The Weekly Rap! Friday July 27, 2012

The Dow is currently trading at 13,010 up 67 pts over last week, a level not seen since May.  The S&P 500 is trading at the same level at 1,376.   Gold is trading at $1,621 an ounce, while oil futures at $89.99 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.41/Gal. 

Yields on 10-year notes, which move inversely to prices, are trading at 1.49%.  30-year bond yields are trading at 2.59%.  Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.875, amazingly holding these levels all week.  It’s a great time to lock in a rate if you can, while we’ve through the top of the current range (104 to 105) if we can’t sustain higher levels we will likely correct to the middle of the range.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. 

In economic news this week; I’ve been saying this for oh a year or so; “less negative is the new positive.”  There’s an index that the Chicago Fed puts out that comprises the weighted averages of 85 economic indicators.  Both the three- and one-month indexes of the Chicago Fed’s national activity index were “less negative” in June. The three-month average “rose” to -0.20 from -0.38 in May, while the one-month index rose to -0.15 from -0.48 in May. A zero reading is associated with trend growth, while a reading below -0.70 signals the increasing likelihood a recession has begun.  So according to this we’re not growing but not retracting either.

The number of people who filed applications for unemployment benefits fell sharply last week, marking the third straight week of big swings related to changing employment patterns in the auto industry. The economy took a turn for the worse in the spring as consumers slowed spending and businesses invested at a slower pace, with little sign growth will sharply accelerate anytime soon.  Gross domestic product, the value of all goods and services produced in the U.S., rose at a sluggish 1.5% clip in the second quarter. The sluggish economy, combined with falling gas prices, kept inflation in check. A measure of inflation linked to consumer prices fell to 1.8% from 2.4% in the prior quarter.

Home prices climbed 0.8% in May, following a revised 0.7% increase in April. From May 2011 to May 2012, prices rose 3.7%, although the index is still 17% below its all-time peak set in April 2007. The FHFA purchase-only index is based on transactions bought or guaranteed by Fannie Mae or Freddie Mac. Although I don’t put much credibility in Zillow, they said home prices rose 0.2% in the second quarter compared to one year ago, marking the first year-over-year increase since 2007.  Zillow also said it believes the housing market hit bottom earlier in the year and is now on the rise.

On a national level, pending home sales slipped 1.4% at 99.3 in June. Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities.  With so many home owners owing at or more that their home is worth, even if they would like to make a move they are restricted by their current loan and value of their home.  Also delays in the foreclosure process are holding up sales. Compared to the same period in 2011, pending home sales were up 9.5%, marking the 14th straight month of year-on-year gains. A sale is listed as pending when the contract has been signed but the transaction has not closed, and an index of 100 is equal to the average level of contract activity during 2001.

And now for the Rant:  Really?  Did you know that is against many schools policy to apply sunscreen to children while at school?  So many rules are created to keep from being sued by a parent, but common sense has gone out the window!  According to most statewide laws, teachers are not allowed to apply sunscreen to students and students can only apply it to themselves if they have a doctor’s note.  Luckily California is the only state that allows application of sunscreen.

One child remarked that their teacher used sunscreen in her presence and that it was ‘just for her.’ So, is this an issue of passive, inactive supervision? Where is the collective awareness for student safety?” At the very least, a hat might have protected the girls, but, alas, hats are not allowed at school, even on field day.  Even if you were to apply sunscreen to your child before heading off to school it wouldn’t be effective (the AAP recommends applying sunscreen with an SPF of at least 15 every two hours). 

We have no many laws that in my opinion are written to keep from being sued as opposed to safety.  There is a point of diminishing returns even in the disclaimers of products.  Have you noticed that the disclaimers and disclosures have gotten so long that no one bothers to read them?  This is my reality show!  It’s my opinion and I’m sticking to it!

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

For additional information please visit my Stanford Mortgage website:


Bill Bartok

Mortgage Advisor

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