Mortgage Market Weekly – Update Jan 12, 2015

This Issue…

Last Week in Review: The labor sector continues to improve, while home price gains are stabilizing at more normal levels.Forecast for the Week: Look for key reports on inflation, manufacturing and retail sales.

View: Navigate tax time with ease thanks to the overview below.

Last Week in Review

Take this job and love it. That’s exactly what more people are doing these days, as job growth in 2014 was the strongest in fifteen years and our economy continues to improve.corelogic-home-price-index-2015-01-12 The December Jobs Report showed that 252,000 jobs were created, a touch above expectations. In addition, upward revisions to October and November added another 50,000-plus jobs to what was originally reported for those months. Employers added 2.95 million new jobs in 2014, with an average of 246,000 per month, above the 194,000 per month average in 2013.

Another positive in the report is that the Unemployment Rate came in at 5.6 percent. The head scratcher was a -0.2 percent hourly earnings figure. Hourly earnings are not growing and that is keeping inflation persistently low. One positive about low inflation is that it should benefit Bonds for the foreseeable future, as high or growing inflation can cause fixed assets like Bonds to worsen. Since home loan rates are tied to Mortgage Bonds, low inflation should also help keep home loan rates low for now.

In housing news, CoreLogic reported that its Home Price Index, including distressed sales, rose by 5.5 percent annually in November. After a near 12 percent annual increase back in January 2014, prices have been decelerating, but have stabilized to a more normal 5 to 6 percent growth rate for the last four months.

The bottom line is that home loan rates remain near historic lows, and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

The second half of the week heats up with key news on inflation, manufacturing and retail sales.

  • The first economic report doesn’t get released until Wednesday with Retail Sales, and the numbers will show how retailers did in December, the big shopping season.
  • On the inflation front, look for the wholesale-measuring Producer Price Index on Thursday, followed by the Consumer Price Index on Friday.
  • Thursday brings two key manufacturing reports: the Empire State Index and the Philadelphia Fed Index.
  • Also on Thursday, Weekly Initial Jobless Claims will be released, as usual.
  • The Consumer Sentiment Index ends the week on Friday.

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 on which home loan rates are based.

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, Mortgage Bonds have been trending higher. Home loan rates remain near record lows.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jan 09, 2015)
mtg-bonds-2015-01-12
The Mortgage Market Guide View…

Time to Think About TaxesTax time is here. Do you have your 2014 documents in order? Use this overview to get started. As always, consult with your tax professional for the best advice for your individual circumstances.

Look Back to Plan Ahead
Review your 2013 return to remind you of the detailed information you gathered in prior years regarding itemized deductions, business use of home or car, and equipment depreciation.

Pull Together Documentation
Receipts, invoices, canceled checks, online bill pay or automatic deduction logs, mileage logs, and other documents substantiate deductions. If applicable to you, gather your documentation for:

  • Charitable gifts
  • Equipment purchases
  • Memberships to professional and trade organizations
  • Mileage for business
  • Mileage for volunteering
  • Office supplies
  • Phone and data bills
  • Subscriptions to professional and trade publications
  • Utility bills (for business use of home)

Plan for 2015
If this year’s gathering process does not go as smoothly as you’d like, devise a meaningful and easy-to-follow record system to start 2015 on the right foot. Having one place to keep your records will make it easier next year—as long as you dutifully put invoices, receipts and other documentation there. A file folder or box works fine if it is easily accessible. Electronic scanning and storage also works but may take more time.

If you deduct mileage expenses, keep a small notebook and pen in your glove compartment or center console. Commit to keeping track of every business-related mile traveled, along with the date and purpose of travel. You can also use the notes section of your smart phone to keep track of this information. Tally your mileage at the end of each month rather than waiting until the end of the year. This will assist you in substantiating expense and deduction claims going forward.

On a final note, store all tax-related records in a secure location for at least five years in case the IRS asks for further information.

Feel free to share this friendly reminder about tax time with your colleagues, friends and business associates.

Source: irs.gov

Economic Calendar for the Week of January 12 – January 16

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Wed. January 14
08:30
Retail Sales
Dec
NA
Â
0.7%
HIGH
Wed. January 14
08:30
Retail Sales ex-auto
Dec
NA
Â
0.5%
HIGH
Thu. January 15
10:00
Philadelphia Fed Index
Jan
NA
Â
24.5
HIGH
Thu. January 15
08:30
Core Producer Price Index (PPI)
Dec
NA
Â
0.0%
Moderate
Thu. January 15
08:30
Producer Price Index (PPI)
Dec
NA
Â
-0.2%
Moderate
Thu. January 15
08:30
Jobless Claims (Initial)
1/10
NA
Â
294K
Moderate
Thu. January 15
08:30
Empire State Index
Jan
NA
Â
-3.6
Moderate
Fri. January 16
08:30
Core Consumer Price Index (CPI)
Dec
NA
Â
0.1%
HIGH
Fri. January 16
10:00
Consumer Sentiment Index (UoM)
Jan
NA
Â
93.6
Moderate
Fri. January 16
08:30
Consumer Price Index (CPI)
Dec
NA
Â
-0.3%
HIGH
 Â
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
Don Parsons
Commerce Mortgage – NMLS 2105
450 Newport Center Drive Suite 350
Newport Beach, CA 92660
2130 Main Street Suite 260
Huntington Beach, CA 92648