The Weekly Rap! Friday Sept 13th, 2013

The National Debt is currently: $16,937,192,689,583.00

The Dow last traded at 15,365.  The S&P 500 is trading at 1,687.  Gold is trading at $1,312 an ounce, while oil futures at $107.92 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.77/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.90%.  30-year Treasury Bond yields last traded at 3.84%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 98.90.  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 it was a very light week in the economic news category with lackluster trading in the markets and an economy that continues to limp along an anemic growth rates.

Consumer credit rose in July, posting an annual growth rate of 4.4.  Revolving credit, which is mostly made up of credit card loans, fell for a second month. Meanwhile, non-revolving credit, which covers loans for education and cars, among other areas, rose at an annual rate of 7.4% in July, down from 9.5% in June. Non-revolving credit has grown every month since August 2011. Credit is important to watch because it points to how real consumer spending is due to whether its borrowed or not.

A gauge of consumer sentiment, The University of Michigan/Thomson Reuters consumer-sentiment index fell to a preliminary September reading of 76.8, the lowest since April, from a final August reading of 82.1.  The sentiment gauge fell in August from the highest level in six years, on grimmer views of current and coming economic conditions. This is not a good report and indicates that Americans are still cautious and their mood has worsened recently.

On the employment frontier; Job openings at U.S. workplaces fell to 3.69 million in July, the lowest level since January, from 3.87 million in June.  Compared with same period last year, July’s job openings rose 5.4.  That’s about 3.1 potential job seekers per opening. When the recession began in December 2007, there were less than two potential job seekers per opening.  Consider this: One reason why employers are letting go of few workers is that staff levels are already so slim that there’s little fat to cut.  The number of applications for unemployment benefits fell below 300,000 for the first time since 2006, but the government attributed the surprising plunge to computer-related glitches instead of a sudden improvement in the labor market.

Retail sales increased in August by the smallest amount since late spring 0.2.  Americans remain cautious in their spending habits because of slow growth in wages and job creation.  Companies hired fewer workers toward the end of summer. And that’s a big obstacle to growth since consumers are main driver of the economy. Barring a sudden pickup in spending, there’s little chance of the economy shifting into a higher gear before the end of the year. Retail sales have risen a mild 4.7% over the past 12 months, unadjusted for inflation. In the three years prior to the 2007-2009 recession, retail sales grew at a annual pace of 6.2%, 6.5% and 5.4%.

On the inflation front; wholesale prices rose in August, mainly because of higher costs of gasoline and vegetables, but there was little sign of rising inflationary pressure in the broader economy.  The producer price index rose 0.3% in August after no change in July. Minus the volatile categories of food and energy, “core” wholesale prices were unchanged. The core index is viewed by the Federal Reserve as a more accurate gauge of inflationary pressure. Core prices have risen just 1.1% over the past 12 months, well below the central bank’s ceiling of 2.5% or less. A better measure of whether Americans are paying more for goods and services, the consumer price index, will be released next week.

The Government recorded a budget deficit of $148 billion in August, but remains on course for its first full-year shortfall below $1 trillion since 2008.  The U.S. has run deficits of more than $1 trillion for every year of President Barack Obama’s presidency, though they have fallen slightly as revenue has increased through the recent mandatory sequester cuts. The shortfall for fiscal 2012 was $1.1 trillion.  As you can see from the Debt clock above we are about to break the 17 TRILLION mark.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 30th, 2013

Good Friday morning:

The National Debt is currently: $16,920,033,360,537.00

The Dow last traded at 14,792.  The S&P 500 is trading at 1,632.  Gold is trading at $1,400 an ounce, while oil futures at $107.54 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.49/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.76%.  30-year Treasury Bond yields last traded at 3.69%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at $99.96, .75 points (or percent) better than we were last week as we continue to test the top of the current trading range (100).  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; It’s the beginning of a long Labor Day holiday weekend and the markets are very quiet with most month end trading behind us and most of the big traders already  heading out to the Hamptons to enjoy the last official summer holiday weekend.  News this morning was mixed and in some ways contradictory.  For instance, consumer income was flat but spending was down. You’d think that would signal lower consumer confidence, but it did not. Confidence was up for some strange reason.  Based on current market conditions, if I had purchase loans, I would not want to enter a three day weekend unlocked.

Orders for big-ticket goods sank 7.3% in July, mostly because of fewer contracts for jetliners and large military goods.  The retreat in orders, the first in four months, was expected after a steady increase in demand since spring. Still, the weak report underscores how slowly the manufacturing sector is expanding and suggests the economy entered the third quarter with little momentum.

The economy, Gross Domestic Product (GDP) rose at a 2.5% annual rate in the April-to-June period instead of an initial reading of 1.7%.  The revision was mainly because of an improved trade picture and higher demand for American-made goods and services. This is due to a devalued Dollar which makes our goods more attractive to foreign buyers.  But the Dollar has risen since which likely will reduce 3rd quarter GDP.  At 2.5% growth employment has no chance of expanding.  We would need to see a rate of about 6.00% for many quarters to see advancement in employment.  The U.S. is forecast to grow 2.4% in the third quarter and 2.8% in the fourth quarter.  The fact that growth has not surpassed 3% since the first quarter of 2012 remains troubling.  GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces.

Home prices in June posted another month of growth, though the data signals some moderation.  With gains in cities across the country, home prices increased 2.2% in June, a strong result but down from 2.5% in May, according to the S&P/Case-Shiller gauge. Overall, the report shows that housing prices are rising but the pace may be slowing.  Overall, home prices remain about 23% below a bubble peak. However, the story varies widely by city.

Led by drops in most of the U.S. Pending sales, or contracts on homes, fell 1.3% in July, a second month of declines, as mortgage rates continued to rise.  Despite the recent drop, the pending-home sales gauge in July was up 6.7% from the year-earlier period, according to the National Association of Realtors.

American consumers grew slightly more optimistic in the waning days of summer as the effects of tax hikes earlier in the year continued to fade, according to the consumer confidence index which rose to 81.5 in August from 80.0 in July and nearly matched a five-year high.  Rising confidence is generally a good sign for the economy, but the index remains well below its historical norm. Readings usually top the 100 mark during an expansionary phase. Another gauge of consumer sentiment the University of Michigan/Thomson Reuters consumer-sentiment index declined to 82.1 August from 85.1 in July, which was the highest level since, on grimmer views of current and coming economic conditions. I guess it depends on which index you watch and whom they poll.

Americans barely increased spending in July, another indication that the economy got off to a slow start in the third quarter.  Consumer spending edged up 0.1% last month. The increase in spending matched the meager growth in personal income, which also rose a scant 0.1% in July.  Consumers account for more than two-thirds of U.S. economic activity. When Americans buy more goods and services, businesses generate higher sales and profits and can afford to hire extra workers. That puts more money into the economy and further boosts spending and growth.

On the employment front; Signaling that the pace of layoffs remains relatively slow, a trend of jobless claims recently stuck close to the lowest level in six years.  the number of people who applied last week for unemployment benefits declined by 6,000 to 331,000.

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 23rd, 2013

The National Debt is currently: $16,911,552,058,827.00

The Dow last traded at 14,986.  The S&P 500 is trading at 1,660.  Gold is trading at $1,397 an ounce, while oil futures at $106.79 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.47/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.83%.  30-year Treasury Bond yields last traded at 3.81%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at $99.25, .375 points (or percent) better than we were last week as we continue to test the bottom of the current trading range.  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 still treading along and the Fed has to begin tapering off the bond purchases later this year (because they can’t keep doing this forever) and housing is taking a breather from the spring price increases.

The big news of the day was that sales of “new” homes dropped 13.4% to an annual rate of 394,000 in July, the lowest rate since October, as all four regions posted declines. Expectations were for sales to pull back in July to a rate of 485,000.  Looking longer-term, new-home sales in July were up 6.8% from the year-earlier period.

July’s “existing” home sales, according to the National Association of Realtors, rose 6.5% to an annual rate of 5.39 million, the highest level since late 2009, when buyers rushed to make a tax-credit deadline.  July’s spike could be due to buyers looking to purchase a home before mortgage rates rise further.  Mortgage rates have increased more than one percentage point since early May, though they still remain historically low.  The median price of a home was $213,500 in July, up 13.7% from the year-earlier level. Inventories rose 5.6% to 2.28 million homes available for sale, representing a 5.1-month supply at current sales rates. NAR added that all-cash deals remained high in July, while there were relatively few first-time buyers and distressed sales.

The Fed Gods agreed with their leader Ben Bernanke’s view that the economy will pick up later this year and allow the central bank to taper its asset purchase plan before the end of the year, according to last meeting’s minutes released Wednesday.  But they shied away from signaling when a move might come.  It’s expected that if economic conditions improve broadly, the Fed would taper the pace of its securities purchases later this year. And if economic conditions continue to develop broadly as anticipated, they would reduce the pace of purchases in measured steps and conclude the purchase program around the middle of 2014.

The U.S. continues to expand at a moderate if uneven pace with a chance that growth might speed up later in the year, according to the “Leading Economic Index” an index that measures the nation’s economic health. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.  The index rose 0.6% in July to 96.0, the highest level in five years, after no change in June. Eight of the 10 components expanded in July, led by the spread on interest rates, availability of credit, stock prices and permits to build new homes.  The two categories to show declines were hours worked by manufacturing employees and business orders for long-lasting manufactured goods.

On the employment front; the number of people who applied last week for unemployment benefits rose to the highest level in a month but remained near a post-recession low.

The national activity index, a weighted average of 85 different economic indicators, produced by the Chicago Fed rose to a negative 0.15 reading in July from negative 0.23 in June, and the three-month average did virtually the same, rising to negative 0.15 from negative 0.24 in June. The index is designed so that readings of zero indicate trend growth, and readings below negative 0.70 indicate an increasing likelihood a recession has begun.

I read a great article this morning in the Wall Street Journal and I couldn’t have written a better rant so I’m just going to post the link to the article, “Fed tapering: The math investors need to know” It’s about just how overvalued the stock market is based on the Fed manipulating interest rates.  In a nutshell: Fed “tapering”, the winding down of “quantitative easing,” and the normalization of interest rates, changes absolutely everything in the markets.  Check it out.

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.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 16th, 2013

 

The National Debt is currently: $16,902,974,130,678.00

The Dow last traded at 15,071.  The S&P 500 is trading at 1,655.  Gold is trading at $1,369 an ounce, while oil futures at $106.91 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.57/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.84%.  30-year Treasury Bond yields last traded at 3.87%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at $98.875, 2.07 points (or percent) lower (or worse) than we were last week as we test the bottom of the current trading range.  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 readers digest version is how do we survive without the Fed’s “crack” feeding the Markets.  This will not end pretty.  The markets (stock and bond) are trading in reverse.  That is, they are moving higher on negative economic news because that means the Fed will continue buying bonds and stimulating the economy.  They should be moving higher on good news.  Strong economic growth should be good for stocks because they earn a higher return.  The current pattern suggests that when (not if) the Fed returns to normalcy, the stock market will correct.  And it won’t be pretty.

The Federal Government posted a budget deficit of $97.6 billion in July, a rise from the same month ago, though a rise in tax receipts may make the annual budget gap the smallest in five years.  In July, the government spent $297.6 billion and took in $200 billion in revenue. Including the July deficit, the budget gap for the first ten months of the 2013 fiscal year totaled $607.4 billion, down 38% from the same period a year ago.  Question; is this supposed to be good news?

Small-business “optimism” pretty much remained the same in July, helped by slight gains in the percentage of those planning to increase employment, those saying now’s a good time to expand and those expecting real sales to be higher. The National Federation of Independent Business said its small-business optimism index rose 0.6 points to 94.1, still half a point below the Dec. 2007 reading, when the U.S. entered recession. The report is based on the responses of 1,615 randomly sampled small businesses in NFIB’s membership.  I don’t know if there’s a “pessimism” index, but I show this because small business I think is a big component in the direction of growth.

Retail sales rose a sluggish 0.2% for the fourth straight month in July, and details of the report suggest some firming in consumer spending.  But most of the weakness was due to a steep drop in automobile sales after strong gains in May and June.  Excluding that category, retail sales rose 0.5%.  Consumer spending drives about two-thirds of demand in the U.S. economy.

Prices (inflation) at the wholesale level were unchanged in July, as prices declined for energy, didn’t change for food, and rose for pharmaceuticals. Meanwhile, the core producer-price index, which excludes food and energy, increased 0.1%.  The report signals that inflation was contained in July.  Weak international conditions have been pressuring prices.

Consumer prices rose 0.2% on gains for gasoline, housing, clothing and food, among other goods. Excluding energy and food, the “core” consumer-price index also rose 0.2%.  Consumer prices have increased 2% over the past 12 months, and the core has increased 1.7%.  While most traders (the Market) expect that the Fed could announce plans to taper its massive bond-buying program as early as September, there’s been some concern about inflation running too low.  Also, the government reported that inflation-adjusted average hourly earnings fell 0.2% in July. Real wages have declined 0.1% over the past 12 months.

On the employment front: Signaling a slower pace of layoffs, the number of people who applied for new jobless benefits fell 15,000 to 320,000 last week, hitting the lowest level of initial claims since October 2007. Continuing claims dropped 54,000 to a seasonally adjusted 2.97 million in the week that ended Aug. 3. Continuing claims reflect the number of people already receiving benefits.

Home-builder confidence rose in August to the highest level in nearly eight years, on gains in both current sales conditions and prospective ones. The National Association of Home Builders/Wells Fargo housing market index rose 3 points to 59, marking the fourth rise in a row.  Any reading above 50 is considered “good.” The component measuring current sales conditions rose 3 points to 62, the component measuring sales expectations in the next six months rose a point to 68, and the component measuring traffic of prospective buyers was unchanged at 45.

Consumer sentiment took a step back in August from post-recession highs after some leading retailers reported cautious spending by shoppers.  The preliminary August reading of the University of Michigan/Thomson Reuters consumer sentiment fell to a reading of 80.0 in August, down from 85.1 in July.  The outlook component fell to 72.9 in August from 76.5 in July, while current conditions dropped to 91.0 in August from 98.6 in July.  These levels are still quite weak on a historical basis even with the post-recession gains.

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.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 9th, 2013

The National Debt is currently: $16,894,431,665,658.00

The Dow last traded at 15,436.  The S&P 500 is trading at 1,694.  Gold is trading at $1,310 an ounce, while oil futures at $105.75 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.57/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.58%.  30-year Treasury Bond yields last traded at 3.64%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.96 right where we were last week.  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 readers digest version is it was a very light week in the economic news category with lackluster trading in the markets.

U.S. service-sector companies expanded at faster than expected pace in July, according to the Institute for Supply Management. The ISM said its survey of purchasing managers – the executives who buy supplies for their companies – climbed to 56.0% last month from 52.2% in June. That’s the highest level since February.

According to the most recent survey of senior bank loan officials at American banks and foreign branches in the US, in the last three months, 13% of those questioned had established easier conditions on business loans to large and medium-sized firms and 7% on small firms.  While this is a small percentage, their business could be feeling the pinch of a slow growth economy and attempting to gain new business.

Annual home-price growth in June was close to the fastest pace in seven years, as inventories of existing and new homes remains low.  Home prices, including distressed sales, rose 1.9% in June, and were up 11.88% from a year earlier, according to CoreLogic, an Irvine, Calif.-based analysis firm. Excluding short sales and other distressed properties, prices rose 1.8% in June, and were up 10.97% from the year-earlier period, reaching the fastest annual pace since February 2006.  The 30-year fixed-rate mortgage, according to Freddie Mac data, rose as high as 4.46% in June from as low as 3.35% in May.

Consumer credit rose 5.9%, or $13.8 billion, to an annual rate of $2.85 trillion, the Fed reported.  Revolving credit like credit cards fell 3.8%, while non-revolving credit like student and auto loans climbed 10%. Revolving credit fell for the first time since March, while non-revolving credit has grown every month since August 2011.

New applications for unemployment benefits rose less than expected last week and remained near a five-year low, perhaps a sign of some improvement in the labor market. A better sign was a decline in the four-week average, a more reliable gauge than the volatile weekly number. It fell by 6,250 to 335,500, touching the lowest level since November 2007.

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

NMLS# 445991

The Weekly Rap! Friday June 28th, 2013

US national Debt is $16,888,906,375.00 and climbing!  (http://www.usdebtclock.org/)

The bond market’s month-long plunge got a bit of a bounce back in the last couple days.  The Dow last traded at 14,987.  The S&P 500 is trading at 1,613.  Gold prices continued to slide this week shedding more than 13% since the start of June and are now down almost 30% since the beginning of the year, propelled lower in part due to investors’ concerns that the Fed will soon trim its $85 billion-a-month bond-buying program.  It’s trading are at $1,226 an ounce, while oil futures at $97.06 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.65/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.52%.  30-year Treasury Bond yields last traded at 3.54%.  Rates on 30-year fixed-rate mortgages stayed a hair above 4% this week. Just a month ago, they were below 3.5%.  Since May 8th Fannie Mae MBS (Mortgage Backed Security) with 3% coupons has fallen nearly 7 points to their lowest levels in a year.  MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.0% coupon, containing 3.75-4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.375,.  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 readers digest version is everything hinges on what the Fed will or will not do and when.  And the Fed Gods are creating more uncertainty in the market just by opening their mouths.  Every time one of them speaks the markets react.  Most of the selling in the last few weeks is from “program” trading: that is traders will put in sell orders below the market and when they are triggered it causes a domino effect.

Mortgage rates soared over the past week, after panic set in after the Fed suggested it could start tapering bond purchases this year, with 30-year fixed-rate mortgage rate hitting the highest level in almost two years. The average rate for the 30-year fixed-rate mortgage rose to 4.46% in the week ending June 27, the highest rate since July 2011, and up from 3.93% in the prior week, Freddie Mac said in its weekly report. The latest weekly result is also the first time the rate has reached above 4% since March 2012.

The central bank’s $85-billion-a-month bond-buying program has helped prop up stock prices and keep interest rates ultralow.  Bernanke said last week that the central bank would likely scale back its bond buying later this year and end the program when the unemployment rate was near 6%, perhaps by mid-year 2014.  The problem is that the Markets didn’t pay attention to the “ifs” in his statement and took it as fact that the Fed will be pulling back on accommodative policy. There is a big rule in securities trading; “Sell the rumor, and buy the fact.”  And the markets sold off big-time on the rumor.  There are some really big “ifs” in the Fed’s statement: Bernanke said the Fed “could begin” to taper its purchase of bonds later this year, “if the economy continues to improve” as Fed officials expect and “if everything goes well.”

The Fed expects the unemployment rate, now at 7.6%, to fall to as low as 6.5% by the end of 2014 and perhaps even dip below 6% in 2015.   Unless we get employment numbers above 250,000 every month for more than six months and GDP growth above 4.5% (currently less than 2%), this simply isn’t going to happen folks.  But markets trade on perception first and facts second.

A Federal Reserve official this morning opend his mouth saying that the central bank’s bond purchase program may be scaled back in September.  In a speech to the Council on Foreign Relations, Fed God Jeremy Stein used only September as the hypothetical start date for slowing the pace of purchases. Stern’s remarks indicate he is eyeing September for making a decision about changing the pace of purchases.  In his speech, Stein suggested markets should not to focus on fresh payroll numbers that come out just before the meeting, saying any decision by the Fed to slow the pace of its currently $85 billion-per-month asset-purchase program will be based on accumulated trends since the program started last fall, not the most recent data. Stein said the Fed didn’t want to be a “prisoner” of the market.

Markets are now pricing in more rate hikes than had been assumed before last week’s policy meeting and news conference by Bernanke. Fed fund futures imply at least three quarter-point rate hikes, and possibly four, by the end of 2015.  Earlier this week, Dallas Fed President Richard Fisher likened market participants to “feral hogs” for pushing bond yields higher.

The mood of U.S. consumers climbed to a five-year high in June, according to an index released Tuesday that showed expectations for the future climbing significantly.  The Conference Board’s consumer confidence index jumped to 81.4 in June, the best reading since January 2008 and up from 74.3 in May. The final June reading of the University of Michigan and Thomson Reuters consumer-sentiment index declined to 84.1 from a final May reading of 84.5. May’s reading was the highest since July 2007.

The U.S. economy grew slower in the first quarter than previously believed, mainly because of softer spending on consumer services such as health care, takeout food and travel.  Gross domestic product rose by just 1.8% in the January-to-March period, down from a prior estimate of 2.4%, the Commerce Department said in the last of three regular updates.  The reduced pace of growth in the first three months of 2013 calls into question the Fed’s assertion last week that the economy has improved significantly since last fall.

U.S. house prices saw the strongest monthly jump on record, while new-home sales reached a five-year high. Pending home sales jumped in May to reach a six-year high.  The NAR’s pending home sales index climbed 6.7% to 112.3 in May, from 105.2 in April. The index was up 12.1% from May 2012 levels.  In the Eldorado Hills to Shingle Springs area this year, listings have grown from 149 in January to 222 in May or 48%, while sales have gone from 70 to 147 in the same period.

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.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday May 31st, 2013

The bond market’s month-long plunge has pushed long-term interest rates on mortgages and Treasurys to their highest levels in more than a year, sparking a debate: Is this a bursting bubble, the aftereffect of clumsy Federal Reserve communication or a welcome sign the economy is, at last, on the mend.  The Dow last traded at 15,232.  The S&P 500 is trading at 1,652.  Gold is trading higher at $1,393 an ounce, while oil futures at $92.87 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, last traded at 2.18%.  30-year Treasury Bond yields last traded at 3.33%.  Rates on 30-year fixed-rate mortgages rose a hair above 4% this week. Six months ago, they were below 3.5%.  Since May 8th Fannie Mae MBS (Mortgage Backed Security) with 3% coupons has fallen nearly 4 points to their lowest levels in a year.  MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The 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 trading at 100.34, which is 1.25 pts worse than where we were just last week ago.  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 housing market continues to improve and overshadow the slight improvements in the rest of the economy as well as consumer confidence at least for the moment is on the rise.  All eyes are on the Fed these days as many traders see the recent fall in bond prices, which move inversely to yields, as confirmation of a bond-market bubble fueled by the Fed and bound to end badly, retarding an economy whose growth is already painfully slow.

Home prices rose in March, marking the fastest annual growth rate in nearly seven years.  The S&P/Case-Shiller 20-city composite rose 1.4% in March, the largest monthly growth since July. The growth from the same period of last year was 10.9%, which marks the highest year-on-year growth rate since April 2006. All 20 cities tracked by the gauge saw year-over-year improvements for a third consecutive month.  Low inventory and interest rates, as well as pent-up demand, are supporting home prices. There are also fewer distressed sales.

Pending sales of homes ticked up 0.3% in April, with gains in the Northeast and Midwest, but decreases in the South and the West.  Despite April’s slight gain, the pending-sales gauge increased 10.3% from April 2012, hitting the highest level in three years.  While the housing market has seen large gains over the past year, low inventories, and high unemployment and credit standards are constraining growth.

Rising home prices encourage market activity as more owners are willing and able to place their homes on the market.  As home prices have increased, the number of owners who owed more on a home than the property was worth fell to about 13 million in the first quarter from 15.7 million during the same period last year. On a percentage basis, 25.4% of all homeowners with a mortgage had negative equity in the first quarter, down from 31.4% during the same period last year.  Owners with negative equity, (those with less than 20% equity) may be unable to afford a down payment for a new home, thereby preventing them from moving.  Rapidly rising prices and bidding wars are preventing first-time buyers from participating.  With fewer first-time buyers, it’s tougher for other owners to sell and move up from starter homes.  It’s a vicious circle.

The Economy grew a touch slower in the first three months of 2013 than previously believed, mainly because of a slower buildup in inventories and a somewhat steeper drop in government spending.  Gross Domestic Product (GDP) expanded at an annual rate of 2.4% in the first quarter, down from an initial estimate of 2.5%.  GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces.  The gain in first-quarter growth follows a tepid increase of 0.4% in the fourth quarter last year.  A big driver of GDP is consumer spending.  The more products that are purchased the more products are produced thus increasing GDP.  Consumer confidence allows us to predict future GDP growth.

Earlier in the week we saw the Conference Board’s Consumer-Confidence Index climbed to a five-year high of 76.2 in May from 69.0 in April.  Apparently we have the most confidence in five years about the nation’s economic prospects.  Higher stock prices, rising home values and falling gasoline costs have made apparently made us more upbeat. A lack of drama in Washington has also allowed consumers to regain confidence after several political disputes had threatened to harm the economy. Still, consumer confidence remains well below the level expected in a normal economic recovery. Before the Great Recession, consumer confidence hovered in the 100-point range.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday May 24th, 2013

Stocks fell this morning on light pre-holiday volume, as concerns about Fed policy and recent volatility in global markets kept buyers on the sidelines.  The Dow last traded at 15,289.  The S&P 500 is trading at 1,647.  Gold is trading higher at $1,387 an ounce, while oil futures at $93.88 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, last traded at 2.01%.  30-year Treasury Bond yields last traded at 3.17%.  Mortgage Bonds have traded much lower this week following Bernanke’s comments.  On Wednesday alone Fannie Mae MBS (Mortgage Backed Security) with 3% coupons fell nearly 1 point to their lowest levels in a year and about five times the magnitude of a typical trading day.  MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The 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 trading at 101.62, which is 2.00 pts worse than where we were just two weeks ago and 1.00 pt worse than last Friday.  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 looks to be picking up slightly, with the emphasis on slightly, and the Fed doesn’t know what it wants to do but is shaking up the Markets none the less.

The bond market got rocked again this week on rumblings from the Fed regarding their Bond and Mortgage purchases.  If you’ve been reading this then you know that I’ve been warning of this for some time.  Markets react to the slightest hint of change and it’s like rats deserting a sinking ship, everyone (traders) wants to be the first one out.  Now this could be overblown and we could recover from the panic but take it as a warning, when the Fed has to unwind this “stimulus” markets will unwind as well.

Head Fed Chief Ben Bernanke this week speaking before congress made a few statements that the markets took to mean that the economic stimulus (purchases of mortgages and bonds to the tune of 85 BILLION per month)  the Fed has been pumping into the market is about to come to an end.  The Fed could slow down its asset purchase program in the next few months he told congress.  “In the next few meetings, we could take a step down in our pace of purchase,” Bernanke said in a question-and-answer session with the Joint Economic Committee.  He noted that there has been “some improvement” in the job market, and the central bankers will focus on whether this continues, “and there is confidence that it is going to be sustained.”  But then to contract and confuse us all he stated “A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,”

According to the minutes of the Fed’s April 30-May 1 meeting released this week, a “number” of the Fed Gods although there was no consensus, were willing to slow down asset purchases as soon at their next meeting in June. On the other hand, a “couple” of Fed officials said the Fed might have to ease more if inflation fell further. One Fed official wanted to stop the bond purchases immediately, while another wanted to increase the size of the program.  This really give me a comfort feeling (read sarcasm) that the Fed Gods have no real clue what to do and definitely are not acting as a cohesive group.

Existing-home sales rose in April to hit the highest rate since November 2009, pointing to an ongoing recovery supported by low interest rates and pent-up demand.  Existing-home sales rose 0.6% in April to an annual rate of 4.97 million, according to the National Association of Realtors. Sales of existing homes in April were 9.7% higher than during the same period last year.  Both first-time buyer and investor buying trends have remained steady over the past six months, suggesting that the recent rebound in home prices has not yet become an issue for buyers.  Inventories rose 11.9% in April to 2.16 million existing homes for sale. April tends to have the highest inventories of the year. The supply rose to 5.2 months in April from 4.7 months in March.  Distressed-property sales fell to 18% of all transactions in April, the lowest since data collection began in 2008. Sales of new homes edged up 2.3% in April to the second-highest post-recession level

Orders for durable goods climbed 3.3% last month after a revised 5.9% drop in March.  Higher demand for autos, airplanes and military wares boosted orders for long-lasting goods in April, but orders also rose in most other industries in a positive sign for U.S. manufacturers.  If the volatile transportation sector is excluded, orders rose a smaller 1.3% but demand was still broad based. Almost every key sector reported higher orders. This latest report offers a ray of hope for a segment of the economy that has shown softness over the past few months in an array of other indicators.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday May 10th, 2013

This Sunday is Mother’s day, but did you know the modern holiday of Mother’s Day was first celebrated in 1908, when Anna Jarvis held a memorial for her mother in Grafton, West Virginia. She then began a campaign to make “Mother’s Day” a recognized holiday in the United States.  I’m sure there was a lobbyist from Hallmark in there somewhere.  She succeeded in 1914 when Congress actually agreed on something and designated the second Sunday in May as Mother’s Day.  So Happy Mother’s day to all you fantastic Mothers out there!  We wouldn’t be here without you.

The economy continues to limp along fueled mostly by Fed intervention, but apparently that’s enough to boost stocks into record territory.  The Dow last traded at 15,060 breaking another record high this week.  The S&P 500 is trading at 1,627.  Gold is trading lower at $1,433 an ounce, while oil futures at $94.60 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.68/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 1.89%.  30-year Treasury Bond yields last traded at 3.09%.  Mortgage Bonds have broken out of the downward trend (higher rates) they’ve been trading in since Dec 5, 2012 and continue to have established a higher range (lower rates).  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 trading at 104.125 a tad worse than where we were last Friday.  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; it’s been a very light week of economic news so I get to rant a bit.  The reader’s digest version is the economy continues to drag its feet as slow as possible without going backwards.

Home prices rose 1.9% in March, marking the 13th straight monthly rise and a 10.5% year-on-year gain, CoreLogic reported. Excluding distressed sales, the monthly gain was 2.4%. Strong gains here in the western region, including a 22.2% year-on-year gain in Nevada and a 17.2% gain in California, lead the advance.  Only four states saw year-on-year drop: Delaware, Alabama, Illinois and Virginia. CoreLogic’s pending home price indicator points to a 1.3% monthly and 9.6% year-on-year gain for April.

The Fed reported that consumers increased their debt in March by $8.0 billion, While this may seem like a large increase, it’s the smallest increase since last July.  The increase is well below February’s $18.6 billion pace and was smaller than the $16 billion increase expected by Wall Street.  Monthly debt rose at a 3.4% annual rate in March, less than half the 8.0% pace in the prior month.  This is the biggest percentage decline since last July. The fear is that consumer spending may not hold up in the face of payroll tax increases.

In the latest Fed survey (the April 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices), only a few American banks reported that they eased standards on prime residential mortgages over the past three months. This summary is based on responses from 68 domestic banks and 21 U.S. branches and agencies of foreign banks.

Fear of “putback risk,” the risk that the insurers (Fannie Mae and HUD etc) and mortgage buyers would force them to buy back bad loans, is an important factor.  A number of smaller banks indicated that they were even less likely now to approve a mortgage loan with a FICO score of 620, depending on the down payment.  Some more banks were likely to approve a mortgage application with excellent credit (a FICO score of 720) and a 20% down payment.  Surprise surprise.  About a third of banks indicated that they were less likely to approve mortgages insured by the Federal Housing Administration with FICO scores of 580 or 620.

I really don’t have a problem with this thinking.  You need to have at least decent credit or we end up right where we were a few years ago.  Last fall, Bernanke said that mortgage lending standards appeared to be “overly tight.”  That is, by the way, a “vague” term.  It depends on HIS meaning of overly tight.  While I agree that we have gone to the other end of the spectrum from a few years ago when if you could fog a mirror you got 100% financing to purchase a home, this is what happens.  The banking system is trying to eliminate all risk in a risk based industry.

I really don’t think it’s difficult to get a loan these days.  It is though difficult to document a loan.  Some of the paper trails underwriters are demanding border on the ridiculous.  I have a purchase where the buyer had a CD mature and transferred the funds from the investment account into their bank account for the down payment.  No problem right?  We have the statement showing the funds being transferred out and the other statement with the funds being transferred in.  Should be good right?  Oh no, the Underwriter wants a copy of the front and back of the check.  Really???   Have we really gotten this anal that we need to document trivial things?  The borrowers in this case have 790 credit scores great income and plenty of reserves, what a loan should be based on, or as the newly anointed by congress Consumer Finance Protection Bureau CFPB says, “the ability to repay the debt”.  If an address shows up on a credit report that is not listed as owned on the application we have to provide a detailed explanation on when and why the client lived at the address even if it was 15 years ago.  What does this have to do with the borrowers’ ability to repay the debt?  And don’t get me started on the credit scoring system.

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.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday May 3rd, 2013

The job gains reported this morning don’t reflect a rapidly growing economy, but they provided enough relief to markets to boost stocks into record territory.  The Dow last traded at 14,986 about 276 pts higher than last Friday.  The S&P 500 is trading at 1,615.  Gold is trading lower at $1,464 an ounce, while oil futures at $95.57 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.59/Gal.  There’s a great “App” called “Gas Buddy” that will allow you to find the cheapest gas prices where ever you are and map you to the station.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 1.75%.  30-year Treasury Bond yields last traded at 2.95%.  Mortgage Bonds have broken out of the downward trend (higher rates) they’ve been trading in since Dec 5, 2012 and continue to have established a higher range (lower rates).  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 trading at 104.125 a tad worse than where we were last Friday.  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; get your popcorn ready, it’s been a full week of economic news.  the reader’s digest version is The economy is faltering early in the new year, the Fed Gods had a meeting housing seems to have reached a bottom and is at least in recovery mode and job growth seems to have rebounded a bit.

What ultimately drives the economy is spending.  Without primarily consumer spending we have no economic growth..  Well… consumers were more cautious spenders in March and income growth also slowed, reinforcing a mass of reports that indicate the economy slowed as the spring began.  Consumer spending rose just 0.2% last month, down from 0.7% in February. It was the smallest gain in three months. When Americans buy more goods and services, businesses generate higher sales and profits and can afford to hire workers. Less spending results in slower economic growth.  Americans spent more in March on services such as eating out, but they also paid higher utility bills because of an unusually cold March. That accounted for a big chunk of the spending. Utility bills are expected to decline in the next month or two, letting consumers save the extra cash or spend it on other things.  We’ll see.

While we spent less money we apparently grew more confident in April despite mounting evidence the economy may have slipped into another spring lull.  The consumer confidence index rose to 68.1 this month from 61.9 in March, according to the nonprofit Conference Board, publisher of the report.  Consumer confidence took a fall in March partly because of the “sequester,” the law requiring billions in federal spending cuts that dominated headlines last month. Yet the controversy over the sequester has largely died down, or fell out of media favor, while rising stock prices and falling gasoline costs may have eased concerns, at least for the moment.  Before the 2007-2009 recession, the consumer confidence index hovered around the 100 mark. The index is a good long-term indicator of where the economy is headed, but it can be very choppy on a month-to-month basis.

U.S. manufacturers barely expanded in April as the industry’s rate of growth slowed to the lowest pace since December, fell to 50.7% from 51.3% in March according to the closely followed ISM or Institute for Supply Management index. Reading over 50 indicate more manufacturers are expanding instead of contracting.

Pending home sales rose nationally 1.5% in March, reversing February’s decline, the National Association of Realtors reported. The pending-home-sales index increased to 105.7 in March from 104.1 in February, and was up 7% from March 2012. Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply.  The S&P/Case-Shiller 20-city composite index rose 9.3% in February from the same period last year, the largest annual growth since May 2006.  All 20 cities saw year-over-year gains in February, with accelerating growth in 16 cities.

I’m sure you’ve heard the scuttle “is this a bubble” that housing prices could be rising so quickly.  This is very much like an over correction in the stock market. On Oct 12 2007 the Dow was at 14,093,  On March 6 2009 (just two years later) it had dropped to 6,626.  That’s a drop of 53%.  But by June 12, 2009 (just 3 months later) the Dow was at 8,799, a 32% increase from the low hit just months earlier.  I just think we’ve seen the bottom and the market is reacting to having overcorrected.  The housing market could go up by 100% from the bottom and we would still be half way to where we were at the top and I’m not even factoring in inflation.

The Fed Gods met this week and stated in their policy statement, that they were flexible, saying the Fed was prepared to “increase or reduce the pace of its purchases,” commonly known as quantitative easing, depending on labor market or inflation changes.  Big Chief Bernanke had previously said the Fed was flexible, but this is the first time it was included in the statement.  If you’ve been reading this commentary you are aware that after starting the year brightly, the economy has started to look sluggish in recent weeks. At the same time, inflation has been softening and remains well below the Fed’s 2% target.

The new flexible language matters because most of the market discussion has centered on the question on when the asset purchases will be reduced.  The Fed Gods have to be careful with this because they are artificially suppressing long term interest rates on treasuries and mortgages by purchasing these securities and creating more demand with less supply (remember your econ 101).  With inflation low though, the Fed wants to make clear that excessive deflation could require more aggressive easing.  The minutes of this two-day meeting will be released on May 22. It’s expected that there will be an active discussion of the factors behind the weaker inflation.

On the jobs front: The U.S. created a net 165,000 jobs in April and the hiring was stronger in March and February than the Labor Department initially reported. The increase in jobs exceeded the 135,000 forecast which is causing the stock market to rally. The acceleration in hiring also nudged the unemployment rate down to 7.5% from 7.6% in March. That’s the lowest level since December 2008, the month before President Obama took office.  Yet despite an improved labor market in April, companies are not hiring as many workers as they were just a few months ago and most economites think job growth will remain soft. Among the reasons: cuts in federal spending will accelerate and consumers are expected to feel a sharper bite from higher tax rates imposed in January.

The unemployment rate, for its part, won’t shrink rapidly unless companies hire at a much faster clip. The U.S. needs to average around 250,000 jobs a month for an extended period to tug the jobless rate back down to pre-recession levels of under 6%. The pace of hiring in April is far too slow to accomplish that task.

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

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991