The stimulus bill took over headlines last week as the Senate and Housed fleshed out their versions into one cohesive bill. Here's a wrap-up of news that affected the housing market, and what to expect this week.
Mortgage Rates
Last week was another volatile week for mortgage rates. They improved earlier in the week, but lost their ground later in the week and ended slightly worse than where they began. Last week's Bankrate.com 30 yr fixed rate average ended at 5.44% (last week's was 5.34%). Usually, bad news for stocks equals good news for mortgage bonds (i.e., interest rates) as money flows from stocks to bonds. However, investors are flooded with mortgages right now as Americans take advantage of lower interest rates, so bad Stock news hasn't completed translated to lower mortgage rates.
That being said, if you're buying a home or refinancing keep in mind it may take a little longer than normal to close.
Revised Home-buyer Tax Credit
The $15,000 tax credit is gone; it has been replaced by a $8,000 tax credit available to first-time home-buyers that does NOT need to be re-paid if you live in your home for at least 3 years. Not bad, huh? The government is essentially paying your down-payment, you just need to front the money and then get it back when you file your taxes.
To qualify for the credit, you need to purchase a home from January 1st to November 30th. The credit begins phasing out if an individual buyer makes $75,000 or more a year, and joint filers make $150,000 or more a year.
Government to Step-up Efforts to Help Those in Foreclosure
The Obama administration announced last week it would begin working on a new program to subsidize mortgages in foreclosure. This program is aimed to help homeowners BEFORE they fall behind on their mortgage, whereas current loan modification efforts have been criticized for only helping homeowners AFTER they fall behind on the mortgage.
There aren't too many details on the plan just yet, but here's a short article on what is to be expected.
http://budurl.com/djbf
What to Look Out for This Week
We may see some volatility in mortgage rates on Wednesday, Thursday and Friday. Keep this in mind when thinking about locking your interest rate. Generally speaking, bad news positively affects mortgage rates. However, other economic news associated with our crisis is playing into the equation, which sometimes distorts this previously predictable pattern.
Wednesday: FOMC minutes. Minutes will be released from the 1/28 FOMC meeting where the near-term direction of monetary policy was determined.
Thursday: Philadelphia Fed Index (PPI). This is a regional manufacturing index that is a good indicator of the national manufacturing index. This is a good snapshot of our factory sector, and indication of contraction or expansion.
Friday: Consumer Price Index and Core Consumer Price Index (CPI). This report will give us a read on deflation/inflation. Inflation is mortgage rates arch-enemy: however, it doesn't seem to be looming its head, for now.
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