This Week’s ECONOMIC update as it pertains to YOU!!!
This is important for the highly educated and informed: READ!!!!
Economic news this week was a little mixed this week.
The stock market was pretty steady finishing the week just under the close last Friday. Just barely a losing week, but the first losing week after a string of incredible gains placing us at an all-time high last week. Among the winners for the week was the home improvement sector showing increased sales due to the sharp uptick in Real Estate sales. Among the losers were clothing retailers showing an unexpected drop in same store sales.
Some good news this week included: Oil prices dropped further on low inflation data. Business investment was up more than expected. California, after plagued with a budget deficit for years now has a much larger than expected surplus and has begun paying off debt. Even the U.S. deficit has begun to shrink at the quickest pace ever, which is not hard given the record size of the deficit, but it is dropping much more and quicker than expected. This is mainly due to lower unemployment, increased company profits, investment gains, and higher wages which increase tax revenue. There has also been some savings in spending. Tax increases have not figured into this too much as they take effect this year so were not included in the April tax filing for the 2012 tax year.
The most volatile sector this week was interest rates!!! Rates rose further for a 3rd consecutive week. Three weeks ago we were at the lowest point in a year, now we are at the highest rates this year, yet still a little below last year’s highs. Rates are about ½ percent higher than just 3 weeks ago. The 10 and 30 year treasury bond yields have rose about ½ percent as well in the last 3 weeks. This is due to uncertainty on how soon the Federal Reserve will begin to taper down its purchases of treasury bonds and mortgage securities. At this point the economy is improving at a quick enough pace that these programs ending is a foregone conclusion. The question is how soon will they begin and how gradual they will pull back. To calm the market, TheFederal Reserve has reiterated its plan to purchase approximately $85 billion in treasury bonds and mortgage-backed securities each month to help keep bond prices high and interest rates low as a stimulus to the economy, yet last week they indicated that they will put a plan in place to stop this program at the appropriate time but only until the labor market improves substantially, maybe as soon as this summer. That is the cause of the timing of rates beginning to rise. As I stated in my e mails over the last couple of weeks rates are now on a course toward a market rate without intervention from the Fed. I expect rates to rise steadily for about a year or two while the Fed tapers its buying of mortgages. With low inflation expected I would not expect to see rates over 6 percent when they level out upon the end of the Fed’s intervention.
The 30-year fixed-rate average jumped to 3.59 percent with an average 0.7 point. It was up from 3.51 percent last week but down from 3.78 percent a year ago. Until last week, the 30-year fixed rate had remained below 3.5 percent for more than a month. The 15-year fixed-rate average climbed to 2.77 percent with an average 0.7 point. It was 2.69 percent a week ago and 3.04 percent a year ago. Despite the increase, the 15-year fixed rate has not been above 3 percent in nearly a year. . ONCE AGAIN I GIVE PUBLISHED CONFORMING RATES WHICH ARE FOR LOANS UP TO $417,000 IN THESE UPDATES AS LOANS OF HIGHER BALLANCES DO NOT REALLY HAVE WEEKLY PUBLISHED RATES. HIGH BALANCE CONFORMING $625,500 FOR L. A. COUNTY ARE ABOUT ¼ HIGHER AND JUMBO ARE ABOUT ½ HIGHER DEPENDING ON THE INVESTOR, EXUITY, BUYER AND PROGRAM. The yield on the 10-year Treasury closed above 2% Wednesday for the first time since March 15.The refinance index has fallen almost 19 percent over the past two weeks and is back to its lowest level since late March. Purchase activity declined over the week but is still running about 10 percent above last year’s pace at this time.
HAVE A “GREAT” HOLIDAY WEEKEND!!!!
And call me if you want to take advantage of this market from an above average realtor, Terre Steinbeck (310.666.4094)