Austin Mortgage Market Update – For the week of August 1, 2011

For the week of August 1, 2011 – Vol. 9, Issue 31

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Anything worth doing is worth doing slowly.”–Mae West

INFO THAT HITS US WHERE WE LIVE…Maybe the famous actress liked the slow approach, but it sure would be nice if our housing recovery were moving faster than a snail’s pace. Last week’s most positive note came with Pending Sales of Existing Homes, UP 2.4% for June. This was especially gratifying coming on the heels of the 8.2% gain for May. These figures bode well for Existing Home Sales a few months out.

New Home Sales did not fare quite as well. Sales of new single-family homes fell 1% for June, coming in at a very modest 312,000 annual rate. But the months’ supply of new homes dropped to 6.3, as inventories declined by 3,000 to their lowest level since 1963. The $235,200 median price was UP 7.2% over last year, while the $269,000 average price registered a 4.8% annual gain. And the S&P/Case-Shiller 20-city home price index rose 1% in May, with gains in 16 of the cities.

BUSINESS TIP OF THE WEEK…Do the right thing. Operating ethically is good business over the long term. You build your brand and your reputation, attract the best employees and help the community, your source of customers and referrals.

>> Review of Last Week

WASHINGTON DITHERS, WALL STREET DIVES…Instead of getting their fiscal house in order, government leaders chose to play politics with the debt ceiling debate. Investors, true to form, reacted negatively to the uncertainty. Contributing to the drama, people kept misusing the word “default.” The only way the U.S. can default is by not paying the interest due on its debt and everyone knows that’s not going to happen. Add to this a very weak GDP report: 1.3% growth for Q2, with Q1 GDP revised down to a meager 0.4%. Small wonder stocks had their worst week in over a year.

There was some good news in seeing weekly unemployment claims drop below 400,000 for the first time since early April. We also had continued manufacturing growth with a positive reading from the Philadelphia Fed index. Best of all, about 70% of the companies in the S&P 500 have reported Q2 earnings and around 68% of them have beaten analyst expectations! 

For the week, the Dow ended down 4.2%, to 12143; the S&P 500 was down 3.9%, to 1292; and the Nasdaq was down 3.6%, to 2756.

Bonds, like stocks, were down at the beginning of the week, but picked up after the debt ceiling shenanigans and anemic GDP reading ignited a flight to safety in bonds. With prices heading north, the FNMA 4.0% bond we watch ended the week up .96, at $101.18. Once again, national average mortgage rates changed little for the week, remaining near their lows for the year, in Freddie Mac’s weekly survey. 

DID YOU KNOW?…Warren Buffett, Chairman of Berkshire Hathaway, may be the greatest investor of all time. If you put $10,000 into his company when he took over in 1965, you’d have over $20 million today. His strength? Identifying undervalued companies to invest in.

>> This Week’s Forecast

THE FED: GOOD AND NOT-SO-GOOD ON ITS TWO MANDATES…The Fed is supposed to keep inflation under control AND boost employment. This week they’re expected to be OK on the inflation front, with June Core PCE Prices up just a bit and lower than May’s reading.

But on the jobs front, the Fed’s not doing so well, with the July Employment Reportexpected to show only 78,000 new jobs created for July. This is better than June’s abysmal 18,000 new jobs but well below the level needed to bring the Unemployment Rate below 9%. Good economic news should come from the July ISM Index of manufacturing and July ISM Services, both still in expansion territory above 50.

>> 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 Aug 1 – Aug 5

 Date Time (ET) Release For Consensus Prior Impact
M

Aug 1

10:00 ISM Index Jul 54.0 55.3 HIGH
Tu

Aug 2

08:30 Personal Income Jun 0.1% 0.3% Moderate
Tu

Aug 2

08:30 Personal Spending Jun 0.1% 0.0% HIGH
Tu

Aug 2

08:30 Core PCE Prices Jun 0.2% 0.3% HIGH
W

Aug 3

10:00 ISM Services Jul 53.1 53.3 Moderate
W

Aug 3

10:30 Crude Inventories 7/30 NA -2.296M Moderate
Th

Aug 4

08:30 Initial Unemployment Claims 7/30 405K 398K Moderate
Th

Aug 4

08:30 Continuing Unemployment Claims 7/23 3.700M 3.703M Moderate
F

Aug 5

10:00 Average Workweek Jul 34.3 34.3 HIGH
F

Aug 5

08:30 Hourly Earnings Jul 0.2% 0.0% HIGH
F

Aug 5

08:30 Nonfarm Payrolls Jul 78K 18K HIGH
F

Aug 5

08:30 Unemployment Rate Jul 9.1% 9.2% HIGH

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…Economists are still not predicting a rise in the Funds Rate any time soon. 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
Aug 9 0%–0.25%
Sep 20 0%–0.25%
Nov 2 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Aug 9      <1%
Sep 20      <1%
Nov 2      <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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