Mortgage Market Update for the week of 04/13/09

By
Real Estate Agent with KW Elite

 

"THE FACT THAT AN OPINION HAS BEEN WIDELY HELD DOESN'T MEAN THAT IT'S NOT UTTERLY ABSURD." Bertrand Russell. True words - and last week was one that was full of opinions that moved the financial markets - here are some highlights.

The week began with bank analyst Mike Mayo spewing out a negative forecast, which included his thoughts that loan losses by financial institutions would ultimately exceed levels from the Great Depression. This was followed by word from hedge fund giant George Soros that the US banking system is insolvent and that the economy won't recover in 2009.

However, as mentioned in many previous newsletters, the recent changes to mark-to-market should prove to have a positive impact on the economics and overall operations of financial institutions. Why? Because the recent ruling to look at mark-to-market accounting in a more relaxed light will free up the banks' capital ratios and allow them to do more lending, which will help their profitability, as well as ultimately help the economy unlock as businesses and consumers are once again able to borrow and use credit in a more normal fashion.

Lo and behold...as earnings season began last week, there was already evidence of this playing out as true, when Wells Fargo said Thursday that it expects record 1st quarter earnings and that their Wachovia acquisition was exceeding their expectations. In addition, the New York Times said Thursday that the US banking system overall may be in better shape than most people think.

As you can see in the chart below, Stocks hit an all time high in October 2007...until mark-to-market accounting practices were instituted. And notice also that Stocks reversed course, and have been on a strong rise since early March of this year, buoyed simply by the speculation that there would be a change in mark-to-market, which was finally announced on April 2nd by the Financial Accounting Standards Board.

-----------------------
Chart: Dow Jones

 

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. And this is exactly what happened in the early part of the week when Stocks were plagued by the negative opinions mentioned above. However, Stocks rallied on the good news that ended the week, causing Bonds and home loan rates to give back some of the gains they had made, ending the week unchanged to slightly worse from where they began. The Bond market closed early Thursday and both the Stock and Bond markets were closed Friday in observance of the holiday weekend.

MOST PEOPLE SHARE THE OPINION THAT PAYING TAXES IS NO FUN, ESPECIALLY DURING TOUGH ECONOMIC TIMES. BUT FILING ON TIME IS IMPORTANT, EVEN IF YOU CAN'T FOOT THE WHOLE BILL ON TIME. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR IMPORTANT FILING INFORMATION.

 

Forecast for the Week

 

 

 

Last week may have been a quiet one in terms of economic reports, but the middle part of this week will be jam-packed with reports. Tuesday will bring the Retail Sales Report for March. We know that consumers continue to watch their spending, but how much they are still doing so will be interesting to see.

There's also news on the inflation front coming both Tuesday and Wednesday. Tuesday brings the wholesale measuring Producer Price Index (PPI) Report, while on Wednesday we get the Consumer Price Index (CPI) Report. It will be important to see if these reports are inflationary or deflationary in direction. Given the low interest rate environment we are in, along with all the recent economic stimulus provided, it seems a foregone conclusion that inflation will become an issue that must be dealt with. These reports will give us clues on any significant changes to the rates of inflation, which is the arch enemy of home loan rates.

Thursday will be a busy day as well, as we will get a read on the Housing Market with the Housing Starts and Building Permits Reports. The Philadelphia Fed Report will also be released Thursday, and this monthly survey of manufacturing purchasing managers conducting business around the tri-state area of Pennsylvania, New Jersey, and Delaware is one of the most-watched manufacturing reports.

As you can see in the chart below, stocks' late week rally pulled money out of the Bond market, and caused Bonds to fall below a key floor of support. I will be watching closely to see if Bonds and home loan rates can reverse direction this week and find some improvement.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Apr 10, 2009)

 

 

The Mortgage Market View...

 

 

 

File Your Taxes on Time. Even If You Can't Pay!

The deadline to file your taxes is practically here!

But what do you do if you've completed your tax returns only to find out that you owe way more to Uncle Sam than you were expecting - or worse, that your tax bill is more than you can possibly afford to pay right now?

Don't worry. If this is the case, you're not alone. especially in today's economy. And more importantly, you're not going to jail just for being a little short on cash.

Rest assured, the IRS only seeks criminal charges for those who the agency can prove intentionally chose not to file and pay taxes. So, even if you can't pay your bill right away, file your return on time, and not only will you stay off the IRS's bad side, you'll avoid some hefty financial penalties in the process.

Penalties

According to the IRS, the penalty for filing late is generally 5% per month, or up to 25% of the total tax amount due. Not to mention interest charges, which the IRS changes quarterly, and which range between 4% and 9%. This interest applies to the unpaid balance, penalties, and to any interest that has been charged to the account as well.

If no effort is made to pay back-taxes, the IRS can impose stricter penalties, including levying bank accounts, wages, other income, or taking other assets like houses and cars. A Federal Tax Lien could also be filed, which could ruin your credit history for years to come.

The penalty for filing on time but paying late, however, is only half of one percent or .5% per month, up to 25% of the total amount owed. If you choose an installment plan to pay your debt, interest will accrue on the unpaid debt amount only.

Therefore, when you file your return, pay as much as you can and cut down the penalties even more.

Extensions

It is possible to get a 30- to 120-day extension to pay your taxes after filing a return on time. Soon after filing, the IRS will send you a tax bill for the amount you still owe. Simply call the number on the bill and request an extension and explain your situation. If granted an extension, the penalties and interest will be much lower.

If you cannot pay any part of your tax bill, the IRS may temporarily delay collection until your financial situation improves, although interest and penalties will accrue throughout this time. But this extension is reserved for what the IRS calls "significant hardship."

 

The Week's Economic Indicator Calendar

 

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of April 13 - April 17

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. April 14

08:30

Core Producer Price Index (PPI)

Mar

0.1%

 

0.2%

Moderate

Tue. April 14

08:30

Producer Price Index (PPI)

Mar

0.0%

 

0.1%

Moderate

Tue. April 14

08:30

Retail Sales

Mar

0.3%

 

-0.1%

HIGH

Tue. April 14

08:30

Retail Sales ex-auto

Mar

0.1%

 

0.7%

HIGH

Wed. April 15

02:00

Beige Book

 

 

 

 

Moderate

Wed. April 15

10:30

Crude Inventories

4/10

NA

 

1645K

Moderate

Wed. April 15

09:15

Industrial Production

Mar

0.9%

 

-1.4%

Moderate

Wed. April 15

09:15

Capacity Utilization

Mar

69.7%

 

70.9%

Moderate

Wed. April 15

08:00

Empire State Index

Apr

-35.0

 

-38.2

Moderate

Wed. April 15

08:30

Consumer Price Index (CPI)

Mar

0.2%

 

0.4%

HIGH

Wed. April 15

08:30

Core Consumer Price Index (CPI)

Mar

0.1%

 

0.2%

HIGH

Thu. April 16

08:30

Building Permits

Mar

550K

 

547K

Moderate

Thu. April 16

08:30

Housing Starts

Mar

550K

 

583K

Moderate

Thu. April 16

08:30

Jobless Claims (Initial)

4/11

NA

 

654K

Moderate

Thu. April 16

10:00

Philadelphia Fed Index

Apr

-32.0

 

-35.0

HIGH

Fri. April 17

10:00

Consumer Sentiment Index (UoM)

Apr

58.5

 

57.3

Moderate

 

 

Goran Jovanovic
YOUR World Class Realty Team
Keller Williams Elite
Ph:954-243-7570
http://www.goranflorida.com

 

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