INFO THAT HITS US WHERE WE LIVE Mortgage rates, already at historically low levels, have been sliding even further the last few weeks. Nonetheless, the Mortgage Bankers Association's Weekly Mortgage Applications Survey showed purchase applications down a bit from the week before.
But happily, applications for conventional purchase loans are actually at their highest level since the start of May, following the home buyer tax credit expiration on April 30. Of course, with today's super low rates, demand for refinancings are also up -- a healthy 24% over the week before, with refinance application volumes now close to their highest level all year.
>>> Review of Last Week
ANOTHER WEEK UP... Yup, the stock market maintained its steady cruise upward, begun in September and continuing now for the first two weeks in October. Investors on Wall Street seem to be staying in positive, if cautious mode. The economy sends mixed signals, but stocks push relentlessly upward. All three major market indexes were up for the week, with the tech-heavy Nasdaq leading the pack, delivering a very strong 2.8% gain, helped by good Q3 numbers from Intel and Google!
On the negative side, the trade deficit expanded by $3.8 billion in August to $46.3 billion, which was larger than anticipated. New claims for unemployment insurance also increased by 13,000. Continuing claims, however, dropped to their lowest level in almost two years, but it's unfortunately still a big number, at 4.399 million. Wholesale inflation inched ahead a bit, with the Producer Price Index up 0.4% in September and up 4.0% compared to a year ago. This, of course, isn't great, although worries about deflation should be less in the headlines.
For good news, we saw consumer inflation stay well under control, with consumer prices edging up just 0.1% in September. This was less than expected and up only 1.1% versus a year ago, well within the Fed's guidelines. Core consumer prices, which leave out food and energy, were unchanged for the month. These steady prices may be why retail sales were up 0.6% for the month, better than expected and giving evidence the consumer is trying to help the recovery.
For the week, the Dow ended UP 0.5%, to 11062.78; the S&P 500 was also UP 0.9%, to 1176.19; and the Nasdaq was UP 2.8%, to 2468.77.
It was a volatile week in the bond market, but prices held up well enough in certain areas. The FNMA 30-year 4.0% bond we watch ended down just 6 basis points for the week, closing at $103.00. Freddie Mac's weekly survey showed national average mortgage rates for most mortgages trickling lower for another week, staying at historically low levels.
>>> This Week’s Forecast
BUILDING PRODUCTS, BUILDING HOMES...This week's economic reports begin and end with manufacturing readings, which are expected to still show a slow recovery. Monday's Industrial Production and Capacity Utilization are expected to stay flat for September. Thursday we get the Philadelphia Fed Index of the state of manufacturing in that region, forecast to nudge up into positive territory.
In addition to building products, we'll also get a look at building homes. Tuesday's September Housing Starts should be down a bit from August and still hovering at a modest rate below 600,000. September Building Permits, showing how builders are feeling further out, are expected to be slightly under the Housing Starts number, indicating still cautious attitudes in that industry.
>>> 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 October 18 – October 22
>>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months With Fed chairman Ben Bernanke last Friday all but promising a second round of quantitative easing (QE-2), economists do not expect the Fed Funds Rate to move off its rock bottom level for quite some time. 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:
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© 2010 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender.
INFO THAT HITS US WHERE WE LIVE With all the conflicting opinions about the housing market, we found this recently published article in the Wall Street Journal to be quite helpful. It's title says it all, "10 Reasons to Buy a Home."
Last Monday, the National Association of Realtors (NAR) reported its August Pending Home Sales index UP 4.3% over the prior month. But this measure of signed contracts on existing homes was down 20.1% compared to a year ago. The NAR's current economic forecast looks to a 6.4% drop in existing home sales for 2010 compared to 2009, putting the volume at 4.82 million, and the median existing home price UP 0.2%, to $172,900. This is a smaller drop and a greater price rise than previously predicted.
On the new homes front, the NAR projects sales off 13.4% for the year to 325,000, although housing starts will be UP 11.3% while the new home median price will dip 0.4% to $215,000. But the NAR projects new home sales UP a whopping 28.9% for 2011 and 28% in 2012, with the median price UP 2.4% next year and 4.9% the year after that. Finally, the President last week signed a bill that keeps in place today's higher loan limits for Fannie Mae and Freddie Mac guaranteed loans and FHA multifamily programs.
>>> Review of Last Week
DOW AT 11 THOU... Stocks went up and down all week as investors on Wall Street tried to figure out if it was smarter to be betting on the economy or against it. The economic data coming from the government and corporations pointed opposite ways, but UP was the direction that ultimately prevailed. As a result, the Dow crossed over the 11,000 threshold for the first time since May, as all three major market indexes showed gains for the week and were up from 4.5% to almost 6% for the year.
It was nice to see Pending Homes Sales ahead for the month, but the 20% drop year-over-year indicates that the housing market still awaits real recovery. Then the week ended with a disappointing September employment report showing payrolls down by 95,000 for the month. This was all due to heavy layoffs in government jobs, as the private sector showed a gain of 64,000 jobs, which was OK, but a bit less than expected. The unemployment rate held at 9.6%
On the good news side, the ISM Services index rose above expectations in September, showing slow but still steady expansion in the non-manufacturing sector of the economy. There were also better-than-expected earnings reports from Alcoa, Yum! Brands, and Costco, with PepsiCo's Q3 numbers in line with expectations. But some observers felt the biggest push to the upside was investors' increasing certainty that the Fed will move soon to stimulate the economy with QE-2, its second round of quantitative easing. Of course, negative economic numbers increase chances that the Fed will act sooner.
For the week, the Dow ended UP 1.6%, to 1106.48; the S&P 500 was also UP 1.6%, to 1165.15; and the Nasdaq was UP 1.3%, to 2401.91.
Prices were strong in the bond market and held up, even with some profit-taking at the end of the week. The FNMA 30-year 4.0% bond we watch ended UP 79 basis points for the week, closing at $103.06. National average mortgage rates for most mortgages tracked in Freddie Mac's weekly survey remain at historically low levels.
>>> This Week’s Forecast
THE FED'S THOUGHTS, INFLATION, RETAIL... Tuesday we have the minutes from the Fed's last FOMC meeting a few weeks ago. The economic experts are sure to pore over the dialogue to see when the central bank may go for another round of quantitative easing ("QE-2"). This will keep rates low, but could lead to more inflation later on, which could drive more people into the housing market.
Wholesale inflation for September is measured with Thursday's Producer Price Index (PPI), but more important are Friday's CPI readings on consumer inflation. These are all expected to remain in benign territory, where they've resided for some time. Friday's Retail Sales numbers will tell us more about the consumer's contribution to the recovery, but they're expected to show more modest gains than previously reported. All this indicates a slowing of the recovery, but at least we're not falling back into recession.
>>> 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 October 11 – October 15:
>>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months There's more talk about the Fed helping the economy along with a second round of quantitative easing (QE-2). Consequently, economists expect the Fed Funds Rate to stay at its rock bottom level well into next year. 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:
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© 2010 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender.
INFO THAT HITS US WHERE WE LIVE Last week's housing market data centered on Standard & Poor's S&P/Case-Shiller Home Price Index. This showed home prices UP in July for the fourth month in a row, but the pace of their gain had slowed from prior months. With the expiration of the government's home buyer tax incentives, some observers wonder if the S&P/Case-Shiller will keep moving up. The composite 20-city index, a broad measure of U.S. home prices, showed a 3.2% increase year over year, the sixth month in a row it posted an annual gain.
Nonetheless, home price gains did slow in the waning days of the tax credits. In July, only 12 of the 20 cities surveyed showed price gains, compared to 17 cities reporting rising prices in June. Analysts pointed out that these results underscore the fact that the spring/early summer months are the best for home sales. Most experts feel the next few months should give us a better idea of the true strength of the housing market.
>>> Review of Last Week
A BIT OF A BREATHER... Investors on Wall Street took a rest last week from bidding stock prices up the way they had earlier in the month. Performance of the major market indexes was uninspiring, though slippages were all less than a half a percent. But performance for the month was impressive. The broad-based S&P 500 index, favored by professional investors, shot up 8.8% for September, its best monthly gain since April 2009 and its best September reading in over 70 years.
Perhaps investors took the week off because they remain cautious about the near-term economic recovery. Consumers seem to agree, as the week began with a surprise drop in September's Consumer Confidence Index, which hit a seven-month low, falling far short of consensus expectations. The ISM Manufacturing Index also slid a bit from August to September, missing estimates, but remaining in expansion territory.
Upside economic data included better than forecast weekly initial jobless claims, although 453,000 is still not a good number. Continuing claims dropped by 83,000 for the week, but that number remains well above 4 million. Personal income and spending (PCE) for August were up better than expected and Core PCE was up just 0.1%, so inflation is still in check.
For the week, the Dow ended down 0.3%, to 10829.68; the S&P 500 was down 0.2%, to 1146.24; and the Nasdaq was off 0.4%, to 2370.75.
The bond market ended the week with investor interest helping prices in some areas. One was the FNMA 30-year 4.0% bond we watch, which ended UP 10 basis points for the week, closing at $102.27. According to Freddie Mac's weekly survey, national average mortgage rates for fixed-rate mortgages dropped a tad, remaining at historically low levels.
>>> This Week’s Forecast
WHERE WE'RE GOING WITH HOMES AND JOBS... The week begins with August Pending Home Sales, which count signed contracts and therefore tell us what will be happening with closings a few months out. Unfortunately, the consensus expects the August reading to be down a bit from July. But September ISM Services is expected to show the non-manufacturing sector still indicating expansion, with a reading just over 50.
The week ends with the September Employment Report and the forecast is for no increase in payrolls overall, although 70,000 jobs are expected to be added to the private sector. However, population growth outpaces this rate of job creation, so unemployment is predicted to tick up to 9.7%.
>>> 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 October 4 – October 8
>>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months There's been a lot of talk about the Fed's readiness to provide a second round of quantitative easing (QE-2) if needed. This has led economists to believe that the Fed Funds Rate will remain at its rock bottom levels for quite some time. 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:
© 2010 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender.
