The Weekly Rap! Friday Nov 30, 2012

The Dow is currently trading at 12,553 higher by 445 pts compared with two weeks ago.  The S&P 500 is also trading higher at 1,412.  Gold is trading at $1,714 an ounce, while oil futures at $88.35 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.38/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 1.61%.  30-year Treasury Bond yields are trading at 2.80%.  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 about 75% of the over-all production.  This security is currently at 105.21 still trading in a tight 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; There’s quite a bit of news this week, but I’ll try to consolidate as much as possible.  The overall news for the week is slightly positive but nothing to get excited about.  The major news continues to be the impasse our politicians face as the “fiscal cliff” of automatic tax increases and spending cuts will take place at year end if they can’t come to an agreement.  These were put in place over the last few years by the politicians because they couldn’t agree (or compromise) then.  My fear is that they will just raise the debt ceiling again and push the decision on to the next term.

U.S. durable goods orders were basically flat or unchanged in October, mainly because of slower demand for automobiles and airplanes and a reversal in defense orders.  Most other manufacturers saw an slight rise in demand, however, in a sign that conditions aren’t getting any worse in an already-soft segment of the economy.  Why do we watch Durable goods orders you ask?  Well, these are items such as cars, computers or heavy machinery expected to last at least three years. A sort of economic canary in the coal mine, orders spike when growth accelerates and soften when we experience a slowdown.

Business contacts told the Federal Reserve that manufacturing was either slowing or outright contracting as the fiscal cliff clouds the outlook for factory owners, according to the latest Beige Book report on current economic conditions released on Wednesday.  The extent of weakness in manufacturing was more pessimistic than recent reports on durable goods and industrial output, and caught most economites by surprise.  It’s very difficult to plan ahead when you have looming uncertainty over what could make or break your business based on what our government decides over taxation, spending and other factors.

Gross domestic product expanded at a 2.7% rate from July through September, up from 2% in the government’s ”advance” estimate.  Slower consumer spending and the decline in business investment suggest the faster level of growth in late summer is unsustainable.  Consumer spending was revised down to 1.4% from 2%.  What’s more, business investment in capital goods was changed to a 2.2% decline from a 1.3% drop. Spending on equipment and software slumped 2.7% instead of being flat.  The keys are whether the fiscal cliff is averted and consumer spending picks up.  Personal consumption accounts for as much as 70% of the U.S. economy.

On a national level; home prices rose in September for the sixth straight month, signaling that the housing market is “in the midst of a recovery,” according to the S&P/Case-Shiller home-price index.  The 20-city composite index posted a 0.3% increase in September to reach the highest level in two years, following a 0.8% gain in August.  Home prices were up 3% from September 2011 for the largest annual percentage growth since July 2010.

Pending home sales rose 5.2% in October continuing to signal a recovering housing market, the National Association of Realtors reported. Consumer confidence rose slightly as well in November to its best reading in more than four years, as growing hopes for the jobs market buoys sentiment.  This month’s moderate improvement was the result of an very slight rise in expectations, while consumers’ assessment of present-day conditions continues to hold steady. Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.

And now for the Rant:  In order to keep this short I have moved the rant to my Blog site  Today’s rant is titled “Glee, A show that is promoting Bulimia among our  school age children”

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:

Bill Bartok

Mortgage Advisor


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