Back in the Saddle

We celebrated our 14th wedding anniversary as a family in Hawaii last week.  It was a magical time and I think that a part of me is still there.  The rest of me that did make the trip home had difficulty comprehending the source of the buzzing sound from my nightstand this morning at 6 o’clock.

The fourth quarter GDP was released this morning up 0.6%, or up 2.6% year-over-year, bringing the 2014 average reading at 2.4%.  That is right in line with the Federal Open Market Committee’s (FOMC) target of 2-2.5%.  Speaking of the Fed, they maintain their pledge to be “patient” on raising interest rates.  Though they confirm that economic activity has been expanding at a solid pace and the labor market continues to improve, the plunge in oil prices is cooling inflationary pressures, further delaying the first Fed rate hike since 2006.


Inflation numbers so far this week (as construed by the leading economic indicators of Philly Fed, Producer Price Index, and Retail Sales) have shown it tame at best and could be interpreted by some as a foreshadowing od widespread deflation.  Today’s Consumer Price Index shows that the cost of purchasing stuff by households across the country has declined in tandem with the cost of manufacturing said goods by -0.4% since the prior month.  In both cases, this is the lowest reading in the last six years and has caused many to call for the Feds to start hiking interest rates.

Contrary to the deflationary decriers, my untrained take is a little (in my biased opinion) more level-headed.  It sees obvious enough to me that the costs of manufacturing and distributing goods for sale has declined commensurate to the cost of fuel this last month and not a result of a domestic economic downturn.  So while the black clouds brewing overhead might alarm some, I believe we should just take advantage of the beautiful scenery thus created because it won’t last forever.  Hence the picture.  Translation: interest rates are really good and we should take advantage of that.

I believe that my 10th Grade Creative Writing teacher would be proud right now.

I am doing a lot of no-cost FHA loans at 3.5% and Conventional 30 year no-cost loans at 3.875% this week.  I realize that most of you are enjoying interest rates that are already lower than this, but if not, we need to talk.

That Which Must Not Be Named

Retail Sales dropped 0.9% in December, or down -1.0% if you strip out automobiles. The consensus among brainiacs who forecast this sort of thing was that the numbers would remain unchanged.

Import Prices also fell -2.5% and Export Prices were down -1.2%, but these were roughly inline with the forecasts given the recent reduction in fuel costs.  If tomorrow’s wires broadcast that the Consumer Price Index has also declined, we may start hearing talk of “that-which-must-not-be-named”: deflation.  Then you’ll really hear the angry economist mob cry for the Fed to raise interest rates sooner rather than later.

For now,  rates are battling multi-year lows

[Cheap] Help Wanted

There are currently 4.972 million job openings in the United States; that’s the most since late 2000.  But the available positions aren’t as well paying or as glamorous as they once were, especially for those that require a large amount of post secondary education.

Attorney salaries are down 13% over the last six years, while at the same time, enrollment in law school has plummeted to a 27 year low.  Those who do complete law school to compete for that median $62,000 starting salary will have an average of $141,000 in student loan debt.

Your next family doctor will likely have borrowed $180,000 to go to school and will be the lowest paid MD you know.  You want to send your kids to medical school?  Steer them toward orthopedic surgery, who enjoy average salaries of $435,000 according to

More prone to academia?  Tenured professors now only comprise 9.9% of our higher educational system’s teachers, that’s less than half of those who historically have comprised the marbled halls’ workforce.  Just over 50% college professors are now only teaching part-time–and that’s not by choice.

So unemployment remains low, gas prices are down, and interest rates are still unbelievably cheap.  Yet the President just tripled the cost of my health insurance, and now I know that my doctor isn’t the beneficiary.  I wonder how much education the average government official has?

Got Work?

Since there are no economic reports out today and I decided to go skiing last Friday (all business of course), I thought I’s pass along the latest data on the Jobs Report (yes, from last Friday).

Non-Farm Payrolls increased 252,000, more than the 245,000 new jobs expected.  There were 2.95MM new jobs created in 2014 (an average of 246,000 per month), making last year the best job creation year since 1999.

We are Getting Better

CoreLogic reports this morning that there are still 5.1 million homes underwater in the U.S, down from 6.5 million a year ago.  Way to go collective America.

In about 20 minutes from now, President Obama will address the nation’s homeowners from Arizona to announce that FHA is reducing the cost on their monthly mortgage insurance by 37%.  More great news.

In the job front, Challenger, Gray and Christmas report that job cuts declined again last month; 2014 saw the fewest planned layoffs since 1997.  We are on fire!

Fedspeak about tame inflation continuing for a few years and interest rates remaining low for the same period has helped stocks rally in early trading (DOW is up 266), drawing money out of bonds and ironically placing upward pressure on interest rates.  Touch luck; good time to lock

The Government to the Rescue

Here is something that will effectively be shouted from the housetops as it were: a press release this morning says that on Thursday President Obama will announce that FHA monthly MI premiums will drop from 1.35 to .85%.  A report out today shows that FHA is currently only funding 10% of the market, compared to almost half of the loans issued a few years ago.  Cheaper MI coupled with lower interest rates will go a long way in helping FHA return to its former glory in being a bastion of home ownership. While I highly doubt that our Commander in Chief is the brain behind more affordable mortgage loans, I certainly appreciate him getting behind it, and I believe that Mr. and Mrs. America will too.

Home Price Fluctuation

Home prices across the nation rose 5.5% November to November according to CoreLogic, who also forecasts a 4.6% appreciation rate in the year ahead.  Including distressed sales, home prices in Utah are still 11.0% under their peak 2007 value (9.1% excluding distressed sales).


before and after
The DOW is down another 100 points this morning after yesterday’s 300 point slide.  It would seem that this new year is bringing with it concern over just how robust our economy actually is.  Low oil prices and a new congress are just not as inspiring as they used to be.
Mortgage Bond pricing is bumping up against resistance not seen since March of 2013.  If we can get through this threshold, interest rates could drop another 1/2%…

A Beary New Year to You and Yours!

Happy New Year to all of my friends! The bond market is beginning 2015 much better than it began 2014; we are now trading at levels not seen since May of 2013. The DOW is looking to close down 330 points, a one day drop of 1.86%.  This could make for an interesting year.
(Oh, the photo of the bear is to represent a bear market–and a reminder that you have a fresh cafeteria plan with the 2015 calendar year and should go see the dentist.)