The bonds market favored a weak jobs report, which showed less people working than estimated. This was just enough to send rates down a tick, when earlier this week everyone held our breath as rates appeared to be moving higher (rates will move higher, soon, but not this week). Next week retail sales could shake up the market for a day or two. I’ll keep you posted.
When will rates go up? Most likely in March or April as the Fed’s stop purchasing mortgage backed securities. Just in time for the sleeping home buyers who decided to take a nap once the home buyer tax credit was extended. If you know someone purchasing a home this Spring to take advantage of the $8,000 home buyer tax credit - wake them up! They could buya larger home and it would cost less per month if rates stay at their current levels. Eric Rosengren of the Federal Reserve Bank of Boston has predicted rates could increase .75% in 2010.
HOW BIG? - The US economy shrunk by 2.4% in 2009 to 14.5 trillion in size. China’s economy grew by +8.7% in 2009 to 4.9 trillion in size (source: Commerce Department).
THIS YEAR? - the US economy is projected to grow +2.7% in 2010. China’s economy is projected to grow +10% in 2010 (source: International Monetary Fund).
Mortgage bonds are having a few bad days and interest rate are going up. Get used to it. We may see rates come down a bit in the next few weeks but by March rates should be on a stiff climb as the Federal Reserve Bank stops buying up Mortgage Backed Securities and the “real” rates begin to appear.
Keep in mind even with rising rates, this is still considered an incredible interest rate market. Waiting for the bottom, the lowest of the lows. That’s passed folks. The fat lady sang. If you are buying are planning to purchase a home in 2010 do it this Spring while rate are low.
Watching interest rates the past few days is similar to watching a ping pong match, although instead of watching the ball move quickly from side to side this ball is moving rapidly up and down. The bond market is moving between resistance and support between 50 and 200 day moving averages. That’s a lot of movement in a short amount of time. What does this mean to you? If you are watching rates to refinance - lock in when the rates see some improvement because the next day it’s likely to be gone. In my opinion, take the week off. Enjoy the Holiday season and start watching rates again January 4th. It’s likely to be a wild game for the next two weeks.
From The Mortgage Market Guide -
Homebuyer Tax Credit Update!
TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Monday’s bond market closed in the positive and in the mortgage industry we received an alert that banks may reprice with better rates. But the banks didn’t do this. Come Tuesday morning I’m expecting better rates posted at the start of the day. Here’s hoping they open .125% than today. If you are watching rates give me a call tomorrow morning. It might be a good day to act and lock in.
How to receive the tax credit if you are a first time buyer. Everything you need to know to start the process of buying and financing your first home. You’ll learn little know tax write-offs, programs available in today’s market, how to compare lenders and save money, as well as how to avoid common pitfalls. Cindy offers mortgage and real estate terminology in an easy-to-understand format.
All classes are offered through Community Education. Registration can be completed online through each community’s Adult Education Department.
Tuesday, February 9th 6:30 - 8:30 @ Fairview Community Center in Roseville (cost $9)
Tuesday, Febraury 16th 6:30-8:30 offered through Richfield/Bloomington Community Ed (location to be announced)
Tuesday, February 23rd 6:30 - 8:30 offered through ISD 196 - Eagan (location to be announced)
Tuesday, April 27th 6:30-8:30 @ Fairview Community Center, Roseville (cost $9)
Unemployment figures reported this morning dropped to 10%. This is very good news for our economy - but it’s bad news for rates today. Expect rates to open higher this morning and likely repricing for the worse through out the day.
Happy to report my clients all locked in their rates prior to this morning. Smart folks!
Rates are likely to move even higher today since some improved economic news was reported. Interest rates like dismal news, not sunny bright uplifting economic forecasts. Fed Chair Bernanke gave positive comments about the recession lightening, a few less people were out of work, at least less than expected as reported by ADP, and Bank of America reported less claims last month.
The recession is not over - but interest rates will go up as a result of this news.
Congratulations to the people who locked in yesterday morning. You have a great rate. By Tuesday afternoon the bond market was down (which is bad news) and banks quickly repriced their rates by almost .25%. Today the bond market is still a little off - waiting for Beige Book results.
Closing in the next 30 days? consider locking in now. Rates may move higher again later today.
Officially known as the Survey on Current Economic Conditions, the Beige Book, is published eight times per year by a Federal Reserve Bank, containing anecdotal information on current economic and business conditions in its District through reports from Bank and Branch directors, and interviews with key business contacts, economists, market experts, and other sources. The Beige Book highlights the activity information by District and sector. The survey normally covers a period of about 4-weeks in duration, and is released two weeks prior to each FOMC meeting, which is also held eight times per year. While being deemed by some as a lagging report, the Beige Book has usually served as a helpful indicator to FOMC policy decisions on monetary policy.
POTENTIAL IMPACT ON INTEREST RATES: Medium
