Texas Mortgage Market Update – For the week of October 15, 2012

For the week of October 15, 2012 – Vol. 10, Issue 42

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “The great opportunity is where you are.” –John Burroughs, American naturalist and essayist

INFO THAT HITS US WHERE WE LIVE… Opportunity is finally popping up all over the U.S. housing market. Confirmation of that fact came last week in the Federal Reserve’s Beige Book, which contains anecdotal findings on the state of the economy in the Fed’s 12 districts across the country. The Beige Book noted that even though economic activity has only modestly improved in recent months, the housing market has shown “widespread improvement.”

Industry observers echo this, saying the only economic bright spot is the rise in some home prices, although this has largely been tied to the drop in supply  In fact, a new report from a major online real estate market put the number of homes for sale nationwide down 19.4% for the year ending September 30. In addition, according to a leading real estate data aggregator, shadow inventory is down 10.2% from July a year ago. Shadow inventory includes distressed homes likely to hit the market soon. Experts say fewer distressed homes for sale also relieves downward pressure on prices.

BUSINESS TIP OF THE WEEK… That pile of papers on your desk is a distracting reminder of everything you have to do. The fix? Create a one sheet to-do list, then take all that paperwork and file it away, out of sight!

>> Review of Last Week

SLIPPING ON WALL STREET… All the major equity indexes lost traction, as stock prices fell and investors witnessed the worst week on Wall Street in four months. Eurozone fiscal worries took center stage once again, with speculation over if and when debt-strapped Spain would hit the European Central Bank for a bailout. The International Monetary Fund said it would take two years for Greece to meet its budget targets, and that, in the absence of decisive policy measures, European banks may need to sell $2.8 to $4.5 TRILLION worth of assets through the end of next year, a mighty big downsizing indeed.

On the positive side, Michigan Consumer Sentiment posted a higher than expected first reading for October. Initial weekly jobless claims also dropped unexpectedly, to 339,000. But like last week’s lower unemployment rate, this reading was questioned after the Labor Department admitted nearly all the reduction in claims came from one large, unnamed state. Analysts said this could mean the drop was a quarterly seasonal adjustment, not fewer people unemployed. Those who believed the number were chastened by the fact that 339,000 newly unemployed describes a jobs market still a long way from recovery.

For the week, the Dow ended down 2.1%, to 13329; the S&P 500 was down 2.2%, to 1429; and the Nasdaq was down 1.4%, to 3044.

As stocks went south, bonds should have gained ground but were kept in check, some say because of inflation concerns following a 1.1% hike in September wholesale prices. The FNMA 3.5% bond we watch ended the week down just .08 to $106.19. National average mortgage rates barely edged up from their historic lows of the week before. Demand for purchase loans was up 2% for the week and up 12% from a year ago.

DID YOU KNOW?… The Federal Funds Rate is the interest rate banks charge each other for the use of Federal funds. It is a sensitive indicator of general interest rate trends.

>> This Week’s Forecast

RETAIL, INFLATION, MANUFACTURING, HOUSING STARTS, EXISTING HOME SALES… A data packed week kicks off today with September Retail Sales expected to continue upward but at a slower pace. Tuesday’s CPI inflation readings are forecast within Fed guidelines, so no worries there. The New York Empire and Philly Fed Indexes should still show contraction in manufacturing.

Home building ought to continue slowly expanding, with September Housing Starts up a tad. But September Existing Home Sales on Friday are expected off a bit, falling to a 4.70 million annual rate, an unfortunate hiccup in a housing recovery that’s only just getting started.

>> 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 15 – Oct 19

 Date Time (ET) Release For Consensus Prior Impact
M
Oct 15
08:30 Retail Sales Sep 0.7% 0.9% HIGH
M
Oct 15
08:30 Retail Sales ex-auto Sep 0.6% 0.8% HIGH
M
Oct 15
08:30 NY Empire Manufacturing Index Oct –2.8 -10.4 Moderate
M
Oct 15
10:00 Business Inventories Aug 0.5% 0.8% Moderate
Tu
Oct 16
08:30 Consumer Price Index (CPI) Sep 0.5% 0.6% HIGH
Tu
Oct 16
08:30 Core CPI Sep 0.2% 0.1% HIGH
Tu
Oct 16
09:15 Industrial Production Sep 0.2% –1.2% Moderate
Tu
Oct 16
09:15 Capacity Utilization Sep 78.3% 78.2% Moderate
W
Oct 17
08:30 Housing Starts Sep 768K 750K Moderate
W
Oct 17
08:30 Building Permits Sep 815K 803K Moderate
W
Oct 17
10:30 Crude Inventories 10/13 NA 1.672M Moderate
Th
Oct 18
08:30 Initial Unemployment Claims 10/13 360K 339K Moderate
Th
Oct 18
08:30 Continuing Unemployment Claims 10/06 3.275M 3.273M Moderate
Th
Oct 18
10:00 Philadelphia Fed Manufacturing Index Oct –0.1 –1.9 HIGH
Th
Oct 18
10:00 Leading Economic Indicators (LEI) Sep 0.2% –0.1% Moderate
F
Oct 19
10:00 Existing Home Sales Sep 4.70M 4.82M Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed has embarked on QE3, buying $40 billion a month of mortgage backed securities for an unlimited period of time. The Fed also extended its vow to keep the Funds Rate at rock bottom until mid-2015. 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
Oct 24 0%–0.25%
Dec 12 0%–0.25%
Jan 30 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Oct 24      <1%
Dec 12      <1%
Jan 30      <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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