The Federal Open Market Committee begins a 2-day meeting today in Washington D.C. It's the group's first meeting of 2011 - one of 8 scheduled for the year.
The Fed meets every 45 days, on average. Its last meeting was December 14, 2010.
Rate shoppers and home buyers should make a note. Mortgage rates and home affordability could change dramatically beginning tomorrow afternoon.
Because Wall Street watches FOMC meetings closely, so should you. The meetings provide insight on the future of U.S. monetary policy, as told by the nation's central banker. Investors make trades based on the FOMC's commentary which is one reason why mortgage rates tend to undulate through the hours leading up to the FOMC's adjournment, and the days immediately after.
Wall Street is shifting old bets, and placing new ones.
A terrific example of this is what happened after the Fed's November 3, 2010 meeting.
In its post-meeting press release, the Federal Reserve announced a new, $600 billion, market-bolstering plan dubbed "QE2″. Wall Street had widely expected the Fed to create the program, but had underestimated its size.
Starting a $600 billion program sparked fears of a Fed-led inflation run, which, in turn, caused mortgage markets to deteriorate in a hurry. In the 3 days following the program's announcement, mortgage rates spiked to multi-month highs and have not since recovered.
QE2 marked the beginning of the end of the Refi Boom and low rates. Today, conforming rates in Minnesota are relatively low as compared to higher, but are much higher than they were prior to the FOMC's November 2010 meeting.
Then, December's FOMC meeting did little to change the direction of rates. We shouldn't expect that January's will, either. After the FOMC's 2:15 PM ET adjournment Wednesday, mortgage rates should resume climbing, as they have done for the past 10 weeks.
If you're shopping for a mortgage rate, therefore, the prudent move is to lock prior to Wednesday's FOMC adjournment because, after once the Fed's outlook is released, it will be too late.
website: http://www.homeloansmidwest.com/
youtube channel: http://www.youtube.com/midwesthomeloans
Mortgage markets worsened last week in a holiday-shortened trading week.
As the body of U.S. economic data continues to show slow, steady improvement, Wall Street is becoming a net-seller of mortgage-backed bonds. As a result, conforming mortgages rates in Minnesota are rising.
This is why conforming and FHA mortgage rates rose last week in Minnesota. Existing home supplies plunged to a 2-year low in December, and unemployment claims dropped more than expected, giving hope for the U.S. economy in 2011.
This week, that trend may continue. There's a lot of news set for release.
The biggest story of the week is Federal Open Market Committee's 2-day meeting. Scheduled for Tuesday and Wednesday, the FOMC's meeting is the first of its 8 scheduled meetings this year.
In it, the FOMC is expected to vote the Fed Funds Rate unchanged in its target range near 0.000 percent, but it won't be what the Fed does that's so important to mortgage markets - it will be what the Fed says. Wall Street will be watching the FOMC's post-meeting press release for clues about the economy, and the central banker's next steps. From what it reads, Wall Street will react.
This week is also heavy on housing data.
Following up on last week's Existing Home Sales and Housing Starts figures, this week features 4 additional releases:
Strength in housing should lead mortgage rates higher as it becomes more clear that the sector is on solid ground.
Since November 3, mortgage rates have been trending higher in Plymouth and across the country. The Refi Boom is over, but low rates remain - for now. If you've yet to lock a mortgage rate, consider doing it soon.
Before long, rates won't be so low.
website: http://www.homeloansmidwest.com/
youtube channel: http://www.youtube.com/midwesthomeloans
Existing Home Sales surged 12 percent last month, closing 2010′s housing market with strength. An "existing home" is a home that cannot be categorized as new construction; a resale.
According to the National Association of REALTORS®, seasonally-adjusted, annualized Existing Home Sales figures climbed by more than a half-million units in December as compared to November. It's the 3rd straight month of home resale improvement nationwide.
Sales volume is now as high as it's been since May 2010 - just after the federal home buyer tax credit's expiration.
In addition, the number of months needed to sell the complete, current home inventory at the current pace of sales fell by 1.4 months, tying December for the biggest one-month home supply improvement in 2 years.
It's yet another signal that the housing market is in recovery. Not that this data should surprise anyone. November's Pending Home Sales report told us to expect it two weeks ago.
Broken down by buyer-type, home sales split as follows:
Cash buyers represented 29 percent of all transaction, down 2 ticks from November. This may suggest that mortgage guidelines are loosening - another sign of economic improvement.
So, take note, Plymouth home buyers. This spring, along with mortgage rates, home values should rise, too. Expect less "bang for your buck" as the housing recovery takes hold across the nation.
The best deals of the year may be the ones made this month.
website: http://www.homeloansmidwest.com/
youtube channel: http://www.youtube.com/midwesthomeloans
Each month, in conjunction with the Department of Housing and Urban Development, the Census Bureau releases its New Residential Construction report. The report is comprised of several sections, one of which counts the number of homes that have "broken ground" in Wisconsin and nationwide.
They're called "Housing Starts" and, by most measures, they faded quickly as 2010 came to a close.
According to the Census Bureau's report, Housing Starts of single-family homes fell to 417,000 units on a seasonally-adjusted, annual basis. The figure marks a 9 percent drop-off from November, and is the lowest reading since May 2009.
Not surprisingly, the press went bearish on housing post-release:
Despite being truthful, these headlines are somewhat misleading. They each ignore a key element of December's New Residential Construction report - Building Permits. Building Permits rose 6 percent to an 8-month high last month.
A building permit is a local-government certification that authorizes home construction.
Permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. More permits in December, therefore, should lead to more Housing Starts in January and February.
It's unclear whether permits were up because the economy was improving, or because builders raced to beat new building code for 2011. Regardless, expect additional "new home" supplies this spring which would ordinarily help home prices drop if not for the normal surge in spring buyers to gobble those new homes up.
Look for home prices to stay flat, but with rising mortgage rates contributing to higher costs of homeownership overall.
website: http://www.homeloansmidwest.com/
youtube channel: http://www.youtube.com/midwesthomeloans
Fire & Ice
Family Event
Date: 2/5/2011 2:00 PM - 7:00 PM
Cost: Free
Location: Parkers Lake Park
Co Rd 6 & Niagara Ln
Plymouth, Minnesota 55447
Fire & Ice: 22nd Annual Winter Celebration
Activies for all ages (times of activities will vary):
Hayrides, horse rides and sled dog rides, recycle bin races, miniature golf on the ice, snow bowling, youth ice fishing contest, recreational skating, goofy hat contest, food vendors and fireworks at 6:30 p.m.
website: http://www.homeloansmidwest.com/
youtube channel: http://www.youtube.com/midwesthomeloans
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