Mortgage Market Weekly Update – February 7, 2014

job-creations_2014-02-07When it comes to recent Jobs Reports, what has been tough is being good every month, as both January’s and December’s numbers were disappointments. January’s Jobs Report can best be described as lackluster, as employers added just 113,000 new workers. This was well below expectations of 175,000 new jobs. In addition, the number of job creations for December was raised just a paltry 1,000, bringing December’s total to 75,000. November was revised higher to 274,000.

The Unemployment Rate did fall to 6.6 percent, from 6.7 percent. However, this is not necessarily a good metric of labor market health, as the more important Labor Force Participation Rate (LFPR) remains at 63 percent, a 35-year low. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery.

Also of note, productivity in the fourth quarter of 2013 rose by 3.2 percent, with both the third and fourth quarters the highest since the second half of 2009. Employers are squeezing more out of current workers and may not be on the hunt for new employees given the economic landscape, which is another negative for the labor market. In housing news, research firm CoreLogic reported that home prices, including distressed sales, rose by 11 percent in December 2013 compared to December 2012. December marked the 22nd consecutive year-over-year gain in home prices nationally. However, from November to December, prices fell by 0.1 percent.

What does this mean for home loan rates? Mortgage Bonds and home loan rates have seen some improvement of late, due to some weak economic reports, while Stocks have suffered as a result. But a big question remains as we move ahead in 2014: If economic reports continue to be weak, will the Fed continue to taper its Bond purchases? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This figure is down from the $85 billion in Bonds and Treasuries the Fed had been purchasing last year. The timing of further tapering is sure to impact Stocks, Bonds and home loan rates throughout the year, and it is a key story to monitor.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

The economic report calendar is light this week, with reports not beginning until Thursday.

  • Weekly Initial Jobless Claims will be released as usual on Thursday. Claims have been stuck in a tight range the past four weeks.
  • Also on Thursday, look for January’s Retail Sales data.
  • The last report this week will be the preliminary reading on February Consumer Sentiment.

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 and home loan rates improved after the weak Jobs Report for January was released. I’ll be watching the news closely this week to see if these improvements continue.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Feb 07, 2014)


The Mortgage Market Guide View…

Mileage Rates for 2014 If you drive a car, truck or van for work, you’ll want to make sure you know standard mileage rates the Internal Revenue Service (IRS) has set for 2014.

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 year, you’ll need these numbers!

New for 2014

As of January 1, 2014, the standard mileage rates are as follows:

  • Businesses = 56 cents per mile driven
  • Medical or moving = 23.5 cents per mile driven
  • Charitable organizations = 14 cents per mile driven

You’ll notice that the rates for business, medical and moving expenses decreased one-half cent from the 2013 rates.

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.

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. Please feel free to pass these tips along to your team, clients, and colleagues.

Economic Calendar for the Week of February 10 – February 14


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As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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Commerce Mortgage
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