December, 2012 | Arizona Mortgage

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Improving Market Index : Up To 201 Cities For December 2012

December IMI includes 201 cities Last week’s National Association of Home Builders/First American Improving Markets Index (IMI) brought positive news about U.S. housing markets and the broader U.S. economy, in general.

According to the IMI, there are now 201 U.S. markets which can be considered “improving”.

To meet this standard, a local area economy must exhibit at least six consecutive months of improvement in terms of local employment, single-family housing permits and area home prices; and, at least six months must have passed since each of these readings were at their respective low points, called troughs.

The Improving Market Index added 76 metropolitan areas in December as compared to the month prior. 45 states are now represented on the list, in addition to the District of Columbia.

The cities deemed “improving” aren’t limited to recent, high-profile hot spots such as Detroit, Michigan; and Phoenix, Arizona, either. Several of the newly-included areas for December were :

Atlanta, Georgia
Bloomfield, Illinois
Ithaca, New York
Riverside, California
Seattle, Washington

The geographic diversity of this month’s Improving Market Index suggests a nationwide economic recovery in progress. More jobs, a steady supply of available homes, plus rising home prices helps communities thrive.

Unfortunately, it may also mean less opportunity to buy homes as rock-bottom prices.

As sellers and home builders gain confidence in the economy, it may be more challenging for today’s Mesa buyers to get a “great deal”. In addition, an improving, post-recession economy will likely lead mortgage rates higher, robbing home buyers of their purchasing power.

Freddie Mac says that the average 30-year fixed rate mortgage rate is 3.32% nationwide. In a fully-recovered economy, that rate could be 5 percent or higher. The impact on monthly housing payments would be palpable.

The National Association of Homebuilders expects more markets to join the Improving Market Index list through 2013. Today’s home buyers may want to lock in today’s low rates before economic improvement leads mortgage rates higher.

Simple Explanation Of The Federal Reserve Statement (December 12 , 2012)

Putting the FOMC statement in plain English The 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 tenth consecutive meeting, the FOMC vote was nearly unanimous. Richmond Federal Reserve President Jeffrey Lacker was the lone dissenter in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that, since its last meeting in late-October, the U.S. economy has expanded “at a moderate pace” despite “weather-related disruptions”. It also acknowledged that “strains in global financial markets” remain a threat to U.S. economic growth.

This comment is in direct reference to the Eurozone, its sovereign debt concerns, and its nation’s economies.

The Fed included the following observations in its statement, too :

Growth in employment is expanding but unemployment is elevated
Inflation pressures are stable, and below the Fed’s target range of 2%
Business spending on equipment and structures has slowed

In addressing the housing market, the Fed said that there has been “further signs” of improvement and the group re-affirmed its commitment to the $40-billion monthly QE3 bond buying program.

QE3 is meant to suppress U.S. mortgage rates from rising too high, too quickly.

Lastly, the Federal Reserve announced an explicit economic target for when it will begin to consider raising the Fed Funds Rate from its current target range near 0.000%. When the national Unemployment Rate reaches 6.5%, the Fed said, it will likely move to start raising its benchmark borrowing rate.

Previously, the Fed had provided only a date-based target of mid-2015.

The 6.5% Unemployment Rate target may be pre-empted by rising inflation rates. The Fed does not expect price pressures to mount prior to jobless rates dropping from the current 7.7% levels, however.

Mortgage rates in Phoenix are rising post-FOMC announcement. Many lenders raised mortgage rates mid-day Wednesday in response to the Fed’s statement.

The FOMC’s next scheduled meeting is a two-day event scheduled for January 29-30, 2013.

Mortgage Rates Rising On 26 Straight Months Of Jobs Growth

According to the Bureau of Labor Statistics (BLS) and its November 2012 Non-Farm Payrolls report, the U.S. economy added 146,000 net new jobs last month.

November’s job growth exceeded Wall Street expectations of 90,000 jobs added for the month, and was a small increase from October’s 138,000 jobs added.

Three job sectors in which employment rose in November include :

Retail : 58,000 jobs added
Business and Professional Services : 43,000 jobs added
Healthcare : 20,000 jobs added

It appears that the effects of Hurricane Sandy were muted, although they may be temporarily overshadowed by seasonal factors.

After losing more than 7 million jobs in 2008 and 2009, the U.S. economy has since recovered more than 4.6 million jobs. Job growth has reached 26 consecutive months and is expected to remain consistent through 2013.

In addition, the BLS report showed the national unemployment rate dropping 0.2 percentage points in November to 7.7 percent. This is the lowest Unemployment Rate since January 2009.

Growing employment is a strong indicator of economic expansion, which traditionally leads to rising mortgage rates.

When mortgage people work, more income is earned and more taxes are paid. This often leads to higher levels of both consumer spending and government spending, both of which spur additional hiring and economic expansion.

When the economy is in expansion, equity markets often gain and bond markets often lose. When bond markets are in retreat, mortgage rates in Scottsdale rise. This relationship takes on added importance this week with the Federal Reserve’s Federal Open Market Committee (FOMC) scheduled to adjourn.

The Non-Farm Payrolls Report is a top economic indicator and is a key part of economic and policy decision made Capitol Hill and within the Federal Reserve. As one example, recent Federal Reserve stimulus has been specifically aimed at lowering the national Unemployment Rate. As the economy improves and as jobs are regained, the Fed may be less likely to support low rates.

If you’re floating a mortgage rate, consider locking in. Rates can’t stay low forever.

The Federal Reserve Begins A 2-Day Meeting Today

Fed Funds Rate The Federal Open Market Committee (FOMC) begins a 2-day meeting today, its last of 8 scheduled meetings this year.

The Federal Open Market Committee is a 12-person subcommittee within the Federal Reserve. It’s the group which votes upon U.S. monetary policy.

The monetary policy action for which the FOMC is most well-known is its setting of the Fed Funds Funds. The Fed Funds Rate is the interest rate at which banks borrow money from each other overnight.

Since late-2008, the Fed Funds Rate has been near zero percent.

Prime Rate, a business and consumer interest rate used in lines of credit and credit card rates, is based on the Fed Funds Rate. Prime Rate has been similarly unchanged since 2008.

One rate which the Federal Reserve does not set is the 30-year fixed rate mortgage (FRM) rate.

Like all other mortgage rates, the 30-year FRM is based on the market value of mortgage-backed bonds; securities bought and sold by investors.

There is no correlation between the Federal Reserve’s Fed Funds Rate and the everyday homeowner’s 30-year fixed rate mortgage rate. Some months, the two rates converge. Other months, they diverge. Since 2000, they’ve been separated by as many as 5.29 percentage points.

They’ve been as close as 0.52 percentage points.

However, although the Federal Reserve does not set U.S. mortgage rates, that doesn’t mean that it can’t influence them. The Fed’s post-meeting press release has been known to make mortgage rates get volatile.

If, in its post-meeting press release, the Fed notes that the U.S. economy is slowing and that new economic stimulus is warranted, mortgage rates will likely fall throughout Arizona. This is because additional Fed stimulus would likely lend support to U.S. mortgage markets which would, in turn, boost demand for mortgage-backed bonds.

Conversely, if the Fed acknowledges stronger-than-expected growth in the U.S. economy and no need for new stimulus, mortgage rates are expected to rise.

Either way, mortgage rates will change Wednesday upon the FOMC’s adjournment — we just don’t know in which direction. Rate shoppers may see fluctuations of as much as 0.250 percent.

The FOMC adjourns at 12:30 PM ET.

What’s Ahead For Mortgage Rates This Week : December 10, 2012

FOMC meets this week Mortgage bonds worsened last week as Fiscal Cliff talks moved closer to resolution and as the U.S. economy showed continued signs of growth.

Conforming mortgage rates in AZ rose slightly, edging off the all-time lows late in November.

According to Freddie Mac’s weekly mortgage rate survey, the average 30-year fixed rate conforming mortgage rate was 3.34% last week for home buyers and refinancing households willing to pay 0.7 discount points at closing plus a full set of closing costs.

Freddie Mac also showed the 15-year fixed rate mortgage averaging 2.67% with an accompanying 0.7 discount points plus closing costs.

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

The two big stories that moved rates worse last week were the Fiscal Cliff talks and the November jobs report.

With respect to the Fiscal Cliff, mortgage rates worsened as Capitol Hill moved closer to a deal which would avoid the dual-event of expiring U.S. tax break and a mandated government spending rollback. These events are both scheduled to occur December 31, 2012.

Some analysts believe that these two events — in unison — could slow U.S. economic growth to the point of recession. Other analysts aren’t so sure. However, Wall Street is choosing to be cautious. This is why a break in talks has been good for mortgage rate shoppers of late; and why steps toward avoiding one or both scenarios has been bad for rate shoppers.

Mortgage rates often rise when economic growth is expected. This explains why November’s jobs report pushed mortgage rates worse Friday, too — Wall Street underestimated the Non-Farm Payrolls report which showed 146,000 net new jobs created, and didn’t expect to see the national Unemployment Rate drop to 7.7%.

This week, mortgage rates may rise again with new inflation data and a Retail Sales report set for release.

The big event, though, is the Federal Open Market Committee’s 2-day meeting scheduled, set to begin Tuesday. The FOMC is not expected to add new economic stimulus, but the Fed’s words can carry as much weight as its policies and actions.

The Fed will issue a statement to the markets at 12:30 PM ET Wednesday, and will host a press conference shortly thereafter. Mortgage rates are expected to remain volatile all week.

Energy-Saving Tips For The Holiday Season

Energy-saving at holiday time With the holiday season comes more than colder weather — there are the parties, the baking, the fixing of family dinners, and, in some cases, the stringing of holiday lights. It’s also a time of year when home energy use can spike, leading to a very large January electricity bill.

This year, do what you can to conserve energy through the holidays and the New Year. Try following these simple tips.

Go LED
If you string lights outside of your home, try LED (Light-Emitting Diode) lighting. LED lights use 86% less electricity than comparable incandescent lights and have numerous safety advantages. For example, LED lights are shatterproof, present no fire hazard, and, because they emit almost no heat, are safe to the touch.

Reduce Your Home Thermostat
When you home is filled with people, or the ovens are working overtime, or both, the temperature can rise by several degrees. Rather than opening a window or leaving a door ajar, consider lowering your home’s thermostat, or turning off the heat altogether. Each degree “colder” that you set you set your thermostat decreases your home’s energy usage up to 3 percent.

Plan Your Meal
Holiday meals are often prepared in advance of dinner and then reheated or warmed to be ready for company. This leads to running the oven, microwave or stove-top multiple times for each served dish. When possible, prepare foods at the same time and warm in the oven at the same time. In running your appliances less, you will save on energy costs.

Use Your Dishwasher At Capacity
Some dishes require hand-washing. For everything else, use a dishwasher. Dishwashers use less water than is required to wash and rinse plates, utensils and pots and pans by hand. They can also use up to 50% less energy than is required to heat the water you’ll need to wash your dishes manually.

The holiday season can be full of excesses. Don’t let your energy bill be one of them.

November 2012 Non-Farm Payrolls Report May Show Hurricane Sandy Effects

Non-Farm Payrolls Floating a mortgage rate? Consider getting locked Thursday.

ADP released its November 2012 Employment Report Wednesday in which the payroll-processing firm reported 118,000 new jobs created last month.

The company said the service sector created 114,000 new positions, the construction sector created 23,000 new positions, and goods-producing businesses created 4,000 new jobs, among others. There was a 16,000 decline in manufacturing employment.

ADP’s monthly Employment Report can influence mortgage rates. This is because it’s typically released during the same week as the Non-Farm Payrolls report from the U.S. Bureau of Labor Statistics, and can sometimes provide a preview.

The Non-Farm Payrolls report — more commonly called “the jobs report,” is a sector-by-sector breakdown of the U.S. employment situation, which includes changes in the national Unemployment Rate.

In a recovering economy, as jobs go, so goes the economy and, this month, the jobs forecast is clouded because of the effects of Hurricane Sandy.

In its Employment Report, ADP estimates that Hurricane Sandy reduced payrolls by 86,000 jobs across manufacturing, retail, leisure and hospitality, and temporary help industries.

Without Hurricane Sandy, the report may have shown north of 200,000 new jobs.

Prior to Wednesday, Wall Street expected Friday’s Non-Farm Payrolls report to show 93,000 net new jobs created in November, and no change in the U.S. Unemployment Rate. The ADP report did little to change those expectations.

Regardless, Friday’s release remains a market risk to Scottsdale buyers. The jobs report is closely watched because of its links to the broader domestic economy. When more workers are employed, more income is earned, and more money is spent.

This drives economic growth, of course, because consumer spending accounts for 70% of the U.S. economy and when the economy is expected to expand, mortgage rates tend to rise.

If you are currently in the market for, or are undecided about a mortgage, therefore, consider locking your mortgage rate today. If Friday’s Non-Farm Payrolls report shows more jobs created than were estimated, mortgage rates are likely to rise — maybe even sharply.

Non-Farm Payrolls is released at 8:30 AM ET.

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Archive for December, 2012

Improving Market Index : Up To 201 Cities For December 2012

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Simple Explanation Of The Federal Reserve Statement (December 12 , 2012)

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Mortgage Rates Rising On 26 Straight Months Of Jobs Growth

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What’s Ahead For Mortgage Rates This Week : December 10, 2012

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Energy-Saving Tips For The Holiday Season

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