Bob Phillips

As reported by the government, home prices are rising nationwide, up 0.3 percent in July.

Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged.

The housing market appears to be holding its own.

However, we have to be careful about putting our full faith in the Federal Housing Finance Agency's data. It's somewhat flawed.

1. The Home Price Index is a national statistic and all real estate is local
2. The Home Price Index's methodology specifically excludes key housing demographics

As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking.

As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past. Furthermore, the HPI sample set also excludes newly-built homes and multi-unit properties.

Because of these exclusions, some analysts call the HPI incomplete. The same could be said of all home price metrics, however -- including the venerable Case-Shiller Index.

Therefore, what should be of interest to today's buyers and sellers is that all of "popular" home valuation models seem to be telling the same story -- home prices have stopped falling and look like they're beginning to rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

According to the country's home builders, the housing market is looking good.

Each month, the National Association of Home Builders releases its Housing Market Index report, a survey geared at taking "the pulse of the single-family housing market".

Respondents report on three facets of their business, each series weighted and averaged:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the traffic of prospective buyers of new homes?

For the 3rd straight month, the Housing Market Index improved. It's now at its highest level since May 2008.

The housing market has shown signs of life since March. Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns. Builders showing confidence is another positive signal.

Fed Chairman Ben Bernanke said that the recession is "very likely over" and strong housing data corroborates that statement.

As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations. If you're an active home buyer, therefore, and looking for "a deal", be aware that time is close to running out.

The Federal Open Market Committee starts a 2-day meeting today in Washington.

The scheduled get-together ends at 2:15 PM ET Wednesday after which the FOMC will issue a press release to the markets.

Consider locking your mortgage in advance of the press release.

The FOMC meets 8 times annually and its adjournments are among the biggest market-movers of the year.

The Fed's post-meeting press release is a direct look into the mind of the Federal Reserve and Wall Street is looking for clues anywhere it can find them.

After its August 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved, relative
2. Household spending remains constrained
3. Although weak, the economy is "leveling off"

Since then, however, credit risks have lessened on Wall Street, consumer spending have shown signs of life and Fed Chairman Ben Bernanke said the recession is "very likely over".

This is why tomorrow's FOMC press release is so important. Markets don't expect the Fed to raise or lower the Fed Funds Rate, but they do expect the Fed to shed light on its next series of moves.

If the Fed alludes to inflation and stronger growth ahead, mortgage rates should rise. By contrast, reference to slower growth ahead 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 the its 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.

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said last Tuesday that the "recession is very likely over at this point".

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered.

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode. As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds -- including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year's aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low.

Since November, however, rates have been on the rise. Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you're wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it's probably going to happen.

It should spell higher mortgage rates into 2010.

As downpayment requirements increase, anecdotally, home buyers are tapping 401(k) plans for extra cash.

Classified as a "hardship withdrawal", loans against your retirement funds can be cheap and simple.

1. There's no credit check or approval process
2. There's only a small set of paperwork
3. Money can be available in as little as a day

But just because you can get access to your retirement money doesn't mean that you should. 401(k) withdrawals should only be made after careful consideration.

There are some serious negatives, specifically with respect to taxation.

If you open a 401(k) loan and don't repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2.

That's a stiff penalty.

But, even if you do repay the loan on time, you're still getting leaving yourself subject to double-taxation.

• Taxation #1 occurs when the loan is repaid using post-tax dollars
• Taxation #2 occurs upon final withdrawal at retirement

Furthermore, when you borrow against a 401(k), you assume the opportunity costs of having that money out of the market. Since March, the Dow Jones Industrial Average is up 44 percent. If your 401(k) was empty, you'd have missed those gains forever.

Taking a loan against a 401(k) isn't necessarily a bad idea, there just may be better choices. If you're planning to withdraw from your 401(k) to make a downpayment on a home, talk with a qualified financial professional first.

You can never have too much good information.