For the week of August 20, 2012 – Vol. 10, Issue 34


Texas Mortgage Market Update

QUOTE OF THE WEEK… “Nothing can be done without hope and confidence.” –Helen Keller, American lecturer and author

INFO THAT HITS US WHERE WE LIVE… Home builders last week showed plenty of evidence they are both hopeful and confident. July new Building Permits came in UP 6.8%, to an 812,000 annual rate. In fact, July saw the most single-family building permits filed since August 2008, the month before the Lehman collapse and the financial market meltdown. Versus a year ago, permits for single-family homes are now UP 23.0%.

Housing starts did slip a scant 1.1% from June to July, but they’re still UP 14.2% year-over-year. Housing starts have been rising on an annual basis since September 2011 and are now 56% above their April 2009 low point. No wonder builder confidence in the market for new single-family homes rose in August to its highest level in more than five years, as builders expect the housing recovery to continue. We’re not yet in positive territory above 50, but we’re getting there, with four straight upbeat months.

BUSINESS TIP OF THE WEEK… Successful people set concrete goals with a specific completion date: “I will contact 10 new prospects in the next 5 days.” Not: “I will make more new business calls when I get the chance.”

>> Review of Last Week

QUIETLY BULLISH… Stocks ended up again in a week marked by low volume and low volatility, as many traders were off on vacation, Europe’s debt crisis cooled down and our own economic data improved some. The net result had the Dow and the S&P 500 up for the sixth week in a row and the Nasdaq heading higher for its fifth week. The first news of the week was the best, with Retail Sales UP 0.8% in July after dropping three months in a row. At the same time, consumer prices stayed flat in July as measured by the CPI Consumer Price Index.

This good news that inflation remained in check was followed by overall industrial output growing 0.6% for the month. But manufacturing in the New York and Philadelphia regions were in negative territory, indicating contraction. Mixed messages also came with Initial Weekly Jobless Claims heading up to 366,000, but Continuing Claims declining to 3.05 million. Preliminary Michigan Consumer Sentiment for August surprised to the upside at 73.6, while the July Leading Economic Indicators index went up a better-than-expected 0.4%.

For the week, the Dow ended UP 0.5%, to 13275; the S&P 500 was UP 0.9%, to 1418; and the Nasdaq was UP 1.8%, to 3077. 

Economic data that came in better than had been feared, plus the lull in bad news from Europe kept investors comfortable with riskier stocks. This sent bond prices down. The FNMA 3.5% bond we watch ended the week off .88, at $104.24. Average mortgage rates nationally were mostly higher, with fixed rates edging up for the third week in a row. Rates are still well below levels of a year ago.

DID YOU KNOW?… Leading indicators change before the economy does and include things like building permits, inventory changes, money supply, production workweek, stock prices, and unemployment claims. The Fed keeps an eye on many of these.

>> This Week’s Forecast

JULY HOME SALES, FOMC MINUTES… We now get a full read on July home sales, with Existing Home Sales on Wednesday expected to be up a bit and New Home Sales on Thursday also inching ahead. Tuesday we’ll get a look at FOMC Minutes from the Fed’s last meeting on July 31. These will be closely parsed to see if anyone can tell when the central bank will be cranking up the printing presses for the next round of quantitative easing.

>> 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 Aug 20 – Aug 24

 Date Time (ET) Release For Consensus Prior Impact
Aug 21
14:00 FOMC Minutes 07/31 NA NA HIGH
Aug 22
10:00 Existing Home Sales Jul 4.55M 4.37M Moderate
Aug 22
10:30 Crude Inventories 08/18 NA –3.699M Moderate
Aug 23
08:30 Initial Unemployment Claims 08/18 365K 366K Moderate
Aug 23
08:30 Continuing Unemployment Claims 08/11 3.298M 3.305M Moderate
Aug 23
10:00 New Home Sales Jul 368K 350K Moderate
Aug 24
08:30 Durable Goods Orders Jul 2.5% 1.3% Moderate


>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… Economists do not believe the Fed will raise the Funds Rate until their stated goal of late 2014. 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
Sep 13 0%–0.25%
Oct 24 0%–0.25%
Dec 12 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Sep 13      <1%
Oct 24      <1%
Dec 12      <1%