Home Values Rose In June 2011

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 Maple Grove , 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

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 Maple Grove.

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 :

1. Consumer spending gets a boost
2. Government tax collection gets a boost
3. 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

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

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 Plymouth , 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

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 Maple Grove 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.