The Federal Reserve restated its intention to cease buying $1.25 trillion of mortgage-backed securities in March and maintained its pledge to keep interest rates near zero for an “extended period,” opening a rift among policy makers for the first time in a year.

Kansas City Fed President Thomas Hoenig dissented, saying the time had come to change the promise to keep rates low. The economy “has continued to strengthen,” the Fed said in a statement today in Washington, “although the pace of economic recovery is likely to be moderate for a time.”

The dollar strengthened and two-year Treasury notes fell the most this year as investors bet the Fed’s decision to end purchases of mortgage-backed securities, along with a more optimistic assessment of the economy, increases the odds of an interest-rate increase by October. The Federal Open Market Committee said it “will continue to evaluate its purchases of securities in light of the evolving economic outlook” and the state of financial markets.

“They’re signaling the recovery is on the mend and they’re going to have to continue monitoring conditions,” said Paul Ballew, a former Fed economist who’s now a senior vice president at Nationwide Mutual Insurance Co. in Columbus, Ohio.

The dollar advanced 0.4 percent to $1.4022 per euro at 3:53 p.m. in New York, from $1.4072 yesterday. It touched $1.3994, the strongest level since July 15. The yield on the 2-year note rose 5 basis points to 0.90 percent.

Winding Down

Policy makers are winding down the record amounts of credit they have provided since the bankruptcy of Lehman Brothers Holdings Inc. in 2008.

The Fed also repeated that it will close four facilities supporting money markets and bond dealers in February, as well as dollar swap programs with central banks in Europe and Asia.

The central bank is “prepared to modify these plans if necessary to support financial stability and economic growth,” the statement said. The Fed also said it is winding down the Term Auction Facility and will hold a final auction on March 8.

In his dissent, Hoenig said “financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted,” according to the Fed statement.

“Clearly, the president of the Kansas City Fed is looking at a recovery that’s picking up speed and is concerned that the pivot has to happen faster than the board in Washington thinks,” Ballew said. “It’s a message being sent from someone out in a part of the country where things are clearly improving more than the central office in Washington thinks.”

Confirmation Vote

Chairman Ben S. Bernanke, who tomorrow faces a procedural vote in the Senate on his confirmation for a second term, is looking for signs that the return to economic growth is generating jobs and is accompanied by an increase in credit to people and businesses. The U.S. unemployment rate held at 10 percent in December, while consumer credit dropped a record $17.5 billion in November.

“Household spending is expanding at a moderate rate, but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit,” the Fed said in its statement.

Business spending on equipment and software “appears to be picking up, but investment in structures is still contracting,” the Fed said. Employers “remain reluctant to add to payrolls.”

Job Losses

Verizon Communications Inc., coping with subscriber losses at its fixed-line phone business, said yesterday it will cut about 13,000 jobs at the division this year. Home Depot Inc., the world’s largest home-improvement retailer, also said yesterday it will pare 1,000 U.S. jobs.

Stocks have provided no increase in consumer wealth this year. The Standard & Poor’s 500 Index is down 1.8 percent, and the Nasdaq Composite Index has lost more than 2 percent. Last year, the indexes rose 23.5 percent and 43.9 percent, respectively.

Officials kept their benchmark overnight lending rate between banks in a range of zero to 0.25 percent, where it has been for more than a year. Policy makers said that low rates are contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.”

Production in the U.S. rose for a sixth consecutive month in December, and housing markets are stabilizing. Industrial production rose 0.6 percent last month, pushing up factory capacity in use to 72 percent. That’s still below the average plant-use rate of 78.5 percent from 2000 through 2007.

Economy Expands

The economy expanded at a 4.6 percent annual rate in the final quarter of last year, according to the median estimate of economists surveyed by Bloomberg News. The government will release its advance report on gross domestic product Jan. 29.

Sales of existing homes rose 4.9 percent to 5.16 million in 2009, the first gain in four years, the National Association of Realtors said this week. Fed officials will be watching to see if the end of their mortgage bond purchase programs hinders a recovery in housing.

The average rate on a 30-year fixed mortgage fell to 4.99 percent the week of Jan. 21 from 5.06 percent the previous week, according to Freddie Mac of McLean, Virginia.

The 56-year-old Fed chairman’s first four-year term expires at the end of this month, and the Senate hasn’t yet confirmed the former Princeton University professor for a second four-year term.

Financial Crisis

Bernanke has presided over two years of economic growth that were followed by a financial crisis that produced the worst recession since the Great Depression. The economy contracted at a 5.4 percent annual rate in the fourth quarter of 2008 and at a 6.4 percent rate in the first quarter of 2009.

Employers cut 85,000 jobs in December, after revisions showed a gain of 4,000 in November, the first in almost two years.

Wal-Mart Stores Inc., the world’s largest retailer, will eliminate about 11,200 jobs at its Sam’s Club membership warehouse clubs in the U.S. as it hires an outside company to demonstrate products.

Dallas-based financial services company Comerica Inc. said Jan. 21 that it plans to cut 300 jobs, or about 3 percent of its total workforce, this year.

U.S. central bankers forecast in November a slow decline in unemployment this year with the jobless rate averaging 9.3 percent to 9.7 percent in the fourth quarter, according to their central tendency estimates.

“We’ll definitely see job growth in 2010,” New York Federal Reserve Bank President William Dudley told the Nightly Business Report on PBS Television Jan. 13. “Whether it’ll be sufficient to bring down the unemployment rate, materially, remains to be seen.”

By Inman News, Monday, January 25, 2010.

While September through November saw a rise in the rate of resale home sales that was fueled at least in part by federal tax credits to homebuyers, December saw a monthly decrease in sales, according to a report released by the National Association of Realtors.

At the same time, both prices and sales rose year-over-year in December, and total sales grew in 2009 compared to 2008.

The rate of resale home sales dropped 16.7 percent last month to a seasonally adjusted annual rate of 5.45 million units from 6.54 milllion in November, but rose 15 percent year-over-year, from 4.74 million units. Resale homes include single-family homes, townhouses, condominiums, and co-ops, the association reported.

“It’s significant that home sales remain above year-ago levels, but the market is going through a period of swings driven by the tax credit,” said Lawrence Yun, the association’s chief economist.

“By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010. However, the job market remains a concern and could dampen the housing recovery — job creation is key to a continued recovery in the second half of the year.”

Coinciding with the extension of the homebuyer tax credit to include current homeowners, the share of homes bought by first-time homebuyers fell to 43 percent, from 51 percent in November, while repeat buyers increased to 42 percent in December from 37 percent a month earlier.

The sales rate of resale homes increased 4.9 percent in 2009, to 5.16 million from 4.91 million the year before. It was the first annual sales increase since 2005, the report said.

December also saw the first year-over-year increase in median price since August 2007, with a 1.5 percent increase to $178,300, according to the report. Yun attributed the gain to an increase in the number of mid-priced to higher-priced homes on the market.

Total inventory declined 6.6 percent month-to-month and 11.1 percent year-over-year to 3.29 million resale homes, which at the current sales pace represents a 7.2-month supply compared to a 6.5-month supply in November.

The seasonally adjusted annual rate of single-family home sales fell 16.8 percent to 4.79 million, which compares with 5.76 million in November, but rose 12.7 percent from the same period last year. Sales increased 5 percent for all of 2009, to 4.56 million, while the median price was $173,200, 11.9 percent less than 2008’s figure.

Resale condominium and co-op sales dropped 15.4 percent month-to-month to a seasonally adjusted annual rate of 660,000 from 780,000. Such sales rose 34.7 percent year-over-year, however, and increased 4.8 percent for all of 2009 to 590,000 units. The median price for such homes was $176,100 for all of last year, or 16.1 percent below the 2008 level.

The Northeast saw the highest year-over-year increase in resale home sales, at 21.3 percent. Month-to-month sales fell 19.5 percent. The median price increased 3.2 percent to $241,700 from December 2008.

The South saw the next-highest increase in the same period, at 15.5 percent, while month-to-month sales dipped 16.3 percent. The median price declined 1 percent compared to December 2008.

Resale home sales in the Midwest fell the most month-to-month, down 25.8 percent, and increased the least year-over-year, up 8.5 percent. The median price of $142,200 was the lowest in the country, although still 1.8 percent above December 2008.

In the West, sales fell 4.8 percent from November but increased 15 percent from December 2008. The median price went up to $236,000, 2.7 percent higher than in December 2008.

26 January  2009

U.S. home prices fell in November, according to the S&P Case-Shiller home-price indexes, as yearly declines continued to abate.

The indexes showed prices in 10 major metropolitan areas fell 4.5% in November from a year earlier, while the index for 20 major metropolitan areas dropped 5.3% on the year.

Both indexes declined 0.2% compared with October. Adjusted for season factors, the 10-city index was flat on the month, while the 20-city composite fell 0.1%.

Separately, U.S. consumer confidence rose for the third consecutive month in January, according to a report released Tuesday.

David M. Blitzer, chairman of S&P’s index committee, noted how for the first time in at least two years, some markets posted home-price increases year-over year. Dallas, Denver, San Diego and San Francisco finally entered positive territory.

As of November, the 10-city index is down 30% from its mid-2006 peak, and the 20-city is down 29%. Nationally, home prices are at levels similar to late 2003.

Compared with a year ago, Las Vegas continued to be hit the hardest. It, along with Charlotte, Seattle and Tampa, posted new low index levels as measured for the past four years, meaning any gains they saw in recent months have been erased. Las Vegas posted a drop of 25%. Phoenix followed with a 14% decline. The best year-on-year performer was Dallas, which posted a 1.4% increase.

Phoenix also led month-to-month gainers, posting a 1.1% gain. Chicago and New York fared worst, falling 1.1% and 1% respectively.

Mortgage rates declined throughout November to hit record lows near month’s end.

The data come are the latest documenting an unsteady recovery in the U.S. housing market. This week, the Commerce Department reported that existing-home sales plunged in December after three straight months of increases lifted by a government tax credit. The previous week, the department said new home construction fell far more than expected in December, although building permits were issued at much higher-than-expected rate.

Consumer Confidence Ticks Up

The Conference Board, a private research group, said its index of consumer confidence increased to 55.9 in January from a revised 53.6 in December, which was originally reported as 52.9. The January reading was better than economists’ projection of 54.0, according to a survey conducted by Dow Jones Newswires.

The present situation index, a gauge of consumers’ assessment of current economic conditions, rose almost five points to 25.0 from a revised 20.2, first reported as 18.8.

Consumer expectations for economic activity over the next six months increased to 76.5 from a revised 75.9, first reported as 75.6.

“Consumer confidence rose for the third consecutive month, primarily the result of an improvement in present-day conditions,” said Lynn Franco, director of the Conference Board Consumer Research Center. “Consumers’ short-term outlook, while moderately more positive, does not suggest any significant pickup in activity in coming months.”

Sentiment about the current labor markets improved in January. The percentage who think jobs are “hard to get” fell to 47.4% from December’s 48.1%. And those who think jobs are “plentiful” rose to 4.3%, from 3.1%.

The employment outlook showed signs of expected stability. The percentage of consumers expecting more jobs in the months ahead fell to 15.5% from 16.4% in December, while those expecting fewer jobs fell to 18.9% from 20.6%. But those expecting the same number of jobs in the next six months rose to 65.6% from 63.0% in December.

A Look at Case-Shiller, by Metro Area (January Update)

The S&P/Case-Shiller 20-city home-price index, a closely watched gauge of U.S. home prices, was mostly flat in November from a month earlier.

The index declined 5.3% from a year earlier. For the first time in 19 months, some of the cities the 20-city index posted a year-over-year price gain. Dallas, Denver, San Diego and San Francisco are in positive territory from a year earlier.

“While these data do show that home prices are far more stable than they were a year ago, there is no clear sign of a sustained, broad-based recovery,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s.

Just five of the 20 areas saw monthly price gains in November. Phoenix posted the largest gain at 1.1%. Chicago fared the worst with a 1.1% drop.

Home prices nationwide had returned to levels similar to late 2003. By November the the 20-city was down 29.2% from its mid-2006 peak.

• See the full S&P/Case-Shiller report.

Below, see data from the 20 metro areas Case-Shiller tracks, sortable by name, level, monthly change and year-over-year change — just click the column headers to re-sort.

(About the numbers: The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.)

Home Prices, by Metro Area

Source: Standard & Poor’s and FiservData

22 January  2009

Rates on 30-year fixed-rate mortgages dipped back below 5 percent this week, as mortgage rates followed bond yields lower for the third consecutive week, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage averaged 4.99 percent with an average 0.7 point for the week ending Jan. 21, down from 5.06 percent last week and 5.12 percent a year ago.

The 15-year fixed-rate mortgage averaged 4.4 percent with an average 0.6 point, down from 4.45 percent last week and 4.8 percent a year ago.

Rates surveyed by Freddie Mac are for prime borrowers taking out loans with 20 percent downpayments. Borrowers taking out loans too large or risky for purchase or guarantee by Freddie Mac can expect to pay more.

Rates on 30-year fixed-rate mortgages hit a record low of 4.71 percent in early December, in records dating back to 1971, as the Federal Reserve continued buying up mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

Many observers expect interest rates will head back up if the Federal Reserve follows through on its plan to wind down its $1.25 trillion purchase program by the end of March.

In a Jan. 12 forecast, the Mortgage Bankers Association projected rates on 30-year fixed-rate mortgages will average 5.4 percent during the first three months of 2010, rising to 6.1 percent during the final quarter of the year. The MBA projects rates will continue to steadily increase, averaging 6.2 percent in 2011 and 6.5 percent in 2012.

One reason mortgage rates might be easing is if investors, fearing another stock market downturn, are moving money into bonds and mortgage-backed securities. Increased demand for those investments would drive their prices up, while lowering their yields.

Rates on adjustable-rate mortgage (ARM) loans are also easing, as investors aren’t expecting the Federal Reserve to boost the federal funds rate at its upcoming Jan. 26-27 meeting, said Freddie Mac chief economist Frank Nothaft.

The 5-year Treasury-indexed hybrid ARM averaged 4.27 percent this week, with an average 0.6 point, down from 4.32 percent last week and 5.24 percent a year ago, Freddie Mac said.

The 1-year Treasury-indexed ARM averaged 4.32 percent this week with an average 0.6 point, down from 4.39 percent last week and 4.92 percent a year ago.

Inman News 

22 January  2009

Home sales increased and prices decreased year-over-year in November, according to a monthly report released by real estate data and analysis company Radar Logic Inc. Thursday.

Home sales across 25 metro areas nationwide increased 1.5 percent month-to-month and 46.7 percent year-over-year in November, as indicated by transactions completed through the company’s Residential Property Index (RPX). The index measures changes in the price per square foot of homes.

Transactions increased in nine of the 11 months ending in November 2009, including those from July to October, when sales typically decline.

“We believe that the housing market is poised for significant recovery,” said Michael Feder, president and CEO of Radar Logic.

“Affordability measures are at their highest levels in years and home sales are moving toward normal levels. Nationwide, foreclosure sales have declined from 29 percent of total sales in November 2008 to 23 percent of sales in November 2009.”

Prices decreased 4.2 percent across all 25 metropolitan areas. Eight of those areas experienced year-over-year price increases, the highest number since July 2007. Half of those areas were in California. San Diego, Calif., led the way with a 6.8 percent price increase, to $211.32 per square foot, while San Jose saw a 5.5 percent increase, to $338.37 per square foot.

Los Angeles and San Francisco, two of the country’s five largest metro areas, experienced fewer motivated (i.e., distressed) sales: 27.2 percent and 22.3 percent of sales, respectively, from 44 percent and 37.6 percent in November 2008.

January 20, 2010R

Recent headlines pointing to the detriments of reverse mortgages aren’t getting the story straight. One of the nation’s leading reverse mortgage lenders, Generation Mortgage Company, wants to separate fact from fiction.

“Because so many Americans over the age of 62 are facing significant financial stress due to dropping retirement and savings account balances, as well as higher healthcare costs, many groups are targeting seniors under the guise of helping them,” said Scott Peters, CEO and President of Generation Mortgage. “HECM reverse mortgages are Federal Housing Administration-insured products and are heavily scrutinized by regulators and legislators looking to protect seniors’ best interests. As a result, more than 600,000 American seniors have obtained reverse mortgages that have enriched their lives by allowing them to stay in their homes and pay off their bills.”

The top 9 most common reverse mortgage myths include:

Myth: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. As long as the house is maintained and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth: My children will be responsible for the repayment of the loan.
Fact: False. Reverse mortgages are non-recourse loans. That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house. If the homeowner’s heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.

Myth: I can’t get a reverse mortgage if I have an existing mortgage.
Fact: False. With enough equity, you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason most seniors take out a reverse mortgage.

Myth: Only low-income seniors get reverse mortgages.
Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

Myth: If I outlive my life expectancy, the lender will evict me.
Fact: False. Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines.

Myth: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Fact: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth: There are restrictions on how reverse mortgage proceeds may be used.
Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

Myth: Reverse mortgage lenders take advantage of seniors.
Fact: False. Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations’ strict Code of Ethics and Standards for Trust.

Myth: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.
Fact: Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays you. Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.

January 20, 2010

The weekly average rate borrowers were quoted on Zillow Mortgage Marketplace for 30-year fixed mortgages decreased five basis points last week to 4.94%, down from 4.99% the week prior, according to the Zillow Mortgage Rate Monitor, compiled by leading real estate website Zillow.com. Rates for 15-year fixed mortgages fell eight basis points to 4.33% from 4.41%, and 5-1 adjustable rate mortgages fell thirteen basis points to 3.93% from 4.06% the week prior.

The volume of mortgage requests did not change significantly from the prior week. Of last week’s requests, 32% were for refinance loans, 66% were for purchase loans and 2% were for home equity loans. The prior week, 31% of requests were for refinance loans, 66% were for purchase loans and 2% were for home equity loans.

Rates for 30-year fixed purchase mortgages had fallen further, with the average rate on Zillow Mortgage Marketplace at 4.86%. Thirty-year fixed mortgage rates varied by state. Texas mortgage rates and Virginia mortgage rates decreased the most, from 4.93% to 4.82% in Texas and from 5.06% to 4.95% in Virginia. Illinois mortgage rates (5.07%), Arizona mortgage rates (5.05%) and New York mortgage rates (5.05%) were the highest in the country, while Texas mortgage rates (4.82%) and Utah mortgage rates (4.88%) were the lowest. California mortgage rates were the most requested among all states.

The Wall Street Journal

Mortgage rates declined this week after a month of gains, with the average rate on 30-year fixed-rate mortgages retreating closer to 5%, according to Freddie Mac’s weekly survey of mortgage rates.

Current rates on fixed-rate mortgages are just about at their average levels for 2009, while adjustable-rate loans are considerably lower. Freddie Mac Chief Economist Frank Nothaft said he expects that to change. “As the economy strengthens further and the Federal Reserve decides to raise its overnight target rate, ARM rates will follow suit because they are typically tied to shorter-term interest rates,” he noted.

The housing market recovery has been shaky. After plummeting during the recession, home prices began to rise in the summer as a tax credit for first-time home buyers spurred sales. Sales of newly built homes have been soft recently while existing-home sales have been strong. But earlier this week, the National Association of Realtors’ index for November pending sales of previously owned homes plunged, largely reflecting a surge of home buyers in October racing to beat the expected deadline for the tax credit.

The 30-year fixed-rate mortgage averaged 5.09% for the week ended Thursday, down from last week’s 5.14% average but up from 5.01% a year ago. Rates on 15-year fixed-rate mortgages were 4.5%, down from 4.54% and 4.62%, respectively.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.44%, flat with the previous week and down from 5.49% a year earlier. One-year Treasury-indexed ARMs were 4.31%, down from 4.33% and 4.95%, respectively.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point and the adjustable-rate mortgages required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.