Federal Reserve Wary Of European Spillover

The Federal Reserve has released the minutes from its 2-day meeting January 24-25, 2012.

The Fed Minutes is a summary of the conversations and debates that shape our nation's monetary policy. It receives less attention than the Fed's more well-known, post-meeting press release, but the Fed Minutes is every bit as important.

To rate shoppers in Minneapolis , for example, the Fed Minutes can provide clues about whether mortgage rates will generally rise or fall in the coming months.

The most recent Fed Minutes reveals a central bank divided on the future of the U.S. economy. The minutes show some Fed members in favor of new, immediate market stimulus. It shows others in favor of terminating the stimulus that's already in place.

The Fed's debate centered on the topic of inflation, and the pressures that a prolonged, near-zero Fed Funds Rate can place on the economy. Ultimately, the Fed did nothing, neither adding new stimulus nor removing that which is already in place.

It did, however, communicate a plan to keep the benchmark Fed Funds Rate rate "exceptionally low" through late-2014, at least.

The Fed Minutes included the following notes, too :

• On employment : Unemployment rates will "decline only gradually" in 2012
• On housing : The market is "held down" by the "large overhang" of distressed homes
• On inflation : Consumer prices have remained "flat"

Furthermore, the Fed expressed optimism regarding European financial markets, noting that market sentiment "appeared to brighten a bit". Nonetheless, "spillovers" remain possible and the threat continues to weigh on markets. 

Mortgage rates are slightly worse since the Fed Minutes were released. 

The Federal Reserve's next scheduled meeting is March 13, 2012 -- its second of 8 scheduled meetings this year.

Existing Home Sales Climb To A 20-Month Record

January's home resales moved to a 20-month high -- additional evidence that the nation's housing recovery is underway.

According to the National Association of REALTORS®, the January 2012 Existing Home Sales showed 4.57 million units sold last month on a seasonally-adjusted, annualized basis -- a 4 percent increase as compared to December's revised figures.

An "existing home" is one that's been previously occupied and cannot be categorized as new construction.

Beyond the headline numbers, though, there was plenty about which for today's Maple Grove home sellers to get excited. Demand for homes remains strong, foreshadowing higher home prices through 2012.

First, the national housing stock is at a 5-year low.

In January, the number of homes for sale nationwide slipped to 2.31 million, the smallest home inventory since February 2007, and a 21% decrease from just one year ago.

Falling home supply amid constant home demand leads home prices higher. At the current pace of sales, today's complete home inventory would "sell out" in 6.1 months. 

Analysts say that a 6-month supply is a market in balance. Anything less is Bull Market territory.

Second, the National Association of REALTORS® says that one-third of all homes under contract "failed" last month. This means that many more buyers tried to buy, but couldn't for a number of reasons including mortgage denials; or, insurmountable home inspections issues; or, homes appraising for less than the contract price.

As contract failures subside, Existing Home Sales are expected to rise even faster.

And, lastly, first-time buyers continue to power the home resale market. In January, 33% of all sales were made to first-time buyers, up four points from last year. This statistic suggests that renters are moving into homeownership, an important component in a sustained housing market recovery.  

Given high demand and shrinking supply, we should expect for home prices to rise in the coming months, if they haven't already. Thankfully, mortgage rates remain near all-time lows.

Low mortgage rates make homes more affordable.

Foreclosure Filings Down 19 Percent In One Year

 

Foreclosure filings fell 19 percent last month versus one year ago, says foreclosure-tracking firm RealtyTrac. It's yet one more signal that the U.S. housing market may have already climbed off its bottom.

According to RealtyTrac, a "foreclosure filing" is any one of the following foreclosure-related events : (1) A default notice on a home; (2) A scheduled auction for a home; or, (3) A bank repossession of a home.

In looking at the January 2012 figures :

• Default Notices were down 22% from January 2011
• Scheduled Auctions were down 19% from January 2011
• Bank Repossessions were down 15% from January 2011

On a monthly basis, however, the numbers weren't so promising.

Default notices and scheduled auctions were mostly unchanged, but bank repossessions rose 8 percent. The rise in bank repossessions is likely because 2010's robo-signing controversy has been rectified at the state and lender level.

This trend toward more bank-owned homes is expected to continue through 2012.

As in most months, January's foreclosure activity was geographically concentrated. Nevada led the nation in Foreclosures Per Capita, followed closely by California. 13 states fared worse than the national average of 1 foreclosure per 624 households. 37 fared better.

The difference in foreclosure frequency among the two groupings was stark :

• Top 13 Foreclosure States : 1 foreclosure per 435 households, on average
• Bottom 37 Foreclosure States : 1 foreclosure per 5,101 households, on average

North Dakota had January's lowest foreclosure rate nationwide. Just 1 in 63,500 homes was in some form of foreclosure in North Dakota last month.

As a first-time or seasoned buyer in Plymouth , foreclosed homes can be enticing. They're plentiful and cheap. However, just because a foreclosed home can be bought for a "steal", that doesn't mean it's worth buying. The process of buying a foreclosed homes is different from the process of buying a non-foreclosed home.

The contract-and-negotiation process may be different with a foreclosed property, and foreclosed homes are often sold "as-is". This means the home you buy at auction could be run-down and defective to the point where it's uninhabitable.

If you plan to buy a foreclosed home, therefore, have a real estate professional on your side. The internet can teach you much about how the Minnesota housing market works, but when it comes to writing contracts, you'll want an experienced agent on your side.

What's Ahead For Mortgage Rates This Week : February 21, 2012

Mortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought "safe assets" as protection from risk and that's driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in Minnesota rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac's weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac's weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% -- it's highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed's forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It's a safe time to lock a long-term rate.

What's Ahead For Mortgage Rates This Week : February 21, 2012

Mortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought "safe assets" as protection from risk and that's driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in Minnesota rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac's weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac's weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% -- it's highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed's forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It's a safe time to lock a long-term rate.

What's Ahead For Mortgage Rates This Week : February 21, 2012

Mortgage markets worsened last week as the Eurozone moved closer to a bailout agreement with Greece, and the U.S. economy displayed more signs of growth.

In response, mortgage rates climbed last week.

Rate shoppers should not be surprised that rates ticked north. Since mid-2011, weakness in Greece has helped keep mortgage rates low and the same is true for a weak U.S. economy. Wall Street has sought "safe assets" as protection from risk and that's driven mortgage rates down.

Now, the safe haven buying that served to anchor low rates appears poised to reverse.

Last month, it was shown, consumer spending rose to record levels and the housing market surpassed analyst expectation again. Homebuilder confidence is now at a 4-year high and Single-Family Housing Starts topped one-half million units for the second straight month.

Conforming mortgage rates in Minnesota rose for the first time in a month last week. Unfortunately, few shoppers knew because Freddie Mac's weekly mortgage rate survey failed to capture the change. The survey deadline was Tuesday. Rates started rising Wednesday morning.

Freddie Mac's weekly mortgage rate survey put the average 30-year fixed rate mortgage unchanged at 3.87% for borrowers willing to pay 0.8 discount points plus a full set of closing costs.

Rates are higher today.

Beyond Greece and the U.S. economy, inflation is another reason mortgage rates are up. Inflation is the enemy of mortgage rates and, an on annual basis, the core Consumer Price Index registered 2.3% -- it's highest reading since 2008. The Fed expects inflation to ease later this year but if gas prices stay high, the Fed's forecast may be wrong.

This week is holiday-shortened. Look for Greece to dominate headlines (again) and watch for housing data toward the end of the week. Existing Home Sales is released Wednesday. New Home Sales is released Friday.

For now, mortgage rates remain low. It's a safe time to lock a long-term rate.