The Federal Open Market Committee caps off a scheduled, 2-day meeting today in the nation's capital, its 8th meeting of the year.
The group adjourns at 2:15 PM ET and, as is customary, will issue a press release reviewing its monetary policy and the health of the U.S. economy.
The FOMC's post-meeting statements are brief but comprehensive. They're a window into the mind of the Federal Reserve and Wall Street picks apart every sentence for clues.
It's why FOMC meetings tend to shake up the mortgage markets -- for good and for bad.
After its September 2009 meeting, the FOMC said in its press release:
Since September, the momentum has picked up. Credit risks have reduced further, home sales are surging, and, although unemployment remains high, the Fed remains optimistic about a full economic recovery.
Today's FOMC press release will be closely watched. If the Fed alludes to strong growth with inflation in 2010, mortgage rates should rise. Reference to slower growth should help keep rates steady.
The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent -- the lowest it's been in history. However, it's what the Fed says Wednesday that will matter more than what it does.
If you're floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.
The housing market continues to steam forward.
As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.
It's the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.
A Pending Home Sale is a home under contract to sell, but not yet closed. It's the precursor to an Existing Home Sale.
Trade group data shows that nearly 80 percent of "pending" homes close within 2 months. The majority of those remaining close within months 3 and 4.
When the Pending Home Sales Index rises, it tells us that market activity has picked up. September's data confirms what we've been noticing since February -- the Buyers Market is ending.
With more homes under contract in the marketplace, homebuyers typically face one or more of the following:
1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions
Therefore, if you're buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. It should result in higher home prices, too
Indeed, we're already seeing it.
Mortgage markets improved last week after a series of hugely volatile trading sessions.
Rates carved out a wide range on the week, culminating in a late-Friday plunge that dropped rates by about 1/8 percent.
It was the first time in 5 weeks that mortgage rates fell.
Volatility like that of last week is nothing new on Wall Street; it's been a running theme in 2009. Volatility occurs when markets don't agree on what's next for the economy and, this year, there's been a lot of disagreement like that.
Data has been inconsistent. Take last week for example.
At 9:00 AM Tuesday morning, the Case-Shiller Index showed home prices rising nationwide. Because many analysts believe housing fueled the recession, strength in the sector is widely construed a positive for the economy.
Mortgage rates rose on the news.
But then, an hour later, the national consumer confidence report revealed a substantial deterioration in sentiment versus the month prior. The data forced Wall Street to do an about-face.
Housing is important to the economy, but it can't affect growth like consumer spending can. When Americans are less confident about their future income, they tend to keep their wallets closed, retarding economic growth.
Holiday Shopping Season is getting underway and the last thing businesses want to see is a suddenly reserved American shopper.
This week, the volatility should continue.
In addition to the release of key employment and housing data, the Federal Open Market Committee has a scheduled 2-day meeting. The group's Wednesday afternoon adjournment will influence mortgage rates.
The Fed is widely expected to keep the Fed Funds Rate in its target range near 0.000 percent, but it won't be what the Fed does that will matter as much as what the Fed says.
If the FOMC's press release shows optimism for the economy, mortgage rates will rise in response. Alternatively, if the Fed appears more dour, rates will fall.
Either way, consider locking your rate before the Wednesday afternoon announcement.
This is an article by Jeff Collins, in this morning's Orange County Register:
Home-data firm First American CoreLogic predicts that Orange County house prices will be up 9.5% next August from this past summer.
If accurate, the median price of an Orange County house would increase by nearly $48,000 from the $500,000 median reported by DataQuick in August and September.
Those price gains would outstrip appreciation rates for the nation’s 10 largest metro areas, First American reported. For example, Los Angeles County is forecast to see home prices rise 6.3%, the highest rate among the big 10. That’s followed by Miami-Dade County’s projected 6.1% gain.
First American projected that California’s house prices will increase 7.9% by August, while nationwide prices will go up 4.6%. First American expects U.S. home prices to hit bottom in March.
First American’s forecast is just the latest in the past five weeks. Among the others:
First American’s Home Price Index showed that Orange County house prices fell 7.9% in August, its most recent data. Prices for non-distressed homes only — which excludes bank-owned houses and short sales (where prices are below debt) — had dropped by a slightly smaller margin: 7.1%.
Here’s a sampling of what we’ve covered in recent weeks:
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Some days, newspaper headlines are a terrible place to get your real estate news.
Today is one of those days.
After the September New Home Sales report showed sales volume down from August, the mainstream media jumped on the story:
But the headlines miss the point, somewhat. Yes, home sales volume is important to housing, but it's not as important as home supply.
A deeper look at the New Home Sales data reveals an interesting comparison point:
In other words, sales outpaced supply -- a running theme this year and a positive signal for housing.
Since peaking in January 2009, the supply of newly-built homes has now dropped by 40 percent. The average sale price is up 15% over the same period.
This is why you can't get your real estate news from the headlines. You have to dig a little bit deeper to get the real story.
September's New Home Sales report was plenty strong. The housing market recovery continues.
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