Money, Debt, Real Estate, and Credit talk with Jeff Underwood

The Federal Open Market Committee begins a 2-day meeting today in Washington D.C. It’s the group’s first meeting of 2011 — one of 8 scheduled for the year.

The Fed meets every 45 days, on average. Its last meeting was December 14, 2010.

Rate shoppers and home buyers should make a note. Mortgage rates and home affordability could change dramatically beginning tomorrow afternoon.

Because Wall Street watches FOMC meetings closely, so should you. The meetings provide insight on the future of U.S. monetary policy, as told by the nation’s central banker. Investors make trades based on the FOMC’s commentary which is one reason why mortgage rates tend to undulate through the hours leading up to the FOMC’s adjournment, and the days immediately after.

Wall Street is shifting old bets, and placing new ones.

A terrific example of this is what happened after the Fed’s November 3, 2010 meeting.

In its post-meeting press release, the Federal Reserve announced a new, $600 billion, market-bolstering plan dubbed “QE2″. Wall Street had widely expected the Fed to create the program, but had underestimated its size.

Starting a $600 billion program sparked fears of a Fed-led inflation run, which, in turn, caused mortgage markets to deteriorate in a hurry. In the 3 days following the program’s announcement, mortgage rates spiked to multi-month highs and have not since recovered.

QE2 marked the beginning of the end of the Refi Boom and low rates. Today, conforming rates in Arizona are relatively low as compared to higher, but are much higher than they were prior to the FOMC’s November 2010 meeting.

Then, December’s FOMC meeting did little to change the direction of rates. We shouldn’t expect that January’s will, either. After the FOMC’s 2:15 PM ET adjournment Wednesday, mortgage rates should resume climbing, as they have done for the past 10 weeks.

If you’re shopping for a mortgage rate, therefore, the prudent move is to lock prior to Wednesday’s FOMC adjournment because, after once the Fed’s outlook is released, it will be too late.

Thank you for reading and following.

Jeff Underwood, The Street Economist

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney

Follow The Street Economist at http://www.facebook.com/TheStreetEconomist

http://www.blogtalkradio.com/jeffunderwood

Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that since November’s meeting, the “economic recovery is continuing”, but at a pace deemed too slow to make a material impact on unemployment rates. It also said that household spending in increasing, but remains constrained by joblessness, tight credit and lower housing wealth.

In addition, the Fed used its press release to re-affirm its plan to keep the Fed Funds Rate near zero percent “for an extended period” while also opting to keep its $600 billion bond market support package in place.

And lastly, of particular interest to home buyers and mortgage rate shoppers, the FOMC statement devoted an entire paragraph to the Federal Reserve’s dual mandate of keeping inflation and employment at acceptable levels.

The Fed acknowledges making progress toward this goal, but calls it “disappointingly slow”. Currently, inflation is too low for what the Fed deems acceptable, and unemployment is too high.

Over time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC statement has been negative thus far. Mortgage rates in Phoenix are unchanged post-FOMC, but appear poised to worsen.

The FOMC’s next scheduled meeting is a 2-day affair, January 25-26, 2011. It’s the first scheduled meeting of 2011.

Thank you for reading and following.

Jeff Underwood, The Street Economist

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney

Follow The Street Economist at http://www.facebook.com/TheStreetEconomist

http://www.blogtalkradio.com/jeffunderwood

Also visit TheUglyTruthAboutMoney to follow The Street Economist

Mortgage markets improved last week as markets digested a bevy of data from the housing sector, plus the scheduled Federal Open Market Committee meeting.

In back-and-forth trading, conforming mortgage rates in Arizona bottomed out Wednesday before rising through Friday’s afternoon close. Rates still managed to eke out improvement on the week overall.

According to Freddie Mac, mortgage rates remain near their lowest levels of all time.

Despite low rates, however, rate shoppers are finding it a challenge to lock the “best price”. This is because Wall Street is conflicted about the future of the U.S. economy and, as a result, mortgage pricing has been extra volatile.

For as much data that points to economic growth, there are numbers that suggest a pullback, too. Traders are undecided in either direction and mortgage pricing reflects it. It’s not uncommon for mortgage rates to vary by as much as 3/8 percent in a given week.

This week, without much new data due for release, prepare for even swifter swings in rates. In the absence of “numbers”, momentum- and trend-trading should amplify the market’s normal drops and spikes.

A sampling of the week’s economic data includes Tuesday’s Consumer Confidence report and Case-Shiller Index, Thursday’s Jobless Claims and Gross Domestic Product data, plus Friday’s consumer income and spending figures.

Notably missing from the week’s economic calendar is the jobs report which is typically issued on the first Friday each month. The release is delayed a week to October 8.

If you’re still floating a mortgage rate or have yet to commit to a refinance, consider that mortgage rates are primed to rise. They’ve been falling for 22 weeks and when the market turns, it’s expected to turn quickly.

Talk to your loan officer about your refinance options while mortgage rates are still low.

Thank you for reading and following.

Jeff Underwood, The Street Economist

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney

Today, in its 7th meeting of the year, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Funds Rate remains at a historical low, within a Fed’s target range of 0.000-0.250 percent.

In its press release, the FOMC said that the pace of economic recovery “has slowed” in recent months. Household spending is increasing but remains restrained by high levels of unemployment, falling home values, and restrictive credit.

For the second straight month, the Federal Reserve showed less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. However, the Fed still expects growth to be “modest in the near-term”.

This outlook is consistent with recent research showing that the recession is over, and that growth has resumed — albeit at a slower pace than what was originally expected.

The Fed also highlighted strengths in the economy:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in Arizona are thus far unchanged this afternoon.

The FOMC’s next meeting is a 2-day affair scheduled for November 2-3, 2010.

Thank you for reading and following.

Jeff Underwood, “The Street Economist”

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney

Today, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates in Arizona are unchanged this afternoon.

The FOMC’s next meeting is scheduled for September 21, 2010.

Thank you for reading and following.

Jeff Underwood, “The Street Economist”

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney

The Federal Open Market Committee holds a one-day meeting today, its fifth scheduled meeting of the year, and sixth overall since January.

The FOMC is the government’s monetary policy-setting arm and the group’s primary tool for that purpose is an interest rate called the Fed Funds Rate.

The Fed Funds Rate is the prescribed rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

It’s the lowest Fed Funds Rate in history.

Because the Fed Funds Rate is near zero, it’s accommodative of economic growth, spurring businesses and consumers to borrow money on the cheap. This, in turn, fosters economic growth within a U.S. economy that is somewhat tentative and facing headwinds.

The Fed has said over and again that it will hold the Fed Funds Rate “exceptionally low” for as long as conditions warrant.  It’s expect that the Fed will reiterate that message in today’s post-meeting press release.

However, just because the Fed Funds Rate won’t be changing today, that doesn’t mean that mortgage rates won’t.  Mortgage rates are not set by the Federal Reserve; open markets make mortgage rates.

Mortgage rates in Arizona tend to be volatile when the Fed is meeting. This is because the Fed’s press release highlights strengths and weaknesses in the economy and, depending on how Wall Street views those remarks, bond markets can undulate and mortgage rates are based on the price of mortgage-backed bonds.

When Ben Bernanke & Co. speak, Wall Street listens.

The Fed’s press release today will be dissected and analyzed.  Talk of higher-than-expected inflation, or better-than-expected growth should have a negative effect on rates. Talk of an economic slowdown may help rates to fall.

Either way, we can’t be certain what the Fed will say or do this afternoon so if you’re floating a rate right now and wondering whether the time is right to lock, the safe choice is to lock before 2:15 PM ET today.

Thank you for reading and following.

Jeff Underwood, “The Street Economist”

Licensed Mortgage Professional And Personal Finance Expert

Also visit http://theuglytruthaboutmoney.com/ or TheUglyTruthAboutMoney