Texas Mortgage Market Update – For the week of October 8, 2012

For the week of October 8, 2012 – Vol. 10, Issue 41

 

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “Winning can be defined as the science of being totally prepared.” –George Allen, American football coach

INFO THAT HITS US WHERE WE LIVE… Many observers feel we should be totally prepared for the housing recovery to continue. A major real estate portal reports list prices UP 2.5% in September versus a year ago, the biggest year-over-year boost since the housing recession started. Excluding foreclosures, list prices were UP 3.5% from a year ago. From July to August, those prices were UP 0.5%, their eighth straight month of gains. These numbers are causing experts to predict that 2012 will likely record the first calendar year list price increase since 2006, as gains were seen in 74 of the top 100 U.S. metros.

A leading data aggregator reported national home prices in August UP 4.6% versus a year ago, the largest annual hike since July 2006. Their repeat sales index showed a 0.3% monthly price gain from July to August, which was the sixth straight month of both monthly and yearly gains. Another index, based on MLS data, expects September will continue its monthly string of home price gains, plus a 6.3% increase, year-over-year.

BUSINESS TIP OF THE WEEK… The best way to build sales in a tough economy isn’t to cut prices, it’s to keep customers. And the best way to do that is to focus on great customer service!

>> Review of Last Week

STOCKS UP AMIDST MIXED ECONOMIC MESSAGES… Investors sent stock prices upward as they digested a spate of positive and negative economic data. The fun began with both ISM Manufacturing and ISM Services coming in above 50, indicating modest expansion for both sectors. Europe was less of a worry, as the European Central Bank reiterated its support for the euro and Spain said it didn’t need a bailout just yet. But FOMC Minutes from the last Fed meeting pointed to downside economic risks. And August factory orders dropped 5.2%, their worst reading in over three years.

As a prime example of mixed messages, it would be hard to beat Friday’s Jobs Report. There were only 114,000 nonfarm payrolls added in September, just 104,000 in the private sector. Yet the unemployment rate dropped from 8.1% to 7.8%! It was explained that the payrolls number comes from the Bureau of Labor Statistics (BLS) “establishment survey” of employers. But the unemployment rate is calculated from the volatile BLS “household survey,” in which more than 800,000 people said they found work. However, two-thirds were part-time jobs. New weekly unemployment claims were up 4,000, to 367,000.

For the week, the Dow ended up 1.3%, to 13610; the S&P 500 was up 1.4%, to 1461; and the Nasdaq was up 0.6%, to 3136. 

Some economic data, plus less concern over Europe’s fiscal problems, sent investors into riskier stocks. Bond prices consequently suffered. The FNMA 3.5% bond we watch ended the week down .81, at $106.27. But with the Fed buying $40 billion a month of mortgage bonds, national average fixed mortgage rates fell again last week, several to all-time record lows. Not surprisingly, applications for purchase loans were up a seasonally adjusted 4% over the week before.

DID YOU KNOW?… The final estimate of GDP growth for Q2 was revised down to 1.3%, representing the slowest economic growth we’ve had in a year.

>> This Week’s Forecast

TRACKING THE DEFICIT, INFLATION, CONSUMERS… Analysts don’t expect the Federal Deficit to shrink for September, no big surprise there. The end of the week will report wholesale inflation, with the Producer Price Index (PPI) forecast down slightly for September and Core PPI, excluding volatile food and energy prices, holding at a benign 0.2%.

Michigan Consumer Sentiment is predicted to remain in surprisingly good territory, given the still slow growing economy. Wednesday, the Fed Beige Book will come out with observations of economic conditions in the 12 Federal Reserve districts. The U.S. Treasury market is closed today, in observance of Columbus Day.

>> 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 8 – Oct 12

 Date Time (ET) Release For Consensus Prior Impact
W
Oct 10
14:00 Federal Deficit Sep NA –$62.8B Moderate
W
Oct 10
14:00 Fed Beige Book Sep NA NA Moderate
Th
Oct 11
08:30 Initial Unemployment Claims 10/06 370K 367K Moderate
Th
Oct 11
08:30 Continuing Unemployment Claims 09/22 3.275M 3.281M Moderate
Th
Oct 11
08:30 Trade Balance Aug –$43.8B –$42.0B Moderate
Th
Oct 11
08:30 Crude Inventories 10/06 NA –0.482M Moderate
F
Oct 12
08:30 Producer Price Index (PPI) Sep 0.8% 1.7% Moderate
F
Oct 12
08:30 Core PPI Sep 0.2% 0.2% Moderate
F
Oct 12
09:55 Univ. of Michigan Consumer Sentiment Oct 78.5 78.3 Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… As long as the Fed keeps buying $40 billion a month of mortgage backed securities, you can be sure the Funds Rate won’t be going anywhere. 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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