Austin Mortgage Market Update – For the week of October 4, 2010

For the week of October 4, 2010 – Vol. 8, Issue 40

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Last week’s housing market data centered on Standard & Poor’s S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government’s home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.

Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.

>> Review of Last Week

A BIT OF A BREATHER… Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.

Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September’s Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.

Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.

For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.

The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac’s weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels. 

>> This Week’s Forecast

WHERE WE’RE GOING WITH HOMES AND JOBS… The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.

The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.

>> 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 4 – October 8

Date Time (ET) Release For Consensus Prior Impact
M

Oct 4

10:00 Pending Home Sales Aug 1.0% 5.2% Moderate
Tu

Oct 5

10:00 ISM Services Sep 51.8 51.5 Moderate
W

Oct 6

10:30 Crude Inventories 10/2 NA –0.475M Moderate
Th

Oct 7

08:30 Initial Unemployment Claims 10/2 455K 453K Moderate
Th

Oct 7

08:30 Continuing Unemployment Claims 9/25 4.450M 4.457M Moderate
F

Oct 8

08:30 Average Workweek Sep 34.2 34.2 HIGH
F

Oct 8

08:30 Hourly Earnings Sep 0.1% 0.3% HIGH
F

Oct 8

08:30 Nonfarm Payrolls Sep 0K –54K HIGH
F

Oct 8

08:30 Nonfarm Private Payrolls Sep 70K 67K HIGH
F

Oct 8

08:30 Unemployment Rate Sep 9.7% 9.6% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months There’s been a lot of talk about the Fed’s readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. 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)

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