The Weekly Rap! Friday March 28th, 2014

The National Debt is currently: $17,546,412,702,957.00 is higher by about 20 BILLION. I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,285 about 50 pts. lower than where it was last Friday. The S&P 500 is trading at 1,853. Gold is trading at $1,294 an ounce, while oil futures at $101.77 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.70/Gal.

Mortgage Backed Securities or “MBS” yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. The FNMA 30-year fixed 4.0% coupon, containing 4.25% – 4.625% mortgages, pretty much the benchmark or how rate sheets are priced these days is currently trading at 104.00 about .375 worse than where we were last Friday at this time. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the better the rate.

In economic news this week; The reader’s digest version is the economy continues to limp along at a snails pace with Most of the upward movement due to higher healthcare costs as consumers now have to pay their own health insurance due to the new “Affordable” health care law known as Obama Care..

The economy’s growth in the final three months of 2013 was bumped up to a 2.6% annual pace from 2.4%, but the increase stemmed mainly from higher spending on health care and little else. The solid pace of growth in the waning months of 2013, following a 4.1% advance in the third quarter, showed an economy that entered the new year with fresh momentum but still not fully healed more than four years after the end of the Great Recession. And some of that momentum was lost in the first quarter owing to a brutally harsh winter that disrupted business operations across large stretches of the U.S. and kept consumers indoors.

Higher health-care expenditures accounted for nearly three-fourths of the revised increase in consumer spending in the last three months of 2013. Bigger electricity bills also contributed. While most expect growth to accelerate later this year, the first quarter is shaping up to disappoint. The expectation is for gross domestic product to taper off to 1.6%. GDP reflects the total value of all goods and services produced by the economy. The U.S. has expanded at an average pace of 3.3% since 1929, but growth has slowed to a 2.3% rate in the first four full years since the Great Recession ended. Oh by the way, the stock market has more than doubled in value in the last 4 years.

The national activity index, a gauge of economic activity, swung back to positive territory in February. The index rose to 0.14 from negative 0.45 in January, while the three-month moving average fell to negative 0.18 from positive 0.02. The index is a weighted average of 85 different economic indicators, designed so that readings of zero indicate trend growth. When the three-month average value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun.

The purchasing managers index or, PMI, for the U.S. fell to 55.5 in March from 57.1 in February, but still showed improving conditions for manufacturers. Readings over 50 indicate growth. In March, output was barely changed at 57.5. New orders dipped to 58.0 from 59.6 and employment fell to 53.9 from 54.1. The slight drop-off in the March PMI comes after the index rose in February to the highest level in almost four years, helped by manufacturers catching up after winter-related softness in January.

A gauge of consumer confidence rose to 82.3 in March from an upwardly revised 78.3 in February, the Conference Board reported. The expectations index rose to 83.5 in March from 76.5 in February, while a barometer for the present situation declined to 80.4 from 81. Apparently while consumers were moderately more upbeat about future job prospects and the overall economy, they were less optimistic about income growth. The expectation is that the economy will continue improving and believe it may even pick up a little steam in the months ahead.

According to a report from the University of Michigan and Thomson Reuters, consumer sentiment declined to a final March reading of 80, the lowest level since November, from a final February level of 81.6. Sentiment levels are watched to get a feeling for the direction of consumer spending.

Consumer spending rose 0.3% in February at the fastest rate since November as Americans spent more on health care and utilities, but purchases of durable goods fell for the third straight month in a negative sign. Partly offsetting the gain, however, was a reduction in rate of spending in January. Spending increased at a 0.2% clip in the first month of the year instead of 0.4% as previously reported. Personal income also rose 0.3% in February.

The savings rate edged up to a four-month high of 4.3% from 4.2% in January. Inflation-adjusted disposable income, meanwhile, jumped 0.3% to mark the biggest advance in five months. Also, inflation as gauged by the core PCE price index posted a slight 0.1% increase in February, and it’s up just 1.1% over the past 12 months. The overall PCE index also rose 0.1% last month and its climbed 0.9% in the past year, offering further evidence that inflation remains muted.

On the Real Estate front: Home prices ticked down 0.1% in January for a third straight month after a particularly harsh winter, according to S&P/Case-Shiller’s 20-city composite index, as strong year-over-year appreciation showed signs of moderating. Including January, prices remained about 20% below a 2006 peak. Price gains over the past year should encourage more sellers to place their homes on the market, thereby raising inventory and cutting upward pressure on prices.

There’s concern about recent weakness in housing-market data. Unusually poor weather may have also a played a role in the drop in home sales, but it’s unclear how much of recent weakness is due to a particularly harsh winter or limping demand. If the weakness is weather related, housing projects and purchases that were delayed could show up in coming months.

New homes sales were down 3.3% from January’s one-year high, the government said Tuesday. New home sales are 1.1% lower compared to one year ago, reflecting weaker demand because of higher mortgage rates and home prices as well as a bitterly cold winter.

Slumping for an eighth month, a gauge of pending home sales fell 0.8% in February to the lowest level in more than two years, signaling that upcoming activity may slow, the National Association of Realtors reported. The index of pending home sales hit 93.9 in February – the lowest reading since October 2011 compared with 94.7 in January. Low inventory, declining affordability and poor weather have hit the housing market in recent months. Pending sales typically close within two months. An index reading of 100 equals 2001’s average contract activity level.

On the Employment front: Applications for unemployment benefits fell last week to the lowest level in four months, indicating that layoffs have slowed and perhaps a hint that hiring is about to pick up. Initial jobless claims are a gauge of whether layoffs are rising or falling and changes in the number of people seeking benefits tend to correlate over time with how many jobs the economy is producing.

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Bill Bartok

Mortgage Advisor MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!


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