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Improving Market Index : Up To 201 Cities For December 2012

December 14, 2012 by Jeff Cost

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 Cincinnati 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)

December 12, 2012 by Jeff Cost

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 Cincinnati 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

December 12, 2012 by Jeff Cost

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 Columbus 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.

Improving Market Index : Up To 201 Cities For December 2012

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

Mortgage Rates Rising On 26 Straight Months Of Jobs Growth

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