Austin Mortgage Market Update – For the week of October 5, 2009

For the week of October 5, 2009 – Vol. 7, Issue 40

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Another good week for the housing market. The S&P/Case Shiller home price index was up for the third month in a row and the rate of annual decline fell for the sixth month in a row! Price increases were reported in 18 of 20 metro areas measured. Many now feel this data indicates the worst of the price declines are behind us. David M. Blitzer, chairman of the index committee at Standard & Poor’s, said: “These figures continue to support an indication of stabilization in national real estate values.”

Later in the week, Pending Home Sales came in UP 6.4% for August, their seventh straight monthly gain, UP 12.4% from a year ago and at their highest level since March 2007. Many see this boost in sales coming from first-time homebuyers rushing to make the deadline for their $8,000 tax credit which expires at the end of next month!

On the mortgage front, Freddie Mac’s weekly survey showed the 30-year fixed-rate mortgage below 5% for the first time since May. The average rate was 4.94% with an average 0.7 point (including the origination fee) for 80% loan-to-value ratio loans to borrowers with good credit. Finally, residential construction spending also rose in August, UP 4.7%!

>> Review of Last Week

CORRECTION?… Friday ended with the stock markets down for the second week in a row, so pundits wondered if the bull market is over, or just correcting itself as it does after the kind of big run-up it’s had. Or maybe investors were fearing the recovery’s in jeopardy, given a few disappointing economic indicators, capped by a still problematic employment report for September.

Yes, we did get lower than expected numbers for Consumer Confidence and ISM Manufacturing. But that manufacturing number is now above 50 two months in a row, showing expansion. The business media jumped all over a rise in initial claims for unemployment, but ignored the fact that the four-week moving average dropped to 548,000, its lowest level since January, and continuing claims dropped another 70,000, to 6.09 million, the lowest level since April. The major placement firm of Challenger, Gray, & Christmas reported that layoffs announced in September were down 30.2%, compared to last year. Some economists see unemployment falling by the end of the year.

But for the moment employment lags the rest of the recovery. Non-farm payrolls fell more than expected in September and unemployment inched up 0.1% from the month before. Yet we are clearly in recovery. Personal income increased 0.2% in August and small business earnings were up 0.7%, hitting a 7.6% annual rate for the past three months. Final Q2 GDP was revised upward to –0.7% and virtually all economists expect Q3 to show positive growth.

Nevertheless, for the week, the Dow ended down 1.8%, to 9487.67; the S&P 500 was off 1.8%, to 1025.21; while the Nasdaq fell 2.0%, to 2048.11.

Once again, as stock prices sank, bonds soared. The FNMA 30-year 4.5% bond we watch finished up decisively from the previous week’s $101.12 close, moving to $101.66. As detailed above, mortgage rates slid down a bit more, back to the super low territory they were in last May. Fence-sitters should take note.

>> This Week’s Forecast

PRETTY QUIET… Not much going on this week on the economic front. We’ll get the ISM reading on how the services sector is recovering, plus our weekly look at the jobs story. The week ends with the Trade Balance figure showing the state of our export-import situation.

>> 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 5 – October 9

Date Time (ET) Release For Consensus Prior Impact
M

Oct 5

10:00 ISM Services Index Sep 50.0 48.4 Moderate
W

Oct 7

10:30 Crude Inventories 10/2 NA 2.80M Moderate
Th

Oct 8

08:30 Initial Unemployment Claims 10/3 NA 551K Moderate
Th

Oct 8

08:30 Continuing Unemployment Claims 9/26 NA 6.09M Moderate
F

Oct 9

08:30 Trade Balance Aug –$32.9B –$32.0B Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months. Last week’s Personal Consumption Expenditures (PCE) numbers showed inflation under control, with prices down 0.3% from last year. But over the last three months, prices are up. If inflation picks up, the Fed could raise rates. Note: In the lower chart, a 2% probability of change is a 98% 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 2%
Dec 15 4%
Jan 27 13%
This bog postl 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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