February 13, 2013
Last Week in Review
Table Source: Mortgage Success Source
There was good news for the housing sector, as CoreLogic reported that home prices rose by 0.4% in December, from November, and was the tenth monthly gain. In the calendar year through December 2012, prices rose by 8.3%, the largest increase since May of 2006.
The news from the Congressional Budget Office (CBO) wasn’t as positive. The CBO said that growth in the U.S. will slow due to large government spending cuts coupled with new tax increases in 2013. The Gross Domestic Product (GDP) is expected to rise by 1.4% this year. This is clearly not enough to lower the unemployment rate, which is estimated to remain near 7.9% in 2013. The CBO went on to say that growth will likely rise in 2014, which would then lower the unemployment rate. However, this could result in inflation and rising interest rates.
The news out of Europe was overwhelmingly negative. Greece is in a depression-like state with no prospect of meeting its third bailout terms. Spain has historically high unemployment and the second highest debt load in the region. Other countries continue to struggle as well.
What does all of this mean for home loan rates? As the instability in Europe continues, the U.S. dollar and our bonds should benefit from safe haven buying. And since home loan rates are tied to mortgage bonds, as bonds benefit, home loan rates should as well. In addition, the Fed’s bond purchase program (known as Quantitative Easing) continues, so it is difficult to see bonds (and therefore home loan rates) worsen significantly without the immediate threat of inflation.
However, one thing to continue to monitor is the seesaw battle that has developed between the stock and bond markets. If stocks continue to do well, this could temper any significant improvement in bonds and home loan rates.
Home loan rates remain near historic lows, meaning now is a great time to consider a home purchase or refinance.
Forecast for the week
The beginning of the week is quiet, but look for several important reports in the second half of the week.
- Today, Retail Sales will be released and will gauge how consumer spending habits held up in January.
- Initial Jobless Claims will be reported on Thursday. Last week, claims fell by 5,000 in the latest week to 366,000, just above expectations.
- New York State Empire Manufacturing and Consumer Sentiment will be released on Friday.
As you can see in the chart below and as mentioned above, last week’s Initial Jobless Claims came in at 366,000, just above expectations. It’s also important to note that the four-week moving average, which evens out any seasonal abnormalities, fell to a five-year low of 350,500.
Chart: Initial Jobless Claims
Table Source: Mortgage Success Source
IRS Makes Claiming the Home-Office Deduction Easier
A simplified option available for 2013 tax returns requires fewer calculations and will save taxpayers time.
By Cameron Huddleston, Kiplinger.com
If you work from home, deducting costs associated with your home office on your tax return can be a money saver. But claiming this write-off has been somewhat complicated -- until now, that is.
The IRS recently announced a simplified option to make it easier for taxpayers to calculate and claim the home-office deduction. Although those who work at home won't be able to take advantage of the simplified option on their 2012 returns, it will be available for 2013 tax returns, which taxpayers will file in early 2014. The IRS estimates it will reduce the paperwork and record-keeping burden on small businesses by an estimated 1.6 million hours annually.
Currently, to claim the home-office deduction you have to fill out the 43-line Form 8829, which involves substantiating actual expenses. With the new method, you don't deduct actual expenses. Instead, you determine the amount of deductible expenses by multiplying a prescribed rate ($5) by the square footage of the area of your residence that is used for business purposes, not to exceed 300 square feet. So that means the deduction is capped at $1,500.
With the new option, you don't depreciate the portion of your home used for business, and you don't have to allocate deductions for mortgage interest, real estate taxes and casualty losses between personal and business use. You'll simply claim these expenses as itemized deductions on Schedule A. However, to claim the home-office deduction under the new option, you still must use the space regularly and exclusively for your business.
Reprinted with permission. All Contents ©2013 The Kiplinger Washington Editors. Kiplinger.com.
In the news this week (February 11 - 15, 2013)
 Table Source: Mortgage Success Source
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