The Weekly Rap! Friday May 30th, 2014

The National Debt is currently: $17,518,115,962,587.00 is lower by about 10 BILLION.  The interest pay-out alone on the debt is 246 Billion per year!  I post this so we will be aware of what we are leaving to our children.

The Dow last traded at 16,667 right about where it was a week ago.  The S&P 500 is trading at 1,917.  Gold is trading at $1,245 an ounce, while oil futures at $102.64 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal. 

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 105.80 about .30 better than where we were last week.  We’ve broken out of the past trading range and rates are still trending lower at this point.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.   

In economic news this week; “Economics: The science of explaining tomorrow why the predictions you made yesterday didn’t come true today.”  The reader’s digest version is the economy is plugging along, the economy contracted in the first quarter for the first time in three years, Consumer confidence is a bit higher, home prices are higher,

Millennials are going to make major shifts in corporations over the next decade and most people aren’t ready for the amount of change that’s coming.  By 2025, Millennials will account for 75% of the global workforce and by next year, they will account for 36% of the American workforce. At some companies like Accenture and Ernst & Young, they already account for over two thirds of the entire employee base.  The Millennials like the Baby Boomers are very likely to shape many things to come just as their parents did.  To be continued…

The largest Navy ship-building contract ever boosted orders for durable goods in April, but demand for long-lasting civilian items such as personal computers and appliances slowed a bit after surging in the prior month.  Orders for long-lasting goods rose 0.8% in April, propelled by the biggest burst of orders for defense equipment since December 2012.  The Navy placed a $17.6 billion order in late April for 10 nuclear-powered submarines.  Are the ones we have wearing out or are we planning an invasion somewhere?  The durables report is often quite volatile and subject to large revisions.  Business investment has repeatedly faltered since the recovery began in mid-2009 and the question in whether companies are ready to sustain a faster pace of spending after years of frugality.

The economy contracted in the first quarter for the first time in three years, hampered by harsh weather that disrupted business and slowed construction. Yet the damage seems to be fading fast amid widespread signs that growth has accelerated in the spring.  Gross domestic product, or GDP, the sum of all goods and services produced by the economy, shrank by annual pace of 1% in the first three months of 2014, the Commerce Department said. Initially the government had reported last month that GDP rose at 0.1% rate.  GDP is anticipated to snap back with a 3.8% gain. 

The Conference Board said its consumer confidence index in May rose to 83 from 81.7 in April.  Both the present situation and future expectations indices also advanced.  While there is a real pickup in consumer confidence, six years out from “the Great Recession,” sentiment is still at very weak levels.  Those who plan to buy a home within six months fell to 4.9% in May, the lowest since July 2012; that compares with a percentage of 5.6% in April and as high as 7.4% in December.    

Consumer spending slipped 0.1% in April, the first decline in a year, as we cut back on car purchases and spent less on utilities such as natural gas and electricity as the weather warmed up.Just one month earlier, consumer spending jumped by a revised 1%, reflecting the largest increase since 2009.  A large chunk of the increase in spending in March, and most of the decline in April, was tied to changes in what we paid for utilities. We spent less to heat and power our homes in April than we did in March.

Personal incomes, meanwhile, rose 0.3% in April.  Adjusted for inflation, disposable income rose 0.2% last month.  Disposable income is mainly the money left over after taxes and an increase typically foreshadows an rise in consumer spending. Yet over the past 12 months disposable income has risen just 2%, a rate that needs to rise if the economy is going to grow much faster.

Consumer sentiment May 30, 2014 GDP Q1 2014

On the Real Estate front:  Home prices rose 0.9% in March, the first increase in five months, but annual growth is slowing down a bit.  Including March’s gain, prices across the 20 cities were still about 19% below a 2006 peak.  Year-over-year home prices were up 12.4% in March. Going forward home prices are expected to continue to slow down as inventories expand.  Both the number of new single-family homeson the market, as well as existing homesavailable for sale, rose in April, according to reports released last week.  Here locally in El Dorado Hills, Cameron Park and Shingle Springs as far as new listings go this month May 1 through 29 we had 139 new listings.  Current inventory is 336 homes listed for sale (per MLS).  Last year in the same time period there were 201.

The National Association of Realtors reported that pending home sales rose 0.4% in April, the second consecutive gain after slumping since the summer, signaling that sales of existing homes may pick up. The index of pending home sales hit 97.8 in April compared with 97.4 in March. Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence.  Despite April’s gain, the gauge was down 9.2% from a year earlier, hit by few homes available for sale and pricier properties. An index reading of 100 equals 2001′s average contract activity level.  Here locally pending sale increased 9.8% from March to April.

On the Employment front:  The number of people applying for unemployment benefits sank last week to the second-lowest level since the recession ended in mid-2009, suggesting continued improvement in a labor market that’s perked up in the early spring.  Initial jobless claims fell by 27,000 to 300,000 in the week ended May 24, the Labor Department saidThursday. 

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

Bill Bartok ESIG 9-25-13

The Weekly Rap! Friday May 23rd, 2014

The commentary is a bit late today due to me having two separate signings this morning and one of them that almost funded in the same day.  It’s been a busy morning.  I hope all of you have a wonderful Memorial day weekend!

The National Debt is currently: $17,528,071,962,587.00 is higher by about 8 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,606 right about 175 points higher than where it was a week ago.  The S&P 500 is trading at 1,900.  Gold is trading at $1,292 an ounce, while oil futures at $104.39 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal. 

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 105.53 about .20 better than where we were last week.  We’ve broken out of the past trading range and rates are still trending lower at this point.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.   

In economic news this week; The reader’s digest version is the economy is plugging along, existing home sales are positive, and the Fed Gods are at the podium again.

Existing Home Sales Apr 2014Jobless Claims 5-22-2014Millennials are starting to age into their prime spending years

Ninety percent of Millennials frequently used the internet to search for homes compared to less than half of Silent Generation buyers. Younger generations of buyers were also more likely to find the home they purchased through the internet; older buyers most often learned about the home they purchased from their real estate agent.
The Millennials like the Baby Boomers are very likely to shape many things to come just as their parents did.  To be continued…

The Fed Gods examined “several approaches” for the eventual tightening of monetary policy but only decided to be flexible, according to the minutes from the April meeting released Wednesday that suggested that the time for higher interest rates is drawing closer.  They emphasized the need for base decisions on experience because of the unprecedentedly large size of the central bank’s balance sheet.  According to the minutes, a number of Fed officials said it would be important for the Fed to “communicate still more clearly about the Fed’s policy intentions as the time of the first increase in the federal funds rate moves closer.” Several of the Fed Gods were at the podium this week speaking on the very same topic.

Charles Plosser, president of the Philadelphia Fed. In a speech Tuesday in Washington said “The U.S. economy is likely to grow at an accelerating pace in the second half of 2014 and into next year, possibly requiring the Federal Reserve to begin raising interest rates sooner rather than later.” Plosser reaffirmed his view that the economy will continue to strengthen over the next year. He said a more rapid pace of hiring might lower the unemployment rate, now at 6.3%, below 6% by the end of 2014. He also said he’s optimistic the housing market will bounce back after a recent drop in sales.

William Dudley, the president of the New York Fed, told the New York Association for Business Economics that “The Federal Reserve will take its time lifting interest rates” and that that there will be “a considerable period of time” between the end of its asset purchases (in the fall, he says) and the first rate hike. He said the trajectory of hikes will “probably be relatively slow” – but that depends both on how the economy perform and how financial conditions respond to tightening.  He expects the level of rates over the longer-term to be “well below” the historical average of 4.25%.

Fed Chairwoman Janet Yellen on Wednesday delivered what you’d expect from a commencement speech: graduates, she said, should “tend the fires of curiosity,” listen to others, and show grit in the face of failure. Yellen reminded New York University students in Yankee Stadium that even Babe Ruth, Lou Gehrig and Joe DiMaggio failed most of the time they stepped to the plate, according to a text of her remarks.

The leading economic index (LEI) rose 0.4% in April to 101.4, the Conference Board reported. “Despite a brutal winter which brought the economy to a halt, the overall trend in the leading economic index has remained positive,” said Ken Goldstein, economist at the board.  

Economic growth moderated in April, according to the Chicago Fed national activity index released Thursday. The index fell to negative 0.32 in April from positive 0.34 in March. However, the three-month average rose to 0.19 from 0.04 in March — the highest level since November 2013. The index is a weighted average of 85 different economic indicators, designed so that a reading of zero is equivalent to trend growth. When the three-month average exceeds 0.7, there’s an increasing likelihood of sustained increasing inflation, and when it’s below negative 0.7, there’s an increasing likelihood a recession has begun.

U.S. manufacturing picked up in May, according to the purchasing managers index released by Markit on Thursday.  The manufacturing PMI rose to 56.2 compared to the 55.4 in April. Readings over 50 indicate growth.  Readings for new orders, new export orders and employment expanded at a slower pace than April. Basically this means that manufacturing is at an even pace barely exceeding growth numbers.

On the Real Estate front: Sales of existing homes rose 1.3% in April to an annual rate of 4.65 million, the National Association of Realtors reported.  Details of the report contained at least two nuggets that may bode well for future sales. One, the number of existing homes on the market is rising, a trend that will give buyers more choice and support sales. Inventories jumped almost 17% in April. Two, home-price growth is slowing, which may make would-be buyers more comfortable with entering the market.  The median sales prices for existing homes hit $201,700 in April, up 5.2% from a year earlier supported by low inventory.  Last year, price growth was in the double digits.  This is the first crucial sign that the housing recovery, which had essentially stalled during the past nine months, may be on the verge of a rebound.

On the Employment front:  New applications for unemployment benefits rose in mid-May, reversing a big drop earlier in the month that put initial claims at a seven-year low.  The number of people who applied for new benefits climbed by 28,000 to 326,000 in the week ended May 17.  I guess they just waited a week.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

The Weekly Rap! Friday May 16th, 2014

The National Debt is currently: $17,521,071,962,587.00 is lower by about 27 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,437 right about where it was a week ago.  The S&P 500 is trading at 1,870.  Gold is trading at $1,293 an ounce, while oil futures at $102.09 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal. 

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 105.35 about .20 better than where we were last week.  We’ve broken out of the past trading range and rates are still trending lower at this point.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.   

In economic news this week; The reader’s digest version is the economy is showing signs of improvement, not great but improvement.  Inflation is on the rise, retail sale is slightly higher, small business sentiment is higher while consumer sentiment is lower, manufacturing activity appears to be growing at a moderate pace, home building has slowed and employment is improving.

The government recorded a budget surplus of $107 billion in April.  The surplus for April is $6 billion, or 5%, lower than in April 2013. April is usually a surplus month, as Treasury sees a spate of tax payments from individuals and corporations.  Though smaller than last year’s, the April surplus contributes to a steady decline in the deficit for fiscal 2014.  For the first seven months of the fiscal year that began Oct. 1, the deficit is $306 billion. That is $181 billion, or 37%, lower than it was for the same period in fiscal 2013.  In April, the government spent $307 billion and took in $414 billion.

Wholesale prices climbed 0.6% in April, marking the second straight big gain in a government index that underwent a major overhaul at the start of the year.  Excluding the volatile categories of food, energy and trade, core wholesale prices rose a smaller 0.3% last month, the Labor Department reported.  Personal consumption, a new index designed to foreshadow changes in the consumer price index, rose 0.7% in April. Over the past year overall producer prices have risen 2.1%, up from 1.4% in March and just 0.9% in February. The unusually sharp increase in such a short period raises questions about the usefulness of the fresh-look PPI index, at least in the short term.

Consumer prices posted the biggest increase in April since last summer as the cost of many staples rose, making it harder for Americans to stretch their paychecks to pay for typical household expenses.  The consumer price index jumped 0.3% last month to mark the largest gain since June, the Labor Department said.  As a result, real inflation-adjusted hourly wages decreased 0.3% in April to mark the biggest decline in 14 months. Over the past 12 months real hourly wages have actually fallen 0.1%, the first negative reading in two and a half years.  The yearly pace of inflation rose to 2% in April from 1.5% in the March.

Excluding the volatile food and energy categories, core consumer prices increased 0.2%.  The core rate has risen 1.8% in the past 12 months, and it’s been stuck between 1.6% and 1.8% for more than a year. The core rate is viewed as a more useful gauge of underlying inflationary trends, but it remains well below the level the Federal Reserve considers harmful to the economy.

Americans apparently shopped less in April after splurging in March, with retail sales rising a scant 0.1%.  The increase in March was originally reported as 1.1%. Excluding the auto sector, retail sales were unchanged.  So-called core or control group sales fell 0.2%.  That category strips out cars, gasoline and building materials and gives a better sense of retail-sales trends.  Retail sales account for about one-third of consumer spending, the main conduit of economic activity.  In the past 12 months, retail sales have risen 4%, about two-thirds the historic average.  The latest retail report includes the government’s annual benchmark revisions meant to provide more accurate data.

Small-business sentiment in May rose to the highest level in more than six years, the National Federation of Independent Business said Tuesday. Its small-business optimism index rose 1.8 points to 95.2, the first time it’s surpassed the 95 level since Oct. 2007. There were gains in seven of the 10 components, notably a 9-point jump in those who expect the economy to improve.

The preliminary May reading of the University of Michigan and Thomson Reuters consumer sentiment index fell to a reading of 81.8, down from 84.1 in April.

Manufacturing activity appears to be growing at a moderate pace in the second quarter, according to three separate readings released Thursday.  The most upbeat indicator was a survey of manufacturers in the New York, which hinting that business owners were less melancholy about the outlook.  After barely expanding in April, the Empire state index shot up to 19.0 in May, its highest level since mid-2010, according to a report released by the New York Federal Reserve Bank.

Two other indicators were not as rosy but economists argued that they also hinted at future strength in the sector.  The Philadelphia Fed’s manufacturing index retreated slightly to a reading of 15.4 in May from a 16.6 reading in April. The drop in the Philly Fed index retraces only a small part of the sharp gain in April. The index was 9.0 in March.

The Empire State and Philly Fed data are closely watched because they are one of the first readings of the health of the manufacturing sector in May.  The softest report was the industrial output data for April released by the Federal Reserve , that showed a 0.6% drop in April. But that came after strong gains in February and March.

Home builder index Apr 2014CPI Apr-2014

On the Real Estate front:  Home builders are the most pessimistic they’ve been in a year, with makers of new single-family homes reporting fewer sales.  The housing-market index for builder confidence declined to 45 this month, the lowest reading since May 2013, from 46 in April, the National Association of Home Builders/Wells Fargo reported.  The index has been below 50 since February, indicating that builders, generally, are pessimistic about sales trends.  

While the Overall construction starts on U.S. homes, including apartments rose 13.2%, the fastest pace in five months, according to the U.S. Commerce Department, that jump was led by apartments, as starts for single-family homes only nudged higher.  Starts for single-family homes eked out just a 1% gain in April.  Data for building permits, which are an indicator of future projects, also indicated that demand for apartments, not single-family homes, is driving growth.

Just last week, Federal Reserve Chairwoman Janet Yellen expressed caution about the housing market. “Readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching,” she told U.S. lawmakers. “The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.” “The U.S. economy has come far since the deths of the financial crisis but “we have further to go to achieve a healthy economy,”

The good news is that some headwinds for the housing market are abating. Mortgages rates, for example, have declined in recent weeks.  Home-price growth is slowing down. And employers are picking up the pace of hiring.

On the Employment front:  The number of Americans who applied for unemployment benefits declined by 24,000 falling sharply for the second straight week, touching the lowest level since May 2007, but at least part of the drop probably stemmed from lingering seasonal affects tied to a late Easter holiday.  It looks as though Small business is leading the way in hiring as a little more than half of the net number of jobs created since employment began growing in 2010 has been generated by firms with fewer than 250 employees.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage Advisor  MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

Bill Bartok ESIG 9-25-13

The Weekly Rap! Friday May 9th, 2014

The National Debt is currently: $17,548,071,962,587.00 is lower by about 34 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,554 right about where it was two weeks ago.  The S&P 500 is trading at 1,872.  Gold is trading at $1,287 an ounce, while oil futures at $99.98 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.95/Gal. 

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 105.15 about .60 better than where we were two weeks ago.  We’ve broken out of the past trading range and rates are trending lower at this point.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.   

In economic news this week; The reader’s digest version is the economy continues to limp along but at least moving in a positive direction.  It looks like the blame for the slow growth in the economy in the first quarter this year is the Weather.   In other words all reports are taken with a grain of salt so to speak.

The service sector and other non-manufacturing companies posted faster-than-expected growth last month, as production and new orders picked up. The Institute for Supply Management said its non-manufacturing index rose to 55.2% in April, the highest reading in six months, from 53.1% in March. Readings over 50% signal expansion — the higher the reading, the faster the expansion.

Slower economic growth caused, as expected, in part by brutal winter weather led to a sharp decline in productivity in the first quarter.  The productivity of American businesses fell at a 1.7% annual rate from January through March, the Labor Department reported. The drop in productivity stemmed from companies producing fewer goods and services even as the amount of time their employees worked went up. Poor weather contributed to the disparity as many employees had trouble getting to work or performing their jobs as usual.

Fed Chairwoman Janet Yellen testified before the Joint Economic Committee of Congress on Wednesday and based on her recent “speakings,” we look for direction from the Fed Gods.  She stated:The U.S. economy will end the year in better shape despite the slow start in the first quarter, but recent weakness in the housing market bears watching,”  She also said that the weakness in the housing sector has become a concern. “The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery,” Yellen said.  The Fed chairwoman said given the slack in the economy, a high degree of monetary accommodation remains warranted. She once again emphasized a flexible policy path that would respond to changes in the outlook.

On the Real Estate front:  Banks are not making it easier for potential homebuyers. A Federal Reserve senior loan officer survey (74 domestic and 23 foreign banks operating in the U.S.) showed that banks are holding loan standards steady for prime mortgages and have raised them for nontraditional and subprime loans over the past three months.  Demand for mortgage loans was also weaker. The housing sector has been one of the few troublesome spots in the economy this year, with some analysts pointing to tight credit as a major factor. The Fed’s survey also shows that banks made it easier for commercial and industrial firms to get loans and that these companies have stepped up their borrowing demands.  

Home prices according to CoreLogic rose in March, with certain regional markets posting fresh peaks, while the U.S. as a whole saw a sharp slowdown in annual growth.  In March, home prices were up 1.4% from the prior month, as Arkansas was the only state where prices fell,. Meanwhile, five states, including North Dakota and Texas, which have seen strong jobs growth, posted fresh peak prices in March.

Looking at longer-term trends, prices are slowing down, with dropping affordability cutting demand. For the year through March, home prices rose 11.1%, a notable slowdown from annual growth of 11.8% in February, which was the fastest pace in eight years. That drop of seven-tenths of a point was the sharpest monthly slowdown for annual growth in three years. Over the year ending in March 2015, CoreLogic expects home-price growth of 6.7%, far below annual rates seen in 2014.

Although sellers don’t love to see prices slow down, a national market in which prices continued to run quickly ahead of income growth for a sustained period would ultimately slash demand. First-time buyers, in particular, have a tough time keeping up with rapidly climbing price growth. This key segment of the market has played a weak role in the recovery, with many stuck living with their parents or preferring to rent.

On the Employment front:  Last week it was reported that the U.S. generated 288,000 jobs in April, the best performance since a 360,000 gain in January 2012, and the unemployment rate fell to 6.3%, a strong performance that suggests the economy is accelerating after tepid first-quarter growth. The unemployment rate is the lowest since September 2008.  So far in 2014 the economy has gained an average of 214,000 jobs a month, well ahead of the 2013 pace of 194,000. Yet in an odd twist, the size of the labor force fell by whopping 806,000 despite the apparent willingness of companies to hire more workers. That’s the biggest drop in six months and the second largest decline in 32 years.  The economy was widely expected to show a faster pace of job creation in April, as warmer temperatures induced firms to add workers they might have hired earlier in the year if not for an extremely harsh winter. The poor weather contributed to a meager 0.1% U.S. growth rate in the first quarter.  What’s less clear is if the momentum generated by the switch from winter to spring will continue.

The number of people who applied for unemployment benefits last week fell by 26,000 to 319,000 to mark the lowest level in a month, but the decline likely stemmed from seasonal quirks instead of any major change in hiring trends or layoffs.

Have a great weekend.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!