Mortgage Update - Tuesday August 25

Current Trend Direction: Sideways
Risks favor: Carefully Floating
Current Price of FNMA 4.5% Bond: $100.09, -6bp
Mortgage bonds are a bit lower as stocks look to open higher, after it was announced that President Obama has reappointed Ben Bernanke as Federal Reserve Chairman to a second 4-year term. This looks to be a smart move as financial markets finally appear to be stabilizing. It was a little less than a year ago that the credit markets were in disarray and fears of financial collapse spread worldwide. Although Mr. Bernanke has his critics, and he has probably exerted his influence in areas far beyond those of past Fed chairs, he has many supporters that credit him with helping the United States step towards recovery. President Obama's reappointment of Mr. Bernanke comes amid pressure and speculation from some Democrats, who would have rather seen current Fed member Janet Yellen or former Fed Vice Chairman Alan Blinder. But a look back at the history books shows that when former Fed Chairman Paul Volcker was replaced by Alan Greenspan in 1987, the uncertainty hating stock markets sold off hard. So the move to keep Big Ben should help keep the markets a bit more stable.
The Bond market is also a little jittery ahead of this afternoon's $42B 2-year Note auction at 1:00pm ET.
In what appears to be a continuing positive trend, more good signs for housing were released this morning. The Case-Shiller Home Price Index rose to a seasonally adjusted 1.4% in June - the 2nd month in a row. Prices rose in 18 of the 20 cities used in the survey. And the index showed that prices for the 2nd quarter rose by 2.9%, the first quarterly increase in 3 years. Prices are still down 15.4% compared to a year ago.
While we are very pleased to see good housing numbers, we must remember that some of the improvement may be coming from people who would have purchased in 2010 that are moving up their buying decisions to take advantage of lower rates and tax credits before they expire. This means that we may actually see a little dip in the housing numbers early next year. So the positive trend is very welcome but should be taken with a grain of salt. It's perhaps best thought of for now as housing not getting worse, instead of housing improving rapidily.
Consumer Confidence is set to be released at 10:00am this morning and despite the expected improvement, consumers' confidence remains fragile amid ongoing job losses.
With mortgage bond prices modestly lower and sitting in a range between Support and Resistance, we can start the day floating and watch for the impact of the treasury auction as well as stocks influence on mortgage bonds. For more information contact Philip Jensen at PhilipJensen.com

Monday, August 17, 2009 10:45am ET

Current Trend Direction: Higher

Risks favor: Carefully Floating

Current Price of FNMA 4.5% Bond: $100.22, +34bp

Mortgage Bonds are starting the week to the upside, as Stocks slide lower. Stocks are reacting to renewed fears of a slower than anticipated world economic recovery. If you look back at Friday's update, we felt concerned about the negative technical signals we were seeing for Stocks and wrote the following:

The technical picture for stocks looks to be bearish - A variation of an Evening Star Pattern along with a negative Stochastic Crossover, suggests a correction.

The Dow is down 250 points, or almost 3% since. A correction is usually a 5-10% drop in a short time.

China’s Stock market dropped nearly 6% after their second largest insurer's profits fell 45% year-over-year and one of their huge manufacturers said it sees no sign of a recovery. The US consumer plays a huge role in Chinese exports – for example, Sony and Nissan both generate a third of their revenues from the US. With US consumer spending and, as explained in Friday's Update, the Velocity of Money both slowing, China feels the effect. Additionally, there is concern over the accuracy of the data coming out of China...ya think?

Amidst all the global negativity, was some better than expected news on US manufacturing, as the Empire State Index came in at 12.08, far better than expectations of 2.20. However, this report did little to influence the heavy negative tone for Stocks at the opening of trading.

There are no Treasury auctions this week, but this Thursday will bring the announcement for the upcoming round of Bond supply that will hit the market next week. We have come to see that Bond prices may take a big hit off the announcement of more heavy supply coming to market. And recently, just the anticipation of the announcement was reason enough for Traders to sell off in fear. The last announcement was on August 5th, but prices sold off sharply on the 4th as Traders tried to get ahead of the news. Let's watch carefully on Wednesday to see if this pattern repeats.

Call Philip Jensen at 480-682-6613 or visit www.PhilipJensen.com for more information

About to Expire! First-Time Homebuyer Tax Credit

About to Expire!! First-Time Homebuyer Tax Credit

Most consumers are unaware that while renting may seem like a economical way to manage their money, they are actually losing out not only on historically low rates, prices and tax deductions but they are missing out on the US Government's 1st Time Home Buyer Tax Incentive. This applies to purchase transactions in Gilbert, Mesa, Chandler, Queen Creek, Phoenix, Glendale, Scottsdale and statewide!

If you are paying rent within the range of $700-1,900 (depending on the state) per month, this is your time to purchase a home while taking advantage of the $8,000 Tax Credit that is immediately paid to you after you purchase a home. In fact, you are able to claim the credit this year (Ask me how). This is FREE MONEY!! You apply and the IRS sends you $8,000.

The time is now and if you are a Loan Officer, REALTOR, or any other industry professional, we should be ringing the alarm.

Here is what you need to know...

The 2008 tax credit provision is outlined below:

• Amount of the tax credit (free money) - 10% of the purchase price or $8,000 which ever is less
  
• Who's Eligible? - First-time homebuyers purchasing a principal residences only
  
• Income Limits - $75,000 for an individual; $150,000 for a married couple
  
• Expiration Date - Eligible buyers must purchase the home between January 1st, 2009 and November 30th, 2009. Transactions closed on or after December 1st will not qualify.
  
• Repayment - No repayment to be repaid if the property is not sold or rented in the first three years of ownership.

$10,000 Additional Tax Credit For California Buyers

California lawmakers approved a new budget that cut spending by $13 billion in an effort to reduce the state's $42 billion deficit. Included in the budget is a provision allocating state funds for a $10,000 tax credit for home buyers.

The tax credit incentive represents hope for struggling home builders, but is it a repeat of the same thinking that brought about this economic turmoil? A large part of how we got into this mess was by making it easy for home buyers to temporarily afford a home, is this not another way of doing the same? Either way, it will be interesting to see how successful the tax credit is, and to see if it starts a trend in other construction dependent states.

The $10,000 tax credit is for home buyers that purchase a new home between March 1, 2009 and March 1, 2010. The bill set aside $100 million for the tax credit, so after 10,000 new homes are purchased, the credit wil be gone. Last month, an estimated 29,458 new and resale houses were sold statewide; if you want the incentive, you probably won't want to wait until next March. Below are details about the tax credit.

1. The $10,000 tax credit is not a loan and if the home remains your primary residence for 2-years, you do not have to pay any portion of the tax credit back.
   
2. The tax credit is for new homes only. The construction of a new home generates more tax revenues than the $10,000 tax credit will cost, so the credit is limited to the purchase of new homes. You will not qualify for the state tax credit if you buy an existing home.
   
3. The tax credit is good for 5% of the home's price or $10,000, whichever is less.

Examples: (price of home x .05)

• If you purchase a new home that costs $150,000, your tax credit will be $7,500.
  
• If you purchase a new home that costs $200,000, your tax credit will be $10,000.
  
• If you purchase a new home that costs $450,000, your tax credit will be $10,000.
  
• Home buyers will receive the tax credit, in equal amounts, over 3-years.

Examples: (Tax Credit / 3)

• If your tax credit is $7,500, you will receive a tax credit of $2,500 each year for three years.
  
• If your tax credit is $10,000, you will receive a tax credit of $3,333.33 each year for three years.
  
• Unlike the $8,000 federal tax credit, the California state tax credit is not limited to first-time home buyers.
  
• There are no maximum income limitations so any buyer purchasing a previously unoccupied home can qualify for the tax credit.
  
• The tax credit only applies if the purchased home is your primary residence.
  
• There is no down payment requirement to receive the $10,000 tax credit.
  
• The $10,000 state tax credit can be used along with the $8,000 federal tax credit for home buyers. If you're a first-time home buyer, and you purchase a new home in California that costs more than $200,000, you'll get $18,000 in tax credits!
  
• The tax credit is limited to the first 10,000 new home purchases.

If you have questions about this or have a scenario question, please contact me. I will honored to assist you in any way possible.