The Weekly Rap! Friday Mar 22, 2013

The Dow is currently trading at 14,501 right about where we were last Friday.  The S&P 500 is trading at 1,554.  Gold is trading at $1,607 an ounce, while oil futures at $93.15 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, are trading at 1.92%.  30-year Treasury Bond yields are trading at 3.14%.  Mortgage Bonds have been and still are in a downward trend (higher rates) since Dec 5, 2012, and after breaking out of the current range to the high side a week ago, have since retreated back towards the bottom.  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 at 102.78 today heading back to the lower end of the range (higher rates).  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 reader’s digest version is that builders are nervous but still building homes, although they’re still building them.  New home construction is up as well as existing home sales and inventories are beginning to improve.  Labor is about the same and the Fed is still trying to stimulate the economy.

The National Association of Home Builders housing-market index decreased to 44 in March from 46 in February for a second month of declines. Year-over-year growth in confidence among home builders is slowing.  Meanwhile, the most recent report on home construction showed single-family-home starts rose 20% in January from the same period in the prior year. Builders remain extremely hesitant about ramping up construction activity. Basically I think they simply don’t want to run ahead of demand.  The combination of conservatism by both builders and lenders means that housing starts are likely to remain a half step behind demand for the foreseeable future.

That being said construction on new homes nudged up in February with modest gains for single-family residences and apartments, as longer-term trends signaled a housing market that continued to strengthen.  The U.S. Department of Commerce’s report also showed substantial gains in building permits, which indicate future demand.

Existing-home sales rose in February to reach the highest “rate” in more than three years, another sign of a strengthening housing market, as inventories posted an unusually large gain in the month.  The National Association of Realtors said existing-home sales rose 0.8% in February, hitting the highest level since November 2009. Inventories rose 9.6% in February. The months’ supply of existing homes rose to 4.7 in February from 4.3 in January, the first increase since April, but still a relatively low figure. January’s months’ supply was the lowest since May 2005. While levels are still low, housing is now the strongest part of the economy in growth terms

The biggest news of the week was the Fed meeting and Bernanke’s remarks.  At the meeting, the Fed decided to stick with its $85 billion a month of asset purchases. In their latest forecasts also released on Wednesday, Fed officials still didn’t see the jobless rate reaching a key level until 2015.  The Fed said that the economy is growing at a moderate pace but there are still downside risks to the outlook.  Bernanke stated that the labor market is healing but the central bank will keep its aggressive easing stance until it is shown that the gains are durable.  “We are seeing improvements. I think one thing we would need is to make sure that this is not a temporary improvement,” Bernanke said the Fed was focused on the outlook for the labor market.

The number of Americans who applied last week for new unemployment benefits rose slightly but clung near a five-year low, another indication that fewer people are losing their jobs.  Jobless claims, a rough gauge of layoffs, have fallen below 350,000 in five of the past six weeks, marking the first time that has happened since late 2007, shortly before the “Great Recession” began.

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Bill Bartok

Mortgage Advisor NMLS #445991

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