What’s Ahead For Mortgage Rates This Week : January 30, 2012

January 30th, 2012 by Michael Metz

Net New Jobs, 2010-2011Mort­gage mar­kets improved last week as news from the Fed­eral Reserve, the U.S. econ­omy, and Europe com­bined to spur new demand for mortgage-backed bonds.

Con­form­ing mort­gage rates ral­lied from Wednes­day through Friday’s close, end­ing the week near all-time lows set ear­lier this year.

Last week’s rally was sparked by the Fed­eral Open Mar­ket Committee.

After its first meet­ing of the year, Chair­man Ben Bernanke & Co. changed its pro­jec­tion for “excep­tion­ally low rates” to at least late-2014. Pre­vi­ously, the Fed had said its bench­mark Fed Funds Rate would remain low until 2013.

This, in con­junc­tion with the Fed’s mes­sage that fur­ther eco­nomic stim­u­lus may be com­ing, led Wall Street investors to increase their bets on mort­gage bonds, push­ing up prices and push­ing down yields.

Lower yields means lower rates.

Mort­gage rates were also helped lower by mixed data on the U.S. econ­omy includ­ing weaker-than-expected hous­ing reports, and another set­back in the Greece sov­er­eign debt negotiations.

Each time that Euro­zone lead­ers have failed to reach an expected accord with Greece since 2010, mort­gage rates have dropped. Last week was no different.

This week, with a large amount of U.S. eco­nomic data due for release and a high-profile sum­mit among Euro­pean Union lead­ers, mort­gage rates are poised to move. Unfor­tu­nately, we can’t know in which direction.

Some of the news that will move mar­kets include :

  • Mon­day : Per­sonal Con­sump­tion Expenditures
  • Tues­day : Con­sumer Con­fi­dence; Case-Shiller Index
  • Wednes­day : Con­struc­tion Spending
  • Thurs­day : Weekly Job­less Claims
  • Fri­day : Non-Farm Payrolls;Factory Orders

Of all of the eco­nomic releases, Friday’s Non-Farm Pay­rolls has the most poten­tial to move mar­kets. More com­monly called “the jobs report”, Non-Farm Pay­rolls details the monthly change in national employ­ment and the national Unem­ploy­ment Rate. 

Jobs are believed to be the key to U.S. eco­nomic recov­ery so strength in jobs should result in higher mort­gage rates through­out and the country.

Mort­gage rates remain very low. If you’re ner­vous about mort­gage rates ris­ing this week or next, it’s as good of a time as any to lock your rate with a lender, and start mov­ing toward closing.

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Pending Home Sales Index Posts Second Best Month Since April 2010

January 27th, 2012 by Michael Metz

Pending Home Sales 2011

After 3 con­sec­u­tive months of growth, the hous­ing mar­ket appears to have eased a bit in December.

Accord­ing to the National Asso­ci­a­tion of REALTORS®, December’s Pend­ing Home Sales Index slipped 4 per­cent from the month prior. The index mea­sures the num­ber of homes under con­tract to sell nation­wide, but not yet sold.

Despite falling below its bench­mark “100 value”, December’s Pend­ing Home Sales Index is the reading’s second-highest value since April 2010 — the last month of last year’s home buyer tax credit program.

In other words, the hous­ing mar­ket con­tin­ues to show signs of improve­ment, pro­pelled by low home prices and the cheap­est mort­gage rates of all-time.

Fred­die Mac’s mort­gage rate sur­vey put the 30-year fixed rate mort­gage at an aver­age of 3.96% in Decem­ber — a 75-basis point improve­ment from Decem­ber 2010. This helps to make homes more afford­able nationwide.

On a regional basis, December’s Pend­ing Home Sales Index varied :

  • North­east Region: –3.1 per­cent from Novem­ber 2011
  • Mid­west Region : +4.0 per­cent from November 2011 
  • South Region : –2.6 per­cent from November 2011
  • West Region : –11.0 per­cent from November 2011

But even regional data is only so help­ful. Like every­thing in real estate, data must be local to be relevant.

Through­out the West Region, for exam­ple, the U.S. region in which pend­ing home sales fell the most, sev­eral states must have per­formed bet­ter than the regional aver­age. And, undoubt­edly, there were cities, towns, and neigh­bor­hoods that expe­ri­enced marked mar­ket growth.

Unfor­tu­nately, the Pend­ing Home Sales Index can’t cap­ture that data. Nor can it iden­tify the mar­kets in which home sales suffered.

For today’s home buy­ers and sell­ers, there­fore, it’s impor­tant to under­stand your local mar­ket and the dri­vers of local activ­ity. Reports like the Pend­ing Home Sales Index can paint a broad pic­ture U.S. hous­ing but for data that mat­ters to you, you’ll want to look local.

For local real estate data, talk to an expe­ri­enced real estate professional.

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A Simple Explanation Of The Federal Reserve Statement (January 25, 2012)

January 25th, 2012 by Michael Metz

Putting the FOMC statement in plain EnglishWednes­day, the Fed­eral Reserve’s Fed­eral Open Mar­ket Com­mit­tee voted to leave the Fed Funds Rate unchanged within its cur­rent tar­get range of 0.000–0.250 percent.

The Fed Funds Rate has been near zero per­cent since Decem­ber 2008.

For the third con­sec­u­tive month, the Fed Funds Rate vote was nearly unan­i­mous. Just one FOMC mem­ber dis­sented in the 9–1 vote, object­ing only to the lan­guage used in the Fed’s offi­cial statement.

In its press release, the Fed­eral Reserve noted that the the U.S. econ­omy has “expand­ing mod­er­ately” since its last meet­ing in Decem­ber 2011, adding that the growth is occur­ring despite “slow­ing in global growth” — a ref­er­ence to ongo­ing eco­nomic uncer­tainty within the Eurozone.

The Fed­eral Reserve expects mod­er­ate eco­nomic expan­sion through the next few quar­ters but is wary of “strains” from global finan­cial mar­kets, and these three threats to the U.S. economy :  

  1. The hous­ing sec­tor remains “depressed”
  2. The unem­ploy­ment rate remains “elevated”
  3. Fixed busi­ness invest­ment has “slowed”

On the pos­i­tive side, the FOMC said that house­hold spend­ing is ris­ing and infla­tion remains in-check. The group also believes that employ­ment will grad­u­ally improve nation­wide going forward.

The Fed­eral Reserve nei­ther intro­duced new eco­nomic stim­u­lus, nor dis­con­tin­ued exist­ing mar­ket programs.

Imme­di­ately fol­low­ing the FOMC’s state­ment, mort­gage mar­kets ral­lied, pres­sur­ing mort­gage rates to fall. 

Mort­gage rates remain near all-time lows and, for home­own­ers will­ing to pay points plus clos­ing costs, con­ven­tional, 30-year fixed rate mort­gages can be locked at below 4 per­cent. If you’re in the process of buy­ing or refi­nanc­ing a home , it’s a good time to lock a mort­gage rate with your lender.

The FOMC’s next sched­uled meet­ing is a one-day event slated for March 13, 2012.

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