The Weekly Rap! Friday July 4th, 2014

The National Debt is currently: $17,581,866,962,587.00 is Higher by about 43 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 17,068 about 100pts higher than where it was a week ago and establishing another all time high.  The S&P 500 is trading at 1,985.  Gold is trading at $1,321 an ounce, while oil futures at $103.77 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.82/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 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 102.09 about .75 worse than where we were last week.  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 Employment has picked up, pending home sale are higher as are home prices, and manufacturing is trudging along.

There are 2 million “missing households” in the US – which represents pent up demand for new residences.  These are Millennials who are living with their parents or rooming together in an apartment. That represents 2 years of housing starts at the current pace. Rents are increasing, jobs are tough to get, and student debt is high. Fun fact – we haven’t been building this few homes since World War II, according to the NAHB.

In the manufacturing sector; Chicago PMI retreated to 62.6 in June after hitting a seven-month high in May. A fall in new orders led the decline in June. But the index remains above 60 for the third straight month, signaling a bounce-back in the second quarter after a sharp decline in first quarter gross domestic product. Any reading above 50 indicates expansion.  

The final Markit reading of U.S. manufacturing conditions in June totaled 57.3. Despite the slight decline, this is still the highest reading of the index since May 2010.  The Institute for Supply Management said its manufacturing index registered 55.3% in June, just a hair below May’s reading of 55.4%. Any number above 50% signals expansion.

Fed Chairwoman Janet Yellen was at the podium again this week saying Federal Reserve monetary policy should continue to focus on jobs and inflation and leave stability concerns to regulation.  “I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns,” Yellen said in a speech at the International Monetary Fund.

On the Real Estate front:  Pending home sales jumped 6.1% in May to reach the highest level in eight months, signaling that upcoming closings of existing homes are likely to speed up, the National Association of Realtors reported Monday. The index of pending home sales hit 103.9 in May, compared with 97.9 in April. Low mortgage rates, a growing number of homes on the market and stronger job creation will all likely fuel more sales.  Although pending sales have risen three months in row, first-quarter closings were weak enough that NAR expects them to drag down 2014’s total sales tally below last year’s result. In May the pending-sales gauge was down 5.2% from a year earlier. An index reading of 100 equals 2001’s average contract activity level.

As spring sales continued, home prices in May rose 1.4%, and 10 states set record highs.  Record prices were hit in states such as Texas, New York and North Dakota.  Despite the monthly gain, annual growth slowed down as more homes were put on the market. Annual home-price growth hit 8.8% in May, down almost three percentage points from a quarter earlier. Looking forward, CoreLogic expects annual growth to slow to 6% by May 2015. Including May 2014’s increase, national home prices were about 13.5% below a 2006 peak.

Jobs Growth June 2014

On the Employment front:  The U.S. produced another big batch of jobs in June and the unemployment rate fell to a nearly six-year low as more people entered the labor force and found work, another strong signal that economic growth has rebounded after a dismal first quarter.  The economy created 288,000 jobs last month, posting a fifth straight gain of 200,000 or more, according to the government’s survey of worksites. The last time that happened was in 1999.  The unemployment rate, meanwhile, fell to 6.1% from 6.3%, based on a separate Labor Department survey of Americans households. That’s the lowest jobless rate since September 2008.

The strong jobs report is further indication that the economy continues to build momentum after a surprising rough patch in the first quarter, when growth contracted by 2.9%.  The first-quarter decline marked the steepest drop in growth outside of a recession since 1947, but the economites chalk it up to an a particularly harsh winter and other unusual factors that are unlikely to be repeated soon.The better-than-expected employment report pushed the Dow above the 17,000 mark for the first time ever and Bond yields higher.

Curb your enthusiasm folks… while the increase is good news, the year-over-year acceleration is still small, arguing that this has been catch-up.  Hours worked and average hourly earnings do not imply much momentum for the economy.  The number of people who had to take on a part-time job for financial reasons jumped by 275,000, offsetting a similarly sized decline in Americans who’ve been without a job six months or longer. And the fewest young adults entered the labor market in June in four years, though that could be the result of a longer school year.

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

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