C21AGVoices

September 11, 2008

For the third consecutive meeting, the Federal Open Market Committee left the Fed Funds Rate unchanged at 2.000 percent.

Of interest to mortgage rate shoppers, the FOMC led its press release with comments about the health of the financial and labor markets, calling them “strained” and “weakened”, respectively. The relative weakness in both of these areas has contributed to low mortgage rates of late.

The FOMC also noted in its release that, although economic growth has slowed this year, the historically-low 2.000% Fed Funds Rate should foster “moderate economic growth” in the future.

In the wake of the announcement, Wall Street is rallying. Investors like what the Fed had to say and this is attracting money to the stock market at the expense of bonds.

Mortgage rates have given up all of Monday’s gains, and then some.

Source
Parsing the Fed Statement
The Wall Street Journal Online
September 16, 2008
https://online.wsj.com/internal/mdc/info-fedparse0809.html

I couldn’t make it the 2 hours to the shore. I was hungry and all I could smell was the sharp provolone. About half way there I pulled over and made myself a small sandwich with sharp provolone, capicolla and roasted peppers. The rest of the ride was a delight. I popped in one of my many Sinatra CD’s to top things off. When I got to the shore everyone was so hap py to see me. Not because I am great company, rather because I came bearing gifts. I was the envy of the room. You see, I get to work in South Philadelphia. I have to admit – sometimes I take it for granted.

Photo courtesy of creativecommons.org and Joeltelling

It’s known that owning your own  home is more financially and personally full filling then renting. I would love to own a home in the next 2-3 years, but as a somewhat fresh out of college young’n I’m stuck with renting (for now).

My apartment is  a highrise in a beautiful neighborhood in North East Philadelphia. There is a park across the street, shopping around the corner and it’s very close to work. So what is there to complain about? I’m noticing things lately that I hadn’t paid attention to before and it’s raising my awareness to how great my own place would be.

My cable and internet connection is lost for hours on end more than once a week. I have Comcast and they keep telling me our building has a connection problem, they send someone out to fix it and then the problem occurs again. Out of all of my friend’s that rent, my complex is the only one that charges it’s tenants to use the pool.  My bathroom has no fan it it, so anytime someone showers the temperture turns into that of the Amazon Rain Forest. Did I mention getting stuck in the building’s elevator the other day?

I know my first home is out there somewhere. For now I’ll rent and begin my home buyer education and just hope I don’t get stuck in the elevator any time soon.

This article by Elizabeth Razzi appeared in the Washington Post on 09/07/08. If you have been considering purchasing a home but have been hesitant due to the negative national press on home sales, you may want to consider stepping up your search efforts.

The FHA allows down payments of as little as 3 percent, but that will rise to 3.5 percent as of Oct. 1. People scraping dollars together for a down payment should try to set their closing for the end of this month.

Well, not really.  It is not so much Facebook itself that is wonderful.  I mean, it is kind of cute with all the games and quizzes.  Really, it can be downright fun.  But that isn’t the part I love.  What I love is that all these people that I knew from grade school, high school, and college, but lost touch with, have reappeared in my life through Facebook.  This is especially important to me because I am a member of one of those high school classes that never had a reunion.  (Is it just my class, or is this a growing trend?)  It is so interesting to see what became of the kids I used to know, now adults.  Maybe it will even be the seed of a high school reunion to come.

It’s also a friendly way to network.  If I need a product or service, I would rather work with someone I know from way back than with a stranger; or get a good referral from someone I could trust.  There are other internet sites out there that exist specifically for networking, but they are not nearly as personal.  They don’t have poking, gifts, garden patches, causes, and so many other ways to connect with your contacts.  If you don’t know what I’m talking about, I recommend you get onto Facebook and see for yourself (feel free to contact me if you need any help setting up your profile).  And while you’re at it, you can find me and “Friend” me!

Sunday, the U.S. government assumed control of Fannie Mae and Freddie Mac.

The papers have done a terrific job talking about the political perspective of the takeover, and the economic perspective of the takeover, but very few people have addressed the key news for homeowners.

Mortgage rates are plummeting.

The reason why mortgage rates are falling post-takeover is because of Fannie Mae and Freddie Mac’s collective role in the U.S. mortgage market.

1. They guarantee about half of the nation’s $12.1 trillion in mortgages
2. They purchased and securitized four-fifths of the nation’s home loans as recently as six months ago

See, earlier this year, Wall Street punished Fannie Mae and Freddie Mac for their weak balance sheets and large numbers of delinquencies.  This led to Wall Street to raise the borrowing costs for the two firms across the board which, in turn, led to higher mortgage rates for Americans.

But today, with their balance sheets backed by the U.S. government, Fannie and Freddie are now viewed as “safe” by the eyes of Wall Street. 

This has lowered their borrowing costs, pushing down mortgage rates for the four-fifths of the country that is currently channeling their home loans through Fannie or Freddie.

(Image courtesy: The New York Times)

On the first Friday of every month, the government releases its Non-Farm Payrolls report.

More commonly called the “jobs report”, the two-page analysis examines the nooks and crannies of the U.S. economy to see which industries are hiring and which are firing.

The August jobs report was released yesterday morning and it shows that the U.S. economy shed 81,000 jobs in August.

This marks the eighth straight month in which payrolls declined and puts the annual job loss total at 605,000. The Unemployment Rate jumped to 6.1% — its highest level in 5 years.

For American workers, this is bad news. But, for American home buyers, the news couldn’t be better.

Mortgage rates are improved this morning on the weak jobs data.

If this seems counter-intuitive, remember that earlier this year, lingering concerns about inflation in the U.S. economy caused mortgage rates to rise to their highest levels in more than 5 years.

Lately, however, those fears are subsiding and as today’s jobs report shows worse-than-expected weakness, it’s one more reason for markets to put inflation concerns to rest. With fewer Americans working, there are fewer dollars are available to propel the economy forward, after all.

So, today’s jobs data is good for mortgage rates because it reduces inflationary pressures on the economy and as inflation levels fall, mortgage rates tend to do the same.

Lower rates mean more affordable housing payments each month.

(Image courtesy: USA Today, The Wall Street Journal)