Fed Meeting Statement Reveals Good News For Real Estate

The Federal Reserve's statement after yesterday's Federal Open Market Committee (FOMC) meeting left no doubt as to the Fed's dual commitment to keeping long term interest rates down and encouraging economic growth.

No changes to the Fed's current bond-buying program were made during today's FOMC meeting.

The Fed's monthly purchase of $85 billion in bonds and MBS works by boosting bond prices, which typically helps with keeping mortgage rates lower.

The Fed reaffirmed its position that it will not withdraw or reduce monetary easing until the unemployment rate is substantially lower.

Unemployment Rate Improving Nationally

Fed predictions for the national unemployment rate improved; December's outlook for 2013 estimated the unemployment rate at between 7.4 to 7.7 percent; the Fed now expects unemployment rates of 7.3 to 7.5 percent by the end of this year.

February's jobs report likely influenced this revision as the unemployment rate fell from 7.8 to 7.7 percent.

The Fed notes that while employment rates are improving, they remain elevated which supports the Fed's decision not to modify its bond purchase program in the near term.

Lower unemployment rates suggest that more people will be financially prepared for buying homes or refinancing their existing mortgage loans, and the unemployment rate is also expected to fall due to growing numbers of baby boomers leaving the workforce.

Lower Inflation Rates Boost Consumer Purchasing Power

The Fed slightly revised its December forecast for 2013 economic growth of between 2.3 to 3.0 percent.

Now the Fed predicts economic growth to range between 2.3 and 2.8 percent in 2013, but negative influences including a higher payroll tax and government spending cuts are expected to slow the rate of economic growth.

Concerning inflation, the Fed expects an inflation rate of between 1.3 and 1.7 percent this year and for inflation to remain below 2 percent through 2015.

Lower inflation rates allow consumers more discretionary spending power, which can further boost the economy and improve consumer confidence in making big ticket purchases including homes and related items and services in Georgia and around the country.

Fed Keeping Tabs On European Economic Issues

Fed officers are continuing to monitor economic developments in Europe, and expressed concerns that the situation remains fragile.

Commenting in a press conference held after the FOMC meeting, Fed Chair Ben Bernanke characterized economic issues in Cyprus as “difficult”, but said that the Fed doesn't expect these developments to have major impact on U.S. financial markets.

Its plan to keep short term interest rates near zero until unemployment rates reach 6.5 percent or the inflation rate exceeds 2.5 percent further support the Fed's plan to keep its monetary easing policy intact for the near term.

Unless unexpected or catastrophic events occur which would cause sudden or rapid economic changes, the Fed appears unlikely to announce major changes in its policy.

What's Ahead For Mortgage Rates This Week: February 25th, 2013

A quiet past week in economic news caused mortgage rates to worsen slightly.

This week, however, will be packed with economic reports which may have an impact on interest rates going forward.

Freddie Mac reported that the average rate for a 30-year fixed rate mortgage rose by 3 basis points from 3.53 percent to 3.56 percent with borrowers paying 0.8 in discount points and all of their closing costs.

The average rate for a 15-year fixed rate mortgage was unchanged from last week at 2.77 percent with borrowers paying 0.8 in discount points and all of their closing costs.

In other economic news, the Consumer Price Index (CPI) for January fell slightly to 0.0 percent as compared to Wall Street expectations of 0.1 percent and December’s reading of 0.1 percent.

The Core CPI, which measures consumer prices exclusive of volatile food and energy sectors, was 0.3 percent for January and surpassed analyst expectations of 0.2 percent and December’s reading of 0.1 percent.

Inflation Remains Low

These readings remain well below the 2.5 percent inflation level cited by the Fed as cause for concern.

According to the Department of Commerce, Housing Starts for January fell to 890,000 from December’s 954,000 and below Wall Street projections of 910,000.

These seasonally adjusted and annualized numbers are obtained from a sample of 844 builders selected from 17,000 newly permitted building sites.

Falling construction rates could further affect low supplies of homes reported in some areas; as demand for homes increase, home prices and mortgage rates can be expected to rise.

Full Economic Calendar This Week

This week's economic news schedule is full; Treasury auctions are scheduled for Monday, Tuesday and Wednesday. New Home Sales will be released Tuesday.

Fed Chairman Ben Bernanke is set to testify before Congress on Tuesday and Wednesday.

Wednesday's news includes the Pending Home Sales Index and Durable Orders.

Thursday's news includes the preliminary GDP report for Q4 2012, the Chicago Purchasing Managers Index, and weekly jobless claims.

Friday brings Personal Income and Core Personal Expenditures (CPE).

Consumer Sentiment, the ISM Index and Construction Spending round out the week's economic news.

Breaking Down The Federal Reserve Statement (January 2013 Edition)

The Federal Reserve's Federal Open Market Committee (FOMC) voted to maintain the Federal Funds Rate within its current range of zero to 0.25 percent, and to continue its current stimulus program of purchasing $85 billion monthly in Treasury bonds and mortgage-backed securities (MBS).

Citing weather-related events such as Hurricane Sandy and drought in the Midwest, the committee said in its statement that information received since its December 2012 meeting "suggests that growth in economic activity has paused in recent months in large part because of weather-related disruptions and other transitory factors."

Concerns over the then-looming fiscal cliff crisis may have also contributed to the economic contraction during the last quarter of 2012. Positive economic trends observed by the Fed included:

• Improved household spending
• Improving housing markets
• Growth in business fixed investments

The Fed initiated its third round of quantitative easing (QE3) in September as part of an ongoing effort to hold down interest rates and to encourage business spending. The benchmark Federal Funds Rate will remain between zero and.0.25 percent until the unemployment rate falls to 6.5 percent and provided that inflation remains stable.

The Fed Funds Rate has stayed near zero since December 2008.

The national unemployment rate was 7.8 percent in December, and Wall Street expects it to be 7.7 percent for January. The Department of Labor will release its monthly jobs report on Friday; this report includes the monthly unemployment rate. Inflation is expected to remain at or below the Fed's target level of 2.0 percent or less for the medium-term.

While noting that "strains on global financial markets have eased somewhat," the FOMC said that it "continues to see downside risks to the economic outlook." Low overall interest rates and gradual inflation work in favor of home buyers as home prices and mortgage rates are likely to rise at a gradual pace.

Mortgage rates in Atlanta improved slightly after the FOMC release.

What's Ahead For Mortgage Rates This Week : August 13, 2012

Mortgage markets worsened last week as the investors moved back into risk-taking mode. Better-than-expected economic data in the U.S. plus a general feeling that the ongoing Eurozone issues will be soon be resolved (or lessened) contributed to a second straight week of rising mortgage rates.

One such data point was the weekly Initial Jobless Claims report.

According to the U.S. Department of Labor, the number of U.S. workers filing for first-time unemployment benefits unexpectedly dropped 6,000 from the week prior on a seasonally-adjusted basis. Economists had expected a week-over-week increase.

In addition, government-backed mortgage securitizers Fannie Mae and Freddie Mac both announced quarterly profits last week of a combined $8.3 billion. This, too, reflects well on the economy because both companies attributed strong results to a recovering housing market.

Conforming rates in Canton rose for the second straight week, according to Freddie Mac's weekly mortgage rate survey.

The 30-year fixed rate mortgage rate now averages 3.59% nationwide for mortgage applicants willing to pay 0.6 discount points plus a complete set of closing costs where 1 discount point is a loan fee equal to one percent of your loan size.  This is a 10 basis point increase from late-July, when rates averaged 3.49%.

The 15-year fixed rate mortgage also moved higher, registering 2.84% last week after recently posting at 2.80%, on average.

This week, there won't be much data to move markets. We'll see the release of the Producer Price Index and the Consumer Price Index -- two inflationary gauges for the U.S. economy -- as well as July's Retail Sales report. Beyond that, however, there won't be much. Therefore, be wary of day-to-day momentum in the mortgage bond market.

Between January and July, momentum took mortgage rates lower; eventually to an all-time low. Since August 1, however, that momentum has reversed.

If you're floating a mortgage rate or are otherwise not yet locked, get with your loan officer quickly. Mortgage rates may fall between today and Friday, but there's much more room for rates to rise instead.

Fed Minutes Suggest Fiscal Stimulus Later This Year

The Federal Reserve released the minutes from its June Federal Open Market Committee meeting, revealing a Fed divided on the future of the U.S. economy. Mortgage rates are higher after the release of the minutes.

The Fed Minutes is the detailed recap of an FOMC meeting. It is the companion piece to the more brief, more well-known post-meeting FOMC press release.

For a comparison, whereas the Fed's June 20, 2012 press release contained 5 paragraphs and 490 words, the same meeting's minutes contain 62 paragraphs and 7,508 words. The extra detail afforded by the extra words Wall Street gives insight into the nation's central banker.

The June Fed Minutes, for example, suggest that the Fed may soon add new economic stimulus. 

Recent data suggests that the U.S. economy is expanding, but more slowly that it was at the start of the year. The Fed acknowledged that this, in part, is the result of "below-trend" growth in Euro-area economies, plus a general slowdown in China.

The Fed also said that "strains in global financial markets" continue to pose "significant downside risks" to the U.S. economy. The Fed expects U.S. growth to "moderate over coming quarters".

Other notes from with the Fed Minutes included : 

• On housing : Home sales, construction and prices suggest improvement
• On inflation : Prices are stable, and inflation will remain "subdued" through 2014
• On new policy : Rapid fiscal tightening poses a "downside risk" to the economy

In addition, there was discussion about whether the Fed is missing its dual mandate of low inflation and low unemployment. Several Fed member discussed the need for new stimulus to raise employment and to raise the rate of inflation. This action could occur as soon as next month.

If the stimulus was enacted, mortgage rates would likely rise because inflation, in general, is a threat to low mortgage rates.

The next Federal Open Market Committee meeting is a 2-day affair scheduled for July 31-August 1, 2012. 

A Simple Explanation Of The Federal Reserve Statement (April 25, 2012)

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 fifth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.

In its press release, the Federal Reserve noted that the U.S. economy has been "expanding moderately" since the FOMC's last meeting in March. Beyond the next few quarters, the Fed expects growth to "pick up gradually". 

This key phrase will likely be repeated by the press. It suggests that the economy is no longer contracting; instead moving along a path of slow, consistent expansion.  

In addition, the Fed acknowledged that "strains in global financial markets" continue to pose "significant downside risks" to long-term U.S. economic outlook. This is in reference to the sovereign debt concerns of Greece, Spain and Italy, and the potential for a broader European economic slowdown.

The Fed's statement included the following notes :

1. The housing sector remains "depressed"
2. Labor conditions have "improved in recent months"
3. Household spending has "continued to advance"

Also, with respect to inflation, the Fed said that the higher oil and gasoline prices from earlier this year will affect inflation "only temporarily", and that inflation rates will return to stable levels soon.

At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at "exceptionally low" levels through late-2014, and to buy mortgage-backed bonds in the open market.

Immediately following the FOMC's statement, mortgage markets improved slightly, pressuring mortgage rates lower in Marietta and nationwide.

The FOMC's next scheduled meeting is a two-day event slated for June 19-20, 2012.

What's Ahead For Mortgage Rates This Week : March 19, 2012

Mortgage markets worsened last week as the Federal Reserve's Federal Open Market Committee suggested economic recovery may be closer than it originally expected, and that inflation may be a near-term economic concern.

Although the FOMC voted to leave the Fed Funds Rate unchanged in its current range near 0.000 percent, its published comments sparked a broad-based mortgage bond selloff.

Conforming mortgage rates throughout Georgia rose sharply post-FOMC, climbing by as much as 0.375%.

If you've been shopping for a mortgage rate, the run-up was both untimely and unwelcome.

According to Freddie Mac's weekly mortgage rate survey, for most of the year, conforming 30-year fixed rate mortgage rates had remained within a tight range near 3.90 percent for mortgage applicants willing to pay an accompanying 0.8 discount points.

This week, though, Freddie Mac is expected to report average 30-year fixed rate mortgage rates well north of four percent. It would mark the highest level for the benchmark mortgage rate since mid-December of last year.

There will be a lot more for rate shoppers to watch this week, too. There is a slew of housing data set for release and the heavily-anticipated HARP 2.0 Refinance program "goes live" nationwide.

HARP is a government-led refinance program meant to help underwater homeowners refinance their Fannie Mae- or Freddie Mac-backed mortgages into new loans at today's low rates.

The program was first launched in 2009 and helped roughly one million U.S. homeowners. HARP's newest iteration, though, provides for a more lenient underwriting process that is expected to open the program to an additional 6 million homeowners or more.

Mortgage rates may rise this week as a result of HARP-based loan volume. It may also rise on strength in housing -- there are four data points due for release :

• Monday : Housing Market Index
• Tuesday : Housing Starts
• Wednesday : Existing Home Sales
• Friday : New Home Sales

As in most weeks, it's less risky to lock a mortgage rate than to float one. Mortgage rates have much room to climb but very little room to fall. If you're not yet locked, talk to your loan officer and make a plan.

A Simple Explanation Of The Federal Reserve Statement (March 13, 2012)

Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

For the fourth consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. It is expected to remain near-zero through 2014, at least.

In its press release, the Federal Reserve noted that the the U.S. economy has "expanded moderately" since the FOMC's January 2012 meeting, adding that growth is occurring despite "strains in the global financial markets" that pose "significant downside risks" to long-term outlooks.

The Federal Reserve now expects moderate economic expansion through the next few quarters and a gradual easing in the national Unemployment Rate.

The Fed also noted that :

1. The housing sector remains "depressed"
2. Labor conditions have "improved further"
3. Household spending has "continued to advance"

With respect to inflation, the Fed said that rising oil and gasoline prices will "push up" inflation temporarily, but not over the long-term.

At its meeting, the Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs. The Fed re-affirmed its intentions to hold the Fed Funds Rate at "exceptionally low" levels through late-2014, and to buy mortgage-backed bonds in the open market.

Immediately following the FOMC's statement, mortgage markets worsened slightly, pressuring mortgage rates higher in and around Atlanta. 

The FOMC's next scheduled meeting is a two-day event slated for April 24-25, 2012.

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 Canton , 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.

What's Ahead For Mortgage Rates This Week : December 19, 2011

Mortgage markets improved last week, but by a slight amount only; not enough to move conventional mortgage rates in Georgia in any significant manner.

Wall Street watched as Eurozone leaders expressed little willingness to increase aid programs within the region, and as the Federal Reserve voted against new economic stimulus for the United States. The Fed Funds Rate remains near 0.000 percent and QE3 was not introduced.

Investors had expected the opposite outcome in both scenarios.

In most weeks, these stories would have led mortgage rates lower. There was, however, a fair amount of data suggesting that the U.S. economy is in recovery, and that tempered any major shifts in markets.

• Manufacturing data proved to be strong
• Inflation numbers are heating up
• Jobless claims continue to drop, week-to-week

In addition, in its last meeting of the year, the Federal Reserve specifically mentioned that the economy has been "expanding moderately".

These are all good signs for the future of the U.S. economy. Unfortunately, for mortgage rate shoppers and would-be home buyers, it may mean higher mortgage rates ahead.

Since early-November, mortgage rates have idled, moving within a range of less than 2 basis points and centered on 3.99%. According to Freddie Mac, this week's average 30-year fixed rate mortgage fell to 3.94% which, at first glance, appears to be a "dip".

To get access to that rate, however, requires more discount points as compared to prior weeks.

This week's 3.94% with its accompanying 0.8 discount points is the financial equivalent of last week's 3.99% with its accompanying 0.7 discount points. Going further, last week's rates are actually less expensive to mortgage applicants for the first 3 years of a loan because the closing costs are so much lower.

So, given global economic conditions and the mortgage bond market's status as a "safe market", the failure of mortgage rates to fall suggests that this may be as low as mortgage rates get. It's time to look at locking in.

This week is a holiday-shortened week. Markets will close early-Friday and volume is expected to be thin. Therefore, expect exaggerated movements in rates. There are 3 releases related to housing (Housing Starts, Existing Home Sales, New Home Sales) and a consumer sentiment release. 

Top 25 Least Expensive U.S. Cities

A report issued Monday by the U.S. government showed core inflation rising 2.5 percent in the last 12 months for its biggest one-year gain since January 2010.

Everyday living is becoming expensive, it seems.

But there are some U.S. towns in which the cost of living remains affordable -- and downright cheap -- as compared to the national average. They're detailed in a BusinessWeek piece titled "The Cheapest 25 Cities In The U.S".

In comparing costs across 340 urban areas as compiled by the Council of Community & Economic Research, cities in Texas, Arkansas, Tennessee and Oklahoma ranked consistently high. Cities in Hawaii did not.

Take note, though. Although the BusinessWeek piece highlights inexpensive cities in which to live, a low cost of living does not necessarily correlate to a high standard of living. Cost-leader Harlingen, Texas, for example, boasts a poverty rate nearly triple the national average.

Other "Inexpensive Cities" feature similar poverty rates.

The Top 10 "cheapest cities", as shown by BusinessWeek are:

1. Harlingen, Texas
2. Pueblo, Colorado
3. Pryor Creek, Oklahoma
4. McAllen, Texas
5. Cookeville, Tennessee
6. Commerce-Hunt County, Texas
7. Brownsville, Texas
8. Fort Smith, Arkansas
9. Muskogee, Oklahoma
10. Springfield, Illinois

And, at the other end of the spectrum, the top 5 most expensive cities/areas were, in order, Manhattan, New York; Brooklyn, New York; Honolulu, Hawaii; San Francisco, CA; and Queens, New York.

Manhattan's cost of living is more than twice the national average.

The complete list is available at the BusinessWeek website.

What's Ahead For Mortgage Rates This Week : June 27, 2011

Mortgage markets improved again last week on a revised economic outlook for the U.S. economy, and ongoing concerns about Greece and its sovereign debt.

Conforming mortgage rates in Georgia fell last week and now hover near the all-time lows set last November.

Adjustable-rate mortgages are especially low.

There were three big stories last week that will carry forward into this week.

First, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged in its current target range of 0.000-0.250 percent. This was expected. However, the Fed revised its growth estimates for the U.S. economy lower. This was not expected.

Mortgage rates dipped on the news.

Second, Greece moved closer to avoiding insolvency. The nation-state's parliament must now pass a package of spending cuts and tax increases to appease Eurozone leaders and the IMF. Without passage, though, bankruptcy may be unavoidable.

Worries about Greece's fate sparked a bond market flight-to-quality. This, too, helped mortgage rates ease.

And, lastly, Thursday, the U.S. and other members of the International Energy Agency chose to release 60 million barrels of oil to the market over the next month. You've likely experienced the impact as the gas pump already -- gas prices are way down nationwide.

Lower gas prices means fewer inflationary pressures and inflation is the enemy of mortgage rates. Less inflation, lower mortgage rates.

This week, mortgage rates may reverse. 

There isn't much new data due for release -- inflation data due Monday, housing data due Wednesday, and a series of confidence reports throughout the week -- but there are 3 scheduled treasury auctions that could pull rates up or down.

• Monday : 2-Year Treasury Note auction
• Tuesday : 5-Year Treasury Note auction
• Wednesday : 7-Year Treasury Note auction

If demand is high at any/all of the auctions, mortgage rates should drop. If demand is weak, mortgage rates should rise.

What's Ahead For Mortgage Rates : Week of June 20, 2011

Mortgage markets improved last week as Wall Street managed news on both sides of the economic coin. There were several instances of higher-than-expected inflation -- an event that tends to lead rates higher -- but weak domestic jobs data and a soft manufacturing report suppressed the damage.

Rates were also held low by ongoing issues in Greece.

In Greece, the government is currently struggling to meet its debt obligations -- despite a restructuring of existing debt negotiated in 2010.

Without a plan for its new debt, though, Greece will likely to default on what it owes.  Eurozone and international banking leaders have failed to reach consensus on the situation, and now the citizens of Greece are in a state of social unrest.

The uncertainly surrounding the nation-state spurred a bond market flight-to-quality last week. That, too, helped to keep rates low. 

Last week, mortgage rates fell for the sixth week out of nine, a streak that's dropped conforming mortgage rates in Atlanta to their lowest levels of the year.

This week, that could change.

Wednesday, the Federal Open Market Committee adjourns from a 2-day meeting and anytime the Fed meets, there's a good chance that mortgage rates will move. The FOMC makes the nation's monetary policy.

The meeting adjourns at 12:30 PM ET and Fed Chairman Ben Bernanke will follow with a press conference at 2:15 PM ET. The press conference is meant to give context to the FOMC's decision, and allow for back-and-forth with the press corps. Wall Street will watch closely, too, for signals of the Fed's next action(s).

In addition, this week will see the results of May's Existing Home Sales report and New Home Sales report. Both are considered important to the housing market, and to the economy overall.

If you're still floating a mortgage rate, falling mortgage rates have helped you. There's not much room for rates to fall further, however. Consider calling your loan officer and locking something in. 

What's Ahead For Mortgage Rates This Week : June 13, 2011

Mortgage markets moved in feverish fashion last week, changing with extreme frequency, and eventually ending slightly worse on the week. Conforming mortgage rates fell to a 6-month low Wednesday but, by Friday, they had retreated higher.

Last week marked just the second time in 8 weeks that rates in Kennesaw increased. During that span, Freddie Mac reports that mortgage rates have dropped 42 basis points, or 0.42%.

That equates to a monthly savings of $25.24 per $100,000 borrowed.

One reason why mortgage rates have been dropping is that the economy is growing more slowly than projected. In a speech last week, Federal Reserve Chairman Ben Bernanke described the U.S. recovery as "frustratingly slow". In a separate speech, another Federal Reserve President, William Dudley, categorized the recovery as "subpar".

Economic weakness tends to promote a low mortgage rate environment as equity markets sell off and investors seek safety of principal. Indeed, the Dow Jones Industrial Average fell for the 6th straight week, its longest losing streak since 2002. 

Mortgage rates were also helped by ongoing uncertainty in Greece. The nation remains at-risk for default, and that's spurring a bond market to flight-to-quality which benefits the U.S. mortgage market, too.

This week, mortgage rates may reverse their recent slide. There isn't much data due for release, but the numbers that will hit the wires have the ability to move markets -- especially the inflation-linked figures.

• Tuesday : Producer Price Index, Retail Sales
• Wednesday : Consumer Price Index
• Thursday : Housing Starts
• Friday : Consumer Sentiment

If you've been looking at mortgage rates for a purchase or refinance, now may be a good time to lock. FHA and conforming rates are at their lowest levels since December 2010.

Going forward, rates have much more room to rise than to fall.

Fed Minutes Put The Heat On Mortgage Rates To Rise

The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Georgia are higher by 1/8 percent this morning, at least.

The "Fed Minutes" is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve's official recap of the conversations and debates that shaped the prior FOMC session.

Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.

By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.

The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.

Here is some of what the Fed discussed last month:

• On inflation : Higher levels are "transitory"; will level-off with commodity prices
• On housing : The market remains depressed. "Vacant properties" are harming construction.
• On stimulus : The Fed will stick to its $600 billion support plan

In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon. 

Wall Street estimates that a gradual economic tightening will begin within 12 months.

Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.

As bond markets fall, mortgage rates in Kennesaw rise.

Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.63% -- the lowest of the year.

Job Growth Returning To "Normal" Levels -- A Bad Sign For Mortgage Rates

Be prepared for Friday morning. Mortgage rates and home affordability could worsen quickly. At 8:30 AM ET, the Bureau of Labor Statistics releases its April Non-Farm Payrolls report and momentum has been strong.

The monthly jobs report is a market-mover and analysts expect that 196,000 new jobs were added last month. If those expectations are exceeded -- by even a little -- Wall Street would take it mean "economic strength" and the stock market would be boosted.

Too bad for rate shoppers, though; a move like that would also lead to higher mortgage rates throughout Georgia. This is because, coming out of a recession, reports of economic strength tend to push mortgage rates up. We've seen it happen multiple times in the last 8 months.

Since losing more than 7 million jobs between 2008 and 2009, employers have added 1.3 million jobs back to the economy. And we're learning that there's plans for fewer job cuts in the future. It's clear that the jobs market is improving and this is why tomorrow's Non-Farm Payrolls report is so important.

A "weak economy" helped keep mortgage rates low for a very long time. A strengthening economy will reverse that tide.

So, consider your personal risk tolerance today, in advance of tomorrow's Non-Farm Payrolls report. If the thought of rising mortgage rates makes you nervous, call your loan officer and lock in a rate today. Once tomorrow's data is released, after all, the market might look changed.

What's Ahead For Mortgage Rates This Week : April 18, 2011

Mortgage markets improved last week, buoyed by two days of out-sized gains. Mortgage rates bounced off their 8-week highs on much weaker-than-expected inflation data, and debt concerns abroad.

It's an abrupt change in mortgage rate momentum.

Since the Federal Reserve's March 2011 meeting, in which the Fed said rising energy costs are "putting upward pressure on inflation", inflation chatter has figured big for Kennesaw  mortgage rates. With each tick higher in gas prices; in every conversation on U.S. debt load; as fruits and vegetables get more expensive at the supermarket, Wall Street's fears of inflation have grown, and rate shoppers have suffered.

The connection between inflation and mortgage rates is straight-forward. Inflation is the devaluation of the U.S. dollar -- the currency in which mortgage bonds are denominated. As the dollar loses values, so do mortgage bonds, therefore, leading mortgage rates to rise, inevitably.

Leading up to last week, concerns peaked and rates did, too. And then, a strange thing happened. The government's March inflation report showed inflation well under control.

The results surprised Wall Street and the trades that had previously served to pump rate up, last week, ran in reverse.

The biggest gains were made Friday.

This week, inflation takes back-seat to housing data. There's a lot of it coming.

• Monday : Homebuilder Confidence Index
• Tuesday : Housing Starts and Building Permits
• Wednesday : Existing Home Sales
• Thursday : Housing Market Index

There's no data due Friday with markets closed for Good Friday.

This is a holiday-shortened week so expect low trading volume to render rates more erratic than typical. If you're not yet locked in to a mortgage rate with your lender, consider doing it this week.

Inflation Pressures Mounting; Mortgage Rates Rising

Inflation pressures are mounting in the United States. And, Friday, the Consumer Price Index should prove it.

More commonly called "The Cost of Living Index", CPI measures cost changes in the typical items bought by American households. Among others, CPI measures goods and service in apparel and recreation; medical care and education; and housing and transportation.

The March CPI data is expected to show an increase in the cost of living for the 17th straight month -- a reading that would take CPI to an all-time high.

If you've filled your gas tank, sent a child to school, or shopped for groceries, you're likely not surprised. Household budgets have been squeezed from all angles lately. The dollar's purchasing power is waning.

This is inflation, defined. And a weaker U.S. dollar is bad for mortgage rates. 

The connection between the U.S. dollar and mortgage rates is direct. When inflation pressures rise, mortgage rates in Atlanta tend to rise, too, because mortgage rates are based on the price of mortgage-backed bonds -- a security bought, sold and paid in U.S. dollars

Inflation, in other words, renders mortgage bonds less valuable to investors, all things equal, so investors sell them as inflation pressures grow. More sellers leads to lower prices which, in turn, causes mortgage rates to rise.

It's why March's Cost of Living data is so important to rate shoppers and home buyers in Bridge Mill. Higher levels of CPI can harm home affordability, and stretch your household budget uncomfortably.

As Memorial Day approaches, gas prices are projected to spike, offering little relief from the inflationary pressures in the economy. It's one reason why mortgage rates should trend higher over the next few months.

If you're wondering whether to lock or float your mortgage rate, consider locking in. At least today's rates are a sure thing. Tomorrow's rates could be much higher.

What's Ahead For Mortgage Rates This Week : April 11, 2011

Mortgage markets worsened last week as energy costs remained high, and jobs data looked strong. The safe haven buying that characterized the March mortgage market has subsided.

it's driving mortgage rates higher across Georgia.

Conforming and FHA mortgage rates rolled back 8 weeks worth of improvements last week and are now back to mid-February levels. The rise in rates is hurting refinance activity and home affordability.

The biggest story from last week figures to carry forward into this one -- the Federal Reserve's take on inflation.

In the minutes from its March meeting, the FOMC was shown to have discussed the possibility of raising the Fed Funds Rate ahead of schedule, and to be watching near-inflation closely. Both developments are in response to a growing economy with rising price pressures.

Mortgage rate shoppers should take note.

Inflation is a mortgage-rate killer. When inflation is present in the economy, all things equal, mortgage rates rise. Sometimes by a lot. And, usually, just the expectation of inflation is all it takes to make mortgage rates jump.

That's what we saw last week.

This week, keep a close watch on new inflation-related data set for release. This includes Tuesday's Retail Sales data, Wednesday's Producer Price Index, and Thursday's Consumer Price Index. Each release can potentially move mortgage rates although, if recent trends are an indication, expect for rates to rise.

Mortgage rates in Atlanta remain historically low. If you're shopping for a mortgage, consider locking as soon as you can.

What's Ahead For Mortgage Rates This Week : March 21, 2011

Mortgage markets improved again last week despite an inflation-acknowledging statement from the FOMC and stronger-than-expected jobless data.

Usually, events like this would lead mortgage rates higher, but violence in the Middle East and worsening fear for public safety in Japan took center stage instead, spurring a massive, global flight-to-quality instead.

Rate shoppers in Marietta  benefited.

As safe haven buying increased last week, conforming mortgage rates dropped, falling to their lowest levels since January. It marked the 5th straight week through which mortgage rates improved and is the longest such streak since August 2010.

This week, rates may run lower again. You may not want to gamble on it, though. Here's why.

In general, when there's inflation in the U.S. economy, mortgage rates rise. This is because inflation devalues mortgage bonds, the underlying security on which mortgage rates are based.

So, last Tuesday, the Federal Open Market Committee met and in its post-meeting press release, the group said inflation pressures were building, a signal that rates should rise. It then went one step further.

To keep the economy from slipping back into recession or into disinflation, the FOMC also said it plans to keep its existing monetary policies in place for the foreseeable future.  This, too, is considered inflationary -- another signal that rates should rise. And they did. 

Immediately following the FOMC announcement, mortgage rates spiked. But it didn't last.

Starting Wednesday, the battles in Libya grew more intense, and Japan battled with its own domestic crisis (i.e. a potential nuclear meltdown). The economic implications of the events spurred the purchase of "safe" assets, and mortgage bonds improved.

And this is why mortgage rates won't stay low for long.

Eventually, Wall Street will come to terms with Libya and Japan and the flight-to-quality will reverse. Inflation, however, is not likely to lessen. At least, not anytime soon.  Therefore, this week may represent the low-point in mortgage rates for a while. It's important to lock your low rate while you still can.

There isn't much economic data due this week so mortgage rates will take their cues from the broader market. If you haven't locked a rate yet, or were waiting for rates to fall, this might be your best chance. Call your loan officer as soon as possible and get a fresh rate quote today.