Home Price Index Rises 0.3% in March 2010
Home values rose in March, according to the Federal Home Finance Agency’s most recent Home Price Index. Values were reported higher by 0.3 percent, on average, from February.
We use the phrase “on average” because the Home Price Index is broad-reaching, national housing statistic. It ignores the dynamics of neighborhood real estate markets as well as citywide markets , too.
Instead, the Home Price Index focuses on state and regional statistics.
For example, in March 2010 as compared to February:
- Values in the East South Central region rose 2.5%
- Values in the Mountain states rose 1.1%
- Values in the Middle Atlantic states fell 1.0%
Of course, none of this data is especially helpful for today’s home buyers and sellers.
Real estate is a local phenomenon that can’t be summarized by state or region. What matters most to buyers and sellers is the economics of a neighborhood and that level of granularity can’t be served up by a national housing report like the Home Price Index.
The Home Price Index data is additionally unhelpful to buyers and sellers in that it reports on a 2-month delay.
In other words, Home Price Index is not even a fair reflection of today’s market — it highlights the real estate market as it existed 60 days ago.
So why is the Home Price Index even published? Because government, business and banks rely on the reports. As a national indicator, the Home Price Index helps governments make policy, businesses make decisions, and banks make guidelines. This, in turn, trickles down to Main Street where it impacts every one of us — and eventually influences real estate.
Since peaking in April 2007, the Home Price Index is off 13.44 percent.
What’s Ahead For Mortgage Rates This Week : May 24, 2010
Another week, same old story.
Mortgage markets improved again last week on worsening news out of Greece and the Eurozone. Then, as contagion mentality set in, U.S. mortgage bonds gained and mortgage rates fell.
It’s the 4th straight week in which conforming mortgage rates improved and, against the expectations of experts everywhere, it’s now late-May and mortgage rates are as low as they’ve been all year.
If you’re a homeowner and haven’t looked at refinancing lately, it may be a good time to call your loan officer to hear your options. Especially because low rates can’t last forever.
The European market concerns are likely overblown and the U.S. economy continues to expand at a measured pace.
This week, housing and inflation data takes center stage.
- Monday : Existing Home Sales data
- Tuesday : Case-Shiller Index; Home Price Index
- Wednesday : New Home Sales data
- Thursday : GDP
- Friday : Personal Consumption Expenditures
Each of these data points has the power to move mortgage rates — especially because trading volume is expected to thin as the 3-day weekend nears. As volume drops on Wall Street, it will be harder to match buyers and sellers and, as a result, mortgage pricing will get (more) erratic.
Rates should be most stable at the start of the week. It may be the best time to lock a rate.
The Fed’s April Minutes Push Mortgage Rates Even Lower
After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.
It’s good news for home buyers and would-be refinancers. Mortgage rates continue to troll along multi-year lows.
“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.
The Fed meets 8 times annually.
Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors. Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.
The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.
And the extra words matter.
Here’s some of what the Fed discussed last month:
- On Greece : A crisis in Greece could slow U.S. domestic growth
- On housing : Despite government support, growth appears to have stalled
- On its mortgage buyback program : There’s little reason to sell mortgage bonds right now
When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.
Mortgage rates move opposite mortgage bond prices.
Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder. April’s meeting was no different.
For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing. Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.
Your Mortgage Approval Isn’t Final Until It’s Funded
A mortgage approval is never final until it’s funded.
A host of things can “go wrong” while your home loan is underway. Some are in your control, many more are not. And just being aware of some potential pitfalls could help save your loan down the road, and your peace of mind today.
MSN Money ran a summary piece on the topic titled “10 Things That Can Kill A Home Loan“.
It’s an excellent article because, unlike most “get approved” articles that advise against things like buying a car before closing, or opening a bunch of new credit cards, the MSN Money piece addresses more uncommon factors that can lead to a similar loan turndown.
For example, a home may be unfundable if it’s unsuitable for human habitation — a condition you may not discover until after a thorough home inspection’s been made. Broken windows, lack of plumbing, and/or major foundation damage are all deal-breakers with a lender.
Either fix the home prior to closing, or don’t close at all.
Homes in “declining markets” have danger spots, too. Especially for conforming mortgage applicants with less than 20% equity.
Because of how private mortgage insurers operate, some homes carry tougher, ZIP code-based PMI eligibility requirements. As a mortgage applicant, it’s important to understand this because you may be PMI-eligible in one neighborhood, but not in another.
There’s others ways in which a mortgage approval can go bad, too:
- You’re self-employed and your income was lower last year versus the year prior
- Your tax return shows large amounts of unreimbursed employee expenses
- You failed to return required paperwork to the lender within a reasonable time frame
Mortgage approvals are delicate and, despite an improving economy, lenders still operate with caution. Talk with your real estate agent and your loan officer and put together a game plan.
The best way to beat the mortgage system is to know the rules before you start to play.
Relocate America’s Top 100 Places To Live (2010 Edition)
Relocate America recently released its 2010 list of Top 100 Places To Live In America. The rankings are topped by some cities you may expect, and some you may not.
According to Relocate America, the rankings highlight communities “moving in the right direction”, defined as having a combination of strong leadership, job opportunities, improving real estate markets, recreational options and a good quality of life.
It’s not a bad formula and topping the list of Top 100 Places To Live In America is Huntsville, Alabama. Huntsville was chosen for its low levels of unemployment, stable housing stock, and low cost of living. Last year, Huntsville placed fifth on the Relocate America list.
The Top 10 cities in which to live, as selected by Relocate America are:
- Huntsville, AL
- Washington, DC
- Austin, TX
- San Diego, CA
- San Antonio, TX
- Tulsa, OK
- Charlotte, NC
- Raleigh, NC
- Boulder, CO
- Minneapolis, MN
View the complete Top 100 Places To Live In America 2010 list at the Relocate America website.
Shopping For Mortgage Rates Is Part Research Skills, Part Luck
Shopping multiple lenders for a “good mortgage rate” can sometimes save you 1/8 percent on your rate and/or a few hundred dollars in fees. However, when it comes to getting the best mortgage rate, you’re going to more than good research skills.
You’re going to need some luck.
Mortgage rates are unpredictable, ever-changing, and rarely change as expected.
For example, when the Federal Reserve left the mortgage market March 31, 2010, analysts said that mortgage rates would rise by a half-percent or more. It was practically stated as fact on TV. When April 1 came around, though, rates didn’t rise.
Instead, a volcano erupted and mortgage rates dropped on safe haven buying.
Then, a week later, as the volcano ash cleared, mortgage rates were supposed to resume their rise. Only they didn’t. Instead, a debt crisis emerged in the Eurozone and mortgage rates dropped.
Since March 31, conforming mortgage rates are lower by roughly 0.125 percent, according to Freddie Mac’s weekly mortgage rate survey. At today’s rates, the savings are roughly $20 per month per $200,000 borrowed — or $100 per month based on their original, post-March 31 forecast.
It brings us to one of the most important axioms in rate shopping: You can’t shop for good luck.
- On some days, rates go higher
- On some days, rates go lower
- On some days, rates stay the same
Occasionally, there are days when rates do all three.
As a home buyer or would-be refinancer, what rate you get depends on at what time of day you do your shopping.
You can’t predict what will happen next in mortgage markets — even just an hour from now. Therefore, the smartest move, sometimes, is just lock your rate now. At least that way, you’ve got a guarantee.
What’s Ahead For Mortgage Rates This Week : May 10, 2010
Mortgage markets improved to their best levels of 2010 last week, aided by events half a world away and ongoing safe haven buying. Greece’s debt problems continue to help mortgage rate shoppers around the country.
Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.
Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.
The Department of Labor’s April Non-Farm Payrolls reports:
- Payrolls have been net positive for 4 straight months
- Nearly 600,000 jobs have been created thus far in 2010
- Monthly job growth posted its biggest gain in 4 years in April
Additionally, more than 800,000 Americans re-entered the workforce in April in search of work. As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).
But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.
This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone. If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.
Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.
Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent. Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece. Maybe this will be the news that finally turns the mortgage market around.
Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.
Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.
What’s Ahead For Mortgage Rates This Week : May 3, 2010
Mortgage markets improved last week on tame inflation data, a benign statement from the Federal Reserve, and ongoing credit problems in Greece.
The factors combined to drop conforming mortgage rates to their lowest levels in 6 weeks.
It’s an unexpected development considering that mortgage rates were supposed to rise post March 31, 2010. That was the day the Fed’s support for mortgage markets ended.
Since then, however, a month-long string of devastating economic and meteorological events within the Eurozone sparked a global flight-to-quality that benefited “safe” assets such as mortgage bonds.
May 2010 may not be so kind.
The week starts with news that Greece reached a $147 billion bailout agreement with the IMF Sunday. This is a plus for the Eurozone and mortgage market negative. Rates should rise on the bailout.
Also on Monday, the government releases Personal Consumptions and Expenditures data.
PCE is the Fed’s preferred inflation gauge and it’s expected to show an annual read of 1.3 percent. Anything higher and rates should rise.
Then, for the rest of the week, employment data takes center stage.
- Wednesday : ADP releases its private sector employment data
- Thursday : The government releases initial jobless claims
- Friday : The government releases April’s job report
Jobs are key to the U.S. economic recovery, tied to consumer spending, consumer confidence, and mortgage delinquencies. If job growth is better than expected, mortgage rates should rise. If job growth is worse, rates should fall.
There’s no “best day” to lock this week so keep an eye on the market. However, if rates rise as quickly in May as they fell in April, you won’t have much time to act.
The Headlines Were Overly Rosy On February’s Case-Shiller Index
Earlier this week, Standard & Poors released its February Case-Shiller Index, a home price tracker for select metropolitan areas.
Overwhelmingly, home values fell in the 20 markets tracked by the Case-Shiller. Only San Diego showed a modest increase. The other 19 markets averaged a 1.23 percent decline between January and February.
However, that’s not the story you read in the most papers. Instead, headlines read that home values were up in the United States, citing annualized data.
Unfortunately for active home buyers and sellers, year-over-year data isn’t all that helpful when making a real estate decisions. It’s the month-to-month data that matters. Month-to-month changes in home prices are what defines a housing market. Month-to-month is what sets the tone for contracts and negotiations on a purchase.
The rosier, annualized data published this past week just doesn’t capture the reality of what was the February 2010 market. And even then, the data is somewhat useless because it’s from February and May will be upon us next week.
Case-Shiller is on a 2-month lag — hardly reflective of the “right now” of real estate.
When you’re looking for real estate data that actionable, consider using sources that are more “real-time”. A real estate agent may be the right place to start. Because for all the data that Case-Shiller and the other housing indices collect, it can never be as relevant to your individual needs as a well-executed, timely market analysis.
A Simple Explanation Of The Federal Reserve Statement (April 28, 2010 Edition)
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.
In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”. This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.
It also reiterated that business spending “has risen significantly”.
Today’s statement marks the 7th straight press release in which the Fed shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.
Threats remain to growth, however. The Fed fingered a few:
- Employers are reluctant to hire new workers
- High unemployment threatens consumer spending
- Consumer credit (still) remains tight
Also in its statement, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”. This was expected.
Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.
Mortgage market reaction has been muted thus far. Mortgage rates are unchanged post-FOMC.
The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010. The 55-day span between meetings will be the FOMC’s longest of 2010.