The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent. In its press release, the FOMC noted that the U.S. economy "has continued to pick up" since the September FOMC meeting and that housing market activity has increased. It's the third consecutive post-FOMC statement in which the Fed speaks optimistically about the U.S. economy -- a signal that the recession is likely over. The economy isn't without threats, however, and the Fed identified several in its announcement, including:
The overall tone remained positive, however, as inflation appears to be held in check. Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period" and to honor its $1.25 trillion commitment to the mortgage bond market. The Fed plans to wind down its mortgage market support over the next 5 months, reaffirming its March 2010 exit date. For now, Fed support helps hold mortgage rates down. Mortgage market reaction to the Fed's press release is negative overall. Mortgage rates are rising.The FOMC's next scheduled meeting is December 15-16, 2009.
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 are already seeing it.
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This weekend, the sun set on another season of Daylight Saving Time. The extra daylight we now enjoy was actually the result of the Energy Policy Act, which was enacted by Congress back in 2005. But did you know that throughout its long history, Daylight Saving Time has had a remarkable and sometimes unexpected impact? A man was actually able to avoid the draft for the Vietnam War using a Daylight Saving Time loophole. When he was born, it was just after midnight, DST. When he was drafted, he successfully argued that in his home state of Delaware, standard time - not DST - was the official time for recording births. So he was technically born on the previous date--which had a much higher draft lottery number - and he was able to avoid being drafted. In September 1999, the West Bank was on Daylight Saving Time, while Israel had switched back to standard time. A group of West Bank terrorists prepared some timed bombs - but misunderstood the time change - and the bombs exploded early, killing the terrorists themselves, rather than the intended victims - two busloads of innocent citizens. In the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul - which are considered one metropolitan area - didn't agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches seven times in 35 miles! To keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks "fall back" in the fall, all trains that are running on time actually stop at 2 am - the official time of DST change - and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time. So Daylight Saving Time sure can have some unexpected impact. As we enter the first week of Daylight Saving Time, be sure to double-check all of your electronic devices and confirm that the time is correct. Although you may be accustomed to your computer and maybe even your digital clock in your car automatically updating, the recent change of dates for Daylight Saving Time may require that these devices be manually changed, as they now may NOT be ready to update to the correct time on the correct date! |
What The Media About September's New Home Sales Report
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.
For August, the Case-Shiller Index showed annual home values improving across 19 of 20 US Markets. It's the first time in 3-plus years that the benchmark housing index has shown such strength. According to a Case-Shiller Index spokesperson, "The rate of annual decline in home price values continues to improve." It's yet another sign that housing may have already bottomed.
However, just because the Case-Shiller Index shows a stabilization in home values, that doesn't necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more "national". It tracks data in just 20 U.S. cities. Homeowners everywhere else are unaccounted for. Furthermore, even within the 20 tracked Case-Shiller markets, there's no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform. Case-Shiller treats them all the same.
Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too. If that's true, August's Case-Shiller data is another step in the right direction.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
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