President Obama signed the new tax credit bill yesterday.  Here are the details:

First Time buyers are eligible for an $8,000. tax credit if purchasing jointly ($4,000. for married filing separately) for purchases after November 30, 2009 and contracted for by April 30, 2010 and closed by July 1, 2010.  A first time buyer is defined as someone who has not owned a primary residence in the last three years.

Current homeowners (must have owned a primary residence consecutively for 5 of the last 8 years) are eligible for a $6,500. credit ($3,250. for married filing separately).

The income limits have been incrrease to $125,000. for a single buyer and $225,000. for married.  Each category has an additional $20,000. phase out option.  The maximum purchase price is $800,000.  There are, of course, other conditions and requirements, but this is the essence of the credit program.  Happy selling!

Mortgage backed securities closed up 22 basis points today at 101.28 just below a new resistance level at 101.34.  As I suggested in yesterday's blog, there were 190,000 job losses in October which was more than the 175,000 expected and the unemployment rate was up to 10.2%.  This sparked a wild rally sending MBS bonds up 44 basis points before settling to the 22 point gain for the day.  The Dow surprisingly closed up 17 points.

Investors are speculating that tomorrow's jobs report will be better than the current estimate of 175,000 jobs lost.  Should the number be closer to 200,000 jobs, however, the unemployment rate would likely surge over 10%.  The effect of that eventuality could cause a much anticipated correction in stocks.  Such a move would further bolster MBS bonds and, as a result, reduce interest rates.  We will all find out tomorrow morning.

Mortgage backed securities (MBS) closed up 19 basis points today at 101.06 above the 25, 50, 200 and 100 day moving averages.  MBS bonds managed the slight rally despite the fact that stocks surged on news of increased productivity and improved initial job claims.  Stocks and bonds normally go in opposite directions.  The Dow Jones Industrials closed over 10,000. today.

In yesterday's blog I talked about a mother and father giving a daughter and son-in-law gifts of $13,000. each, totaling $52,000. in gifts.  Suppose the gift required to put the deal together was $100,000.  Then the additional $48,000. would be subject to the gift tax, right?  No.  Because there are two gift exclusion accounts from which each individual can draw.  Each individaul can give up to $13,000. a year to as many people as he/she chooses from the first account.  There is a second lieftime account, however, which allows someone to give someone more than the annual amount of $13,000. up to a lifetime total of $1,000,000. and still be excluded.  If both the father and mother in my example each gave an additional $24,000. to their young homebuyers, they could charge that amount to their lifetime account and still have $976,000. remaining to gift from their indivdual accounts in the future.  Knowing the rules could save your deal and make everyone happy about the skilled realtor they have working for them.

Mortgage backed securities (MBS) closed up 6 basis points today at 100.88 above both the 50 and 200 day moving averages.  The market took a wild ride after the Fed's announcement.  Initially traders sold off when they saw there was no new good news about an extending the Fed's MBS purchase program.  The market was off 26 basis points at the low.  Cooler heads prevailed later in the session, however, resulting in the slight advance.

Some loan products including FHA loans allow buyers to use a gift as all or part of their down payment.  All or part of that gift may not be taxable.  Donors are allowed to give up to $13,000. each year with out paying the gift tax.  It is known as a gift tax exclusion.  For the sake of an example, let us say a young couple could receive a gift from each of the wife's parents.  Each of the parents could give up to $13,000. to the wife and the same amount to the husband.  Thus in my example they could give up to $52,000. and still avoid the gift tax. 

Mortgage backed securities (MBS) closed down 12 basis points today at 100.81, still above the support of the 200 day moving average.  The impending announcement of the size of next week's treasury auctions has been weighing on MBS bonds for three day now.  Also the uncertainty of the wording in tomorrow's Fed announcement is of concern to bond traders. 

Municipal bonds have a fixed interest rate and they pay you interest every six months.  The "par" price is always 100.  If rates go up after you buy the bonds and you sell them before maturity you will likely sell them for less than you paid for them.  If you keep them until maturity you will be paid back the face value of what you bought which is called par.  The shorter the time remaining until maturity the less volatility the price is likely to have.  If you sell the bond for more than you paid for it, you will be subject to a capital gains tax.

Mortgage Backed Securities (MBS) closed down 25 basis points today at 100.94 its lowest level of the day.  The MBS bonds slipped below the 25 day moving average but remained above support at the 50 day moving average.  Strong housing results and a better than expected ISM Manufactuing Index pushed stocks higher and tool money out of bonds.