|For the week of October 29, 2012 – Vol. 10, Issue 44|
>> Texas Mortgage Market Update
QUOTE OF THE WEEK… “Action may not always bring happiness; but there is no happiness without action.” –Benjamin Disraeli, British politician
INFO THAT HITS US WHERE WE LIVE… The rest of the economy may be barely moving forward, but there’s clearly some action in the housing market. New single-family home sales were up 5.7% for September and up 27.1% over a year ago. The seasonally adjusted annual rate of 389,000 units is the strongest sales pace since April 2010. The median sales price was $242,400, up almost 12% versus a year ago. 145,000 new homes were on the market, a 4.5 months’ supply at the current sales rate, down from a record 12.1 months in January 2009.
Following this news, the National Association of Realtors (NAR) Pending Home Sales index was up 0.3% in September after a 2.3% August decline. This measure of contracts signed on existing homes is up 14.5% over a year ago, posting the 17th month in a row of annual gains. The NAR’s chief economist feels that this steady year-over-year increase “is pointing in the right direction.” The FHFA index of prices for homes financed with conforming mortgages was up 0.7% in August, up 4.8% from a year ago, and up at an 8.9% annual rate the last 6 months.
BUSINESS TIP OF THE WEEK… Successful people are optimists, always seeing the cup half full. They keep a positive attitude and believe in their ability to achieve their goals.
>> Review of Last Week
OOPS, THEY DID IT AGAIN!… “They” are corporations reporting Q3 earnings. And just like the week before, those earnings on the whole failed to impress investors, who sent all three stock indexes down. With solid companies reporting basically negative revenue growth, Wall Street interpreted that as an indicator the global economy is slowing down. For the U.S. economy, the first estimate of Q3 GDP growth came in at a very modest 2.0% annual rate. The Fed policy statement added, “growth in employment has been slow, and the unemployment rate remains elevated.”
Durable goods orders headed up 9.9% in September, bouncing back after their steep drop in August. But the Richmond Fed index, tracking mid-Atlantic manufacturers, dropped to –7 in October from +4 the prior month. Manufacturing reports have been mixed, reflecting halting growth in that sector. Initial jobless claims for the week came in at 369,000, down from the week before, but still a long way from the recovery economists are looking for. The week ended with Michigan Consumer Sentiment for October up from the month before.
For the week, the Dow ended down 1.8%, to 13107; the S&P 500 was down 1.5%, to 1412; and the Nasdaq was down 0.6%, to 2988.
When stocks are under pressure, bond prices usually take off, but this week they were little changed. The FNMA 3.5% bond we watch ended the week up .04 at $106.12. Freddie Mac’s Primary Mortgage Market Survey showed national average mortgage rates edging up during the week, but still near historic lows. Purchase loan demand was down slightly, but still up 7% from a year ago.
DID YOU KNOW?… There were 38,000 completed new homes for sale in September. This was the lowest level for that stat since the Census Bureau started tracking it in 1973.
>> This Week’s Forecast
INFLATION, MANUFACTURING, OCTOBER JOBS… The Fed’s favorite inflation measure, Core PCE Prices, leads off the week. It excludes food and energy and is expected to remain within the central bank’s guidelines. The Chicago PMI is forecast to come in just above 50 for the Midwest, the same as the overall ISM Index, indicating a slight expansion in manufacturing activity.
The October Employment Report caps off the week. Nonfarm payrolls are predicted not much higher than last month’s, at 125,000. The unemployment rate is expected to inch back up to 7.9%, well above the level needed for a jobs 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 Oct 29 – Nov 2
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… At last week’s meeting, the Fed did not touch the Funds Rate and confirmed they want to keep it 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%
Probability of change from current policy: