Maple Grove, MN

The housing market got another dose of good news yesterday. 

According to the National Association of REALTORS, the number of homes sold in May increased for the third straight month and the national housing supply fell by 5 months.

Furthermore, first-time home buyers are accounting for nearly one-third of the market activity.

But, before we declare a bottom in housing, it's important that we remember the First Rule of Real Estate:

All Real Estate Is Local

National housing statistics like Existing Home Sales are painted with a very broad brush. They lump disparate locales such as San Francisco and Seattle into one sample set and don't account for regional differences, let alone neighborhood ones.

Furthermore, getting down to a city-by-city, or even street-by-street basis, we can always find homes that are selling quickly and home that are languishing.  Real estate is highly local and subject to countless influences.

That said, the national data isn't completely useless.  From the patterns, we can infer that low mortgage rates, ample home supply and available tax credits are providing a quantifiable boost to the broader real estate market. 

And based on recent pending sales data, we can expect June and July's Existing Home Sales figures to be similarly strong to May.

Therefore, if you're in the market for a new home right now -- or plan to be soon -- be conscious of home inventory levels in your target neighborhoods.  Fewer homes on the market usually means less ability for buyers to negotiate and that leads to higher sales prices. 

Plus, the NAR is reporting buyer activity up 10 percent from last year.

The housing market may not be fully recovered in every housing market just yet, but in studying the data, a lot of the pieces appear to be falling into place.

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The Federal Reserve begins its scheduled two-day meeting this morning.

It's one of 8 scheduled meetings for the Federal Open Market Committee this year.

When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.

The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to "near-zero" percent in an attempt to stimulate growth.

But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.

Now, if you'll remember, the Fed made that pledge in two parts:

• Part 1 came in November 2008 for $500 billion.
  
• Part 2 came in March 2008 for $750 billion.
  

After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two.  Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.

The Fed isn't expected to increase its mortgage market commitment this week, but because mortgage rates are above the government's "target zone", it's possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.

A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says. 

It's for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky.  The Fed could say nothing about mortgages, or it could say a lot.  Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person's pending home loan.

The Fed's press release hits the wires at 2:15 PM ET Wednesday.  If you're the cautious type, consider locking your mortgage rate prior to its release.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

Mortgage markets finished out the week unchanged last week but that's not to say that mortgage rates stayed flat. 

From day-to-day, mortgage rate shoppers were on a veritable roller coaster.

• Monday and Tuesday, rates dipped
  
• Wednesday and Thursday, rates surged
• Friday, rates retreated

Overall, conforming mortgage rates carved out a half-percent range this week.  This caused fit for home buyers in need of a rate lock, and homeowners interested in refinancing.

Rates changed quite a bit from day-to-day, and even from hour-to-hour at times.

This is the same brand of mortgage rate volatility we've seen all year and it's expected to continue through at least this week, too.  There are a number of market-moving events set to hit.

The event with the largest potential impact is the Federal Open Market Committee's two-day meeting. 

Scheduled for Tuesday and Wednesday, the Bernanke-led Fed is not expected to raise the Fed Funds Rate upon its adjournment but the markets are more interested in what the Fed says than what it actually does.

If the Federal Reserve says that long-term inflation is a concern, mortgage rates should rise because inflation often leads rates higher.  Similarly, if the Fed says the economy is recovering quicker than expected, mortgage rates should rise on that story.

The Fed adjourns at 2:15 PM Wednesday so watch for big market swings around that time.

In addition, there's some big data points due out this week including the Existing Home Sales and New Home Sales reports, plus the Personal Spending and Consumer Sentiment survey. 

Each of these reveals the psychology of the U.S. consumer and consumers with dollars to spend move the economy forward.  If the reports are overwhelmingly positive, mortgage rates should rise as a result.  On the other hand, if the data is weak or non-convincing, mortgage rates should ease.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

Mortgage rates are suffering through another volatile week, causing problems for rate shoppers and home buyers.

After falling Monday and Tuesday, mortgage rates surged Wednesday and Thursday.  The momentum higher appears to be carrying into the weekend, too.

There are several data-related reasons for the mortgage market's spastic activity this week:

1. Unemployment claims fell
2. Leading Economic Indicators rose
3. Inflation readings are tame

But while each of the data points above fueled mortgage rate volatility, it's not the data that's making markets move the most.  It's the psychological impact of the data.

See, data tells us about the past.  It measures and reports on what's already happened.  Unfortunately for rate shoppers, mortgage markets are not made on data from the past -- they're made on the expectations of what will happen next. 

Mortgage rates reflect Wall Street's opinion of the future.

In reading the papers and watching the news, you'll notice ongoing debate about the U.S. economy.  It's unclear whether the recession is worsening or improving. 

On one hand, data is weak and sub-optimal.  On the other hand, the data is not nearly as weak as it was 6 months ago and, in some cases, it's strong. To some, this is a signal that a recovery is already underway.

Or, it may just be a blip.

We can't be certain in which direction the economy is headed and the same can be said for mortgage rates.  Because sentiment is changing so often, though, it forces us to be on our toes. 

The last few months have been marked by large mortgage rate swings across small windows of time.  A rate that's offered in the morning, for example, is rarely available in the afternoon.  Therefore, do your rate shopping in a compressed period of time and be ready to lock your rate at a moment's notice.

When markets move, they tend to move quickly.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/

Moving to a new metropolitan area requires adjustments.  There's new streets to learn, new weather patterns to get used to, and new social cultures to assimilate.

There's also new costs.

Just like home values vary by area, so does the Cost of Living.  To visit a doctor in Chicago, as an example, costs a person more than to visit a similar-type doctor in Des Moines. 

Cost of Living adjustments can't be ignored between two cities because it changes a household's budget.

And while it's a challenge to know exactly how far your dollar can stretch in a new town, Bankrate.com hosts a helpful Cost of Living Comparison Calculator to make the math a little easier.  With categories such as dry cleaning, groceries and beauty salon, the calculator goes extra deep into the typical costs to a household, and can help families to make more realistic budgets.

The calculator also shows the equivalent household income between any two metropolitan areas.

website: http://www.homeloansmidwest.com/

youtube channel: http://www.youtube.com/midwesthomeloans

blog: http://www.homeloansmidwestblog.com/