Austin Mortgage Market Update – For the week of October 11, 2010

For the week of October 11, 2010 – Vol. 8, Issue 41

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE With all the conflicting opinions about the housing market, we found this recently published article in the Wall Street Journal to be quite helpful. It’s title says it all, “10 Reasons to Buy a Home”.

Last Monday, the National Association of Realtors (NAR) reported its August Pending Home Sales index UP 4.3% over the prior month. But this measure of signed contracts on existing homes was down 20.1% compared to a year ago. The NAR’s current economic forecast looks to a 6.4% drop in existing home sales for 2010 compared to 2009, putting the volume at 4.82 million, and the median existing home price UP 0.2%, to $172,900. This is a smaller drop and a greater price rise than previously predicted.

On the new homes front, the NAR projects sales off 13.4% for the year to 325,000, although housing starts will be UP 11.3% while the new home median price will dip 0.4% to $215,000. But the NAR projects new home sales UP a whopping 28.9% for 2011 and 28% in 2012, with the median price UP 2.4% next year and 4.9% the year after that. Finally, the President last week signed a bill that keeps in place today’s higher loan limits for Fannie Mae and Freddie Mac guaranteed loans and FHA multifamily programs.

>> Review of Last Week

DOW AT 11 THOU… Stocks went up and down all week as investors on Wall Street tried to figure out if it was smarter to be betting on the economy or against it. The economic data coming from the government and corporations pointed opposite ways, but UP was the direction that ultimately prevailed. As a result, the Dow crossed over the 11,000 threshold for the first time since May, as all three major market indexes showed gains for the week and were up from 4.5% to almost 6% for the year.

It was nice to see Pending Homes Sales ahead for the month, but the 20% drop year-over-year indicates that the housing market still awaits real recovery. Then the week ended with a disappointing September employment report showing payrolls down by 95,000 for the month. This was all due to heavy layoffs in government jobs, as the private sector showed a gain of 64,000 jobs, which was OK, but a bit less than expected. The unemployment rate held at 9.6%

On the good news side, the ISM Services index rose above expectations in September, showing slow but still steady expansion in the non-manufacturing sector of the economy. There were also better-than-expected earnings reports from Alcoa, Yum! Brands, and Costco, with PepsiCo’s Q3 numbers in line with expectations. But some observers felt the biggest push to the upside was investors’ increasing certainty that the Fed will move soon to stimulate the economy with QE-2, its second round of quantitative easing. Of course, negative economic numbers increase chances that the Fed will act sooner.

For the week, the Dow ended UP 1.6%, to 1106.48; the S&P 500 was also UP 1.6%, to 1165.15; and the Nasdaq was UP 1.3%, to 2401.91.

Prices were strong in the bond market and held up, even with some profit-taking at the end of the week. The FNMA 30-year 4.0% bond we watch ended UP 79 basis points for the week, closing at $103.06. National average mortgage rates for most mortgages tracked in Freddie Mac’s weekly survey remain at historically low levels. 

>> This Week’s Forecast

THE FED’S THOUGHTS, INFLATION, RETAIL… Tuesday we have the minutes from the Fed’s last FOMC meeting a few weeks ago. The economic experts are sure to pore over the dialogue to see when the central bank may go for another round of quantitative easing (“QE-2”). This will keep rates low, but could lead to more inflation later on, which could drive more people into the housing market.

Wholesale inflation for September is measured with Thursday’s Producer Price Index (PPI), but more important are Friday’s CPI readings on consumer inflation. These are all expected to remain in benign territory, where they’ve resided for some time. Friday’s Retail Sales numbers will tell us more about the consumer’s contribution to the recovery, but they’re expected to show more modest gains than previously reported. All this indicates a slowing of the recovery, but at least we’re not falling back into recession.

>> 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 October 11 – October 15

Date Time (ET) Release For Consensus Prior Impact
Tu

Oct 12

14:00 Minutes of the FOMC Meeting 9/21 NA NA HIGH
W

Oct 13

10:30 Crude Inventories 10/9 NA 3.09M Moderate
Th

Oct 14

08:30 Initial Unemployment Claims 10/9 449K 445K Moderate
Th

Oct 14

08:30 Continuing Unemployment Claims 10/2 4.450M 4.462M Moderate
Th

Oct 14

08:30 Producer Price Index (PPI) Sep 0.2% 0.4% Moderate
Th

Oct 14

08:30 Core PPI Sep 0.1% 0.1% Moderate
Th

Oct 14

08:30 Trade Balance Sep –$44.5B –$42.8B Moderate
F

Oct 15

08:30 Consumer Price Index (CPI) Sep 0.2% 0.3% HIGH
F

Oct 15

08:30 Core CPI Sep 0.1% 0.1% HIGH
F

Oct 15

08:30 Retail Sales Sep 0.4% 0.4% HIGH
F

Oct 15

08:30 Retail Sales ex-auto Sep 0.4% 0.6% HIGH
F

Oct 15

08:30 NY Fed Empire Manufacturing Index Oct 6.0 4.10 Moderate
F

Oct 15

09:55 Univ. of Michigan Consumer Sentiment Oct 68.6 68.2 Moderate
F

Oct 15

10:00 Business Inventories Aug 0.5% 1.0% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months There’s more talk about the Fed helping the economy along with a second round of quantitative easing (QE-2). Consequently, economists expect the Fed Funds Rate to stay at its rock bottom level well into next 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
Nov 3 0%–0.25%
Dec 14 0%–0.25%
Jan 26 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Nov 3 <1%
Dec 14 <1%
Jan 26 <1%

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.