Fed Minutes Detail QE3 Discussion; Mortgage Rates Down

The minutes from the Federal Reserve's September Federal Open Market Committee meeting were released Thursday.

The Fed Minutes detail the discussions and debates which shaped the central banker's launch of its third round of qualitative easing since 2008. The minutes also give Wall Street insight into future monetary policy.

At 6,987 words, the Fed Minutes provides a level of detail that was unavailable via the FOMC's post-meeting press release, a documen that, by contrast, ran 562 words.

Despite its large word count, there was very little that was new or surprising in the Fed Minutes, though. This is because, since the Fed's last meeting, Federal Reserve Chairman Ben Bernanke has publicly clarified and re-iterated the Fed's positions on employment, housing and inflation.

The minutes provide a strong backdrop to his comments, however.

For example, with respect to the jobs market, Fed members deemed employment "disappointing", noting that growth in payrolls has been slower in 2012 as compared to 2011, and that the expansion rate of today's job market is too slow to make significant progress against the national unemployment rate.

The Fed Minutes also included the following notes :

• On housing : Further improvement is occurring, albeit from a "depressed level"
• On inflation : Risks appear "tilted to the downside", but energy costs pose risks
• On Europe : A "slight improvement", but still a risk to global economic activity

Of greatest interest to home buyers in Minneapolis and rate-shopping refinancers, though, was the Fed's discussion of its QE3 program. The program was introduced to help suppress mortgage rates nationwide which, the Fed believes, will make "broader financial conditions" more accommodative.

The Fed plans to purchase $40 billion in mortgage-backed bonds monthly for a "considerable" period of time after the U.S. economy has already shown signs of full recovery and, since the launch of QE3, 30-year fixed rate mortgage rates are down 19 basis points to 3.36% nationwide, on average.

The next Federal Open Market Committee meeting is scheduled for October 23-24, 2012. 

With Tomorrow's Job Report Due, Mortgage Rates May Finally Rise

It's a dangerous time for home buyers in Maple Grove to be without a locked mortgage rate.

Friday morning, at 8:30 AM ET, the government releases its Non-Farm Payrolls report for September. More well-known as "the jobs report", Non-Farm Payrolls data has the power to move mortgage rates up or down.

Unfortunately, ahead of the release, we can't know which.

Last year, job growth more than doubled between August and September. If this year shows that same growth, Minnesota mortgage rates are expected to rocket higher.

The connection between rising jobs and rising rates is a chain reaction-type link, and is often quite tight.

Jobs are a growth engine for the U.S. economy and mortgage rates are "made" based on future expectations for the U.S. economy. In general, when the economy is improving, it draws Wall Street into "risky" investments and away from "safe" ones.

Meanwhile, mortgage-backed bonds -- especially those from Fannie Mae and Freddie Mac -- are considered to be among the safest investment assets available. Therefore, as the size of the U.S. workforce swells, and economic projections increase, Wall Street tends to divest itself of its mortgage bond holdings which, in turn, increases the supply of mortgage-backed bonds for sale.

With more supply, all things equal, mortgage bond prices fall and this causes mortgage rates to rise.

This is why the September jobs report is important to today's home buyers and mortgage rate shoppers. A better-than-expected tally will result in higher mortgage rates. 

In August 2012, the government reported 96,000 net new jobs created -- a sharp decrease from the month prior and a figure just shy of the metric's six-month moving average. The Unemployment Rate fell one-tenth of one percent in August to 8.1%.

For September, economists expect to see 120,000 net new jobs created, and no change in the national Unemployment Rate.

How To Help Your Home Appraise At Its Fair Market Value

Home values are rising in many U.S. markets. The S&P/Case-Shiller Index has home values up 1.2 percent as compared to last year, and the government's Home Price Index shows an increase of 3.7 percent.

This has been partially evidenced by rising median home sales prices nationwide. Versus last year, the median sale price of a new construction home has climbed 17 percent, and the median sale price of an existing home sale is higher by 10 percent.

For home sellers, an improving market means the chance to net more proceeds from a home sale. Or does it?

In this 3-minute piece from NBC's The Today Show, we hear about the home appraisal process and how it may be limiting the number of home sales nationwide, plus the prices at which homes are selling. 

The interview includes several key insights into the home appraisal process :

• In a rising housing market, a home's appraised home value may be lower than its "true" market value
• Short sales and foreclosures can make a negative impact on a home's appraised value
• Consolidation in the appraisal industry has lowered product quality and may be harming valuations

One key take-away from the video is that home owners in Minneapolis should provide their home appraisers with as much relevant information as possible -- especially information which may not be publicly-available. This includes records of recent "all-cash" sales of comparable homes which were never formally listed for sale.

One in three purchase agreements are canceled because of appraisal issues, according to the interview. Take steps to make sure yours is not among them.

Case-Shiller index Shows Home Values Rising Nationwide, Too

There have been no shortage of "housing market" stories lately. After sinking through much of late-last decade, home values slowly stabilized into mid-2011. By October 2011, values appeared to have bottomed.

Today, nearly five-and-one-half years after the April 2007 housing market peak, home prices are finally showing their ability to rebound. Over the past 12 months, a bevy of housing market data highlights broad-based market growth.

For example, as compared to August 2011, Existing Home Sales are up 9.3 percent nationally; New Home Sales are up 27.7 percent nationally; and home inventories have slipped to multi-year lows in Maple Grove and throughout the country.

Furthermore, multiple home value trackers show home prices rising both regionally and nationwide.

Last week, the government's Federal Housing Finance Agency released its Home Price Index (HPI) -- a metric which tracks how home values change between sequential property sales. HPI showed home values up 3.7% nationally.

Another home valuation tracker -- the S&P Case-Shiller Index -- has shown home values to be rising, too.

As compared to one year ago, the private-sector metric puts home prices higher by 1.2 percent via its 20-city composite. 20 cities remains a small subset of the broader U.S. population, but, in looking for a trend, it's clear that the trend is a positive one.

Some of the Case-Shiller Index highlights from its most recent report :

• All 20 tracked cities showed home price gains between June 2012 and July 2012
• The previously hard-hit city of Phoenix now leads the nation with a 16.6% annual gain
• Versus their respective lows, San Francisco and Detroit are up 20.4% and 19.7%

In addition, on a 12-month basis, only four cities are showing negative home value growth -- Atlanta, Chicago, Las Vegas, and New York City.

The Case-Shiller Index is a national index, though, and specifically does not report on valuation changes in specific U.S. cities and their neighborhoods. For local real estate data, make sure to speak with a local real estate agent instead.

What's Ahead For Mortgage Rates This Week : October 1, 2012

Mortgage rates dropped to another all-time low last week as concerns for global economic growth helped U.S. home buyers and refinancing households nationwide. 

U.S. mortgage rates responded to non-U.S. events and, for rate shoppers and home buyers in Plymouth , home affordability improved.

Early in the week, with Greece and Spain debating new austerity measures, and with citizen protests rampant, a flight-to-quality helped to boost demand for U.S. mortgage bonds. So did rumors of a weakening Chinese economy.

"Flight-to-quality" is a trading term for when investors shun investment risk in favor of safer, more high-quality portfolio assets. Typically, this involves selling stocks and buying bonds, including mortgage-backed ones.

When demand for mortgage-backed bonds rise, mortgage rates tend to fall.

Demand for bonds is also receiving a boost from the Federal Reserve's latest market stimulus program -- QE3.

"QE3" is a shorthand term for the Fed's third qualitative easing, a program by which the nation's central banker buys mortgage-backed securities on the open market in hopes of driving mortgage rates down.

So far, it's been working. Since the Federal Reserve announced QE3 in mid-September, conforming mortgage rates have been on steady decline.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.40% nationwide last week with an accompanying 0.6 discount points plus closing costs. The average 15-year fixed rate mortgage rate moved to 2.73%, also with 0.6 discount points and closing costs. Both rates are at all-time lows.

This week, mortgage rates have a lot of data on which to trade, and may be poised to bounce higher. 

In addition to the release of manufacturing, construction and retail sales reports, the Bureau of Labor Statistics will post its September Non-Farm Payrolls report Friday. More commonly called the "jobs report", the monthly release takes on added significance now that the Federal Reserve has said that its open-ended QE3 program will be linked to the U.S. jobs economy.

Wall Street expects to see 120,000 net new jobs created in September. If the actual reading exceeds this figure, mortgage rates should rise.