Austin Mortgage Market Update For the week of November 2, 2009

For the week of November 2, 2009 – Vol. 7, Issue 44

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Last week September New Home Sales were reported down 3.6% for single-family units. But the supply of unsold new homes is just 7.5 months and inventories, at 251,000, are down 56.1% from their mid-2006 peak and at their lowest level since 1982. The sales drop followed five straight months of sales increases and some observers felt the decline may have come from more aggressive pricing by sellers, actually a bullish sign for the housing market.

Indeed, the median new home price was UP 2.5% for September, a bigger than usual gain for the time of year. The average price went UP 10.2%, the biggest September rise on record. Finally, the average price of new homes sold — $282,600 — was only 1.6% lower than last year. Speaking of prices, the Case-Shiller index reported home prices up in August for the fourth month in a row. The average of the 20 metro areas measured showed a 1.2% gain.

Finally, we had the good news covered in last week’s Inside Lending Bulletin that the Senate passed an extension of the first-time homebuyer $8000 tax credit, with higher qualifying income limits and adding a $6500 credit to buyers who have owned their homes at least 5 years. Let’s hope the House passes it too. Finally, the House and Senate extended the ability of Fannie Mae, Freddie Mac and the Federal Housing Administration to back conforming loans in high-cost areas, up to $729,750 through all of 2010. These higher limits would have expired at the end of this year.

>> Review of Last Week

CAUTIOUSLY RECOVERING… The government reported our first quarter of positive economic growth last week, indicating the recovery has begun. Yet investors kept the Dow moving up and down over 100 points four out of the five days, ending the week with a startling 249-point drop. Was this a bull market correction, or the return to a bear market? Who knows? The only thing certain is that investors aren’t quite sure the economy is back on track.

Makes you wonder what it will take to convince them. The initial estimate for Q3 real GDP revealed the economy growing at a 3.5% annual rate — way better than expected and the first rise in GDP in over a year. Happily, most of the advance was driven by consumption. Q3 GDP also showed home building UP at a 23.3% annual rate, its fastest rise since the ’80’s. Plus, Q3 corporate earnings reported so far show over 80% of the companies beating estimates, the highest rate in history.

On the jobs front, Initial Unemployment Claims dropped and the 4-week moving average hit a new low in the recovery of 526,000. Continuing Claims fell to 5.8 million. Positive news also included Durable Goods Orders UP for September, their fourth boost in six months. Most impressive of all, the Chicago PMI measuring Midwest manufacturing, shot up to its highest level in over a year. And the Richmond Fed index for Mid-Atlantic manufacturing logged its sixth straight month in expansion territory. All are favorable signs for U.S. manufacturing.

For the week, the Dow finished down 2.6%, to 9712.73; the S&P 500 was down 4.0%, to 1036.19; while the Nasdaq fell 5.1%, to 2045.11.

The bond market closed the week with a rally, helped in no small measure by the slide in stocks. The FNMA 30-year 4.5% bond we watch ended up from the previous week’s close, finishing at $101.19. Mortgage rates inched up a bit but remain in historically low territory. For this year, the Freddie Mac survey of mortgage rates reported its lowest 10-month average going back to 1971.

>> This Week’s Forecast

FOCUS ON THE FED… Almost no one expects a rate change coming out of this week’s Fed meeting, but economists will be looking at the Fed policy statement for any signs of when things may change. Other items of interest this week include Pending Home Sales on Monday and Friday’s Employment Report, where we’ll search for signs of a turnaround on the jobs front.

>> 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 November 2 – November 6

Date Time (ET) Release For Consensus Prior Impact
M

Nov 2

10:00 ISM Index Oct 53.0 52.6 HIGH
M

Nov 2

10:00 Pending Home Sales Sep –0.1% 6.4% Moderate
W

Nov 4

10:00 ISM Services Index Oct 51.5 50.9 Moderate
W

Nov 4

10:30 Crude Inventories 10/30 NA 0.78M Moderate
W

Nov 4

14:15 FOMC Rate Decision 11/4 0.25% 0.25% HIGH
Th

Nov 5

10:30 Productivity–Prelim. Q3 6.5% 6.6% Moderate
Th

Nov 5

08:30 Initial Unemployment Claims 10/31 520K 530K Moderate
Th

Nov 5

08:30 Continuing Unemployment Claims 10/24 5.75M 5.80M Moderate
F

Nov 6

08:30 Average Workweek Oct 33.1 33.0 HIGH
F

Nov 6

08:30 Hourly Earnings Oct 0.1% 0.1% HIGH
F

Nov 6

08:30 Nonfarm Payrolls Oct –175K –263K HIGH
F

Nov 6

09:45 Unemployment Rate Oct 9.9% 9.8% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months. With Q3 GDP showing the economy growing again, the big question is, when will the Fed start raising rates? Most economists think rates will stay down for a few months more, unless inflation bubbles up. 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
Nov 4 0%–0.25%
Dec 15 0%–0.25%
Jan 27 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Nov 4 1%
Dec 15 2%
Jan 27 7%

This blog entry is an advertisement for Max Leaman. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. © 2009 PrimeLending, a PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, a PlainsCapital Company is exempt from licensing in the following states: AL, AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NC, NE, NV, NY, OH, OK, OR, PA, SC, SD, TX, UT, VA, WV, WY. Arizona Mortgage Banker Number License Number 0907334; California Department of Real Estate License Number 01857468; Connecticut Mortgage Lender License Number ML-13649; Illinois Mortgage banker License number MB.6760635; Maine Supervised Lender License Number SLM8285; Maryland Mortgage Lender License number 11058; Michigan First Mortgage Registrant License Number FR 0010163 and Second Mortgage Registrant License Number SR 0012527; New Jersey Licensed Lender Number 083659; New Mexico Mortgage Loan Company License Number 01890; North Dakota Money Broker License number MB101786; Tennessee Mortgage Registrant Number 4023; Texas Regulated Loan License Number 7293; Vermont Mortgage Banker license Number 6127; Vermont Mortgage Broker license Number 0964MB; Washington Consumer Loan License Number 520-CL-49075; Wisconsin Mortgage banker License number 214170. NMLS# 151263

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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