The Weekly Rap! Friday Jan 23rd , 2015

The National Debt is currently: $18,096,830,132,587.00  is Higher by another 7 BILLION.  The interest pay-out alone on the debt is 268 Billion per year!  I post this so we will be aware of what we are leaving to our children.

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Stocks are lower today, giving up some ground after four sessions of gains that lifted the S&P 500 to its highest close of the year.  The Dow last traded at 17,775 about 375 pts higher than where it was last Friday.  The S&P 500 is trading at 2,060.  Gold is trading at $1,292 an ounce, while oil futures at $45.51 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.15/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% mortgage rates, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 105.19 better by 0.15 over where we were last week.  Our current trading is 104.00 to about 105.50.  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 improve at a “modest to moderate” pace according the Fed.  Home prices and new construction have picked up.  Existing home sale have dropped on a national level but I expect that to change drastically in the coming months.  If you remember just about two years ago when each sale was met with multiple offers, well its likely to happen again this spring.  When interest rates get this low, 3.75% for a 30yr fixed, everyone qualifies for a mortgage.  Couple that with FHA reducing the monthly mortgage insurance rate from 1.35% down to 0.85% and a rate of 3.25% for a 30yr fixed mortgage and even those with low credit scores and foreclosures, bankruptcies, and short sales can qualify.

In things to note, in Davos, Switzerland, where the famous finance folks are, 1,700 private jets were counted. Among other things, the owners were there to discuss global warming.

The leading economic index rose 0.5% in December, pointing to steady growth in early 2015. The increase last month suggests “the short-term outlook is getting brighter and the economy continues to build momentum,” said Ataman Ozyildirim, an economist at the Conference Board, producer of the report. The coincident index, which measures current conditions, edged up 0.2% in December. The lagging index increased 0.3%. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.

On the Real Estate front: A gauge of confidence among home builders fell slightly this month, but still showed optimism about single-family-home sales, staying close to the highest level since late 2005.  The gauge from the National Association of Home Builders/Wells Fargo declined one point to 57, marking the seventh consecutive month of above-50 readings. Readings above 50 signal that builders, generally, are optimistic about sales trends.

As to the actual building of new homes, the pace of construction started rose last month to cap the strongest year in seven.  Housing starts rose 4.4% in December to an annual rate of 1.09 million, the U.S. Commerce Department reported.  Starts of single-family homes hit the highest level since early 2008.  For all of 2014, there were 1.01 million total housing starts, the highest annual total since 2007 and up almost 9% from 2013. Despite 2014’s progress, total housing starts remain far below an average pace of about 1.5 million over the 20 years leading up to the housing bubble’s 2006 peak. A particularly harsh winter hit construction starts in early 2014, and quickly rising mortgage rates and prices, weighed on demand. Last month the Fed Gods noted that the housing sector’s recovery “remains slow.”

Home prices picked up a bit in November, a sign that costs continue to rise even if not at the rapid rate they were seeing last year.  Home prices rose 0.8% in November, the Federal Housing Finance Agency said. The year-on-year change accelerated to 5.3% from 4.4% in October. Annual gains have been in the 4%-to-5% range since May.  A separate measure from CoreLogic shows a 5.5% year-on-year increase, and the latest Case-Shiller 20-city composite, through October, shows a 4.5% gain.

Existing home sales dipped in 2014, the first decline since 2010, despite low mortgage rates and other factors that should have helped the market.  For all of 2014, existing home sales dipped to 4.93 million sales, a 3.1% decline from 2013, the National Association of Realtors reported.  Some of the factors that should have pushed home sales higher include a strengthening labor market, higher consumer confidence, and mortgage rates that refuse to go up.

On the Employment front: The number of people who sought new unemployment benefits in mid-January fell by 10,000, but the level of applicants remained above 300,000 for the third straight week for the first time since July in what’s likely a reflection of post-holiday layoffs.  Initial jobless claims declined to 307,000 last week from a revised 317,000, the Labor Department reported. Two weeks ago, claims hit their highest level since June.  Also, the government said continuing claims increased by 15,000 to 2.44 million last week. Continuing claims reflect the number of people already receiving benefits.

I’ll just call this “Then and Now, Issues in High School”

Issue:  Jeffrey will not sit still in class, he disrupts other students.

1957 – Jeffrey sent to the Principal’s office and given a good paddling by the Principal. He then returns to class, sits still and does not disrupt class again.

2014 – Jeffrey is given huge doses of Ritalin. He becomes a zombie. He is then tested for ADD. The family gets extra money (SSI) from the government because Jeffrey has a disability.

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Bill Bartok

Mortgage Advisor MLO# 445991

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