For the week of October 1, 2012 – Vol. 10, Issue 40
>> Texas Mortgage Market Update
QUOTE OF THE WEEK… “Even if you fall on your face, you’re still moving forward.”–Victor Kiam, American businessman
INFO THAT HITS US WHERE WE LIVE… You could say New Home Sales fell on its face in August, as it was down 0.3% to a 373,000 annual rate. But confirming the sentiment of the above quote, New Home Sales are in fact moving forward–UP a nice 27.7% from a year ago and remaining near a two-year high, with every region up in the last year. Even better, the months’ supply of new homes is at 4.5 and the median price of new homes sold hit $256,900, UP 11.2% for August, the largest monthly increase since 1963!
Speaking of prices, the much-reported S&P/Case-Shiller home price index showed 16 out of 20 metros posting annual gains in July and, for the third month in a row, all 20 markets had price gains over the prior month. The Federal Housing Finance Agency home price index reported a 3.7% annual gain in July, this for homes bought with conventional mortgages. Analysts say these July numbers indicate a positive turn in the housing market, quickly becoming the brightest spot in an otherwise dim economic recovery.
BUSINESS TIP OF THE WEEK… Press the flesh. In today’s smartphone, tablet-enabled world, it’s easy to forget the importance of face time with clients. The best networking happens in person — and it’s way more enjoyable!
>> Review of Last Week
ECONOMIC DATA DOWN, STOCKS FOLLOW… Stock prices took a dive last week, as most economic data came in worse than expected and Eurozone worries re-surfaced when stress tests on Spanish banks exposed a combined capital shortfall of 59.3 billion euros! Although all three major stock indexes were seriously down for the week, they were still ahead for September, for the quarter and for the year. Good news also came with positive consumer confidence data, plus personal spending and Core PCE both showing inflation in-line with expectations.
Disappointments came from a series of reports that mostly missed estimates by a wide margin. Personal income was up only 0.1% in August. Durable Goods were down 13.2%, and excluding transportation items, they were still down 1.6%. Chicago PMI revealed manufacturing contraction in the Midwest. Worst of all, the third estimate of Q2 GDP put our overall economic growth at a barely visible 1.3% annual rate! The week was so bad, some saw the lower reading of 359,000 new jobless claims as a good thing. Those waiting in the unemployment line would no doubt disagree.
For the week, the Dow ended down 1.0%, to 13437; the S&P 500 was down 1.3%, to 1441; and the Nasdaq was down 2.0%, to 3116.
Once again, concerns over our economy and Europe’s finances sent investors to the safe haven of bonds, pushing up prices. The FNMA 3.5% bond we watch ended the week UP .05, at $107.08. With the Fed buying $40 billion a month of mortgage bonds, national average mortgage rates were at or near record lows. Demand for purchase loans was up 5% from the same time a year ago. No surprise there.
DID YOU KNOW?… Durable Goods measures consumer spending on products expected to last more than three years. The reports are considered a gauge of manufacturing and they’re broken down by industry, to eliminate the effect of volatile segments like defense and transportation.
>> This Week’s Forecast
MANUFACTURING, SERVICES, THE FED AND, OH YES, JOBS… Not a lot of economic reports this week, but the ones we’ll get are key. The ISM Manufacturing Index is expected to still show contraction in that sector, while ISM Services should remain just over the 50 threshold, indicating feeble growth.
Wednesday, FOMC Minutes from the Fed’s last meeting will be scrutinized and could prove interesting. The big focus will be Friday’s September Employment Report. No dramatic growth in payrolls is expected, and the unemployment rate appears to be holding simply because more people are discouraged from looking for work.
>> 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 Oct 1 – Oct 5
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… With last week’s GDP estimate showing economic growth slowing, no one see the Fed hiking 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: