Sep 21, 2011 | Federal Reserve
Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The vote was 7-3 — the second straight meeting at which the FOMC adjourned with as many 3 dissenters. Prior to that last meeting, there hadn’t been 3 FOMC dissenters since 1992.
In its press release, the Federal Reserve presented a dour outlook for the U.S. economy, noting that since its last meeting in August:
- Economic growth “remains slow”
- Unemployment rates “remain elevated”
- The housing sector “remains depressed”
The Fed also said that there are “significant downside risks” to the economic outlook, tied to strains in the global financial markets.
The news wasn’t all bad, however. (more…)
Sep 21, 2011 | Federal Reserve
The Federal Open Market Committee adjourns from a two-day, scheduled meeting today, the sixth of 8 scheduled meetings this year, and the seventh Fed meeting overall.
The FOMC is a designated, 12-person committee within the Federal Reserve, led by Fed Chairman Ben Bernanke. The FOMC is the voting members for the country’s monetary policy. Among its other responsibilities, the FOMC sets the Fed Funds Rate, the overnight rate at which banks borrow money from each other.
Note that the “Fed Funds Rate” is different from “mortgage rates”. Mortgage rates are not set by the Fed. Rather, they are based on the price of mortgage-backed bonds, a security traded among investors.
As the chart at top illustrates, the Fed Funds Rate and conforming mortgage rates in Fitchburg have little correlation. Since 1990, the two benchmark rates have been separated by as much as 5.29 percent, and have been as close as 0.52 percent. (more…)
Sep 20, 2011 | Housing Analysis
Homebuilders are feeling worse about the market for new homes nationwide.
With construction credit tight and competition from foreclosures increasing, the National Association of Homebuilder’s Housing Market Index slipped 1 point in September, falling to levels just below the index’s 12-month average.
The HMI measures homebuilder confidence nationwide. It’s the result of 3 separate homebuilder surveys, each designed to measure a specific facet of the homebuilder’s business.
- How are market conditions for the sale of new homes today?
- How are market conditions for the sale of new homes in 6 months?
- How is prospective buyer foot traffic?
Each component survey showed a drop-off from August. Responses fell 1 point, 2 points, and 2 points, respectively. Together, September’s composite reading was 14 out of a possible 100 points. Readings over 50 are considered favorable.
The HMI not been above 50 since April 2006. (more…)
Sep 16, 2011 | Mortgage Rates
It’s not just 30-year fixed rate mortgages that are posting all-time lows these days. The 15-year mortgage has been plunging, too.
If you’ve ever considered a 15-year loan term, it’s a terrific time to talk to your lender. According to Freddie Mac’s weekly mortgage rate survey of roughly 125 U.S. lenders, at 3.30 percent, the 15-year fixed rate mortgage is at its lowest point in history.
The 3.30% rate doesn’t come for free, however. Based on average loan term nationwide, borrowers in Massachusetts choosing to “go 15” should expect to pay 0.6 discount points at closing. 1 discount point is equal to 1 percent of your loan size.
With low rates, 15-year fixed rate mortgage can be enticing; a primary benefit is the huge reduction in the long-term interest costs of your loan. The downside, though, is that monthly mortgage payments can be relatively large.
At today’s mortgage rates, a 15-year fixed rate loan carries a principal + interest payment of $705.10 per $100,000 borrowed — a 46% increase over a comparable 30-year fixed rate loan. If you can manage the bigger payments, though, you’ll reap $47,000 in interest payments savings per $100,000 borrowed in paying off your loan in full. (more…)
Sep 15, 2011 | Housing Analysis
On an annual basis, foreclosure filings fell last month. As compared to August 2010, last month’s foreclosure filings dropped 33 percent. “Foreclosure filing” is a catch-all term, comprising default notices; scheduled auctions; and bank repossessions.
The study was published by foreclosure-tracking firm RealtyTrac and this month’s report reveals a slowing rate of foreclosure within each of the Top 10 most foreclosure-heavy states.
All news is not good, however.
On a monthly basis, foreclosure filings spiked, led by a surge in default notices. Default notices made their biggest one-month jump since August 2007 on the way to a 9-month high last month. Default notices are the first step in the foreclosure process so this jump may foreshadow a large number of bank repossessions as foreclosures “make their way through the process”.
It’s also noteworthy that just 6 states housed half of the nation’s bank repossessions last month.
- California : 18 percent of bank repossessions
- Florida : 8 percent of bank repossessions
- Georgia : 7 percent of bank repossessions
- Michigan : 6 percent of bank repossessions
- Texas : 6 percent of bank repossessions
- Arizona : 6 percent of bank repossessions
As a home buyer in Fitchburg , foreclosures can save you money. The National Association of REALTORS® reports that distressed homes sell with typical discounts of 20 percent versus comparable, non-distressed homes. However, buying a home from a bank is a different process from buying a home from a “person”. Contract negotiations are different and it can take months to finally close on a foreclosed home.
If you’re buying a foreclosed, therefore, enlist the help of a professional real estate agent. Real estate agents can help you navigate the sometimes-complicated world of foreclosures, and help you come out ahead.
