For the week of April 26, 2010 – Vol. 8, Issue 17
>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE The week ended on the most dramatically impressive new home sales numbers in 47 years. March’s 26.9% increase was the biggest monthly sales gain since 1963, taking us to a 411,000 annual rate! Supply dropped to 6.7 months, inventories fell to 228,000 and the median price went to $214,000, up 4.3% versus last year. Some put the sales surge to the soon-to-expire tax credit, but the facts remain that the economy IS recovering and homes ARE substantially more affordable!

The day before, March existing home sales came in UP 6.8% at a 5.35 million annual rate, UP 16.1% from a year ago, with all regions showing gains! The existing home median price went to $170,700, UP 0.4% from a year ago. These good numbers reversed a three-month slide and sent the supply of existing homes down to 8.0 months.

On April 22, the EPA’s new lead paint renovation rules went into effect. These require contractors who are disturbing lead-based paint in homes built before 1978 to hire certified renovators working for a certified renovator firm using lead-safe work practices. Realtors need to advise sellers to use certified professionals to fix up a home and to make sure it’s safe for buyers to move into a home that’s been renovated. The real estate disclosure must include any tests for the presence of lead paint and any dust wipe testing done after lead paint’s been disturbed. Property managers with pre-1978 homes must also hire certified renovators. Find more info at http://www.realtor.org/government_affairs/lead_paint_main. Or visit the EPA at http://www.epa.gov/lead/pubs/renovation.htm.

>> Review of Last Week

RALLY CAPS BACK ON… After the prior week’s flat stock market performance due to the Goldman Sachs-SEC troubles at the end, this week saw investors resume their 13-month-long market rally. The Dow is now firmly in 11,000 territory, the S&P 500 passed the 1200 mark and the Nasdaq crossed over 2500.

First quarter corporate earnings certainly fueled the enthusiasm. Most of the 85 S&P 500 companies reporting beat both profit AND revenue expectations, meaning the good numbers weren’t just from belt-tightening. Big stars included Amazon.com, American Express, Apple, Citigroup, IBM, McDonald’s, Microsoft, SanDisk, Starbucks and UnitedHealth, all with nice Q1 earnings.

The Leading Economic Indicators (LEI) index registered its twelfth consecutive monthly gain, up 1.4% in March. The Producer Price Index (PPI) put wholesale inflation up 0.7% for March, but Core PPI, excluding volatile food and energy, was up only 0.1% for the month and 0.9% for the year. New weekly unemployment claims were down 24,000, while continuing claims dropped by 40,000. Excluding volatile transportation, Durable Goods orders were up 2.8% for the month and up 13.5% over a year ago.

For the week, the Dow ended UP 1.7%, to 11204.28; the S&P 500 was UP 2.1%, to 1217.28; while the Nasdaq went UP 2.0%, to 2530.15.

Last week’s improved economic data, along with Greece’s move away from disaster, hurt bond prices, which tend to benefit from weak economic developments. Investors were also looking ahead to the huge levels of supply on offer this week. The FNMA 30-year 4.5% bond we watch closed down 41 basis points for the week, at $100.09. As reported in Freddie Mac’s weekly survey, national average mortgage rates stayed flat, still at historically low levels!

>> This Week’s Forecast

THE FED, THE Q1 GDP… The Fed meets again this week, announcing their FOMC Rate Decision on Wednesday. Even though the economy is picking up, virtually no one expects a rate hike, given Fed Chairman Ben Bernanke’s recent pronouncements on Capital Hill. We’ll have a new look at the economy with Advance Q1 GDP on Friday. The only housing news comes Tuesday, with February’s Case-Shiller home price index. We’ll also get Consumer Confidence on Tuesday and University of Michigan Consumer Confidence on Friday.

>> 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 April 26 – April 30

Date Time (ET) Release For Consensus Prior Impact
Tu

Apr 27

 10:00 Consumer Confidence Apr 53.7 52.5 Moderate
W

Apr 28

 10:30 Crude Inventories 4/24 NA 1.89M Moderate
W

Apr 28

 14:15 FOMC Rate Decision 4/28 0%–0.25% 0%–0.25% HIGH
Th

Apr 29

 08:30 Initial Unemployment Claims 4/24 440K 456K Moderate
Th

Apr 29

 08:30 Continuing Unemployment Claims 4/17 4.625M 4.646M Moderate
F

Apr 30

 08:30 GDP–Adv. Q1 3.2% 5.6% Moderate
F

Apr 30

 08:30 GDP Chain Deflator–Adv. Q1 0.9% 0.5% Moderate
F

Apr 30

 08:30 Employment Cost Index Q1 0.5% 0.5% HIGH
F

Apr 30

 09:45 Chicago PMI Apr 59.8 58.8 HIGH
F

Apr 30

 09:55 Univ. of Michigan Consumer Sentiment Apr 71.5 69.5 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Even though the economy is improving, the experts are taking Fed Chairman Bernanke at his word. To keep the recovery going, he wants to hold rates down as long as inflation remains in check — and so far, so good on that front. 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
Apr 28 0%–0.25%
Jun 23 0%–0.25%
Aug 10 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Apr 28 <1%
Jun 23 6%
Aug 10 18%