Texas Mortgage Market Update – For the week of April 8, 2013

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “Hold on; hold fast; hold out. Patience is genius.”–Georges-Louis Leclerc (1707–1788), French naturalist, mathematician, cosmologist, and author

INFO THAT HITS US WHERE WE LIVE… Patience may not quite be genius in the housing market, but it certainly is paying off. A report by a major real estate search and marketing site said home asking prices in March rose 7.2% annually, while rents on single-family homes were up just 0.1% for the year. Their chief economist explained: “Rising prices and flattening rents change the math. Investors will decide to sell units they’ve been renting, which would create new, desperately needed for-sale inventory. On the other hand, some renters watching prices rise will rush to buy before they rise further.”

In addition, a real estate analytics firm released a report that overall home prices were UP 10.2% in February compared to a year ago. This was the biggest year-over-year hike since March 2006. The firm’s home price index, UP 0.5% for the month, has now posted a gain twelve months in a row. Most significantly, this price index includes distressed sales, which aren’t doing much to slow down the overall upward price trend. Finally, a Fannie Mae survey says Americans expect home prices to rise 2.9% in the next year, the highest forecast reported since 2010.

BUSINESS TIP OF THE WEEK… To foster innovation, focus on understanding what your customers want and then think of fresh ways to offer it to them.

>> Review of Last Week

JOBS DISAPPOINT, STOCKS FOLLOW SUIT… Friday, the March Employment Report came in with just 88,000 new jobs added during the month, way lower than analysts had estimated. This sent stocks solidly southward, with the S&P 500 and the Nasdaq suffering their worst weeks yet in 2013. The Dow fared a little better but still ended lower than the week before. The jobs letdown came on the heels of other disappointing economic data earlier in the week. Finally, North Korea was busy backing up its belligerent rhetoric by moving a pair of mid-range missiles into threatening positions.

The weak job growth in March came after February posted 268,000 new payrolls and January 148,000. Curiously, the unemployment rate dropped from 7.7% to 7.6%. This was the result of fewer people being counted in the workforce, probably because more have given up looking for jobs. In fact, the labor participation rate (63.3%!) is the lowest it’s been since 1979. If the March level of job creation continues, it will portend very slow economic growth indeed. All eyes economic will therefore be focused on April jobs numbers. Earlier in the week, ISM Indexes for Manufacturing and Services showed both sectors slowing, though still growing.

The week ended with the Dow down 0.1%, to 14565; the S&P 500 down1.0%, to 1553; and the Nasdaq down 1.9% 0.7%, to 3204.

The disappointing economic data plus the North Korean saber-rattling incited a flight to safety that produced strong gains for bonds. The FNMA 3.5% bond we watch ended the week up .94, at $106.13. Average fixed mortgage rates slipped back down a bit in Freddie Mac’s Primary Mortgage Market Survey, staying near historical lows. The Mortgage Bankers Association reported purchase loan applications up 2% for the week and up 4% versus a year ago.

DID YOU KNOW?… The Retail Sales report is a monthly measure of goods sold at retail. It doesn’t include money spent on services, so it represents less than half of total consumption. But it’s still considered a key indicator of economic health.

>> This Week’s Forecast

RETAIL STAGNANT, NO SURPRISES EXPECTED IN FED MINUTES…  Retail Sales are key because consumer spending accounts for such a huge part of the economy. March numbers are expected to show sales stagnating at the same level they were the month before.

The FOMC Minutes from the Fed’s March 20 meeting will be released Wednesday. Economists anticipate no surprises, but you never know, as individual FOMC member’s views are not always in concert with Chairman Bernanke’s. Michigan Consumer Sentiment for April is forecast to fall a little, understandable given the pace of this recovery.

>> 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 8 – Apr 12

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Economists take Fed Chairman Ben Bernanke at his word and expect no change in the Funds Rate with inflation at bay and unemployment well above the Fed’s 6.5% target. 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: