The Weekly Rap! Friday Jan 25, 2013

The Dow is currently trading at 13,876 higher by 300 pts compared with last Friday.  The S&P 500 is also trading higher at 1,500.  Gold is trading at $1,658 an ounce, while oil futures at $95.85 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, are trading at 1.93%.  30-year Treasury Bond yields are trading at 3.11%.  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.  This security is currently at 103.56 continuing to test the bottom of the current range.  We could very well be in for a new lower trading range (higher rates).

Since October 4 We’ve been trading in a range of 104.00 to 105.53 hitting the low twice and the top twice.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  Think of anything above 100 as a credit.  The higher the number (price), the better the rate.

In economic news this week; The number of people who applied for new unemployment benefits fell again last week and remained at a five-year low, though it’s unclear whether the decline reflects improved hiring or dwindling layoffs.

Sales of existing homes fell 1% in December to an annual rate of 4.94 million, reported the National Association of Realtors.  Record low mortgage interest rates clearly are helping many home buyers, but we’re still having an issue with tight inventory.  Despite the slight decline in December, existing-home sales are up 12.8% from the prior year. The median existing-home price rose 11.5% from the prior year to $180,800. Inventories fell 8.5%, a current sales rate of a 4.4-month supply, the lowest supply ratio since 2005. For all of 2012, existing-home sales hit 4.65 million

I’m really getting tired of economites and especially the media stating that restrictive mortgage underwriting standards are limiting sales.  Borrowers simply have to prove that they can repay the loan.  Seems logical right?  Loans may require more documentation and time as they are more heavily scrutinized than a few years ago, but as long as they have income and credit we’re still making loans and in many cases with little money down.

Sales of new single-family homes fell 7.3% to a rate of 369,000 in December, while less volatile longer-term trends showed a strengthening market.  Despite December’s decline, sales rose 8.8% from the same period in the prior year, with high affordability and rising household formation supporting demand.  The rate of new-home sales remains far below a bubble peak of almost 1.4 million in 2005.

The likelihood of faster domestic economic growth is rising, said the Conference Board as it reported that its leading economic index rose 0.5% in December. Although this is a small gain it’s the strongest result since September.  Among the 10 indicators tracked by the Conference Board’s index, the largest positive contribution in December came from fewer claims for unemployment-insurance benefits. The largest negative contribution came from consumers’ expectations.

For additional information please visit my Stanford Mortgage website: http://bill.bartok.stanfordloans.com/agents/Blog
Sincerely,

Bill Bartok

Mortgage Advisor

NMLS 445991

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