Good News For Sellers -- Housing Starts Plummet In February

Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.

February's figures represents the worst 1-month drop in housing starts since May 2010 -- the month that followed the expiration of last year's federal home buyer tax credit -- and puts single-family housing starts at a 24-month low.

In addition, single-family Building Permits plunged last month, too, shedding 9 percent from January. A building permit is a local government's certification and approval to begin home construction.

Housing permits are an excellent forward-indicator for the housing market. This is because 93 percent of homes start construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Plymouth looking at new construction or existing homes, this news should create a sense of urgency.

Home prices are based on supply and demand and overall home supply looks headed for a fall. Plus, with mortgage rates retreating and homebuilders projecting higher sales this summer, buyers may face rising home prices before long.

Sellers look poised to regain negotiation leverage.

For now, though, home affordability remains high with properties inexpensive and mortgage rates still low, historically. If you plan to buy a home in 2011, the February 2011 Housing Starts data may be reason to move up your time frame.

With home supplies dropping, prices are likely to rise.

Homebuilders Expect More Sales Volume This Year

Homebuilders are optimistic about the housing market this spring, relative to recent months.

According to the monthly Housing Market Index as published by the National Association of Homebuilders, after 4 straight months of reading 16, March homebuilder confidence ticked 1 point higher to 17.

It's the highest confidence reading in 10 months.

A value of 50 or better indicates "favorable conditions" for home builders; with more builders viewing sales conditions as "good" than "poor".

HMI hasn't read higher than 50 since April 2006.

Regionally, the Housing Market Index showed mixed results. Confidence fell 1 point in the Northeast, held firm in the Midwest, and rose in the Southeast and West regions by 2 points and 4 points, respectively.

As an index, the monthly survey is actually a composite of three separate homebuilder surveys -- a report on single-family sales; a report on current buyer foot traffic; and a projection for single family sales in the next 6 months.

March's HMI breakdown shows that builders expect sales to be brisk over the next few months. Projected Single-Family Sales is running at its highest level since May 2010 -- right as the $8,000 federal homebuyer tax credit was ending.

• Single-Family Sales : 17 (Unchanged from February)
• Buyer Foot Traffic : 12 (Unchanged from January)
• Projected Single-Family Sales : 27 (+2 from February)

For home buyers in Minneapolis and across the country , the March Housing Market Index may signal the end of "builder discounts" and free upgrades. As home sales increase, builders are often less likely to make concessions.

In conjuction with rising mortgage rates and new, mandatory loan costs, buying a newly-built home may never be as inexpensive as it is right now.

If you expect to buy a newly-built home this year, consider moving up your time frame. The longer you wait, the more it may cost you.

A Simple Explanation Of The Federal Reserve Statement (March 15, 2011 Edition)

Today, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.

The vote was 10-0.

In its press release, the FOMC noted that since its January 2011 meeting, the economic recovery "is on firming footing", and that the labor markets are "improving gradually". In addition, household spending "continues to expand". Nonetheless, the Fed said, the economy remains constrained by rising commodity prices and the "depressed" housing sector.

The FOMC statement also re-affirms the group's plan to keep the Fed Funds Rate near zero percent "for an extended period", and to keep its $600 billion bond market support package -- more commonly called "QE2" -- intact.

And, lastly, for the third straight time, the Federal Open Market Committee's post-meeting release statement included a paragraph detailing the Federal Reserve's dual mandate of managing inflation levels, and fostering maximum employment. Although it acknowledged inflationary pressures on the economy, the Fed said inflation remains too low for the economy currently, and that unemployment remains "elevated". 

In time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC has been negative since the statement's release. Mortgage rates in Plymouth are unchanged, but poised to worsen.

The FOMC's next scheduled meeting is a 1-day event, March 15, 2011.

Your Mortgage Rate Strategy For Today's FOMC Meeting

The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.

The FOMC's official schedule calls for 8 meetings annually at which it reviews the nation's economic and financial conditions, and chooses whether to change existing monetary policy.

The group's last rendez-vous was a 2-day affair, January 25-26, 2011.

Today's FOMC meeting represents a bona fide risk to home buyers and rate shoppers in Maple Grove and across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability. 

Rate shoppers learned this the hard way after the FOMC's last meeting.

In January, Wall Street deemed the Fed's status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.

This may happen again beginning today.

At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn't mean mortgage rates will idle, however.

Depending on the verbiage of the Fed's statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET -- just to be safe.

Once the Fed adjourns, you're at the market's mercy.

What's Ahead For Mortgage Rates This Week : March 14, 2011

Mortgage markets improved last week in a week of few economic releases. The one major data point -- Retail Sales -- showed stronger-than-expected, but markets reacted mildly. The report's strength was whispered in advance of the actual release; its reading validated Wall Street's growing faith in the U.S. economy.

Most action last week revolved around the Middle East:

• Libya's internal turmoil continued
• Bahrain clashes intensified
• Saudi Arabia's citizens planned a Day of Rage

In response to these events, Wall Street continued its flight-to-quality. Mortgage-backed bonds are now at their best levels since early-February. Mortgage rates have improved 4 straight weeks.

Unfortunately for rate shoppers in Minnesota , the gains have been meager. Conforming mortgage rates have only dropped slightly.

This week, however, the market could move in either direction.

The biggest news on tap is the Federal Open Market Committee's 1-day meeting, scheduled for Tuesday. The Fed is expected to leave the Fed Funds Rate near 0.000 percent, but that doesn't mean that mortgage rates won't change. The FOMC's post-meeting press release will be closely scrutinized on Wall Street. Any changes in theme, tone, or message will cause mortgage rates to dart.

This week also marks the return of housing data with Housing Starts, Building Permits, and Homebuilder Confidence due for release. Housing is believed to be key to the economic recovery so strength in these reports should lead mortgage rates higher.

In addition, several inflation-related data sets will be released including Consumer Price Index and Producer Price Index. Inflation is generally bad for mortgage rates and with gas prices rising to a multi-year high, pressure will be on for mortgage rates to rise.

Lastly, there's Japan.

The nation's earthquake, tsunami, and (now) looming nuclear threat will have implications on the global bond market. Mortgage rates may benefit while the crisis remains unresolved. 

If you've floated a mortgage rate over the past few weeks, it may be time to lock that rate down. Economic factors should be pushing rates higher, but geopolitics and natural disasters are keeping them low.

It's a perfect time to commit to a loan.