(Note: This is an excerpt from the Weekly Mortgage Market Newletter that we send out to realtors and all those interested on mortgage and finance topic. If you would like to receive a copy of the newsletter, please send us your e-mail via the quick contact form on the right side bar or leave a comment on this post.)The capital markets were closed on Monday due to Presidents’ Day and the economic calendar is light the rest of the week with just a few reports.
In addition to those reports, a number of news stories may move the markets, including additional news out of Greece, the Treasury Department’s auction of $99 Billion worth of government securities, and movement in the Stock Market. All of those news stories have the potential to negatively impact the Bond Market, depending on how they develop. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving – and when they are moving lower, home loan rates are getting worse. To go one step further – a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, good economic news late last week reversed the improving trend Bonds and home loan rates experienced early in the week. I’ll continue to monitor this situation closely. Chart: Fannie Mae 3.5% Mortgage Bond (Friday Feb 17, 2012)
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Mileage Rates for 2012If you drive a car, truck or van for work, you’ll want to make sure you know the standard mileage rates that the Internal Revenue Service (IRS) has set for 2012.These mileage rates are used to calculate deductible costs for driving an automobile for business, charitable, medical and moving purposes. So when it comes to filing your taxes this time next year, you’ll need to know these numbers!New for 2012As of January 1, 2012, the standard mileage rates are as follows:
You’ll notice that the rate for business miles is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile. Make Sure You Qualify Before you calculate your deduction, make sure you qualify. The IRS reminds taxpayers that they cannot use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. However, the IRS is accepting public comments on this policy. Additional Option Although the IRS provides the standard mileage rate for ease and convenience, you’re not required to use it. If you prefer, you can calculate the actual costs of using your vehicle instead of using the standard mileage rates. Remember, if you have questions or concerns, talk to a tax consultant or accountant to discuss your options and unique situation. Economic Calendar for the Week of February 20 – February 24
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The Advanced GDP reading – or first of three readings – for the 4th Quarter of 2011 came in at 2.8%, a bit below expectations of 3.2%. This number will be
Overall, the Jobs Report wasn’t great, but it did surprise by being better than anticipated. One thing that wasn’t a surprise was the unemployment rate which held steady at 9.1%. But the headline number came in at 103,000 jobs created, which was better than expectations of 60,000 and even higher than some of the more frothy expectations. In addition, 137,000 jobs were created in the private sector, which offset more government job losses and which was a lot better than the 83,000 private job gains expected.
That elevated inflation reading was released on the heels of a hot Core Consumer Price Index (CPI), which has risen steadily and jumped to the upper-end of the Fed’s comfort level in the latest release.Although Fed Chair Ben Bernanke stated a couple weeks ago that inflation has “moderated” of late and should continue to do so, there are still some reasons for concern. For example, we are experiencing an unprecedented amount of stimulus and low rates, which is something never seen before in history.
It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French “credit default swaps” (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.