Financial Civilization

A Simple Explanation Of The Federal Reserve Statement (September 21, 2011 Edition)

2011-09-21T14:09:00.001-05:00

Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was 7-3 -- the second straight meeting at which the FOMC adjourned with as many 3 dissenters. Prior to that last meeting, there hadn't been 3 FOMC dissenters since 1992.

In its press release, the Federal Reserve presented a dour outlook for the U.S. economy, noting that since its last meeting in August:

Economic growth "remains slow"
Unemployment rates "remain elevated"
The housing sector "remains depressed"

The Fed also said that there are "significant downside risks" to the economic outlook, tied to strains in the global financial markets.

The news wasn't all bad, however.

The Fed noted that business investment in equipment and software continues to expand, and that inflationary pressures on the economy appear to have stabilized. The Fed then re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent "at least until mid-2013". This means that Prime Rate -- the rate to which credit card rates and lines of credits are often tied -- should remain unchanged at 3.250 for at least another 2 years.

Furthermore, as expected, the Federal Reserve launched a market stimulus plan aimed at lowering long-term interest rates. The Fed will sell $400 billion in Treasury securities with a maturity of 3 years or less, and use the proceeds to buy the same with maturity between 6 and 30 years.

Mortgage market reaction to the FOMC statement has been positive this afternoon. Mortgage rates in Minnesota are improving, but note that Wall Street sentiment can shift quickly -- especially in a market that's as uncertain as this one.

If today's mortgage rates and payments fit your household budget, consider locking in a rate. Rates can change swiftly.

The FOMC's next meeting is a 2-day affair, scheduled for November 1-2, 2011.

A Simple Explanation Of The Federal Reserve Statement (September 21, 2011 Edition)

2011-09-21T13:55:00.001-05:00

Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was 7-3 -- the second straight meeting at which the FOMC adjourned with as many 3 dissenters. Prior to that last meeting, there hadn't been 3 FOMC dissenters since 1992.

In its press release, the Federal Reserve presented a dour outlook for the U.S. economy, noting that since its last meeting in August:

Economic growth "remains slow"
Unemployment rates "remain elevated"
The housing sector "remains depressed"

The Fed also said that there are "significant downside risks" to the economic outlook, tied to strains in the global financial markets.

The news wasn't all bad, however.

If today's mortgage rates and payments fit your household budget, consider locking in a rate. Rates can change swiftly.

The FOMC's next meeting is a 2-day affair, scheduled for November 1-2, 2011.

The Fed Adjourns At 2:15 PM ET Today : What It Means For Mortgage Rates

2011-09-21T07:58:00.001-05:00

The Federal Open Market Committee adjourns from a two-day, scheduled meeting today, the sixth of 8 scheduled meetings this year, and the seventh Fed meeting overall.

The FOMC is a designated, 12-person committee within the Federal Reserve, led by Fed Chairman Ben Bernanke. The FOMC is the voting members for the country's monetary policy. Among its other responsibilities, the FOMC sets the Fed Funds Rate, the overnight rate at which banks borrow money from each other.

Note that the "Fed Funds Rate" is different from "mortgage rates". Mortgage rates are not set by the Fed. Rather, they are based on the price of mortgage-backed bonds, a security traded among investors.

As the chart at top illustrates, the Fed Funds Rate and conforming mortgage rates in Lakeville have little correlation. Since 1990, the two benchmark rates have been separated by as much as 5.29 percent, and have been as close as 0.52 percent.

Today, the separation between the Fed Funds Rate and the national average for a standard, 30-year fixed rate mortgage is roughly 4 percent. This spread will change, however, beginning 2:15 PM ET Wednesday. That's when the FOMC adjourns from its meeting and releases its public statement to the markets.

There is no doubt that the Fed will leave the Fed Funds Rate in its current target range of 0.000-0.250%; Fed Chairman Bernanke plans to leave the benchmark rate as-is until at least mid-2013. However, the Fed is expected to add new support for markets.

Unfortunately, there are few clues about how the Fed will support markets, and there is no consensus opinion regarding the size of the said support. As a result, mortgage rates should be bouncy today. First, they'll be volatile ahead of the Fed's statement. Then, they'll be volatile post-Fed statement.

Even if the Fed does nothing, mortgage rates will change. This is because Wall Street is prepping for an announcement and -- no matter what the Fed says or does -- investors will want to react accordingly.

When mortgage markets are volatile, the safest move is to lock your mortgage rate in. There too much risk to float.

Homebuilder Confidence Stays Flat

2011-09-20T12:09:00.001-05:00

Homebuilders are feeling worse about the market for new homes nationwide.

With construction credit tight and competition from foreclosures increasing, the National Association of Homebuilder's Housing Market Index slipped 1 point in September, falling to levels just below the index's 12-month average.

The HMI measures homebuilder confidence nationwide. It's the result of 3 separate homebuilder surveys, each designed to measure a specific facet of the homebuilder's business.

How are market conditions for the sale of new homes today?
How are market conditions for the sale of new homes in 6 months?
How is prospective buyer foot traffic?

Each component survey showed a drop-off from August. Responses fell 1 point, 2 points, and 2 points, respectively. Together, September's composite reading was 14 out of a possible 100 points. Readings over 50 are considered favorable.

The HMI not been above 50 since April 2006.

With homebuilder confidence low -- and stagnant -- buyers of new homes Apple Valley in should remain alert for "deals". Builders are more likely to offer free upgrades and other concessions to incoming buyers. The availability of such deals may increase as the seasons change and as the year comes to a close.

Low mortgage rates are making new homes attractive, too. Last week, 30-year fixed rate mortgage rates fell to their lowest levels of all-time. As compared to just 8 weeks ago, 30-year fixed rate mortgage payments are lower by 5 percent at all loan sizes, down $27 per month per $100,000 borrowed.

What's Ahead For Mortgage Rates This Week : September 19, 2011

2011-09-19T07:59:00.001-05:00

Mortgage bonds worsened last week as Eurozone default fears eased abroad, and expectations for a domestic stimulus increased.

Mortgage rates rose for the first time in three weeks last week, pushing conforming and FHA mortgage rates in Minnesota off their all-time, historical lows. Rates were at their lowest Tuesday morning, then rose through Friday's afternoon closing.

Markets open this week with an eye toward the world's central banks.

In the Eurozone, central bankers (continue to) discuss the debt burdens of Greece and whether a coordinated intervention is necessary. Without it, some economists believe that the nation-state will default on its sovereign debt, which would then create additional financial stress within other nations in the region.

Italy is included among those countries.

In the United States, central bankers are making equally-important choices.

The Federal Open Market Committee will emerge from a 2-day meeting Wednesday and is expected to announce new stimulus for the U.S. economy.

Since 2009, the Federal Reserve has twice stimulated the economy via an open-market, bond buying initiative. The programs created demand for mortgage bonds which, in turn, lowered mortgage rates for U.S. homeowners. If the Fed chooses this path a third time, expect for mortgage rates to fall in Apple Valley.

If the Fed's sponsored stimulus is something else, however -- or if the Fed choose to do nothing -- mortgage rates may rise.

There is economic data due this week, including the Existing Home Sales and Housing Starts report, but it will be the world's central bankers that sit in spotlights.

Expect volatile mortgage rates this week. Wall Street can only guess what governments will do to stimulate their respective economies and can lead to wild swings in pricing. The "safe play" is to lock a rate while we're still near all-time lows.

Once rates reverse higher, they're expected to rise quickly.

Choosing A 15-Year Fixed Rate Mortgage Over A 30-Year Fixed Rate Mortgage

2011-09-16T07:58:00.001-05:00

It's not just 30-year fixed rate mortgages that are posting all-time lows these days. The 15-year mortgage has been plunging, too.

If you've ever considered a 15-year loan term, it's a terrific time to talk to your lender. According to Freddie Mac's weekly mortgage rate survey of roughly 125 U.S. lenders, at 3.30 percent, the 15-year fixed rate mortgage is at its lowest point in history.

The 3.30% rate doesn't come for free, however. Based on average loan term nationwide, borrowers in Minnesota choosing to "go 15" should expect to pay 0.6 discount points at closing. 1 discount point is equal to 1 percent of your loan size.

With low rates, 15-year fixed rate mortgage can be enticing; a primary benefit is the huge reduction in the long-term interest costs of your loan. The downside, though, is that monthly mortgage payments can be relatively large.

At today's mortgage rates, a 15-year fixed rate loan carries a principal + interest payment of $705.10 per $100,000 borrowed -- a 46% increase over a comparable 30-year fixed rate loan. If you can manage the bigger payments, though, you'll reap $47,000 in interest payments savings per $100,000 borrowed in paying off your loan in full.

$47,000 per $100,000 borrowed is a huge amount of savings and those saved monies can be used to fund items such as college, home improvement, and retirement, among others.

That said, the 15-year fixed rate mortgage is not for everyone.

Because it comes with higher monthly payments, the 15-year fixed rate mortgage may add financial stress to your household budget. And, once you have committed to a 15-year loan term and its payments, you're can't "go back". Your lender won't revert your loan to a 30-year schedule without a refinance, and a refinance could be costly.

Annual Foreclosure Filings Down For 11th Straight Month

2011-09-15T07:58:00.001-05:00

On an annual basis, foreclosure filings fell last month. As compared to August 2010, last month's foreclosure filings dropped 33 percent. "Foreclosure filing" is a catch-all term, comprising default notices; scheduled auctions; and bank repossessions.

The study was published by foreclosure-tracking firm RealtyTrac and this month's report reveals a slowing rate of foreclosure within each of the Top 10 most foreclosure-heavy states.

All news is not good, however.

On a monthly basis, foreclosure filings spiked, led by a surge in default notices. Default notices made their biggest one-month jump since August 2007 on the way to a 9-month high last month. Default notices are the first step in the foreclosure process so this jump may foreshadow a large number of bank repossessions as foreclosures "make their way through the process".

It's also noteworthy that just 6 states housed half of the nation's bank repossessions last month.

California : 18 percent of bank repossessions
Florida : 8 percent of bank repossessions
Georgia : 7 percent of bank repossessions
Michigan : 6 percent of bank repossessions
Texas : 6 percent of bank repossessions
Arizona : 6 percent of bank repossessions

As a home buyer in Eagan , foreclosures can save you money. The National Association of REALTORS® reports that distressed homes sell with typical discounts of 20 percent versus comparable, non-distressed homes. However, buying a home from a bank is a different process from buying a home from a "person". Contract negotiations are different and it can take months to finally close on a foreclosed home.

If you're buying a foreclosed, therefore, enlist the help of a professional real estate agent. Real estate agents can help you navigate the sometimes-complicated world of foreclosures, and help you come out ahead.

Capitalize On Low Interest Rates In Overlooked Places

2011-09-14T07:58:00.001-05:00

It's no secret. Rates are low right now. And, it's not just mortgage rates, either -- all types of rates are scraping rock-bottom. Borrowing rates, lending rates and savings rates are at or near their all-time lowest levels.

As a homeowner in Apple Valley , one way to take capitalize on today's low rates is to apply to refinance your home. But there are other ways to take advantage, too.

In this 5-minute piece from NBC's The Today Show, you'll learn of a half-dozen ways to exploit the current rate environment, including:

Refinance a car loan from a high rate to a low rate, for cheap, in an hour
Balance transfers between credit cards with teaser rates lasting up to 20 months
Move some savings to an "online" bank where savings rates are higher

The interview's theme is to examine both where you're spending and saving your money, and make sure you're doing what's best for your budget.

Federal Reserve Chairman Ben Bernanke has pledged to hold the Fed Funds Rate near 0.000% until at least 2013. So long as the Fed Funds Rate is low, there will be places you can save.

Adjustable-Rate Mortgages Starting To Adjust Higher

2011-09-13T07:59:00.001-05:00

For the first time in a year, homeowners with adjusting mortgages are facing rising mortgage rates. The interest rate by which many adjustable-rate mortgages adjust has climbed to its highest level since September 2010, and looks poised to reach higher.

This is because of the formula by which adjustable-rate mortgage adjust.

Each year, when due for a reset, an adjustable-rate mortgage's rate changes to the sum of fixed number known as a "margin", and a variable figure known as an "index". For conforming mortgages, the margin is typically set to 2.250 percent; the index is often equal to the 12-month LIBOR.

LIBOR stands for the London Interbank Offered Rate. It's a rate at which banks lend to each other overnight.

Expressed as a math formula, the adjusting ARM formula reads :

(New Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR)

LIBOR has been rising lately, which explains why ARMs are adjusting higher as compared to earlier this year. There has been considerable stress on the financial sector and LIBOR reflects the uncertainty that bankers feel for the sector.

LIBOR last spiked after the collapse of Lehman Brothers in 2008 amid global financial fears. Analysts expect LIBOR to rise into 2012 because of bubbling concerns in the Eurozone.

Despite LIBOR's rise, though, most adjusting, conforming ARMs are still resetting near 3 percent. For this reason, homeowners with ARMs in Minnesota may want to consider letting their respective loans adjust with the market.

This is because an adjusting mortgage rate near 3 percent may be better than what's available with a "fresh loan" -- even as 5-year ARMs rates make new all-time lows. Unlike a straight refinance to lower rates, an adjusting loan requires no closing costs, requires no appraisal, and requires no verifications.

So, if you have an adjustable-rate mortgage that's set to reset this season, don't rush to refinance it. Talk to your lender and uncover your options. Your best course of action may be to stay the course.

What's Ahead For Mortgage Rates This Week : September 12, 2011

2011-09-12T07:57:00.001-05:00

Mortgage markets improved last week as a weakening Eurozone and questions about the U.S. economy sparked a global flight-to-quality. Conforming and FHA mortgage rates improved for the second week in a row.

The storylines should sound familiar by now. They are the same ones that have dictated the path of mortgage rates since April 2011. As a result, according to Freddie Mac, mortgage rates across Minnesota and nationwide are now at an all-time low.

Not in 50 years of tracking mortgage rates has pricing been so favorable.

Last week's holiday-shortened week didn't begin well for rate shoppers in Lakeville. Rates moved higher on the expectation of additional economic stimulus from two separate parts of the government -- the Federal Reserve and Congress.

Wall Street held high hopes for Ben Bernanke's address to the Economic Club of Minnesota, and for the President's address to a joint session of Congress. It expected Fed Chief Bernanke to reveal clues about the Fed's next move; and it expected the President to unleash a massive jobs creation program that would put more Americans to work.

Both outcomes would have harmed mortgage rates as money flowed into stocks. However, neither happened. Bernanke kept mum on the Federal Reserve's options and the White House announced a jobs program smaller in scope than was expected.

Mortgage rates fell throughout the day Thursday then received a big boost Friday.

Amid rumors of a pending Greek default and the potential credit downgrades of several Eurozone banking groups, safe haven buying picked up and drove mortgage rates down.

Markets open this week with rates lower than they've ever been in history.

There isn't much new data set for release this week so market expectations will continue to set the direction in which mortgage rates go. If concerns for a Eurozone default rise, mortgage rates should fall. Conversely, if Eurozone chatter settles, mortgage rates should rise.

For now, mortgage rates remain at all-time lows and should not be taken for granted. If you see a rate that makes sense for you, consider locking it in.

Home Affordability Still Tops Nationwide

2011-09-09T07:56:00.001-05:00

Home affordability slipped slightly last quarter, dragged down by rising mortgage rates and recovering home prices in Minnesota and nationwide.

The National Association of Home Builders reports a Q2 2011 Home Opportunity Index reading of 72.6. This means that nearly 3 of 4 homes sold last quarter were affordable to households earning the national median income of $64,200.

Q2 2011 marks the 10th straight quarter -- dating back to 2009 -- in which the index surpassed 70.

Prior to 2009, the index had never crossed 70 even one time.

However, we must remember that the Home Affordability Index is a national survey. From region-to-region, and town-to-town, home affordability varied.

In the Midwest, for example, affordability was highest. 14 of the 15 most affordable markets nationwide were spread throughout Ohio, Michigan, Illinois and Indiana. Only Syracuse (#9) cracked the list from other regions.

The top 5 most affordable cities in Q2 2011 were:

Kokomo, IN (95.8%)
Wheeling, WV (94.7%)
Lansing, MI; East Lansing, MI (94.4%)
Bay City, MI (94.3%)
Youngstown, OH; Warren, OH; Boardman, OH (93.7%)

By contrast, the Northeast Region and Southern California ranked as the least affordable markets. Led by the New York-White Plains, NY-Wayne, NJ area, 7 of the 10 least affordable areas were in New York, New Jersey, and California. For the 13th consecutive quarter the New York metro area was ranked "Least Affordable".

Just 25.2 percent of homes were affordable to households earning the area median income there.

The rankings for all 225 metro areas are available for download on the NAHB website.

After A Pause, Mortgage Guidelines Resume Tightening

2011-09-08T07:58:00.001-05:00

Mortgage guidelines appear to be tightening with the nation's largest banks.

In its quarterly survey to senior loan officers nationwide, the Federal Reserve uncovered that a small, but growing, portion of its member banks is making mortgage approvals more scarce for "prime" borrowers.

A prime borrower is described as one with a well-documented payment history, high credit scores, and a low monthly debt-to-income ratio.

Of the 53 responding "big banks", 3 reported that mortgage guidelines "tightened somewhat" last quarter. This is a tick higher as compared to prior quarters in which only 2 banks did.

46 banks reported guidelines unchanged from Q1 2011.

When mortgage guidelines tighten, it adds new hurdles for would-be home buyers in Lakeville. Tighter lending standards means fewer approvals, and that can retard home sales across a region.

Just don't confuse "tighter standards" with "oppressive standards".

While it is more difficult to get approved for a purchase home loan in 2011 as compared to 2006, the same basic rules apply:

Show that you have a history of paying your bills on time
Show that your income is sufficient to cover your obligations
Show that you can make a downpayment

And the good news is that, once approved, you'll benefit from some of lowest mortgage rates in history.

Last week, the average 30-year fixed mortgage was below 4.250% for buyers willing to pay points, and the average 5-year ARM was below 3.000%. The 15-year fixed rate loan was similarly low.

For as long as delinquency rates remain high, expect mortgage guidelines to continue to tighten through the rest of 2011 and into 2012. Therefore, if you're a "fringe" borrower looking at a purchase in the fall or winter season, consider moving up your time frame. Changing guidelines may render you ineligible for a mortgage.

As Jobs Tally Fades, Mortgage Rates Fall

2011-09-07T07:57:00.001-05:00

The U.S. economy is no longer adding new jobs.

Last Friday, in its monthly Non-Farm Payrolls report, the Bureau of Labor Statistics reported that the U.S. economy added exactly zero new jobs in August as the national Unemployment Rate held steady at 9.1 percent.

Despite the "zero" reading, the jobs figures were in the red. This is because the BLS issued revisions to its June and July figures that adjusted the two months of data down by 58,000 jobs.

Economists had expected a monthly reading of +75,000. Their estimates missed.

The weaker-than-expected jobs data fueled a stock market sell-off that pushed stocks down 2.5% and spurred a bond market rally.

Mortgage bonds -- the securities on which mortgage rates in Lakeville are based -- improved Friday ahead of Labor Day Weekend, and carried that momentum into Monday. While the U.S. markets were closed, global investors snapped up "safe" assets in fear of a second wave of financial crises. Already this year, markets have grappled with sovereign debt concerns in Greece and Portugal.

Now, Italy is facing similar international scrutiny, forcing markets to question the health of the Eurozone.

Concerns like these tend to benefit home buyers and mortgage rate shoppers and that's exactly what we're seeing.

Mortgage rates are falling this week. Rates may reverse quickly, however.

Later this month, the Federal Reserve and White House are each expected to add stimulus to the U.S. economy. If they do, it may push investors back into risky assets including equities at the expense of safe securities. This would spark a bond market sell-off and send rates higher.

Possibly by a lot.

Therefore, if you're currently looking for home or comparing rates between lenders, consider executing sooner rather than later. Mortgage rates are low today, but low rates may not last. And when rates reverse higher, it will likely happen fast.

What's Ahead For Mortgage Rates This Week : September 6, 2011

2011-09-06T08:10:00.001-05:00

Mortgage markets improved last week on a weak jobs report, expectation for new market stimulus, growing evidence of a global economic slowdown. Rates were especially volatile, too, with the long Labor Day Weekend looming.

Overall, conforming mortgage rates in Minnesota improved for the first time in 3 weeks. On a product-by-product basis, though, mortgage rates are faring differently.

According to the Freddie Mac weekly mortgage rate survey, last week, the 30-year fixed rate mortgage was unchanged but the 15-year fixed rate mortgage and the 5-year ARM fell.

The 5-year ARM is at a new all-time low for qualified borrowers.

A drop in 5-year ARM rates throughout Lakeville without a corresponding drop in 30-year fixed mortgage rates signals that markets expect the economy to stabilize over the long-term but with weakness in the near-term. The 5-year ARM's ultra-low rates suggests marked weakness ahead.

The 5-year ARM may get another boost this week, too.

While U.S. markets were closed for Labor Day, Eurozone nations were hit with new wave of sovereign debt concern, this time centered on Italy. Greece, Portugal and Ireland have already been the subject of debt default debate this year. Italy's inclusion hit equity market hard and safe-haven buying re-commenced.

This should give a good start to mortgage rates this week. Look for rates to start lower. That's not to say, however, that they'll finish the week lower. With very little economic data due for release, markets will move on momentum and momentum can change in a flash.

The two biggest potential market movers both come Thursday. Fed Chairman Ben Bernanke speaks in Minnesota at 1:00 PM, and United States President Barack Obama addresses the nation at 7:00 PM. Both speeches are highly anticipated and should cause markets to move.

Home Values Rose In June 2011

2011-09-02T07:56:00.001-05:00

Has housing turned the corner for good?

The June 2011 Case-Shiller Index reading posted strong numbers across the board, with each of the index's 20 tracked markets showing home price improvement from May.

Some markets -- Chicago and Minneapolis -- rose as much as 3.2 percent.

The rise in values is nothing about which to get overly excited, however. The Case-Shiller Index is just re-reporting what multiple data sets have already shown about the summer housing market; that it was stronger than the spring market, and that a recovery is underway, but occurring locally, at different rates.

For example, the June 2011 Case-Shiller Index shows the following :

Denver, Dallas, Washington D.C., and the "California Cities" bottomed in 2009. Each has shown steady improvement since.
None of the Case-Shiller cities showed negative growth between May and June 2011.
12 of Case-Shiller's tracked cities have improved over 3 consecutive months.

In isolation, these statistics appear promising, but it's important to remember that the Case-Shiller Index is a backward-looking data set, focusing on just a portion of the national housing economy.

As an illustration, the Case-Shiller Index's "national report" only includes data from 20 cities nationwide. They're not the 20 biggest cities, either. Smaller metropolitan areas such as Minneapolis (#48) and Tampa (#51) are included.

Larger ones including Houston (#4), Philadelphia (#5) and San Jose (#10) are not.

In addition, the Case-Shiller index fails to track sales of condominiums, multi-unit homes and new construction. In some markets, including Chicago, these excluded home type can represent a large share of the overall market.

The Case-Shiller Index is a fine data set for policy makers and economists. It describes the broader housing market and shows long-term trends. For the individual home buyer in Lakeville , however, it's much less useful. More than "broad data", you want focused data that's current and relevant.

The best place for data like that is a local real estate agent.

With The Jobs Report Looming, Mortgage Rates May Rise

2011-09-01T07:57:00.001-05:00

If you're shopping for a mortgage rate, today may be a good day to lock one down. That's because Friday morning, the Bureau of Labor Statistics will release its Non-Farm Payrolls report for August 2011.

The "jobs report" tends to have a big influence on mortgage bonds and mortgage rates in Apple Valley.

The jobs report is a monthly issuance, providing sector-by-sector analysis of the U.S. workforce. It also report the national Unemployment Rate.

Wall Street expects the August Non-Farm Payrolls data to show 75,000 jobs created in August, down from 117,000 in July; and it expects that the Unemployment Rate will remain unchanged at 9.1%.

The jobs report's connection to mortgage markets is straight-forward -- as jobs go, so goes the economy. This is because when the number of working Americans rises :

Consumer spending gets a boost
Government tax collection gets a boost
Household savings gets a boost

These are each good turns in a recovering economy.

For today's rate shoppers and home buyers, though, it won't be the actual number of jobs created that matter as much as how close that jobs figure is to Wall Street's expectations. If the number of jobs created exceeds the 75,000 estimate, look for mortgage rates to rise.

Conversely, if job creation falls short of 75,000 in August, mortgage rates are expected to rise.

Home affordability remains at all-time lows and mortgage rates do, too. If you've been wondering whether now is the right time to lock a rate, you can remove some risk by locking ahead of Friday's Non-Farm Payrolls release.

The report will be released at 8:30 AM ET.

Fed Minutes : Fed Considered Additional Stimulus In August

2011-08-31T07:58:00.001-05:00

The Fed publishes meeting minutes 8 times annually -- three weeks after each scheduled Federal Open Market Committee get-together. The Fed Minutes summarizes the FOMC meeting.

The Federal Reserve released the minutes from its August 9, 2011 Federal Open Market Committee meeting Tuesday.

The Fed Minutes contained no surprises and, as a result, mortgage rates across Minnesota and nationwide have idled.

Although it gets less press attention, the Fed Minutes is every bit as important as the more highly-publicized, post-meeting statement from the FOMC. With its detailed record of conversation, the Fed Minutes highlights the discussions and debates that shape our nation's monetary policy.

For example, here is some of what was said at the Fed's August 2011 meeting :

On growth : Economic growth had been slower than the committee expected
On housing : The market "remains depressed". Underwriting standards are "tight".
On rates : The Fed Funds Rate will remain low until mid-2013

In addition, the Fed talked about whether a third round of asset purchases should be announced. Ultimately, that plan was rejected by consensus.

The FOMC's next meeting is a 2-day meeting, scheduled for September 20-21. The meeting was originally scheduled for just one day, but Fed Chairman Ben Bernanke chose to extend it to two. Wall Street believes that the extension was made so Fed members could discuss new forms of economic stimulus.

Depending on the form of said stimulus -- if it should even occur -- mortgage rates may rise or fall. We can't know for certain unti the size and scope of the Fed's plan is known.

For now, mortgage rates remain rock-bottom. There's more room for rates to rise than to fall. If you're shopping for a loan and the rate looks right, therefore, consider locking on it.

Pending Home Sales Slip In July; Creates Buyer Opportunity

2011-08-30T08:00:00.001-05:00

After 3 straight months of gains, the Pending Home Sales Index slipped 1 percent in July. The monthly report is published by the National Association of REALTORS® and measures the number of home under contract to sell nationwide.

The Pending Home Sales Index is closely watched by Wall Street and analysts because it's a forward-looking housing market indicator. Unlike most housing market data, though, Pending Home Sales forecasts a future housing market event. In this case, the Existing Home Sales report.

In its methodology, the Pending Home Sales Index states that 80% of homes under contract close within 2 months, with most of the remaining home going to closing within Months 3 and 4.

We would expect home sales data to taper into the fall buying season, but this year, they may taper more than normal. This is because, in a separate report, the National Association of REALTORS® said that contract cancellation rates are running high.

As compared to a 4 percent contract cancellation rate in May 2011, June and July both registered 16 percent. This means that fewer homes tallied as part of July's Pending Home Sales Index will show up as "closed sales" this fall.

Contracts can be canceled for any number of reasons including more stringent mortgage guidelines, appraisals falling short of the purchase price, and changing mortgage loan limits.

For home buyers in Lakeville , the Pending Home Sales Index may represent an opportunity. Not only are fewer homes going under contract nationwide, but with cancellation rates spiking, sellers may be more willing to "make a deal".

Note, though, like all real estate, the pace at which homes go under contract is a "local" statistic; you can't assume national data applies to all markets equally. Your home market, for example, may out-perform -- or under-perform -- the national average.

For a closer look at what's happening on your street including the speed at which homes are selling, talk to a local real estate agent.

What's Ahead For Mortgage Rates This Week : August 29, 2011

2011-08-29T08:29:00.001-05:00

Last week was another volatile week for mortgage rates. Wall Street alternately sought risk and shunned it, causing mortgage-backed bonds to rise and fall rapidly.

There was a lot to move markets, too, including banking concerns across Europe, inflation figures within the U.S., and a public speech by Fed Chairman Ben Bernanke.

Conforming rates in Minnesota rose to their highest levels of the week Wednesday afternoon, then receded into the weekend. 3

0-year fixed rates remain above their all-time lows set 2 weeks ago. 5-year ARMs are at all-time lows.

This week, mortgage rates figure to be equally jumpy. As well as a full slate of economic data, because of Labor Day, bond markets will be light on volume. When volume is light, pricing gets volatile.

The week's calendar of data includes:

Monday : Pending Home Sales Index; Personal Income and Outlays
Tuesday : FOMC Minutes; Fed President Kocherlakota speaks
Wednesday : Factory Orders
Thursday : Jobless Claims; ISM Manufacturing Index
Friday : Non-Farm Payrolls

Of all the reports, though, it's Friday's Non-Farm Payrolls that might move mortgage markets the most.

Jobs are crucial to the ongoing economic recovery and, from Wall Street to Capitol Hill, it's top of mind.

If the jobs report shows more jobs created than expected, or a positive forward trend, expect bond markets to fall, pushing mortgage rates up. On the other hand, if the jobs report is soft, mortgage rates may improve.

We can't know what rates in Eagan will do on any given day, so the best strategy for a shopper is to shop with purpose. Know what you want, and be ready to lock when you see it.

If you wait too long, the rate will be gone.

Mortgage Rates Bounce Off All-Time Lows; The Start Of A Trend?

2011-08-26T08:11:00.001-05:00

Low mortgage rates are terrific -- if you can get them.

One week after posting its lowest mortgage rate in 50 years, Freddie Mac reports that the 30-year fixed rate mortgage rose by an average of 7 basis points nationwide this week to 4.22%. To get the rate, you'll pay an average of 0.7 "points".

This week's rise in the 30-year fixed rate mortgage pulled rates off their all-time lows so either you locked last week's rock-bottom rates, or you missed it.

Mortgage rates are rising.

As a refinancing homeowner or home buyer in Apple Valley , rising mortgage rates are something to watch. This is because, as mortgage rates rise, so do the long-term interest costs of giving a mortgage, increasing your homeownership costs.

For example, if you failed to lock a rate last week when rates were bottomed, and then decided to lock-in only after rates had climbed 0.25 percent, at the new, higher rate, over the life of your loan, you would have responsibility for an extra $5,300 in interest costs for every $100,000 you borrowed.

Rising mortgage rates can be expensive.

For home buyers, rising mortgage rates pose a second problem -- they erode your purchasing power. A home that fits your budget at today's rates may not fit your budget at next week's rates. And because mortgage rates change quickly, you can sometimes feel ilke you're racing the clock.

The hard part about mortgage rates, though, is that we can never know what they'll do next. On some days they rise, on some days they fall, and on some days they stay the same. Instead of trying to "time the bottom", therefore, a good strategy can be to lock the first, low rate that fits your budget. Then, if rates are lower in the future, you can look to refinance at that time.

Mortgage rates remain at historical lows. It's a good time to lock a rate.

Ranking The Best Places To Live In The U.S. (2011 Edition)

2011-08-25T08:23:00.001-05:00

CNNMoney recently released its Best Places To Live 2011 list.

The annual survey is based on data from Onboard Informatics. Using Quality of Life factors such as education, crime and "town spirit", and focusing on towns with between 8,500 and 50,000 residents, the CNNMoney survey ranks the country's best "small towns".

To be eligible, towns must be have a median household income greater than 85 percent, and less than 200 percent of the state median income; must not be a categorized as a "retirement community"; and must be racially-diverse.

From a list of 3,570 eligible towns nationwide, Louisville, Colorado was ranked #1.

The complete Top 10 Best Places to Live as cited by CNNMoney, and their respective average home listing prices :

Louisville, Colorado ($383,569)
Milton, Massachusetts ($577,008)
Solon, Ohio ($291,162)
Leesburg, Virginia ($486,018)
Papillion, Nebraska ($218,520)
Hanover, New Hampshire ($643,500)
Liberty, Missouri ($177,678)
Middleton, Wisconsin ($347,770)
Mukilteo, Washington ($345,487)
Chanhassen, Minnesota ($418,607)

Rankings like these can be helpful to home buyers nationwide, but it's important to remember that the Best Place To Live survey is subjective. You may find none of the above towns to be to your liking.

You may also find the lowest-ranked city to be your favorite.

In other words, before making a decision to buy, connect with a real estate agent who has local market knowledge. That's the best, most reliable way to make sure you get the housing data that matters to you.

Ranking The Best Places To Live In The U.S. (2011 Edition)

2011-08-25T08:12:00.001-05:00

CNNMoney recently released its Best Places To Live 2011 list.

From a list of 3,570 eligible towns nationwide, Louisville, Colorado was ranked #1.

The complete Top 10 Best Places to Live as cited by CNNMoney, and their respective average home listing prices :

Louisville, Colorado ($383,569)
Milton, Massachusetts ($577,008)
Solon, Ohio ($291,162)
Leesburg, Virginia ($486,018)
Papillion, Nebraska ($218,520)
Hanover, New Hampshire ($643,500)
Liberty, Missouri ($177,678)
Middleton, Wisconsin ($347,770)
Mukilteo, Washington ($345,487)
Chanhassen, Minnesota ($418,607)

You may also find the lowest-ranked city to be your favorite.

New Home Supplies Remain Flat; Builders Not Over-Extending

2011-08-24T08:09:00.001-05:00

Sales of newly-built homes slipped in July, falling 1 percent as compared to June. Home buyers closed on a seasonally-adjusted, annualized 298,000 units, the lowest reading since February.

The supply of new homes, however, remained flat.

July's 6.6 months of supply equaled June's tally and remains near the multi-year low of 6.5 months set in May of this year. The figures suggest a new home market that's finding its balance.

Builders are building to meet demand, and not much more.

The New Home Sales report may have read differently if not for the Northeast Region which doubled its sales units in July. The gains buoyed the broader data, re-affirming the importance of looking past national data and focusing on what's local; the national market is not reflective of any given town

Broken down by region, July New Home Sales fared as follows:

Northeast Region : +100.0% from June 2011
Midwest Region : +2.4% from June 2011
South Region : -7.4% from June 2011
West Region : -5.9% from June 2011

However, as with most months, it's important that we recognize the New Home Sales data's margin of error.

Although New Home Sales showed a 1 percent drop in July, the reported margin of error was ±12.9%. This means that the actual reading could have been as high as +11.9 percent, or as low as -13.9 percent. Because the range includes both positive and negative values, the Census Bureau assigned its July data "zero confidence".

New Home Sales appear to be stable, despite falling sales figures. Supplies remain flat and builder confidence does, too. The good news for buyers in Apple Valley , then, is that lower mortgage rates are making homes more affordable.

Mortgage rates are currently at 50-year lows.

Existing Home Sales Slip In July

2011-08-23T08:08:00.001-05:00

Home resales slipped in July.

According to the National Association of REALTORS®, Existing Home Sales nationwide fell to 4.67 million units on a seasonally-adjusted annualized basis last month. It's the fourth straight month below the 5 million mark, and the report's lowest reading since November 2010.

An "existing home" is a home that's been previously occupied or owned.

In addition, the Existing Home Sales report showed home supplies rising nationwide. At the current pace of sales, in other words, the complete, national "For Sale" inventory would be exhausted in 9.4 months. This, too, is the worst reading since November 2010.

On a units basis, however, the number of homes for sale actually fell in July. As compared to June, home resale inventory dropped 65,000 units to 3.65 million.

From these figures, we can infer that, despite low mortgage rates and lagging home values, buyer activity is slowing in Minnesota and nationwide. This may be seasonal, or it may be a long-term trend.

Either way, there's opportunity for today's home buyers.

With mortgage rates at all-time lows, home affordability is peaking. More households can afford housing payments than during any time in history and with the fall season approaching, buyers in Lakeville may find contracts negotiations to be more "friendly".

This can mean lower sale prices and larger concessions from sellers -- the hallmark of a Buyer's Market.

It's a good time to look at your options. Talk to your real estate agent and see what's out there for you. Low home prices may persist, but low mortgage rates likely won't.

What's Ahead For Mortgage Rates This Week : August 22, 2011

2011-08-22T08:32:00.001-05:00

Mortgage markets improved again last week, pushing mortgage rates in Minnesota to an all-time low; lower than the lows set last November, even.

Last week's low mortgage rate drivers are primarily European. Joining the debt concerns that have dogged Europe since March, a fresh wave of doubt has surfaced about the health of some Eurozone banks. The fears sparked a new wave of safe haven buying.

Global equities were socked last week and the Dow Jones Industrial Average fell for the 4th straight week. For home buyers in Eagan , though, the timing may be perfect. As stock markets lose, bond markets gain and when bond markets gain, mortgage rates drop.

According to government-group Freddie Mac's weekly mortgage rate survey, the average 30-year fixed rate mortgage fell to 4.17% last week with 0.7 points. This is the lowest rate-and-points combination in history.

The 5-year ARM fell to 3.08 with 0.5 points.

As mortgage rates fall, though, be wary of trying to "time the market". It's impossible to know when rates have bottomed and mortgage rates tend to spike without notice. That's what happened in May 2010. And then again in November 2010. And then a third time in April 2011.

When rates rise, they could tack on 0.500% or more overnight.

This week, there is a lot that can move mortgage rates. With housing data set for Tuesday release, the Eurozone stories still unfolding, and three Treasury auctions planned, it's best to be ready for locking.

If you're floating a mortgage rate or still shopping, consider locking your rate as soon as possible. Rates trended higher to close out last week and will be riding that momentum forward. Rates are lower than they've been in history.

Take advantage of it.

Mortgage Rates Don't Move With The Fed Funds Rate

2011-08-19T07:59:00.001-05:00

Last week, at its 5th scheduled meeting of the year, the Federal Open Market Committee voted to leave the Fed Funds Rate in its target range near zero percent.

The Fed Funds Rate has been near zero percent since December 2008 and, in its official statement, the FOMC pledged to leave the Fed Funds Rate untouched for at least another 2 years.

This doesn't mean mortgage rates will be untouched for 2 years, though.

Mortgage rates and the Fed Funds Rate are two different interest rates; completely disconnected. If mortgage rates and the Fed Funds Rate moved in tandem, the chart at right would be a straight line.

Instead, it's jagged.

To make the point more strongly, let's use real-life examples from the past decade.

June 2004, 529 basis points separated the Fed Funds Rate and the 30-year fixed mortgage rate
June 2006, 168 basis points separated the Fed Funds Rate and the 30-year fixed mortgage rate

Today, the separation between the two benchmark rates is 407 basis points.

1 basis point is equal to 0.01%.

Between now and mid-2013, when the Fed may begin changing the Fed Funds Rate, the spread between rates will change based on economic expectation -- not Fed action (or non-action). If the economy is expected to improve, mortgage rates in Eagan will rise and the spread will widen.

Should mortgage rates cross 6 percent before the Fed starts raising rates, it will create the widest interest rate spread in history, surpassing the 615 basis point difference set in August 1982.

At the time, the Fed Funds Rate was 10.12% and mortgage rates averaged 16.27%.

On the other hand, if the economy shows signs of a slowdown for late-2011 and beyond, mortgage rates are expected to drop.

Shopping for a mortgage can be tough -- especially in a volatile environment like the current one. Mortgage rates move independent of the Fed Funds Rate. Make sure you're watching the proper market indicators. It's your best chance to lock the lowest rate possible.

What Perks Does Your Favorite Credit Card Offer?

2011-08-18T08:05:00.001-05:00

Last week, the Federal Reserve pledged to leave the Fed Funds Rate near 0.000 percent until at least mid-2013. For credit card holders in Minnesota who carry a monthly balance, this is good news. Because of the Fed's call, credit card rates are unlikely to rise before mid-2013.

But cardholders can save on more than just interest costs, as you'll learn from this two-and-a-half minute piece with NBC's The Today Show. In the interview, you'll hear about "built-in" perks offered by most credit cards and ways by which you can save on everyday goods and services.

For example, did you know your everyday credit card might offer:

Travel perks : Automatic trip cancellation protection and car rental insurance.
Shopping perks : Discount admission to concerts and museums; free shipping from overseas.
Consumer perks : Price protection against a drop in price; insurance against theft; extended warranties.

And it's not just "high end" cards that offer these options, either. Credit cards of all types do what they can to improve consumer loyalty. Offering free perks is just one way in which they try.

Most credit cards offer websites detailing cardmember perks and benefits. Visit the site of your favorite card and see where you might save on everyday items.

Housing Starts Tick Lower; Building Permits Tick Higher

2011-08-17T08:04:00.001-05:00

Single-Family Housing Starts fell to a seasonally-adjusted, annualized 425,000 units in July, according to the Census Bureau.

A "Housing Start" is defined as a home on which construction has started and ground has broken.

Furthermore, Single-Family Housing Starts were revised lower for both May and June of this year, by 6,000 units and 2,000 units, respectively.

The data may be worthless, however.

Like in most months, the government's official report states that the Housing Starts numbers have a margin of error exceeding their actual measurement. Mathematically, this renders the data statistically irrelevant.

July Published Results : +4.9%
July Margin of Error : ±8.9%

In other words, July Housing Starts made have increased by as much as 13.8%, or they may have dropped up to 4.0%. We won't know for certain until several months from now, when the Census Bureau gathers more data.

Regardless, the trend in Housing Starts has been flat since last summer. July's reading is in-line with the 12-month average and, not surprisingly, New Home Sales have been mostly flat over the same time span.

Also included in the Housing Starts report is the Building Permits tally. As compared to June, permits were higher by a half-percent nationwide, with varying results by region.

Northeast : +2.9 percent from June
Midwest : +0.0 percent from June
South : -1.4 percent from June
West : +4.9 percent from June

When permits are issued, 86 percent of them start construction within 60 days. This means that new home sales and housing stock should follow the Building Permits trend, but on a 2-month delay.

Expect improvement into the fall season.

Homebuilders Expect A Soft Winter Housing Market

2011-08-16T07:54:00.001-05:00

Two months after posting their worst confidence reading of 2011, home builders say they foresee no improvement in the immediate- or medium-term market for new homes nationwide.

In August, for the second straight month, the Housing Market Index read 15.

The HMI is a monthly housing survey, published by the National Association of Homebuilders. It's scored on a scale of 1-100 with readings over 50 suggesting favorable home builder conditions. Readings under 50 suggest unfavorable conditions.

The Housing Market Index has been below the 50-point benchmark since 2006.

To calculate the HMI, home builders are asked 3 separate questions, each addressing the different element of the new home sales business.

How are today's market conditions for the sale of new homes?
How do you expect market conditions to be 6 months from now?
How are the current foot traffic of prospective buyers?

Based on the August answers to these questions, builders are witnessing an improvement with the current market, partially fueled by low mortgage rates, but expect momentum to fade into early-2012.

As a home buyer in Lakeville , this may bode well for you. If you can wait to buy a home, you may find builders more willing to concede on price or upgrades.

The other side of that conversation, though, is that while you may save money on the home, you may lose it in your monthly payments. Rising mortgage rates can quickly zap your savings -- adding tens of thousands in interest costs to your budget long-term.

For now, home prices remain low and mortgage rates do, too. Home affordability is at an all-time high. Take advantage of what the market gives you.

What's Ahead For Mortgage Rates This Week : August 15, 2011

2011-08-15T08:21:00.001-05:00

Mortgage markets improved again last week. The combination of global economic uncertainty plus a dour outlook from the Federal Reserve pushed mortgage bonds to highs for 2011, and drove mortgage rates below their all-time lows.

Bonds were volatile, driven by the stock market's gyrations.

On 4 consecutive days, the Dow Jones Industrial Average moved by more than 400 points. Rate shoppers in Minnesota had no choice but to go along for the ride.

The week began with the market's reaction to Standard & Poor's U.S. credit rating downgrade. Mortgage bonds caught a boost on the news, and pushing rates lower throughout the day.

Tuesday, rates idled ahead of the Federal Open Market Committee meeting. There was speculation that the Federal Reserve would introduce a new round of economic stimulus but that didn't happen. Instead, the Fed pledged to keep the Fed Funds Rate in its current range near zero percent until mid-2013, at least.

Mortgage rates dropped on the announcement and continued to drop until they fell to their lowest levels of the year -- and of all-time -- late Wednesday afternoon.

This proved to be the lowest rates of the week.

Thursday and Friday were marked by better-than-expected jobless figures and an improving Retail Sales number. Mortgage rates rose slightly.

This week, mortgage rates should be equally as volatile.

In addition to new bailout talks within the Eurozone, there is a bevy of economic data due for release in the U.S., as well as a full Fed speaker docket:

Monday : Homebuilder Confidence Survey; Fed President Lockhart speaks
Tuesday : Housing Starts; Building Permits
Wednesday : Producer Price Index; Fed President Fisher speaks
Thursday : Existing Home Sales; Fed President Dudley speaks
Friday : Fed President Pianalto speaks

Mortgage rates have been trending lower in recent weeks and there are few reasons to think that trend will reverse. However, mortgage markets can be wildly unpredictable -- especially when acted upon by an outside force such as the Federal Reserve or the U.S. government.

Stimulus and rheotoric can change mortgage rates in a hurry.

Therefore, if you see today's rates and they fit within your budget, consider locking something in. Once rates start to rise, they're going to rise quickly.

Foreclosures Sink To 4-Year Low

2011-08-12T07:59:00.001-05:00

Foreclosure activity continues to slow.

According to RealtyTrac, a national foreclosure-tracking firm, the number of foreclosure filings nationwide fell 35 percent as compared to July 2010, a statistic suggesting that the housing market continues to improve.

"Foreclosure filing" is a catch-all term encompassing default notices, scheduled auctions, and bank repossessions.

Filings fell to a 44-month low in July 2011.

For all the improvement, though, activity remains concentrated in just a few states. More than half of all bank repossessions last month occurred in just a handful of states.

In July, 6 states accounted for 52% of activity.

California : 19% of all repossessions
Georgia : 8% of all repossessions
Florida : 7% of all repossessions
Texas : 6% of all repossessions
Michigan : 6% of all repossessions
Arizona : 6% of all repossessions

At the other end of the spectrum is Vermont. With just 11 repossessions for all of July, Vermont accounted for 0.016% of repossessions nationwide.

Distressed homes are in high demand with today's home buyers. According to the National Association of REALTORS®, they account for 30% of all home resales. That's no surprise, either.

Distressed homes typically sell at 20 percent discounts as compared to non-distressed ones.

But, if buying a foreclosure is in your agenda, be sure to do your homework. Buying bank-owned homes is different from buying from "people". The contracts are different, the negotiations are different, and the homes are sometimes sold with defects.

If you plan to purchase a foreclosure in Lakeville , therefore, be sure to speak with a licensed real estate agent first. There's plenty of available information online but when it's time to buy, have an experienced agent on your side.

Strong Job Growth In July Trumped By Credit Downgrade

2011-08-11T08:01:00.001-05:00

More Americans are getting back to work.

The latest Non-Farm Payrolls survey from the Bureau of Labor Statistics shows that 117,000 net new jobs were created in July, thumping analyst estimates and surprising Wall Street investors.

In addition, May and June's originally-reported figures were both revised higher:

May 2011 was revised higher by 28,000 jobs
June 2011 was revised higher by 28,000 jobs

The national Unemployment Rate slipped to 9.1 percent.

The jobs report's strong readings would typically be a boon to stock market and a threat to mortgage rates. This is because more employed Americans means more disposable income spent on products and services; and more taxes paid to governments at the federal, state and local level.

This combination fuels consumer spending and supports new job growth, a self-reinforcing cycle that spurs economic growth and often to draw investors into equities.

This month, however, the market reaction has been decidedly different.

Since the Friday release of the July Non-Farm Payrolls report, the Dow Jones Industrial Average has lost close to 6 percent of its value. Furthermore, mortgage bonds -- which typically sink on a strong jobs figure -- have thrived.

High demand for mortgage-backed bonds have pushed mortgage rates below their all-time lows set last November; the biggest cause of which is Standard & Poor's credit downgrade of U.S. government-issued debt.

Ironically, the credit rating downgrade sparked a surge of safe haven bidding that has been tremendous to rate shoppers and home buyers in Eagan and nationwide. Bond buyers are flocking to the U.S.

If you've been shopping for a mortgage, therefore, or recently bought a home, use this week's action to your advantage. Call your lender and ask about rates. You may be surprised at what you find.

A Simple Explanation Of The Federal Reserve Statement (August 9, 2011 Edition)

2011-08-09T13:59:00.001-05:00

Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was 7-3 — the first time in 5 meetings that the nation's Central Bank was non-unanimous and the first time since 1992 that the FOMC adjourned with as many as three dissenters.

In its press release, the FOMC had little good to say about the U.S. economy, noting that since its last meeting in July:

Growth has been "considerably slower" than expected
Labor market conditions have deteriorated
Household spendng has "flattened"

The Fed also noted that the housing sector remains depressed.

On the positive side, the Fed said that business investment in equipment and software continues to expand, and that energy costs have dropped and no longer contribute to inflationary pressures on the economy.

In fact, the Fed worries that inflation may be running too low for the country's good.

To that end, the Federal Reserve has pledged to keep the Fed Funds Rate in its current range near 0.000 percent "at least until mid-2013". This is a departure from prior statements in which the Fed gave no such date.

Mortgage market reaction to the FOMC statement has been positive this afternoon. Mortgage rates in Minnesota are improving, but note that sentiment can shift quickly -- especially in a market as uncertain as this one.

If today's mortgage rates look good in your household budget, consider locking in a rate.

The FOMC's next scheduled meeting is September 20, 2011.

What's Ahead For Mortgage Rates This Week : August 8, 2011

2011-08-08T09:11:00.001-05:00

Mortgage markets were especially volatile last week, taking rate shoppers in Minnesota on a roller-coaster ride. The week's news schedule was full. It included debt ceiling debates, jobs figures, and ongoing maneuverings within the Eurozone.

Each story a material impact on mortgage rates and, as a result, rates varied wildly from day-to-day.

Throughout the early part of the week, mortgage rates fell.

Monday, bond markets improved as leaks of the congressional debt ceiling agreement surfaced. Investors approved of the accord's general terms and bought U.S.-backed debt to prove it. Tuesday, when the final agreement was reached and the terms were made public, mortgage rates dropped again.

This is because the debt ceiling agreement is based on spending cuts and tax increases. In response, analysts revised lower their respective growth estimates for the United States, benefitting bonds.

By Thursday, markets were in full rally mode.

On the eve of the July jobs report, traders flocked to the ultra-safe bond market; "whispers" put the net jobs created figure at a negative. Wall Street feared the worst. By Thursday's close, mortgage pricing was at its best levels since November 2010.

Friday morning, though, markets recoiled. When the Non-Farm Payrolls report showed much-better-than-expected growth, it triggered a bond market sell-off and rates reversed higher. Rates rose more Friday than on any single day since November 30, 2010.

If you were quoted a mortgage rate on Thursday, on Friday, the same mortgage rate cost 1 discount point more.

This week, rates may rise or fall -- it's too soon to tell.

Friday afternoon, after markets closed, S&P downgraded the long-term debt of the U.S. government a notch. Typically, lower credit ratings means higher borrowing costs which leads to higher mortgage rates, among other things. However, it's unclear how markets will react to the S&P decision.

Plus, the Federal Open Market Committee meets Tuesday and that, too, can affect markets.

As always, the prudent move is to lock your mortgage rate if its payment and terms are sensible. There's too much volatility to know what markets might do tomorrow.

Mortgage Rates Make New 2011 Lows

2011-08-05T07:59:00.001-05:00

Mortgage rates in Minnesota plunged to new 2011 lows this week.

According to Freddie Mac's weekly Primary Mortgage Market Survey, the national, average 30-year fixed rate mortgage fell to 4.39% this week -- the lowest 30-year fixed reading since November 18, 2010.

The 0.16 drop from last week is the largest one-week rate drop in more than 2 years, and, although the 30-year fixed remains above its all-time lows from November 2010, two other benchmark products made new records this week.

Both the 15-year fixed rate mortgage and the 5-year ARM are reporting lower than at any time in recorded history.

Freddie Mac puts those average rates at 3.54% and 3.18%, respectively.

Mortgage rates are dropping for several reasons, including :

U.S. economic growth is slower-than-expected
The U.S. government plans to curb its spending
Global investors seek the safety of U.S.-backed bonds

The first two items are unfavorable for business and, as a result, stock markets have sold off all week. The Dow Jones Industrial Average posted an 8-day losing streak and Thursday it made its biggest one-day loss since 2008.

When equities lose, bonds tend to gain. This leads mortgage rates lower.

Mortgage rates also fell on "safe haven" buying; bond buys made because of their relative safety to risky assets. Mortgage bonds are considered "safe" so when economies and geopolitics are uncertain, mortgage rates improve.

Going forward, there are reasons for mortgage rates to fall again. The economy won't rebound overnight and neither will investor confidence. However, markets can be fickle and rates have been known to reverse quickly.

With rates as low as they've been history, it's an advantageous time to refinance your home loan, or purchase a new property.

Closing At The Start Of September? Watch Out For Labor Day.

2011-08-04T07:58:00.001-05:00

Home sales have heated up, according to the National Association of REALTORS®.

More homes are going under contract this summer than went during the winter or spring seasons. Many of these homes are scheduled for late-August/early-September closings.

If your home is among them, plan ahead.

Like for the rest of the U.S. workforce, Labor Day is a popular vacation time in the real estate, title and mortgage industries. Closings come together more slowly when the parties involved are on holiday. In addition, when issues arise, they are often slower to resolve because not everyone is "present".

Therefore, if you're under contract to buy or sell your home, or have a refinance in-process with a lender, get proactive with your home and your loan. Finalize your approval as quickly as possible.

Here are some tips to help your loan clear faster:

Prepay your first year of homeowners insurance, effective your closing date. Provide proof of payment to your lender.
Document and deposit all gifts and retirement withdrawals to be used at your closing as early in the process as possible.
Get Power of Attorney forms signed by all parties, and lender-approved, if applicable.
When your lender makes a paperwork request, fulfill the request within 24 hours.

There are steps you can take to make your closing go more smoothly, too.

First, if your transaction is purchase, don't leave your walk-through for the last-minute. Schedule it for as early as reasonable. This way, if there's an issue, there's ample time to resolve it. Remember, it's harder to solve problems when one or more parties to the transaction is away on vacation.

Second, if you have planned time off between now and your closing, make it known, and be reachable in the event of emergency by phone, email or both.

Lastly, if possible, avoid scheduling your closing for the Friday before Labor Day or the Tuesday after. Real estate, title and lender offices are notoriously short-staffed and overworked on these two days. Routine tasks take longer than usual.

You can't stop people from going on vacation, but you can plan for it. It would be foolish not to.

A Mortgage Rate Strategy For July's Jobs Report

2011-08-03T07:58:00.001-05:00

At 8:30 AM ET Friday, the Bureau of Labor Statistics will release the July 2011 Non-Farm Payrolls report. Mark it in your calendar. If you've been watching mortgage rates fall to new all-time lows this week and fear a mortgage rate reversal, Friday could be the day.

The monthly Non-Farm Payrolls data can swing a big stick in mortgage markets.

More commonly called "the jobs report", Non-Farm Payrolls details the U.S. workforce, providing sector-by-sector analysis of workforce, as well as the national Unemployment Rate.

The jobs report affects mortgage rates because of how important jobs are to the U.S. economy.

When there are more working Americans:

There's more consumer spending, a boost to businesses
There's more tax collection, a boost to governments
There's more personal savings, a boost to households

In July, analysts anticipate 85,000 new jobs created. This would be a 4-fold increase from June's 18,000 figure.

The Unemployment Rate is expected to remain unchanged at 9.2%.

For rate shoppers and home buyers in Minnesota , these Wall Street expectations can be as important as the actual data itself. Right now, traders placing bets, expecting 85,000 new jobs in July. If the final tally is more than 85,000, traders will load up on equities at the expense of bonds. This is because job growth is good for the economy.

When bonds sell off, rates rise.

Conversely, if jobs growth is less than 85,000, mortgage rates should drop.

Mortgage rates are near all-time lows this morning. By Friday, they could rise. The safe move is to lock your rate today. Rates may fall when the jobs report is released, but there's much more room for rates to rise.

What Will The Debt Ceiling Agreement Do To Mortgage Rates?

2011-08-02T07:55:00.001-05:00

The United States is projected to reach its legal $14.294 trillion debt limit today. The limit was set by Congress February 12, 2010. The U.S. Treasury may not issue new debt beyond the debt ceiling.

Since April 2011, Congress has debated ways to remain below the nation's $14.292 trillion borrowing limit. The debate commenced with the passage of the 2011 U.S. Federal Budget which featured a $1.645 trillion deficit.

This multi-trillion dollar deficit ensured that the debt ceiling would be touched at some point during the current fiscal year.

That date was May 16. It took an intervention from the Treasury Secretary to temporarily extend the limits; an "extraordinary measure" meant to keep the U.S. government from defaulting on its debt.

With additional room to borrow, then, the U.S. Treasury's new debt ceiling date was moved to August 2. Congress has been debating the federal budget since mid-May with the dual-goal of (1) Remaining below the federal debt limit, and (2) Creating a budgetary surplus for the future.

An agreement is expected today.

For home buyers and rate shoppers in Apple Valley , this is an important development. The debt ceiling agreement will influence mortgage markets and, as a result, require amendments to home affordability calculations. As mortgage rates change, your purchasing power does, too.

Unfortunately, we don't know in which direction mortgage rates will go.

Since the prospect of a deal was first hinted Friday, mortgage rates have been improving. Conforming, 30-year fixed rates are down nearly 0.250 percent, lowering a $150,000 mortgage payment by $22 per month.

The final deal terms of a deal, however, could lead rates higher.

As always, the safest play is to lock your mortgage rate if you are comfortable with its proposed payment. Yes, mortgage rates may move lower in the future but, then again, maybe they'll move higher.

What's Ahead For Mortgage Rates This Week : August 1, 2011

2011-08-01T08:05:00.001-05:00

Mortgage markets improved last week as the U.S. debt ceiling debate continued on Capitol Hill. Bonds traded in a range Monday through Thursday before breaking higher Friday morning.

30-year fixed conforming mortgage rates improved in Minnesota last week, falling to levels just north the product's all-time low set in November 2010.

5-year ARMs improved last week, too. The benchmark adjustable-rate mortgage's average national rate is now tied with its all-time low, also set last November.

This week, the direction of mortgage rates depends on two events:

The resolution of the U.S. debt ceiling debate, due Tuesday
The July Non-Farm Payrolls report, due Friday

Mortgage rates will be volatile as markets grapple with the expectations for the above events, and their eventual outcomes.

Sunday evening, for example, congressional leaders reached an agreement to raise the U.S. debt ceiling by $2.1 trillion, and to introduce $2.5 trillion in budget cuts within 10 years. The deal must pass Congress, however, and until it does, speculation will push mortgage rates around.

Friday's jobs report should swing mortgage rates, too.

After starting the year strong, the 2011 jobs market has faded. Net new jobs have dropped 5 months in the row and the national Unemployment Rate is climbing. Weak job growth portends weak consumer spending and a weak economy -- typically two outcomes that are good for mortgage rates.

Because of doubt cast by the debt ceiling debate, though, it's too soon to know how Wall Street will react to the jobs data -- strong or weak.

For now, mortgage rates remain low. They may fall further, or they may not. The "safe bet" is to lock.

Pending Home Sales Rise For 3rd Straight Month

2011-07-29T08:02:00.001-05:00

Buyers are writing contracts at a furious pace nationwide.

On a seasonally-adjusted basis, the Pending Home Sales Index rose 2 percent last month to reach its highest level since March.

A "pending home sale" is a home under contract to sell, but not yet closed.

The forward-looking Pending Home Sales Index is up 11 percent from its low of the year, according to the National Association of REALTORS®, and well ahead of its rolling 6-month average.

Unfortunately, national data isn't always helpful for buyers and sellers in Lakeville and nationwide. To help make data more relevant, therefore, the official Pending Home Sales Index report includes a region-by-region breakdown.

Between May and June 2011, results were mixed:

Northeast Region: -0.4%
Midwest Region : -3.7%
South Region : +4.4%
West Region : +6.4%

However, even the value of regional data may be dubious.

The West Region, for example, which showed big gains in June, is comprised of multiple states containing thousands of cities and towns. Some of those areas outperformed the region, and some of them underperformed. The Pending Home Sales Index doesn't show which towns did which. It can't.

For everyday buyers and sellers , it's the local data that matters.

The Pending Home Sales Index shows that more contracts were written in June than in April or May -- a good sign for housing overall. And because 80% of all contracts close within 60 days, we can expect the summer's home resale activity to be high.

This leads home prices higher.

With mortgage rates low and home sales spiking, now may be the best time to buy a home in 2011. Home prices appear to be rising and mortgage rates should, too.

16 of 20 Case-Shiller Cities Show Improvement In May

2011-07-28T07:57:00.001-05:00

Standard & Poors released its May 2011 Case-Shiller Index this week. The index measures change in home prices from month-to-month, and year-to-year, in select U.S. cities.

May's Case-Shiller Index showed a 1 percent increase from April 2011. Home values rose in 16 of the Case-Shiller Index's 20 tracked markets. Only Detroit, Las Vegas and Tampa fell. Phoenix was flat.

Don't look too far into the findings, though. Like the FHFA's Home Price Index, the Case-Shiller Index is rife with flaws.

The first flaw of the Case-Shiller Index is its limited geography. Despite being positioned as a national housing index, Case-Schiller Index is sourced from just 20 cities nationwide. There are more than 3,100 municipalities nationwide.

The Case Shiller Index's second flaw is that it ignores all home types excepts for single-family, detached homes in its findings. Condominiums, multi-family homes, and new construction are not included in the Case-Shiller Index.

In some markets, these excluded home types outnumber the included ones.

Furthermore, the Case-Shiller Index is flawed in that it takes 60 days to release.

The Case-Schiller Index reports on a housing market from 2 months ago -- hardly helpful for today's buyers and sellers in Eagan , trying to make sense of today's real estate market data.

When you want real-time housing market data, therefore, look past the Case-Shiller Index and talk to a real estate professional instead. It's where you'll get your best, most relevant information.

New Home Supplies Keep Shrinking; Prices Pressured Higher

2011-07-27T07:57:00.001-05:00

Home builders are slowly reducing inventory.

According to Census Bureau data, the number of new homes slid 1 percent from May. On a seasonally-adjusted, annualized basis, home buyers bought 312,000 newly-built homes last month.

It's the third straight month of falling sales and the headline data casts the Eagan housing market in a negative light.

Upon closer inspection, however, the numbers appear quite strong.

First, sales are down marginally. Total units sold have dropped just 2 percent from the highs of the year. And, second, the number of newly-built homes for sale is down markedly from last year

There are 22% fewer new homes for sale today as compared to June 2010

At today's sales pace, the complete new home inventory would be sold in 6.3 months -- the quickest sell-out window since the expiration of the 2010 federal home buyer tax credit.

Builders are feeling better about their business, too.

After falling to a 9-month low, homebuilder confidence rebounded this month, boosted by expectations for a strong fall season. For buyers across Minnesota , this could be seen as a market-shifting signal.

When builder confidence rises, negotiating for upgrades and price reductions can be tougher; "good deals" get scarce.

If you're a home buyer and are considering new construction, don't let the headlines fool you. Sales figures are slipping, but that's because there are fewer homes are for sale nationwide. The inventory is shrinking and that can push home prices higher.

With mortgage rates still low, today's market may be your best value of the year.

Is An FHA Mortgage Better Than A Conforming One?

2011-07-26T07:57:00.001-05:00

The FHA is insuring a greater percentage of loans than during any time in recent history. In 2006, it insured roughly 5 percent of the purchase mortgage market. Today, it insures one-quarter. "Going FHA" is more common than ever before -- but is it better?

The answer -- like most things in mortgage -- depends on your circumstance.

Like its conforming counterpart, an FHA-insured mortgage is available as a fixed-rate loan and as an adjustable-rate one. Payments are made monthly and come without prepayment penalties.

That's where the similarities end, however, and decision-making begins. For homeowners and buyers across Lakeville , FHA mortgages carry a different set rules as compared to conforming loans through Fannie Mae or Freddie Mac that can render them more -- or less -- attractive for financing.

For example:

FHA mortgages can be assumed by a subsequent buyer. Conforming loans may not.
FHA mortgages require mortgage insurance, regardless of downpayment. Conforming loans do not.
FHA mortgages do not have loan-level pricing adjustment. Conforming loans do.

FHA mortgages also require smaller downpayment requirements versus a comparable conforming mortgage. FHA calls for a minimum downpayment of 3.5%. Conforming mortgages often require 5 percent or more.

And, lastly, FHA mortgages are priced differently from conforming ones. Since 2005, the average FHA mortgage rate has been below the average conforming mortgage rate more than 50% of the time, meaning that an FHA mortgage's principal + interest payment is lower than a comparable Fannie/Freddie loan.

Today, conforming mortgage rates are lower.

So, which is better -- FHA loans or conforming ones? Like most things in mortgage, it depends. FHA-insured loans can be big money-savers or money-wasters. To find out which is best for you, ask your loan officer for today's market interest rates and study the results.

With less than 20% equity, the answer is often clear.

What's Ahead For Mortgage Rates This Week : July 25, 2011

2011-07-25T08:07:00.001-05:00

Mortgage markets worsened last week as the Greek sovereign debt situation came closer to final resolution, and as the U.S. housing market showed signs of life.

After many weeks, European leaders agreed on a financial package for Greece that featured favorable loan terms designed to slow Eurozone contagion, along with a built-in, 37 billion euro "haircut" for private-sector investors.

The accord pleased Wall Street. Equities rallied after the announcement. Mortgage bonds sank.

Bonds also sank after a strong home builder confidence report Monday.

Last week, conforming and FHA fixed mortgage rates increased in Minnesota and for the first time in 3 weeks. Adjustable-rate mortgages slipped slightly.

The interest rate spread between the Freddie Mac 30-year fixed rate and 5-year ARM is back near its all-time high.

This week, mortgage rates will be guided by Congress's on-going U.S. debt ceiling debate. The United States government is expected reach its legal $14.294 trillion debt limit August 2, 2011. Congress must either vote to raise the debt ceiling, or take steps to reduce debt prior to August 2.

The debt ceiling was last raised February 12, 2010.

It's unclear in which direction Congress will vote. Therefore, mortgage rates may be erratic until a deal is reached. If the debt limit is raised, expect mortgage rates to rise. This is because carrying high levels of debt can devalue the U.S. dollar and mortgage bonds are less valuable as the dollar weakens.

On the other hand, if Congress votes to make cuts in the budget, mortgage rates should fall. This is because fewer treasury securities will be issued, creating fewer inflationary pressures on the U.S. economy. Inflation is linked to higher mortgage rates.

Also this week : New Home Sales (Tuesday), Pending Home Sales (Thursday), Consumer Sentiment (Friday), plus Treasury auctions of 2-year, 5-year and 7-year notes. Each event can move mortgage rates so be ready to lock at a moment's notice.

Mortgage rates remain low. By August 2, they could be much higher.

Home Prices Rise For The 2nd Straight Month

2011-07-22T07:55:00.001-05:00

A strong spring season helped home values recover, says the government.

According to the Federal Home Finance Agency's Home Price Index, home prices rose a seasonally-adjusted 0.4 percent from April to May.

It's the HPI's second straight increase, and puts the monthly index at its highest point since January 2011.

As a home seller in Lakeville , you may appreciate news such as "rising home prices", but it's important to remember that the Home Price Index has a several built-in flaws -- the biggest of which its age.

Today, the calendar nearly reads August, yet, we're still discussing May's housing data. A 2-month delay does little to help buyers and sellers wanting to know the "right now" of housing.

Unfortunately, the Home Price Index data is even more aged than that.

Because the FHFA's Home Price Index measures home prices as recorded at closing, the actual sales prices included in the index are from real estate contracts written 30-60 days prior.

In other words, when we look at the Home Price Index report for May, what we're really seeing is a snapshot of the housing market as it existed in March. March's housing market has little to do with the forces driving home prices today.

Today's real estate market is driven by today's economics.

The Home Price Index is a useful gauge for economists and law-makers; it shows long-term national trends in the housing market which can be used to allocate resources to a project, or to form new policy. For home buyers across the state of Minnesota , though, it's less helpful.

For today's real estate buyers and sellers, there's no substitute for real-time data. For that, talk to a real estate professional.

Existing Home Sales Fall To 8-Month Low

2011-07-21T07:55:00.001-05:00

Home resales slipped for the 3rd straight month, according to data from the National Association of REALTORS®.

The Existing Home Sales posted a 1 percent drop from May as the number of homes sold fell to a seasonally-adjusted, annualized 4.77 million units. It's the monthly report's lowest reading since November 2010.

The report also showed the national supply of homes for sales rising to 9.5 months -- also its highest reading since November 2010.

Home Supply is the amount of time it would take to exhaust the complete home inventory at the current pace of sales.

June's Existing Home Sales data would have been stronger if not for a high contract cancellation rate. As compared to May's 4 percent rate, June's cancellation rate was 16 percent; an elevated figure that "stands out in contrast" to what's typical, according to the REALTOR® trade group.

By region, home resale activity varied:

Northeast : -5.2% from May
South :+0.5% from May
Midwest : +1.0% from May
West : -1.7% from May

This disparity from region-to-region highlights an important housing market concept. Namely, that all real estate is local. Because just as the Existing Home Sales varies on a regional level, it varies on a state-wide level, too.

What's true for California housing is not necessarily what's true for Florida housing, for example. Each of the 50 states has its own trends, and within those 50 states, there are thousands of cities and neighborhoods, each with their own trends, too.

The "national housing market" doesn't exist, so national data is rendered somewhat useless.

For data in Lakeville or your local market, talk to your real estate agent.

Housing Starts Surge 9 Percent; Signal A Strong Fall Season

2011-07-20T07:55:00.001-05:00

Builders are busy once again.

According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June -- a 9 percent spike from the month prior and the highest reading in 3 seasons.

A "Housing Start" is defined as a home breaking ground on new construction.

June's reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.

Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.

For buyers of new construction, the news is mixed. Rising confidence may mean that builders in Apple Valley are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.

Adding to the nation's home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders.

The Census Bureau also reported on Building Permits.

In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.

Momentum should carry forward into fall.

If you're buying new construction in Minnesota , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.

Led By Expectations Of A Strong Fall Season, Homebuilder Confidence Bounces Back

2011-07-19T07:57:00.001-05:00

Homebuilder confidence is bouncing back.

One month after an unceremonious dip highlighted by poor sales figures and dim prospects for the future, the National Association of Homebuilder's Housing Market Index rebounded two points to 15 in July.

The monthly Housing Market Index is scored on a 1-100 scale. Readings above 50 indicate favorable conditions for homebuilders and the "new home" market. Readings below 50 indicate unfavorable conditions.

The Housing Market Index has not read higher than 50 in more than 5 years.

As a housing metric, the HMI is actually a composite of three separate surveys, self-reported by builders. The surveys ask about current single-family home sales volume; projected single-family home sales volume; and current buyer foot traffic levels.

In July, the responses read as follows :

Current single-family sales : 15 (+2 from June)
Projected single-family sales : 22 (+7 from June)
Buyer foot traffic : 12 (Unchanged from June)

The most noteworthy reading is the rapid rise in Projected single-family home sales. Although builders aren't experiencing more foot traffic, they think sales will spike between now and the New Year.

That could spell bad news for Lakeville home buyers.

When builders harbor higher expectations for the future, they're less willing to make concessions for upgrades and/or price. Your likelihood of getting "a great deal" as a buyer diminishes.

That's why it's good that mortgage rates are still so low. Low mortgage rates help with home affordability and can offset slight jumps in sale price.

Mortgage rates remain just above their lowest levels of 2011, and of all-time.

What's Ahead For Mortgage Rates This Week : July 18, 2011

2011-07-18T08:54:00.001-05:00

Mortgage markets worsened last week as concerns for the global economy drove new rounds of "safe haven" buying. Fear continues to dominate mortgage bond market movement and Minnesota rate shoppers are benefiting.

Conforming and FHA mortgage rates fell for the second straight week last week, and closed out Friday with favorable momentum to the downside.

There were three main mortgage market drivers last week.

The first is tied to the Eurozone.

Although the Greek Parliament reached agreement on austerity measures for the nation-state two weeks ago, concerns that a debt crisis could spill into Italy, Portugal, Ireland, and/or Spain resurfaced last week. The debt of both Ireland and Portugal was downgraded to Junk status, and Italy and Spain may follow soon.

U.S. bond markets gained on the news.

The second story was the just-released Fed Minutes. Notes from the FOMC meeting showed that Ben Bernanke & Co. debated a slowing U.S. economy, the weakening domestic jobs market, and whether a third round of economic stimulus would be necessary. This, too, dragged mortgage rates lower.

The third story is one that's still forming -- the U.S. Debt Ceiling Debate. For now, the issue remains on the market periphery, but as the August 2 debt limit deadline nears, expect more influence over day-to-day mortgage rates.

Other factors in mortgage rates this week include the Existing Home Sales report; Housing Starts data; Homebuilder Confidence Survey; and, Jobless Claims.

Mortgage rates are low but remain volatile. If you're wondering whether now is a good time to lock your rate, consider that it's better to be safe than sorry. If mortgage rates rise this week, the rise may be permanent.

Rates can only stay low for so long.

Retail Sales Rise For 12th Straight Month In June

2011-07-15T07:58:00.001-05:00

The American Consumer will not be deterred.

Despite worsening jobless figures and an increase in the Cost of Living, Retail Sales are climbing. In June, for the 12th straight month, retail receipts rose, excluding cars and auto parts.

Analysts expected no change from May. Instead, receipts topped $321 billion -- an all-time record.

For home buyers and would-be refinancers in Apple Valley , this is a bit of unwelcome news. Mortgage rates are rising in the wake of the Retail Sales data release.

This is because Retail Sales account for roughly half of consumer spending, and nearly one-third of the economy overall. A rise in Retail Sales, therefore, suggests stronger growth ahead.

Here's how it happens.

As consumers spend more money, businesses sell more product. So, to accommodate burgeoning demand, business hire additional employees, and are forced to make additional capital expenditures as well.

This rise in spending prompts other businesses to hire and spend; to meet their own respective demand surges. There's a chain reaction-like effect.

Then, with businesses carrying larger payrolls and bigger staffs, federal, state and local governments realize bigger tax bases and can fund new and existing projects.

This, too, leads to hiring and the cycle repeats.

A weak economic outlook dragged down mortgage rates last week. This week's Retail Sales data reversed that flow. Mortgage rates are higher by 1/8 percent -- roughly $8 per $100,000 borrowed.

Retail Sales are up 8 percent from a year ago.

For The 9th Straight Month, Foreclosure Filings Fall

2011-07-14T07:57:00.001-05:00

For the 9th straight month last month, foreclosure activity slowed.

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings dropped 29 percent nationwide on an annual basis in June. The phrase "foreclosure filing" is a catch-all term, comprising default notices, scheduled auctions, and bank repossessions.

June marked the ninth consecutive month of sub-300,000 filings after 20 months above it -- a promising signal for the housing market in Minnesota and nationwide.

It's also noteworthy that each of the 10 most foreclosure-heavy states showed fewer foreclosures in June 2011 as compared to June 2010, led by Florida's 54% decline. Florida is one of 4 states on the leading edge of foreclosure activity since 2007.

The other 3 states performed similarly well in June:

California : -22% on an annual basis
Arizona : -7% on an annual basis
Michigan : -25% on an annual basis

The decrease in foreclosure filings comes at a time when buyer demand is highest. According to the National Association of REALTORS®, "distressed properties" account for more than 30 percent of all home resales and no wonder -- homes in various stages of foreclosure or sold by short sale are selling with discounts of 20 percent versus comparable non-distressed homes.

For buyers in search of foreclosures , talk with a licensed real estate. Buying homes in foreclosure follows a different process path as compared to buying a "traditional" home. Make sure you seek the help of a professional.

Fed Minutes Hint At New Economic Stimulus

2011-07-13T07:57:00.001-05:00

The Federal Reserve released its June 2011 Federal Open Market Committee meeting minutes Tuesday. It contained no surprises and, as such, mortgage rates in Minnesota have idled in the hours since.

The Fed Minutes is published 8 times annually, three weeks after each scheduled Federal Open Market Committee meeting. It's the official log of the meeting's conversations and debates.

The Fed Minutes is the lengthier companion piece to the FOMC's more well-known, post-meeting press release. As compared to the brief-and-focused press release,by comparison, the Fed Minutes are long and detailed.

June's press release was 458 words long. Its minutes totaled 6,889 words.

The June minutes reveal some interesting perspectives from within the Federal Reserve, too.

On growth : Economic recovery had been slower than the committee expected
On housing : The market remains depressed. Foreclosures are "holding back" construction.
On rates : The Fed Funds Rate should remain low for an "extended" period

In addition, the Federal Reserve discussed whether a new round of economic stimulus was necessary. Committee members agreed that a poor outlook for employment in the medium-term would make this move more likely.

There was little that surprised Wall Street in the June Fed Minutes. This is why market reaction has been muted since its release.

The FOMC meets next August 9. If jobs data continues to weaken between now and then, expect the stimulus chatter to continue. It's unclear, however, how this would impact mortgage rates.

For now, mortgage rates remain near their all-time lows, and they have much more room to rise than to fall. If you're shopping for a loan, therefore, the timing is right for a lock.

What Is Annual Percentage Rate (APR)?

2011-07-12T07:58:00.001-05:00

More commonly called APR, Annual Percentage Rate is a government-mandated mortgage comparison tool. It measures the total cost of borrowing over the life of a loan into dollars-and-cents.

A loan's APR is printed in the top-left corner of the Federal Truth-In-Lending Disclosure, as shown above. When quoting an interest rate, loan officers are required by law to disclose a loan's APR, too.

APR is meant to simplify the process of choosing between two or more loans. The theory is that the loan with the lowest APR is the "best deal" for the applicant because the loan's long-term costs are lowest. However, the loan with the lowest APR isn't always best.

APR makes assumptions in its formula that can render it moot.

First, APR assumes you'll pay your mortgage off at term, at never sooner. So, if your loan is a 15-year fixed rate, its APR is based on a full 15 year term. If you sell or refinance prior to Year 15, the math used to make your loan's APR becomes instantly flawed and "wrong".

Example: Let's compare two identical loans in Minnesota -- one with discount points and a lower interest rate; and one without discount points and a higher mortgage rate. The loan with discount points will have a lower APR in most cases. However, if the homeowner sells or refinances within the first few years, the loan with the higher APR would have been the better option, in hindsight.

Second, APR can be "doctored" early in the loan process.

Because the APR formula accounts for third-party costs in a mortgage transaction, and third-party costs aren't always known at the start of a loan, a bank can inadvertently understate them. This would make the APR appear lower than what it really is, and may mislead a consumer.

And, lastly, APR is particurly unhelpful for adjustable-rate loans. Because the APR calculation makes assumptions about how a loan will adjust during its 30-year term, if two lenders use a different set of assumptions, their APRs will differ -- even if the loans are identical in every other way. The lender whose adjustments are most aggressively-low will present the lowest APR.

Summarized, APR is not the metric for comparing mortgages -- it's a metric. For relevant comparison points, talk to your loan officer.

What's Ahead For Mortgage Rates This Week : July 11, 2011

2011-07-11T08:00:00.001-05:00

Mortgage markets improved in roller coaster-like trading last week. And, not surprisingly, the week's two big stories were the same two stories roiling mortgage markets since March -- Greece and Jobs.

In both instances, rate shoppers won. Conforming mortgage rates in Minnesota improved for the first time in 3 weeks last week.

Early in the week, mortgage rates fell as doubts resurfaced on the just-completed Greece aid package. Although an agreement had been reached by the Greek Parliament, investors are wondering if it's a bona fide solution, or delaying an inevitable default.

Talk like this triggers a flight-to-quality, and last week, it led mortgage rates lower.

Then, mid-week, a strong preview of the Friday jobs report led to a reversal. Mortgage markets sold off sharply with the prospect of a blow-out Non-Farm Payrolls number. Analysts upped their estimates 50% -- from 80,000 net new jobs created in June to 120,000 -- and mortgage rates spiked in anticipation.

The rate rise was short-lived, however, because when the actual jobs report was released, it showed just 14,000 jobs added in June. Mortgage markets reversed and mortgage rates sunk to their best levels in 2 weeks.

This week, Greece should remain in the headlines, but there's other rate-changing news, too:

Tuesday : FOMC Minutes
Wednesday : 10-Year Treasury Auction
Thursday : PPI; 30-Year Treasury Auction; Jobless Claims
Friday : CPI; Consumer Sentiment

If you're still floating a mortgage rate, today marks a good week to lock. Mortgage rates could fall this week and next, but there's more room for rates to rise than to fall.

Lock up today's low rates while they're still available.

Mid-Year Review : Were The Experts Right About The Market?

2011-07-08T07:57:00.001-05:00

The year is half-over. It's an opportune time to take stock of analyst predictions made at the start of the year, and to recognize that the "experts" can be wrong as often as they are right.

For as much experience and authority an expert brings to the conversation, though, nobody can accurately predict the future.

As such, there's often disagreement.

Looking back to December, some housing analysts called for a market rebound this year; while others called for a fall. With respect to mortgages, some said rates had nowhere to go but up; while others expected more dips.

As a layperson, how do you know who will be right?

In short, you can't.

Predictions are a tricky business because they're guesses about the future based on the world as it exists today. When the predictions listed earlier were made, the world was a different place.

A lot has changed since January:

Slowing job growth has suggested to slower U.S. economic growth
Food and energy costs have spiked, adding inflationary pressures to the economy
Eurozone debt issues have grown, punctuated by a near-Greek default
Tsunamis have caused widespread damage in Japan
Earthquakes, floods and volcanoes have harmed economic output

None of these events had occurred as of December, when the original predictions were made. Yet, each of these developments has made a deep impact on housing, and on the economy.

So, what's a Eagan homeowner to do? Think of the present instead.

First, mortgage rates are low today -- extremely low by historical standards. Second, home values have been slow to rebound through most U.S. markets. Combined, these factors have made homes more affordable than it any time in recorded history. It's not only cheap to buy a home right now, it's cheap to refinance one, too.

Analysts are saying the home prices will rise this year, and mortgage rates will, too. Those predictions may ultimately be proven true. Until the future arrives, though, those predictions are just guesses.

Economy Expected To Have Added 80,000 Jobs In June

2011-07-07T08:00:00.001-05:00

Friday morning, at 8:30 AM ET, the Bureau of Labor Statistics releases its June Non-Farm Payrolls report. If you're currently shopping for a mortgage, or floating a mortgage rate, be prepared. Mortgage rates can change following the monthly report's release.

Often, by a lot.

More commonly called "the jobs report", Non-Farm Payrolls reports on the U.S. workforce by sector, summarizing its findings in terms of total workforce size, and as a national Unemployment Rate. Jobs are considered a keystone in the continuing U.S. economic recovery.

More working Americans means:

More consumer spending, a boost to businesses
More tax collection, a boost to governments
More personal savings, a boost to households

For June, analysts expect the government to report 80,000 net new jobs created, and no change in the 9.1% Unemployment Rate.

Although these figures are slightly below than what can be considered "strong growth", that's not what should concern Lakeville rate shoppers. Mortgage markets react to a deviation from estimates more than to the actual results themselves.

This is because Wall Street placed bets in advance of the jobs report's release. If jobs growth tallies more than 80,000, therefore, it signals better news for the economy than what was expected. This will push banks and investors towards equities, and away from bonds -- including the mortgage-backed kind.

With less demand for mortgage bonds, mortgage rates will rise.

Conversely, if jobs growth is less than 80,000, mortgage rates should fall.

Mortgage rates remain near their lows for the year, but if the June Non-Farm Payrolls report beats estimates of 80,000 jobs made in June, look for mortgage rates to spike. The safe move is to lock today.

What To Know Before You Move To A New Neighborhood

2011-07-06T07:58:00.001-05:00

As home buyers in the Apple Valley area , we tend to research homes a lot. We look at square footage; at upgrades; at landscaping; at community statistics; and, at every other "number" on which we can get our hands.

But those are just statistics. What about the home's "feel"?

In this 5-minute piece from NBC's The Today Show, you'll learn a dozen complementary home-shopping techniques to help you review and evaluate a home for purchase. Each is focused on findings you won't see listed on a website.

For example, instead of scheduling your second showing for the same time of day as your first one, revisit a home during an "opposite" time. if you originally saw the home in daylight, go see it at nighttime. If you first saw a home on the weekend, go see it during the work week.

By seeing a home in two distinct settings, you can get a better feel for what the home and neighborhood are really like.

Some of the other tips from the video include:

Visit during Rush Hour and on a Saturday night. This will help you gauge sound levels of the street.
Go to Google Maps and study the aerial shot of the home. What's nearby?
Talk to neighbors. They'll share everything about the neighborhood with you -- good and bad.

When you buy a home, you committing to more than just the property. You're committing to the neighborhood, too. Armed with the methods described in this video, you'll be better prepared to make a good decision.

What's Ahead For Mortgage Rates : Week Of July 5, 2011

2011-07-05T07:59:00.001-05:00

Mortgage markets worsened last week as Wall Street's renewed optimism pushed equities to their best one-week gain in 2 years. The change in sentiment was bad news for rate shoppers, however, as investors pored into stocks at the expense of bonds.

Last week, for the first time since February, mortgage rates rose 5 days in a row. By the time bond markets closed for the 3-day weekend, conforming fixed mortgage rates in Minnesota had climbed to their worst levels since mid-May.

Mortgage rates are now at 7-week highs.

The biggest reason for last week's mortgage rate turnaround is that lawmakers in Greece approved a national austerity plan. Reaching an accord on spending cuts and tax increases was a necessary step for the nation-state to avoid defaulting on its debt and falling into bankruptcy.

Until last week, it wasn't clear whether the Greek Parliament would reach this agreement, and this fear is why mortgage rates were down through May and June. Faloout from a default would have created global economic uncertainty and uncertainty tends to be good for mortgage rates.

With agreement reached, though, that uncertainty is minimized. Mortgage rates are reversing.

This week, the big news will be June's Non-Farm Payroll report, set for release Friday morning. If jobs growth is stronger-than-expected, stock markets should continue to post gains and mortgage rates should continue to rise.

The jobs report is a market-mover. If you're floating a mortgage rate and wondering whether to lock, it may be prudent to lock ahead of Friday's release.

5-Year ARM Falls To Historic Lows

2011-07-01T07:55:00.001-05:00

The interest rate differential between fixed-rate and adjustable-rate mortgages continues to widen and has now reached historic levels.

There's never been a better time to lock an ARM.

According to Freddie Mac's weekly Primary Mortgage Market Survey, homeowners in Apple Valley who lock their mortgage rate today will save 129 basis points on rate, on average, by choosing a 5-year ARM as their mortgage product as compared to a 30-year fixed rate loan.

The average 30-year fixed rate is 4.51%. The average 5-year ARM rate is 3.22%.

It's the biggest interest rate spread between fixed-rate and adjustable-rate mortgage rates in Freddie Mac's recorded history; a gap which is the result, in part, of the 5-year ARM dropping to all-time lows this week.

Rates for the 5-year ARM are even lower than during last year's historic Refi Boom.

Putting today's "spread" in action against a hypothetical $250,000 loan size, a homeowner that chooses an ARM over a fixed-rate loan would save $184.30 monthly, and would have $500 fewer closing costs.

That's a 5-year savings of $11,558 -- nearly triple what you would have saved just 2 years ago.

The main reason why today's adjustable-rate mortgages are priced so aggressively relative to comparable fixed-rate loans is that Wall Street expects the economy to drag for the next several quarters, after which it expects an acceleration.

ARMs tend to reflect short-term expectations for the U.S. economy which is why short-term mortgage rates are dropping. Fixed products, by contrast, take a longer view and expectations for an economic rebound are pulling fixed-rate mortgage rates up.

For now, mortgage applicants can exploit the difference -- especially those who plan to move within the next 5 years -- but adjustable-rate mortgages aren't right for everyone. ARMs carry particular risks about which you should be aware before locking.

Before you choose an ARM, therefore, talk it through with your loan officer.

Pending Home Sales Unexpectedly Spike In May

2011-06-30T08:01:00.001-05:00

The summer housing market is heating up.

According to data from the National Association of REALTORS®, the Pending Home Sales Index smashed analyst expectations, jumping 8 percent on a monthly basis in May.

Wall Street calls were for an increase of just 0.5 percent.

It was a surprise result that, coupled with the recent stronger-than-expected New Home Sales and Existing Home Sales readings, has sparked housing market optimism in Minnesota and nationwide.

The biggest reason for the optimism is because of what the Pending Home Sales Index measures.

In contrast to "traditional" housing data which reports on how housing performed two months ago, for example, the Pending Home Sales Index is a forward-looking indicator; a predictor of future market activity based on freshly-written contracts between buyers and sellers.

In other words, the Pending Home Sales Index looks ahead -- not back. This is reflected in its methodology which states that 80% of homes under contract close within 2 months, and a large percentage of the rest close within Months 3 and 4.

Because May's Pending Home Sales Index rose sharply, therefore, we can expect similar jumps in the Existing Home Sales figures of June and July.

For housing and home prices, this is a positive but the gains won't apply to each home equally. The Pending Home Sales Index is still a national report for a market built on local sales. What's happening on your particular street in your particular neighborhood may not reflect what's happening somewhere else.

For accurate, real-time data in your local market, ask a real estate agent for statistics.

Home Values Climb 0.8 Percent In April

2011-06-29T08:01:00.001-05:00

Maybe homes in Lakeville are holding value better than we thought.

Between March and April of this year, home values rose 0.8 percent nationally, according to the Federal Housing Finance Agency's Home Price Index. It's the index's first month-to-month improvement since May of last year.

Values are down 19 percent since peaking 4 years ago.

Private-sector data affirms the government's report.

Tuesday, the S&P's Case-Shiller Index also showed home values higher by 0.8 percent in April, on a monthly basis. Led by Washington, D.C. and San Francisco, 13 of the Case-Shiller's 20 tracked markets showed improvement in April.

In March, just 2 markets did.

As a home seller , it's nice to see reports of rising home prices after multiple months of "bad news". However, the data may not be as rosy as it appears to be. National real estate surveys including the Home Price Index and the Case-Shiller Index are flawed for everyday buyers and sellers.

The biggest flaw is "age". Both the Home Price Index and the Case-Shiller Index report on a near 2-month delay.

This week, the calendar turns to July. Yet, we're still discussing housing news from April. The housing market of 60 days ago was very different from the housing market of today. Mortgage rates are different, market drivers are different, and the pool of buyers is likely different, too.

We can't discuss today's housing market with "April" in mind. The data is irrelevant.

Another flaw is that both reports are national in scope. Real estate, by contrast, is local.

When we cite the Home Price Index or the Case-Shiller Index, for example, and say "home values rose 0.8% in April", we're just giving a national average. On the local level, some markets rose by more, some rose by less, and others actually fell.

People buy homes on a specific block of a specific street in a specific neighborhood. Data for homes like that can't be captured in a national survey.

The group that gets the most value from the Home Price Index and Case-Shiller is Wall Street and policy-makers. The indices do a fair job of reporting how housing behaves as a whole, but for individuals concerned with buying and selling homes, the best place to find real-time, accurate data is from a real estate professional.

Top 25 Least Expensive U.S. Cities

2011-06-28T08:05:00.001-05:00

A report issued Monday by the U.S. government showed core inflation rising 2.5 percent in the last 12 months for its biggest one-year gain since January 2010.

Everyday living is becoming expensive, it seems.

But there are some U.S. towns in which the cost of living remains affordable -- and downright cheap -- as compared to the national average. They're detailed in a BusinessWeek piece titled "The Cheapest 25 Cities In The U.S".

In comparing costs across 340 urban areas as compiled by the Council of Community & Economic Research, cities in Texas, Arkansas, Tennessee and Oklahoma ranked consistently high. Cities in Hawaii did not.

Take note, though. Although the BusinessWeek piece highlights inexpensive cities in which to live, a low cost of living does not necessarily correlate to a high standard of living. Cost-leader Harlingen, Texas, for example, boasts a poverty rate nearly triple the national average.

Other "Inexpensive Cities" feature similar poverty rates.

The Top 10 "cheapest cities", as shown by BusinessWeek are:

Harlingen, Texas
Pueblo, Colorado
Pryor Creek, Oklahoma
McAllen, Texas
Cookeville, Tennessee
Commerce-Hunt County, Texas
Brownsville, Texas
Fort Smith, Arkansas
Muskogee, Oklahoma
Springfield, Illinois

And, at the other end of the spectrum, the top 5 most expensive cities/areas were, in order, Manhattan, New York; Brooklyn, New York; Honolulu, Hawaii; San Francisco, CA; and Queens, New York.

Manhattan's cost of living is more than twice the national average.

The complete list is available at the BusinessWeek website.

What's Ahead For Mortgage Rates This Week : June 27, 2011

2011-06-27T08:20:00.001-05:00

Mortgage markets improved again last week on a revised economic outlook for the U.S. economy, and ongoing concerns about Greece and its sovereign debt.

Conforming mortgage rates in Minnesota fell last week and now hover near the all-time lows set last November.

Adjustable-rate mortgages are especially low.

There were three big stories last week that will carry forward into this week.

First, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged in its current target range of 0.000-0.250 percent. This was expected. However, the Fed revised its growth estimates for the U.S. economy lower. This was not expected.

Mortgage rates dipped on the news.

Second, Greece moved closer to avoiding insolvency. The nation-state's parliament must now pass a package of spending cuts and tax increases to appease Eurozone leaders and the IMF. Without passage, though, bankruptcy may be unavoidable.

Worries about Greece's fate sparked a bond market flight-to-quality. This, too, helped mortgage rates ease.

And, lastly, Thursday, the U.S. and other members of the International Energy Agency chose to release 60 million barrels of oil to the market over the next month. You've likely experienced the impact as the gas pump already -- gas prices are way down nationwide.

Lower gas prices means fewer inflationary pressures and inflation is the enemy of mortgage rates. Less inflation, lower mortgage rates.

This week, mortgage rates may reverse.

There isn't much new data due for release -- inflation data due Monday, housing data due Wednesday, and a series of confidence reports throughout the week -- but there are 3 scheduled treasury auctions that could pull rates up or down.

Monday : 2-Year Treasury Note auction
Tuesday : 5-Year Treasury Note auction
Wednesday : 7-Year Treasury Note auction

If demand is high at any/all of the auctions, mortgage rates should drop. If demand is weak, mortgage rates should rise.

New Home Supplies Drop, And So Does Homebuilder Confidence

2011-06-24T08:03:00.001-05:00

On paper, the market for newly-built, single-family homes looks healthy.

Last month, the number of new homes sold on an annualized, seasonally-adjusted basis tallied 319,000. The May reading is the second-highest of the year, and 6 percent above the current 12-month average.

These are strong numbers in isolation. However, after accounting for the dwindling supply of new homes for sale as well, the figures look even stronger.

In May, at the current pace of sales, the complete, national inventory of new homes for sale would have been sold in just 6.2 months.

That's the quickest pace in a year and a 3-month improvement from a year ago.

To hear it from homebuilders, though, you'd think that sales were crashing.

Homebuilder confidence slipped to a 9-month low this month; builders report slowing foot traffic; and the prospects for the next 6 months appear weak. This is not the portrait painted by HUD's May New Home Sales report.

As a home buyer in Eagan , this dichotomy may work to your advantage.

Falling supplies and rising demand correlate to higher home prices. Yet, builders are pessimistic for their market. Therefore, despite the economics, psychology may help buyers experience more favorable negotiations, including complimentary upgrades and other builder concessions.

If you're a buyer in today's market, it's a reason to consider the new home market. There may be good value once you know where to look.

A Simple Explanation Of The Federal Reserve Statement (June 22, 2011 Edition)

2011-06-22T12:18:00.001-05:00

Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

The vote was 10-0 -- the fourth straight unanimous vote for the nation's Central Bank.

In its press release, the FOMC said that the economy is recovering, although "somewhat more slowly" than what was expected. Labor markets have been weaker than anticipated and the Fed believes that is, in part, a result of higher food and energy costs, and supply chain disruptions as a result of "tragic events in Japan".

Some economic bright spots identified by the Fed include expanding household spending, and increased business investment.

These comments were in-line with what Wall Street expected from Chairman Ben Bernanke and the members of the Federal Open Market Committee.

The Fed stayed on message with respect to inflation, too. It acknowledged inflationary pressures on the economy, but attributed them to rising commodity costs and the aforementioned supply-chain disruption. The Fed expects long-term inflation to be stable.

And, lastly, the Federal Reserve re-affirmed its plan to end its $600 billion pledge to bond markets June 30, and to hold the Fed Funds Rate near zero percent "for an extended period" of time.

Again, no surprise.

Mortgage market reaction to the FOMC statement has been even this afternoon. Mortgage rates in Lakeville are unchanged and leaning lower. Note that sentiment can shift quickly, however. If today's mortgage rates fit your budget, consider locking in your rate.

The FOMC's next scheduled meeting is August 9, 2011.

Existing Homes Sales Slip In May

2011-06-22T08:04:00.001-05:00

Home resales slipped 4 percent in May, falling below the 5,000,000-unit mark on a seasonally-adjusted, annualized basis for the first time since February.

April's resales were revised lower, too.

Analysts were surprised by the figures because it runs counter to the National Association of REALTORS® monthly Pending Home Sales reports.

The association's Pending Home Sales Index is purported to be a forward-looking indicator for the housing market because 80% of homes under contract close within 60 days and recent Pending Home Sales readings show an increase in "pending" homes.

This month's Existing Home Sales, however, fell flat.

May's drop in home resales wasn't limited to a particular region or price point, either. All 4 geographic regions lag last May's results. Five of the 6 valuation ranges fell, too.

$0-$100,000 : +6.7 percent annual change
$100,000-$250,000 : -21.6 percent annual change
$250,000-$500,000 : -16.0 percent annual change
$500,000-$750,000 : -11.0 percent annual change
$750,000-$1,000,000 : -20.7 percent annual change
$1,000,000 or more : -11.0 percent annual change

The Existing Home Sales report wasn't all bad, however.

Although the months of housing stock rose to 9.3 in May, the number of homes for sale nationwide fell 1%. This suggests that there weren't as many buyers in May as compared to April -- a function of weather, jobs and the economy. Since April, the jobs market and the economy have shown steady, slow improvement and Mother Nature has been less destructive.

Home resales should rebound in June and July, therefore.

If you're a buyer in today's market, home supplies are higher and mortgage rates are lower. The combination makes for ample bargain-hunting. There's excellent "deals" to be found in Lakeville. Ask your real estate agent for help in finding them.

Homebuilder Confidence Slips To 9-Month Low

2011-06-21T08:03:00.001-05:00

Despite rising new home sales and an increase in building permits nationwide, home builder confidence slipped to a 9-month low in June. The monthly Housing Market Index from the National Association of Homebuilders registered 13 this month -- three ticks lower than last month, and its lowest level since September 2010.

June's 3-point drop from May is the biggest one-month move since May 2010, the month after the expiration of the federal home buyer tax credit. The retreat could signal favorable pricing for new home buyers in Eagan in the months ahead.

When builders get less bullish on housing, they may be more willing to negotiate for upgrades and discounts. Ultimately, this can help new home buyers buy homes at better, lower prices.

A closer look at the Housing Market Index shows why this may be true.

The Housing Market Index is not a single-reading statistic. It's a composite; the result of 3 separate surveys, each meant to measure a specific facet of a home builder's business. The survey questions are:

How are market conditions for the sale of new homes today?

How are market conditions for the sale of new homes in 6 months?

How is prospective buyer foot traffic?

How are market conditions for the sale of new homes today?
How are market conditions for the sale of new homes in 6 months?
How is prospective buyer foot traffic?

When builders reply, their responses are tallied and mapped to a scale of 1-100. Readings over 50 are considered favorable. Readings under 50 are considered unfavorable. The HMI has not been higher than 50 in more than 5 years.

In June, the HMI composite reading of 13 was anchored by falling foot traffic and reduced expectations for "future sales". Homebuilders expect new home sales to be down through the New Year.

Therefore, if you're a home buyer in Minnesota and have considered "buying new", the time may be right for making an offer. Financing is cheap, home values are low, and builders are pessimistic -- a terrific combination for today's home buyer.

What's Ahead For Mortgage Rates : Week of June 20, 2011

2011-06-20T08:26:00.001-05:00

Mortgage markets improved last week as Wall Street managed news on both sides of the economic coin. There were several instances of higher-than-expected inflation -- an event that tends to lead rates higher -- but weak domestic jobs data and a soft manufacturing report suppressed the damage.

Rates were also held low by ongoing issues in Greece.

In Greece, the government is currently struggling to meet its debt obligations -- despite a restructuring of existing debt negotiated in 2010.

Without a plan for its new debt, though, Greece will likely to default on what it owes. Eurozone and international banking leaders have failed to reach consensus on the situation, and now the citizens of Greece are in a state of social unrest.

The uncertainly surrounding the nation-state spurred a bond market flight-to-quality last week. That, too, helped to keep rates low.

Last week, mortgage rates fell for the sixth week out of nine, a streak that's dropped conforming mortgage rates in Apple Valley to their lowest levels of the year.

This week, that could change.

Wednesday, the Federal Open Market Committee adjourns from a 2-day meeting and anytime the Fed meets, there's a good chance that mortgage rates will move. The FOMC makes the nation's monetary policy.

The meeting adjourns at 12:30 PM ET and Fed Chairman Ben Bernanke will follow with a press conference at 2:15 PM ET. The press conference is meant to give context to the FOMC's decision, and allow for back-and-forth with the press corps. Wall Street will watch closely, too, for signals of the Fed's next action(s).

In addition, this week will see the results of May's Existing Home Sales report and New Home Sales report. Both are considered important to the housing market, and to the economy overall.

If you're still floating a mortgage rate, falling mortgage rates have helped you. There's not much room for rates to fall further, however. Consider calling your loan officer and locking something in.

How To Clean Outdoor Furniture : Resin, Wood And Metal

2011-06-20T08:03:00.001-05:00

This week marks the official start of Summer in Apple Valley. If your home's outdoor area has furniture in it, you'll want to make sure that your furniture is clean.

In this 4-minute video from Lowe's, you'll learn tricks to keep your outdoor furniture clean, and protected from the elements. All types of outdoor furniture are covered in the lesson including metal, resin-based, and wooden.

The offered tips include:

Why you should never remove the "care tags" from a furniture pillow
Choosing the proper pressure-washer tip for the job at-hand
How to use car wax as a rust-preventative

Furthermore, the instructional video includes tips for cleaning fabrics and canopies; and for shampooing an outdoor rug.

There's lot of reasons to keep your outdoor furniture clean -- health reasons among them -- but it shouldn't be lost that clean furniture will have a longer useful life than furniture that's been neglected or ignored.

Clean your outdoor pieces at least twice annually and they'll give you years of good looks and comfort.

Housing Starts Climb Unexpectedly In May

2011-06-17T08:04:00.001-05:00

The housing market received a jolt of good news Thursday. The Commerce Department reports that Single-Family Housing Starts improved in May.

As compared to April, last month's Single-Family Housing Starts rose 4 percent to a seasonally-adjusted, annualized rate of 419,000 units, a figure slightly better than the 6-month average and the highest tally since January.

A "housing start" is defined as a home on which new construction has started.

In addition, Building Permits saw a boost in May, too, climbing nearly 9 percent overall. Building Permits are a gauge of future construction activity with 89 percent of permits leading to new construction within 60 days.

For several reasons, the May data surprised Wall Street analysts.

First, more homes being built suggests a healthier housing market, yet, earlier this week, the June homebuilder confidence report posted its lowest reading since September 2010.

Second, new home sales are only slightly higher than their all-time lowest annualized readings. Sales volume remains low in Lakeville and nationwide.

And, lastly, home prices have yet to recover in full. By adding additional inventory, builders may suppress price growth through the remaining portions of 2011.

For home buyers in Minnesota , though, the Housing Starts data may be a signal that the market is turning. The data can be used to your advantage.

Home prices are a function of supply and demand and -- based on the Housing Starts data plus the number of newly-issued Building Permits -- home supply is likely to rise. Demand, on the other hand, despite low mortgage rates, may not. At least not in the short run.

As a buyer, you can use this information to your advantage. If you're looking to buy new construction, ask your real estate agent about the current new homes supply. There are bargains to be found and May's Housing Starts data should support low prices for at least the next few weeks.

Monthly Foreclosure Count Drops For 16th Straight Month

2011-06-16T08:03:00.001-05:00

Foreclosure rates are falling.

According to foreclosure-tracking firm RealtyTrac, monthly foreclosure filings fell 2 percent in May to just under 215,000 filings nationwide. A foreclosure filing is defined as any one of the following: a default notice, a scheduled auction, or a bank repossession.

On an annual basis, foreclosure counts have dropped over 16 consecutive months, dating back to January 2010.

Like all things in real estate, though, foreclosures are local. 6 states accounted for more than half of the country's foreclosure filings in May. Those six states -- California, Michigan, Arizona, Florida, Georgia and Texas -- represent just 34% of the U.S. population.

But even on a per household basis, the figures remain disproportionate.

Top 10 Foreclosure States : 1 foreclosure per 357 households, on average
Bottom 10 Foreclosure States : 1 foreclosure per 8,764 households, on average

The nationwide foreclosure rate was 1 foreclosure per 605 households.

As a home buyer in Eagan , foreclosures matter. Distressed homes account for close to 40% of home resales and that's because distressed properties often sell at steep discounts; in some markets, up to 20 percent less than a comparable, non-distressed home. Foreclosed homes can be a great "deal", therefore, but only if you've done your homework.

Buying a bank-repossessed home is different from buying from "people". The contracts and negotiation process are different, and homes are sometimes sold with defects.

If you plan to purchase a Minnesota foreclosure, therefore, speak with a real estate professional first. With foreclosures, there's a lot you can learn online, but when it comes time to submit an actual bid, you'll want an experienced agent on your side.

Mortgage Rates Surge On May Retail Sales Figures

2011-06-15T08:02:00.001-05:00

The jobs market is recovering slower than expected, and so is housing. But neither condition has slowed U.S. consumers.

According to the Census Bureau, Retail Sales rose for the 11th straight month in May. Excluding cars and auto parts, sales receipts climbed to $322 billion last month. It's an all-time high and another example of the U.S. economy's resiliency.

Wall Street didn't expect such results. As a result, mortgage rates worsened Tuesday.

By a lot.

The connection between Retail Sales and mortgage rates can be fairly tight in a recovering economy. Retail Sales accounts for almost half of all U.S. consumer spending, and nearly one-third of the economy overall. The May report, therefore, showed the economy may be on more solid footing than economists expect.

Plus, lately, as the economy goes, so go mortgage rates in Eagan and nationwide.

When the economy has shown signs of life, mortgage rates have increased. When the economy has shown signs of a slowdown, mortgage rates have dropped.

It's why mortgage markets reacted the way they did Tuesday; May's Retail Sales data was strong. The resultant surge in conforming mortgage rates -- from market open to market close -- turned into one of the year's fiercest, raising average mortgage rates well off their 7-month lows established earlier this week.

At today's rates, each 0.125 percent change in rates yields a payment difference of $7.50 per $100,000 borrowed. Yesterday, some product rates rose by as much as 0.250 percent. It put a dent in home affordability and household budgets.

With Retail Sales are up 8 percent from last year, therefore, and showing few signs of a slowdown, today may be a prudent date to lock a rate with your lender. As the economy continues to grow, rates are expected to rise.

Is This The Start Of A Refi Boom? Mortgage Rates Fall For 8 Straight Weeks.

2011-06-14T08:06:00.001-05:00

Mortgage rates are falling, falling, falling.

On a wave of uncertainty about Greece and its debt; and weaker-than-expected economic data at home, conforming 30-year fixed rate mortgage rates have fallen to levels not seen since December 2, 2010.

Mortgage rates have dropped 8 weeks in a row. Not even last year's Refi Boom produced an 8-week winning streak. This season's streak is historic.

The 30-year fixed rate mortgage now averages 4.49% nationally, down 42 basis points, or 0.42%, since early-April. For every $100,000 borrowed, that equates to a monthly savings of $25.24.

Adjustable-rate mortgages have shed even more, giving back 50 basis points since the streak began.

Because of low rates, it's an excellent time to buy or refinance a home relative to just a few weeks ago. Note, though, that depending on where you live, you may find your quoted interest rates to be slightly higher or lower than what Freddie Mac reports in its survey. This is because the Freddie Mac figure is a national average.

Mortgage rates and fees vary by region:

Northeast : 4.49 with 0.6 points
Southeast : 4.52 with 0.8 points
North Central : 4.52 with 0.6 points
Southeast : 4.52 with 0.6 points
West : 4.45 with 0.8 points

You'll notice that, in the West Region, rates tend to be low and fees tend to be high; in the North Central Region, the opposite is true. You should expect Minnesota to have its own pricing norm within this region, too.

Is there a particular rate-and-fee setup that suits you best? The good news is that you can ask for it -- no matter where you live.

If having the absolute lowest mortgage rate is more important to you than having the absolute lowest fees, ask your loan officer to structure your loan in the "West" style. Or, if low costs are more your style, ask for them.

Mortgage rates appears as if they're headed lower but don't forget how quickly markets can change. Once they do, mortgage rates in Lakeville should spike. Exploit today's market while you still can.

What's Ahead For Mortgage Rates This Week : June 13, 2011

2011-06-13T08:00:00.001-05:00

Mortgage markets moved in feverish fashion last week, changing with extreme frequency, and eventually ending slightly worse on the week. Conforming mortgage rates fell to a 6-month low Wednesday but, by Friday, they had retreated higher.

Last week marked just the second time in 8 weeks that rates in Apple Valley increased. During that span, Freddie Mac reports that mortgage rates have dropped 42 basis points, or 0.42%.

That equates to a monthly savings of $25.24 per $100,000 borrowed.

One reason why mortgage rates have been dropping is that the economy is growing more slowly than projected. In a speech last week, Federal Reserve Chairman Ben Bernanke described the U.S. recovery as "frustratingly slow". In a separate speech, another Federal Reserve President, William Dudley, categorized the recovery as "subpar".

Economic weakness tends to promote a low mortgage rate environment as equity markets sell off and investors seek safety of principal. Indeed, the Dow Jones Industrial Average fell for the 6th straight week, its longest losing streak since 2002.

Mortgage rates were also helped by ongoing uncertainty in Greece. The nation remains at-risk for default, and that's spurring a bond market to flight-to-quality which benefits the U.S. mortgage market, too.

This week, mortgage rates may reverse their recent slide. There isn't much data due for release, but the numbers that will hit the wires have the ability to move markets -- especially the inflation-linked figures.

Tuesday : Producer Price Index, Retail Sales
Wednesday : Consumer Price Index
Thursday : Housing Starts
Friday : Consumer Sentiment

If you've been looking at mortgage rates for a purchase or refinance, now may be a good time to lock. FHA and conforming rates are at their lowest levels since December 2010.

Going forward, rates have much more room to rise than to fall.

Do You Know What Questions To Ask Your Lender?

2011-06-10T07:59:00.001-05:00

A mortgage comes with many moving pieces and understanding them is the key getting a great deal. Unfortunately, studies show that few Americans have a firm grasp of how mortgages work -- from mortgage types to mortgage fees.

In this back-to-basics interview on NBC's The Today Show, you'll learn some mortgage planning basics to help you get smarter with your next home loan in Apple Valley or anywhere else -- purchase or refinance.

Some of the topics covered include:

The mortgage applicants for whom adjustable-rate mortgages are a better choice than fixed-rate mortgages
Why you should include "How Good Is This Lender?"-type questions in the rate shopping process
What a pre-approval letter is good for, and what it is not good for

There is also one of the most simple explanations of "discount points" ever offered on network television.

The video runs 4-and-a-half minutes. For first-time buyers and experienced ones, it's worth a watch. You'll pick up some tips to use on your next mortgage.

Moving To A New City? See How Much Your Cost Of Living Will Change.

2011-06-09T07:58:00.001-05:00

It's a fact: It's more expensive to live in some cities than others. Beyond just the costs of buying a home, different cities also carry a different Cost of Living. For households relocating from Minnesota and across state lines, the change in "life costs" can be jarring.

Depending on where you live, everyday expenses -- from groceries to gasoline -- make a different-sized dent in a household budget. And now you can see in numbers by how much your expenses might change.

Visit Bankrate.com's Cost of Living Comparison Calculator.

The Cost of Living Comparison calculator is as basic as it is thorough. The calculator asks just 3 questions -- (1) Where do you live now, (2) To what city are you moving, and (3) What is your salary -- and uses your answers to produce a detailed, 60-item cost comparison between the two towns.

The city-to-city cost comparisons include:

Dry Cleaning Costs
Total Energy Costs
Beauty Salon Costs
Movie Costs
Dentist Visit Costs

The list also features a mortgage rate comparison, and a comparison of local home prices.

The Cost of Living calculator is based on data from the ACCRA. On the ACCRA website, a similar report sells for $5. At Bankrate.com, the information is free.

Temporary Conforming Loan Limits Expire September 30, 2011

2011-06-08T07:57:00.001-05:00

If you live in a high-cost area, keep an eye on your calendar. Effective October 1, 2011, temporary conforming loan limits will be lowered nationwide. Perhaps by as much as 14 percent.

These limits range up to $729,750 currently.

"Temporary loan limits" were enacted as part of the government's 2008 economic stimulus package. At the time, the financial sector was entering its crisis and private mortgage lending had all but disappeared. Financing was scarce for both homeowners and home buyers for whom loan sizes exceeded Fannie Mae and Freddie Mac's national $417,000 limit -- even for those with excellent credit and income.

The issue was exacerbated in places like New York City where local home prices routinely topped $1 million. Buyers unable or unwilling to bring a substantial downpayment to closing (i.e. $600,000 or more) found themselves without financing.

The February 2008 package addressed this issue, using a math formula to change loan limits in Apple Valley and nationwide. The government assigned to each U.S. metropolitan area a temporary, new loan size limit equal to 25% greater than its respective median home sale price, not to fall below $417,000, and not to exceed $729,750.

Then, later that same year, the Housing and Recovery Act made "high-cost areas" permanent, but with a reduced 15% increase to median home prices, and loan sizes not to exceed $625,500.

These new limits take effect October 1, 2011 -- one day after the temporary limits expire.

If you live in a high-cost area, therefore, take note. Mortgage rates may be low, but the amount of loan for which you qualify may be less than you expect, and you may find yourself ineligible.

Whether you're planning a refinance or a purchase, keep an eye on the calendar.

The complete list of high-cost areas is available online.

"Homes Under Contract" Plunge 12 Percent In April

2011-06-07T07:58:00.001-05:00

Hurt by foul weather and a soft market, the Pending Home Sales Index plunged 12 percent in April.

The monthly index is published by the National Association of REALTORS® and measures the number of homes on which new contracts have been written.

It's the association's lone "forward-looking" report; meant to predict future, closed home sales. 80% of homes under contract close within 2 months.

Therefore, if the April Pending Home Sales Index is accurate, we should expect home sales to decline through June and July.

On a regional basis, "pending homes" varied. The Northeast Region posted growth. None others did.

Northeast Region: +1.7% from March
Midwest Region : -10.4% from March
South Region : -17.2% from March
West Region : -8.9% from March

But even regional data remains too broad to be useful to everyday buyers and sellers in the Lakeville market. Housing is local and that means that each block, of each street, in each city has its own market and economy. Grouping 9 states into a single "region" is neither helpful nor relevant.

That said, we can't ignore the data in its entirety.

Housing is believed to be a key component in the nation's economic recovery. Fewer home sales will retard growth, and slower growth leads mortgage rates down.

Home Affordability hit record-highs last quarter, and should do the same in this one. Homes now sell at discounts to prior prices and mortgage financing is cheap. Buyers tend to be drawn to favorable markets such as this, and that will pressure home prices higher.

If you're in the market for a home today, conditions look good. Talk to your real estate agent to gauge your options.

What's Ahead For Mortgage Rates This Week : June 6, 2011

2011-06-06T07:58:00.001-05:00

Mortgage markets improved last week, carried by the same stories that have led markets better since April. Worries of a Eurozone sovereign debt default mounted, and the U.S. economy's revival showed itself to be slower than originally anticipated.

In Greece, the nation readied itself for its second bailout in two years. The austerity measures of last year have not worked as planned. There are concerns that a default would lead to contagion, delivering the Euro region into an economic tailspin.

These fears spurred a flight-to-quality in bond circles to the benefit of U.S. mortgage rate shoppers.

In addition, last week's U.S. jobs data fell short of expectations, giving another boost to mortgage markets.

There were 3 weak reports:

ADP showed 38,000 private-sector jobs created in May. Analysts expected 170,000.
The Department of Labor showed 422,000 Initial Jobless Claims. Analysts expected 415,000.
The Bureau of Labor Statistics showed 54,000 jobs created in May. Analysts expected 150,000.

Each of these data points underscores the fragile nature of the U.S. recovery, and the weaker-than-expected readings helped mortgage rates improve.

It's the sixth week of 7 that mortgage rates in Eagan have improved, setting the stage for a new wave of refinances.

This week, there is very little new data on which for mortgage bonds to trade. Therefore, expect the stories from recent weeks to continue to dominate headlines. If Greece's austerity and/or bailout plan is met with investor optimism, mortgage rates should rise. If the plan falls flat, mortgage rates should fall.

There will also be chatter about the U.S. debt ceiling, another potentially negative force on mortgage rates.

If you're floating a mortgage rate right now, consider locking in. There's a lot more room for rates to rise than to fall.

Case-Shiller Shows Home Values Rolling Back 9 Years

2011-06-03T07:57:00.001-05:00

The March Case-Shiller Index was released this week and it corroborates the findings of the government's most recent Home Price Index -- home values are slipping nationwide.

According to the Case-Shiller Index's publisher, Standard & Poors, home values fell in March from the year prior.

The March report was among the worst Case-Shiller Index readings in 3 years. On a monthly basis, 18 of 20 tracked markets worsened. Only Seattle and Washington, D.C. showed improvement, rising 0.1% and 1.1%, respectively.

On an annual basis, price degradation was even worse.

Washington, D.C. is the only tracked market to post higher home values for March 2011 as compared to March 2010. The national index has now dropped to mid-2002 levels.

As a buyer in today's market, though, you can't take the Case-Shiller Index at face value. It's methodology is far too flawed to be the "final word" in home prices.

The first big Case-Shiller Index flaw is its relatively small sample size. S&P positions the Case-Shiller Index as a national index but its data comes from just 20 cities total. And they're not the 20 most populous cities, either. Notably missing from the Case-Shiller Index list are Houston (#4), Philadelphia (#5), San Antonio (#7) and San Jose (#10).

Minneapolis (#48) and Tampa (#55) are included, by contrast.

A second Case-Shiller flaw is how it measures a change in home price. Because the index throws out all sales except for "repeat sales" of the same home, the Case-Shiller Index fails to capture the "complete" U.S. market. It also specifically excludes condominiums and multi-family homes.

In some cities -- such as Chicago -- homes of these types can represent a large percentage of the market.

And, lastly, a third Case-Shiller Index flaw is that it's on a 2-month delay. It's June and we're only now getting home data from March. Today's market is similar -- but not the same -- to what buyers and sellers faced in March. The Case-Shiller Index is far less useful than real-time data of a city or neighborhood.

The Case-Shiller Index is more useful to economists and policy-makers than to everyday buyers and sellers in Apple Valley. For better real estate data for your particular neighborhood, ask your real estate agent for help.

A real estate agent can tell you which homes have sold in the last 7 days, and at what prices. The Case-Shiller Index cannot.

Making A Rate-Lock Plan Before Friday's Jobs Report

2011-06-02T07:57:00.001-05:00

Tomorrow morning, at 8:30 AM ET, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for May. If you're floating a mortgage rate right now -- or are in the process of shopping for a loan -- consider locking your rate sooner rather than later.

The Non-Farm Payrolls report can be a major market mover, causing large fluctuations in both conforming and FHA mortgage rates in Apple Valley. It's because of the report's insight into the U.S. economy.

More commonly called "the jobs report", Non-Farm Payrolls is issued monthly. Sector-by-sector, it details the U.S. workforce and unemployment rates.

Jobs momentum has been strong. Through 7 consecutive months, the economy has added jobs, the government reports. Nearly 1 million new jobs have been created during that time. These are strong figures for a country that lost 7 million jobs in 2008 and 2009 combined.

However, Wednesday, a weaker-than-expected "preview" figure from payroll company ADP has Wall Street wondering whether this month is the month that the winning streak ends.

May's ADP data fell so far short of expectations that investors have had to re-assess their job growth predictions. Earlier this week, the consensus was that 185,000 new jobs were created in May. Today, those estimates are much lower.

The change is leading mortgage rates lower, too.

The connection between jobs and mortgage rates is somewhat straight-forward. Job growth influences mortgage rates because jobs matter to the economy. As job growth slows, so does the economic growth, and that puts downward pressure on mortgage rates.

The opposite is true, too. Strong job growth tends to lead mortgage rates higher.

So, with job growth estimates revising lower, Wall Street has adjusted its "bets" and that's benefiting rate shoppers across Minnesota. Should the actual jobs figures not be so bad, though, expect a quick and sharp reversal; and much higher mortgage rates for everyone.

The safe move is to lock your rate today.

Mortgage Guidelines Start To Loosen At The Country's Biggest Banks

2011-06-01T08:04:00.001-05:00

Another quarter, another sign that mortgage lending may be easing nationwide.

The Federal Reserve's quarterly survey of senior loan officers revealed that an overwhelming majority of U.S. banks have stopped tightening mortgage requirements for "prime borrowers".

A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.

Of the 53 responding "big banks", 49 reported that mortgage guidelines were "basically unchanged" last quarter. Of the remaining four banks, two said mortgage guidelines had "eased somewhat", and the remaining banks said guidelines "tightened somewhat".

It's the second straight quarter in which fewer than 5 percent of banks tightened guidelines, and the first quarter in nearly 5 years in which the number of banks that loosened guidelines equaled the number of banks tightening them.

The easing in mortgage lending is a positive development for the housing market; and for buyers in Apple Valley and nationwide. Looser lending standards means that more buyers will be approved for home loans, and that should spur home sales forward across the region.

However, don't confuse "looser standards" with "irresponsible standards". It's much more difficult to get financing today as compared to 2006. Delinquencies and defaults have altered how a bank reviews a loan application.

Today, underwriters are more conservative with respect to household income, total assets and overall credit scores. Even as compared to just 6 months ago:

Minimum credit score requirements are higher
Downpayment/equity requirements are larger
Maximum allowable debt-to-income ratios are lower

If you can get approved, though, your reward is that mortgage rates are especially low. Since early-April, both conforming and FHA mortgage rates have been on a downward trajectory, and pricing is near a 6-month low.

Home affordability is at an all-time high, too.

Looser guidelines and lower rates should help fuel home demand through the summer months. If you're in the market to buy, your timing appears to be excellent.

Mortgage Guidelines Start To Loosen At The Country's Biggest Banks

2011-06-01T07:56:00.001-05:00

Another quarter, another sign that mortgage lending may be easing nationwide.

The Federal Reserve's quarterly survey of senior loan officers revealed that an overwhelmingly majority of U.S. banks have stopped tightening mortgage requirements for "prime borrowers".

A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.

The easing in mortgage lending is a positive development for the housing market; and for buyers in Lakeville and nationwide. Looser lending standards means that more buyers will be approved for home loans, and that should spur home sales forward across the region.

Today, underwriters are more conservative with respect to household income, total assets and overall credit scores. Even as compared to just 6 months ago:

Minimum credit score requirements are higher
Downpayment/equity requirements are larger
Maximum allowable debt-to-income ratios are lower

Home affordability is at an all-time high, too.

Looser guidelines and lower rates should help fuel home demand through the summer months. If you're in the market to buy, your timing appears to be excellent.

What's Ahead For Mortgage Rates This Week : May 31, 2011

2011-05-31T08:17:00.001-05:00

Mortgage markets improved last week ahead of Memorial Day and a 3-day weekend. Bond pricing ending the week higher, pushing conforming mortgage rates in Minnesota down for the 5th week out of six.

Most economic news reported worse-than-expected. Initial Jobless Claims increased sharply, GDP was unchanged, and Durable Orders posted the largest one-month decline since October. Each of these stories reduced inflationary pressures on the economy, contributing to lower mortgage rates.

However, the main driver for U.S. mortgage rates last week was Europe.

One year ago, Greece pledged to lower its spending, cut its deficit, and reduce the number of public programs and benefits. In economic circles, this is known as austerity. For more than a month, however, despite the austerity measures, there has been concern that Greece will fail to meet its debt obligations.

Last week, that concern spiked. It triggered a flight-to-quality that helped U.S. mortgage bonds, and led mortgage rates lower.

Conforming and FHA mortgage rates are now at their lowest levels in more than 6 months.

This week, the biggest news is May's Non-Farm Payrolls report. Although, expect for rates to carve out wide ranges from day-to-day. Until the Greece scenario reaches a resolution, Wall Street will be on edge.

Tuesday : Consumer Confidence, Case-Shiller Index
Wednesday : ADP Challenger Report
Thursday : Initial Jobless Claims
Friday : Non-Farm Payrolls Report

Plus, four members of the Fed have scheduled speeches.

If you're still floating a mortgage rates, or have otherwise not locked in, luck is on your side. Mortgage rates look poised to fall over the next few days, however, markets have been known to reverse quickly. Therefore, if you've been quoted on a rate that looks acceptable to you, you may not want to gamble on mortgage rates falling further.

The safest decision may be to commit to what's available to you today.

Home Affordability Still Soaring; New Records Reached

2011-05-27T08:02:00.001-05:00

Home affordability moved higher last quarter, buoyed by stable mortgage rates and falling home prices in Minnesota and nationwide. The National Association of Home Builders reports that Q1 2011 Home Opportunity Index reached an all-time high for the second straight quarter last quarter.

Nearly 3 of 4 homes sold between January-March 2011 were affordable to households earning the national median income of $64,400. It's the 9th straight quarter in which home affordability surpassed 70 percent, and the highest reading in more than 20 years of record-keeping.

From metropolitan area-to-metropolitan area, though, affordability varied.

In the Midwest, for example, affordability was high. 7 of the 10 most affordable markets were in the Midwest, including Kokomo, Indiana, in which 98.6% of homes were affordable to median income-earning families. Indianapolis, Indiana placed second for "big city" affordability.

The most affordable "big city" last quarter was Syracuse, New York. With a 94.5% affordability rate, Syracuse ranks 8th nationally in the Home Opportunity Index. It's the second time that Syracuse placed first in the last 4 quarters.

Meanwhile, on the opposite end of home affordability, the "Least Affordable Major City" title went to the New York-White Plains, NY-Wayne, NJ area for the 12th consecutive quarter. Just 24.1 percent of homes were affordable to households earning the area median income, down more than 1 percent from the last reading.

Regardless of where you live, remember that rising mortgage rates can levy more pain on your household budget than can rising home values. And mortgage rates are expected to rise long before home prices do.

The rankings for all 225 metro areas are available for download on the NAHB website.

Home Price Index Shows Values Down 19 Percent From Peak

2011-05-26T08:04:00.001-05:00

Home values dropped for the sixth straight month in March 2011, according to the Federal Home Finance Agency's Home Price Index. The Home Price Index is a government-sponsored home value tracker.

The HPI report is the latest in a string of "falling home values" stories -- a trend that's troubling home sellers across Lakeville and nationwide.

However, although the Home Price Index says home values are falling, that doesn't necessarily mean that they are. Like most statistics in the housing sector, the Home Price Index is plagued by poor methodologies and a lack of timeliness.

In short, the Home Price Index is flawed. In three ways.

The first big flaw in the Home Price Index is that it only measures the values of homes with mortgages backed by Fannie Mae or Freddie Mac. Homes financed via FHA, or via other means are specifically excluded from the calculation. For today's purchase market, that leaves more than 1 in 4 homes "uncounted" -- a big percentage of the market.

Second, the Home Price Index determines home values by measuring price change from sale to subsequent sale. This eliminates new homes -- a major market segment.

And, lastly, the Home Price Index reports on a 60-day delay; we're only now seeing data from March. This two-month lag renders the HPI a trailing indicator for the housing market instead of a forward-looking one. If you're a home buyer looking for market insight, the HPI can't give it -- it's out-dated and out of season.

Despite its shortcomings, though, we can't ignore the Home Price Index completely. It's among the most thorough home valuation models available, and it's used in public policy discussions. When the HPI says prices are down, Wall Street and Capitol Hill take notice, and that trickles down to everyday life on Main Street.

Since peaking in April 2007, the Home Price Index is off 19.1 percent.

New Home Sales Increase For The Second Straight Month

2011-05-25T08:06:00.001-05:00

Sales of newly-built homes surprised Wall Street, jumping 7 percent to an seasonally-adjusted, annualized 323,000 units last month.

In addition, the supply of new homes dropped to 6.5 months — a 2-month decrease from October 2010 and the best reading in a year.

The report runs counter to recent reports from the National Association of Homebuilders and the National Association of REALTORS® which suggest a looming housing slowdown. April's New Home Sales report runs counter to that theory; it shows ongoing, steady, staggered improvement in terms of sales volume and sales inventory.

Broken-down by sales prices, the New Home Sales report also showed that homes are selling across all price tiers. The "luxury market" improved most:

Up to $199,999 : +1,000 homes from March
$200,000 to $399,999 : +2,000 homes from March
$400,000 and over : +3,000 homes from March

These figures suggest that that move-up buyers -- not first-timers -- are driving the new home market. Homes under $200,000 now account for just 40% new home sales, down from 46% a year ago.

However, as with most months, it's important that we recognize the New Home Sales data's margin of error. Although New Home Sales showed a 7% improvement in April, the reported margin of error was ±17%. This means that the actual reading could have been as high as 24 percent, or as low as -10 percent.

It's a huge range, and because it encompasses both positive and negative values, the Census Bureau assigned its April reading "zero confidence". It's right there in the footnotes.

For home buyers in Eagan , rising sales and falling supply may mean higher home prices. And, combined with the issuance of fewer building permits, supplies may be constrained into the summer months. This, too, would pressure home prices higher.

Memorial Day Messes With Mortgage Rates

2011-05-24T07:59:00.001-05:00

Mortgage rates across the state are near year-to-date lows, but locking them in this week may be difficult. As Memorial Day nears, and Wall Streeters get a head-start on the long weekends, trade volume in the mortgage bond markets will dip.

When bond volume drops, mortgage rates get jumpy. It's a relationship based more on scarcity than actual market fundamentals.

It works like this:

Conforming and FHA mortgage rates are based on the "market price" of a mortgage-backed bond
Mortgage-backed bonds can't be bought or sold without a buyer and a seller at a specific price

As Friday gets closer this week, and more and more Wall Street traders will leave for their "extended" 3-day weekend, and bond markets will be left with fewer and fewer participants. This will create a market situation in which it's harder to match a buyer and seller at any given bond price, resulting in larger mortgage rate shifts than usual.

These jumps in rates are exaggerated during periods of economic uncertainty like these. What's more, there's a lot of economically-important data due for release this week. That, too, can put markets in hysterics.

If this were a "normal" week, mortgage rates would be volatile. The coming of Memorial Day is just adding to the mix.

Mortgage rates may rise in Eagan this week, or they may fall. Either way, if you have the opportunity to lock something favorable, consider doing it. Rates are low and likely won't last.

What's Ahead For Mortgage Rates This Week : May 23, 2011

2011-05-23T08:11:00.001-05:00

Mortgage markets were unchanged last week, despite improving on four of five days. Economic data was worse-than-expected almost across the board, but neither FHA nor conforming mortgage rates in Minnesota budged.

Instead, markets grappled with the just-released Fed Minutes which weighed heavily on investors and on Wall Street.With the release of the minutes, it's increasingly clear that the Federal Reserve will end its support for bond markets on schedule in June, and that a Fed Fund Rate hike is possible within the next 12 months.

Not surprisingly, the date of the Fed Minutes release -- Wednesday -- was the singular "down day" for mortgage markets last week.

After falling for 4 straight weeks, Apple Valley mortgage rates appear to have troughed. This week they could rise, and there's no shortage of data on which for bonds for trade.

Tuesday : New Home Sales; Speeches from Fed's Plosser and Bullard
Wednesday : Durable Goods; FHFA Home Price Index
Thursday : GDP; Initial Jobless Claims
Friday : Core PCE; Pending Home Sales; Consumer Sentiment

There's other forces on markets, too. First, there are 3 bond auctions -- a 2-year, a 5-year, and a 7-year. Weak demand for any of the three will lead mortgage rates higher.

And, second, this is a holiday week. Memorial Day is next Monday and, with the 3-day weekend ahead, expect large numbers of Wall Streeters to skip out on Friday (and likely part of Thursday, too). As the week concludes, therefore, bond volume will thin, amplifying mortgage rate movement -- up or down.

If you're shopping for a mortgage, it's a good time to look at locking in. As the week progresses, mortgage rates should become less predictable and more volatile.

Distressed Homes Now Selling At A 20 Percent Discount

2011-05-20T07:59:00.001-05:00

The housing market recovery stalled last month. At least temporarily.

According to the National Association of REALTORS®, Existing Home Sales slipped 1 percent in April from the month prior, falling to 5.05 million units on a seasonally-adjusted, annualized basis. The reading is exactly in-line with report's 6-month average which also reads 5.05 million units.

The data may appear "average", but there's another angle to consider.

In April, as compared to March, the supply of existing homes for sales spiked. At the current pace of home sales, it would now take 9.2 months to exhaust today's complete home inventory. This is almost one full month worse than March. It's the worst home supply reading of the year.

There are also more homes "on the market" today than at any time since September 2010.

Other noteworthy statistics in the April Existing Home Sales report include:

31 percent of all homes sold in April were purchased with cash
First-time home buyers bought 36 percent of all homes in April
Distressed properties typically sold at a 20 percent discount

This "discount", it should be noted, is a major reason why distressed properties accounted for 37 percent of the home resales in April. Home buyers are finding bargains when they're willing to consider homes in various stages of foreclosure and short sale.

Overall, the April Existing Home Sales report represents opportunity for home buyers in and around Eagan. Home sales are stagnant, supplies are rising and there's no shortage of properties from which to choose. Furthermore, mortgage rates remain low.

If you're considering a home purchase this fall, home supply may not be as ample, and financing conditions may not be as favorable, post-Labor Day. Talk to your real estate agent about what's possible today. You may want to move up your time frame.

Fed Minutes Put The Heat On Mortgage Rates To Rise

2011-05-19T08:01:00.001-05:00

The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Minnesota are higher by 1/8 percent this morning, at least.

The "Fed Minutes" is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve's official recap of the conversations and debates that shaped the prior FOMC session.

Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.

By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.

The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.

Here is some of what the Fed discussed last month:

On inflation : Higher levels are "transitory"; will level-off with commodity prices
On housing : The market remains depressed. "Vacant properties" are harming construction.
On stimulus : The Fed will stick to its $600 billion support plan

In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon.

Wall Street estimates that a gradual economic tightening will begin within 12 months.

Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.

As bond markets fall, mortgage rates in Eagan rise.

Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.63% -- the lowest of the year.

Building Permits Fade Faster Than Expected

2011-05-18T08:00:00.001-05:00

Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.

The Housing Starts report measures the number of homes on which new construction "broke ground". It's tracked by the U.S. Department of Commerce which releases new data monthly.

Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago.

The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.

A building permit is a local government's approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.

Fewer permits, as a consequence, means fewer new homes. Therefore, if you're looking at new construction in or around Lakeville , April's numbers may spark a sense of urgency.

Home prices are a function of home supply and demand and, based on the Housing Starts data, supplies appear headed for a fall. Meanwhile, on the other side of the equation, demand should be rising -- foot traffic is higher, mortgage rates are lower, and job growth is picking up.

This should lead new home prices higher in time. For now, though, home affordability remains high.

It's a good time to look at new home construction.

Home Builders Seeing More Sales Today; Fewer Sales Tomorrow

2011-05-17T07:58:00.001-05:00

Home builder confidence can't shake its range, according to the National Association of Home Builders. The group's monthly Housing Market Index put May's builder confidence reading at a level of 16.

The Housing Market Index is scored on a scale of 1-100. A reading above 50 suggests favorable conditions for the new home housing market, as reported by home builders. A reading below 50 suggests unfavorable conditions.

May marks the sixth time in 7 months that the HMI posted a 16, the longest such plateau in the index's history.

The HMI has not posted higher than 50 since April 2006.

As an index, the HMI is a composite of three separate surveys sent to home builders each month. The surveys are meant to capture the current and projected single-family home sales volume, in addition to buyer foot traffic levels.

Versus April, there was little change:

Current single-family sales : 16 (+1 from April)
Projected single-family sales : 20 (-2 from April)
Buyer foot traffic : 14 (+1 from April)

Broken down, the Housing Market Index for May shows that home builders are experiencing a boost in sales and foot traffic today, but expect that boost to fade between today and November. For home buyers in Apple Valley , this can present an opportunity.

With home builder confidence stagnating, and with a worsening sales expectation for the next 6 months, builders may be more willing to negotiate with you on home prices and/or the costs of upgrades. Builders may also be more willing to make concessions in your sales contract that would otherwise be unavailable to you.

Your real estate agent can help you to identify the negotiable items of your offer.

In addition, today's home buyers can exploit the recent strength of the mortgage market. Surging mortgage bond demand since April has pushed mortgage rates down to their lowest levels of the year. If you can find a home you love, therefore, it can be financed on the (relative) cheap, too.

Conforming mortgage rates in Minnesota fell through 5 consecutive weeks before rising last week.

What's Ahead For Mortgage Rates This Week : May 16, 2011

2011-05-16T08:26:00.001-05:00

Mortgage markets worsened overall last week for the first time in 5 weeks.

Better-than-anticipated economic data plus dwindling concerns for Greece's sovereign debt combined to a spark a bond sell-off. Conforming mortgage rates moved higher in Minnesota as a result.

Rate shoppers were hit especially hard last Tuesday.

At Monday's close, conventional fixed- and adjustable-rate mortgages were posting their lowest levels of 2011, but by Tuesday's market close, rates had climbed as much as 0.250 percent across the board. In some cases, more.

The spike highlights how quickly mortgage rates can change in a recovering economy, and why "floating" a rate can be costly.

This week, mortgage rates figure to be equally volatile. There's a large set of market-changing data planned for release, and several Fed members have planned public appearances, including a 9:00 AM ET, Monday morning kickoff from Fed Chairman Bernanke.

Monday : Bernanke speech; Homebuilder Confidence Survey
Tuesday : Housing Starts; Building Permits
Wednesday : FOMC Minutes
Thursday : Existing Home Sales

In addition, Thursday brings a second rate shopper-risk.

The Initial Jobless Claims will be released at 8:30 AM ET and it will be closely watched by Wall Street. Initial claims are sharply higher since the end of April and investors believe the jobs market is key in a sustained economic recovery. If the data shows that initial claims receded, mortgage rates are expected to rise in response.

Foreclosure Filings Fall To 40-Month Low

2011-05-12T08:00:00.000-05:00

Foreclosure activity continues to drop nationwide.

Based on data from foreclosure-tracking firm RealtyTrac, foreclosure filings nationwide fell below 220,000 in April 2011, a 9 percent decrease from March.

A "foreclosure filing" is defined as any foreclosure-related action including Notice of Default, Scheduled Auction, or Bank Repossession.

April marks the seventh straight month in which foreclosure filings have dropped and total filings are down more than one-third year-over-year.

One reason why filings are down is that banks are letting more time pass between delinquency and foreclosure, exploring alternative courses of actions such as short sales and loan modifications. It now takes, on average, 400 days from an initial default notice to bank repossession.

That's more than double the 151-day average of early-2007.

Another reason may be that job growth is returning to the U.S. and job creation is associated with fewer home loan defaults.

Regardless, in the states in which foreclosures are occurring, bank repossessions are concentrating among just a few.

5 states accounted for half of the country's April REO:

California : 19.8 percent
Arizona : 9.5 percent
Michigan : 7.5 percent
Florida : 6.7 percent
Texas : 5.6 percent

Collectively, these 5 states represent just 32 percent of the nation's population.

On the other end of the chart, Vermont accounted for a measly 0.007% of April's foreclosure filings.

If you're a first-time home buyer considering foreclosed homes in Eagan , or a seasoned investor adding to your portfolio, the good news is that foreclosures are selling at steep, 20 percent discounts relative to non-distressed homes. Just make you know what you're buying. Foreclosure purchases carry different risks and follow different procedures than "traditional" sales.

Rely on a seasoned real estate agent to navigate the deal.

Conforming ARMs From 2004-2006 Are Adjusting To 3 Percent

2011-05-11T07:58:00.001-05:00

When a mortgage applicants chooses an adjustable-rate mortgage over a fixed-rate one, he accepts a risk that -- at some point in the future -- the mortgage's interest rate will rise. Lately, though, that hasn't been the outcome.

Since mid-2010, conforming mortgages have adjusted below their initial "teaser" rate consistently, giving homeowners in Minnesota and nationwide reason to ride their respective adjustable-rate mortgages out.

For example, this month, conforming 7-year and 5-year ARMs are adjusting near 3.011 percent based on the most common loan terms of 2004-2006. It's because of how adjustable-rate mortgages are structured.

Adjustable-rate mortgages follow a defined lifecycle. First, the ARM's mortgage rate is pegged; held fixed for a set number of years. This period ranges from one year to 10 years; periods of five and seven years are most common.

When the initial fixed-rate period ends, the mortgage rate then adjusts based on a pre-set formula. The formula is established by contract in the mortgage closing paperwork, and is commonly defined as:

(Adjusted Mortgage Rate) = (2.250 percent) + (Current 1-Year LIBOR)

Next, every 12 months, based on the same formula as above, the ARM adjusts again until 30 years have passed and the loan is paid is full.

It's important to recognize that in the above equation, LIBOR is a variable so as LIBOR goes, so goes your adjusted mortgage rate. And because LIBOR is ultra-low right now, adjusted mortgage rates are ultra-low, too. LIBOR is expected to stay this way until the global economy has recovered more fully. Analysts predict a higher LIBOR by mid-2012.

So, if you have an adjustable-rate mortgage that's due to reset this season, don't rush to refinance. For at least one more year, you can benefit from low rates and low payments. As for the next adjustment, though, that's anyone's guess.

What To Fix Before You List

2011-05-10T07:58:00.001-05:00

With housing prices down across the country, there are a lot of homeowners in Lakeville barely breaking even on their respective home sales. Some are even losing money.

You may find yourself in that position, too; wanting to sell, but worried about bringing cash to your own closing.

It creates an interesting dilemma. You want your home to "show nicely" relative to comparable properties, but you don't want to invest big dollars that may never be recouped into upgrades or renovations. So what do you do?

The answer is simple. Do the bare minimum.

From an advice piece in the Wall Street Journal, we learn of 10 basic home improvement projects that will help your home have better showings. The advice requires almost no technical skills, and the projects be tackled in a weekend.

The theme? Handled your home's delayed maintenance.

Repair or remove screen doors with holes and tears
Pressure wash windows, sidewalks, and siding
Paint your front door and polish the doorknob
Pull weeds, seed bare spots, and lay down mulch
Touch up holes, dings and cracks in paint
Clean grout and re-caulk sinks, bathtubs and showers
Buy new cabinet hardware
Fix leaky faucets and toilets
Spray lubricant on squeaky doors
Get clutter into storage and out of the way

Now, you'll notice that none of these projects can be considered "major". By contrast, each is minor; they're the items you'd add to your to-do list for work on "another day". However, they're extremely important for a home that's about to be listed.

Here's why. A prospective buyer doesn't notice that the above repairs were made. He only notices if they weren't made. When a buyer sees ripped screens or chipped paint in your home, it makes him wonder what else hasn't been cared for. This is the why you should also hire an exterminator prior to selling your home. If a buyer spots a trail of ants in your home, it's unlikely you'll get an offer.

You don't need to spend big bucks to get your home ready for sale, but you may to use apply elbow grease. The good news is that time spent up-front can be worth it in the end. Homes that show better tend to sell faster, and at higher prices.

What's Ahead For Mortgage Rates This Week : May 9, 2011

2011-05-09T08:07:00.001-05:00

Mortgage markets improved last week on a bevy of economic and geopolitical news. Conforming mortgage rates in Apple Valley improved, falling to their lowest levels of 2011.

It's a welcome development for home buyers and rate shoppers nationwide. Mortgage rates were expected to rise throughout most of this year.

There were four big stories that contributed to falling rates last week.

The first was the news that Osama bin Laden was killed. The news was announced over the weekend, and by the time markets opened Monday morning, the price of oil was already falling. Falling oil prices reduce inflationary pressures on the economy and because inflation contributes to rising mortgage rates, the absence of inflation helps them to fall.

This news carried markets to Thursday morning. That's when the Department of Labor announced that Initial Jobless Claims had suddenly and unexpectedly surged to an 8-month high. Last week's report featured the biggest one-week jump in claims in more than 2 years.

This, too, pushed mortgage rates lower, casting doubt on the strength of the U.S. economic recovery.

Then, Friday morning, those doubts were cast aside. When the government released its Non-Farm Payrolls report for April, it showed job creation topping 200,000 for the third straight month. We would have expected mortgage rates to rise on news like this, but they didn't.

Rates fell instead -- mostly because the strength of the U.S. jobs report rendered mortgage-backed bonds more attractive to global investors.

The last story, though, is the one worth watching long-term.

Late-Friday, in response to its growing debt issues, it was reported that Greece may withdraw from the Eurozone. An outcome such as this is unlikely, however, the possibility was enough to spark a flight-to-quality that benefited U.S. mortgage rates. Conforming and FHA rates ended Friday lower, reaching their best levels since December.

This week, there isn't much economic news set for release so the above stories will continue to influence markets and rates. Geopolitics can change quickly, though, so if you're floating a mortgage rate and waiting for the bottom, don't wait too long. Markets can reverse in a snap.

If you see a rate you like, the safest move is to lock it.

Foreclosures And Short Sales Distorting "Home Price Trackers"

2011-05-06T07:57:00.001-05:00

In an echo of February's Case-Shiller Index report, the government's own home price-tracker -- the Home Price Index -- showed home values slipping between January and February 2011.

The Federal Home Finance Agency data had home values down 1.6 percent nationwide in February, on average, marking the fourth straight month in which prices fell.

Furthermore, all 9 regions posted losses from the month prior:

Mountain Region : -3.7% from January
East South Central : -0.6% from January
South Atlantic : -0.9% from January
New England : -2.0% from January

Before you draw conclusions, however, note that the data at which we're looking has several major flaws to it.

First, it's old. We're now in the first week of May and the FHFA's most recent release only covers through February, a time period ending roughly 60 days ago. That's a long delay and today's purchase market in Apple Valley looks much different from the one of February.

Just ask a real estate agent and they'll tell you -- purchase activity is rising.

Second, the FHFA Home Price Index reports on home value changes between consecutive Fannie Mae or Freddie Mac-securitized transactions only. This might be creating an overweight of "distressed properties" in the index which, in turn, drags down valuations.

Distressed homes account for 40% of all home resales and typically sell at 20 percent discounts.

And, lastly, although the Home Price Index is a national report, real estate as a market is decidedly not national. To the contrary, it's extremely local. As an individual, you don't buy, sell or own homes in all 50 states. You buy them in a specific state, and a specific neighborhood.

The national data is useless to you in that respect.

We can't discount the Home Price Index data entirely, but should remember that it paints a clearer picture of where housing has been versus where housing is going. As a home buyer or homeowner, it's the future of home values that matters more.

Job Growth Returning To "Normal" Levels -- A Bad Sign For Mortgage Rates

2011-05-05T07:57:00.001-05:00

Be prepared for Friday morning. Mortgage rates and home affordability could worsen quickly. At 8:30 AM ET, the Bureau of Labor Statistics releases its April Non-Farm Payrolls report and momentum has been strong.

The monthly jobs report is a market-mover and analysts expect that 196,000 new jobs were added last month. If those expectations are exceeded -- by even a little -- Wall Street would take it mean "economic strength" and the stock market would be boosted.

Too bad for rate shoppers, though; a move like that would also lead to higher mortgage rates throughout Minnesota. This is because, coming out of a recession, reports of economic strength tend to push mortgage rates up. We've seen it happen multiple times in the last 8 months.

Since losing more than 7 million jobs between 2008 and 2009, employers have added 1.3 million jobs back to the economy. And we're learning that there's plans for fewer job cuts in the future. It's clear that the jobs market is improving and this is why tomorrow's Non-Farm Payrolls report is so important.

A "weak economy" helped keep mortgage rates low for a very long time. A strengthening economy will reverse that tide.

So, consider your personal risk tolerance today, in advance of tomorrow's Non-Farm Payrolls report. If the thought of rising mortgage rates makes you nervous, call your loan officer and lock in a rate today. Once tomorrow's data is released, after all, the market might look changed.