The Weekly Rap! Government Rhetoric, the Economy and other stuff. 3/25/16

The National Debt is currently: $19,158,639,132,587.00  is Higher by another 41 BILLION in the last week.  The interest pay-out alone on the debt is 233 Billion per year!  I post this so we will be aware of what we are leaving to our children.

Stocks ended five consecutive weeks of gains Thursday, as a rally that carried shares to their highest levels of the year petered out during a holiday-shortened week.  The Dow closed higher by 13 points at 17,568 Thursday and was closed yesterday for Good Friday.  The S&P 500 closed at 2,044.  Gold is trading at $1,218 an ounce, while oil futures at $39.59 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.37/Gal. Summer gas (higher priced) is in production.

The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 101.88.  Our current trading range is about 101.25 to about 102.8.  Each .50 change in the price of the security translates to about 0.125 in rate.  Basically the 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 lower the rate.  

You’ve no doubt heard that Republicans could have what’s called a “contested” Convention.  So exactly what is a Contested Convention?  Sometimes a contested convention is called a “brokered convention,” under the presumption that powerbrokers will negotiate backroom deals in order to determine the ultimate nominee. The terms are essentially interchangeable, but “contested convention” is more precise because the situation may resolve itself more organically.

In most election years, one presidential candidate wins enough delegates during the primary-caucuses process in order for the presumptive nominee to earn a majority of the delegates before the convention begins.  In a contested convention, however, no presumptive nominee exists because no candidate garners a majority of the delegates on the first ballot. So even though a convention is often just a perfunctory meeting for top party officials used to rally around the flag into the general election, a contested convention means the meetings actually make a pivotal difference for who the nominee will be.

What I really want to know is exactly “who” is making the rules?   GOP “rules” say that a candidate needs to win a majority in at least eight states in order to be nominated on the floor of the convention.  It was originally aimed at stifling Ron Paul supporters at the 2012 convention.  But party “officials” say this threshold could be lowered in the days before the convention to either allow (or block) certain candidates from getting nominated on the convention floor.  In other words Donald Trump could have the approval of the voters but not the party “officials” who could block him from getting nominated, which is why I think the Party let him run in the first place.  You can just see it…  “We’ll let him run to make sure he doesn’t run Independent.  He won’t win anyway and if he does we’ll control the nomination at the Convention.”  I can see that happening.  Voters may be in for a rude awakening when they learn that the votes cast by delegates on the floor of the convention — rather than those cast in primaries and caucuses — actually determine the Republican nominee.

In economic news this week; Orders for Durable goods fell, revised fourth Quarter GDP showed corporate profits fell, as did existing home sales.  This coming week will end with a gusher of fresh data on the health of our economy: High-profile reports on the labor market and the manufacturing sector are set to come out Friday morning. Other releases throughout the week will offer insight into consumer confidence and spending, inflation and the path forward for the Federal Reserve.

Orders for long-lasting or durable goods fell 2.8% in February (the third drop in four months) as every major industrial sector except for autos showed declines.  The details of the report show widespread weakness that underscores why the economy has slowed since last fall.  A strong dollar, weak global economy and nosedive in the U.S. energy sector have dented demand for American manufactured goods.  And there’s little reason to expect a big rebound anytime soon.

The fourth quarter’s slowdown was less severe than previously estimated but corporate profits fell, showing the economy entered 2016 on uneven footing.  Gross domestic product, the broadest measure of goods and services produced across the economy, advanced at a 1.4% annual rate in the fourth quarter, the Commerce Department said Friday. That was an upward revision from last month’s estimate of 1% growth.

Corporate profits sank 3.2% in 2015 to mark the first decline since the Great Recession, adding another weight on a slow-growing economy.  American companies have been squeezed by falling exports, cheaper imports and continued caution on the part of savings-minded consumers.  Firms have also incurred higher labor costs.  Weak earnings call into question whether companies can continue to add new workers, increase investment and sustain an economic recovery that’s almost seven years old.

On the Real Estate front: Millennials and others looking to buy a first — or “starter” — home are struggling to find ones they can afford, a new research report says.  There are fewer affordable starter homes in 95 of the 100 largest U.S. markets now compared with 2012, according to the San Francisco-based real estate research company Trulia defines a starter as a home that is in the lower third of a market’s valuation and affordable to those making the median income in that market.

There’s a paradox in Monday’s existing-home-sales data.  Sales slid 7.1% to the lowest pace since November, the National Association of Realtors reported.  NAR has warned for many months that low levels of supply, which are pushing prices ever higher, will eventually cripple the market.  February’s decline may be a sign that the Realtors’ fears are coming true, although it may still turn out to be a temporary blip caused by weather, new closing regulations, and the difficulties of adjusting data to account for all those anomalies. 

Still, as NAR Chief Economist Lawrence Yun said in a statement, “the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers.”  That may sound obvious: if you can’t afford the few limited options available on the market, you’d probably give up too. It also tracks with a survey NAR published last week, which found that the share of current renters who say now is a good time to buy fell in the most recent quarter.

Sales of new homes bounced back in February, another sign of continued, if subdued, momentum in the housing market.  New home sales ran at an annual pace of 512,000, the Commerce Department said Wednesday.  That was the highest since December.  February’s rate was 2% higher than January’s, but 6.1% lower than year-ago levels.  The median national sales price in February was $301,400, up 6.2% compared to January. There was 5.6 months’ worth of supply available at the current sales pace at the end of the month.

By 2016, about 238,000 homes or 28% of the total available inventory of 860,000 in those markets surveyed were considered starter homes, down from 425,000 homes or 30% of all homes in 2012, out of a total of 1.4 million that year the report found.  In 2016, the median starter home list price was $154,156, and a buyer would need to dedicate 37% of his income just to afford it, compared with 32% in 2012, Trulia said.

On the Employment front:  The number of Americans who applied for unemployment benefits in the mid-March was little changed at 265,000, reflecting the low level of layoffs taking place across the economy.  Initial claims have now been below 300,000 for 55 weeks, a feat last accomplished in 1973, when the size of the labor force was much smaller.  The average of new claims over the past four weeks edged up by 250 to 259,750, the Labor Department said Thursday. The monthly average is seen as a more accurate predictor of labor-market trends.

If you like this commentary please visit and “Like” my Facebook pageI put all of my prospective buyers through underwriting so that when they place their offer, it is as close to “cash” as you can get.  So to get your clients “underwriter approved”, please contact me and get your offer accepted!

I have a personal App for your phone that replaces my business card.  You can contact me (various formats), run the mortgage calculator, get RE/Mortgage news, and have access to my social media sites including this weekly commentary.  You can even share my app with others.  Please check it out and let me know what you think.  Click on the following link from your phone and hit “add to home screen, then click “add” and you’re done.

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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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