Weekend Mortgage Update - 09/10/2010

The positive news on the economy is gaining momentum. Adding on to last week's up beat reports, this week continued to show that the economy is slowly recovering and is headed in the right direction. As mentioned in last week's Warrior Weekender, there were not many economic reports due out this week, however the reports we received were positive in nature and indicate that for now, the economy is moving towards recovery.
The positive housing report was one of the key areas that has many experts and analysts breathing a small sigh of relief. The Mortgage Bankers Association reported that the home purchase index rose 6.3% from the prior week. Home purchases are now at the highest point since May and this month's rise represents the 3rd consecutive increase in purchase activity. Many people are keeping their fingers and toes crossed that this may be the beginning of a slow but steady recovery in housing that the economy needs desperately.
Weekly jobless claims dropped by a more than expected 27,000 from the prior week. This week's claims are the lowest since July and this is also the 3rd straight week of decline in first time filers. The weekly moving average also held steady.
The only down side to the improvement in the economy is that with improvement comes a rise mortgage interest rates. We have already seen since the end of August that the 10YR Treasury Security has risen more than a 1/4%. Although treasuries and mortgage rates do not move hand in hand, the 10YR movement is certainly an indicator of rate direction. Mortgage rates have begun to rise off of their lowest point and as long as positive economic data keeps being reported, rates will continue to edge upward.
The biggest question relating to rising mortgage rates is will the increase slow purchases once again, or will buyers realize that the lowest rates are behind and rush to take action on purchasing now? Only time will tell how buyers and the markets interpret the future of mortgage rates.
It was announced this week that almost half of the home purchasers that made a claim on the tax credit will have to refund the credit back to the IRS. Thus far 1.8 Million homebuyers have claimed the tax credit and early indications is that many people have incorrectly claimed the credit. The confusion comes with that the rules for the tax credit changed from 2008 to 2009.
In 2008 the tax credit was not really a tax credit. The reality is that the credit was an interest free loan to homebuyers. In 2009 when the government extended the tax credit, they changed the program from an interest free loan to an actual tax payer refund.
What has happened is that many of the tax filers did not know the difference and claimed the refund in 2008. As I write this newsletter, the IRS is scouring through every tax return with a credit trying to determine which credit the homebuyer was eligible for. Once this is complete, the IRS will begin to notify the credit filers that they owe the IRS money. (We all know this is not going to go over well with homebuyers)
This week there will be a lot more economic news coming out which can impact the markets. Let us keep our fingers crossed that the trend of good economic news will continue.
• Tuesday September 14th - Retail Sales
• Wednesday September 15th - MBA Mortgage Applications
• Wednesday September 15th - Industrial Production
• Thursday September 16th - Weekly Jobless Claims & Producer Price Index
• Friday September 17th - Consumer Price Index & Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800