Year End Tax Tips for 2012

What do you need to know about your taxes before December 31st?  There are a number of tax changes happening in 2013, and you should know when you want certain income to be taxed.  Finding a good tax professional will be more expensive right now since it’s the holidays and it would be a rush job, but it may save you quite a bit come April 15th.

Ok, so what can you do personally?

From Year End Tax Tips on about.com:

There are basic year-end tax planning techniques that can be utilized to successfully manage income taxes. Year-end tax planning techniques include:

• Accelerating or deferring income.
• Accelerating or deferring expenses that can be used for tax deduction or tax credits.
• Taking advantage of any tax provisions that are scheduled to expire at the end of 2012.

All of these strategies have one factor in common: the timing of income and expenses. Accelerating means earning additional income or incurring additional tax-deductible expenses in 2012 rather than in 2013. Deferring means pushing additional income or additional deductions to 2013 rather than 2012. To the extent that income and expenses can be moved from one year to the next, these tactics can be utilized to optimize a person’s tax liabilities between the years 2012 and 2013. Year-end planning is about finding the right year in which to earn additional income or to spend money on more tax deductions. For the most part, income earned in 2012 is taxed in 2012, and deductions incurred in 2012 are deductible in 2012.

And here are tips for Year End Tax Planning for Investors on about.com:

• Check Your Default Cost Basis Reporting Settings in Your Brokerage Account
• Consider Re-Balancing Your Portfolio By Tax Type
• Selling off Losing Investments
• Sell off Winning Investments
• Pairing Losses with Gains
• Deferring Losses until Next Year
• Deferring Gains until Next Year
• Tax Planning with Capital Loss Carryovers

Additional Resources:

1. IRS Tax Tips
2. Kiplinger Slideshow of Recommendations
3. 8 Tax Tips from TurboTax
4. H & R Block End of Year Tax Tips

Do some planning and see how you can save yourself some money come April 15.

Do you wait until the last minute or do you start planning your taxes right away?

Weekly Mortgage Commentary_December 17, 2012

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This week brings us the release of seven monthly or quarterly economic reports in addition to two semi-relevant Treasury auctions. None of the releases are considered to be highly important to the markets and mortgage rates, but several of them do have the potential to cause some movement in rates. The more important news comes later in the week. Therefore, we may see more movement in mortgage pricing as the week progresses.

There is nothing of economic relevance scheduled for release Monday or Tuesday. However, this week does have Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates Tuesday and/or Wednesday afternoon.

Wednesday’s only data is November’s Housing Starts, but it is the week’s least important data. I don’t see it causing much movement in mortgage rates unless it shows a huge variance from expectations. It is expected to show a decline in construction starts of new homes, hinting at a weakening housing sector last month. Generally speaking, an increase in new starts would be bad news for bonds and mortgage pricing, but unless there is a significant surprise it will likely have little impact on Wednesday’s mortgage rates.

Thursday brings us the release of three reports, with the first being the final revision to the 3rd Quarter Gross Domestic Product (GDP). I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 2.7% annual pace during the quarter and this month’s final revision is expected to show no change from that level. A revision higher than the 2.7% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, I don’t think it will have much of an impact on mortgage rates Thursday.

The second report of the day comes at 10:00 AM ET when November’s Existing Home Sales figures will be posted. This release will come from the National Association of Realtors, giving us a measurement of housing sector strength and mortgage credit demand. It is expected to show an increase in sales, indicating housing sector growth. A decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes a broader economic recovery more difficult. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.

The Conference Board will release their Leading Economic Indicators (LEI) for the month of November late Thursday morning also. This release attempts to measure or predict economic activity over the next three to six months. It is expected to show a small decline, meaning that it predicts slowing economic growth over the next several months. This probably will not have much influence on bond prices or affect mortgage rates unless it shows a much stronger reading than the 0.2% decrease that is forecasted. The weaker the reading, the better the news for bonds and mortgage pricing.

The final three economic reports of the week come Friday morning and they are the more important ones scheduled. The first is November’s Personal Income and Outlays data at 8:30 AM ET. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up over two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.3% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Friday morning.

November’s Durable Goods Orders is the second report, also being posted early Friday morning. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years. Analysts are expecting the report to show a 0.2% rise in new orders. A decline in new orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a larger jump in orders could lead to mortgage rates moving higher early Friday morning. This data is known to be quite volatile from month-to-month though, so it is not unusual to see large headline numbers on this report.

The last economic report will be released just before 10:00 AM ET when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small downward revision from the preliminary reading of 74.5. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. A reading above the 74.0 that is forecasted would be negative for bonds and mortgage rates.

Overall, I am expecting to see little movement in the markets and mortgage rates the first couple days. As the week progresses and we get to the economic releases, we should see more activity in the markets and changes to mortgage pricing. The least important day for mortgage rates will likely be Monday unless something drastic happens overnight. We will probably see the most movement in rates Friday, but Thursday’s economic data can also move mortgage pricing noticeably. The Fiscal Cliff issue will also be a topic of discussion and trading in the markets as we get closer to the deadline. Therefore, please maintain contact with your mortgage professional if still floating an interest rate, especially the latter part of the week.

Weekly Mortgage Commentary_November 19, 2012

This holiday-shortened week brings us the release of four relevant economic reports for the markets to digest. All of the week’s data is being posted over three days due to the Thanksgiving holiday, so the first part of the week should be the most interesting for mortgage shoppers.

October’s Existing Home Sales data will be posted by the National Association of Realtors late Monday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales. This report is expected to show a small decline in sales, meaning the housing sector weakened slightly last month. That would be good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on Monday’s mortgage rates.

Tuesday’s only relevant data is October’s Housing Starts. This report gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes, meaning the new home portion of the housing sector softened last month.

Also Tuesday is a public speaking engagement by Fed Chairman Bernanke. He will be speaking at a function in New York at 12:15 PM ET, which will be followed by Q&A. This speech isn’t of much importance to the markets. However, anytime he speaks his words have the potential to influence the financial and mortgage markets. Therefore, we will be watching it, but with little concern.

The revised November reading to the University of Michigan’s Index of Consumer Sentiment will be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future, fueling economic activity. Analysts are expecting to see a small downward revision to the preliminary reading of 84.9. Unless we see a significant variance from the forecasted 84.5, I don’t think this data will cause much movement in mortgage rates Wednesday.

The final report of the week will come from the Conference Board at 10:00 AM ET Wednesday when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.2% increase, meaning economic activity will likely rise modestly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.

The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.

Overall, I believe that we will see more volatility in the markets and mortgage rates the first couple days of the week. The most important day will probably be Wednesday, while the least important will be Friday. Also worth noting are rising tensions and activities overseas that could affect the global markets and carry into ours. As we have seen recently, those crisis and the markets can get pretty active at any time, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet.

Weekly Mortgage Commentary_November 12, 2012

This holiday-shortened week brings us the release of four monthly economic reports for the markets to digest along with the minutes from the last FOMC meeting. With very important data scheduled for release two different days and relevant data three of the four trading days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week. The bond market will be closed Monday in observance of the Veteran’s Day holiday, but the stock markets will be open for business. While we may see some lenders open for business, many likely will not issue new rates or lock agreements until Tuesday morning when the bond market reopens. Because the bond market is closed Monday, there will be no update to this report.

There is nothing of relevance scheduled for release Tuesday, leaving the bond market to movement in stocks and overseas news. But Wednesday makes up for it with three events scheduled that we need to watch, including two of the week’s more important economic reports. The Commerce Department will give us October’s Retail Sales figures early Wednesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up over two-thirds of the U.S. economy. It is expected to show a 0.2% decline in retail-level spending, meaning consumers spent less last month than they did in September. An increase in spending would be considered negative news for bonds because increases in spending fuels an economic recovery and raises inflation concerns in the bond market. If Wednesday’s report reveals a larger than expected decline in spending that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows an unexpected increase, mortgage rates will likely move higher.

The second report of the morning Wednesday is the release of October’s Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see no change in the overall reading and a 0.1% increase in the core data.

Also worth noting is the release of the minutes from the last FOMC meeting Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising, we may see some movement in rates Wednesday afternoon, but it is more likely there will be little reaction.

Thursday’s only monthly report is October’s Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Wednesday’s PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider the CPI one of the most important reports the bond market gets each month. The overall reading is expected to show a 0.1% increase from September’s level while the core data is also expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Thursday morning.

The week closes with only a moderately important release Friday morning. October’s Industrial Production data will be posted mid-morning Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.1% increase in production, indicating little strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the most of the week’s other reports are. Therefore, it will likely take a sizable variance from forecasts for it to have a noticeable impact on mortgage pricing.

Overall, look for Wednesday to be the most important day of the week with two very important reports scheduled and the FOMC minutes, but Thursday’s CPI is also a major release for the bond market. It is difficult to label any particular day as the quietest day, but Tuesday is a good candidate. The key releases will be Wednesday’s Retail Sales and Thursday’s CPI reports. They will probably determine whether rates close the week higher or lower than Tuesday’s opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.

Weekly Mortgage Commentary_11-5-2012

This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are also two important Treasury auctions this week that may influence mortgage rates more than the minor economic data will. I don’t foresee any significant happening with mortgage rates unless something quite unexpected happens, but we should still see minor changes to pricing several days.

Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.

The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.4 billion trade deficit.

November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 83.0, up slightly from October’s final reading of 82.6. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely. The lower the reading, the better the news for mortgage shoppers.

Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates when the markets were open for trading. This week should be much calmer as I don’t believe the economic data on tap will be a catalyst for large swings in the major indexes or bond prices. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than Monday’s opening levels.

This Week's Market Commantary_October 29

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This week has an active agenda with seven economic reports scheduled for release that have the potential to influence mortgage rates. There is at least one relevant report scheduled each day this week, making it likely to be an active one for the financial and mortgage markets.

The first release of the week will come Monday at 8:30 AM ET when September’s Personal Income and Outlays report will be posted. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.6% increase in income and a 0.4% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.

October’s Consumer Confidence Index (CCI) is Tuesday’s only news. This Conference Board index will be released at 10:00 AM ET Tuesday. It gives us a measurement of consumer willingness to spend and is expected to show a small increase in confidence from last month’s 70.3 reading. That would mean that consumers felt a little better about their own financial situations than last month, indicating they are more likely to make large purchases in the near future. As long as the reading doesn’t exceed the forecasted 72.5, we will likely see the bond market react favorably to this report. This data is watched closely because it is related to consumer spending.

The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET on Wednesday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.5%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week. Therefore, it will likely take a large variance from forecasts for this report of have a noticeable influence on mortgage pricing.

Thursday has two relevant economic reports scheduled for release. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 1.6% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.

The key data of the day and one of the two highly important reports of the week will be the Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET Thursday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Thursday’s release is expected to show a reading of 51.0, indicating that manufacturer sentiment slipped from September’s level. This means fewer surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector weakness. A smaller than expected reading would be good news for bonds and mortgage rates, especially if it falls below the benchmark 50.0.

Friday brings us the release of two pieces of economic data, one of which is arguably the single most important monthly report. The Labor Department will post October’s Employment report early Friday morning. This report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to move higher by 0.1% to 7.9%, an increase in payrolls of approximately 125,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news. On the other hand, if the report indicates employment sector strength, we could see mortgage rates spike higher Friday morning.

The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 4.5% increase in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could contribute to higher mortgage pricing since it would indicate economic strength. It is worth noting though, that the Employment report is much more important to the financial and mortgage markets than this data is.

Overall, the single most important day is likely to be Thursday or Friday. In addition to the economic reports, I believe stocks will experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than Monday morning’s levels.

This Week's Market Commentary_October 22nd

This week brings us the release of four economic reports and two relevant Treasury auctions for the bond market to digest in addition to another FOMC meeting. There is nothing of importance scheduled for release Monday or Tuesday, but we do have important events to watch every other day. The data scheduled this week ranges from low importance to extremely important so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates. In other words, there is a pretty good chance of seeing noticeable movement in mortgage rates several days this week, especially if the major stock indexes rally or post sizable losses.

Wednesday starts the week’s agenda with the release of September’s New Home Sales at 10:00 AM ET. This data covers the small percentage of home sales that last week’s Existing Home Sales report didn’t include and is this week’s least important data. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Wednesday.

This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There really is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of change in Fed sentiment or possibly further development on recent talk of them issuing certain targets in particular economic readings that would trigger an automatic increase in key short-term interest rates. This would eliminate most of the guessing in the markets of what it will take for the Fed to start raising those rates. The meeting will adjourn at 2:150 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours.

Early Thursday morning, the Commerce Department will post Durable Goods Orders for September. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a jump in new orders of approximately 7.4%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on bond trading or mortgage pricing.

The final two economic reports will be released Friday morning, one of which is not only the most important report of the week, but also the most important we see regularly. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released early Friday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Friday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 1.9% in the GDP, which would mean that the economy grew at a noticeably quicker pace than the 2nd quarter’s 1.3%. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Friday morning.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. Current forecasts show this index remaining nearly unchanged from the preliminary reading of 83.1. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watch closely.

This week also has Treasury auctions scheduled each day except Friday. The only two that have the potential to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly Thursday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.

Overall, it will likely be a fairly calm early part of the week but very active latter part for the markets and mortgage rates. I believe that the single most important day will probably end up being Friday with the extremely important GDP release in the morning, but anytime there is an FOMC meeting there is a good possibility of seeing the markets move significantly. Monday is likely to be the least important day, but we still could see some movement in rates as the markets prepare for the upcoming week. Accordingly, I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate.