The Weekly Rap! Friday Aug 31, 2012

The Dow is currently trading at 13,050 down 80 pts over last week  The S&P 500 is trading lower at 1,402.  Gold is trading at $1,686 an ounce, while oil futures at $96.44 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.85/Gal.

Yields on 10-year notes, which move inversely to prices, are trading at 1.58%.  30-year bond yields are trading at 2.71%.

Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.75.  I’ve been saying for some time now, (ok, more than a month), that we were due for a correction and to lock if you could, well we have now gone into that correction.  On July 25 we reached an all time high Price) of 106.31, and because it wasn’t able to hold, the correction began on Aug 2.  We reached a critical support level (104.5) Aug 14 and we’ve now started to recover.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; Home prices bounced higher for a second month in June, according to the S&P/Case-Shiller 20-city index which showed the strongest back-to-back monthly advance in the more than the decade-long history of the price gauge. Even with the gains, prices have still fallen a long way from their 2006 peaks, roughly 31%.  Pending home sales climbed 2.4% in July to the highest level since April 2010, when a home-buyer tax credit was set to expire. The National Association of Realtors reported pending-home-sales index rose to 101.7 in July from 99.3 in June, which is 12.4% above July 2011 levels.

Consumer confidence fell to a nine-month low in August as Americans grew more worried about business conditions and the chances of finding a job.  The decline in confidence coincides with a series of economic indicators that indicate U.S. growth slowed over the spring and summer. We’re also in an election period so this could be a rather volatile index.

The economy apparently grew “gradually” last month, as improving retail and other service-sector activity was weighed down by softening activity in manufacturing, according to a collection of anecdotes released by the Fed Gods.  The Beige Book reported that activity expanded gradually in July and early August across most regions and sectors, compared to the previous assessment of “modest to moderate.” It’s all in the semantics, which of coarse is what the Fed is famous for.

Consumers boosted their spending in July by the biggest amount in five months as aftertax incomes continued to grow modestly.  Personal spending rose 0.4% to mark the largest increase since February. The economy can’t grow much faster unless consumers boost spending, but that’s not expected to happen. The forecasts of growth in gross domestic product are to edge up slightly to 2.0% in the third quarter from a mediocre 1.7% in the second quarter. Inflation, meanwhile, appears to pose little threat.  Prices rose less than 0.1% in July based on an index linked to consumer spending.

The big chief Ben Bernanke called the stagnation in the labor market a grave concern and said he was open to using more quantitative easing as needed to help the economic recovery.  In a speech at the Fed’s Jackson Hole retreat this morning, Bernanke did not pre-commit to taking action, but he did reinforce the case for more asset purchases. Bernanke called current growth “tepid” and said the economy was “far from satisfactory.”  I think this leaves little doubt where the Fed is headed.

And now for the Rant:  Last week I wrote about Kaitlin Nootbaar, a straight-A Oklahoma high school student, who is being denied her diploma because she used the word “hell” in her graduation speech as valedictorian.  Well if the word is ok for a presidential candidate at the Republican National Convention; I think it’s OK for a VALEDICTORIAN commencement speech.  What power do these school leaders think they have?

This is not just an isolated incident. A similar incident occurred in June when high school senior Anthony Cornist was denied his diploma because, school officials said, his friends and family cheered so loudly for him that it disrupted the ceremony.  The school demanded that the student complete 20 hours of community service to obtain the certificate.  Really?  I don’t remember anywhere in the fine print where is says that if you complete the required curriculum and earned your diploma that a school can withhold it “at will”!  This is my reality show!  It’s my opinion and I’m sticking to it!

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Bill Bartok

Mortgage Advisor

The Weekly Rap!…

The Weekly Rap!    Friday Aug 24, 2012

The Dow is currently trading at 13,133 up 15 pts over last week  The S&P 500 is trading lower at 1,409.  Gold is trading at $1,674 an ounce, while oil futures at $96.44 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal. 

Yields on 10-year notes, which move inversely to prices, are trading at 1.68%.  30-year bond yields are trading at 2.79%.  Mortgage rates have dropped so much that we are now following a lower security.  If this is something you may not truly understand please let me know.  I’ve been wrestling with trying to explain it in better terms.  If I get enough interest I’ll devote a blog to how the process works. 

Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.50.  I’ve been saying for some time now, (ok, more than a month), that we were due for a correction and to lock if you could, well we have now gone into that correction.  On July 25 we reached an all time high Price) of 106.31, and because it wasn’t able to hold, the correction began on Aug 2.  We reached a critical support level (104.5) that held last week and we’ve now started to recover.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. 

In economic news this week; Sales of existing homes rose 2.3% in July, as low mortgage rates, rising rent and some job creation led to a modest rebound. Compared to July 2011, sales climbed 10.4%, the 13th straight year-on-year gain. Year-to-date, sales were up 8.6%, demonstrating the improvement that has taken place in a market recovering from the burst of the housing bubble. A lack of inventories is holding back the market, probably due to many owing more on their mortgage than their home would sell for, or have very little equity to put towards the purchase of a new home. Sales of new homes also rebounded in July as the housing industry remains one of the few areas of steady growth in the economy.

Distressed sales represented 24% of all transactions in July, down from roughly one-third last year. Foreclosures and short sales each represented 12% of all transactions, unlike last year where foreclosures far outnumbered short sales. All-cash deals fell to 27% from 29% in July, and investors represented 16% of all transactions, down from 19% in June.

The Fed Gods got closer to pushing the button on a new round of bond purchases even as a less-aggressive step of altering language on a low-rate pledge seems to be in the works, according to the minutes of the July 31-Aug 1 meeting of the central bank’s Federal Open Market Committee which showed a central bank worried about signs of decelerating growth, and itching to take action.  Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.

Orders for big-ticket items such as autos and airlines surged in July, but other areas of the U.S. manufacturing sector softened for the second month in a row. The decline in orders for big-ticket items outside the transportation sector provides further evidence of a broad slowdown in the U.S. economy. Companies are receiving fewer orders for expensive goods at home and finding it tougher to market their wares in overseas markets such as Europe and China that are slowing.

And now for the Rant:  There’s a bit of diploma drama going on between an Oklahoma high school and that school’s valedictorian.  Yes, I said Valedictorian!  Kaitlin Nootbaar in her graduation speech apparently she used a four letter word that got the school to withhold her diploma.  The word was “Hell.”

When tasked with writing the graduation speech, she apparently got her inspiration from the movie The Twilight Saga: Eclipse. Her quote was, When she first started school she wanted to be a nurse, then a veterinarian and now that she was getting closer to graduation, people would ask her,  ‘What do you want to do?’ and she said ‘How the hell do I know? I’ve changed my mind so many times’”

She said the audience laughed, she finished her speech to warm applause and didn’t know there was a problem until she went to pick up the real certificate this week. She went to the office and to pick up her diploma and the principal said, ‘Your diploma is right here but you’re not getting it. The principal told Kaitlin she would have to write an apology letter before he would release the diploma.

Kaitlin doesn’t plan on writing an apology letter because she doesn’t feel she did anything wrong. She starts college in a few days on a full scholarship, making the administrators’ decision even more appalling. She earned that diploma. And I don’t think the school has any right to hold it.  What do you think?

Ok so I need your opinion on the content of this weekly economic and market wrap.  Do you like the “Rant” portion of this?  I’m tempted to move it to my blog page mostly in the interest of keeping this shorter.  Please feel free to weigh in and let me know.  This is my reality show!  It’s my opinion and I’m sticking to it!

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home. 

For additional information please visit my Stanford Mortgage website: http://bill.bartok.stanfordloans.com/agents/About-Me

The Weekly Rap! Friday Aug 17, 2012

The Dow is currently trading at 13,115 up 143 pts over last week inching closer to the highs for the year, led by sectors tied to economic growth, after a reading on Americans’ feelings about the economy unexpectedly improved.  The S&P 500 is trading higher as well at 1,415.   Gold is trading at $1,617 an ounce, while oil futures at $95.87 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal. 

Yields on 10-year notes, which move inversely to prices, are trading at 1.81%.  30-year bond yields are trading at 2.93%.  Mortgage rates have dropped so much that we are now following a lower security.  If this is something you may not truly understand please let me know.  I’ve been wrestling with trying to explain it in better terms.  If I get enough interest I’ll devote a blog to how the process works. 

Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 104.56.  I’ve been saying for some time now, (ok, more than a month), that we were due for a correction and to lock if you could, well we have now gone into that correction.  On July 25 we reached an all time high Price) of 106.31, and because it wasn’t able to hold, the correction began on Aug 2.  We are currently at a critical support level (104.5) that hopefully will hold.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. 

In economic news this week; Other than inflation reports, Retail Sales was the report most keyed in on this week.  After three straight monthly declines, retail sales increased 0.8% in July.  Details of the report were strong, with monthly sales rising across the board.  This was the biggest gain in sales since February, and compared with July 2011, sales are up 4.1%.  Retail sales account for about half of total consumer spending and about a third of final sales in the U.S. economy.

On the wholesale inflation side, producer prices, or PPI, rose 0.3% in July as higher food costs offset another decline in energy costs.  Core producer prices, excluding volatile food and energy, rose 0.4%. The severe drought in the Midwest appears to already be hitting prices.  Wholesale food prices in July rose 0.5% for the second straight month with corn prices rising 34.5%, the biggest rise since October 2006.

Consumer prices or CPI were unchanged in July, as lower energy prices offset gains in the cost of food and other items.  The so-called core consumer price index, which excludes the volatile categories of food and energy, rose 0.1%.  The CPI rose 1.4% over the year through July, the smallest 12-month change since late 2010. The core rate gained 2.1% over the past 12 months, the smallest gain since late 2011. The Fed Gods watch consumer prices, and are expecting inflation to be relatively low through 2013.

Builder confidence in the market for newly built single-family homes climbed in August to the highest level in more than five years on expectations the recovery in housing can continue.  Now I realize that big companies like to have stadiums named after them as in the “Staples” Center in Los Angeles, but naming rights to economic indicators?  Really?  The National Association of Home Builders/Wells Fargo housing market index rose 2 points to a reading of 37, which is the best level since February 2007.  Wells Fargo had to get their name onto the home builders’ index?  Isn’t it enough that they fund or own roughly 33% of all mortgages?  I guess the scary part is that a 2 pt rise in the index is the best we can do since 2007!  A level of 50 indicates “good” conditions.

A gauge of consumer sentiment rose this month on rosier views of current economic conditions, but remains relatively low, according to data released Friday by the University of Michigan-Thomson Reuters sentiment index.  There’s another company “Thomson Reuters” That has somehow got the naming rights to this particular index.  For a preliminary August reading, the index increased to 73.6  the highest level since May from a final July reading of 72.3. The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the recession.

Aside from sentiment and expectations, slow growth in the economy looks set to continue.  The Conference Board reported that its leading economic index grew a modest 0.4% in July.  The leading economic index consists of 10 components that together are designed to show turning points in the economy.  The indications point to slow growth through the end of this year.

If you know anyone who can benefit from my services as a Mortgage/Financial Advisor, please Send me a note on how to reach you.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Bill Bartok
Mortgage Advisor

The Weekly Rap! Friday Aug 10, 2012

The Dow is currently trading at 13,115 up 33 pts over last week.  The S&P 500 is trading higher as well at 1,400.   Gold is trading at $1,623 an ounce, while oil futures at $92.97 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.65/Gal.

Yields on 10-year notes, which move inversely to prices, are trading at 1.65%.  30-year bond yields are trading at 2.74%.  Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.41, falling off higher levels. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; How do you know that you’ve reach a bottom in a cycle (Real Estate, Stocks, Gold, etc)???  You know when you’ve already passed it and you’re going up the other side.

Home prices rose by their largest percentage in at least seven years during the second quarter, propelled by low inventories of properties for sale and high demand for bargain-priced foreclosures.  Prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter. Separately, Freddie Mac, which uses a different methodology, said home prices during the second quarter jumped by 4.8% from the previous quarter. That was the largest jump since 2004.

The main force behind the home-price gains appears to be a shortage of homes for sale.  The number of properties on the market is down sharply from a year ago.  Meanwhile, demand is up, as mortgage rates have dropped to their lowest levels in at least 60 years. Many traditional sellers are sitting on the sidelines because they are unable or unwilling to sell, mny because they owe as much if not more than they could sell their home for.

U.S. consumers increased their debt in June by a seasonally adjusted $6.5 billion, the Federal Reserve reported Tuesday. This is the tenth straight monthly gain in consumer borrowing.  For the second quarter, consumer credit increased at a 5% annual rate.  Productivity rebounded in the second quarter, posting a 1.6% gain as companies generated more goods and services even though there was little change in the number of hours their employees worked.  Productivity measures the goods and services generated by an economy. In the long run, higher productivity usually results in higher profits for businesses and bigger paychecks for workers.

The job market remains difficult as employers have pulled back from adding workers due to the European debt crisis and a stalemate in the U.S. over tax and spending policies. The unemployment rate ticked up to 8.3% in July.

And now for the Rant:  I’m sure you’ve been enjoying the summer Olympics these past two weeks as much as I have, especially seeing how well our American athletes are doing.  They are bringing home the Gold.  But did you know that when an athlete in the Olympics wins a medal that they have to pay a tax to the government based on the implied value of that medal?

Based on today’s commodity prices, the value of a gold medal is about $675, silver medal is worth about $385 while a bronze medal is worth under $5.  There are also cash prizes given out to medal winners — $25,000 for a Gold, $15,000 for a Silver and $10,000 for a Bronze.  While I agree that cash prizes should be taxed because it is, after all, income.  Taxing the value of the medal which the athlete is rarely likely to part with should be exempt.  What are your thoughts?

Whole some (few) athletes will get endorsement deals of play in a professional sport many like Kim Rhode who won Gold in women’s skeet shooting may not have the excess funds to pay the tax on the medal.  This is my reality show!  It’s my opinion and I’m sticking to it!

For information on Mortgage on what I do when I’m not bloging, check out my website.

http://bill.bartok.stanfordloans.com/agents/Blog

Sincerely,

Bill Bartok

Mortgage Advisor