How much house will $200K get you? Depends on zip code

 

Home values continue modest gains

Home values in many areas of the United States have just about recovered back to pre-recession levels by now, or getting closer to it. If you live in the Denver metro area, values have even exceeded all-time highs to reach new records.

Now that values have returned to near peak levels, the timing is great to cash in on your home's value by refinancing with a better loan-to-value ratio. As the economy gradually strengthens, U.S. consumer outlook is also increasing, meaning there's no guarantee how long interest rates will remain low. In addition, gas prices are also dropping, as they typically do in the fall, which is expected to further boost the economy.

Looking at the bigger picture, the rise in home values is still growing, but U.S. home prices moved upward just 0.8 percent in the second quarter of 2014. Looking back at growth from 2013 to 2014, though, values in Case-Shiller's 20-city composite jumped 8.1 percent.

For comparison's sake, compare your neighborhood's median home value with the highest county in each state on this map compiled by Business Insider. It's a good reminder that value is nearly all relative to location and is never promised to stay the same next year.

Stimulus program slashed: What's next?

 

Photo credit: Jin Lee/Bloomberg/Getty Images

The Federal Reserve committee held a two-day meeting this week, voting as expected to cut their bond-buying program down by another $10 billion per month. Over the past year, the Fed has voted consistently to reduce its bond-buying program, called "quantitative easing," by $10 billion each month as the economy gradually improves and the stimulus program has become less necessary.

By next month, Fed officials are expected to vote to end the program completely, dropping purchases down to $5 billion for the last month. Despite predictions for a big economic rebound year, growth has remained slow and steady, lowering pressure on the Fed to raise interest rates soon.

The key words to watch for hints as to when we can expect rate changes: a "considerable time." This is the phrase Fed officials are sticking to in regard to determining when the time is right to finally raise central interest rates. They maintained the verbiage in their statements this week to keep rates low for a "considerable time" after the QE program comes to an end, indicating the economy is not strong enough to withstand rate changes yet.

What does this mean for mortgage rates? Mortgage rates rose modestly this week to about 4.23 percent on average for a 30-year fixed loan, up about 0.1 percent from a week ago but still significantly lower than where they stood a year ago. For the considerable amount of time to be up, though, depends on how much the meters move on unemployment, household wealth gains, consumer purchasing power, and a variety of other economic factors before major adjustments are made.

U.S. stocks fall, interest rates flat

Graph courtesy of www.FHFA.gov

After a week of political unrest in which President Obama announced plans for the U.S. to take renewed military action against terrorist groups in Syria and Iraq, the stock market has remained relatively calm, with little reactionary movement. After five straight weeks of overall gains, the Dow Jones industrial average ended the week with a modest drop.

The stock market's dip is likely more linked to speculation on next week's Fed meeting rather than jitters over potential conflict in the Middle East, while oil prices dropped. Perhaps it is too soon to tell what kind of toll increased military conflict would inflict economically.

Meanwhile, interest rates continue to cruise at low levels into the fall, staying fairly flat at roughly 4.12 percent on average. This low interest-rate trend is defying earlier 2014 predictions that a resurgent economy would raise interest rates into the 5 percent range.

Any updates at next week's Fed meeting will be telling for the mortgage industry's immediate future. The Fed's bond-buying program is scheduled to end in October, but officials say that rates will remain steady for a "considerable time," a definition certainly open to interpretation.

Two steps forward, one step back

Graphic courtesy of CNN.com

 

Job gains at slower pace in August 

Employment reports for the last month, released today, were somewhat less than stellar. A total of 142,000 new jobs were added to U.S. payrolls in August, which is below the average of roughly 207,000 new jobs per month for the past year. Still moving in the right direction, but not robust enough to keep up with population growth - or to convince the Fed to raise rates yet.

The tug and pull managed to push stocks higher on Friday, however, as stock brokers interpreted the weak jobs report to mean that interest rates will continue dwelling at historic low ranges. Lower interest rates typically foster more economic growth, in terms of stimulating new business and activity in the mortgage industry.

Federal Reserve chief Janet Yellen has expressed concerns that although unemployment rates have been slowly dropping or remaining steady - currently at 6.1 percent - the truth is that many people have simply stopped looking for jobs. Another problem is that wage growth is still failing to keep up with the rising costs of housing and other goods. There may be more jobs in the market, but a key issue remains a lack of well-paying jobs, or upward mobility within companies.

As for economic benchmarks the Federal Reserve seeks before big changes are made, check out this dashboard of current market conditions, recession low points and future goals. A longer term analysis of market data helps put into perspective how far we've come, but also how far is left to go before the economy is on truly stable ground.