For the week of September 10, 2012 – Vol. 10, Issue 37
 

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “One never notices what has been done; one can only see what remains to be done.”–Marie Curie, Polish-French physicist and chemist

INFO THAT HITS US WHERE WE LIVE… One of the key things remaining to be done to achieve a housing market recovery is a return to appreciating prices. Many observers feel prices have stabilized nationally and now we’re seeing the first signs of some increases. A national real estate website reports the asking prices for homes for sale were up in August for the seventh month in a row. This put them UP 2.3% versus a year ago, the largest year-over-year gain since the housing downturn began.

Excluding foreclosures, asking prices were UP 3.8% nationally for the year. This means they’re rising at a faster rate than wages, so affordability is no longer on the increase. The price gains are broadly based, showing up in 68 of the 100 largest metros tracked. Many feel a big reason for the improved housing market is the reduced inventory of homes for sale. According to the National Association of Realtors (NAR), inventory fell nationally 23.8% from a year ago July, to 6.4 months.

BUSINESS TIP OF THE WEEK… Productivity isn’t about how much you do, it’s about how much you finish. Each day, do the most important thing first. Then you’ll never have a day when you didn’t get something important done.

>> Review of Last Week

JOBS WEAK, STOCKS STRONG… All the major stock market indexes showed weekly gains that sent them to their highest levels in years, as a weak August jobs report got investors excited that the Fed would start another round of monetary stimulus. August non-farm payrolls increased 96,000, but this netted out to only 55,000 new jobs after downward revisions to June and July. Observers believe some firms are waiting until the election before deciding whether to hire and invest. The unemployment rate did dip to 8.1%, but the labor force declined by 368,000 people who are no longer looking for work.

Economic data was typically inconsistent. Productivity was up in Q2, but only 1.2% higher than last year. August ISM Manufacturing remained below 50, signaling contraction, yet ISM Non-Manufacturing showed the services sector modestly growing. Finally, fears about finances across the pond were calmed when the European Central Bank (ECB) backed up its promise to protect the euro by announcing a large bond-buying plan. This includes unlimited, sterilized purchases of sovereign debt if a country asks for assistance.

For the week, the Dow ended UP 1.6%, to 13307; the S&P 500 was UP 2.2%, to 1438; and the Nasdaq was UP 2.3%, to 3136. 

The run-up in stocks, plus the mixed economic data, put price pressure on bonds. The FNMA 3.5% bond we watch ended the week down .71, at $105.31. National average mortgage rates eased, but need to be watched. The ECB’s new bond buying program could hurt bond prices over here and raise mortgage rates. But more quantitative easing from the Fed could include mortgage bond purchases, which would keep mortgage rates down. Stay tuned.

DID YOU KNOW?… FOMC stands for Federal Open Market Committee, a 12-member group who sets credit and interest rate policies for the Federal Reserve System. It is made up of 7 members of the Fed Board of Governors plus Federal Reserve Bank Presidents from 5 of the 12 Fed Districts.

>> This Week’s Forecast

DEFICITS, INFLATION, RETAIL SALES, AND THE FED… The week’s reports begin with Tuesday’s July Trade Balance expected to show a continuing $40+ billion deficit. Thursday, we’ll see if the August Federal Deficit stays well over $100 billion. But inflation seems under control, as measured by both wholesale (Core PPI) and consumer (Core CPI) indexes. Retail Sales are predicted to grow a bit.

The week’s big focus is on Thursday’s FOMC meeting. The question is whether the Fed will begin another round of money printing–“quantitative easing”–to stimulate the economy. In the past they’ve used this to buy mortgage bonds, which keeps mortgage rates down.

>> 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 Sep 10 – Sep 14

 Date Time (ET) Release For Consensus Prior Impact
Tu
Sep 11		 08:30 Trade Balance Jul –$44.0B –$42.9B Moderate
W
Sep 12		 10:30 Crude Inventories 09/08 NA –7.426M Moderate
Th
Sep 13		 08:30 Initial Unemployment Claims 09/08 369K 365K Moderate
Th
Sep 13		 08:30 Continuing Unemployment Claims 09/01 3.300M 3.322M Moderate
Th
Sep 13		 08:30 Producer Price Index (PPI) Aug 1.2% 0.3% Moderate
Th
Sep 13		 08:30 Core PPI 09/01 0.2% 0.4% Moderate
Th
Sep 13		 12:30 FOMC Rate Decision 09/13 0%-0.25% 0%-0.25% HIGH
Th
Sep 13		 14:00 Federal Deficit Aug NA –$134.1B Moderate
F
Sep 14		 08:30 Retail Sales Aug 0.7% 0.8% HIGH
F
Sep 14		 08:30 Retail Sales ex-auto Aug 0.8% 0.8% HIGH
F
Sep 14		 08:30 Consumer Price Index (CPI) Aug 0.6% 0.0% HIGH
F
Sep 14		 08:30 Core CPI Aug 0.2% 0.1% HIGH
F
Sep 14		 09:15 Industrial Production Aug –0.2% 0.6% Moderate
F
Sep 14		 09:15 Capacity Utilization Aug 79.2% 79.3% Moderate
F
Sep 14		 09:55 Univ. of Michigan Consumer Sentiment Sep 73.3 74.3 Moderate
F
Sep 14		 10:00 Business Inventories Jul 0.4% 0.1% Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… Economists do not expect the Fed to touch the Funds Rate well into the future. The big question about this week’s meeting is whether they will announce another round of quantitative easing. 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%