A Simple Explanation Of The Federal Reserve Statement (September 21, 2010 Edition)

Today, in its 7th meeting of the year, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Funds Rate remains at a historical low, within a Fed's target range of 0.000-0.250 percent.

In its press release, the FOMC said that the pace of economic recovery "has slowed" in recent months. Household spending is increasing but remains restrained by high levels of unemployment, falling home values, and restrictive credit.

For the second straight month, the Federal Reserve showed less economic optimism as compared to the prior year's worth of FOMC statements dating back to June 2009. However, the Fed still expects growth to be "modest in the near-term".

This outlook is consistent with recent research showing that the recession is over, and that growth has resumed -- albeit at a slower pace than what was originally expected.

The Fed also highlighted strengths in the economy:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent "for an extended period".

There were no surprises in the Fed’s statement so, as a result, the mortgage market's reaction to the release has been neutral. Mortgage rates in Arizona are thus far unchanged this afternoon.

The FOMC’s next meeting is a 2-day affair scheduled for November 2-3, 2010.

The Federal Reserve Meets Today. Should You Lock Your Rate Before It Adjourns?

The Federal Open Market Committee adjourns from its 6th scheduled meeting of the year today, and 7th overall.

Upon adjournment, Federal Reserve Chairman Ben Bernanke will release a formal statement to the market. In it, the Fed is expected to announce "no change" to the Fed Funds Rate.

Currently, the Fed Funds Rate is within a target range of 0.000-0.250 percent.  It's been at this same level since December 2008.

Note that the Feds Funds Rate is not "a mortgage rate" -- nor is it a a consumer rate of any kind. The Fed Funds Rate is a rate that defines the cost of an overnight loan between banks. And, although the Fed Funds Rate has little direct consequence to everyday Phoenix homeowners, it is the basis for Prime Rate, the interest rate on which most consumer cards are based, plus many business loans, too.

Therefore, because the Fed Funds Rate won't change today, neither will credit card rates.  Mortgage rates, however, are a different story.  Mortgage rates should change today -- regardless of what the Fed does.

It's more about what the Fed says.

In its statement, the Federal Reserve will highlight strengths and weaknesses in the economy, and threats to growth over the next few quarters. Depending on how Wall Street interprets these remarks, mortgage rates may rise or fall.

If the Fed's comments signal better-than-expected growth, bond markets should lose and mortgage rates should rise. Conversely, if the Fed's comments signal worse-than-expected growth, mortgage rates should fall.

If you're actively shopping for a mortgage, it may be prudent to lock your rate ahead of the Fed's announcement today. The Fed adjourns at 2:15 PM ET.  Call your loan officer to lock your rate.

The Fed meets 8 times annually.

What's Ahead For Mortgage Rates This Week : September 20, 2010

Mortgage markets were highly volatile, yet relatively unchanged last week in back-and-forth trading on Wall Street. Global investors are grappling with the state of U.S. economy and unable to discern whether it's growing, or slowing.

As an real-world illustration, the government's August Retail Sales report showed strong growth nationwide. However, in looking at a subset of that same data that accounted for rising gas prices, and excluded automotive-related sales, the results were far more tame.

In other words, despite the winning headlines, there was no clear conclusion in August's Retail Sales.

As another example, consumer confidence dropped to its lowest level since August 2009, it was reported last week. Now, on most days, this statistic would lead mortgage rates lower, but the figures happened to be offset by improving employment report that suggests a looming jobs recovery.

Again, markets got confused and without clear direction, mortgage rates have been dancing.

Last week, conforming rates carved out a range close to 0.375 percent, making it difficult for Arizona rate shoppers to zero-in on pricing. 30-year fixed rates worsened, 15-year fixed held steady, and ARMs improved overall.

This week, expect rates to be equally jumpy.  There's a lot of housing data due for release and the Federal Open Market Committee is meeting.

• Monday : Homebuilder Confidence Survey
• Tuesday : Housing Starts, Building Permits, FOMC Meeting
• Wednesday : FHFA Home Price Index
• Thursday : Existing Home Sales
• Friday : New Home Sales

That's one housing-related release per day, and a Federal Reserve meeting to boot. Today's low rates could be vanished by Friday. 

Therefore, if you haven't already, it may be time to call your loan officer for a refinance. Rates could certainly fall further, but they're looking more likely to rise.

Rent A Home Or Buy A Home : The Case For Both Sides

Is it better to rent a Scottsdale home, or to buy one? The answer may not be as clear-cut as you think. In this balanced, 3-minute joint interview from NBC's The Today Show, you'll hear the case for both sides.

From the pro-renting part of the talk, there's valid points about the economic impact of low credit scores and/or no cash for downpayment, and the ongoing, annual cost of home maintenance -- estimated at 2% of a home's value.  Plus, renters have the ability to "follow a job" to a new town or region whereas a homeowner may be restricted, somewhat.

From the pro-purchase part, however, there's excellent points that were made, too:

• Mortgage rates are low and each 1% drop to rates equates to a 9% drop to home price
• Buyers can zero in on a particular area with particular schools or walkability, for example, better than renters
• A home can a piggybank over the long-term; a place for "forced savings" for families that want it

The segment then closes with 5 of the best cities in which to rent, and 5 of the best cities in which to buy.

Whether buying or renting, don't try to go at it alone. There's lot of resources online, and an email to a local real estate or mortgage pro can set you in the right direction.

Home Defaults Dropped For The 7th Month In A Row In August

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings climbed 4 percent in August from the month prior. A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

Despite the number of filings surpassing 300,000 for the 18th straight month, RealtyTrac's report shows some bright spots for housing.

1. The number of default notices served per month fell for the 7th time this year
2. Foreclosure activity in Nevada, the nation's leading foreclosure state, is down 25% from last August
3. Foreclosure activity has not materially increased since early-2009, pointing to a stabilization

In addition, each of the 10 leading metro areas for foreclosures posted year-over-year declines for the second month in a row.

But, perhaps, most important, is that mortgage lenders and servicers appear to be managing their REO more effectively, making properties available for sale at a measured pace as opposed to flooding markets with new homes.  As noted by RealtyTrac, the probable reason is "to prevent further erosion of home prices".

For home sellers, it's a welcome development.

Foreclosures have had a hand in falling home values in Arizona and across the country. And, although it's self-serving for banks to meter the release of homes under ownership, everyday homeowners benefit, too.  Fewer homes on the market helps to provide a floor for Phoenix housing values.

If you have an interest in buying foreclosed homes, be sure to talk with a real estate agent first. The process of buying a home from a bank is different from buying from "a person". Having the help of a professional should work to your benefit.

Home Affordability Gets A Boost From Weak Back-to-School Retail Receipts

The recent rise in mortgage rates was slowed this week after the government released its Retail Sales report for August.

Prior to Tuesday, mortgage rates had been spiking across Arizona on the resurgent hope for U.S. economic recovery. The sentiment shift was rooted in reports including the Pending Home Sales Index and Initial Jobless Claims, both of which showed surprising strength last week.

August's Retail Sales, though, after removing motor vehicles, auto parts and gasoline sales, failed to maintain the momentum. Its figures were actually in-line with expectations -- it's just that expectations weren't all that high.

Wall Street now wonders whether the weak Back-to-School shopping season will trend forward into the holidays.

The doubt spells good news for mortgage rates and home affordability.

Because Retail Sales is tied to consumer spending and consumer spending accounts for two-thirds of the economy, a weak reading tends to drag down stock markets and pump up bonds, and when bonds are in demand, mortgage rates fall.

This is exactly what happened Tuesday. The soft Retail Sales data eased stock markets down, and generated new demand for mortgage bonds. This demand caused bond prices to rise, which, in turn, caused mortgage rates to fall.

Mortgage rates did not cut new lows this week, but they're very, very close.

With mortgage rates at historical lows, it's an excellent time to look at a refinance, or gauge what financing a new home would cost. Low rates like this can't last forever.

The Math Of Choosing A Great Closing Date

Want a lower mortgage rate on your upcoming Scottsdale home buy? Think about moving up the closing date.

The reason is rooted in "rate locks", a bank's guarantee to honor a specific mortgage rate for a specific, finite period of time. Rate locks allow home buyers to reserve mortgage rates today even though their respective closings may be scheduled as far as a year into the future.

A rate lock is a contract. No matter what the "current market rate" is at the time of closing, the bank will honor the terms of the original rate lock.

It would be like making an agreement to buy Microsoft stock at a specific price 60 days from now. No matter what the price, you already know what you're paying for it.

In this sense, rate locks are predictions about the future and, meanwhile, as we all know, the future can be a challenge to forecast. Lenders know this, too, of course, so it's easy to understand why longer rate locks tend to be more expensive than shorter ones.

The longer the rate lock, the more risk to the bank.

To compensate for this "time risk", therefore, lenders typically step-up pricing for rate lock guarantees as lock period lengthen.

• 15-day rate lock : The best of all pricing
• 30-day rate lock : 1/8 percent extra cost versus the 15-day rate lock
• 45-day rate lock : 1/4 percent extra cost versus the 15-day rate lock
• 60-day rate lock : 3/8 percent extra cost versus the 15-day rate lock

One percent of "extra cost" is defined as one percent of the borrowed amount.

Now, this incremental price chart is just a rough guideline; exact spreads vary from lender-to-lender. Overall, however, it's fairly close.

That's why it's important to manage your closing date vis-a-vis your mortgage rate. Closing in 30 days versus 31 can save you an eighth-percent in closing costs. Assuming a loan size of $200,000, that's $2,500 saved.

So, when negotiating a closing date on a contract, keep in mind the math of mortgage rate locks. The shorter its length, the more money you might save.

What's Ahead For Mortgage Rates This Week : September 13, 2010

A shift in Wall Street sentiment caused mortgage markets to worsen last week. There wasn't much in the way of new data, but the numbers that did hit the street helped quell fears of a double-dip recession.

Conforming mortgage rates rose between Monday-Friday for the first time since June, and mortgage-backed securities have now lost ground on six of the last 7 trading days. 

During this period, conforming mortgage rates in Arizona have risen by as much as 0.375 percent. 

Mortgage rates for FHA-insured home loans are higher, too.

Remember, concern for the future of the U.S. economy was a major catalyst for low rates this summer. The drop in rates, which began in April on weaker-than-expected data, accelerated through July and August on record-low home sales and a stalled jobs market.

Lately, though, these concerns are turning to hope.

• The July Pending Home Sales Index showed that housing has life
• Initial jobless claims came in much lower than expected
• Retail Sales is expected to post a gain for August

The growing optimism is putting the Refi Boom at risk. To be sure, it's been a rough two weeks to shop for a mortgage. 

This week may figure no better. In addition to the Retail Sales data, there's key inflation data due both Thursday and Friday, plus, two consumer confidence reports are set for release.  If the overall numbers point to an "improving economy", mortgage rates will likely rise again this week. 

Momentum is moving in that direction, certainly.

If your looking for the right time to lock a rate, now may be the time. Mortgage rates are off their best levels of all-time, but still quite low. There's lot of savings out there for homeowners who qualify.

Your ARM Is Adjusting Lower. Is There A Downside To Letting It?

When adjustable-rate mortgages are on the verge of adjusting, a common concern among homeowners is that their mortgage rates will adjust higher.

Well, this year, because of the math of how ARMs adjust, homeowners in Phoenix and around the country are seeing that mortgage rates on ARMs can sometimes adjust lower, too.

Adjusting conforming mortgages are adjusting to as low as 3 percent.

As a quick review, here's the timeline for most conforming adjustable-rate mortgages:

1. There's a "starter period" in which the interest rate remains fixed. This can range from 1-10 years.
2. There's a rate change after the starter period. It's called the "first adjustment".
3. Subsequent, annual adjustments follow until the loan "ends". This is usually after Year 30.

The adjustments each year are based on a math formula that's included in the contract with your lender. It's surprisingly basic.  Each year, your new, adjusted mortgage rate is equal to the sum of some constant -- usually 2.25 percent -- and some variable.  The variable is most commonly equal to the 12-month LIBOR.

As a formula, the math looks like this:

(Adjusted Mortgage Rates) = (12-Month LIBOR) + (2.250 Percent)

LIBOR is an acronym standing for London Interbank Offered Rate. It's an interest rate at which banks borrow money from each other -- very similar to our Fed Funds Rate here in the United States. And also like our Fed Funds Rate, LIBOR has been low lately.

As a result, adjusting mortgage rates have been low, too.

In 2009, 5-year ARMs adjusted to 6 percent or higher. Today, ARMs are adjusting to 3.000%.

Based on the math, you may want to let your ARM adjust with the market year. Or, if you plan to keep your home long-term and have concerns about adjustments in 2011 and beyond, it may be a good time to open a new ARM.  The same forces that are driving down LIBOR and helping to keep mortgage rates low overall, too.

Consider talking to your loan officer and making a plan. With mortgage rates as low as they've been in history, most homeowners have options.  Just don't wait too long. LIBOR — and mortgage rates in general — are known to change quickly.

Which Model Is More Accurate : The Case-Shiller Index Or The Home Price Index?

The private-sector Case-Shiller Index reported home values up 5 percent nationwide in June. The government's own Home Price Index, however, reached a different conclusion.

According to the Federal Home Finance Agency, month-to-month home values fell 0.3 percent in June, and values are down by 1.7 percent from June 2009.

So, as a home buyer and/or homeowner in Scottsdale , by which valuation model should you make your bets?  Perhaps neither. 

This is because both the Case-Shiller Index and the Home Price have inherent methodology flaws, the most glaring of which is their respective sample sets. 

The Case-Shiller sample set, for example, comes from just 20 cities across the country -- and they're not even the 20 most populated cities. Together, the Case-Shiller cities represent just 9 percent of the overall U.S. population. 

That's hardly representative of the housing stock overall.

By comparison, the Home Price Index tracks home sales everywhere -- every city in every state -- but it specifically excludes certain properties.  The Home Price Index does not track sales of homes for which the financing comes from agencies other than Fannie Mae or Freddie Mac. This means that as FHA loans grow in popularity, the pool of Home Price Index-eligible homes is reducing. 

The HPI ignores homes backed by "jumbo" loans, too.

Therefore, the "right" model for home values cannot come from national data at all -- it can only come locally. Neither Case-Shiller nor the government has the tools to get as granular as a neighborhood. A real estate agent in the area does, however.

The best way to get a pulse for what's happening in markets right now is to talk to somebody with good data.

Home Sales Are Back On The Rise After A 2-Month Pullback

Just one week after reports of Existing Home Sales and New Home Sales plunging, the housing market is signaling that auturm may fare better than did summer.

The number of homes under contract to sell rose 5 percent in July.

The data comes from the July Pending Home Sales Index, as published by the National Association of Realtors®. By definition, a "pending home sales" is a home that is sold, but not yet closed.

Historically, 80% of such homes close within 60 days which makes the Pending Home Sales Index an excellent, forward-looking indicator for the real estate market.

Indeed, the nationwide drop in home sales this summer was foreshadowed by the Pending Home Sales report.  The index dropped 30 percent in May. Then, two months later in July, it was shown that Existing Home Sales volume dropped 29 percent.

That's a strong correlation.

Now, to be fair, the July Pending Home Sales Index is still relatively low; the second-lowest on record and well below last year's numbers. But, the tick higher last month shows how housing may be stronger than than what the headlines report.

It appears that buyers in Scottsdale took advantage of rising inventory, cheap financing, and stagnant prices, and pushed the market forward. We should expect similarly promising numbers when September's Existing Home Sales data is released.

What's Ahead For Mortgage Rates This Week : September 7, 2010

Last week was a roller-coaster ride in the conforming mortgage market.  After opening the week by making new, all-time lows, markets reversed sharply on better-than-expected data in manufacturing and housing, and data from overseas.

Rates rose through Wednesday and Thursday, then Friday's jobs report sent rates jumping.

Last week marked the first time that mortgage rates worsened 3 days in a row since late-April.

The combination of the jobs report not posting as poorly as predicted, and light volume because of Labor Day, pushed rates higher by as much as a quarter-percent in some markets.

On the week, conforming mortgage rates in Arizona were unchanged but, depending on when you locked, there was great disparity.  Tuesday's rates were much better than Friday's.

Meanwhile, this week, with little data due for release, mortgage rates should remain unpredictable, moving as a result of momentum and outside influence. It makes for dangerous times for rate shoppers.  Mortgage rates may fall, but, then again, they might rise, too.

Keep in mind that markets are in the midst of a 19-week rally and rates can't fall forever. Mortgage bonds are likely overbought so when the selling begins, pricing should worsen quickly.  This will cause mortgage rates to spike.

Therefore, if you've been shopping for a mortgage or are just wondering if the time is right to refinance, call your loan officer and work the numbers together. Refinancing won't make sense for everyone, but it may make sense for you.

Mortgage rates are still exceptionally low.

 

August 2010 Jobs Report Pushes Mortgage Rates Higher

On the first Friday of each month, the Bureau of Labor Statistics releases Non-Farm Payrolls data for the month prior. 

The data is more commonly called "the jobs report" and it's a major factor in setting mortgage rates for residents of Arizona and homeowners everywhere. Especially today, considering the economy.

This is because, although it's believed that the recession of 2009 is over, there's emerging talk of new recession starting.

Support for the argument is mixed:

1. Job growth has been slow, but planned layoffs touch a 10-year low
2. Consumer confidence is down, but beating expectations
3. Consumer spending is weak, but not declining

In other words, the economy could go in either direction in the latter half of 2010 and the jobs market may be the key. More working Americans means more paychecks earned, more taxes paid, and more money spent; plus, the confidence to purchase a "big ticket" items such as a home.

Jobs growth can provide tremendous support for housing, too.

Today, though, jobs growth was "fair". According to the government, 54,000 jobs were lost in August, but that reflects the departure of 114,000 Census workers.  The private sector (i.e. non-government jobs), by contrast, added 67,000. 

In addition, net new jobs was revised higher for June and July by a total of 123,000.  That's a good-sized number, too.

Right now, Wall Street is reacting with enthusiasm, bidding up stocks at the expense of bonds -- including mortgage-backed bonds.  This is causing mortgage rates to rise.  Rates should be higher by about 1/8 percent this morning.

August's Fed Minutes Lead Mortgage Rates Higher

Home affordability took a slight hit this week after the Federal Reserve's release of its August 10 meeting minutes.

The "Fed Minutes" is a lengthy, detailed recap of a Federal Open Market Committee meeting, not unlike the minutes published after a corporate conference, or condo association gathering. The Federal Reserve publishes its meeting minutes 3 weeks after a FOMC get-together.

The minutes are lengthy, too.

At 6,181 words, August's Fed Minutes is thick with data about the economy, its current threats, and its deeper strengths. The minutes also recount the conversations that, ultimately, shape our nation's monetary policy.

It's for this reason that mortgage rates are rising. Wall Street didn't see much from the Fed that warranted otherwise.

Among the Fed's observations from its minutes:

• On the economy : The recession was deeper than previously believed
• On jobs : Private employment is expanding slowly
• On housing : The market was "quite soft" in June

Now, none of this was considered "news", per se. If anything, investors were expecting for harsher words from the Fed; a bleaker outlook for the economy. And, because they didn't get it, monies moved to stocks and mortgage bonds lost.

That caused mortgage rates to rise.

The Fed meets 8 times annually. Its next meeting is scheduled for September 21, 2010.  Until then, mortgage rates should remain low and home affordability should remain high. There will be ups-and-downs from day-to-day, but overall, the market is favorable.

Case-Shiller Posts 16th Straight Month Of Home Price Improvement

According to the Standard & Poors Case-Shiller Index, home values rose 5 percent in June versus the month prior, and 4 percent from a year earlier.  It's the 16th consecutive month in which Case-Shiller reported an increase in home values and the third straight month of outstanding results.

That said, homeowners and home buyers in Phoenix would do well to temper Case-Shiller enthusiasm. The June figures are issued on 60-day delay and, over the last 60 days, housing data has been lackluster at best.

• Existing Home Sales are down 27 percent
• New Home Sales are down 12 percent
• Homebuilder confidence is down

Stories like these highlight a key weakness of the Case-Shiller Index -- it's out of date as soon as it's published. Because of this, the Case-Shiller Index relevance to everyday Americans is muted. People don't buy homes in the "60 days ago" real estate market, after all.

June is ancient real estate history.

However, the Case-Shiller Index does have its place. As the most widely-followed, private-sector housing tracker, the index is used to help make policy decisions and to shape Wall Street's expectations of the economy. This means that a strong Case-Shiller reading can cause mortgage rates to rise, and a weak Case-Shiller reading can cause rates to fall.

Tuesday, mortgage rates fell.

Mortgage Rates May Be Low, But They're Tough To Pin Down -- Especially This Week

Mortgage rates are low right now but pinning them down this week could be a challenge. As Labor Day Weekend nears and Wall Streeters take their head-start on the holiday, trading volume will fall, which will cause mortgage rates in Arizona to get jumpy.

As mortgage rates change, so does the long-term cost of owning a home. Every 1/8 percent adjustment changes a household budget.

Meanwhile, the relationship between "vacation days" and mortgage rate volatility is an interesting one; based more in scarcity than market fundamentals.

Rates tend to get volatile near holidays because of two inter-related facts:

1. Conforming mortgage rates are based on the price of mortgage-backed bonds
2. Mortgage-backed bonds can't trade without a buyer and a seller at a specific price

So, as the week progresses and more traders leave for their respective "extended" 3-day weekends, there's fewer buyers and sellers left on Wall Street to connect for a trade.  As a result, mortgage bond prices move across larger gaps than on a "normal" day which, in turn, translates into faster, larger changes in rates.

This phenomenon can be exaggerated during periods of economic uncertainty -- like what we're in now -- and, furthermore, there's a bevy of important data set for release this week including the FOMC Minutes, inflation data, and August jobs figures.

In other words, rates would have been volatile without the vacation week. The presence of Labor Day just piles on.

Mortgage rates may rise this week, or they may fall.  Either way, if you have a chance to lock something favorable and within your budget, consider doing it.  Rates are at all-time lows and likely won't last.

What's Ahead For Mortgage Rates This Week : August 30, 2010

Mortgage markets improved last week despite a major mortgage bond sell-off Friday afternoon. Prior to the jump, conforming mortgage rates had cut new, all-time lows by Thursday, only to lose up to 0.250 percent on the last day of the week.

Meanwhile, the same type of news that drove rates lower Monday through Thursday also contributed to rates rising Friday -- revised projections for the U.S. economy.

Early in the week, "bad" news piled on which, in turn, lowered expectations for the economy and pushed mortgage rates down:

• Existing Home Sales dropped 27% from June
• Single-Family New Home Sales dropped 12% from June
• Purchases of "big ticket" items plunged

Then, on Friday, two events revised the market's expectations back higher:

• Q2 GDP was revised lower, but not as low as had been expected
• Fed Chairman Ben Bernanke said the economy will keep expanding through the end of the year and into 2011

When Chairman Bernanke talks, markets listen. His comments about the U.S. economy helped fuel that late-Friday surge in mortgage rates last week.

This week, the momentum could continue -- depending on the data. 

There's a lot for markets to digest this week including key inflation figures from the government; home value data from Case-Shiller; Fed Minutes from the Federal Reserve; and, the always-important jobs report due Friday.

Since April, mortgage rates have been on a downward trajectory and that may continue this week.  Or, it may not. If you own a home and haven't talked to your loan officer about a refinance, now is as good a time as any -- rates are at historic lows and could rebound at any time.

Last June, mortgage rates rose 1.125% in 10 days. Under the right circumstances, it could happen again.

Home Affordability Rankings For 225 Metropolitan Statistical Areas

With home prices holding firm and mortgage rates still dropping, home affordability is reaching new heights.

According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between April-June 2010 were affordable to families earning the national median income.

It's a slightly higher reading as compared to last quarter, and the second highest reading in the survey's history.

As with all aspects of real estate, however, home affordability varies by locale. 

For example, 97.2% of homes sold in Syracuse were affordable for families making the area's median income, earning the New York city its first "Most Affordable Major City" designation.  Indianapolis was the first quarter winner.

On the opposite end of the spectrum, the "Least Affordable Major City" title went to the New York-White Plains, NY-Wayne, NJ area for the 9th consecutive quarter.  Just 19.9% of homes are affordable to families earning the local median income, down 1 percent from last quarter.

The rankings for all 225 metro areas are viewable on the NAHB website but regardless of where you live, buying a home is as affordable as it's ever been in history. Furthermore, because home values are in recovery and mortgage rates may rise, the market is ripe for home buyers.

All things equal, buying a home may never be this inexpensive again. If you were planning to purchase later this year, you may want to move up your time frame.

New Home Sales Drop In July -- Just Like Existing Home Sales

One day after the National Association of Realtors released the softest Existing Home Sales report since 1995, the U.S. Census Bureau released a similarly-weak New Home Sales report.

Americans bought just 276,000 newly-built homes in July. That marks the fewest units sold since the government started keeping records in 1963.

In addition, although new home inventory actually dropped 2,000 units in July, the slowing sales pace still managed to push the national supply higher by 1.1 months.  At July's rate of sales, the nation's new home inventory would be exhausted in just about 9 months.

None of this news should surprise you, though. It's all been foreshadowed for weeks.

First, Single-Family Housing Starts have dropped in every month since April.  A "housing start" is a when a home starts construction and, because fewer homes are under construction, we should expect fewer homes to be sold.

Second, Building Permits are down.  The number of new permits peaked in March and have fallen 23 percent since.

And, lastly, home builder confidence ranks at its lowest levels since early-2009. A contributing factor in that pessimism is dwindling buyer foot traffic.

Regardless, there's two sides to the story. Although the New Home Sales data looks bad for builders, it can be terrific  for you. This is because new homes are more likely to be discounted when the sales cycle favors buyers.

Coupled with ultra-low mortgage rates, the cost of buying a newly-built home in Phoenix may have just become cheaper.

Existing Home Sales Plummet In July; Home Buyers Gain Leverage

The number of home resales plunged by 1.4 million units in July, according to the National Association of Realtors®' Existing Home Sales report.

It's a drop of 27 percent from June; single-family home resales are at the report's lowest levels since May 1999.

Furthermore, because of the sharp drop in sales volume, home inventories are spiking.

Homes for sale nationwide fell just short of 4 million units in July and, at the current sales paces, it would take 12.5 months for the existing inventory to be absorbed.

Home supply was just 8.9 months in June.

For home sellers in Phoenix , the Existing Home Sales report is a bit of bad news.  Fewer sales and larger inventories put negotiation leverage in the hands of the buyers which, in turn, creates downward pressure on home prices.  It may also increase time-on-market.

For home buyers, however, the data is decidedly welcome. After a stimulus-driven spring buying season that favored sellers, the summer and early-fall market seem to favor buyers. More choices and more leverage is a positive.

It helps that home affordability is up, too. 

Although there's reports that home values are rising, their modest gains are more than countered by the ongoing rally in mortgage rates. Freddie Mac says that 30-year fixed rate mortgage rates are at their lowest levels in history and, at today's rates, every one-eighth drop in mortgage rates roughly offsets a 1.5% increase to home price.

Mortgage rates are down 0.75 percent since mid-April.