What Did Interest Rates Do This Week?

** based on Freddie Mac weekly average survey **
30-yr Fixed – Slightly Lower
This Week: 4.91%
Last Week: 4.98%
1yr Ago: 6.14%

15-yr Fixed – Slightly Lower
This Week: 4.36%
Last Week: 4.40%
1yr Ago: 5.81%

Jumbo Fixed (Average 30-yr Fixed)
Last Week: 5.75%
Previous Week: 5.895%

Highlight of This Week’s Major Economic Reports

Trading activity in the bonds market, as well as the release of new economic data, was light during this holiday-shortened week. One bright note, however, was that the government reported the latest unemployment benefit claims dropped by 12,000 last week, which conveys (in the past four weeks) the emergence of a slight improvement in the job market. Of course, we’re still far from a full recovery in the labor sector, but we’ll take any good news we can get.

Additionally, the Fed just hit the $1 trillion milestone for its purchase of mortgage-backed securities. This program has kept mortgage rates remarkably low throughout the year, and the Fed is committed to spending the full $1.25 trillion through the end of March 2010. Once this program ends, all expectations are that mortgage rates will start to climb to more closely align with yields on US Treasuries.

What to Look for Next Week

Inflation and housing take center stage next week. The latest Retail Sales figures are also due out, and it’s expected to post a slight gain from the previous month.

Short-Term Rate Outlook
Relatively Unchanged

Stay Informed: What’s in the News

“Texas Cities Dominate List of Top Performers” from Milken Institute via Texas A&M RECON

Texas metros, led by number one Austin–Round Rock, claimed four of the top five spots and nine of the top 16 in the 2009 Milken Institute/Greenstreet Real Estate Partners Best-Performing Cities Index.

Also making the list were Killeen–Temple–Fort Hood (2), McAllen-Edinburg-Mission (4), Houston–Sugar Land–Baytown (5), San Antonio (11), Fort Worth–Arlington (12), Dallas-Plano-Irving (13), El Paso (14) and Corpus Christi (16).

Austin–Round Rock was the first metro to ever be ranked number one twice on the index, the last time being in 2000.

But it doesn’t stop there. Nine other Texas metros made the top 25 out of the 124 smallest metros that were studied.

Those were Midland (1), Longview (2), Tyler (4), Odessa (5), College Station–Bryan (14), Texarkana (17), Waco (18), Laredo (20) and Abilene (21).

Leaders in this year’s index, which ranks U.S. metros based on their ability to create and sustain jobs, are all metros that succeeded in avoiding the worst of economic declines driven by falling housing markets and job losses in manufacturing and global trade.

Regional economic factors also strongly influenced the rankings this year, with the oil and gas sector, technology and alternative energy providing stability among metros in Texas, North Carolina, Washington and Louisiana.

Another factor helping Texas metros move up in the rankings is the state’s favorable business climate and its ability to attract jobs and corporations away from higher-cost states.

“Economists See Fed Raising Rates Near Midterm Election” from The Wall Street Journal

Economists in the latest Wall Street Journal survey, on average, expect the Federal Reserve to raise interest rates around September 2010, a politically sensitive time considering midterm elections will be right around the corner and unemployment is forecast to still be over 9.5%. The 52 surveyed economists—not all of whom answer every question—on average expect the unemployment rate to rise to 10.3% by the end of this year from its current 10.2%, and they expect it to stay above 9.5% through 2010. The respondents expect job growth to return over the next 12 months, but the forecast calls for an average of about 50,000 jobs to be added per month over that period. The economy needs to add about 100,000 jobs a month just to keep up with new entrants to the labor force.

“Foreclosures: ‘Tide may be turning’” from CNNMoney.com

Could the foreclosure plague be ending? Foreclosure filings were down 3% in October, the third consecutive month-over-month dip, according to RealtyTrac, the online seller of foreclosed homes. To be sure, foreclosure rates are still elevated from a year ago: They’re up 18% compared with October 2008. But the month-over-month decrease followed a 4% drop in filings during September and a 1% fall in August.

“5% of Americans Plan to Buy a Home Next Year” from CNBC.com

Just one in twenty Americans say they plan to buy a home within the next year, and they’re most likely to be 34 years old or younger and living in the South or West, according to a survey released Wednesday. Roughly a quarter of potential buyers said the No. 1 reason they would buy now is because prices have bottomed out. That reason topped bargain-priced foreclosures, worries about rising interest rates and a wide selection of homes.

“The Recession’s Over, but Not the Layoffs” from The New York Times

The Great Recession is over — not officially, but by popular acclaim — and in this accepted fact we are invited to take comfort, even as the unemployment rate last week rose into double digits for the first time in a quarter-century. Experts have long assured us that economic life is governed by the business cycle, a repeating loop of downturn followed by expansion, as reliable as the seasons. In this context, worsening joblessness is like a punishing blizzard in April: Misery notwithstanding, the calendar promises spring.

“Texas Employment Feeling Pinch” from Texas A&M Real Estate Center

The Texas economy lost 292,700 nonfarm jobs from September 2008 to September 2009, an annual job loss of 2.8 percent.

Over the same period, the U.S. economy lost more than 5.7 million jobs, or 4.2 percent of its total nonfarm jobs.

The state’s seasonally adjusted unemployment rate rose from 5.1 percent in September 2008 to 8.2 percent in September 2009, while the U.S. rate rose from 6.2 percent to 9.8 percent during the same period.

Only three Texas industries (education and health services, other services, financial activities) and the government sector had more jobs in September 2009 than in September 2008. Eight other industries experienced net job losses over the same period.

Only one Texas metro area, McAllen-Edinburg-Mission, posted a positive employment growth rate from September 2008 to September 2009. Twenty-five metro areas had net job losses.

The state’s actual unemployment rate in September 2009 was 8.3 percent. Lubbock had the lowest unemployment rate followed by Amarillo, Midland, Abilene and College Station–Bryan.

Marie Funston | Sr. Mortgage Advisor | (512) 750-7270
9442 N Capital of Texas Hwy., Suite 1-600
Austin, TX 78759
Fax: (512) 343-1224
Marie@austinmortgageadvisor.com