The Weekly Rap! Friday Aug 24, 2012
The Dow is currently trading at 13,133 up 15 pts over last week The S&P 500 is trading lower at 1,409. Gold is trading at $1,674 an ounce, while oil futures at $96.44 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.89/Gal.
Yields on 10-year notes, which move inversely to prices, are trading at 1.68%. 30-year bond yields are trading at 2.79%. Mortgage rates have dropped so much that we are now following a lower security. If this is something you may not truly understand please let me know. I’ve been wrestling with trying to explain it in better terms. If I get enough interest I’ll devote a blog to how the process works.
Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.50. I’ve been saying for some time now, (ok, more than a month), that we were due for a correction and to lock if you could, well we have now gone into that correction. On July 25 we reached an all time high Price) of 106.31, and because it wasn’t able to hold, the correction began on Aug 2. We reached a critical support level (104.5) that held last week and we’ve now started to recover. 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; Sales of existing homes rose 2.3% in July, as low mortgage rates, rising rent and some job creation led to a modest rebound. Compared to July 2011, sales climbed 10.4%, the 13th straight year-on-year gain. Year-to-date, sales were up 8.6%, demonstrating the improvement that has taken place in a market recovering from the burst of the housing bubble. A lack of inventories is holding back the market, probably due to many owing more on their mortgage than their home would sell for, or have very little equity to put towards the purchase of a new home. Sales of new homes also rebounded in July as the housing industry remains one of the few areas of steady growth in the economy.
Distressed sales represented 24% of all transactions in July, down from roughly one-third last year. Foreclosures and short sales each represented 12% of all transactions, unlike last year where foreclosures far outnumbered short sales. All-cash deals fell to 27% from 29% in July, and investors represented 16% of all transactions, down from 19% in June.
The Fed Gods got closer to pushing the button on a new round of bond purchases even as a less-aggressive step of altering language on a low-rate pledge seems to be in the works, according to the minutes of the July 31-Aug 1 meeting of the central bank’s Federal Open Market Committee which showed a central bank worried about signs of decelerating growth, and itching to take action. Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.
Orders for big-ticket items such as autos and airlines surged in July, but other areas of the U.S. manufacturing sector softened for the second month in a row. The decline in orders for big-ticket items outside the transportation sector provides further evidence of a broad slowdown in the U.S. economy. Companies are receiving fewer orders for expensive goods at home and finding it tougher to market their wares in overseas markets such as Europe and China that are slowing.
And now for the Rant: There’s a bit of diploma drama going on between an Oklahoma high school and that school’s valedictorian. Yes, I said Valedictorian! Kaitlin Nootbaar in her graduation speech apparently she used a four letter word that got the school to withhold her diploma. The word was “Hell.”
When tasked with writing the graduation speech, she apparently got her inspiration from the movie The Twilight Saga: Eclipse. Her quote was, When she first started school she wanted to be a nurse, then a veterinarian and now that she was getting closer to graduation, people would ask her, ‘What do you want to do?’ and she said ‘How the hell do I know? I’ve changed my mind so many times’”
She said the audience laughed, she finished her speech to warm applause and didn’t know there was a problem until she went to pick up the real certificate this week. She went to the office and to pick up her diploma and the principal said, ‘Your diploma is right here but you’re not getting it. The principal told Kaitlin she would have to write an apology letter before he would release the diploma.
Kaitlin doesn’t plan on writing an apology letter because she doesn’t feel she did anything wrong. She starts college in a few days on a full scholarship, making the administrators’ decision even more appalling. She earned that diploma. And I don’t think the school has any right to hold it. What do you think?
Ok so I need your opinion on the content of this weekly economic and market wrap. Do you like the “Rant” portion of this? I’m tempted to move it to my blog page mostly in the interest of keeping this shorter. Please feel free to weigh in and let me know. This is my reality show! It’s my opinion and I’m sticking to it!
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.
For additional information please visit my Stanford Mortgage website: http://bill.bartok.stanfordloans.com/agents/About-Me