Gary McNinch Realtor Renton WA Real Estate

The Federal Reserve Is Meeting And What It Means To Your Mortgage Rate

Alright first time home buyers, Renton home seller, anyone investing in Seattle property and anyone else that is effected by King County Home Prices. Here is the latest. (and I'm already predicting there will not be any immediate change.)

The Federal Open Market Committee begins a scheduled, 2-day meeting yesterday to discuss the country's monetary policy. As is custom, the group will issue a press release to the markets upon adjournment.

There are 8 scheduled FOMC get-togethers annually and the post-meeting press releases are among the most powerful market-moving events of the year. (usually but probably not this time)

It's not the Fed's actual policy changes that causes fortunes to be won or lost, though.

These changes can predicted and traded -- and, therefore, hedged -- on Wall Street using Fed Funds Rate Futures. For example, Wall Street predicts with 97% certainty that the Federal Reserve will not make a policy change at this time.

As opposed to than policy change, it's the verbiage of the FOMC's press release that can really move markets. This is because the press release is a clear-eyed look into what the Federal Reserve thinks of the United States economy -- its strengths, its weaknesses, and its threats. Now since Chairman Bernanke was just on CBS and was given softball questions I don't think there will be a huge amount of info in the "verbiage". In my humble opinion, there are too many aspects of the US and World financial picture that have to shake out in the next few months to make much change today.

After its January 2009 meeting, the FOMC's press release said:

• The economy has weakened further
• Employment has declined steeply
• A gradual recovery may come later in 2009

Since that meeting, though, a number of high-profile economists, including Fed Chairman Ben Bernanke, have said the likelihood of economic recovery increased for late-2009.

This is why tomorrow's FOMC press release is so important. It will contain clues about the Federal Reserve's next steps and current psyche. But immediately it may or may not make a significant impact on the mortgage markets.

In the end, it's what the Fed says that matters more than what the Fed does. The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

HIGHLIGHT, BOLD, CAPITALIZE, UNDERSCORE AND ITALICIZE THIS: RATES ARE AS LOW AS THEY CAN GO AND AS LOW AS THEY WILL GO. !!!!!! add in some EXCLAMATION POINTS TOO!!!!!! IT IS A GREAT TIME TO BUY A RENTON HOME OR TOWNHOME.

PLUS many of you can utilize the $8000 IRS Tax credit. Call the Gary McNinch Team, sign up on our web home searches, or shoot us an email or twitter us at Rentonhomefinde and we will be glad to show you how to get qualified to buy a great Renton or Kennydale home. Our business is educating our buyers and sellers and finding great deals for our investor clients.

(Image courtesy: Wall Street Journal)

You know you're in the middle of an economic crisis when an accounting issue become Front Page News, and that's exactly where we're at today.

Mark-to-market accounting is having its day in the sun and people in need of mortgage sometime soon would do well to pay attention.

If you've never heard of mark-to-market accounting, don't worry. Not many people have. Mark-to-market is a method of valuing an asset based on its what-if-it-was-sold-today value. Mark-to-market is officially known as FASB Statement 157.

Mark-to-market is one reason why bank balance sheets look so awful right now. Banks have to assign firesale-like values to their mortgage-backed assets even if those loans are performing, and even if there's no plans to sell them. Assigning low values to assets, then, in turn, forces the banks to seek TARP funds and take other measures to solidify their mandated capital requirments. And contrary to news media there are some banks that are solid. Several were directed to take initial TARP money even though they weren't in danger. Now those same banks are returning TARP money and the stigma that follows.

Wall Street and Washington are taking notice of mark-to-market's impact on banking and, by extension, the economy. Even Fed Chairman Ben Bernanke has expressed an interest in opening a dialogue about the matter.

So, today, starting at 10:00 AM ET, the House Committee on Financial Services meets with key members of the Securities and Exchange Commission, the Treasury, and the Financial Accounting and Standards Board to talk about mark-to-market accounting and whether it should be modified.

It's unlikely that change will come immediately, but if enough evidence shows that mark-to-market is unduly damaging to the economy, expect changes to the way we value banks to happen soon.

For homeowners and home buyer, a reversal in mark-to-market rules would be a bad thing. Almost overnight, bank balance sheets would recapitalize and the economy would spring forward. This would reverse most of the pressures that have held mortgage rates low for so many months. My humble opinion is that it is going to take more than "juggling the books" on the banks to solve the huge economic issues in this country.

A healthy economy, in other words, may be bad for mortgage rates. Conversely a healthy economy is great for Renton and the Seattle area, because there will be stronger employment, healthier tax base for schools, hospitals, roads.

There are great values in Renton homes and townhomes. And at this point mortgage rates are as low as they have been in generations. Now is the time to invest in a home and your families future. Call the Gary McNinch Team Renton Wa Realtor. We appreciate the opportunity to help you decide if and when it is the right time for your next home purchase. We help Renton and Kent clients buy and sell homes and townhomes in Fairwood, Kent, Renton Highlands, Cascade, Talbot Hill, Newcastle, Kennydale, Skyway and Downtown Renton and we'll be glad to help you too.

One popular housing theory is that -- before a bona fide housing recovery can begin -- the cost of owning a home versus renting one must return to historical levels.

If that belief is a truth, a national return to rising home prices may be in store for 2009.

Falling home prices coupled with falling mortgage rates, too, have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home.

This is the exact 18-year historical average and not since 2001 has the gap been this small.

As reported by the Wall Street Journal, though, the study has some flaws. For example, the data doesn't account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies.

But, combining a relatively low cost of ownership with the government's $8,000 tax credit for first-time home buyers is likely to convert long-time renters into never-before homeowners.

This, too, is thought to be a key element of the housing recovery.

In many markets (but not all), home prices are expected to edge lower through 2009. Provided mortgage rates stay low, the cost gap between owning and renting will shrink even more.

For all you renters out there in the South King County area, check out our website www.RentonHomeFinder.com, sign in and take a look at all the available homes in Renton, Fairwood and Kent. Give the Gary McNinch Team a call when you are ready to get more information on the best way to buy a home.

(Image courtesy: Wall Street Journal)