The Weekly Rap! Friday June 20th, 2014

The National Debt is currently: $17,538,072,962,587.00 is Higher by about 6 BILLION.  The interest pay-out alone on the debt is 246 Billion per year!  I post this so we will be aware of what we are leaving to our children.

The Dow last traded at 16,947 about 200pts higher than where it was a week ago.  The S&P 500 is trading at 1,962.  Gold is trading at $1,314 an ounce, while oil futures at $106.62 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.79/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 105.50 about .30 better than where we were last week.  We’ve broken out of the past trading range and rates are still trending lower at this point.  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 inflation is higher, layoffs are lower, manufacturing is steady, and there were no surprises of major changes from the Fed at their regular meeting.

The Federal Reserve Bank of New York reported this week that Manufacturing activity in their “Empire State” general business conditions index basically held steady in June after hitting an almost four-year high in May. The Philadelphia Fed’s manufacturing index jumped to a reading of 17.8 in June from 15.4 in May. This is the highest reading of activity since last September.

Industrial production bounced back in May, according to Federal Reserve which also showed that April output wasn’t as bad as initially estimated. Production climbed 0.6% in May, after falling 0.3% in April and rising 0.8% in March.

Signaling that economic growth could pick up in coming months, the leading economic index for the U.S. rose 0.5% in May to 101.7, the Conference Board reported. “Recent data suggest the economy is finally moving up from a 2% growth trend to a more robust expansion,” said Ken Goldstein, economist at the Conference Board, in a statement.  I want to be an economist when I grow up.  They get paid to guess and whether they’re right or wrong, kind of like the weather man.

Consumer prices, CPI, rose sharply in May for the second straight month and the rate of inflation over the past year reached its highest level since late 2012, an upward trend that could worry the Fed Gods unless it pulls back soon.  The consumer price index jumped 0.4% last month following a 0.3% gain in April, the Labor Department said Tuesday.  Annualized over the past 12 months, consumer inflation is at 2.1%.  Just eight months ago, inflation was running at just a 1% pace.  

The Fed has been aiming to boost inflation to around 2% or so from what it considered an economically damaging low level, but the sudden surge could set off alarm bells. While I doubt that it will, this could cause “market” concern that the Fed might be forced to raise interest rates earlier than it planned.  Excessive inflation appears unlikely in the absence of stronger growth, further tightening in labor market conditions, and greater pressure on wages.  Historically speaking, on an annual basis inflation is still very low. Once annual inflation gets above 5% it becomes extremely troublesome for the economy. But with inflation so low in spite of the Fed’s efforts to print money some are saying that Deflationary forces are stronger than the Fed.  Long term average inflation is about 3.2.  The core CPI, which excludes volatile food and energy costs, rose by 0.3%, the biggest gain since August 2011. The cost of housing, new cars, airline tickets, medical care and prescription drugs all increased.

inflation_by_decade_sm   Housing starts May 2014

On the Real Estate front:  Home builders’ confidence rose four points to 49 in June, the highest level in five months, but respondents were still a bit pessimistic, according to the National Association of Home Builders/Wells Fargo housing-market index released Monday.  The index has been below 50 since February, indicating that builders, generally, are pessimistic about sales trends. “Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase. Builders are reacting accordingly, and are moving cautiously in adding inventory,” said David Crowe, NAHB’s chief economist. Construction on new homes fell by 6.5% in May and builders trimmed plans for future projects in another sign that a hoped-for spring revival in the housing market remains elusive.

On the Employment front:  With layoffs at very low levels and more jobs available, the number of Americans seeking unemployment benefits continues to hover near a post-recession bottom.  Initial jobless claims declined by 6,000 to 312,000 in the week ended June 14.   Yet despite the decline in jobless claims, millions of Americans still cannot find work and the number of long-term unemployed remains higher now than at any time before the 2007-2009 recession struck.  The unfinished recovery in the labor market is the chief reason why the Fed plans to keep interest rates low for the foreseeable future, a point reiterated by Chairman Janet Yellen on Wednesday after the bank’s latest gathering in Washington.

The economy has now recovered all the jobs it lost from the Great Recession. It’s only taken seven years.  Industrial production is now higher.  But consumer confidence is, depending on your measure, somewhere between 10% to 25% below its 2007 peak.  It turns out; Fed Chairwoman Janet Yellen feels pretty much the same way as other Americans. For example, this is what the world’s most powerful central banker had to say Wednesday when asked if, finally, she’s confident the economy is running above its long-run potential.  “When you say confident, I suppose the answer is no, because there is uncertainty,” she said. Yes, she continued, there’s accommodative policy from her Fed, there’s diminished fiscal drag, easing credit conditions, improving household debt finances, rising home prices, rising equity prices. But she returned to the word “uncertainty,” and it didn’t seem like just obligatory caution.

In the Fed’s statement following their meeting on Wednesday, Yellen was more kitten than lion, sticking to her guns that the central bank can hold short-term interest rates steady until the middle of next year and then raise them gradually, and downplaying recent strong inflation readings.  As expected, the central bank trimmed bond purchases by another $10 billion, staying on track to end its long-running stimulus program before the end of the year. This is the fifth straight meeting with a $10 billion cut in the asset purchases. The Fed will now buy $35 billion a month in Treasuries and mortgage-related assets, starting in July.  At the same time, the Fed lowered its forecast for “longer run” interest rates to 3.75% from closer to 4%. The last change is important because it signals the central bank won’t push up interest rates all that high during this recovery phase.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

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

Thank you!

Bill Bartok ESIG 9-25-13

The Weekly Rap! Friday June 13th, 2014

The Weekly Rap will be getting out a bit later as I have taken on another endeavor.  Many of you know that I also have another passion, food and cooking.  I have taken the position as new Chef at the Bass Lake Golf Course Bar & Grill.  Please know though, that my main focus is still being a Mortgage Advisor.  We currently serve just breakfast and lunch and have room for 50+ on the beautiful outdoor patio and 38 inside.  I will be revamping the menu so stay tuned…

The National Debt is currently: $17,531,034,962,587.00 is Higher by about 7 BILLION.  The interest pay-out alone on the debt is 246 Billion per year!  I post this so we will be aware of what we are leaving to our children.

The Dow last traded at 16,775 about 200pts lower than where it was a week ago.  The S&P 500 is trading at 1,936.  Gold is trading at $1,276 an ounce, while oil futures at $106.77 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.81/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 105.20 about .40 worse than where we were last week.  We’ve broken out of the past trading range and rates are still trending lower at this point.  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 plug along, Small Business owners are more optimistic, Retail Sales continue to plug higher, Wholesale prices are lower, and home listings locally are much higher than last year.

Small-business owners have recovered all of the optimism lost during the Great Recession, according to a report released this week. The higher level of confidence is feeding into price increases.  The National Federation of Independent Business’s small-business optimism index increased again to 96.6. last month, from 95.2 in April. The May reading is the highest since September, 2007, before the last recession.  The improvement though, while welcome, is far below readings that normally accompany an expansion.

Our government recorded a budget deficit of $130 billion in May, which is 6% lower than in the same month last year.  For the fiscal year to date, Our government has spent $436 billion more than it’s taking in.  It is though 30% lower than the same period in fiscal 2013. The deficit hit a record of $1.4 trillion in 2009.

Retail Sales rose 0.3% last month on strong demand for cars, trucks and home-improvement products, but spending tapered off at most other retailers after a big bump in demand in April.  Despite the mixed report, the pace of sales in April and May taken together reflect an economy growing at a moderate pace in the spring after the U.S. suffered a sharp contraction in the first quarter. Retail sales account for about one-third of consumer spending, the main engine of economic activity.

Retail Sales May 2014

Prices at the Wholesale level (PPI) unexpectedly sank in May, as prices dropped across the board, easing concern that inflation pressure might be stirring in the pipeline.  The producer price index dropped 0.2% after rising 0.6% in April and 0.5% in March, the Labor Department said. The Federal Reserve has actually been trying to nudge inflation higher. They were caught off guard by the weak inflation seen last year and have been heartened by signs that inflation is stabilizing in the past few months. But Fed officials pay much more attention to the personal consumption expenditure index, which measures prices consumers pay.

Consumer sentiment declined to an early June reading of 81.2, the lowest level in three months, from a final May level of 81.9, according to the University of Michigan and Thomson Reuters report. Economists watch sentiment levels to get a feeling for the direction of consumer spending.

On the Real Estate front:  For the El Dorado Hills/Cameron Park/Shingle Springs areas: From April to May New listings are higher by 14% and higher by 81% over this time last year.  Average price per Sq/Ft is about the same from a month ago but higher by 10% from a year ago.  As you could probably guess the average-days-on-market is higher due to increased inventory.  The average sold price is $552,000 vs. $473,000 just a year ago. 

On the Employment front:  Job openings rose 7.2% to 4.46 million in April, the most since September 2007, the U.S. Department of Labor reported Tuesday.  Compared with same period in the prior year, April job openings rose 17%, as private-sector openings increased 18%.  With 9.75 million unemployed people in April, there were about 2.2 potential job seekers per opening.  In April 2013, there were 11.68 million unemployed people — about 3.1 potential seekers per opening.  When the recession began in December 2007, there were less than two potential job seekers per opening. The total number of hires remained at 4.71 million. The level of hires was almost 5 million when the recession began.

The number of Americans who applied for unemployment benefits last week increased slightly but remained near a post-recession bottom, indicating little change in a gradually improving U.S. labor market.

Please check out my Blog site: BartoksBlog “Food, Wine and Finance; Recipes for success” at http://www.bartoksblog.com 

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

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

Thank you!