What's Ahead For Mortgage Rates This Week : April 30, 2012

Fed Funds RateMortgage markets were mostly unchanged last week for the second straight week. Spain made few moves to allay concerns from its investors, the Federal Reserve did little to change its message on the U.S. economy, and newly-released economic data was in-line with expectations.

Conforming mortgage rates in Georgia idled last week, remaining near all-time lows for the 30-year fixed rate mortgage, the 15-year fixed rate mortgage; and the 5-year ARM.

According to Freddie Mac's weekly mortgage rate survey, last week's mortgage rates, as averaged from more than 125 banks nationwide, were as follows :

  • 30-year fixed rate mortgage : 3.88% with 0.7 discount points
  • 15-year fixed rate mortgage : 3.12% with 0.6 discount points
  • 5-year adjustable rate mortgage : 2.85% with 0.6 discount points

A discount point is a one-time closing cost and is equal to one percent of your overall loan size. This means that a mortgage applicant with a $100,000 mortgage and an accompanying 0.7 discount points would be responsible for paying an upfront charge of $700 at the time of closing.

Freddie Mac's mortgage rates assume full closing costs, too.

This week, it's unclear whether Canton mortgage rates will rise or fall.

There are few economic data points due for release so mortgage markets are expected to take their cues from Europe where there's no shortage of story lines.

In Spain, there are protests over new austerity measures. In France, a new President may be elected -- one whom opposes austerity. In the Netherlands, a new budget passed that includes austerity measures, but barely.

Each storyline generates uncertainty about the future of Europe and its unified economy. As the uncertainty grows, global investors seek safety in the U.S. mrotgage bond market, a move that helps mortgage rate shoppers. When demand for mortgage bonds is high, mortgage rates tend to improve.

Also affecting mortgage rates this week will be Friday's Non-Farm Payrolls report.

The economy is expected to have added 165,000 net new jobs in April and the Unemployment Rate is believed to have remained unchanged at 8.2%. If there is a deviation from either of these expectations, mortgage rates will change. If the actual jobs data is stronger than Wall Street expectations, mortgage rates are likely to rise.

If the jobs report is weak, mortgage rates should fall.


Pending Home Sales Index Crosses The 100 Barrier

Pending Home Sales 2010-2012

After a series of worse-than-expected data last month, the housing market appears to be back on track.

The Pending Home Sales Index posted 101.4 in March, a four percent gain from the month prior and the index's highest reading since April 2010 -- the last month of that year's federal home buyer tax credit.

A "pending home" is a home under contract to sell, but not yet closed. The Pending Home Sales Index is tracked and published by the National Association of REALTORS® monthly.

The March report marks the index's first 100-plus reading in nearly two years.

To home buyers and sellers throughout Georgia , this is statistically significant because the Pending Home Sales Index is normalized to 100, a value corresponding to the average home contract activity in 2001, the index's first year of existence. 2001 was an historically-strong year for the housing market.

The March 2012 Pending Home Sales Index, therefore, puts current market activity on par with market activity from 2001.

You wouldn't know it from reading this week's papers, though. There have been stories about how the Case-Shiller Index put home values at new loans; and how the Existing Home Sales figures unexpectedly dropped off; and how the New Home Sales report was a laggard.

But this is why the Pending Home Sales Index can be so important.

What makes the Pending Home Sales Index different from those other data points is that the Pending Home Sales Index is a "forward-looking" housing market indicator.

Unlike most data which aims to tell us how the housing market performed at some point in the past, the Pending Home Sales Index attempts to tell us how the housing market will perform at some point in the future. 

80% of homes under contract close within 2 months. Many more close within months 3-4. Therefore, on the strength of the March Pending Home Sales Index, we should expect a strong April and May nationwide

If you're shopping for homes right now, consider taking advantage while the market remains somewhat soft. Mortgage rates are low and home prices are, too. It can make for a good home-buying conditions.


A Simple Explanation Of The Federal Reserve Statement (April 25, 2012)

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the fifth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.

In its press release, the Federal Reserve noted that the U.S. economy has been "expanding moderately" since the FOMC's last meeting in March. Beyond the next few quarters, the Fed expects growth to "pick up gradually". 

This key phrase will likely be repeated by the press. It suggests that the economy is no longer contracting; instead moving along a path of slow, consistent expansion.  

In addition, the Fed acknowledged that "strains in global financial markets" continue to pose "significant downside risks" to long-term U.S. economic outlook. This is in reference to the sovereign debt concerns of Greece, Spain and Italy, and the potential for a broader European economic slowdown.

The Fed's statement included the following notes :

  1. The housing sector remains "depressed"
  2. Labor conditions have "improved in recent months"
  3. Household spending has "continued to advance"

Also, with respect to inflation, the Fed said that the higher oil and gasoline prices from earlier this year will affect inflation "only temporarily", and that inflation rates will return to stable levels soon.

At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at "exceptionally low" levels through late-2014, and to buy mortgage-backed bonds in the open market.

Immediately following the FOMC's statement, mortgage markets improved slightly, pressuring mortgage rates lower in Marietta and nationwide.

The FOMC's next scheduled meeting is a two-day event slated for June 19-20, 2012.

New Home Sales Revised Higher In February; Slip 7% In March

New Home Sales 2011-2012Sales of new homes ticked lower in March, unexpectedly.

Based on Census Bureau data, the number of new, single-family homes sold in March slipped 7 percent from February -- the largest one-month drop in more than a year. 

On a seasonally-adjusted, annualized basis, buyers in Georgia and nationwide purchased 328,000 newly-built homes last month. The decrease in sales from February to March can be attributed, in part, though, to a massive upward revision in February's figures.

Last month, the Census Bureau had reported 313,000 new home sales in February on a seasonally-adjusted, annualized basis. This month, those sales were re-measured to be 353,000 -- an increase of 13 percent.

January's sales were revised higher, too.

The long-term trend in the market for new homes remains "up". This is no more apparent than when we look at the available new home inventory.

At the close of March, just 144,000 new homes were available for purchase, down 2,000 from the month prior and representing the most sparse new home housing supply since at least 1993, the year that the Census Bureau starting tracking such data. 

At the current pace of sales, the new home housing stock would be sold out in 5.3 months. A six-month supply is believed to represent a market in balance.

For new home buyers in Atlanta , March's New Home Sales report does not represent a housing market pull-back. It may represent opportunity, however.

From October 2011 to February 2012, housing data was uniformly strong. Home sales were higher, home supplies were lower, and confidence was rising. In March, it was the reverse. This is normal because growth is rarely linear. 

In any market, it's a few steps forward and a single step back, and housing is likely showing a similar pattern. With mortgage rates still low and builder confidence down, it's a terrific time to shop new construction.

There are deals to be found for buyers who seek them out. 


The Fed Starts A 2-Day Meeting Today. Make A Strategy.

Fed Funds Rate vs Mortgage Rates 1990-2012

The Federal Open Market Committee begins a 2-day meeting today in the nation's capitol. It's the group's third of 8 scheduled meetings this year. Mortgage rates are expected to change upon the Fed's adjournment.

Led by Chairman Ben Bernanke, the FOMC is a 12-person, Federal Reserve sub-committee. The FOMC is the group within the Fed which votes on U.S. monetary policy. "Making monetary policy" can mean a lot of things, and the action for which the FOMC is most well-known is its setting of the Fed Funds Funds.

The Fed Funds Rate is the overnight interest rate at which banks borrow money from each other. It's one of many interest rates set by the Fed.

However, one series of interest rates not set by the Fed is mortgage rates. Instead, mortgage rates are based on the prices of mortgage-backed bonds and bonds are bought and sold on Wall Street.

There is little historical correlation between the Fed Funds Rate and the common, 30-year fixed rate mortgage rate.

As the chart at top shows, since 1990, the Fed Funds Rate and the 30-year fixed rate mortgage rate have followed different paths. Sometimes, they've moved in the same direction. Sometimes, they've moved in opposite directions. 

They've been separated by as much as 5.29 percent at times, and have been as near to each other as 0.52 percent.

Today, that spread is roughly 3.65 percent. It's expected to change beginning 12:30 PM ET Wednesday. That's when the FOMC will adjourn from its meeting and release its public statement to the markets.

The FOMC is expected to announce no change in the Fed Funds Rate, holding the benchmark rate within in its current target range of 0.000-0.250%. However, how mortgage rates in and around Atlanta respond will depend on the verbiage of the FOMC statement. 

In general, if the Fed acknowledges that the U.S. economy as in expansion; growing from job growth and consumer spending, mortgage rates are expected to rise. If the Fed shows concern about domestic and global economic growth, mortgage rates are expected to fall. 

Any time that mortgage markets are expected to move, a safe play is to stop shopping your rate and start locking it. Today may be one of those times.


What's Ahead For Mortgage Rates This Week : April 23, 2012

FOMC meets this weekMortgage markets were mostly unchanged last week, breaking a three-week winning streak. Wall Street grappled with surprising demand on Spain's debt issuance and a series of weaker-than-expected data points on U.S. housing.

Conforming mortgage rates across Georgia rose slightly according to the weekly Freddie Mac Primary Mortgage Market Survey.

Nationwide, the 30-year fixed rate mortgage rate climbed 2 basis points to 3.90%. This rate is available to homeowners willing to pay 0.8 discount points and a full set of closing costs, where 1 discount point is equal to 1 percent of the borrowed amount.

Prior to last week's survey, just 0.7 discount points were required.

This week, mortgage rates are expected to be volatile. There is a lot of economic data due for release, the Eurozone's issues with sovereign debt remain unresolved, and the Federal Open Market Committee gets together for a scheduled, 2-day meeting.

On the data front, the week starts with Tuesday's Consumer Confidence figures and the government's New Home Sales report. Both have the power to move mortgage rates. The week then concludes with the Pending Home Sales Index; the GDP release; and a series of Treasury auctions.

With respect to Europe, demand remains strong for debt from Spain, but at much higher rates as compared to several weeks ago. The same is true for Italy. Both nations are feared to be at risk of default on their respective sovereign debt. It's a similar situation to that which occurred in Greece throughout 2011.

Long-term, lingering concerns for Spain and Italy would likely help keep U.S. mortgage rates suppressed.

And, lastly, the Federal Reserve will make a statement to markets Wednesday afternoon. The Fed is the nation's central banker and its post-meeting press releases have tremendous influence on bond markets, including those for mortgage-backed bonds.

By extension, therefore, the Federal Reserve's statement has the power to move mortgage rates in and around Atlanta.

If you're shopping for mortgage rates, it's as good of a time as any to lock with your lender. Rates have more room to rise than to fall.


Existing Home Sales Slip In March

Existing Home Sales In March, for the second straight month, home resales slipped nationwide.

According to the National Association of REALTORS®, March 2012 Existing Home Sales fell to 4.48 million units on a seasonally-adjusted annualized basis -- a 3 percent drop from February.

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

The weaker-than-expected Existing Home Sales data is the third such housing report this month to suggest a lull in the spring housing market. Earlier this week, homebuilder confidence slipped for the first time in three months and March Single-Family Housing Starts fell, too.

The news wasn't entirely bad for home resales, however. Although total home units sold decreased, so did the number of homes available for sale. There were just 2.37 million homes for sale nationwide in March, a 2 percent drop from the month prior.

At the current pace of sales, therefore, the entire nation's home resale stock would "sell out" in 6.3 months. This is the second-fastest pace since the housing market's April 2007 peak.  

A 6-month supply is widely believed to represent a market in balance between buyers and sellers.

The March Existing Home Sales data shows that -- despite record-low mortgage rates nationwide -- buyer activity in Canton is slowing, and seller activity may be slowing, too.

So long as the two forces remain in balance, home prices should do the same. This is the law of Supply and Demand at work. 

However, if home sales continue to slide and home inventory builds, buyers may find themselves with an edge in negotiations. 

If you're planning to buy a home in 2012, the long-term housing trend is still toward recovery. This season may be a good time to look at your options. Talk to your real estate agent to see what's available. Low mortgage rates may persist, but low home prices may not.


Nevada Relinquishes "Top Foreclosure State" Title

Foreclosures March 2012

According to foreclosure-tracking firm RealtyTrac, foreclosure filings fell to 199,000 in March 2012, a 17 percent decrease from March 2011. Last month marks the first time since July 2007 that foreclosure filings numbered less than 200,000 on a monthly basis -- a span of nearly 5 years.

The generic term "foreclosure filing" is used to group all types of foreclosure activity into a single reading. It includes default notices, scheduled auctions, and bank repossessions. 

As in most months, foreclosure density varied by region. 6 states accounted for more than half of the nation's repossessed homes in March.

  • Florida : 13.6 percent of all bank repossessions
  • California : 12.0 percent of all bank repossessions
  • Georgia : 8.0 percent of all bank repossessions
  • Michigan : 7.5 percent of all bank repossessions
  • Arizona : 6.5 percent of all bank repossessions
  • Illinois : 6.4 percent of all bank repossessions

At the other end of the spectrum, North Dakota and Washington, D.C. were home to the fewest bank repossessions, with 0.03% and 0.02% of the national total, respectively.

Also noteworthy is that the RealtyTrac report revealed that Nevada relinquished its title as Top Foreclosure State after 62 consecutive top-ranking months. In March, 1 in every 301 Nevada homes received some form of a foreclosure filing. The March rate was a nation-topping 1 in 300 in neighboring Arizona.

For Atlanta home buyers, today's foreclosure market represents an interesting opportunity. 

Homes purchased while in the various stages of foreclosure can often be bought at lower prices relative to homes not in foreclosure. It's one of the reasons why foreclosed homes now account for 20 percent of all home resales

However, don't confuse less expensive for less costly.

Foreclosed homes are often sold "as-is" and may be in various stages of disrepair. Fixing a foreclosed home to make it habitable could wipe out the money saved on its price tag. Your best real estate "deal", therefore, may be a non-distressed home in sound, move-in ready condition.

If you're buying foreclosures -- or even considering it -- be sure to talk with a real estate agent first. The process of buying a foreclosed property is different from buying a "regular" home. You'll want somebody experienced on your team.


Single-Family Housing Starts Slip 0.2% In March

Housing Starts Tuesday, the government released its March 2012 New Residential Construction report. 

The report is made up of three sections, each related to a phase of the "new home" market. The report's first part is Building Permits; the second is Housing Starts; the third is Housing Completions.

Of the three sections, it's Housing Starts that gets the most attention from the press -- mostly because, of the triad, it's the simplest for a layperson to understand. However, the manner in which Housing Starts data is reported can be misleading.

Today's newspapers offer up an excellent example.

According to the Census Bureau, total Housing Starts fell by 6% in March as compared to the month prior. 654,000 units were started on a seasonally-adjusted annualized basis.

For Housing Starts, it's the lowest reading in 5 months, a statistic suggesting that the housing market may have lost some momentum. Much of the press covered the story from a "housing is slowing" angle.

A few published headlines include : 

Although these headlines are accurate, they tell just half of the story.

Housing Starts did drop in March, but if we remove a subset of the data -- structures with "5 or more units"; a grouping that includes condominiums and apartment buildings -- we're left with Housing Starts for single-family residences only. It's this data that matters most to buyers in Atlanta and nationwide. 

Few home buyers buy entire apartment buildings. Most buy single-family homes. 

In March, single-family Housing Starts were down 0.2% from the month prior, or just 1,000 units on a seasonally-adjusted, annualized basis.

That's hardly a drop at all.


Homebuilder Confidence Slips 3 Points In April

NAHB Housing Market IndexFor the first time in 3 months, homebuilder confidence has slipped. 

As measured by the National Association of Homebuilders, the Housing Market Index dropped three notches in April to a reading of 25. The report measures homebuilder confidence in the newly-built, single-family housing market. 

When the Housing Market Index reads 50 or better, it reflects favorable market conditions. Readings below 50 reflect unfavorable conditions.

According to the scale, not since April 2006 have housing market conditions have been deemed "favorable" but, recently, homebuilder confidence has picked up. Between September 2011 and March 2012, confidence doubled.

April's reading remains that second-highest since 2007.

So what does "builder confidence" mean? The formula is a little bit tricky.

The Housing Market Index is actually a composite figure. It's the combined result of three separate surveys sent to homebuilders monthly. The surveys ask about current single-family sales volume; projected single-family sales volume over the next 6 months; and current home buyer "foot traffic".

The NAHB compiles the results into the Housing Market Index.

In April, builder responses worsened on all 3 questions :

  • Current Single-Family Sales : 26 (-3 from March 2012)
  • Projected Single-Family Sales : 32 (-3 from March 2012)
  • Buyer Foot Traffic : 18 (-4 from March 2012)

At first glance, the data reveals a weakening market for newly-built homes and this may be true; we won't know for another few months whether April's confidence setback is an historical blip or the start of a trend. The change in builder psyche, though, is a change that today's new home buyers in Canton can exploit.

Two months ago, builders expected 2012 to be a banner year for home sales. Today, they're not so sure.

Buyers of new construction, therefore, may find it easier to negotiate with builders for price reductions, "free upgrades", and/or other concessions. Plus, with mortgage rates still resting near historical lows, financing a newly-built home is cheaper than at any time in recorded history.

The Spring Buying Season is underway. For buyers of new construction, there are deals to be found.


What's Ahead For Mortgage Rates This Week : April 16, 2012

Retail SalesMortgage markets improved last week as a global flight-to-quality continued. With Spain facing questions on its sovereign debt, investors continued to pare exposure to risky assets, sparking demand for the relative safety of U.S. government-backed mortgage-backed bonds.

As a result, conforming and FHA mortgage rates slipped for the third straight week last week. 

According to Freddie Mac's weekly Primary Mortgage Market Survey, the average 30-year fixed rate mortgage available to borrowers in Georgia is down to 3.88% nationwide with an accompanying 0.7 discount points plus "typical" closing costs.

Last week's reported 3.88 percent rate for the 30-year fixed rate mortgage is within one-tenth of one percent of the lowest, average mortgage rates in Freddie Mac survey history. However, the last time conforming rates were reported in this range, the accompanying, required discount points were higher than last week's 0.7.

Meanwhile, at 3.11% nationwide with 0.7 discount points plus closing costs, the 15-year fixed rate mortgage rate is equally low. It, too, set a record last week.

It's a good time to be looking for a mortgage in Atlanta. Rates and fees are great.

Last week, markets moved on momentum. This week, they'll move on data. The economic calendar is busy.

  • Monday : Retail Sales; Housing Market Index
  • Tuesday : Housing Starts
  • Thursday : Weekly Jobless Claims; Leading Indicators; Existing Home Sales

In addition, two Federal Reserve members offer prepared remarks Monday. They will be the last public Fed comments before next week's 2-day FOMC meeting.

Mortgage rates remain low. Consider calling or emailing your loan officer to learn more about your current financing options.


Mortgage Rates Fall For Third Straight Week

Freddie Mac Mortgage Rates

After a brief surge north of 4 percent last month, mortgage rates have settled down, near their lowest levels of all-time.  

According to Freddie Mac's weekly Primary Mortgage Market Survey, for applicants willing to pay 0.7 discount points plus a complete set of closing costs, the average 30-year fixed rate mortgage rate fell to 3.88 percent this week.

0.7 discount points adds $700 to your mortgage closing costs for each $100,000 borrowed.

Mortgage rates are down this week on "safe haven" buying. The move is triggered by Wall Street's concern that Spain and Italy will have trouble servicing their respective sovereign debt. In response, investors are selling risk-heavy assets and using the proceeds to purchase U.S. government-backed bonds.

This creates demand for mortgage bonds which, in turn, pressures mortgage rates lower.

The storyline is similar to what transpired in Greece last year, and, at least for now, it gives Atlanta home buyers reason to cheer. So long as economic uncertainty remains, mortgage rates may stay low.

Of course, like all things in real estate, though, mortgage rates are local. Rates offered by banks varied by region.

Freddie Mac's survey of 125 banks showed the following regional breakdown :

  • Northeast Region : 3.88% with 0.8 discount points 
  • West Region : 3.85% with 0.8 discount points
  • Southeast Region : 3.91% with 0.8 discount points
  • North Central Region : 3.89% with 0.6 discount points
  • Southwest Region : 3.90% with 0.8 discount points

The best mortgage "deals" are currently available to North Central Region residents. The most expensive loans are for those in the Southeast.

Relative to history, though, all mortgage rates look inexpensive. Conforming 30-year fixed rate mortgage rates have never been as low as they are today. It's a bonus for home buyers because cheap mortgage rate yield cheap mortgage payments. Home affordability remains near all-time highs.  

If you're unsure of whether now is a good time to buy or refinance, the answer is yes. Talk to your loan officer to review your mortgage options.


Tax Tips : What To Do With Your Tax Refund

The typical U.S. taxpayer will receive roughly $3,000 in federal income tax refunds this year -- an average of $250 per month. So, what would you do with an extra $250 monthly? This segment from NBC's The Today Show offers some advice. 

Whether you've already filed your annual taxes for 2011, filed an extension, or will squeak by on the deadline, you could probably be doing more with your taxes. The above video shares some tips. It's four minutes of solid insight on tax refunds, tax withholdings, and reducing your household's overall "bad debt". There's something for everyone.

Among the points covered in the tax refund piece :

  • Consider changing your personal payroll exemptions so your 2012 refund is $0
  • Remember that refunds are not "free money" -- it's your money. Spend wisely.
  • Use your tax refund to fund retirement accounts

Advice is also shared about how to use your tax refund to fund a reserve account, or emergency fund. As a homeowner or home buyer in Atlanta , applying tax refunds to a savings accounts in this manner can go a long way. When you're a homeowner, maintenance costs can be sudden and unexpected. A furnace can explode, for example; or, a roof could spring a leak. Having money set aside for crisis is essential.

Having a savings account will also improve your household's long-term financial stability. 

As a reminder, in most years, federal income tax is due April 15. However, with Tax Day falling on a Sunday and with the federal government closed for a holiday the following Monday, U.S. taxpayers in Georgia and nationwide get a reprieve until Tuesday, April 17, 2012.


The Top 10 Cities In Which To Raise A Family

Great places to raise a familyLooking for a great place to raise a family? Forbes Magazine has a list that may help you.

Titled "The Best Cities For Raising A Family", Forbes has compiled and analyzed data from America's 100 largest metropolitan areas, accounting for seven lifestyle factors including cost of living, commuting ease, school quality, crime density, and home affordability.

Given these selection criteria, it's no surprise that Grand Rapids, Michigan took top honors. The area's low median income is offset by an extremely low cost of living and a school system that's among the best in the nation. Nearly 90% of the homes in Grand Rapids are affordable families earning the median income -- the seventh-highest affordability ranking in the country -- and commutes are quick.

Since the housing peak, home prices are down just 12% in Grand Rapids -- a figure below the national average.

The complete Top 10 list for the Forbes "The Best Cities For Raising A Family" piece were:

  1. Grand Rapids, Michigan
  2. Boise, Idaho
  3. Provo, Utah
  4. Youngstown, Ohio
  5. Raleigh, North Carolina
  6. Poughkeepsie, New York
  7. Omaha, Nebraska
  8. Ogden, Utah
  9. Cincinnati, Ohio
  10. Worcester, Massachusetts

Now, before you make a home-buying decision based on the Forbes report, remember that real estate is a local market and even city-wide statistics can be too broad to be helpful to everyday home buyers in Canton. Even within Grand Rapids, there are some neighborhoods that outperform in terms of home valuations and school quality, for example; and some areas from which a daily work commute may be more cumbersome. 

For accurate, real-time housing data for any of the above markets or for a smaller neighborhood like East Cobb , be sure to ask a real estate professional.


Homes Get More Affordable On March Jobs Data

Unemployment Rate

Americans continue to get back to work.

Last Friday, in its Non-Farm Payrolls report for the month of March, the Bureau of Labor Statistics announced 120,000 net new jobs created, plus combined revisions in the January and February reports of +4,000 jobs.

The March report marks the 18th straight month of job growth nationwide -- the first time that's happened in 5 years.

The Unemployment Rate dipped in March, too, falling one-tenth of one percent to 8.2%. This is its lowest national Unemployment Rate since February 2009.

Clearly, the jobs market is moving in the right direction. Yet, after the Non-Farm Payrolls report was released Friday morning, stock markets dropped and bond markets gained -- the opposite of what a casual market observer would expect.

It happened because, although job growth was strong, Wall Street decided it just wasn't strong enough. The market expected 200,000 jobs created in March at least and the actual reported figure fell short.

Lucky for you, Wall Street's pain is Main Street's gain. After the jobs report was released, mortgage rates immediately dropped to a 3-week low, making homes more affordable in Georgia and throughout all 50 states.

The market's reaction is an excellent example of how important jobs data can be to home affordability -- especially in a recovering economy.

The economy shed 7 million jobs between 2008-2009 and has since added more than half of them back. Wall Street pays close attention to job creation because more working Americans means more consumer spending, and more consumer spending means more economic growth.

Rate shoppers caught a bit of a break on the March payroll data. By all accounts, the labor market recovery in underway and, as it improves, higher mortgage rates are likely nationwide. For now, though, there's a window for low mortgage rates that buyers and would-be refinancing households can try to exploit.

If you're actively shopping for a home or a mortgage, today's mortgage rates may be at "last chance"-like levels. Once rates rise, they're expected to rise for good.


What's Ahead For Mortgage Rates This Week : April 9, 2012

Spain mortgage ratesIn a week of up-and-down trading, mortgage markets improved for the second consecutive week last week. Weaker-than-expected jobs data plus evidence of a slumping Eurozone took mortgage bonds lower, capped by a furious Friday morning rally that dropped mortgage rates to near-record levels.

Once again, volatility ruled the bond pits.

Tuesday afternoon, after the release of the Fed March Minutes, mortgage rates spiked. Some products climbed as much as 0.250 percent. The surge stemmed from the Fed Minutes showing Federal Reserve members hesitant to begin new rounds of market stimulus without a demonstrated, national economic slowdown. 

Wall Street hadn't expected the Fed's verbiage to be so well-defined. With little evidence that such a slowdown was underway -- the economy has shown two straight seasons of consistent, steady growth, after all -- equity markets rallied and bond markets sunk, causing mortgage rates to rise.

By Wednesday, however, rates had started to fall. 

Civil unrest in Spain plus concern that the nation will fail to meet its debt obligations drew global investors away from equities and into the relative safety of U.S. government-backed bonds -- including mortgage-backed bonds. This is a common investment pattern during times of economic uncertainty and one of the major reasons why mortgage rates have been so low, for so long.

If the scenario in Spain sounds similar to what transpired in Greece between mid-2010 and late-2011, that's because it is. Mortgage rates in Georgia may benefit in the medium-term.

Also helping rates last week was the March jobs report.

The U.S. government reported 120,000 net new jobs created in March, well short of the 200,000 figure that analysts expected. Market sold off sharply on the news, giving rate shoppers another chance to capture low rates.

This week, with the economic calendar light, look for Europe to dictate market action. Mortgage rates may move lower but there's more room for rates to rise than to fall. Rates remain near all-time lows.


Jobs Report Due Friday; Mortgage Rates Expected To Change

Non-Farm Payrolls estimateIf you're out shopping for a home this week, or trying to lock a mortgage rate, with Friday comes home affordability risk. Consider locking your mortgage rate today.

The March Non-Farm Payrolls report is due for release Friday morning and mortgage rates are expected to move. Unfortunately for the home buyers and rate shoppers of Canton , we can't know in which direction that will be.

The prudent play may be to lock your mortgage rate today.

On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report. More commonly called "the jobs report", the release is a bona fide market-mover, month after month. 

Depending on how the March jobs data reads, FHA and conforming mortgage rates could rise -- or fall -- by a measurable amount post-release. This is because today's mortgage market is closely tied to the economy, and the economy is closely tied to job growth.

The connection between jobs and mortgage rates is basic.

More workers leads to higher levels of consumer spending nationwide and consumer spending accounts for the majority of the U.S. economy.

In addition, when more workers are paid, more taxes are paid, too. Local, state and federal governments collect more monies when payrolls are rising which, in turn, benefits projects that purchase new goods and services, and, in many cases, results in the hiring of additional personnel.

Job creation can be a powerful, self-reinforcing cycle. 

Between 2008 and 2009, the economy shed 7 million jobs. It has since recovered half of them. Friday, analysts expect to count another 200,000 jobs created. If the actual number of jobs created exceeds estimates, look for stock markets to gain and bond markets to lose. This leads to higher mortgage rates -- especially with the Federal Reserve zeroed in on the labor market.

If the actual number of jobs created in March falls short of expectations, however, mortgage rates may fall.

Unfortunately, by the time the report is released, it will be too late to act on it. The release is made at 8:30 AM ET and bond markets are closed for Good Friday.


Fed Minutes Causes Mortgage Rates To Rise Suddenly

FOMC Minutes March 2012The Federal Reserve has released the minutes from its last FOMC meeting, a 1-day affair held March 13, 2012. Mortgage rates in Georgia are rising on the news.

For the un-indoctrinated, 3 weeks after it meets, the Federal Open Market Committee, the sub-group within the Federal Reserve that votes on U.S. monetary policy, publishes its meeting minutes.

Similar to the minutes from a corporate event, or condominium association meeting, the Fed Minutes recounts the conversations and debates that transpired throughout the meeting.

The Fed Minutes is a lengthy publication, often filling 10 pages or more. By contrast, the more well-known publication from the FOMC -- its post-meeting press release -- tends to span 6 paragraphs or less.

The extra detail contained within the Fed Minutes is Wall Street fodder, especially given the current economic uncertainty. Investors look to the Federal Reserve for clues about what's next for the U.S. economy.

Lately, the minutes has made an out-sized impact on mortgage rates. The Fed's words continue to swing the mortgage-backed bond market.

Today is no different.

March's Fed Minutes is a dense one and markets are reacting. The text shows a central bank softly divided on future U.S. economic policy, and in debate about whether existing market stimulus should be removed.

The Fed has said that it's expecting high levels of unemployment and low levels of inflation in the coming months, an outlook that leaves little reason to introduce a third round of stimulus. This is the primary reason why mortgage rates in Marietta have been climbing since the Fed Minutes' release.

Since mid-March, mortgage rates dropped on speculation that the Federal Reserve would introduce a mortgage bond purchase program this quarter. Today, those expectations have reversed.

According to the minutes, the Federal Reserve believes that additional market stimulus would only be necessary "if the economy lost momentum", or if inflation remained too far below 2 percent per year. Currently, Core PCE -- the Fed's preferred gauge of inflation -- is running slightly below 2 percent.

The Federal Reserve's next scheduled meeting is April 24-25, 2012 -- its third of 8 scheduled meetings this year.


FHA Mortgage Insurance Premiums Increasing April 9, 2012

FHA MIP increasingPlanning to use an FHA-backed mortgage for your next home loan? You might want to get your application in gear today.

Beginning next week, the Federal Housing Administration (FHA) is changing the way it charges mortgage insurance to U.S. homeowners. For the fourth time since 2010, FHA mortgage insurance premiums are rising for all FHA-backed homeowners.

For FHA Case Numbers assigned on, or after, Monday, April 9, 2012, there are two planned changes.

First, FHA Upfront Mortgage Insurance Premiums (UFMIP) will increase by 75 basis points to 1.75%, or $1,750 per $100,000 borrowed. Upfront Mortgage Insurance Premium is paid at closing, and typically added to an FHA borrower's loan size.

The current UFMIP rate is 1.000 percent.

Second, annual FHA mortgage insurance premiums are rising. All new FHA-backed loans will be subject to a 10 basis point increase in annual mortgage insurance premiums, costing homeowners an extra $100 per $100,000 borrowed per year.

The new FHA annual mortgage insurance premium schedule follows :

  • 15-year loan term, loan-to-value > 90% : 0.60% MIP per year
  • 15-year loan term, loan-to-value <= 90% : 0.35% MIP per year
  • 15-year loan term, loan-to-value <= 78% : 0.00% MIP per year
  • 30-year loan term, loan-to-value > 95% : 1.25% MIP per year
  • 30-year loan term, loan-to-value <= 95% : 1.20% MIP per year

In addition, for loans above $625,500, beginning with FHA Case Numbers assigned on, or after, June 11, 2012, there will be an additional 25 basis point increase in annual MIP.

To calculate your monthly MIP obligation as a FHA homeowners, multiply your starting loan size by your insurance rate from the list above, then divide by 12.

Note that the FHA mortgage insurance changes apply to new FHA Case Numbers only. If you have an FHA mortgage approval in-process, or an existing FHA home loan, you are not subject to the new MIP schedule. To avoid paying the FHA's new MIP schedule, therefore, begin your FHA mortgage application today.

Once your FHA Case Number is assigned, you're locked in to today's lower premiums.


What's Ahead For Mortgage Rates This Week : April 2, 2012

Jobs growth can influence mortgage ratesMortgage markets improved last week on renewed concerns of a European debt default, and Federal Reserve rhetoric.

Conforming mortgage rates in Georgia dropped on the news, one week after posting a 5-month high.

A major strike in Spain and growing unrest in Italy, both in opposition to recent austerity measures, have re-ignited fears that the Eurozone may lapse into recession.

These are similar beginnings as with last year's events in Greece. The difference is that Spain and Italy represent a larger share of the Eurozone's overall economy, and a debt default could trigger faster contagion.

Mortgage markets gained on the news in a bid of safe haven buying.

Bonds also gained as Federal Reserve Chairman Ben Bernanke clarified his position on the economy with respect to Fed-led stimulus. Summarized, he said that the Federal Reserve is inclined to keep its accommodative policies in place until the labor market is more fully recovered.

In addition, Chairman Bernanke alluded to making direct mortgage market intervention if U.S. economic growth were to stall in the near future.

The news helped push mortgage rates back below 4.000 percent last week, according to Freddie Mac's weekly Primary Mortgage Market Survey. The average 30-year fixed rate mortgage rate fell to 3.99% for applicants willing to pay an accompanying 0.7 discount plus closing costs.

1 discount point is equal to one percent of your loan size.

This week's mortgage market activity will be holiday-shortened so expect volatility -- especially surrounding Friday's March Non-Farm Payrolls report.

More commonly called "the jobs report", Non-Farm Payrolls details national employment rates and gains or losses in the workforce size. Lately, what's been good for jobs has been good for the economy so if the actual number of jobs created exceeds the 200,000 projected by economists, or if the Unemployment Rate drops off its current 8.3% reading, look for mortgage rates to rise.

In general, economic expansion is bad for mortgage rates throughout Canton and the nation.

Other market-moving news this week includes Tuesday's FOMC Minutes release and Thursday Jobless Claims data.