Unlike many Mondays, tomorrow does bring us one of those reports. July’s Personal Income and Outlays report will be released early tomorrow morning, giving us a measurement of consumer ability to spend and current spending habits. It is expected to show an increase of 0.2% in income and a 0.3% increase in spending. Weaker than expected numbers would be considered good news for the bond market and mortgage rates.

The Conference Board will post their Consumer Confidence Index (CCI) for August late Tuesday morning. This index measures consumer sentiment about their personal financial situations, giving us a measurement of consumer willingness to spend. That is important because consumer spending makes up two thirds of the U.S. economy. A decline in confidence would indicate that surveyed consumers probably will not make a large purchase in the immediate future. That sign of economic weakness should drive bond prices higher, leading to lower Delaware mortgage rates Tuesday. It is expected to show a reading of 50.0, which would be a small decline from July’s 50.4. The lower the reading, the better the news for bonds and mortgage pricing.

Also Tuesday is the release of the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members. It will be interesting to see some of the Fed member’s views on the economy and inflation and if they will hint what the Fed’s next move may be. But this is one of those events that can cause significant mo vement in rates after its release or be a non-factor. I suspect that this particular release will cause a little movement in bond prices, but not enough to significantly affect mortgage pricing.

Wednesday’s only important news is the release of the Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show 53.0, which would be a decline from last month’s reading of 55.5. A reading above 50 means that more surveyed manufacturers felt business improved during the month than those who felt it worsened. A larger than expected decline in the index would likely cause selling in the stock markets and lead to an improvement in mortgage rates Wednesday.

There are two reports scheduled for Thursday. The first is the revised 2nd Quarter Productivity numbers, which measures employee productivity in the workplace. Strong levels of productivity allow the economy to expand without in flation concerns. It is expected to show a downward change from the previous estimate of a 0.9% decline. Forecasts are currently calling for a 1.6% drop, meaning productivity was weaker than previously thought. This would be negative news for the bond market and Delaware mortgage rates.

July’s Factory Orders data will also be released Thursday morning. This report measures manufacturing sector strength and is similar to last week’s Durable Goods Orders, but includes orders for both durable and non-durable goods. It is expected to show a 0.3% increase in new orders. A smaller than expected rise would be favorable for bonds, but I don’t see this data causing much movement in rates unless its results vary greatly from forecasts.

The biggest news of the week comes Friday morning. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August early Friday morning. The ideal scenario f or the bond market and mortgage rates is rising unemployment, a larger than expected drop in payrolls and earnings to remain unchanged. Analysts are expecting to see that the unemployment rate moved from 9.5% to 9.6% and that 118,000 jobs were lost during the month. Weaker then expected readings would be very good news for bonds and lead to lower mortgage rates Friday. However, if we get stronger than expected numbers, mortgage rates will probably spike higher Friday.

Overall, I expect to see the most movement in rates Friday, but Tuesday and Wednesday should also be fairly active. Also worth mentioning though is the fact that next Monday is Labor Day so all markets will be closed. The bond market will not close early this Friday, but many traders may head home for the long weekend after Friday’s data is posted. This means that trading will likely be thin Friday afternoon even though the markets will still be open. This could lead to additional volatility in rates as traders prepare for the long weekend, so please be careful this week if still floating an interest rate.

If I were considering financing/refinancing a Delaware home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

There is also a Free Delaware First Time Home Buyer Seminar this Saturday September 25th at the Christiana Hilton Hotel in Newark, Delaware from 10 AM till Noon and again from 1:00 PM till 3:00 PM.  Please call 302-703-0727 to register or send an e-mail to jthomas@primeres.com.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

July’s Existing Home Sales will open the week’s data late Tuesday morning. The National Association of Realtors will release this report, giving us a measurement of housing sector strength. It covers approximately 85% of home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a decline from June’s sales, meaning the housing sector is still softening. This would be good news for the bond market and mortgage rates because a weak housing sector makes a broader economic recovery difficult.

The Commerce Department will post July’s Durable Goods Orders early Wednesday morning, giving us an important measure of manufacturing sector strength. This data tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. A much weaker reading than the expected 0.5% rise that is expected would indicate that the manufacturing sector is not as strong as thought. This would be good news for bonds and should lead to lower Delaware mortgage rates Wednesday morning.

Also scheduled for release Wednesday is July’s New Home Sales data. This report is the least important release of the week. It will give us another indication of housing sector strength and mortgage credit demand, but only tracks approximately 15% of all home sales. It usually doesn’t have a major impact on bond prices or mortgage rates unless it varies greatly from forecasts.

Friday is another multi-release day with the first rev ision to the 2nd Quarter Gross Domestic Product (GDP) and the University of Michigan Index of Consumer Sentiment both scheduled for release. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. This reading is the second of three that we see each quarter. Last month’s preliminary reading revealed that the economy grew at an annual rate of 2.4%. Friday’s revision is expected to show that the GDP actually rose only 1.4%. A larger than expected downward revision should help lower mortgage rates Friday, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates.

August’s revision to the University of Michigan’s Index of Consumer Sentiment is also due Friday morning. It helps us track consumer willingness to spend and is expected to show little change from August’s preliminary reading of 69.6. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and Delaware mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and Delaware mortgage rates this week. The two most important are Wednesday’s 5-year Note and Thursday’s 7-year Note sales. Results of this week’s auctions will be posted 1:00 PM ET each day. If investor interest is strong in the auctions, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher Delaware mortgage rates Wednesday and Thursday afternoons.

Overall, we will likely see the most activity in rates Tuesday morning, but Wednesday and Thursday ar e also fairly important. If we manage to get weaker than expected results in the key reports and the auctions go well, we should see mortgage rates close the week lower than tomorrow’s opening levels. But stronger than expected results in the economic reports and disappointing results in the Treasury sales will most likely lead to rates moving higher this week.

If I were considering financing/refinancing a Delaware home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

There is also a Free Delaware First Time Home Buyer Seminar this Saturday September 25th at the Christiana Hilton Hotel in Newark, Delaware from 10 AM till Noon and again from 1:00 PM till 3:00 PM.  Please call 302-703-0727 to register or send an e-mail to jthomas@primeres.com.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

Three of the week’s four reports will be posted Tuesday morning. The first is July’s Producer Price Index (PPI) that gives us an indication of inflation at the producer level of the economy. There are two readings in the report- the overall index and the core data reading. The core data is more important because it excludes more volatile food and energy prices that can change significantly from month to month. Current forecasts call for an increase of 0.2% in the overall and a 0.1% increase in the core data reading. A larger increase in the core data could push Delaware mortgage rates higher Tuesday morning. If it reveals weaker than expected readings, we may see Delaware mortgage rates improve as a result.

The second report of the day is July’s Housing Starts data. This report gives us an indication of housing sector strength and future mortgage credit demand. However, it isn’t considered to be of high importance to the bond market or mortgage pricing and usually doesn’t cause much movement in Delaware mortgage rates unless it varies greatly from forecasts. It is the least important of the week’s reports and is expected to show a small increase in construction starts of new homes. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected housing sector.

July’s Industrial Production is the third. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important to the markets, but will likely not have much if an impact on mortgage rates due to the importance of the PPI reading. Current forecasts are calling for a 0.6% increase in production.

The Conference Board will give us its Leading Economic Indicators (LEI) for July late Thursday morning. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker than expected reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Thursday if the stock markets remain calm. It is expected to show an increase of 0.2 % in the index, indicating minor economic growth over the next couple of months.

Overall, look for Tuesday to be the busiest day of the week with the PPI being released. The rest of the week will likely be influenced more by stock prices than anything else, which may be quite volatile. Therefore, keep an eye on the markets and maintain contact with your mortgage professional if you have not locked an interest rate yet.

If I were considering financing/refinancing a Delaware home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

There is also a Free Delaware First Time Home Buyer Seminar this Saturday August 21st at the Christiana Hilton Hotel in Newark, Delaware from 10 AM till Noon and again from 1:00 PM till 3:00 PM.  Please call 302-703-0727 to register or send an e-mail to jthomas@primeres.com.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

The FOMC meeting will be held Tuesday and will adjourn at 2:15 PM ET. It is expected to yield no change to key interest rates. Usually, the post-meeting comments seem to have more of an influence on the markets than the rate adjustments themse lves, or a lack of one in many cases. Look for the statement to lead to volatility during afternoon trading if it hints at what the Fed’s next move may be and when it will come. If the statement does not give us new information, mortgage rates will probably move little after its release.

June’s Trade Balance report will be released early Wednesday morning. It gives us the size of the U.S. trade deficit but is the week’s least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $42.5 billion deficit, but it will take a wide variance to directly influence mortgage pricing.

There is no important data on the calendar for Thursday. Friday brings us the release of three reports, two of which are highly important to the markets and mortgage rates. The first is July’s Consumer Price Index (CPI) at 8:30 AM. The CPI is one of the most important reports we see each month. It measures inflation at the consumer level of the economy. There are two readings in the report- the overall index and the core data reading. The more important of the two is the core data because it excludes more volatile food and energy prices. Current forecasts call for a 0.2% increase in the overall index and a 0.1% increase in the core data reading. Declines in the readings, especially in the core data, should lead to a bond rally and lower Delaware mortgage rates. However, stronger than expected readings will likely cause a spike in mortgage pricing Friday.

July’s Retail Sales data is the second report of the day and is nearly important as the CPI. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.5%.

The last report of the day will come from the University of Michigan, who will release their Index of Consumer Sentiment for August at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. By theory, a drop in confidence should boost bond prices, but this is the least important of the day’s three reports and will probably have little impact on Delaware mortgage rates.

Also worth noting are two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as they are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

Overall, look for the most movement in bond prices and mortgage rates late in the week. Friday will likely turn out to be the most important day with two of the week’s most important releases and three reports scheduled altogether. If we get stronger than expected results in the Retail Sales and CPI releases, we may see mortgage rates spike higher fairly quickly. I suspect the FOMC meeting will not have as much of an influen ce on mortgage rates as recent meetings have, but the markets can react wildly to a single word or omission of a word in the statement, so we need to be cautious. This is certainly another week that continuous contact with your mortgage professional is highly recommended if you are still floating an mortgage interest rate.

If I were considering financing/refinancing a Delaware home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

THE ROLLER COASTER RIDE BACK UP:  After a horrible June, the domestic equity markets ended a very positive July.  The Dow Jones Industrials was up 0.40% for the week ending up 7.54% for July.  The S&P 500 was down 0.10% for the week, ending a July that was up 7.23%.  The NASDAQ Composite was down 0.65%, ending July up 7.3%.  All three indices are hovering near break even for the year.

EARNINGS GOOD, GDP..NOT SO MUCH:  Second quarter earnings reports continue to be positive, with Merck, Samsung, Chevron, Honda and FEDEX (see below) some of the big names announcing very positive reports.  However, the second quarter GDP report was disappointing.  The report on GDP for the second quarter of 2010 showed a gain of 2.4%.  That was a big drop from the 3.7% rise in the first quarter.  There was strength in business investment, which was up 17%, but consumers increased their spending by less than 2%.  Consumer confidence data continues to move downward, which explains why consumer spending is not picking up. 

LAZY PEOPLE:  Businessweek.com recently analyzed some data from the Bureau of Labor Statistics in order to determine which state has the laziest people.  They meant “lazy” as a measure of leisure time spent doing sedentary activities compared with activities that require more physical effort.  The winner was Louisiana, with Mississippi and Arkansas coming in second and third.  Lest you think that it was all southern states that led the way, Delaware and New York cracked the top 20.  To give you some idea what the average person does in the laziest state, in Louisiana, individuals (age 15 and older) sleep on average 8 hours and 44 minutes, watch 3 hours and 5 minutes of television, socialize for 54 minutes and “relax” for 29 minutes.  The average American sleeps 8 hours and 35 minutes, watches television for 2 hours and 38 minutes, socializes 44 minutes, and relaxes for 18 minutes.  The “least” lazy state is North Dakota.  For more, see here.

USING LEFT OVER COLLEGE FUNDS TO PAY SCHOOL LOANS?  Withdrawals from a 529 College Savings plan are tax-free if the money withdrawn is used for “qualified higher education expenses,” or QHEE. The list of eligible expenses includes tuition, mandatory fees, books, supplies, equipment. It also includes a capped amount of room and board if the beneficiary is at least a half-time student. However, QHEE does not include student loan repayments.  Some may argue that student loans merely represent the expenses incurred by the student in past years and should be counted as QHEE when the loans are repaid. The IRS apparently does not buy this argument and will count a student loan only for the year when the loan is taken out to pay the eligible expenses, not for the year the loan is repaid.

AS FEDEX GOES..:  FEDEX is often seen as a bellwether company.  If shipping is increasing then FEDEX will do well.  If shipping in increasing, it is a sign of increased activity, so the argument goes.  FEDEX reported last Monday that it expects to earn between $1.05 and $1.25 per share for the first quarter ending Aug. 31. That’s up sharply from a previous forecast of 58 cents per share.

June’s Personal Income and Outlays data will be posted early Tuesday morning. This rep ort helps us measure consumer ability to spend and current spending habits. If it shows sizable increases, bond selling could lead to higher mortgage rates. Current forecasts are calling for a increase of 0.1% in income and no change in spending. A larger than expected increase in income means consumers have more funds to spend, which is not favorable to bonds because consumer spending makes up two-thirds of the U.S. economy. Ideally, we would like to see declines in spending and income.

Also Tuesday morning will be the release of June’s Factory Orders data. This report helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to last week’s Durable Goods Orders report that tracks orders for big-ticket items only. Since a significant portion of the data was released last week, this report likely will not have as big of an impact on the markets as last week’s did. Analysts are e xpecting to see a decline in new orders of approximately 0.5%. A larger than expected drop would be considered good news for bonds and mortgage pricing.

There is no relevant monthly or quarterly economic news scheduled for release Wednesday or Thursday, but Friday is a different story. The most important piece of data this week and arguably each month is the monthly Employment report. This report gives us the U.S. unemployment rate, number of jobs added or lost during the month and the average hourly earnings reading for July. The ideal situation for the bond market is rising unemployment, a sizable loss of jobs and little change in earnings.

While the GDP is arguably the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday’s report is expected to show that the unemployment rate rose to 9.6% last month while approximately 85,000 jobs were lost. The unemployment rate probably will not be much of a factor unless it moved much more than the 0.1% that is expected. However, due to the importance of these readings, we will most likely see quite a bit of volatility in the markets and mortgage pricing Friday morning if they vary from forecasts.

Overall, I am expecting to see another fairly active week for Delaware mortgage rates. The most important day is Friday due to the data being released, but tomorrow is also a very important day with the ISM index scheduled for release. The rest of the week is likely to be a little calmer than Monday and Friday. We may see some pressure in bonds mid to late week ahead of Friday’s employment numbers, but we also need to watch the stock markets for significant moves that can influence bond trading. Accordingly, this is a good week to maintain contact with your mortgage professional.

If I were considering financing/refinancing a Delaware home, I would…. Lock if my closing was taking place within 7 days… Float if my clos ing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

Each participate will recieve a Free Audio CD on Homebuying 101, Credit Scoring Handbook, Homebuying Handbook, and an opputunity to meet with a mortgage planner to be pre-approved to buy a home at the seminar.You will also learn importance of credit in buying a home and learn valueable tips on how to improve your credit score. Learn what programs are available to help with down payment and closing costs. The new loan limits for conventional and FHA will be covered as well as changes to borrowing 100% financing.

Your presenter is the author of the new book, Your Guide to Buying Your First Home in Delaware.

The Seminar is being held at The Seminar is being held at

The Sheraton Hotel at 1570 North DuPont Highway, Dover, DE 19901
 

from 10:00 AM till 12:00 PM. To register for the seminar, please call 302-588-3665 and ask for John Thomas. You can also e-mail me at jthomas@primeres.com

For a Complete list of seminars visit Delaware Free Seminars.

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office

610-960-3109 PA Office

410-412-3319 MD Office

www.PRMIDelaware.com

GOOD NEWS DROWNS OUT BAD, EQUITIES RISE:  There was a fair bit of bad news this past week in the unemployment and housing numbers.  In addition, Ben Bernanke’s testimony was far from a Knute Rockne speech.  However, the markets gained.  A big driver for domestic equities was positive earnings reports.  Among the companies that beat quarterly expectations were Caterpillar, 3m, Air Products, UPS, Morgan Stanley, Wells Fargo, Ford, Honeywell and McDonalds.  In addition economic reports showed surprise growth in European manufacturing and United Kingdom retail sales.  German confidence data came out stronger than expected on increasing exports.  The Dow rose 3.24% (down 0.03% for the year).  The S & P 500 rose 3.55% (down 1.12% for the year) and the NASDAQ Composite rose 4.15% (up 0.01 for the year).  We seem to be back to square one again for the year.  

THE NEXT BUBBLE-COLLEGE TUITION?:  No cost can stay way ahead of the general rate of inflation indefinitely.  For years, we have been watching college tuition costs stay ahead of the general rate of inflation by a wide margin.  What is causing this, and what kind of bubble might this create?  Anecdotally, I have heard many more people steering their children to more inexpensive options in the past couple of years.  The combination of the rising costs and the troubled economy has moved many parents to think differently than they might have just a few years ago.  What are some of the indicators that we are running into a problem?  1)  Tuition has been increasing at two to three times the rate of inflation, about 8% per year, 2) students are borrowing more than ever, for example the number of college students graduating with over $25,000 in debt has tripled in the past decade, 3) in the past two decades, colleges have doubled their non-teaching staff while enrollment has increased only 40%, 4) publicly traded, for-profit education companies derive 75% of their revenue from federal funds, up from 48% in 2001, and quickly approaching the 90% limit imposed by federal law, 5) colleges are spending large amounts of money on amenities such as luxury dorms, gyms, pools to lure students, 6) college president salaries are rapidly increasing, for example, 23 private college presidents made more than $1 million in 2008 and 110 made more than $500,000 (there were no million dollar presidents in 2002).  Federal student loans became non-dischargeable in bankruptcy in 1998, and then private loans became non dischargeable as well in 2005.  Will we hit a tipping point when students begin defaulting on these loans at a more rapid rate, and colleges begin to face the need for cost cutting?  

LENGTH OF UNEMPLOYMENT:  Congress passed, and President Obama signed an extension of unemployment benefits.  As you can see from the chart below (from the U.S. Department of Labor, see here), the unemployment in this economic downturn has been long term like no other in the recent past.  The median duration of unemployment we face now is incredibly long compared to anything we have seen in the last fifty years:

MORE ON UNEMPLOYMENT:  Unemployment has by far been the most watched metric to determine the strength, or lack thereof, of the recovery.  One highly watched number has been the number of Americans filing for initial unemployment on a weekly basis.  This past Thursday, the announced number for the prior week was 464,000.  That is up 37,000 from the week before.  The number of Americans filing for initial unemployment insurance climbed last week, the government said Thursday.  The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 456,000, up 1,250 from the previous week’s revised average of 454,750.

HEALTH SAVINGS ACCOUNTS:  One in ten new health plans currently sold in the United States is a high deductible health plan (HDHP) with a health savings account (HSA).  The primary sales argument for these plans has been reduction in health premiums.  However, there is also a strong advantage in the tax advantages that accompany such plans.  To be qualified as a plan that can be paired with an HSA, an HDHP must

1)      have an annual deductible of at least $1,200 for an individual and $2,400 for a family of two or more,

2)      cannot exceed $5,900 out-of-pocket maximum for an individual or $11,900 for a family of two or more (out-of-pocket expenses are those you have to pay before the insurance company starts to pay 100% of covered charges), and

3)      limits first dollar coverage to certain preventative services and for everything else, you must satisfy the high deductible before the policy pays. 

The premiums for such plans are considerably less, and the savings is generally used to fund an HSA, which can be used to pay the out-of-pocket expenses.  Deposits in HSAs are generally pre-tax for employer-sponsored plans.  Employers can also make pre-tax contributions to employee HSAs.  The combination of employee and employer contributions cannot exceed the out-of-pocket maximum for the year (see above).  HSA funds can be invested like most traditional investment or retirement accounts.  The earnings grow tax deferred and remain tax free if withdrawn for allowable medical expenses.  Funds can also be used to pay for qualified long term care insurance premiums.  If funds are taken out prior to age 65, it is taxable as ordinary income and  subject to a 20% penalty (increased from 10% by the new health care reform law).   If funds are withdrawn after age 65, you must pay ordinary income tax, but no penalty will apply.  Presumably, people have lots of medical expenses after age 65, so for most people, it will not be difficult to use accumulated HSA assets in a manner that allows tax free withdrawal many years after the initial deposits are made.  Unfortunately, an ambiguous provision in the new health reform bill threatens the very existence of these plans.  As of January 1, 2011, insurers will be required to maintain an 80% medical loss ratio for policies meaning 80% of the premium must be spent on actual medical claims, not administrative costs or profit.  If “premium” is considered to be just the premium on the high-deductible insurance policy, most such plans would fail the test since most of the medical claims are paid from the HSA and not the policy.  However, if money from HSAs is considered, most such plans would meet the ratio test.  The way the bill was written, this decision rests entirely on the HHS Secretary, Kathleen Sebelius.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

Each participate will recieve a Free Audio CD on Homebuying 101, Credit Scoring Handbook, Homebuying Handbook, and an opputunity to meet with a mortgage planner to be pre-approved to buy a home at the seminar.You will also learn importance of credit in buying a home and learn valueable tips on how to improve your credit score. Learn what programs are available to help with down payment and closing costs. The new loan limits for conventional and FHA will be covered as well as changes to borrowing 100% financing.

The Seminar is being held at The Seminar is being held at The Christiana Hilton Hotel at 100 Continental Drive, Newark, DE 19713 from 10:00 AM till 12:00 PM and a second session from 1:00 PM till 3:00 PM. To register for the seminar, please call 302-588-3665 and ask for John Thomas. You can also e-mail me at jthomas@primeres.com.

For a Complete list of seminars visit Free Delaware Real Estate Seminars.

APPLY ONLINE today to be pre-approved for a mortgag to buy your first home in Delaware.

John R. Thomas – Certified Mortgage Planner – FHA, VA & USDA Specialist

Primary Residential Mortgage, Inc. 302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com

All of those points are favorable to long-term securities such as mortgage-related bonds. This is particularly true of the inflation comments because inflation erodes the value of a bond’s future fixed interest payments, making them less attractive to investors.

The stock markets have moved lower with the Dow down 134 points and the Nasdaq down 32 points. The bond market has improved from earlier levels, currently up 14/32. That is enough of a move to improve Delaware mortgage rates this afternoon by approximately .125 of a discount point. However, many lenders may opt to reflect this improvement in tomorrow’s rates rather than revising today’s pricing.  So waiting till tomorrow to check rates if probably a good bet.

Mr. Bernanke will repeat his testimony tomorrow in front of the House Financial Services committee. He is not likely to say anything that would contradict or differ much from today’s prepared statement. The question and answer portion of the proceeding could bring something of a surprise, but it is not of much concern to me.

The Labor Department will give us last week’s unemployment figures early tomorrow morning. They are expected to say that 445,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. The higher the number of claims, the better the news for bonds. But since this data tracks only a single w eek’s worth of claims, it usually has a minimal impact on Delaware mortgage rates.

The National Association of Realtors will post June’s Existing Home Sales figures late tomorrow morning. This report gives us a measurement of housing sector strength and mortgage credit demand, but as with all of this week’s data it is not considered highly important. Current forecasts are calling for a decline in sales from May’s totals. A larger than expected drop in sales would be considered good news for bonds and mortgage rates because a weak housing sector will make it difficult for the economy to recover anytime soon. However, unless this data varies greatly from forecasts it probably will not cause much of a change in Delaware mortgage rates.

June’s Leading Economic Indicators (LEI) at 10:00 AM will also be posted late tomorrow. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is conside red to be of moderate importance to the bond market. It is expected to show a 0.4% decrease, meaning that we may see noticeable pullback in economic activity over the next few months. A larger decline in the index would be good news for the bond and mortgage markets.

If I were considering financing/refinancing a Delaware home, I would…. Float if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com

John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

42 Reads Way, New Castle, DE 19720

www.PRMIDelaware.com