The Weekly Rap! Friday Mar 22, 2013

The Dow is currently trading at 14,501 right about where we were last Friday.  The S&P 500 is trading at 1,554.  Gold is trading at $1,607 an ounce, while oil futures at $93.15 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.80/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 1.92%.  30-year Treasury Bond yields are trading at 3.14%.  Mortgage Bonds have been and still are in a downward trend (higher rates) since Dec 5, 2012, and after breaking out of the current range to the high side a week ago, have since retreated back towards the bottom.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently at 102.78 today heading back to the lower end of the range (higher rates).  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is that builders are nervous but still building homes, although they’re still building them.  New home construction is up as well as existing home sales and inventories are beginning to improve.  Labor is about the same and the Fed is still trying to stimulate the economy.

The National Association of Home Builders housing-market index decreased to 44 in March from 46 in February for a second month of declines. Year-over-year growth in confidence among home builders is slowing.  Meanwhile, the most recent report on home construction showed single-family-home starts rose 20% in January from the same period in the prior year. Builders remain extremely hesitant about ramping up construction activity. Basically I think they simply don’t want to run ahead of demand.  The combination of conservatism by both builders and lenders means that housing starts are likely to remain a half step behind demand for the foreseeable future.

That being said construction on new homes nudged up in February with modest gains for single-family residences and apartments, as longer-term trends signaled a housing market that continued to strengthen.  The U.S. Department of Commerce’s report also showed substantial gains in building permits, which indicate future demand.

Existing-home sales rose in February to reach the highest “rate” in more than three years, another sign of a strengthening housing market, as inventories posted an unusually large gain in the month.  The National Association of Realtors said existing-home sales rose 0.8% in February, hitting the highest level since November 2009. Inventories rose 9.6% in February. The months’ supply of existing homes rose to 4.7 in February from 4.3 in January, the first increase since April, but still a relatively low figure. January’s months’ supply was the lowest since May 2005. While levels are still low, housing is now the strongest part of the economy in growth terms

The biggest news of the week was the Fed meeting and Bernanke’s remarks.  At the meeting, the Fed decided to stick with its $85 billion a month of asset purchases. In their latest forecasts also released on Wednesday, Fed officials still didn’t see the jobless rate reaching a key level until 2015.  The Fed said that the economy is growing at a moderate pace but there are still downside risks to the outlook.  Bernanke stated that the labor market is healing but the central bank will keep its aggressive easing stance until it is shown that the gains are durable.  “We are seeing improvements. I think one thing we would need is to make sure that this is not a temporary improvement,” Bernanke said the Fed was focused on the outlook for the labor market.

The number of Americans who applied last week for new unemployment benefits rose slightly but clung near a five-year low, another indication that fewer people are losing their jobs.  Jobless claims, a rough gauge of layoffs, have fallen below 350,000 in five of the past six weeks, marking the first time that has happened since late 2007, shortly before the “Great Recession” began.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog

Bill Bartok

Mortgage Advisor NMLS #445991

The Weekly Rap! Friday Mar 15, 2013

Saint Patrick’s Day or the Feast of Saint Patrick is Sunday.  St. Patrick introduced Christianity to Ireland in the fifth century. Congress, back when it could agree on things, proclaimed March as Irish-American Heritage Month in 1995. Originally, the color associated with Saint Patrick was blue. Over the years the color green and its association with Saint Patrick’s Day grew.  Saint Patrick is said to have used the shamrock to explain the Holy Trinity to the pagan Irish, and the wearing and display of shamrocks and shamrock-inspired designs have become a ubiquitous feature of the day.  Bring on the corned beef and green beer!

The Dow is currently trading at 14,509 higher by 141 pts after hitting another all-time high this week.  The S&P 500 is trading higher at 1,561.  Gold is trading at $1,592 an ounce, while oil futures at $93.34 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.85/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 2.05%.  30-year Treasury Bond yields are trading at 3.25%.  Mortgage Bonds have been in a downward trend (higher rates) since Dec 5, 2012, and after breaking out of the current range to the high side a week ago, have since retreated back towards the bottom.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently at 102.56 today heading back to the upper end of the range (lower rates).  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week; Our Government ran a budget deficit of $203.5 billion in February, but don’t even get me started on this one!

The National Federation of Independent Business reported that its small-business confidence index edged up 1.9 points to 90.8% in February, but it remains low by historical standards. Companies cited weak sales as the biggest problem. Some 33% of small-business owners said sales were lower in the past three months compared to the prior three months, while only 19% reported higher sales in the same span. Credit was still hard to obtain for many small businesses. In other words, while the Fortune 500 are enjoying record high earnings, Main Street earnings remain depressed.

Job openings at U.S. workplaces increased slightly to 3.69 million in January from 3.61 million in December.  Compared with same period last year, January’s job openings rose 8%. There were more than 4 million jobs open when the recession began in December 2007.  The number of people who applied last week for new unemployment benefits fell to the second lowest level in five years, perhaps reflecting a rise in the steadily improving labor market.  Yet the labor market is by no means fully healed.  The jobless rate, at 7.7%, is still quite high and well above the 6.5% goal set by the Fed Gods. The Fed has said it plans to keep a key short-term interest rate at historic lows until the unemployment rate plunges.

Retail sales advanced a scant 1.1% in February but big enough to mark the biggest gain in five months. The figures suggest that consumer spending, the linchpin of the economy, is holding steady despite a spike in gasoline prices and higher payroll taxes thus far in 2013. The worry has been that spending would sag early in the year and act as a drag on growth. The retail report is the latest in a string of data that suggests the economy remains on a moderate growth path.  What’s more, gas prices are starting to subside, home values are on the rise again and the stock market has hit new highs. That might support further increases in retail sales over the next few months.

In the inflation front:  The producer price index rose 0.7% in February.  Prices at the wholesale level are still on the low side, up only 1.7% over the past 12 months.  The increase in February was spurred almost entirely by higher energy costs, which jumped 3.0% last month.  Gasoline prices advanced 7.2% to mark the biggest gain since September, but the cost of natural gas, home-heating oil and diesel fuel also rose.  While gasoline prices leveled off in early March, the economites believe energy costs could recede in the next few months.  Food prices fell 0.5% last month, largely because of a decline in the cost of fresh and dry vegetables. Higher wholesale costs can translate into rising prices of consumer goods and services, but it usually takes a sustained increase. Slow global growth has generally constrained wholesale prices over the past few years except for occasional spikes in energy costs.

Consumer prices also rose in February at the fastest pace in more than three years, though longer-term trends show stability.  Despite the CPI’s large jump in February, longer-term trends remain within the Fed’s target. The overall CPI and the core reading, which excludes volatile energy and food categories, increased 2% over the last 12 months. The expectation is that today’s data should continue to support the Fed’s accommodative policy stance.

The University of Michigan consumer-sentiment gauge dropped to a March reading of 71.8, the lowest level since December 2011, from a February reading of 77.6.  However, consumers also faced uncertainty from effects of federal spending cuts.  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 start of the most recent recession. The economites watch sentiment data to get a feel for the direction of consumer spending.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog
Sincerely,

Bill Bartok

Mortgage Advisor  NMLS# 445991

The Weekly Rap! Friday Mar 8, 2013

Ok, it’s the beginning of a new season, well sort of… We turn our clocks back and lose an hour, but it’s all for the best right?  We do gain an extra hour of daylight, and the days are getting longer.  Somehow I thing we have this backwards, we should lose an hour in the winter time when we don’t care as much and gain an hour in spring when we have more energy.  Then again I don’t write the rules I just attempt to follow them.  Just ask my wife.

The Dow is currently trading at 14,367 higher by 277 pts after hitting an all-time high this week.  The S&P 500 is trading higher at 1,548.  Gold is trading at $1,576 an ounce, another six month low, while oil futures at $91.46 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.93/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 2.05%.  30-year Treasury Bond yields are trading at 3.25%.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently at 102.28 which is 1.25% worse than last week.

Mortgage Bonds have been in a downward trend (higher rates) since Dec 5, 2012 and after breaking out of the current range last week have since retreated back towards the bottom.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week;

On a national level home prices advanced by a mere 0.7% in January to stretch the year-on-year advance to 9.7%,  the largest year-on-year gain since April 2006, according to CoreLogic. One would be tempted to ask, with these gains, is the housing market poised to enter the spring selling season on sound footing?  From the peak, prices nationally have shrunk by 26.4%, or a 19.9% when distressed transactions are excluded.  But we have to pose the question; are housing prices truly on the rebound, or is it simply supply and demand due to the fact that with so little inventory this the real reason prices are rising so rapidly?

On the economic front; service-related companies grew at a slightly faster pace in February and expanded for the 39th straight month, according to the Institute for Supply Management. The ISM reported its survey of purchasing managers – the executives who buy supplies for their companies – rose to 56% last month from 55.2% in January. Reading over 50% indicate more companies are expanding instead of shrinking.

The government is apparently getting in the way of a sustainable economic recovery, according to the Fed’s  Beige Book report (which truly gets its name from the traditional color of the top page) a survey of business contacts in several of the Fed’s 12 districts, reported that fiscal and health-care policies are holding back private spending and hiring. Retail sales slowed in many districts through late February, and the Fed contacts cited fiscal policy and higher gasoline prices as the reason. Labor-market conditions were reported to have improved modestly.  The Beige Book survey is essentially a collection of reports on the economy prepared in advance of the Fed’s March 19-20 meeting. It’s designed to give officials a feel for conditions on the ground

The Jobs or employment report was the big news of the week with the economy creating 236,000 jobs in February and the unemployment rate fell to the lowest level since late 2008, bucking expectations that higher taxes, federal spending cuts and a big snowstorm might dampen hiring. The pace of job creation last month was the fastest since November and the good news is that it spread across many sectors, suggesting the economy remains on a steady albeit slow, course despite a number of headwinds early in the year.  The unemployment rate, meanwhile, fell to 7.7% from 7.9%. The last time the jobless rate was that low was in December 2008, the month before Obama took office.

I need an app that will go around my house, office, cars, etc… and change all the clocks this weekend and then bring me strong enough coffee to recover the hour I lost.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog
Sincerely,

Bill Bartok

Mortgage Advisor NMLS 445991