Texas Mortgage Market Update – For the week of November 4, 2013

For the week of November 4, 2013 – Vol. 11, Issue 44

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “There are two ways of spreading light: to be the candle or the mirror that reflects it.” –Edith Wharton, American writer

INFO THAT HITS US WHERE WE LIVE… This week we’ll have to be the candle that spreads light on the housing recovery, as the September Pending Home Sales Index didn’t shine too brightly. This measure of contracts signed on existing homes fell 5.6% from August to September, suggesting a dip in closings for that type of property during Q4. The September drop was put to a lower level of consumer confidence, plus higher mortgage rates and home prices, although home price gains also reassure buyers that they’re making an appreciating investment.

But please note. Those slightly higher mortgage rates were still near historical lows and have since receded. In addition, 2013 should be a solid year for home sales overall, with the National Association of Realtors (NAR) predicting total existing home sales 10% higher than in 2012. The NAR also expects this year’s 11% to 11.5% price gain to be followed by a 5% to 6% increase for 2014. The S&P/Cash Shiller 20-City Composite index of home prices showed a 12.8% annual gain in August, its biggest since February 2006.

BUSINESS TIP OF THE WEEK… You always want to hit all the points you’ve worked into your pitch. But if the other person starts tuning you out, change the conversation to his or her needs. It gets you closer to the sale and leaves a good impression.

>> Review of Last Week

MIXED BAG… Inspired by decent manufacturing data and corporate earnings, investors sent the Dow and S&P 500 upward for the fourth week in a row, but the tech-heavy Nasdaq dipped, ending its two week winning streak. The Fed met and although they didn’t begin to taper their bond buying program, their policy statement was read as a bit hawkish, indicating tapering could start sooner. This was because they deleted the reference to “tightening financial conditions” from their September statement and did not cite any negative economic impact from the partial government shutdown.

That was corroborated by Friday’s ISM Manufacturing index, which was up for October. Popular opinion during the federal shutdown was that manufacturing would suffer. So much for popular opinion. September Industrial Production enjoyed the biggest monthly gain since February, hitting its highest level since March 2008. Inflation stayed under control, the wholesale Producer Price Index (PPI) down a tad and the Consumer Price Index (CPI) up just a bit for September. Unfortunately, September Retail Sales dipped a little and Pending Home Sales a lot.

The week ended with the Dow up 0.3%, to 15616; the S&P 500 up 0.1%, to 1762; but the Nasdaq slid 0.5%, to 3922.

The Fed policy statement wasn’t as dovish as some had expected, sparking a wave of bond selling. The FNMA 3.5% bond we watch ended the week down .21, at $102.01. For the week ending October 31, national average mortgage rates dropped again in Freddie Mac’s Primary Mortgage Market Survey. Their chief economist noted that coming out of the Fed meeting, “there was no policy change, which should help sustain low mortgage rates in the near future.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… The Fed’s statements are called hawkish when they favor increasing interest rates and tapering bond buying, dovish when they favor maintaining low interest rates and current bond buying levels.

>> This Week’s Forecast

GDP AND JOB GROWTH TEPID, BUT INFLATION IN CHECK… The first, or “Advanced” estimate of GDP for Q3 is expected to show the economy growing even more slowly, dipping down below 2%. Friday we get the October Employment Report and job growth won’t be very hot either, just 100,000 new Nonfarm Payrolls forecast for the month and the Unemployment Rate back up to 7.3%. At least inflation is predicted to stay under control, Core PCE Prices remaining within Fed guidelines.

>> 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 Nov 4 – Nov 8

 Date Time (ET) Release For Consensus Prior Impact
Tu
Nov 5
10:00 ISM Services Oct 54.0 54.4 Moderate
W
Nov 6
10:00 Leading Economic Indicators (LEI) Sep 0.6% 0.7% Moderate
W
Nov 6
10:30 Crude Inventories 11/2 NA 4.087M Moderate
Th
Nov 7
08:30 Initial Unemployment Claims 11/2 335K 340K Moderate
Th
Nov 7
08:30 Continuing Unemployment Claims 10/26 2.863M 2.881M Moderate
Th
Nov 7
08:30 GDP–Advanced Q3 1.9% 2.5% Moderate
Th
Nov 7
08:30 GDP Chain Deflator–Adv. Q3 1.4% 0.6% Moderate
F
Nov 8
08:30 Average Workweek Oct 34.4 34.5 HIGH
F
Nov 8
08:30 Hourly Earnings Oct 0.2% 0.1% HIGH
F
Nov 8
08:30 Nonfarm Payrolls Oct 100K 148K HIGH
F
Nov 8
08:30 Unemployment Rate Oct 7.3% 7.2% HIGH
F
Nov 8
08:30 Personal Income Sep 0.2% 0.4% Moderate
F
Nov 8
08:30 Personal Spending Sep 0.2% 0.3% HIGH
F
Nov 8
08:30 Core PCE Prices Sep 0.1% 0.2% HIGH
F
Nov 8
09:55 Univ. of Michigan Consumer Sentiment Nov 75.3 73.2 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… No matter when tapering of the Fed’s bond purchases begins, economists expect the Funds Rate to stay right where it is 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
Dec 18 0%–0.25%
Jan 29 0%–0.25%
Mar 19 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 18      <1%
Jan 29      <1%
Mar 19      <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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