Texas Mortgage Market Update – For the week of April 1, 2013

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”–Abraham Lincoln

INFO THAT HITS US WHERE WE LIVE… Today being April 1, it’s timely to note that fewer and fewer people are being fooled into thinking housing remains in the doldrums. Yes, the housing recovery has a distance to go, but there’s mounting evidence it’s well on its way. New Home Sales were up 12.3% in February compared to a year ago. After a super big hike in January, new home sales fell slightly in February, but they’re still at a 411,000 annual rate. Plus, the median price of new homes sold was up 2.9% versus a year ago, with the average price up an impressive 14.5%!

Speaking of prices, check out the closely watched Case-Shiller index of home prices in the 20 largest metros. Up 1% in January, prices are now up 8.1% over a year ago. That’s the largest annual gain in over 6 years! The chief economist at an online real estate site observed, “We’re seeing prices increase both in markets that had a really big decline during the bust, as well as markets that have really strong fundamentals.” Finally, Pending Home Sales in February were at their second-highest level in nearly three years, up 8.4% over a year ago, although slipping a tad for the month.

BUSINESS TIP OF THE WEEK… Beware of “analysis paralysis,” where you constantly pursue and analyze information and never make a decision. Don’t proceed blindly, but remember that no one ever has all the answers. Once you know the critical details, take action!

>> Review of Last Week

S&P 500 HITS HIGHEST ALL-TIME CLOSE… The S&P 500 ended a holiday-shortened week at its highest close ever, 1569.19, beating the record set on October 9, 2007. That means this major stock benchmark has now recouped all its losses since the 2008 financial crisis. The Dow Jones Industrial Average already beat its 2007 all-time high on March 5 and then set new records ten more times after that. But the new all-time high for the S&P 500 is considered more significant. As one analyst put it, “Having the Dow reaching new highs was good, but the S&P 500 is broader, it’s bigger…it’s an important message for investors.”

Investor behavior is seen as a leading economic indicator and last week offered more evidence their optimism is leading us in the right direction. We had year-over-year increases in New Home Sales and Case-Shiller home prices, up the most since 2006. GDP for Q4 was revised up to a 0.4% annual pace, not where it needs to be, but way better than the initial 0.1% reading. Even Durable Goods Orders gained more than expected. Eurozone worries dissipated with a bailout for Cyprus expected. Over here, Consumer Spending in February was up the most since last September, while personal income and consumer sentiment beat estimates.

The week ended with the Dow up 0.5%, to 14579; the S&P 500 up 0.8%, to 1569; and the Nasdaq up 0.7%, to 3268.

There are still enough concerns about our economy and Eurozone finances to keep investors interested in the safe haven of bonds. The FNMA 3.5% bond we watch ended the week up .07, at $105.19. In Freddie Mac’s Primary Mortgage Market Survey, average fixed mortgage rates edged up slightly for the week, but are still near historical lows. The Mortgage Bankers Association reported demand for purchase loans up 7% for the week and up 10% versus a year ago.

DID YOU KNOW?… A tax credit is a direct dollar-for-dollar reduction of your tax liability. It’s way better than a tax deduction, which only reduces your tax liability in proportion to your tax bracket.

>> This Week’s Forecast

FEWER NEW JOBS BUT THE UNEMPLOYMENT RATE HOLDS… The big news of the week will be Friday’s March Employment Report. Although fewer new Nonfarm Payrolls are forecast, the Unemployment Rate is expected to hold at 7.7%. There will be some statistical explanation for this, of course. The truth is, the economy plods along, but at least it’s plodding upward.

The week begins with the ISM Index of manufacturing, predicted off a smidge for March, but still over 50, registering expansion. ISM Services should give us a similar reading and since the services sector provides well over 80% of our jobs, that small drop in the index dovetails perfectly with the slight slide in new payrolls.

>> 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 Apr 1 – Apr 5

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Fed Chairman Ben Bernanke hasn’t been happy with the pace of the jobs recovery to this point. Nothing in the March Employment Report should inspire him to raise 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%

Probability of change from current policy: