Home values around the country appear to be leveling.The Federal Housing Finance Agency’s latest Home Price Index report shows values up by nearly 1 percent in May versus the month prior.

Since peaking in April 2007, values remain off by 11 percent nationwide.

The FHFA Home Price Index is an interesting metric.  Different from the Case-Shiller Index which collects data from just 20 U.S. markets, the Home Price Index reflects every U.S. home that backs a mortgage sold to Fannie Mae and Freddie Mac.

In this sense, the FHFA Home Price Index is more “national” than the Case-Shiller Index but the HPI has its flaws, too.

The House Price Index specifically excludes from its measurements the sales price on any home purchase with any of following traits:

1. Is new home construction
2. Is a multi-unit property
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Because of these exclusions, some analysts say the report is incomplete.  The same could be said of every method of home valuation, however.

Therefore, what’s most important to today’s home buyers and sellers is that each of the “popular” home valuation reports shows similar patterns.  Home prices appear to have stopped falling and may be even starting to recover.

It won’t be for a few years that we’ll be able to look back and point to the exact month that real estate bottomed. Nevertheless, considering how the data has presented as of late, it’s reasonable to think that we’ve already hit it.  Certainly, that’s what the Home Price Index suggests.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Mortgage markets rallied Tuesday while Fed Chairman Ben Bernanke gave his semi-annual testimony to Congress.By the time the day was over, some conforming mortgage rates were down by as much as 0.250 percent.

One of the leading causes for the market rally was Chairman Bernanke revealing an “exit strategy” from its massive market stimulus.

Until Tuesday, the Fed hadn’t gone into much depth about means and methods by which it would unwind its interventions.  In addition to penning a widely-read Op-Ed piece in the Wall Street Journal Tuesday, Bernanke testified to Congress that the Federal Reserve has a viable “exit strategy”.

Wall Street was pleased to hear it.

The specter of long-term inflation has spooked the mortgage markets off-and-on since the start of the year.  It’s one of the reasons why mortgage rates have been so jumpy, and why they crossed 6 percent last month.  Inflation is terrible for mortgage markets.

So, with the fear of inflation subsiding — at least temporarily — mortgage rates sunk Tuesday.

With any bit of luck, momentum will carry rates lower today and through the rest of the week.  But, don’t get greedy.  Mortgage markets are notoriously fickle and one “bad” statement from the Fed Chairman could cause rates to rise right back up.

Bernanke’s complete Tuesday testimony can read online at the Federal Reserve website.

Housing Starts soared in June, thumping analyst expectations for the second straight month.

A “housing start” is a new home on which construction has started.  Last month’s jump in single-family starts is the largest one-month jump since 2004.

To Wall Street, June’s figures are the latest signal that the country’s housing markets may be on the mend.

For home sellers, however, the news may not be so rosy.  With more homes expected to come on the market, price competition among sellers could intensify and — all things equal — that would push sales prices lower.

So far in 2009, that hasn’t happened.

As home supply has grown, it’s been met by off-setting buyer demand.  Spurred by low mortgage rates and an $8,000 first-time homebuyer tax credit, Americans appear to find today’s home buying conditions somewhat ideal.

As a result, purchase activity has been strong and first-time home buyers now account for close to 30 percent of existing home sales.

Rising Housing Starts can be a double-edged sword.  It shows strength that builders are more optimistic about the economy, but too much optimism can lead to a glut of unsold homes and that could reverse the recovery’s momentum.

Mortgage markets had an awful week last week as a combination of strong economic data and stand-out earnings results led investors into more risky investments.The Dow Jones Industrial Average was up 7 percent.

Mortgage rates, unfortunately, didn’t fare as well.  As the first week since June in which mortgage rates rose, rates were up by a lot.

Mostly for three reasons.

The week’s first big mortgage rate bump came Tuesday, right after Goldman Sachs released its blowout quarterly numbers. As one of the world’s largest financial firms, Goldman’s strong showing hinted that the financial crisis may finally be finished.

Next, rates were impacted by the release of the Fed Minutes from its June meeting.  In the report, it was revealed that Ben Bernanke & Co raised the economic forecast for both 2009 and 2010, noting that the recession should be ending soon.

Lastly, June data showed that Retail Sales is expanding and that jobless claims are falling — two potential positives for the U.S. economy that relies so heavily on consumer spending.

This week, without much data, the mortgage market should continue to take its cue from the stock market.  If stocks improve, rates are expected to worsen.  And vice versa.

The week’s key events are Fed Chairman Bernanke’s Tuesday testimony on Capitol Hill and Thursday’s Existing Home Sales data.  Mortgage rates remain volatile so if you’re offered a rate that comfortably fits your household budget, consider locking in before the market can change.

The government’s First-Time Home Buyer Tax Credit expires December 1, 2009.

If you expect to use the program in conjunction with a home purchase, therefore, you may want to consider yourself officially “on the clock”.

Assuming a 60-day window between contract and closing, there are now 77 days left to find a home and go under contract for it.

The First-Time Home Buyer Tax Credit refunds up to $8,000 at Tax Time for qualified home buyers.  A few of the program’s qualification criteria include:

• Home buyer must not have owned a primary residence in the past 36 months
• The home may not be purchased from a family member
• The household adjusted gross income must be below $95,000 for single tax filers and $170,000 for joint tax filers

The tax credit itself is limited to $8,000 or 10% of the purchase price, whichever is less.

Remember, though: The refund is a true tax credit — not a deduction.  This means that a taxpayer owing $8,000 to the IRS and claiming the $8,000 First-Time Home Buyer Tax Credit would owe the IRS nothing on April 15, 2010.

The complete list of qualifying criteria is posted on the IRS website.

For the fourth consecutive month, the country’s foreclosure activity was dominated by a small number of states.

As reported by RealtyTrac.com, more than 50 percent of the country’s foreclosure-related actions in June concentrated in just 3 states:

1. California
2. Florida
3. Nevada

The states rounding out the Top 10 include Arizona, Georgia, Michigan, Texas, Ohio, Illinois and Colorado.

Meanwhile, June’s reported foreclosure figures are consistent with the data from earlier this year, suggesting that the foreclosure remedy plans put forth by the government and by lenders can barely keep pace with the national default rate.

Foreclosure-related actions nationwide are up 5 percent from May.

The silver lining in data this negative is that foreclosures are creating tremendous buying opportunities for the right buyers.  Because foreclosed homes tend to sell at a discount versus non-foreclosed homes and because mortgage rates are low, home sales are showing strength in a multitude of markets because of ample supply at relatively cheap prices.

Distressed homes accounted for one-third of all existing home sales in May.

Search the complete June 2009 foreclosure report for yourself, including foreclosure heat maps and other trends on the RealtyTrac website.

Mortgage markets worsened for the third straight Tuesday after the government reported June’s Retail Sales report came in slightly better than expected.Since falling to near 5.000 percent last week, 30-year fixed conforming mortgage rates have risen by almost 3/8.

It’s a similar mortgage rate pattern to what we’ve seen over the last 10 months — rates drift down to near their “all-time lows”, and then surge higher over just a few days time.

This week’s movement, in particular, is vexing home buyers and would-be refinancers.

Many people thought mortgage rates would break below the 5.000 percent threshold.  The markets, however, had other ideas.

In addition to the unexpectedly strong Retail Sales data, last month’s Producer Price Index reported higher than expectations, too.

A rising PPI is important to rate shoppers because the figure is akin to the Cost of Living measurement for household, but for American businesses instead.  The thought goes that if business costs are rising, consumer costs will eventually rise, too, as businesses share their expenses with American households.

This is inflationary, of course, and inflation is awful for mortgage rates.  It’s part of the reason why mortgage rates closed higher again Tuesday.

All year long, mortgage rates have been jumpy and unpredictable.  This past week has been no different and it’s why you shouldn’t necessarily try to time for a market bottom with mortgage rates.

If an interest rate looks good to you today and the payment is manageable, consider locking it in.  There’s no guarantee rates will ever fall back toward 5.

If you’ve been driving lately, you’ve noticed that the cost of a fill-up has gone down.

According to GasBuddy.com, retail gas now costs $2.52 per gallon, on average nationwide.  Since peaking in mid-June, gas prices are down 6 percent.

For the economy, this is an important story.

Because Americans are spending less at the gas pump, they’re left with additional dollars to spend in other ways including for everyday items like food and shelter, plus for luxury items, too.

Consumer spending accounts for a huge part of the U.S. economy and falling gas prices give economists one more reason to believe a full economic recovery may be close.

With Back to School season around the corner and the holidays looming, a mini Wealth Effect could propel the economy forward and out of recession.

Falling gas prices can be good for mortgage rates, too.

Because rising gas prices are associated with inflation and inflation is linked to rising mortgage rates, the opposite is often true, too.  When inflation pressures recede, mortgage rates tend to fall.  And that’s what we’re seeing in today’s market.

As gas prices have fallen, mortgage rates have, too.  As a result, home affordability is up.

(Image Courtesy: Department of Energy)

Mortgage markets improved last week on fresh concerns about the U.S. economy.With data showing neither overt strength nor weakness, and with earnings season about to start, traders got defensive with their money and parked it in bonds.

As a result, mortgage rates fell in mixed trading last week.  It’s the third consecutive week in which rates fell.

This week, rates should be in flux with traders watching 3 things.

The first is the aforementioned Earnings Season reports.

Big Banks JP Morgan Chase, Bank of America and Citigroup report quarterly earnings this week.  If balance sheets look healthy and markets are encouraged by the results, it could spark a stock market surge, similar to last quarter.  This would be bad for mortgage rates.

The second item markets will be watching is economic data.  In addition to inflation-related data like the Consumer Price Index, markets are watching for Tuesday’s Retail Sales report.

Retail sales are a key economic indicator because consumer spending accounts for two-thirds of the economy.  If the data is weak, mortgage rates should benefit.

And, lastly, markets are awaiting the Wednesday release of last month’s Federal Open Market Committee meeting minutes.

The minutes will give a behind-the-scenes look at the conversation and debate surrounding the Fed’s decision to hold the Fed Funds Rate near 0.000 percent and not purchase additional treasury securities on the open market.

Mortgage rates remain volatile.  Therefore, if you’re actively shopping for a mortgage rate, consider that mortgage rates have been falling for the past 3 weeks and may be due for a reversal.  All it would take for that to happen is for this week’s economic data to show just a little bit of strength.

We could expect traders to pile back into stocks and mortgage rates to suffer.

Sometimes, saving money on your mortgage is as simple as picking a better closing date.It’s all about Rate Lock Commitments.

A Rate Lock Commitment is a bank’s promise to honor a specific mortgage rate for a specific period of time.  They are a lender’s prediction of what mortgage markets will look like at some point in the future.

The future is murky, of course, so it follows that the longer the rate lock, the higher the bank’s corresponding interest rate.

Banks have to compensate for “time risk”.

Rate locks typically come in 15-day increments with the 30-day lock serving as the basis for all other pricing:

• 15-day rate lock : 1/8 percent lower than the 30-day rate lock
• 30-day rate lock : The basis for all other pricing
• 45-day rate lock : 1/8 percent higher than the 30-day rate lock
• 60-day rate lock : 1/4 percent higher than the 30-day rate lock

These aren’t exact figures, of course.  Spreads between rates can (and do) vary from lender-to-lender.  On average, though, they’re fairly close.

This is why choosing a closing date is so important to your mortgage rate. A 45-day closing may reduce your rate 0.125% versus a 46-day one.

Assuming a $250,000 home loan near today’s rates, that’s an annual difference of $236.

So, when negotiating a contract on a home, keep in mind how rate locks work to make sure you get the best rate possible. The shorter the length of your rate lock commitment, the more money you might save long-term.