Prices of Mortgage Backed Securities (MBSs) and Treasuries rose this morning as stocks fell dramatically as economic news dominated the markets. It appears that after the release of discouraging economic news, investors sought the safety of treasury bonds.
There is renewed concern that the global economic downturn is getting worse. The NY Empire State Index showed manufacturing contracted at the fastest pace on record due to the lack of credit. Slumping retail sales are prompting companies to cut production and slash jobs, signaling the recession is intensifying.
In other news, the president signed the $787 billion stimulus bill into law today. The First-Time homebuyer tax credit of $8000 was implemented, and is retroactive to January 1, 2009. To qualify for the tax credit, neither spouse can have owned a home anytime in the last 3 years. The home they are purchasing must be their primary residence. The tax credit will be $8,000 or 10% of the purchase price, whichever is less. If the homeowner sells his or her home anytime in the first 3 years, then the full amount of the credit is due upon sale. There are income limitations as well. To get the full tax credit, your adjusted gross income must be less then $75,000 if single, and less then $150,000 if married. This tax credit is phased out for incomes above $95,000 if single and $170,000 if married.
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