Joe's Blog

Happy Memorial Day

2011-05-27T07:31:00.000-07:00

Memorial day is a very special day to remember those who have given the ultimate sacrafice for the country in which they loved. I hope you take a minute during the weekend to say a prayer for our country, leaders, and the men and women of the armed forces who protect our way of life.

Have a wonderful time, crank up the grill and please give thanks to those who helped make it all possible. Here is a link to the history of how Memorial Day became a reality. Enjoy your weekend!
http://www.usmemorialday.org/backgrnd.html

Bonds Continue Rally

2011-05-17T12:27:00.000-07:00

These past few days has been good for Mortgage Backed Securities and the Bond market. The rally has pushed Bond prices above the 200 day moving average, causing interest rates on a 30 year fixed rate loan to fall into the middle 4% range. How long the rally will last is uncertain. As the economy continues to weaken and news of unemployment, lower housing starts, and high gas prices, hit Americans hard, the "Safe Haven" of bonds has driven bond prices to almost the highs not seen since last November 2010.

If you are one of those people who have a 6% loan on your home and want to lower your payments, now is a tremendous time to make that happen. Also, the price of existing homes are at great prices as sellers want to sell and will help with closing costs if you are considering a purchase. With all the negative news, there are some positive signs when it comes to refinancing or purchasing a home right now.

Producer Wholesale Inflation...

2011-05-12T12:36:00.000-07:00

...is at 6.8%! That is very hot and is a result of the Producer Price Index (PPI)coming in at 0.8% for April. This high number was a much higher than anticipated number of 0.5%! When you strip out food and energy costs, Core PPI is now at 0.3% for the month, which now makes the year over year Core PPI Rate at 2.1% It is my belief that Producer or Wholesale inflation does not always get passed on to the consumer. At some point one of two things are bound to happen - either the company, which is now stuck with increased costs, must pass the increase to the consumer by raising prices, thus boosting consumer inflation, or the second option is for the company to eat those higher costs, whih will hurt earnings, crippling the ability to expand and/or create jobs, which then causes futher slowing of economic growth. It is a vicious cycle which must be broken and government needs to get out of the way and allow companies to do what they do best, and that is produce, make profits, and employ people.

The Initial Jobless Claims were 434,000, above expectations of 423,000, and way above the 400K mark, providing evidence that the struggles in the labor market are not "transitory".

Rates have remained below the magical 5% range for a couple weeks now. What a great time to buy a home, if you have a good, solid job and good credit!

The Bond Market's Rise

2010-05-21T05:37:00.000-07:00

This past week has been amazing as stocks have fallen which has pushed the Bond market higher than we've seen at anytime this year. The fallout over Greece's failure to meet its debt obligations and the falling EU, has made the US Bond Market a safe place for investors to store their money.

What does all this mean to the mortgage business and your ability to use this as an opportunity save thousands of dollars? I'll try to explain! If you currently have a 30 year fixed rate mortgage, and have a some equity in your home, you could take your loan rate down to 4.5% and save thousands of dollars over the life of the loan, plus increase your net cash flow by not paying as much for your monthly home investment. Another thing, you may have...say 22 years left on your current 30 year loan and would enjoy having the property paid for sooner, you could take out a 15 year loan at 4% or less, depsnding on the market, knock off seven years off your payment schedule, and save a ton of money in interest! If you want to have the numbers on your particular situation then visit my website, www.joeharris.com or send me an email. There is not cost or obligation, be happy to help.

A Day Cooking Ribs

2010-05-16T06:06:00.000-07:00

When my son, Justin decided to drive home from Nashivlle, he asked if we could fire up the Big Green Egg and cook some ribs. Seems he has never seen me cook ribs on the Egg, and wanted to have some fun watching how I managed to do ribs which in his opinion, are the best he's ever had.

Although the day was rainy, we rolled the Egg under the overhang so we and the big cooker wouldn't get soaked. Since the BGE uses those natural wood charcoal chunks, and the temperature inside the grill will be kept at 225 degrees, there won't be too much smoke pouring into the house with the grill being so close. When I do ribs, I like to purchase those St. Louis style ribs as they have great taste, plus there just seems to be more meat on the bone! I take that membrane off the back by sliding a kitchen knife under the thin membrane, then grabbing hold and it will pull off pretty easily. This is a big help in the way the ribs taste and keeps them more tender.

Once we get the membrane off, I pat them dry, rub some olive oil over them, then use a good sprinkling of Jacks's Old South rib rub. I sometimes make my own, but Jack's Rub is as good as any I'll ever make, plus all I have to do is grab the container and start shaking. I'm pretty liberal with the rub too, futhermore, once the rub is covering the ribs, I use my hands and massage the mixture into the meat, then wrap them tightly in plastic wrap, stack them one on top of the other, and into the fridge they go for at least three to four hours, but most preferably overnight.

About 30 minutes before the ribs are to go inside the BGE, I let them rest outside the fridge so the meat will warm, but not quite to room temp. This way when cooked, you will see a smoke ring just inside the meat. This is supposed to be a sign of well cooked ribs, at least according to the guys who do championship ribs. Ok...now we have the Egg at 225 and the ribs go on the rack, with the plate setter in place. A "Plate Setter" is a ceramic covering which covers the hot coals and prevents the ribs from searing or burning. A good way to cook indirectly, which is what you want to go "low and slow."

I have a spray bottle which is filled with a liquid of apple juice, white vinegar, worchestershire, and Tobasco. This is sprayed onto the ribs every 30 minutes, which keeps the ribs moist so they won't dry out. The ribs are cooked about six hours, maintaining the 225 degree heat. During the last 30 minutes, I swab the meat with a bar bq sauce, then stack them one of top of the other, then rotate them about every seven or eight minutes so the sauce will carmalize. Once time is up, the ribs are taken out to let them rest about 15 minutes then the fun begins. I promise, you do ribs this way and you will love not only doing it (the cooking), but eating them will be an amazing, delicious, fun filled dinner!

Mortgage Bonds Continue Rally

2010-05-06T09:33:00.000-07:00

The latest push for bonds moving higher has been fueled by a Stock market selloff where investors are parking the sale proceeds into Bond instruments. Additionally, the US is being viewed as a safer place to invest than Europe, which is evidenced by the Euro hitting a 14 month low agaist the Dollar. Much of this European discontent comes from the situation in which Greece finds itself. With riots and now deaths grabbing the headlines, as Greek workers do not want to accept some of the cutbacks needed to help Greece get on firmer economic footing, which is a conditional reuirement for the ECB and IMF's bailout, it is no wonder the US is becoming a safe place to park dollars.

The jobless claims were announced today, which were reported at 444,000, a touch above the expected 440,000. Continuing Claims, or individuals receiving unemployment benefits lasting up to 26 weeks, fell by 59,000 to 4.6M. Here is the kicker though, as those who have maxed out their Continuing Claims benefits can claim emergency benefits, which can extend them to a total of 99 weeks of benefits! Do you realize that is one year and nine months being able to get paid buy us tax payers for not working! I'm not trying to be hard here, but in my humble opinion, a person can get a job and will find work if he/she is not being paid to not work!

More on today's market on Cinco De Mayo

2010-05-05T08:23:00.000-07:00

Mortgage Bonds are trading higher so far today, but off their best levels. The bond market continues to attract investment dollars as a safe haven from the ongoing - and increasing uncertainty of the situation in Greece.

Today, over 40,000 Greeks are rioting in the streets, engaging in violent protests against the Greek Government's proposed austerity measures. This has spooked the Stock market, and is helping Bonds move higher. Further - another troubling headline is coming from the Eurozone today, as Portugal is apparently facing another potential downgrade on their debt - prompting investors to move even further into the safe haven of Bonds.

Market volatility has been sharply higher of late, and the VIX volatility index -which measures volatility in the Stock market - has risen very sharply over the last four trading sessions. The VIX is a widely used measure of market risk, and is oftern referred to as the "investor fear guage."

While Bonds are higher-they are near their resistance levels marked by the highs seen back n February and March. Additionally, Bonds are now in an overbought state, making them ripe for a reversal lower.

If you are obtaing a loan on a mortgage, now just might be the best time in two or three months to "lock" your loan until closing!

By The Numbers - Monday, March 1, 2010

2010-03-01T07:54:00.000-08:00

Any school kid knows the old saying...that March comes in like a lion and goes out lke a lamb. But since this is the last month of the Fed's Mortgage Backed Security purchase program, interest rates in March could very well come in like a lamb and go out like a lion.

There has been considerable jawboning abut how there will be no negative reaction for interest rates when the Fed bying stops. This "whistling past the graveyard" just doesn't make sense to me, and I feel strongly that rates will move higher - albeit the move higher will be gradual, but rates will be adversely affected in the absence of the Fed purchasing. And I also hear the question, "Do you think rates will go higher once the Fed stops purchasing?" The answer is ..they already have. Rates are .25 to .375% above where they were just a few months ago.

In fact, rather than being a buyer of Mortgage Backed Securities, the Fed said at the last Fed Meeting on Jan 27th that they will in fact gradually become a seller of MB and other government debt, in order to trim their balance sheet. At the moment, the Fed has $777B in Tresuries, $166B in agency debt and will have a whopping $1.25T total in Mortgage Bonds on their books. When you consider this enormous supply of paper that will be unloaded over time, in conjunction with the new Treasury supply coming to market every two weeks - there is only one way to attract buyers to purchase this massive government debt supply...and that is by offering higher rates. Bottom line - if you still hoping for lower rates, you may be running out of time. Now is the ideal time to "get off the fence," and make a decision.

There are also a couple of other factors that have been helping rates which will eventually come to and end. The Carry Trade, will unwind once the Fed begins to tighten - and chances are high that the tightening will begin later this year. Bonds have also been greatly helped by a flight to quality, over fears of a Greek sovereign debt default. I feel strongly there will be a Greek bailout and once announced, the safe haven trade will reverse, which should push Bond prices lower and interest rates higher.

For now-as we begin this first week of March, Mortgage Bonds are trading in lamb-like fashion, presently near unchanged levels, thanks to some tame consumer inflation data. The January Core Personal Consumption Index, PCE, which measures consumer inflation, came in at 0.0% matching expections. This left the year-over-year Core PCE rate at a modest 1.4%, and at the moment, well within the Fed's comfort zone.

If you are a Realtor and have people waiting on lower rates, have them read this blog or give me a call at 601.977.6228.

Jobs Report Friday

2010-02-05T08:34:00.000-08:00

The Jobs Report arrived, and the numbers were both good and badd...depending on which survey you are looking at, and what numbers you are focused on. Mortgage Bonds reacted negatively to the release of the numbers, but have since come back near unchanged levels.

The headline number of job creations was -20,000 for January, which was worse than expections of 15,000 jobs gained. This number comes from the Business Survey, aka the Establishment Survey or also called the CES (Current Employment Statistics) Survey. It's so inaccurate that it actually goes by three different aliases. In any event, it surveys about 140,000 businesses and government agancies-although the media will often mistakenly tell you that this survey is of about 300,000 businesses. This survey uses the birth/death ratio to help calculate the headline number of jobs gained or lost, which I have often discussed here on my blog in the past as being susceptible to significant inacuracies in times where the labor market is substantially worsening or improving.

And speaking of inaccuracies, the revisions to recent Business Survey numbers were once again quite large. December's was revised to 150,000 jobs lost, nearly doubling the original report of 85,000 job losses. Although November showed 60,000 additional gains - wait a minute- October's revisions showed another 100,000 jobs lost. And if that weren't enough, the Business Survey threw in a Benchmark Revision, which indicatd that there were an additional 900,000 jobs lost from March 2008 -March 2009 from what was previously reported!

No matter how you slice it, this report was not good!

As you know, I have always explained that there are two important surveys within the Jobs Report, the aforementioned Business Survey with all its aliases, and the Household Survey. As the name might imply, this survey includes actual phone calls made to households. There are about 50 - 60,000 households that are attempted to be contacted. And I have historically put more weight in the reliability of this survey, especially during times when the labor market is significantly worsening or improving.

The CPS or Household Survey gives us the headline Unemployment Rate, which was reported at 9.7%. That's an inprovement over last month's reading of 10.0%. But this survey has its own job creation/loss number,just like the Business Survey does. The media most oten inexplicably ignores this number. However, this morning's media coverage is suddenly highlighting the Household Survey. The Household Survey showed that 540,000 jobs were created during January, which is really good news, and explains why the Unemployment declined in the face of the Business Survey showing job losses. Remember, the Unemployment Rate comes from the Household Survey. It's interesting to see the media suddenly point to the Household Survey data this morning, when just last month, they completely ignored the 590,000 jobs that the Household Survey indicated were lost!

That said, we are taking all this information as a sign of good news for the labot market. Although...it must be factored in that some of the hiring included temporary census workers, which will have an influence on the next several months Job Reports. And that's important, because Fed members will see this report as a step in the right direction. While we know that reports can be volatile from month to month - and there is still much work to be done - the Fed will have an opportunity to see the release of next month's report prior to their next meeting, Rate Decision and Policy Statement. And should the Fed get another favorable batch of data next month, it may be enough to influence them to remove the famous "extended period" comment from their Policy Statement. Remember Fed President Thomas "BBQ" Hoenig already dissented to the use of the "extended period" pharase in the last Policy Statement.

Speaking of the Fed, they purchased $12B in Mortgage Backed Securities last week, bringing the total to $1.173T since the program began in January of 2009. This only leaves $77B in purchases to be made over the next eight weeks - that's less than $10B a week, and far less than what they've been purchasing. CNBC's Steve Liesman went on to rant this morning that there will be no change to mortgage rates after the Fed stops buying. I'll go ahead and take the other side of that bet...and think you should too!

February Market Update

2010-02-01T09:14:00.000-08:00

"THE NINE MOST TERRIFYING WORDS IN THE ENGLISH LANGUAGE ARE: `I'M FROM THE GOVERNMENT, AND I'M HERE TO HELP.`" Ronald Reagan. And regardless of if those words do indeed terrify you or perhaps give you confidence, the government held center stage last week, with a pivotal Federal Reserve Board Policy Statement, President Obama's first State of the Union address, and Ben Bernanke's confirmation for another term as Fed Chairman.

The Obama administration just released their 2011 Fedeal Budget, which runs from October 2010 to September 2011. It is estimated to come in at $3.8T, which is 3% larger than this present year's budget. Higher taxes for those making more than $250,000 are part of the plan - and although spending cuts have been mentioned, they appear to be largely window dressing. And this budget estimate could even be a bit on the optimistic side...if the economy does not recover as expected, overall tax receipts will decline, making the projected deficit of $1.3T even higher! How do you like this hope and change?

Remember, this massive new budget will ned to be funded by yet more Treasury auctions. And over time, the added supply of Treasury debt will pressure rates higher, as the goernment will ned to entice buyers with higher rates of return. This could have a negative impact on Mortgage Bonds and home loan rates, especially after March 31st, once the Fed is no longer buying Mortgage Backed Securities.

There are now just Two (2) Months remaining (i.e., February and March) in the Fed's program to purchase $1.25 trillion of mortgage backed securities. The program, which originally began in Fed purchases in March 2009, will stop by the end of next month. Eric Rosengren, the President of the Federal Reserve Bank of Boston, predicted last month that rates will rise by as much as .75% when the purchase program ends (source: Federal Reserve)

Homebuyer Tax Credit Update

2009-11-09T07:58:00.000-08:00

On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.

To learn what the new tax credit means to you and your clients, take a look at the concise overview below.

In addition, we’ve put together a script featuring wording you can cut and paste as needed to beat out your competition by connecting with clients who may be able to benefit from the new plan details!

View the Tax Credit Script Now!

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your principal residence.
They sell their home before the end of the year.
They are a nonresident alien.
They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Jobless Rate Hits Double Digits!

2009-11-06T07:34:00.000-08:00

The results are in. The Labor Department reported today that thre were 190,000 jobs lost in October, higher than the 175,000 job losses that were widely expected, but in line with what we have been saying. And as we have been forecating, the number that has been all over the media this morning is the Unemployment Rate rising to 10.2% - quite a bit higher than the 9.9% expected,and the highest Unemployment level since 1983. While this number is bad, what is even more concerning is the "real" unemployment rate being closer to 17.5%. This includes those who have not searched for a job for at least four weeks, known as "discouraged or detached" workers, as well as those desiring full time work but having to settle for part time, the "underemployed."

The Average Workweek came in at a record low of 33 hours, which highlights the present slow economic demand and underscores the fact mentioned above, that many people are working part-time, but would prefer full time work. Another consideration for the low work week could be productivity gains as well. The only ray of sunshine within this anemic report were the upward revisions for August and September, showing 91,000 fewer jobs lost than previously reported.

Let's remember, in order to just keep up with population growth-or to keep the ranks of the unemployed from rising-there must be 125,000 jobs created each month. So the latest report of 190,000 jobs lost, really means we have fallen behind by 315,000 jobs, just last month. Imagine this...I am a Mississippi State fan and Davis Wade Stadium on the campus of Mississippi State will hold almost 60,000 Bulldog fans. If you could fill Davis Wade Stadium three times with the number of people who lost their jobs last month, you can get an idea of the enormity of this number!

The Homebuyers Tax Credit jumped its last hurdle yesterday, as both the house and Senate have passed the bill and it now awaits the Presidents signature,which is expected today or tomorrow. And while I have been expecting this to happen for some time and have given you many details, let's go over them one more time. For First Time Homebuyers or those who have not owned a home within 3 years, the tax credit remains at $4,000 for singles and $8,000 for couples, with income restrictions maxing out at $125,000 and $225,000 respectively. Current homeowners-those defined as having owned a home for five of the previous eight years-can now also take advantage of a credit, with slightly lesser amounts of $3,250 for singles and $6500 for couples, with the income restrictions the same as described above. To qualify for the new program, purchase agreements need to be signed by April 30th and close by June 30th.

Home Buyer Advantage (Buying Foreclosures)

2009-10-30T06:24:00.000-07:00

Mississippi Home Corporation is participating in a program Congress established, the Neighborhood Stabilization Program. What this program offers is government grants of up to $39,999 which is to be used to reduce the principle of a mortgage when a person purchases a foreclosed home. The home has to be bank owned, bank holding company, government agency, or authorized real estate owned designated entitiy.

Here is how it works: A buyer can locate a foreclosed property using a local Realtor. Contract to purchse, then apply through your local lender, like
Mortgage 1st, Inc., for the loan. If you agree to live in the home for five (5) years, you can obtain a grant of $14,999, which can be applied at closing to reduce your principle owed. For example, you find a foreclosed property and you work out a contractural price of $150,000 and obtain an FHA loan with 3.5% downpayment. The loan amount would be $144,750, plus 1.75% MI added back to the loan, for a loan amount of $147,283.13. At the closing table you will be wired $14,999, which will reduce your principle to $132,284.13! That would make your monthly payment much less. The kicker is you must qualify for the $147,283.13 loan amount! You would save $92.97 per month on your payment. You don't have to live in the home for five years, but if you move before completing your occupancy period, then you will pay back a portion of the grant based on the number of months you lived in the home. The longer you live in the home, the less money you pay back. Live there the full five years, you owe nothing.

If you agree to live in the home for 10 years, you can receive another grant of up to $25,000 plus the $14,999 which adds up to $39,999. This grant is "Credit Score" driven, which means if your credit score is above 750, you can earn the full $39,999 for living there 10 years. The amount of the grant reduces the lower your credit scores are.

Income Limits.

Your income has to fall within certain ranges, depending which county you purchase the home. If you purchase a home in either Hinds, Rankin, or Madison Counties, and you are single your income cannot be above $47,650. If you are married, a family of two the amount rises to $54,450. With one child $61,250, and two children it goes to $68,050 etc. Call me for exact details. My phone number is 601-977-6228.

This appears to be a good, workable program. The catch is you must live in the home for either five (5) or ten years, which ever amount you decide to take.

The Market and some Truth!

2009-10-29T12:37:00.000-07:00

"Only two things are infinite: the universe and human stupidity, and I'm not sure about the former." Albert Einstein. The media is all giddy over this morning's news, and the talking heads on CNBC are clamoring that the recession is behind us. But those in the know understand that there's more to the economic data than just the headlines. While others might simply report the numbers - let's take a deeper look and see things as they really are.

The Commerce Department reported that the "Advanced" (the first of three readings) 3rd Quarter Gross Domestic Product (GDP) rose by 3.5%, higher than estimates of 3.2%. This was the first GDP gain in a year and the strongest reading in two years. "Holy Mackerel" is all they could say on CNBC...suggesting that the economy is back, and the stimulus plans have successfully bought our way out of the recession. But hold on - if we were to remove the government subsidized "Cash for Clunkers" program from last quarter's GDP, the reading would have been a lot lower...closer to the tune of 1.9%. Further - if we removed the $8,000 first time home buyer tax credit, the GDP number would have been lower still! Remember, these are temporary programs with temporary results...so once the "temporary" life support is unplugged, the numbers will be far worse, and more importantly, will be realistic.

And the euphoria continued, as a leading indicator on the health of the labor market, Initial Jobless Claims, was reported "Less Bad" than expected. Here we go again, as the media and other commentators lose their mind with excitement over these numbers. Check this out...the Initial Jobless Claims were "just" 531,000 in the latest week, slightly worse than the 525,000 that was expected. So more than half a million people each continue to get pink slips and shown the door - is this rally good news? The Continuing Jobless Claims number fell to a 7 month low, revealing that "only" 5.8 Million people are collecting unemployment benefits. The media jumped all over this dramatic drop in Continuing claims, spinning it as being an encouraging sign for the labor market. This is flat wrong - so many people have been receiving unemployment benefits for so long, that their benefits are expiring, without them having found new jobs. As I've been saying - this number is so awful, that to the inexperienced and untained eye, it actually appears to be good. And think about this - if the labor market were indeed improving, and the signs appear to be encouraging, then why the urgency to extend the unemployment benefits?

Some encouraging news on the extension of the $8,000 tax credit...while it is not a done deal, as it still must be reconciled between the House and Senate and then voted on for final approval, it's looking good. And it's not only looking good for the extension, but there are some additional enhancements to the credit in the works as well. Yesterday, the Senate reached an agreement to extend the $8,000 tax credit for first time homebuyers. They also added a $6,500 tax credit for other primary home purchasers, meaning not just limited to first time home buyers. They also raised the qualifying income limits in a very meaningful way - singles were increased from $75,000 to $125,000, and joint taxpayers from $150,000 to $250,000. Buyers must have executed purchase agreements in hand by April 30th, and then will have until June 30th to close. More details are likely to come, and changes could be made as reconciliation and voting takes place! Stay tuned...!

Market Moving Sideways

2009-10-06T07:55:00.000-07:00

Mortgage Bonds are trading slightly lower, but off the worst levels of the session.

The big news so far today comes from down under, where the Reserve Bank of Australia unexpctedly hiked the country's benchmark interest rate by .25%, from 3.0% to 3.25%, saying they felt it was safe to start cutting back on economic stimulus. Further...they also commentd that more hikes are likely to be coming. Stocks are higher around the globe, as Traders see this as a signal that the global economy is on better footing. And as a result of Stocks moving higher, Mortgage Bonds have been pressured lower.

The hike from Australia has also pressured the US Dollar lower, based on the perception that other nations may be poised to more rapidy raise interest rates, making heir currency more attractive against the Dollar. The weak Dollar, has pushed oil and other commodities such as precious metals higher as well. In fact, Gold hit a record high earlier this morning, reaching $1040.00/ounce!

Australia looks to be in a better position to hike rates than the US does, and one big reason is the current unemployment rate in Australia, which now stands at 5.8%. This is elevated from their last year's very lean 4.2%, but still under their 30-year average of 7.2% for the country. With our own unempoyment rate near 10% and rising...we just don't see how the Fed will be able to hike rates in the very near future.

Stocks will give us a better picture as to how well corporate America and the economy is doing, when 3rd Quarter earnings start to be released tomorrow. If earnings and/or future guidance disappoint, Stocks could lose ground in a hurry...and this could help Mortgage Bonds.

I'm looking for Congress to extend the First Time Home Buyer Tax Credit past the November 30th deadline. If this happens, home sales should remain steady through the first quarter of 2010. One way to get this economy rolling would be to eliminate the Capitol Gains Tax for two years. That would spur investors to invest and create jobs. I don't think the present administration will do anything such as that...it makes too much sense!

Mortgage Bonds Higher

2009-10-01T07:55:00.000-07:00

Mortgage Bonds are trading higher in response to worse than expected employment data, and as a result of weakness in Stocks.

Initial Jobless Claims increased by 17,000 last week, to 551,000, which was higher than the 535,000 expected. Huge numbers of individuals filing for first time Unemployment benefits underscores the weakness in the labor market which I discussed yesterday. Just think about it - well over half a million people were let go from their jobs last week!

Thanks to the "Cash for Clunkers" program, Personal Spending for August rose at its fastest monthly pace in almost eight years. This was positive economic news, but the market is taking it with a grain of salt, as that particular stimulus has since been removed.

There is no inflation at the moment - the August Core Personal Consumption Expenditure Index was 1.3%, down from 1.4% reported the previous month. The tame level of inflation has been friendly to Bond prices, but at some point in the future, inflation will be on the rise, which will cause rates to move higher.

Some good news for housing, as Pending Home Sales were up big at 6.4%, far above expectations of a modes 1% rise. Some of the rise is likely due to folks working fast to take advantage of the First Time Homebuyer Tax Credit, currently set to expire on November 30th. I am going to predict that this program will be extended for six months...and look for an announcment to confirm this soon!

I think bond prices will remain at current levels, giving nod to interest rates staying in the low 5% range for 30 year fixed rate loans, as least for the next three to four weeks.

Unemployment numbers Not Good!

2009-09-30T08:27:00.000-07:00

The monthly ADP Report, which gives us a look at the private sector job market, showed private employers cut 254,000 jobs in September, worse than expectations of a 200,000 drop. This release doesn't always match up with the Labor Department's official Jobs Report, but this news doesn't bode well for this Friday's important number. As of this moment, econimists are expecting a loss of 180,000 jobs for the month of September - stay tuned, as tomorrow I'll outline my Jobs Report Strategy headed into Friday's Jobs Reprt.

It's amazing to see people talking about the "good news" in jobs. Maybe because the employment news over the past year has been so horrible...just plain bad news is being seen as good - but we can't fall prey to that kind of thinking. Let's unpack some of the data. The population is growing, therefore the workforce is growing. There are 150M people in the workforce, and that number grows by about 1% or 1.5M people per year - simply due to population growth. Just to keep pace with that, the US needs to create about 125K jobs per month. So realistically, a loss of 200,000 jobs actually means we are falling 325,000 jobs behind for just one month...which is enormous. Now consider that nearly 10% of the workforce is unemployed - that's 15 million people - a huge number of folks who are without jobs. And many people are not even counted in that data...if you haven't looked for work in four weeks, you are removed from the ranks of "officially unemployed" people - but you might be discouraged, ill, dealing with family issues and therefore not seeking work. Taking those people into consideration brings actualy Unemployment rates to about 11%. Then going on farther, and counting the folks who have had to settle for part time work, as no full time positions were available - this brings the real rate of unemplooyment to about 17%! This is a whopping 23M people who are, for all intents and purposes - unemployed. This is more than the population of Texas, or New York, or Florida...or actually any other state in the US other than California.

So how do we get back to the forty year average rate of 6%? And remember-for the past 15 years, which includes the 2001-2002 recession, the very worst rate of unemployment seen was about 6%. We'd have to see a drop in unemployment of 4%...which means 6M more people need jobs. If the target to reach this was over 5 years, the US would need to create 100,000 more jobs per month-ie: 6 million people divided by 60 months= 100,000 jobs per month. PLUS don't forget, we need at least 125,000 additional jobs just to keep pace with population growth. This means the US needs to add 225,000 jobs per month minimum, consistently over the course of five straight years, just to get back to what we've become accustomed to being a normal level of unemployment.

In the past 10 years-there was only one year when this level was achieved. It was 2006, during very good times, when we grew by 232,000 jobs per month on average over the course of the year. During the past 20 years, the average growth rate has been 91,000 jobs per month-and the very best 10 years were from 1991 - 2000, when we averaged 150,000 per month. So how do we get to 225,000 jobs on average per month for the next five years? Bottom line, we won't. Expect higher unemployment rates to persist. The market euphoria we see happening when a lousy jobs number comes out, is just plain dumb. And eventually, there will come a time when more intelligent thinking will take place-and a bad number will still be considered a bad number. So...the optimistic thinking that the economy is improving will likely temper over time, probaby keeping Stocks in check, in turn benefiting Bonds, and help keep mortgage rates below 7%...that is, until inflation comes around, as high unemployment and inflation together will create a very challenging environment! Remember Jimmy Carter?

Julie & Julia

2009-08-13T05:24:00.000-07:00

I took a break from the mortgage business yesterday afternoon and attended the new movie, Julie & Julia. The movie is a tale of two stories; Julie Powell's one year adventure of cooking each and every recipe from the classic book, written by Julia Child, then the story from Julia Child's memoirs of how she came to write the book!

Mastering the Are of French Cooking is a tremendous work which was first published in 1961. How Julie Powell managed to do what she did, plus write about it, is in itself an amazing accomplishment! Oh how I would love to be smart enough to come up with an idea such as Julie Powell's, then sit down and write a story which would become so welcomed into the public eye.

If you love to cook, as I do, and want to spend a couple of hours enjoying a break from everyday life, do go see the movie Julie & Julia. You won't be dissappointed!

Now, off to buy the two books...Julie & Julie and Mastering the Art of French Cooking!

Mortgage Bonds Higher

2009-08-11T08:20:00.000-07:00

Mortgage Bonds are higher and following through on yesterday's rally - this ahead of today's $37B 3-yar Note auction at 1:00 ET. Traders will be gauging the appetite for this offering, especially by foreign countries.

Helping give bonds a lift was some good news on inflation. The labor Department reported today that worker Productivity in the 2nd quarter rose to 6.4%, higher than the consensus of 5.5% rising at its fastest pace in 6 years as companies cut costs and try to maximize output from their current staff. The efficiency gains help to curb inflation and as all know, low inflation is good for long-term Bonds like Mortgage Bonds. Unit Labor cost fell at a 5.8% pace versus estimates of -2.5%, the second consecutive drop and the biggest since 2001. This is also good news on the inflation front.

Today the 2-day Fed Meeting begins, with the statement to be released at 2:15pm ET tomorrow. We all know the Fed is not about to raise rates tomorrow, but will they hint about a future rate hike and will it be sooner or later? Stocks have been enjoying a rally higher sustained by a lack of investment alternatives. Have you checked available rates in your savings acount lately? They are near zero and can influence many people to place those dollars in the Stock market as they search for higher returns. But should the Fed take away the "punch bowl" and the low rate party comes to an end, Stocks could suffer and Bonds could benefit.

Jobless Claims and the Market

2009-07-24T07:14:00.000-07:00

Initial Jobless Claims rose by 554,000, essentially in-line with expectations of 557,000, but still a high number. Continuing Claims fell to 6.22 million down from 6.31 million the prior week. On the surface, this looks to be a positive, as a reduction in individuals who are receiving unemployment benefits sounds good. But remember, unemployment benefits don't last forever. And individuals who are unable to find work may see their unemployment beneits expire, and still not have a job...but are now not being counted in the Continuing Claims number. I feel that is a more likely scenario than the headline being touted by the media. And the Fed's revised unemployment forecast (which granted, hasn't been something you can take to the bank), also shows high unemplyment through 2011. It will be hard for consumer spending to regain traction and for the economy to turn higher with momentum if the labor market continues to struggle.

Mortgage Bonds are down a bit this week, but remain above a triple-decker floor of support provided by the 25, 50, and 200 day Moving Averages. While thisis somewhat comforting, I'm concerned about Treasury Auctions that will be hitting next week, as an additional $110B of supply will need to be absorbed by the markets.

One may ask the question why doesn't the administration look to the past to help repair the economy. Remember Jimmy Carter? Remember 18% interest rates, and close to 11% unemployment? Remember we even had a "Misery Index?" Ronald Reagan fixed all of this in less than two years by stimulating the economy with tax cuts and freeing up the private sector to put people to work. It worked then and it would work now. Why oh Why doesn't President Oboma see this?

It Still Makes Sense to Purchase a Home!

2009-07-14T12:25:00.000-07:00

Nearly a full third of households are still renting. If you’re one of them, you could be paying a hefty price.

Before talking about purchasing a house, it’s important to note two things. First—and this is extremely important—the housing market is actually localized. So the outlook in your hometown may be different than another city across the state or on the other side of the country. Second, home prices are tied to employment. For example, if someone feels like their job is in jeopardy, it might be enough to stop them from making a move. So, if your local job market is feeling a pinch, the home prices in your area may be down as well.

But with all those factors under consideration, it still makes sense to buy instead of rent. In fact, renting may be costing you a bundle.

Let's look at an example…

If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period! Worse yet, after forking over $100,000, you still would have nothing to show for it.

And speaking of having nothing to show for it, how about any improvements you might make to a rental property? It's not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside. But guess what… all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.

With convenient down payment options still available for qualified buyers, affordable home prices and low interest rates, the very same money could have been used towards home ownership.

Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment—including property taxes and insurance—of around $2,200. Assuming a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.

And the benefits of home ownership are quite considerable. Because the mortgage is being paid down each month, equity is being built. After 5-years, the $300,000 mortgage could be reduced to $279,000, adding $21,000 to your net worth!

But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help. Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding. This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year. In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.

Visit www.irs.gov and use the IRS withholding calculator. This very handy tool can quickly show you the impact that a change in withholding will do to your net paycheck. Remember to balance this with the expected refund and it is always a good idea to check with your tax advisor.

Testing Resistance

2009-07-06T10:35:00.000-07:00

The financial markets are back in full swing today after the long holiday weekend. Mortgage Bonds are slightly lower, and still dancing just under the thick overhead resistance formed by both the 50-day Moving Average and recent highs for Bonds.

Coming later this week, Traders will be turning their attention to the start of the earnings season for the Second Quarter, carefully looking for clues as to the pace of economic recovery. Aluminum company Alcoa (AA) will be kicking off earnings season after the close on Wednesday.

As mentioned earlier, Bonds remain under a thick celiing of overhead resistance. As I talked last week, the last time Bonds traded near these levels, they reversed sharply nad lost about 250bp over just a few days. Bonds appear to be "overbought", which means we need to exercise caution, especially if you are seeking a lower rate to purchase that dream home or simply wanting to refinance at a lower rate or take some cash out for repairs etc. Prices can remain overbought, especially at resistance levels, which can be troublesome. I will monitor this carefully, at the same time allowing for prices to either tread water or move higher in case the decline in Stocks accelerates.

On another note, many traders and investors may be taking the next few days off as an extension of the holiday weekend, which can lead to exaggerated moves as a result of lower trading volume. Have a good week!

Jobs Report Strategy

2009-07-01T11:13:00.000-07:00

Handicapping this month's Jobs Report is made a bit difficult currently due to a wild card - the temporary hires being made to conduct the US Census. The government is planning to hire 1.4 million part time workers to run the 2010 Census, but it isn't clear exactly when or how many of these hires will be or have been made in any given month. However, when these "job creations" hit, they could possibly skew the real employment picture by painting a much more rosy scenario than what actually exists, and last month's Jobs number was an example.

From a fundamental standpoint, we have to peel back last month's Jobs Report and saw that the "birth-death" ratio added 217,000 jobs to the reading, thereby helping provide a better than expected loss of "only" 345,000 jobs. Do you really think that 217,000 new jobs were added by the creation of new businesses last month? Bottom line...without this birth-death estimation by the Bureau of Labor Statistics jobs losses would in reality have eclipsed a half a million last month. I don't think the economy is adding many jobs right now, and there will likely be higher job loss revisions down the road which will lead to a continued uptick in the unemployment rate.

With the slack in the labor market, many are forced to find part-time employment. And upon an economic recovery, many businesses may just take these part-time workers and make them full-time employees...which would keep unemployment rates high for a longer amount of time. This is where the phrase "jobless recovery" comes from...we could see the economy start to pick up, but new hiring can lag for behind.

I expect tomorrow's report to be ugly, and will likely include some revisions to prior reports showing more job losses, as well as an uptick in the unemployment rate.

Take a Look At Market Update (MMG)

2009-06-22T06:49:00.000-07:00

Take a look at what is happening in the market from my MMG update. Go to www.joeharris.com and click on the MMG green tab.

Obama's Mortgage Plan Good or Bad?

2009-06-19T06:11:00.000-07:00

In my very humble opinion this new Mortgage Plan will increase costs on consumers, pile on more paper work for the industry as a whole, and force many Mortgage Brokers out of business. The very people who helped create the mortgage mess, BARNEY FRANK and CHRIS DODD are actually in charge of "Fixing" the mortgage industry. Here is a link to the explinations of the new plan:

http://ow.ly/eTO0

Bonds Reach their Ceiling and Bounce Down

2009-06-18T07:27:00.001-07:00

Bonds woke up angry this morning following yesterday's sell-off. A week ago, bonds began a nice rally with the formation of a Bullish Engulfing Patern. Aided by the recent slide in Stocks, Mortgage Bond prices powered through their 200-day moving average on Tuesday. But yesterday, things changed. Bond prices initially zoomed higher to break above their 25 day moving average - but the Bears pushed prices back below this ceiling, which created a Bearish Shooting Star...a reliable indicator of prices worsening ahead. Should the Bond close below its 200 day moving average, this level will now become a ceiling of resistance, with the nearest floor being found about 250bp below current levels, at the point where the rally began. We may now have seen the last of rates in the 5% range.

Bonds Couninue Climbing

2009-06-17T08:29:00.000-07:00

Inflation and consumer level was reported lower than expected today and the Consumer Price Indes (CPI) came in at 0.1% versus the 0.3% estimated. This left year-over-year headline CPI at -1.3% and the lowest level since 1950, showing that inflation has not been an issue - but many, including myself, feel that inflation will become a tough customer to deal with in the future.

Mortgage Bonds liked the very tame inflation read and continued their run higher. They have been in rally mode of late, gaining 360bp in just the past five trading days...all signaled by the Positive Stochastic Crossover and Bullish Engulfing Pattern. Mortgage Bonds are testing a tough ceiling at their 25 day moving average, and has been the case of late, Mortgage Bonds will follow in the opposite direction of stocks, which are falling through their 200 moving average and appearing to head lower yet.

There is still quite a bit of ground to be made up by bonds from their fall from highs on May 20th. Stay tuned, let us hope rates stay low to get this economy moving.

Bonds and Mortgage Backed Securities

2009-06-15T05:44:00.000-07:00

The bond market has taken quite a beating over the past two weeks. Go to www.gomortgage1st.com and click on the MMG report green button and take a look at the charts. A rally on Thursday and Friday last week helped some, however all of the losses over the past couple of weeks are a long shot to be regained. If you have questions, just give me a call. The numbers or on my website.

Getting Prepared for the Future

2009-06-09T06:21:00.000-07:00

As we continue into the future, there are a number of things one can do to provide for future retirement and being able to survive what appears to be coming.

The first step is to Maximize contributing to your retirement account, ie..your 401-K. Add to your Roth or IRA and learn to be self reliant

The second thing is to get rid of high debt credit cards. Payoff your credit cards as quickly as possible. Keep no more than two credit cards, keep the accounts open, and make sure they have a zero balance each and every month. In order to keep your credit scores high, you need at least two Revolving credit card accounts, however keep them below 90% of your credit limit. For instance, if you have a $2,000 limit on your credit card, make sure your month ending balance is no more than $200.00 if you can't pay it down to zero. Also, don't accelerate payments on a car loan if you have a zero percent interest rate or a very low rate ... say 3% or so. Pay those monthly.

The third thing is to prepare a Rainy Day Fund. Work to have 12 months of your fixed expenses in the bank as liquid cash. CD's Money Market accounts, etc. Work towards this and make a plan to make this happen.

The fourth thing in the process is to Invest for Future Needs in good quality Real Estate, Gold, Hedge Funds etc. Invest for the long term and diversify your investments.

By accomplishing these four things, your life will be set and you won't be counting on the government to take care of you, which will probably not be to your best interest. Good luck and make this happen!

Four Step Process to survive

2009-06-08T06:52:00.000-07:00

Is it a good thing to have your home paid for? I know that paying off your home is a goal that is first and foremost in the minds of most individuals, however is having no mortgage on your home a good thing? Let us take a look.

Suppose your home is paid for and you lose your job or become disabled. Let's say your home has a value of $200,000 and so now you have "equity" in your home which amounts to $200,000! A good thing yes? Let us examine a few things:

Your home will still have to have homeowners insurance which could amount to $150.00 per month, plus your property taxes would have to be paid, which could be another $200.00. Utilities could be another $300.00, so is your home really paid for? Just those expenses amount to $650.00 monthly.

Now, let us look at how using your home to create "velocity of money" would work. Your home is worth $200,000 and 80% of that value is $160,000. If you were to refinance your home up to 80% LTV and put that $160,000 into an account, or investment, say tax free municipal bonds, or something similar, you may be able to earn 6% or 7% return on your money. Of course you would have had to be employed to refinance, however if you did you would now have $160,000 cash. Your monthly payment would be $959.28 at 6% interest, plus taxes and insurance, or in our example $1,309.28, of which the interest on the mortgage is deductible from your federal taxes, which could effectively lower your monthly payment by $248.00 per month if you're in the 31% tax bracket, so the "effective" payment would be close to $1,061.28. Remember you would have $160,000 still in the bank or in an investment earning you money. If you didn't have a job, you could go for 12 years just making your house payment!

Now if you were to invest that money at 6% rate of return in just 11 years that $160,000 would become $320,000! You would owe approximately $136,600 on your mortgage by then, so guess what? You could pay off your mortgage if you wanted and still have $183,390.94 in your account! This is a fact, not speculation.

So is Dave Ramsey right? I have questions about some things he says, and using your homes' equity to gain wealth is an excellent strategy in my very humble opinion!

Jobs Report Strategy

2009-06-04T08:14:00.000-07:00

In handicapping the Jobs Report - bottom line, tomorrow's (Friday) number won't be pretty, and the Stock market probably won't like it. As we mentioned earlier, an already negative techinical picture fo Stocks could be exacerbated by a nasty jobs number. That means negative action in Stocks could mean improvement for Bonds, meaning rates could improve a little.

Current expectations are for a loss of 520,000 jobs, but whisper numbers range from a low of 500,000 to as high as 550,000 jobs lost! I also expect higher revisions to the proor month's reading and what my hurt Stocks is the uptick in the Unemployment Rate...to 9.2% up from last months 8.9%. I would not be surprised to see it tick uup even higher. You can hear the media now talking abut nearly 10% unemployment and we don't see Stocks liking this, the the benefit of Bonds! Remember the Jimmy Carter days? Oh for Ronald Reagan again!!

More on today's market

2009-06-04T07:38:00.000-07:00

Mortgage bonds opened lower, in anticipation of the massive amount of Treasury auctions. This morning the Treasury decided to pare back the amount of auctions for next week, likely sensing that the reception will be less than desirable. The additional supply to fund the various government spending programs has been weighing heavily on both the Bond market and the US Dollar. The severe erosion of the Dollar against other currencies has pushed the price of oil up significantly. This is also providing a headwind for Bonds. But there may be some hope ahead...read on.

Today's initial Jobless Claims number, a leading indicator of the health of the jobs market, met expectations at 621,000. We will need to see a siginificant inprovement in unemployment claims in order to see the labor market improve. Some of the early signs of improvement in the econlmy may be more related to a rebuilding of inventories, rather than robust sales.

Market Update

2009-06-03T08:36:00.000-07:00

The bond market has been hit hard over the past week due to an oversupply of bonds in the market place. The cause is basic economics 101...there is too much supply of bonds, due to the hord of refinances and first time home buyers entering the market. This over supply has caused the bond market to sell off as supply far outweighs demand.