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.
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.
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