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Monday, November 22, 2010

Inside Lending Newsletter From Theron Wall

Inside Lending from Theron Wall

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Theron Wall

Theron Wall
Branch Manager
3615 Crossings Dr, Suite A
Prescott, AZ 86305
Phone: (928) 778-7167
Mobile: (928) 533-7473
Fax: (928) 445-5308

Wallick & Volk Mortgage

For the week of November 22, 2010 – Vol. 8, Issue 47

>> Market Update 

INFO THAT HITS US WHERE WE LIVE  The Commerce Department reported last Wednesday that Housing Starts dropped 11.7% in October. This put them at a seasonally adjusted annual rate of 519,000, their lowest level in 18 months. But most of the fall off came from a 43.5% decline in multifamily construction, a volatile part of the market. Single-family building, accounting for more than 80% of all starts, was off just 1.1%, to 436,000 units. And September single-family starts were revised UP to a 2.1% gain. Meanwhile, Building Permits, which reflect builders' views of the future, were UP 0.5% to 550,000, another hopeful sign.

National average mortgage rates edged up in both Freddie Mac and Mortgage Bankers Association (MBA) weekly reports. The MBA felt rates rose because of "stronger economic data and lingering uncertainty regarding the structure and impact of the Fed's QE2 program." This Fed plan to buy $600 billion in bonds in a second round of quantitative easing was supposed to push rates down, stimulating the economy by making borrowing more affordable. But some investors fear QE2 will spark inflation, which pushes mortgage bond prices down and mortgage rates up. People looking to buy or refinance should probably not drag their feet waiting for lower rates that may never happen.

>> Review of Last Week

FLAT... The week on Wall Street saw a big drop in stock prices Tuesday, followed by a big gain on Thursday, but when all was said and done, the week ended virtually flat for all three market indexes. This, however, was a big improvement over the prior week's big declines for all the indexes.

Negative influences on the proceedings included the drop in Housing Starts covered above, along with the unexpected rise in mortgage rates after the start of the Fed's bond buying program. But once you got past those items, you had to go overseas to find more downers, which were basically continuations of last week's concerns. Investors don't like Chinese inflation threatening a rise in interest rates over there, or the increasing possibility of a bailout for the Irish banks. 

But back over here, we did have some goodies going on. Retail sales were UP 1.2% in October, following a September gain that was upwardly revised to 0.7%. Could other positive economic surprises be on the way? Inflation came in tame, with the Consumer Price Index up just 0.2% for October and Core CPI up only 0.6% year-over-year, the smallest inflation increase in the index's history, dating back to 1957! Initial jobless claims held at under 450,000 for the second week in a row, still too high but showing that the labor market is better than it's been. The General Motors IPO gave back over $13 billion of the money taxpayers put in to prevent a GM bankruptcy.

For the week, the Dow was up just 0.1%, to 11203.55; the S&P 500 was flat, up only a fraction of a point, to 1199.73; and the Nasdaq was also flat, down a fraction of a point, to 2518.12.


The bond market had an up and down week of it, with prices under pressure on some issues at the end. The FNMA 30-year 4.0% bond we watch ended down 89 basis points for the week, closing at $101.17. This downward action in mortgage bond prices sent national average rates for fixed-rate mortgages up a tad for the week, as mentioned above.

>> This Week’s Forecast

TWO PACKED DAYS... Thanksgiving  shortens the week, so a slew of economic reports get packed into Tuesday and Wednesday. We start with Second Estimate Q3 GDP, expected to edge up from the preliminary reading. Existing Home Sales for October should show a slight drop in the annual rate. Also Tuesday, the Minutes of the FOMC meeting of the Fed on November 3, could give more insight into the economic recovery.

Wednesday kicks off with Core PCE Prices, expected to inch up a tad, but still within the Fed's comfort zone for inflation. No need for them to curtail their QE2 bond-buying! Durable Goods Orders are forecast down a little for October, while Initial Unemployment Claims for the week should remain at their currently lower levels. Happily, New Home Sales for October are projected up a tad and let's hope the experts have that right.... Happy Thanksgiving!

>> 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 November 22 – November 26

 Date

Time (ET)

Release

For

Consensus

Prior

Impact

Tu
Nov 23

08:30

GDP – Second Estimate

Q3

2.4%

2.0%

Moderate

Tu
Nov 23

08:30

GDP Deflator – Second Estimate

Q3

2.3%

2.3%

Moderate

Tu
Nov 23

10:00

Existing Home Sales

Oct

4.42M

4.53M

Moderate

Tu
Nov 23

14:00

Minutes of the FOMC Meeting

11/3

NA

NA

HIGH

W
Nov 24

08:30

Personal Income

Oct

0.4%

–0.1%

Moderate

W
Nov 24

08:30

Personal Spending

Oct

0.5%

0.2%

HIGH

W
Nov 24

08:30

Core PCE Prices

Oct

0.1%

0.0%

HIGH

W
Nov 24

08:30

Durable Goods Orders

Oct

–0.3%

3.3%

Moderate

W
Nov 24

08:30

Initial Unemployment Claims

11/20

442K

440K

Moderate

W
Nov 24

08:30

Continuing Unemployment Claims

11/13

4.280M

4.295M

Moderate

W
Nov 24

09:55

U. of Michigan Consumer Sentiment – Final

Nov

69.4

69.3

Moderate

W
Nov 24

10:00

New Home Sales

Oct

312K

307K

Moderate

W
Nov 24

10:30

Crude Inventories

11/20

NA

–7.29M

Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months  With last week's CPI readings showing inflation very mild indeed, economists expect the Fed Funds Rate to stay low as the Fed continues its $600 billion bond buying program through the first half of 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%

After FOMC meeting on:

Consensus

Dec 14

0%–0.25%

Jan 26

0%–0.25%

Mar 15

0%–0.25%


Probability of change from current policy:

After FOMC meeting on:

Consensus

Dec 14

     <1%

Jan 26

     <1%

Mar 15

     <1%

 

This e-mail is an advertisement for Theron Wall. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Wallick & Volk Mortgage and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Wallick & Volk Mortgage. BK 0018295 NMLS #256412



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