More positive signals from housing — home values are still on the rise.

According to the Federal Housing Finance Agency, after posting its first quarterly increase since 2007 this past September, the Home Price Index rose by another 0.6 percent in October.

Prices are up in 4 of the last six months.

But before we take the stats to the proverbial bank, it’s important that we recognize the Home Price Index for its shortcomings.

1. HPI only accounts for homes with mortgages backed by Fannie Mae or Freddie Mac
2. HPI only accounts for re-sold homes — newly-built homes are excluded
3. HPI aggregates national data whereas real estate markets are local phenomena

On a broad scale, the Home Price Index can be useful, but it doesn’t specifically apply to any specific U.S. market.  For that, analysts tend to turn to the Case-Shiller Index, a privately-produced report that assesses home values in 20 cities nationwide.

The good news for home sellers is that Case-Shiller’s most recent report corroborates the government’s conclusion — home values are creeping back.

Home buyers should pay attention. When public and private sector data is in accord, markets tend to go along and, looking back, housing likely bottomed in February 2009.  Since then, home sales are up, home supplies are down, and values have increased in most U.S. markets.  Furthermore, so long as mortgage rates remain low and government stimulus is in place, the trend should continue through at least the first quarter of 2010.

If you’re on the fence about buying a home right now, or wondering about timing, consider your options vis-a-vis today’s market.  Into the new year, homes won’t likely be as cheap to buy, nor to finance.

It’s not only the real estate markets that differ from town to town — the Cost of Living does, too.

Insurance costs, tax bills and just plain, day-to-day living will dent a household budget differently depending on where that household is.  It can be a nerve-wracking fact for families moving across state borders.

As an aid for the budget-aware, Bankrate.com keeps a Cost of Living Comparison Calculator on its website.  The calculator asks 3 questions: (1) Where do you live now, (2) To where you are moving, and (3) What is your salary.  It then spits out a detailed, 58-item cost comparison list between the two cities.

Some of the key costs compared include:

• Everyday groceries
• Energy bills
• Routine healthcare
• Home ownership
• Clothes
• Sporting goods

The Cost of Living Comparison Calculator is thorough, with data culled from the ACCRA. You’ll be surprised at how granular the list can get. On the ACCRA website, you can buy a similar report for $5.

On the Bankrate.com site, the data is free.

Mortgage markets made a 4-day losing streak last week on thin holiday volume and overall economic optimism. It was awful news for rate shoppers because mortgage rates were higher every day last week.

The holiday-shortened week marked the third out of 4 during which rates worsened and last week’s action happened to be especially harsh. Monday’s action was the worst for rates since July, for example.

Tuesday’s was only slightly less worse.

Today, conforming, 30-year fixed mortgage rates have reached at a 15-week high — well off the lows set in early-December.

Normally, when mortgage markets worsen this badly, this quickly, it’s because of strong economic data, or growing inflationary expectations.  Last week saw neither.

• Existing Home Sales showed strength, but was offset by New Home Sales
• 3rd Quarter GDP showed the economy growing at a slower-than-expected pace
• Inflationary data wasn’t as high as was expected

Furthermore, consumer confidence didn’t rise as planned.

And yet — stock markets gained. All 10 sectors improved and they did so at the expense of mortgage bonds.

This week is again holiday-shortened so expect the same low-volume, high-volatility trading as last week.  There’s few data releases save for Tuesday’s Case-Shiller Index. Therefore, watch for momentum trading in either direction.

Markets close early Thursday and re-open Monday, January 4, 2010.  If you need to lock a rate, make sure of your loan officer’s hours.

One day after November’s Existing Home Sales report blew away estimates, the Census Bureau’s related New Homes Sales report failed to impress.

A “new home” is a home that is newly-constructed; not bought as a resale.

In a lackluster showing, New Home Sales dropped 11 percent in November, falling to the lowest levels since April. Furthermore, the all-important “months of supply” climbed by a half-month to 7.9.

The press pounced on the figures and if you only read the headlines, you’d think that housing had cratered.  Some of the angles were quite bold, even:

• Weak U.S. Home Sales Show Recovery’s Shakiness (Reuters)
• New Home Sales Plunge In November (CNNMoney.com)
• Housing Forecast : Off Life Support, Still In Critical Care (CBS News)

These headlines, although technically accurate, only tell half the story, however. The other half relates to November 30’s role as the original First-Time Home Buyer Tax Credit ending date.

See, different from home resales, when a contract is written on a newly-built home, the home is rarely finished.  According to the Census Bureau, just 1 in 4 new homes are sold “move-in ready”.  The other 3 of 4 are in various stages of construction when a buyer signs on the dotted line.

Some have yet to break ground, even.

Regardless, it’s at this date of signing that the Census Bureau counts the home as “sold” — not at the actual closing.  This is the main driver of the November New Home Sales data dip.

First-time home buyers would have risked up to $8,000 in federal tax credits if they bought a newly-built home and it wasn’t ready for move-in by November 30, 2009.  And it wasn’t until November 5 that the credit was officially extended.

Suddenly, first-timers representing more than half of last month’s Existing Home Sales isn’t so shocking. Buying new carried a lot risk.

There’s always more to the story than the headline.  Sometimes, you have to dig deeper. Looking back over 10 months, the housing market is on a steady course of improvement. November’s New Home Sales data — although weak — is not terrible.

Despite what the papers might say.

Home resales are soaring.

For the 4th consecutive month, the Existing Home Sales report revealed what today’s buyers and sellers already know — there’s a lot of buyer activity right now.

Existing Home Sales surged 7-plus percent in November, posting its largest number of recorded sales in 33 months.  Sales volume is up 44% higher versus last year.

It’s another example of the housing market in recovery.

There were other interesting statistics buried in the November data, too.  According to the National Association of Realtors:

1. 51 percent of home buyers were first-timers
2. Distressed properties accounted for one-third of all sales
3. The median home sale price rose slightly

But of all the stats from the November Existing Home Sales report, perhaps the most important one is the one showing home supplies falling to 6.5 months. It’s nearly half of the home supply available last November.

The rapid run-off of inventory throughout 2009 is more than a trend at this point and suggests higher home valuations in 2010. Especially because mortgage rates are low, tax credits are available, and the press is giving housing positive coverage.

You shouldn’t feel rushed to buy, but you probably don’t wait too long, either - especially in the lower to medium price ranges.  The best deals of 2010 may be gone before that Spring Buying Season even starts.

Housing Starts jumped last month as builders got back to business.  It’s a telling sign for the economy, but bad news for next season’s sellers.

With more homes coming online, home prices may be slow to rise nationwide.

A “Housing Start” is a privately-owned home on which construction has started. In November, starts rose by nearly 9 percent while remaining within the same tight range we’ve seen since June.

More interesting that Housing Starts, though, is the accompanying data for Housing Permits. After a 5-month plateau, Housing Permits finally broke through, posting its largest number in 12 months.

This, too, bodes poorly for sellers.

Housing permits are precursors to housing starts so because the number of permits are higher today, we expect that the number of starts will be higher just a few months from now.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

More permits means more starts which, in turn, leads to a larger home inventory. And when home supplies grow faster than the home demand, prices fall.

Throughout the early part of 2010, low mortgage rates and federal tax credits should help hold demand high but if builders flood the market with new, quality product, sellers may find that they’ve lost some of their leverage.

For home buyers, the rise in starts is welcomed.

Mortgage markets improved last week as pricing followed a roller coaster-like pattern. After touching a 6-week high Tuesday, rates rallied to weekly lows Thursday, and then jumped back higher Friday.

Despite the improvement last week overall, mortgage pricing remains significantly worse from the all-time lows set in late-November.

Oddly, last week’s most prominent mortgage-related story wasn’t the most influential one.

On Wednesday, the Federal Open Market Committee adjourned from a two-day meeting.  It voted to leave the Fed Funds Rate unchanged from its current target zone of 0.000-0.250 percent.  This wasn’t news, per se — markets expected the “no change” vote.

However, in its accompanying press release, the Fed appeared more rosy in its economic outlook, citing improving labor markets and low levels of inflation.  Results like this are a mixed bag for rate shoppers, but is generally welcomed as good news.

Rates were unchanged after the FOMC release.

The bigger story last week comes from Greece.

Concerns for the country’s debt burden have been in play for weeks, but last week, Standard & Poor’s officially downgraded Greece’s debt rating. The move triggered concerns regarding broader Eurozone debt, especially considering the recent issues in Dubai.

U.S. mortgage markets benefitted from Greece’s troubles as “safe haven” attracted investors, driving down rates Thursday afternoon.

Debt concerns should remain in focus this week. Furthermore, there’s a bevy of domestic data that could swing rates in either direction, too.  Most notably, watch for Tuesday’s housing data, Wednesday’s inflation data, and Thursday’s consumer confidence data. Each can be a powerful influence on rates.

There will be less volume on Wall Street because of Christmas and less volume tends to spur mortgage rate volatility. Be wary of swings in either direction.

Markets close early Thursday and will be closed Friday.

Mortgage markets worsened for a second consecutive week last week amid debt default concerns and stronger-than-expected economic data. Dollars left the bond market and mortgage rates suffered.

After re-reaching an all-time low December 1, mortgage rates have since rolled back to mid-November levels.

Rates are still low right now. Just not as low.

And meanwhile, last week’s big story — the one that should concern mortgage applicants between now and early-2010 — is the story of Retail Sales.

Last week, a government report showed that American consumers are spending more this holiday season than was expected.  The Retail Sales data implies that consumers are feeling more confident in themselves, and in the economy overall.

This is one of the last remaining pieces in the economic recovery puzzle.  Job growth, of course, is another, and both will be in focus this week as the Federal Open Market Committee meets for its final 2-day meeting of the year.

The FOMC isn’t expected to raise the Fed Funds Rate from its current “target range” near 0.000%, but when the FOMC adjourns at 2:15 PM Wednesday, its press release will dominate the news.

Specifically, watch for verbiage on the expected economic growth for 2010 because no matter what the Fed says, mortgage rates will be in flux.  As one example:

• If the Fed says inflation is under control, mortgage rates should fall
• If the Fed says inflation pressures are growing, mortgage rates should rise

There’s other news this week, too, including PPI and CPI — 2 popular inflation gauges, plus some housing data, too.

If you need to lock a rate this week, it may be safer to lock prior to the FOMC’s adjournment. Given the recent strength in Retail Sales and the reports of “crowded malls” this past weekend, the Fed may choose to revise its growth estimates for the economy — a move that would be awful for mortgage rates.

If you wonder what mortgage rates and home affordability will look like next year, today’s Retail Sales data may hold your answer.

Versus October, November’s ex-auto sales were up by more than 1 percent. Analysts expected the increase, but not an increase of this magnitude.

“Ex-auto” means that motor vehicles and parts are excluded from the data.

Home values are increasing in many parts of the country and household net worths are rising, too. Therefore, we can infer from the Retail Sales report that U.S. consumers are starting to feel better about their individual finances, and about the economy overall.

To homebuyers and rate shoppers, strong Retail Sales data may foreshadow higher mortgages ahead.  This is because sales data is a by-product of consumer spending and consumer spending accounts for more than two-thirds of the economy.

As spending increases, the economy tends to expand, drawing investment dollars into stock markets and away from bond markets – including mortgage-backed bonds, the basis for conforming mortgage rates.

Less bond demand leads to higher rates and, therefore, lower levels of home affordability.

Despite the Holiday Season momentum, however, 2009 will likely mark just the second time that Retail Sales data fell year-over-year since the government started tracking it 40 years ago.  The other year was 2008.

But, if November’s Retail Sales is a reliable indicator of consumer sentiment overall, we should expect 2010 to rebound strongly.  And when it does, mortgage rates should suffer.

The housing market is recovering, mortgage rates are still near all-time lows, and the government is offering an $8,000 tax credit to qualified buyers through April 30, 2010.  If you plan to buy a home next spring, you may want to consider moving up your timeframe.  Waiting may be costly.

Since peaking in July 2009, national foreclosure activity has dropped through 4 consecutive months.

On a month-to-month basis, November’s foreclosure activity fell another 8 percent.

However, national foreclosure activity continues to be dominated by a minority of states.

As reported by RealtyTrac.com, more than half of November’s foreclosure-related activity sourced from just 4 states:

1. California
2. Florida
3. Illinois
4. Michigan

These are the same 4 states that topped October’s foreclosure activity despite three of them posting month-to-month declines last month.

The remaining Top 10 states in terms of total foreclosure activity include Arizona, Texas, Ohio, Georgia, Nevada and New Jersey.

If you’ve been actively looking at REO lately, you’ve likely noticed that true bargains are harder to find.  This is because buyers of all types — first-timers, move-ups, and investors — are purchasing bank-owned homes aggressively and getting better at identifying the “best ones”.

But just because supplies are dwindling doesn’t mean you should just jump in.  Buying foreclosures isn’t for everyone for two very strong reasons:

1. Homes are often sold as-is and may have “issues”
2. The closing process can be unpredictable

Therefore, if you’re thinking of buying a foreclosed home, be sure to talk with me about potential problems before going under contract.  Better too soon than too late.

There are still good deals in the foreclosure market, but based on November’s data, they may not last through the winter.  “Distressed home” sales now account for 30 percent of home resale activity.

Mortgage markets finally reversed course last week, selling off with fury and causing prices to plummet.

When bonds prices fall, rates rise.

The action broke a multi-week winning streak, much to the disappointment of rate shoppers everywhere. Rate hikes came in stages.

First, early in the week, mortgage bonds fell out of favor as traders booked profits ahead of the November jobs report and as concerns over a Dubai Default waned.

Then, on Friday, when the jobs report was ultimately released, it showed a net loss of just 11,000 jobs in November and dip in the Unemployment Rate to 10.0 percent.

Mortgage markets got hit again.

Now, since bottoming last Monday, mortgage pricing is worse by more than 100 basis points. As that figure relates to rates, it’s a jump of anywhere from a quarter- to a half-percent.

Last week was a bad week to not be locked in. Unfortunately, this week may not be much better.

Without much data due for release, momentum should lead mortgage rates higher. Amid a few confidence surveys and a speech by Fed Chairman Bernanke, the biggest news on the week will be Friday’s Retail Sales report.

Retail Sales matters to mortgage rates because consumer spending accounts for two-thirds of the economy.  And now, with jobs data looking stronger, Retail Sales are expected to show a modest increase versus last month.

If the data comes in better-than-expected, mortgage rates should rise — much like they did on the jobs data.  On the other hand, if the data is weak, expect rates to retreat.

So far this season, Holiday Shopping has been mixed.

Mortgage rates tend to rise faster than they fall so if your homebuying or refinance needs are immediate, it may be prudent to lock your rate rather than to wait and see what happens with the economy and this week’s momentum.

Despite getting worse last week, mortgage rates are still very low.

This morning’s jobs report is causing mortgage rates to rise, capping a week during which rates have already jumped 3/8 percent off all-time lows.

The government’s November Non-Farm Payrolls report reinforced the notion that the recession is nearly over, if not over already.

Just 11,000 jobs were lost last month — much fewer than analysts had expected — as the Unemployment Rate fell to 10.0%.

If it seems strange to be talking economic recovery while Americans are still losing jobs – 7.2 million since 2008 –  remember that data always needs context.

See, analysts view employment figures as a lagging indicator for the economy.  This is because business owners tend to make hiring decisions based on how business has been – not on how it will be at some point in the future.

The jobs report rarely reflects the “right now”.  As an example, job loss peaked in January 2009 – 4 months after the height of the financial crisis.

We saw the same pattern during the Recession of 2001.

According to government data, during the last recession, job loss peaked in October 2001 but the recession ended the very next month.  It wasn’t until October 2002 that employment went net positive on a monthly basis.

And this is why investors are cheering November’s jobs report. Better-than-expected numbers and a falling Unemployment Rate show that the economy is improving.

Unfortunately for rate shoppers, better-than-expected data is pushing mortgage rates higher.  Rates are expected to open 0.250% higher versus yesterday’s close.

‘Tis the season to do shopping — and get bombarded with offers to open credit cards.

The deals are tempting, too. ”Open a charge card today” and save up to 20% on your purchase. Considering that the average Black Friday ticket was $343, that’s $68 saved per store.

For big-ticket items like televisions, the savings are even bigger.

But for people in the market for a new home — or looking to refinance — taking advantage of in-store savings could be a long-term money loser.

Every time you apply for a credit card, your credit score drops.

According to myFICO.com, “new credit” accounts for 85 out of 850 possible credit scoring points.  New credit is defined by such traits as:

• Number of recently opened accounts
• Number of recent credit inquiries
• Time since credit inquiry(s)
• Proportion of accounts that are recently opened to all open accounts

Shoppers with few open credit cards are more likely to see their scores drop that shoppers with many cards.

Regardless, a credit score is worth protecting because of how mortgage rates are made.  A conventional mortgage applicant with 20% equity whose FICO is 720-739 will be offered rates 0.125% higher than a comparable applicant at 740.

• For 700-719, the rate increases by 0.375%
• For 680-699, the rate increases by 0.750%
• For 660-679, the rate increases by 1.250%

Having a low credit score can be expensive.

It is okay to take advantage of in-store savings during the holiday shopping season, but it’s also important to be aware of how your credit score may be affected.

If you’re not applying for a mortgage in the next six months, you’ll likely be alright.  But, on the other hand, if you know you’ll need your FICO soon, consider whether saving 15 percent on a $343 ticket is worth the long-term cost of a higher mortgage rate.

When a home seller accepts a contract on an MLS-listed property, the property’s status changes from “Active” to “Pending”.

This means the home is scheduled to sell, but not yet sold.

Each month, the National Association of Realtors® tallies the number of pending homes and publishes the data as the Pending Homes Sales Index report.

In October, for the 9th straight month, the index gained. It’s the longest such streak in Pending Home Sales history.

Because a “pending” home sale is just a contract between buyer and seller, it’s not as important to the economy as actual home sales.  However, the Pending Home Sales Index can be a fine predictor of future activity.

Historically, 80 percent of homes under contract “close” within 60 days, and most others close within 120 days. Recent Existing Home Sales data corroborates this.  Home sales activity is at its highest pace in nearly 3 years.

The Pending Home Sales Index does have some shortcomings, though:

1. It doesn’t account for newly constructed homes, a small but important part of the real estate market
2. It doesn’t track For Sale By Owner properties and other non-MLS listed homes
3. Its sample set is small, measuring just 20 percent of all MLS-listed sales

Despite this, however, Pending Home Sales is a terrific measure of real estate market strength.  Homes are going under contract at a dizzying pace. It’s thinning out home inventory supplies and pressuring prices to rise.

This chain reaction is what makes Pending Home Sales Index worth tracking. As the number of homes under contract increase, home prices can’t be far behind.