Texas Mortgage Market Update – For the week of January 28, 2013

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “There’s no one to stop you but yourself.”–Dave Thomas, founder of Wendy’s and philanthropist

INFO THAT HITS US WHERE WE LIVE… There’s not much that’s stopping the housing market from steadily moving forward. For 2012, the National Association of Realtors reported existing home sales UP 9.2% to 4.65 million units, flirting with levels not seen since 2007’s 5.03 million homes. The median existing home price is UP 11.5% from December a year ago, the tenth month in a row of year-over-year gains. For 2012, the median price was UP 6.3%, the largest annual price gain since 2005! Completing the picture, although down in December, New Home Sales posted a 19.9% annual gain, their first  in 7 years. The median sales price for 2012 was UP 7.2% over 2011, while the FHFA index of prices for homes financed with conforming mortgages is UP 5.6% in the past year.

CORRECTION: Last week’s coverage of homeowner tax benefits from the “fiscal cliff” agreement should have read: “Mortgage principal reductions or cancellations by lenders will NOT be treated as ordinary income to homeowners.” This tax break, which had been scheduled to expire 12/31/12, is good news for those receiving principal balance reductions from loan modifications, short sales, deeds-in-lieu, or foreclosures. NOTE: Always consult a tax professional for the definitive answer to any tax question.

BUSINESS TIP OF THE WEEK… Life rewards action. Instead of worrying about that big hill you’re climbing, commit to one small step you can take today and focus on that. Call a former client, work on your weekly blog post, or just get yourself clear on the next action to take.

>> Review of Last Week

WALL STREET WINNING STREAK… The broadly-based Standard & Poor’s 500 stock price index had been up eight days in a row as of Friday, its longest winning streak since November 2004. Even better, the S&P 500 closed for the week above the 1500 threshold for the first time since December 2007, before the recession began. The week’s upward impetus was provided by generally upbeat Q4 corporate earnings, the big exception being Apple’s disappointing report. Folks were also happy to see German business confidence up more than expected, a sign that Europe’s biggest economy is on the mend.

There were precious few economic reports to dampen the enthusiasm, although the ones we saw carried the usual mixed messages. The Richmond Fed index of mid-Atlantic manufacturing showed contraction. Housing numbers are covered above. New unemployment claims dropped to 330,000, their lowest level in 5 years, while continuing claims fell to 3.16 million.

The week ended with the Dow UP 1.8%, to 13896; the S&P 500 UP 1.1%, to 1503; and the Nasdaq UP 0.5%, to 3150.

The light week of economic data and the move by investors into risk assets led to selling in the bond market, sending prices southward. The FNMA 3.5% bond we watch ended the week down .83, at $105.18. National average fixed mortgage rates inched up, but still stayed near historical lows in Freddie Mac’s Weekly Survey. Purchase loan applications surged, according to the Mortgage Bankers Association, UP 26% versus the same time a year ago.

DID YOU KNOW?… A survey  by the National Association of Home Builders (NAHB) put builder confidence at the highest level since April 2006.

>> This Week’s Forecast

PENDING HOME SALES, THE FED, GDP, INFLATION, MANUFACTURING, JOBS… This week tells us about lots of things economic, but the forecasts are mixed. December Pending Home Sales should be down a bit and Wednesday’s FOMC Rate Decision is expected to be unchanged, but the Fed’s policy statement will be scrutinized for its economic prognostications. Earlier that day, we’ll see an actual economic reading. Unfortunately, Q4 Advanced GDP is predicted to come in at a measly 1% annual growth rate.

Inflation is forecast to stay in check, as measured by Core PCE Prices, while the ISM Index of manufacturing should come in just over 50, showing expansion. The week concludes with its final biggie, Friday’s December Employment Report. A gain of 180,000 new payrolls is predicted, enough to drop the Unemployment Rate a tenth of a percent.

>> 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 Jan 28 – Feb 1

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed is expected to continue to keep the Funds Rate at its super low level at this week’s FOMC Meeting. 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: