August 29, 2012
Last week in review (August 20 - 24, 2012)
The minutes from the July 31-August 1 meeting for the Federal Open Market Committee revealed that the Fed is moving closer towards some kind of Quantitative Easing (QE3) at their next meeting. Remember that rumors of QE3 can help bonds (and therefore home loan rates, which are tied to mortgage bonds). We saw evidence of that last week, as bonds and home loan rates rallied on QE3 rumors.
The Fed minutes also revealed that economic activity has decelerated in recent months, with a notable slowing in consumer spending. The minutes went on to say that the housing market remains depressed. There was some good housing news last week, as both Existing Home Sales and New Home Sales rose in July from June. While this is a step in the right direction, more improvement is needed in the housing market and our economy overall to aid our recovery.
It’s important to note that once an official announcement of QE3 is made, bonds and home loan rates could suffer as stocks would likely rally. However, the weak economic data here and the continued problems in Europe mean that investors will likely continue to see our bonds as a safe haven for their money, helping home loan rates in the process.
The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows.
Unemployment Rate Remains High
As you can see in the chart below, regional and state unemployment rates were generally little changed or slightly higher in July, though forty-four states did record unemployment rate increases. The labor market is one area the Fed will evaluate as they make their decision regarding QE3.
Table Source: Mortgage Success Source
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