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.
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
>> 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%
Probability of change from current policy: