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Fed Minutes Show An Improving U.S. Economy
The Federal Reserve has released the minutes from its most recent Federal Open Market Committee meeting. The Fed Minutes are a detailed meeting recap; the companion piece to the more brief, more well-known press release.
As a comparison, the minutes of the last FOMC meeting contained 60 paragraphs and 7,027 words. The post-meeting press release was just 5 paragraphs and 382 words.
December’s Fed Minutes shows Fed members with a positive, cautious, take on the economy.
Recent data suggests that the U.S. economy is expanding, the Fed said, but “strains” in global financial markets pose “significant risks” to the downside. This tell us that the Fed believes its economy-stimulating programs are working, but that officials remained concerned by events in the Eurozone.
Home Affordability Could Get Worse In The Near Future
Consumer spending continues to rise nationwide, fueled by jobs growth and a rosier outlook for the U.S. economy. Unfortunately for mortgage rate shoppers int he North Georgia Mountains, it may also lead to higher mortgage rates later this week.
Thursday morning, the Census Bureau will release its U.S. Retail Sales data for December. The report is expected to show an 18th consecutive monthly increase, with analysts projecting sales volume higher by 0.4 percent from November. This would be double the increase from last month, which saw a 0.2 percent increase in Retail Sales.
The Retail Sales report tallies receipts collected by retail and food-service stores nationwide. When the sum of these receipts rise, it puts pressure on mortgage rates to do the same. The connection is straight-forward.
Jobs Report Could Effect Interest Rates So Get Locked In
If you’re floating a mortgage rate, or have yet to lock one in, today may be a good day to call your loan officer. Friday morning, the government releases its Non-Farm Payrolls report at 8:30 AM ET.
The Non-Farm Payrolls report is more commonly called the “jobs report“ and, lately, it’s been Wall Street’s domestic economic metric of choice. As jobs go, so go markets. In the 12 months beginning November 2007, the economy shed 2.3 million on its way to losing more than 7 million jobs by the end of 2009.
It’s no coincidence that the stock market has been wayward. Jobs are a keystone in the U.S. economy and the connection between jobs and growth is straight-forward :
- Workers spend more than non-workers and consumer spending is the economy’s largest single component
- Workers pay more taxes to governments and, when governments have money, they build and spend on projects
- Additional consumer and government spending creates revenue for businesses which, in turn, hire more workers.
It’s a self-reinforcing cycle. More employees begets more employees. Read the rest of this entry »
The Federal Reserve Statement For November 2011
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 nearly unanimous, with just one dissenting voter. There were 3 dissenters at each of the FOMC’s last two meetings.
In its press release, the Federal Reserve presented an improved outlook for the U.S. economy, noting that since its last meeting in September, there’s new evidence that the economy “strengthened somewhat” in the third quarter.
One example cited is that consumer and business spending continues to rise while inflationary pressures on the economy remain modest. This indicates controlled growth — a plus in a recovering economy.
The economy remains slowed by a number of factors, though, as noted by the Fed :
- “Continuing weakness” in the labor market
- Softness in commercial real estate
- A “depressed” housing market
In response to mixed economic conditions, the FOMC opted to “do nothing” today; it introduced no new monetary policy, and revised none of its existing market stimulus. The Fed re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent “at least until mid-2013″ and affirmed “Operation Twist” — the program in which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.
Mortgage market reaction to the FOMC statement has been negative this afternoon. Mortgage rates throughout the North Georgia Mountains are rising because analysts expected the Fed to launch new, bigger stimulus plans. It didn’t. Rates may drift higher for the new few days, too.
Therefore, it today’s mortgage rates fit your household budget, consider locking in a mortgage rate. Mortgage rates are very low right now, relative to history. It may not last.
The FOMC’s next meeting — its last scheduled meeting of the year — is December 13, 2011.
Explaining The Federal Reserve Statement From September 2011
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.
The Fed noted that business investment in equipment and software continues to expand, and that inflationary pressures on the economy appear to have stabilized. The Fed then re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent “at least until mid-2013″. This means that Prime Rate — the rate to which credit card rates and lines of credits are often tied — should remain unchanged at 3.250 for at least another 2 years.
Furthermore, as expected, the Federal Reserve launched a market stimulus plan aimed at lowering long-term interest rates. The Fed will sell $400 billion in Treasury securities with a maturity of 3 years or less, and use the proceeds to buy the same with maturity between 6 and 30 years.
Mortgage market reaction to the FOMC statement has been positive this afternoon. Mortgage rates in the North Georgia Mountains are improving, but note that Wall Street sentiment can shift quickly — especially in a market that’s as uncertain as this one.
If today’s mortgage rates and payments fit your household budget, consider locking in a rate. Rates can change swiftly.
The FOMC’s next meeting is a 2-day affair, scheduled for November 1-2, 2011.
Making A Rate-Lock Soon Maybe Wise
Tomorrow morning, at 8:30 AM ET, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for May. If you’re floating a mortgage rate right now — or are in the process of shopping for a loan — consider locking your rate sooner rather than later.
The Non-Farm Payrolls report can be a major market mover, causing large fluctuations in both conforming and FHA mortgage rates in Blairsville and Blue Ridge, GA. It’s because of the report’s insight into the U.S. economy.
More commonly called “the jobs report”, Non-Farm Payrolls is issued monthly. Sector-by-sector, it details the U.S. workforce and unemployment rates.
Jobs momentum has been strong. Through 7 consecutive months, the economy has added jobs, the government reports. Nearly 1 million new jobs have been created during that time. These are strong figures for a country that lost 7 million jobs in 2008 and 2009 combined.
However, Wednesday, a weaker-than-expected “preview” figure from payroll company ADP has Wall Street wondering whether this month is the month that the winning streak ends.
May’s ADP data fell so far short of expectations that investors have had to re-assess their job growth predictions. Earlier this week, the consensus was that 185,000 new jobs were created in May. Today, those estimates are much lower.
The change is leading mortgage rates lower, too.
The connection between jobs and mortgage rates is somewhat straight-forward. Job growth influences mortgage rates because jobs matter to the economy. As job growth slows, so does the economic growth, and that puts downward pressure on mortgage rates.
The opposite is true, too. Strong job growth tends to lead mortgage rates higher.
So, with job growth estimates revising lower, Wall Street has adjusted its “bets” and that’s benefiting rate shoppers across Georgia. Should the actual jobs figures not be so bad, though, expect a quick and sharp reversal; and much higher mortgage rates for everyone.
The safe move is to lock your rate today.
Rising Retail Sales Threaten Low Mortgage Rates
Another day, another piece of evidence that the U.S. economy is expanding.
Thursday, the Census Bureau released the April Retail Sales report. Excluding cars and auto parts, retail receipts rose for the 10th straight month and, at $321 billion, reached an all-time high.
Retail sales account for roughly half of consumer spending, and roughly one-third of the economy overall.
For home buyers and rate shoppers in Blairsville and Blue Ridge, the sales figures have positive and negative implications.
On the positive side, more retail sales suggests more confidence in the U.S. economy. This can spark a growth cycle that benefits the country, on the whole.
- Consumers spend more money
- Businesses sell more product
- Businesses expand payroll to meet new product demand
- Governments collect more taxes; fund more projects
- Consumers gain more confidence and the cycle repeats
Furthermore, rising employment rates help to support higher levels of home sales which, in turn, can lead to higher home prices in Georgia.
This is why Retail Sales data is so important to Wall Street and economists. It can hold clues to the future of the U.S. economy.
On the negative side, however, rising Retail Sales figures can harm home affordability. In addition to the aforementioned pressure on home prices, a strengthening economy can lead to higher mortgage rates. The weak economy of 2009-2010 is a major reason why mortgage rates were so low for so long.
As the economy improves, therefore, it follows that rates should reverse.
Each 1/8 percent increase to mortgage rates raises a mortgage payment $8 per $100,000 borrowed.
Retail Sales are up 7 percent from a year ago.
Retail Sales Weak In December; Home Affordability Gets A Boost
Consumers keep spending, the economy keeps growing.
Mortgage rates are easing lower this morning on just-released, slightly worse-than-expected Retail Sales data from December 2010.
Excluding motor vehicles and auto parts, December’s sales receipts were $1.5 billion higher from November. Analysts had expected a number north of $2 billion.
Despite falling short of estimates, however, December’s reading is the highest in Retail Sales history, surpassing the previous record set in July 2008 during the recession. In addition, December’s strong numbers helped 2010’s year-over-year numbers go positive for the first time in 3 years.
Although the data is a mixed bag for Wall Street, home affordability in the North Georgia Mountains is improving today.
The link between Retail Sales and home affordability may not be up-front obvious, but in a post-recession economy like ours, it’s often tight. Retail Sales is another name for “consumer spending” and consumer spending makes up more that 70% of the U.S. economy.
As spending grows, the economy tends to, too.
Investors recognize this and start chasing “risk”. It becomes a boost for the stock market, but those gains are made at the expense of “safe” asset classes which include mortgage-backed bonds. Mortgage-backed bonds are the basis for conforming and FHA mortgage rates so, as bond markets sell off, asset prices fall and rates move up.
Thankfully, rate shoppers will avoid that scenario today — at least for today. December’s Retail Sales results are a factor in the bond market’s early-day improvement. Conforming and FHA mortgage rates across the state of Georgia should be lower today.
Despite the good news, if you’re shopping for a mortgage, consider locking your rate as soon as possible. Mortgage rates are coming off a 2-week rally and look poised to reverse appear — especially with a full docket of data due for next week. As mortgage rates rise, purchasing power falls.
Today’s Jobs Report Will Keep Mortgage Rates Highly Volatile
Mortgage rates have been falling since April, shedding more than 1 percentage point since the Refinance Boom began. Today, that momentum could lose some steam.
The Bureau of Labor Statistics releases the October jobs report at 8:30 A.M. ET. With a stronger-than-expected reading, mortgage rates should rise, harming home affordability in Georgia and nationwide.
As cited by the Fed earlier this week, jobs are a key part of economic growth and growth affects mortgage rates.
Looking back at jobs, starting in January 2010, after close to 24 consecutive months of job loss, the economy added jobs for the first time since 2007. It started a small jobs winning streak. By May — boosted by the temporary census workers — monthly job growth reached as far north as 431,000 jobs.
That figure then slipped negative in June and has yet to turn-around.
This month, economists expect 61,000 jobs lost and 9.6% Unemployment Rate.
Jobs matter to the U.S. economy. Among other reasons, employed Americans spend more on everyday goods and services, and are less likely to stop payments on a mortgage. These effects spur the economy, stem foreclosures, and promote higher home values.
The reverse is also true. Fewer workers means fewer disposable dollars and, in theory, a slowing economy. Weak jobs data should spur a stock market sell-off which should, in turn, help lead to mortgage rates lower.
Strong jobs data, on the other hand, should cause mortgage rates to rise.
The stronger October’s employment figures, the higher mortgage rates should go.
Mortgage rates have been jumpy this week because of the Federal Reserve and its new support for bond markets. Today’s employment report should add to the volatility.
The Jobs Report Gives A Temporary Boost To Home Affordability
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls data from the month prior.
The release is more commonly called “the jobs report” — a major factor in mortgage rates and monthly payments.
Especially now.
With the recession officially over and growth returning to the U.S. economy, the recovery’s next frontier is jobs. As job growth increases, home affordability should take a hit. Here’s why:
- As the number of working Americans increases, so should total consumer spending
- As consumer spending increases, so should a return to risk-taking on Wall Street
- As risk-taking returns to Wall Street, bond markets should start to lose
Mortgage rates, therefore, should rise.
Furthermore, as the jobs market stabilizes and recovers, renters should be more apt to buy their first home, and homeowners should be apt to up-size. More Home Buyers in Blairsville means more competition for homes and higher home prices typically follow.
Job growth can be trickle-up for housing.
Today, however, the jobs data was not so strong. According to the government, 431,000 jobs were created in May, but of those new jobs, 95.4% represented temporary staffing for the 2010 Census. The number of private-sector jobs created fell well short of expectations and Wall Street is voting with its dollars right now. Mortgage bonds are gaining so, therefore, rates are falling.
The May 2010 jobs report may not reflect well on the economy, but home affordability in the North Georgia Mountains and around the country is improving because of it.
