According to the government, home values edged lower last month.
The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.
The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.
But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:
Is considered new construction
Is a multi-unit property
Is financed by an entity other than Fannie Mae or Freddie Mac
Given the resurgence of FHA financing this year, this last exclusion is especially glaring. FHA represents about one-third of all mortgage loans in 2009.
Because of these exceptions, some analysts label the Home Price Index incomplete. The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.
In light of these shortcomings, therefore, what's most important is to recognize that both of the "popular" home valuation reports show similar patterns -- home prices have leveled and are showing signs of a rebound.
Tuesday -- for the first time in a long while -- members of the press met the monthly Case-Shiller Index data with enthusiasm. And why shouldn't they? 19 of the 20 measured markets showed a slowing pace of home price decline in April.
Here are some of the headlines about the story:
Case-Shiller Home Prices Decline Only 18% (Business Week)
Case-Shiller Less Bad (Seeking Alpha)
Home Prices In 20 Cities Drop Less Than Expected (Bloomberg)
Now, the headlines feel negative, but they're actually highlighting some key strengths in April's figures. For example, nearly half of the Case-Shiller markets posted gains in April and all but one showed month-over-month improvement.
It's a step in the right direction but doesn't mean that housing has turned around for good.
We have to be careful about how we interpret the Case-Shiller Index because it's an imperfect housing gauge. The most obvious Case-Shiller flaw is that it only measures home values in 20 cities nationwide and they're not even the 20 biggest cities.
Houston, Philadelphia, San Antonio and San Jose are excluded from the report and each ranks among the country's 10 most populous areas.
That said, the report is still important because the Case-Shiller Index identifies broader housing trends and that helps to shape economic policy.
Not only versus last month but also versus last year, the pace at which home values are falling appears to be getting slower. This is the third straight month Case-Shiller has reported as such.
Now, three months makes a trend, but the data has to stay strong through the summer months to mark a bona fide turnaround. If the Case-Shiller Index shows strength for May and June, it could be the signal for which the markets have been waiting.
The Federal Reserve begins its scheduled two-day meeting this morning.
It's one of 8 scheduled meetings for the Federal Open Market Committee this year.
When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.
The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to "near-zero" percent in an attempt to stimulate growth.
But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.
Now, if you'll remember, the Fed made that pledge in two parts:
Part 1 came in November 2008 for $500 billion
Part 2 came in March 2008 for $750 billion
After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.
The Fed isn't expected to increase its mortgage market commitment this week, but because mortgage rates are above the government's "target zone", it's possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.
A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.
It's for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person's pending home loan.
The Fed's press release hits the wires at 2:15 PM ET Wednesday. If you're the cautious type, consider locking your mortgage rate prior to its release.
Employment figures released this morning show that the economy has now shed 3.6 million jobs since December 2007, included close to half that in the last 3 months alone. The Unemployment Rate is now 7.6%.
But jobs aren't fading in every housing market equally.
As reported by Ajilon Professional Staffing, there are still areas around the country in which unemployment rates are low and job outlooks are strong.
There's no common denominator uniting the list -- cities are buffered by industries as varied as healthcare, energy, and technology. However, it's worth noting that -- in each of these 10 towns -- housing markets seem to be performing above-average versus the rest of the nation.
Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today. It remains within a target range of 0.000-0.250 percent.
In its press release, the FOMC reiterated most of the key points from its December 2008 statement, including:
The U.S. employment outlook continues to deteriorate
Consumers and businesses continue to cut spending
The housing sector is still showing weakness
In addition, the FOMC addressed the "extremely tight" credit conditions for U.S. households and business, even as it said some financial markets are showing signs of improvement.
To the Fed, the latter is a precursor for the former. For Americans needing new mortgages or other forms of credit, it may mean that getting approved gets easier sometime late this year.
Most importantly, the Fed's press release again mentioned the policy-setting group's intention to "employ all available tools" to promote economic growth. This includes the open-market purchasing of mortgage-backed debt that has helped fuel the current Refi Boom. The Fed indicated a willingness to extend the program beyond the initial $500 billion, if necessary.
For each of the Fed's interventions, though, there is a trade-off.
Buying securities costs money and the Fed -- literally -- comes up with the cash by printing it. The extra supplies devalue the U.S. dollar which, if left unchecked, can cause the Fed's plan to backfire in the form of runaway money supply-led inflation. The Fed is aware of this risk and is pledged to monitoring it closely.
Overall, mortgage rates worsened today after the Fed's statement.
Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling.
Just one month after falling below the 5-million unit trend line, sales volume roared back by 300,000 homes in December, surprising housing analysts and making a case that this spring's Buying Season could be a competitive one.
Falling home prices helped fuel home sales. Nationally, the median sales price -- the point at which half of all homes sold for more and half sold for less -- was $175,400, down $32,000 from last year.
However, the most important part of December's Existing Home Sales report isn't making headlines.
At December's sales pace, it would now take 9.3 months to exhaust the existing home supply. Last month it was 11.2 months. This means that buyers are competing to purchase fewer homes which, in turn, puts upward pressure on home prices.
This is Supply and Demand at its most basic definition.
Economists have long said that the keystone of housing's recovery will be rebalancing in home supply. Coupled with the all-time low in housing starts, December's Existing Home Sales data signals future strength.
Put it all together and it's clear that the experts have no better idea about the future than you or I. Their guesses are educated ones, but they're guesses nonetheless.
A terrific example of how poorly experts can predict the future comes from a Wall Street Journal performance analysis of 1,700 mutual funds.
In 2008, only one earned a positive return. That one fund represents zero-point-zero-six percent of all tracked mutual funds. Surely, the fund managers of the other 99.94% didn't expect to post negative returns on the year.
So, before you use predictions about the demise (or recovery) of the broader economy to make "personal economy" decisions, consider that the oft-quoted experts have a hugely better track record in analyzing the past than the future.
All we know for sure right now is that home prices are, in general, lower than at the time point last year, and mortgage rates are, too. By 2010, both could be lower still.
Poor indoor air quality is linked to Sick Building Syndrome, a combination of ailments with more than 50 seemingly separate and unrelated symptoms, including:
Dizziness and nausea
Headache
Symptoms related to Irritable Bowel Syndrome
Personality changes
Avoiding sickness like this -- as explained by The Today Show -- may be as simple as choosing the right paint for your home.
Most "standard" paints come loaded with chemicals called VOCs -- volatile organic compounds. The naturally-occuring chemicals are added to the paint to help it spread better and last longer. Unfortunately, these same chemicals are damaging to soil and groundwater, react with sunlight to form dangerous ozone, and contribute to global warming.
There is a safer choice.
Non-VOC household paints are widely available for about the same cost as their toxic cousins. They're eco-friendly and, because recent advances in the manufacturing technology, the paint quality is outstanding.
As part of the Economic Stimulus Act of 2008, Congress authorized a conforming loan limit increase in "high-cost" areas around the country. Versus the national conforming loan limit of $417,000, for example, a Manhattan home buyer could secure a 2008 mortgage for $725,000 and still be within "conforming" guidelines.
Effective January 1, however, those limits rolled back. Conforming mortgages in the 59 designated high-cost regions are now capped at $625,500.
Loans in excess of these dollar amounts are often called "jumbo", or "super jumbo" home loans, depending on their size. Jumbo home loans tend to be more costly than their conforming-sized cousins.
With home prices falling across most parts of the country, investors in real estate are finding good value in certain rental properties. Unfortunately, they're also finding it harder to get approved for a home loan.
After getting stung by defaults, conforming mortgage standards for non-owner occupied home loans tightened dramatically last quarter.
One major change was the reduction in the total number of homes Fannie Mae or Freddie Mac will finance for any one borrower.
Prior to the chance, the number of financed properties could be as high as 10. Today, that number is 4, stinging investors with large real estate portfolios. Going forward, buying properties isn't the problem; financing them with conforming mortgage money is.
Another guideline change mandates larger downpayments.
Versus early-2008, when a real estate investor could buy a home with 10 percent down, today's investor is required to pay 15. But, as an added wrinkle, few private mortgage insurers write policies against rental homes anymore, rendering the 15 percent downpayment insufficient. The de facto requirement, therefore, is now 20 percent down.
And then came the fees.
As part of its "pay-for-risk" pricing model, Fannie Mae added mandatory fees to all of its investor property mortgages this year. Based on loan-to-value, the fees are:
75% LTV or less: 1.750 percent of the borrowed amount
75.01 - 80.00% LTV : 3.000 percent of the borrowed amount
Greater than 80% LTV : 3.750 percent of the borrowed amount
So, if your personal plan includes the purchase of investment properties in 2009, consider the impact that tighter conforming guidelines, larger downpayments and higher fees will have on your bottom line.
All things considered, now may be a good time to make that rental property bid. Sure, prices may fall going forward, but increased acquisition costs may wipe out the long-term gains.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
The Federal Reserve begins its scheduled two-day meeting this morning.
Employment figures released this morning show that the economy has now 
Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling. 
The New Year is not yet one week old but that's not stopping market "experts" from predicting what's in store for 2009.
ing good value in certain rental properties. Unfortunately, they're also finding it harder to get approved for a home loan.
;)
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