Inside Lending Newsletter From Theron Wall

 

visit my website     email me now Theron Wall Branch Manager 3615 Crossings Dr, Suite A Prescott, AZ 86305 Phone: (928) 778-7167 Mobile: (928) 533-7473 Fax: (928) 445-5308 For the week of December 20, 2010 – Vol. 8, Issue 51 >> Market Update  INFO THAT HITS US WHERE WE LIVE  Last Thursday it was good to see that Housing Starts picked up for November, rising 3.9% for the month to an annual rate of 555,000 units. This beat expectations and was especially gratifying because all the gain came from a 6.9% increase in single-family starts. These have now been up three out of the last four months. Multi-family starts were down for the fourth month in a row, but these are very volatile on a monthly basis. In fact, the 12-month moving average for multi-family starts is still trending higher, up 5.9% compared to a year ago. The demand for multi-unit residences should continue to grow, which is why some observers foresee a large rebound in multi-unit construction in the new few months. Although there are still excess housing inventories, they are falling quickly and experts expect them to drop further, even with a home building recovery. >> Review of Last Week THREE IN A ROW... Investors sent stocks higher for the third straight week on Wall Street. The markets weren't exactly on fire, as volumes were low, which is typical for this time of year, and investors remain guardedly optimistic, which has been their attitude since last month's elections. As happens so often, the week's festivities were driven by the economic headlines and there certainly were plenty to ponder.  The consumer appears to be showing up for the holidays, as retail sales went up 0.8% in November, up 1.2% excluding autos. Including revisions to September and October numbers, overall sales were up 1.5% for the month. Retail is now UP 7.7% over a year ago, and sales are up at a 12% annual rate for the past five months! On the worrisome side, the November Producer Price Index (PPI) showed wholesale inflation up 0.8%, although the Consumer Price Index (CPI) rose a benign 0.1%. Consumer prices are up 1.1% over a year ago, which is good, but wholesale prices are up 3.5% for the year, which isn't so good if you want to keep inflation in check and interest rates down. The jobs recovery is key to the housing rebound, so it was good to see new unemployment claims falling again last week, to 420,000. This beat expectations and was the second lowest number this year for weekly claims, which have now fallen three times in the last four weeks. The Philadelphia Fed index showed manufacturing continues to grow in that region, as it was up nicely for December. Likewise, the Empire State index showed New York manufacturing coming back strong in December after last month's dip. November Industrial Production rose above expectations and capacity utilization showed factories at their highest volume levels since October 2008. For the week, the Dow was UP 0.7%, to 11491.91; the S&P 500 was UP 0.3%, to 1243.91; and the Nasdaq was UP 0.2%, to 2642.97. With investors feeling more upbeat about the economy, money flowed into stocks and out of the bonds that fund most mortgage loans. The FNMA 30-year 4.0% bond we watch ended down 78 basis points for the week, closing at $98.22. This inched mortgage rates higher once again. Freddie Mac's weekly survey of conforming mortgages had the average 30-year fixed-rate mortgage rate up for the fifth week in a row. Rates are still historically low, but people looking to purchase or refinance should be aware that the low-rate party may soon be over. >> This Week’s Forecast HOUSING, INFLATION AND THE OVERALL ECONOMY... This week we get to see how the economy is coming along in some key areas. We track the housing recovery with Wednesday's Existing Home Sales and Thursday's New Home Sales, both expected to be up a bit for November. Continuing the theme of a steady if slow recovery, the third estimate of GDP should show the overall economy growing at a 2.7% annual rate, up from the prior 2.5% estimate. Again, a slower rate of growth than economists would like to see, but growth nonetheless. Thursday brings more inflation readings, with both Personal Spending and Core PCE Prices expected to remain under control. The final December reading on University of Michigan Consumer Sentiment may be up a small amount, while November Durable Goods Orders may be down a tad. The markets will be closed Friday. Happy Holidays to you and yours during this joyous season! >> 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 December 20 – December 24  Date Time (ET) Release For Consensus Prior Impact W Dec 22 08:30 GDP - Third Estimate Q3 2.7% 2.5% Moderate Tu Dec 14 08:30 GDP Chain Deflator - Third Estimate Q3 2.3% 2.3% Moderate W Dec 22 10:00 Existing Home Sales Nov 4.65M 4.43M Moderate W Dec 22 10:30 Crude Inventories 12/18 NA -9.85M Moderate Th Dec 23 08:30 Initial Unemployment Claims 12/18 424K 420K Moderate Th Dec 23 08:30 Continuing Unemployment Claims 12/5 4.075M 4.135M Moderate Th Dec 23 08:30 Personal Income Nov 0.2% 0.5% Moderate Th Dec 23 08:30 Personal Spending Nov 0.5% 0.4% HIGH Th Dec 23 08:30 PCE Prices - Core  Nov 0.1% 0.0% HIGH Th Dec 23 08:30 Durable Goods Orders Nov -1.0% -3.3% Moderate Th Dec 23 09:55 U. of Michigan Consumer Sentiment Index - Final Dec 75.0 74.2 Moderate Th Dec 23 10:00 New Home Sales Nov 303K 283K Moderate   >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months  The policy statement from last week's FOMC meeting indicated the Fed is not yet convinced the economy is on solid ground. Analysts therefore expect the Fed Funds Rate to stay at its super low level for an "extended period." Inflation, or a stronger economic recovery, could of course start the rate back up. 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 Jan 26 0%–0.25% Mar 15 0%–0.25% Apr 27 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Jan 26      <1% Mar 15      <1% Apr 27      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