Austin Mortgage Market Update – For the week of March 29, 2010

For the week of March 29, 2010 – Vol. 8, Issue 13

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE February existing home sales were down for the third month in a row, but the 0.6% drop was less than expected. We had severe winter weather putting a damper on things and we’re still seeing the hangover from sales pushed into October and November when everyone thought the homebuyer tax credit was going away. February new single-family home sales were down 2.2%. But the median price of $220,500 was UP 5.2% over last year and the average price of $282,600 was a strong 9.3% UP from a year ago. The Mortgage Bankers Association (MBA) expects existing home sales to be UP almost 4% this year to 5.34 million, going to 5.72 million in 2011. They see new home sales hitting 398,000 in 2010 and 528,000 the following year.

The Federal Housing Administration (FHA) announced new measures that will go into effect for borrowers next Monday, April 5. Here’s what they mean: 1) The upfront Mortgage Insurance Premium (MIP) will go from 1.75% to 2.25%. 2) Even though FHA’s official FICO score minimum is less, borrowers need a score of 620 or higher to have a realistic chance of getting an FHA loan with a minimum 3.5% down payment. 3) The maximum seller contribution has been reduced from 6% to 3%. So FHA borrowers will now have to look better on paper and pay a little more upfront MIP. We’re happy to answer any questions on these new FHA requirements.

To take advantage of the homebuyer tax credit (along with today’s low mortgage rates) buyers have just one month left to sign a contract — that’s April 30. And they have to close by June 30.

>> Review of Last Week

UP AGAIN… It was another week that ended UP for all stock indexes. The market hit an 18-month high during the week, although Friday saw just a 9-point gain. Investors are still worried about Greece’s debt, but their European neighbors announced a bail-out plan that sounded encouraging.

Wall Street took the above housing news in stride. Then February Durable Goods came in UP 0.5% and up at an 18% annual rate in the past six months, a healthy level of business investment. Initial unemployment claims dropped by 14,000, to 442,000, and the four-week moving average fell to 454,000, the lowest since September 2008. Continuing claims dropped to 4.65 million, the lowest in fifteen months, spurring further talk that this Friday’s Employment Report will show substantial job gains.

Friday, real Q4 GDP was revised from a previous 5.9% estimate to a 5.6% annual rate, still a booming number. Many economists expect this rate to decline in Q1 because of the harsh winter weather, but some still see GDP growth for the first six months of 2010 at a healthy 4.5% rate. The report showed Q4 corporate profits increased at a 36% annual rate and are up 31% over a year ago. Observers say this spurred the increased equipment investments we’ve seen and will soon give us a big improvement in the job market.

For the week, the Dow headed UP 1.0%, to 10850.36; the S&P 500 was UP 0.6%, to 1166.59; while the Nasdaq went UP 0.9%, to 2395.13.

It was a tough week in the bond market, though prices recovered a tad on Friday. There is understandable uncertainty around the Fed’s ending their purchases of Mortgage Backed Securities this Wednesday. The FNMA 30-year 4.5% bond we watch ended down 43 basis points from the week before, closing at $100.41. Average mortgage rates, as reported in the Freddie Mac Survey, were up a smidge, but still at historically low levels for now.

>> This Week’s Forecast

INFLATION, MANUFACTURING, JOBS… Everyone will be waiting with bated breath for Friday’s Employment Report, when even pessimistic observers are predicting the recovery’s first serious increase in payrolls. Markets will be closed for Good Friday, although the Federal government will be open. But let’s not forget about Monday’s PCE reading, which is the Fed’s favorite look at inflation. Any rise here could bring the Fed closer to a rate hike. Finally, we get two looks at the strengthening manufacturing sector with the Chicago PMI and the ISM Index.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of March 29 – April 2

Date Time (ET) Release For Consensus Prior Impact
M

Mar 29

08:30 Personal Income Feb 0.1% 0.1% Moderate
M

Mar 29

08:30 Personal Consumption Expenditures (PCE) Feb 0.3% 0.5% HIGH
M

Mar 29

08:30 Core PCE Feb 0.1% 0.0% HIGH
Tu

Mar 30

10:00 Consumer Confidence Mar 50.0 46.0 Moderate
W

Mar 31

09:45 Chicago PMI Mar 61.0 62.6 HIGH
W

Mar 31

10:30 Crude Inventories 3/27 NA 7.25M Moderate
Th

Apr 1

08:30 Initial Unemployment Claims 3/27 440K 442K Moderate
Th

Apr 1

08:30 Continuing Unemployment Claims 3/20 4.600M 4.648M Moderate
Th

Apr 1

10:00 ISM Index Mar 57.0 56.5 HIGH
F

Apr 2

08:30 Average Workweek Mar 33.9 33.8 HIGH
F

Apr 2

08:30 Hourly Earnings Mar 0.2% 0.1% HIGH
F

Apr 2

08:30 Nonfarm Payrolls Mar 190K –36K HIGH
F

Mar 26

09:55 Unemployment Rate Mar 9.7% 9.7% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months The Fed still says it will “keep rates low for an extended period”. But with the economy picking up, more economists think we will see a hike in the Fed funds rate in the second half of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on: Consensus
Apr 28 0%–0.25%
Jun 23 0%–0.25%
Aug 10 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Apr 28 <1%
Jun 23 10%
Aug 10 28%

About Max Leaman Austin Mortgage

GREAT RATES, LOW FEES, CLOSE ON TIME™ ---- 2012 Ranked #1 Austin Residential Mortgage Lender (Austin Business Journal) 2010, 2011 & 2012 Five Star Professional (Texas Monthly) 2009, 2010, 2011, 2012, 2013 PrimeLending Chairman's Circle Award 2009, 2010, 2011, 2012 Scotsman Guide Top Originator (Top 200 Mortgage Professionals in U.S.A.) Better Business Bureau "A+ Rating" National Lender Rankings (Scotsman Guide): Top Purchase Volume (No. 10) Most Loans Closed (No. 32) Top Dollar Volume (No. 88)

Comments are closed.