Home buyers and other people in the market for a new mortgage should be thanking the Fed right now.

In its post-meeting press release last week, the Federal Open Market Commitee made a few choice statements about the economy that helped mortgage rates fall for the first time in 6 weeks.

The first Fed remark was that inflation appears to slowing and that it should be under control within 6-9 months. Comments like this are good for mortgage rates because inflation causes mortgage rates to rise.

The absence of inflation, it's worth noting, tends to help mortgage rates fall.

Then, the Fed also said that economic growth should stay steady this year because the full impact of its prior rate cuts have yet to work its way through the economy. 

This, too, is good for mortgage rates because economic growth is good for the U.S. dollar and a strong dollar tends to be good for mortgage rates.

But the Fed observation that made the biggest impact on mortgage rates was where the Fed noted how the credit markets are still under considerable stress.  This comment, coupled with a high-profile downgrade of the nation's largest banks, helped sparked a major sell-off in stocks Thursday and Friday. 

And last week -- unlike from every other sell-off in the last 5 months -- a fair chunk of the cash borne from the stock market exodus found its way into the mortgage bond market.

The greater demand for mortgage bonds led to lower mortgage rates on conforming home loans and this would have never happened if the Fed hadn't set the table for a mortgage bond market recovery.

This week, therefore, as the stock market goes, so should mortgage rates. 

If stocks are up, rates should be up.  If stocks are down, rates should be down.  This is happening because -- at least for now -- the mortgage bond market is serving as a safe haven from Corporate America.

And that's because the Federal Reserve made it that way.

(Images courtesy: Wall Street Journal, 80sTees.com)

Consumer confidence is registering all-time lows and it's no surprise why.  Americans are bombarded by bad economic news day after day.

• Oil prices reach new highs
• Stock prices reach new lows
• Lenders are getting sued

The weight of the gloom drags down the economy and the press is quick to report on all of it.

When there's good news, though, the stories get brushed aside.  And that's why a housing recovery is not getting the coverage it deserves. 

On Wednesday, we looked at charts from April showing improvement in most major real estate markets.  And we saw the same improvement looking back at March.

So now today, with the Existing Home Sales data showed improvement, we can infer that the trend of improving home prices continued through May 2008.

It reminds of Lou Brown's famous quote:

Now, we won a ball game yesterday. If we win one today, that's two in a row.  We win one tomorrow, that's called a winning streak. It has happened before.

Calling this a housing winning streak may be premature, but there's a bevy of anecodal evidence that points to one. 

For example, real estate agents in previously beat-down cities like Phoenix and San Diego are reporting an alarming rate of multiple-offer home sales. 

I can back that up for Chicago and Cincinnati based on my clients' experiences.  If a home is priced right, real estate professionals will tell you, buyers are swooping in.

Unfortunately, this sort of on-the-street reporting doesn't make its way to the papers because economists are most concerned with year-over-year growth.  As in, how does this year compare to last year? 

The press approach is well-suited for long-term trend analysis but home buyers rarely operate on long-term buying cycles.  Generally, they're looking for a home for few months and then make their purchase. 

This is short-term and is why month-over-month data may be more appropriate for the average homebuyer.  As in, how do home prices this month compare to home prices last month?

Lately, all signs point to improvement and that means that homes will likely be more expensive to buy in July than they were here in June.  The long-term charts won't make that conclusion for you but the short-term charts certainly can.

(Images courtesy: Wall Street Journal Online, TF.org)

I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available.

As a reminder:

1. The survey is for conforming loans only.
2. You're welcome to email me about your pending plans to purchase or refinance.
3. I twitter market updates a few times daily.  Follow me, if you want.

Anyway, on to the group's predictions for the next 30 days:

• 38% of participants predict rates will increase
• 8% of participants predict rates will decrease
• 54% of participants predict rates will remain unchanged

I am predicting that rates will remain unchanged over the next 30 days, but that doesn't mean you should necessarily follow my advice when choosing whether to lock a rate, or float it.  My advice may not be appropriate for your individual situation.

From the Bankrate.com survey:

"Until the Fed takes a hard-line stand against inflation, rates will continue to drift within a tight range."

I've been using Twitter to communicate the mid-day market shifts to clients.  My tweets tell them when rates are likely to change so they can be more pro-active about their finances. 

Twitter's simple to set up and it's non-intrusive.  You're welcome to follow me if you'd like the updates, too.

Look, if you want to highlight the negatives, here it is:

Since last year, home prices are down.

Duh.  But, if you want to look at the positives, take a close look at this chart.  It's doctored up a bit, but taken directly from the S&P/Case-Shiller Home Price Index report.  April is the second straight month we've seen improvement like this. 

The papers want to tell you that the housing market is dismal, but talk to any real estate agent you know and they'll tell you the same thing: The market just feels different right now.  Homes are selling and the media's got it wrong. 

There were two news pieces written on FHA home loans today. 

Separately, they're interesting but uneventful.  Together, they could be a harbinger of tougher times ahead for two groups:

1. Home buyers that use FHA financing
2. American taxpayers that fund the FHA

The first FHA story was front page in the Wall Street Journal.  It shouldn't surprise anyone that FHA loans using downpayment assistance programs default at much faster rates than non-DPA loans.

The second story wasn't so obvious.

Originally run in Bloomberg, Dawn Kopecki writes that Fannie and Freddie are cherry-picking good loans, leaving spoiled fruit for the FHA's balance sheet.

I was a source for this article, quoted about Fannie and Freddie's loan-level pricing adjustments and how it's encouraging American homebuyers with below-average borrowing profiles in weak real estate markets to shack up with the FHA.

You can guess how this story could end for the taxpayer-funded FHA.  Not only should the government group's loan portfolio deteriorate over the next few years, its guidelines will likely tighten and its fees may increase. 

We've seen this happen before.  On video.

So, consider today's FHA stories your fair warning.  If you're planning to use the FHA for your next home loan, the approval process should be much easier for you today than even just a few weeks from now.

This is because -- sooner or later -- the FHA's loan problems are going to become a mainstream political issue and that's when the hammer would fall.  For as little as the lenders like holding the bag on defaulted loans, the taxpayers like it even less.

(Image courtesy: Wall Street Journal Online)

Each morning, I'm here with new blog content for my loyal readers, but it's TypePad's blogging platform that is here for me.

I rely on TypePad for its simplicity and reliability.  I know but one other blogging company that does as much for its members.

And that's why I'm honored (and humbled) that TypePad hand-picked The Mortgage Reports as a featured weblog on its Web site today.

If you're a first-time visitor here, best thing to do is get the daily news by email.  And if you use Twitter, feel free to grab the mid-day updates, too.

Each morning, I'm here with new blog content for my loyal readers, but it's TypePad's blogging platform that is here for me.

I rely on TypePad for its simplicity and reliability.  I know but one other blogging company that does as much for its members.

And that's why I'm honored (and humbled) that TypePad hand-picked The Mortgage Reports as a featured weblog on its Web site today.

If you're a first-time visitor here, best thing to do is get the daily news by email.  And if you use Twitter, feel free to grab the mid-day updates, too.