For the week of September 17, 2012 – Vol. 10, Issue 38


>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it.”–Ray Kroc, creator of McDonald’s

INFO THAT HITS US WHERE WE LIVE… Today’s home buyers seem to be in the right place at the right time, as our already super low mortgage rates may go even lower. The impetus for this comes from the Fed’s announcement last Thursday that they will purchase $40 billion a month of mortgage backed securities guaranteed by Fannie Mae and Freddie Mac. This is to keep downward pressure on interest rates to help boost the housing recovery. One observer expects to see “the lowest 30-year rates ever.” Smart buyers will no doubt do something about that.

Economists say the housing market bottomed out this summer and they expect improvement in 2013. Even though Consumer Confidence in August dipped to its lowest level since late 2011, Fannie Mae reported that 73% of Americans who were polled think it’s a good time to buy a home. Harvard University’s recent “State of the Nation’s Housing” report sees “definitive signs of a turnaround.” The situation has improved for sellers too, as lower inventories of homes for sale are making price cuts less common and homes sell for near asking prices.

BUSINESS TIP OF THE WEEK… You can accomplish wonderful things with a positive comment. Say thank you or offer a compliment whenever you can. Mark Twain quipped, he could live for two months on a good compliment!

>> Review of Last Week

THE FED FIRES UP THE STREET… The Fed’s “quantitative easing” bond buying program mentioned above got investors excited enough to give stocks their second straight week of gains. The Dow ended at its highest close since December 2007, while the Nasdaq reached a level it hadn’t seen since November 2000. Investor optimism aside, many economists doubt that this third money printing effort by the Fed will do all that much to help the economy. Jobs continue to be the big prob, as new unemployment claims hit 382,000 last week, the most in two months.

Industrial production contracted more than expected in August, but, hey, the Michigan Consumer Sentiment Index was up for September, many feel because of rising stocks and home prices. Retail Sales also rose in August, yet so did the cost of living, as reflected by increased gasoline prices. All this was verified by the Consumer Price Index (CPI) coming in up 0.6% for August. Still, the CPI is up only 1.7% from a year ago, well within the Fed’s inflation guidelines.

For the week, the Dow ended UP 2.2%, to 13593; the S&P 500 was UP 1.9%, to 1466; and the Nasdaq was UP 1.5%, to 3184. 

Many bonds got hammered by the run-up in stocks. But the new quantitative easing (“QE3”) announced by the Fed includes mortgage bond purchases, which should keep those prices up and mortgage rates down for a while longer. The FNMA 3.5% bond we watch ended the week UP .76, at $106.07. National average mortgage rates remained near record lows. Demand for purchase loans for the week was up a seasonally adjusted 8% over the prior week and up 7% versus a year ago.

DID YOU KNOW?… Initial Unemployment Claims track the number of Americans filing for unemployment benefits for the first time. As that number increases or decreases from week to week, economists gauge how the jobs market is doing.

>> This Week’s Forecast

MANUFACTURING, HOME BUILDING, HOME SALES… After recent slowdowns in factory activity, the New York Empire and Philadelphia Fed Manufacturing Indexes should improve for September, although both still show contraction.

Wednesday, we’ll get a pretty good picture of the August housing market. Housing Starts are forecast up, reflecting builders’ increasing confidence in developing properties to sell or rent. They do remain cautious, though, as Building Permits are off a bit. Existing Home Sales are predicted up for August, steadily if slowly heading back to 5 million units.

>> 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 17 – Sep 21

 Date Time (ET) Release For Consensus Prior Impact
Sep 17
08:30 NY Empire Manufacturing Index Sep –3.0 –5.9 Moderate
Sep 19
08:30 Housing Starts Aug 772K 746K Moderate
Sep 19
08:30 Building Permits Aug 800K 812K Moderate
Sep 19
10:00 Existing Home Sales Aug 4.58M 4.47M Moderate
Sep 19
10:30 Crude Inventories 09/15 NA 1.994M Moderate
Sep 20
08:30 Initial Unemployment Claims 09/15 375K 382K Moderate
Sep 20
08:30 Continuing Unemployment Claims 09/08 3.292M 3.283M Moderate
Sep 20
10:00 Philadelphia Fed Manufacturing Index Sep –5.0 –7.1 HIGH
Sep 20
10:00 Leading Economic Indicators (LEI) Index Aug 0.0% 0.4% Moderate


>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… Last Thursday the Fed extended its commitment to keeping the Funds Rate at exceptionally low levels “at least through 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%

After FOMC meeting on: Consensus
Oct 24 0%–0.25%
Dec 12 0%–0.25%
Jan 30 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Oct 24      <1%
Dec 12      <1%
Jan 30      <1%