At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009.

• Some said housing would rise
• Some said housing would fall
• Some said mortgage rates would rise
• Some said mortgage rates would fall

And nobody predicted just how big the government's stimulus package would be.

Now, on June 30, with the year officially half-over, it's as good a time as any to remember that people are much better at interpreting the past than predicting the future. Economists can make educated guesses about the future, but they're guesses nonetheless.

It's like watching the Weather Channel. A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.

So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood.

There's another 6 months until 2010 and there's no reason to expect the current volatility and uncertainty to change.

The world is unpredictable and so is the U.S. economy. Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.

After all, the weatherman's been wrong before.

If you only saw the headlines this week, you may have missed another positive sign in the housing market.

According to the Census Bureau, the supply of newly-built homes for sale fell to 10.2 months in May, its lowest level in 10 months.

Unfortunately, the New Homes Sales story wasn't positioned as a positively by the press. Instead, the most common headline on the data read "New Home Sales Dip 0.6%" with many journalists referring to the figures as "weak" or "disappointing".

Only, that's not completely true.

See, one of the nice elements of the monthly New Home Sales report is its footnote section in which the Census Bureau talks about statistical Margin of Error and that section tells us that if the Margin of Error is larger than the measurement itself, the report is useless.

And that's exactly what happened in May.

New Home Sales were measured to have fallen by 0.6 percent but that data point was dwarfed by its 17.8 percent Margin of Error, The "headline data", in other words, was just a guess.

The press reported it anyway.

Nonetheless, as it relates to the economy, falling home inventories are a positive. Having 10-plus months of homes on the market is still high historically, but a definite improvement over what we saw earlier this year.

So long as low mortgage rates and aggressive pricing persists from builders, we expect even less supply in the months ahead.

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.

The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the U.S. economy is not slowing with the same speed versus just two months ago and that financial markets, in general, are improving.

These are two signs that the country may be emerging from recession, if it hasn't already.

The news isn't all good, however. The Fed made a point to highlight the potential hazards the nations faces on its path to economic recovery:

• The prices of energy and commodities have been rising
  
• Job losses are still mounting nationally
  
• Businesses are reducing capital expenditures
  

Also in its statement, the Fed acknowledged a plan to hold the Fed Funds Rate near zero percent "for an extended period" and a re-commitment to the U.S. Treasury and Mortgage Bond markets.

Market reaction to the Fed's press release has been muted.

With no new stimulus and no new "tools" to spur the economy unveiled, Wall Street is business as usual. Mortgage rates are unchanged post-FOMC today.

The FOMC's next scheduled meeting is August 11-12, 2009.

The housing market got another dose of good news yesterday.

According to the National Association of REALTORS, the number of homes sold in May increased for the third straight month and the national housing supply fell by 5 months.

Furthermore, first-time home buyers are accounting for nearly one-third of the market activity.

But, before we declare a bottom in housing, it's important that we remember the First Rule of Real Estate:

All Real Estate Is Local

National housing statistics like Existing Home Sales are painted with a very broad brush. They lump disparate locales such as San Francisco and Seattle into one sample set and don't account for regional differences, let alone neighborhood ones.

Furthermore, getting down to a city-by-city, or even street-by-street basis, we can always find homes that are selling quickly and home that are languishing. Real estate is highly local and subject to countless influences.

That said, the national data isn't completely useless. From the patterns, we can infer that low mortgage rates, ample home supply and available tax credits are providing a quantifiable boost to the broader real estate market.

And based on recent pending sales data, we can expect June and July's Existing Home Sales figures to be similarly strong to May.

Therefore, if you're in the market for a new home right now -- or plan to be soon -- be conscious of home inventory levels in your target neighborhoods. Fewer homes on the market usually means less ability for buyers to negotiate and that leads to higher, or at least firmer, sales prices.

Plus, the NAR is reporting buyer activity up 10 percent from last year.

The housing market may not be fully recovered in every housing market just yet, but in studying the data, a lot of the pieces appear to be falling into place.

The Federal Reserve begins its scheduled two-day meeting this morning.

It's one of 8 scheduled meetings for the Federal Open Market Committee this year.

When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.

The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to "near-zero" percent in an attempt to stimulate growth.

But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.

Now, if you'll remember, the Fed made that pledge in two parts:

• Part 1 came in November 2008 for $500 billion
  
• Part 2 came in March 2008 for $750 billion
  

After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.

The Fed isn't expected to increase its mortgage market commitment this week, but because mortgage rates are above the government's "target zone", it's possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.

A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.

It's for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person's pending home loan.

Mortgage rates are suffering through another volatile week, causing problems for home buyers.

After falling Monday and Tuesday, mortgage rates surged Wednesday and Thursday. The momentum higher appears to be carrying into the weekend, too.

There are several data-related reasons for the mortgage market's spastic activity this week:

1. Unemployment claims fell
2. Leading Economic Indicators rose
3. Inflation readings are tame

But while each of the data points above fueled mortgage rate volatility, it's not the data that's making markets move the most. It's the psychological impact of the data.

See, data tells us about the past. It measures and reports on what's already happened. Unfortunately for rate shoppers, mortgage markets are not made on data from the past -- they're made on the expectations of what will happen next.

Mortgage rates reflect Wall Street's opinion of the future.

In reading the papers and watching the news, you'll notice ongoing debate about the U.S. economy. It's unclear whether the recession is worsening or improving.

On one hand, data is weak and sub-optimal. On the other hand, the data is not nearly as weak as it was 6 months ago and, in some cases, it's strong. To some, this is a signal that a recovery is already underway.

Or, it may just be a blip.

We can't be certain in which direction the economy is headed and the same can be said for mortgage rates. Because sentiment is changing so often, though, it forces us to be on our toes.

The last few months have been marked by large mortgage rate swings across small windows of time. A rate that's offered in the morning, for example, is rarely available in the afternoon. Therefore, do your rate shopping in a compressed period of time and be ready to lock at a moment's notice.

When markets move, they tend to move quickly.

Moving to a new metropolitan area requires adjustments. There's new streets to learn, new weather patterns to get used to, and new social cultures to assimilate.

There's also new costs.

Just like home values vary by area, so does the Cost of Living. To visit a doctor in Chicago, as an example, costs a person more than to visit a similar-type doctor in Des Moines.

Cost of Living adjustments can't be ignored between two cities because it changes a household's budget.

And while it's a challenge to know exactly how far your dollar can stretch in a new town, Bankrate.com hosts a helpful Cost of Living Comparison Calculator to make the math a little easier. With categories such as dry cleaning, groceries and beauty salon, the calculator goes extra deep into the typical costs to a household, and can help families to make more realistic budgets.

The calculator also shows the equivalent household income between any two metropolitan areas.

After being range-bound since the start of the year Housing Starts unexpectedly jumped in May, surprising analysts and Wall Street.

It's the latest in a string of housing-related data that suggests a real estate recovery is already underway.

Housing Starts is an important statistic for a number of reasons, but to homebuyers and home sellers, its immediate impact is on home inventory.

Home values are based on supply and demand. When the demand for homes exceeds the supply, values tend to rise. Conversely, when supply exceeds demand, values tend to fall.

When Housing Starts increase as they did in May, therefore, unless there's a corresponding increase in demand, home prices get pressured downward.

Lately, that off-setting demand appears to be present.

With home affordability near record-high levels, mortgage rates well below historical averages, and the first-time homebuyer tax credit in place, Existing Home Sales are up 16 percent on a "raw numbers" basis versus last month and home supplies are lower versus last year.

Rising Housing Starts can a double-edged sword to a recovering economy. It's a strength signal that builders are more optimistic right now, but too much optimism can lead to a glut of unsold homes that pushes housing back to the brink.

So long as demand outpaces supply, however, inventories should reduce and values should move higher.

Americans are feeling better about their budgets right now, raising the possibility of a full economic recovery.

According to a University of Michigan and Reuters, Consumer Sentiment rose for the fifth straight month in June.

Consumer Sentiment is now at its highest levels since September 2008, the month in which Lehman Brothers failed, Fannie Mae and Freddie Mac were nationalized, and the global financial crisis is believed to have peaked.

Rising confidence levels are important to the economy -- and to housing --because a confident consumer is more likely to make the big-ticket purchases that propel the economy forward.

This includes buying new homes.

That said, the Consumer Sentiment Survey has its flaws.

For one, the survey's sample set includes just 500 families. This is hardly a cross-section of America. Secondly, when people feel better about their finances, it doesn't always lead to additional consumer spending -- it could lead to more saving.

What people say they'll do and what they actually do can be two very different things, but if consumer spending does increase in the months ahead, expect home sales to benefit on the willingness of families to "take more chances" and expect mortgage rates to suffer on concerns for inflation.

The Pareto Principle is a statistical concept most commonly known as the 80/20 Rule. 

It says 80 percent of the effects come from 20 of the causes.

Apparently, the 80/20 Rule applies to foreclosures, too — at least according to data compiled by foreclosure-tracking firm RealtyTrac.

Based on data from May, 11 states accounted for 80% of the country’s foreclosure activity. The remaining 20% was spread across the 39 others.

That’s 80/20 almost to the tee.

The disparity goes deeper that that, though.  The top three states in RealtyTrac’s list — California, Florida, Nevada — were home to half of May’s foreclosure-related actions.

Clearly, foreclosures are concentrated in certain geographies.

But, no matter in which state you live, foreclosures still impact you.  This is because mortgage lenders are often national companies, lending in all 50 states.  

When home loans go bad — in any state – lenders respond by increasing downpayment requirements and by adding new borrowing hurdles.  If you’ve applied for a mortgage in the last 18 months, you’ve experienced this phenomenon personally.

On the other side, if you’re a home buyer in a foreclosure-heavy state, you’re finding terrific value versus several years ago.  It’s one reason why Existing Home Sales in the West Region are up by 19 percent from last year, for example.