Austin Mortgage Market Update – For the week of May 17, 2010

For the week of May 17, 2010 – Vol. 8, Issue 20

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Last Tuesday the National Association of Realtors (NAR) reported the Q1 median price for existing homes was up in 91 out of 152 metro areas compared to a year ago, showing the housing market is starting to stabilize. This was a nice gain over Q4 of last year when prices were up in only about 40% of the cities tracked. Even more encouraging, the percentage price increases in 29 cities were in double-digits.

The NAR also reported that existing home sales of single-family homes and condos were UP 11.4% in Q1 compared to a year ago. Sales increased in 44 states and Washington, D.C., with over 70% reporting double-digit percentage gains.

Long-term forecasts were also revised slightly downward by the NAR, but the numbers are still good. They see existing home sales UP 4.3% this year and UP 5.1% for 2011, with the median resale home price UP 2.5% for 2010 and UP 3.7% in 2011. New single-family home sales are forecast to rise 6.9% in 2010 and a whopping 42.0% next year. Median new home prices will be up 3.3% this year and 4.7% the next.

>> Review of Last Week

ANOTHER EUROPEAN TRIP… Europe’s fiscal shenanigans were in the news again and they took the markets on a trip north, then turned them sharply south to end the week. The gains came after Sunday’s announcement of a major Euro-zone rescue package. But as the week wore on, concerns over whether individual countries would put the necessary austerity measures in place sent stocks down, though the market indexes ended the week with strong gains.

If you could take your mind off Europe, there were plenty of reasons to feel positive about the U.S. economic situation. Wednesday, the March trade deficit came in as expected, up $1.0 billion to $40.4 billion, thanks to the strength of our recovery pushing imports up faster than exports. Best of all, the report showed our total volume of international trade was up 3.1% for the month and up 24% since it hit bottom a year ago April.

On the jobs front, the four-week moving average inched down for both initial and continuing unemployment claims. Then Friday came the news retail sales were UP 0.4% for April and UP 0.9% including upward revisions to February/March. For the last six months, retail sales are up at a 10.7% annual rate, 10.3% excluding autos, showing the consumer is certainly alive and well. Finally, industrial production was UP 0.8% for April, as manufacturing continues to boom, up at a 9.5% annual rate since its low last June.

For the week, the Dow ended UP 2.3%, to 10620.16; the S&P 500 was UP 2.2%, to 1135.68; and the Nasdaq was UP.6%, to 2346.85.

Worried about Europe, investors flocked to the safety and bargains they found in bonds. Friday’s drop in stocks pushed bond prices up nicely. So even though we had good economic data on Friday, the week ended on an up note. The FNMA 30-year 4.5% bond we watch closed UP 9 basis points for the week, ending at $101.59. According to Freddie Mac’s weekly survey, national average fixed-rate mortgages dipped to their lowest levels of the year.

>> This Week’s Forecast

HOMES, INFLATION–WHAT’S GOING UP?… Housing Starts and Building Permits reports will tell us where new home construction is headed and the expectation is those numbers will continue to trend upward.  We’ll see if inflation is going up too, with the wholesale PPI on Tuesday, followed by consumer CPI inflation on Wednesday. Most experts feel inflation remains under control. The week will be bookended with reads on New York and Philadelphia manufacturing, which should continue to show a strong recovery for the sector.

>> 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 May 17 – May 21

Date Time (ET) Release For Consensus Prior Impact
M

May 17

08:30 NY Empire State Manufacturing Index May NA 31.9 Moderate
Tu

May 18

08:30 Housing Starts Apr 656K 626K Moderate
Tu

May 18

08:30 Building Permits Apr 680K 680K Moderate
Tu

May 18

08:30 Producer Price Index (PPI) Apr 0.1% 0.7% Moderate
Tu

May 18

08:30 Core PPI Apr 0.1% 0.1% Moderate
W

May 19

08:30 Consumer Price Index (CPI) Apr 0.1% 0.1% HIGH
W

May 19

08:30 Core CPI Apr 0.0% 0.0% HIGH
W

May 19

10:30 Crude Inventories 5/15 NA 1.95M Moderate
Th

May 20

08:30 Initial Unemployment Claims 5/15 440K 444K Moderate
Th

May 20

08:30 Continuing Unemployment Claims 5/15 4.600M 4.627M Moderate
Th

May 20

10:00 Leading Economic Indicators (LEI) Index Apr 0.2% 1.4% Moderate
Th

May 20

10:00 Philadelphia Fed Index May 21.3 20.2 HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Economists are now moving back to the idea the Fed will indeed keep rates where they are for an “extended period” as long as inflation remains in check. 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
Jun 23 0%–0.25%
Aug 10 0%–0.25%
Sep 21 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 23 3%
Aug 10 10%
Sep 21 15%

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)

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