Search This Blog

Friday, May 6, 2016

Mortgage Bond Market Analysis - the last of the jobs reports

It's Friday of Jobs Week which means Non-farm Payrolls.  We got the NFP data today and as has been the case for the first four months of the year, the ADP Private Payrolls Report on Wednesday was a good indicator of the NFP report today.  At 160K, the NFP were much weaker than the expected 200K.  This is helping to support bonds a bit considering the fact that wages were up 3% (as expected) month over month and they are up 2.5% YOY which is a pretty hot reading.  Add to this the fact that oil is up this morning and it's a good thing that the FNMA benchmark bond is only down 5 basis points.

Yesterday oil was also up but the benchmark bond deviated from the recent patter of selling off when oil is up by closing the day up 31 basis points, 14 points above the 1st level of resistance.  The RSI is well above the overbought threshold so there could be some profit-taking on the horizon unless other factors mitigate that desire.  Next week is light on data until Thursday and Friday.  Traders will be looking for direction from oil and the global economy at least until Thursday.  With the recent run over the last week and a half, the benchmark bond is challenging he high point set on April 11th.  Considering the recently released data points that have shown signs of inflation, I wouldn't be too keen on floating.  I'd take advantage of the great rates we have (FHA rates below 3.5%) and not be greedy.  No real trend has been established today so my expectation is that the bond will close somewhere around the current price of 102.86 - currently down 2 basis points.

Bonus Real Estate Investing Strategy:  Since I always like to add value to clients and Realtor partners whenever I can, I have provided some real estate investing strategies in my blog posts this week.  Today I will give you the final tip in this series.  Keep in mind that there is much more to what I teach than just what I have written about and to invest right requires a team of professionals which includes a CPA to help maximize the tax benefits and an estate planning attorney to set up a trust and the proper business structures like an LLC or Series LLC, depending on your state laws.  In an individual meeting, I can go over the financial part with my spreadsheet so that a client can see how leverage works and when it's the right time to sell an investment property to do a 1031 exchange and buy more property in order to maximize the return on investment.

For now, here's the final strategy.  Purchasing an investment property requires a down payment of 20%.  Or does it?  If you want to buy a move up home, you can do so with as little as 5% down (3.5% if you buy it with an FHA loan but that's not always likely and in most cases a conventional loan is better) and then keep your current home as an investment property.  We may need to get an income property appraisal on the property you keep so that you can get credit for the proper amount of rent.  The 2-in-5 home sale gain exclusion rule may also provide some benefit to people who employ this strategy as long as you've lived in the home for two of the previous five years which means you have to sell the house within three years of moving out.  Contact me to see how all of this works (702-812-1214 or 801-853-8720).  In the meantime - make it a great day and a better weekend.

No comments: