Conforming and FHA mortgage rates rose for the first time in 5 weeks, pulling mortgage pricing off its best levels of the year.

The best mortgage rates of last week were locked Tuesday morning.

This week, mortgage rates may rise even more. In addition to the release of May’s jobs report and consumer confidence data, fears of broader economic slowdown appear to be easing.

Day-by-day, the chances of rates rising are real.

On Tuesday, a consumer confidence survey is released. Consumer confidence is linked to economic growth because 70 percent of the economy is based in consumer spending. In theory, as consumer confidence grows, the economy should, too.

Therefore, a strong reading should push mortgage rates higher.

Then, on Wednesday, Pending Home Sales and Auto Sales data is released for last month. Both items are “big ticket” and, again, reflect on consumer confidence. Strong readings should be rough on rates.

Next, on Thursday, jobless claims data hits the wires along with worker productivity stats.  Normally, these two releases don’t carry much weight, but with the jobs market in focus this year, markets will be watching for clues about Friday‘s big report — the May Non-Farm Payrolls.

Anything can happen when the jobs report is released.

In April, an estimated 290,000 jobs were created and, in May, economists think more than a half-million people re-entered the workforce.  This is good for the economy, of course, but can drag on mortgage rates.  If job growth even comes close to the 500,000 marker, mortgage rates could zoom higher.

Mortgage rates moved higher last week but are still very low. If you’ve been thinking about refinancing your mortgage, you probably shouldn’t put it off much longer.  Talk to your loan officer today — the longer you wait, the more that rates can rise.

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Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.

Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.

The Department of Labor‘s April Non-Farm Payrolls reports:

• Payrolls have been net positive for 4 straight months
• Nearly 600,000 jobs have been created thus far in 2010
• Monthly job growth posted its biggest gain in 4 years in April

Additionally, more than 800,000 Americans re-entered the workforce in April in search of work.  As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).

But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.

This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone.  If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.

Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.

Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent.  Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece.  Maybe this will be the news that finally turns the mortgage market around.

Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.

Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.

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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. Unemployed

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.

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

In its press release, the FOMC noted that the U.S. economy “has continued to pick up” since the September FOMC meeting and that housing market activity has increased.

It’s the third consecutive post-FOMC statement in which the Fed speaks optimistically about the U.S. economy – a signal that the recession is likely over.

The economy isn’t without threats, however, and the Fed identified several in its announcement, including:

1. Ongoing job losses for American workers
2. Reduced fixed investment by businesses
3. Ongoing challenges for the financial markets

The overall tone remained positive, however, as inflation appears to be held in check.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.

The Fed plans to wind down its mortgage market support over the next 5 months, reaffirming its March 2010 exit date.  For now, Fed support helps hold mortgage rates down.

Mortgage market reaction to the Fed’s press release is negative overall.  Mortgage rates are rising.

The FOMC’s next scheduled meeting is December 15-16, 2009.

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According to a Case-Shiller Index spokesperson, “The rate of annual decline in home price values continues to improve.”

It’s yet another sign that housing may have already bottomed.

However, just because the Case-Shiller Index shows a stabilization in home values, that doesn’t necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more “national”. It tracks data in just 20 U.S. cities.

Homeowners everywhere else are unaccounted for.

Furthermore, even within the 20 tracked Case-Shiller markets, there’s no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.

Case-Shiller treats them all the same.

Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.

If that’s true, August’s Case-Shiller data is another step in the right direction.

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The scheduled get-together ends at 2:15 PM ET Wednesday after which the FOMC will issue a press release to the markets.

Consider locking your mortgage in advance of the press release.

The FOMC meets 8 times annually and its adjournments are among the biggest market-movers of the year.

The Fed’s post-meeting press release is a direct look into the mind of the Federal Reserve and Wall Street is looking for clues anywhere it can find them.

After its August 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved, relative
2. Household spending remains constrained
3. Although weak, the economy is “leveling off”

Since then, however, credit risks have lessened on Wall Street, consumer spending have shown signs of life and Fed Chairman Ben Bernanke said the recession is “very likely over”.

This is why tomorrow’s FOMC press release is so important.  Markets don’t expect the Fed to raise or lower the Fed Funds Rate, but they do expect the Fed to shed light on its next series of moves.

If the Fed alludes to inflation and stronger growth ahead, mortgage rates should rise. By contrast, reference to slower growth ahead should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history.  However, it’s what the Fed says Wednesday that will matter more than what the its does.

If you’re floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.

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Each month, the National Association of Home Builders releases its Housing Market Index report, a survey meant to “take the pulse of the single-family housing market”.

Respondents report on three facets of their business, each series weighted and averaged:

1. How are market conditions today?
2. How do market conditions look 6 months from now?
3. How is the traffic of prospective buyers of new homes?

For the 3rd straight month, the Housing Market Index improved.  It’s now at its highest level since May 2008.

The housing market has shown signs of life since March.  Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns.  Builders showing confidence is another positive signal.

Fed Chairman Ben Bernanke said that the recession is “very likely over” and strong housing data corroborates that statement.

As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations.  If you’re an active home buyer, therefore, and looking for “a deal”, be aware that time is close to running out.

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On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said Tuesday that the “recession is very likely over at this point”.

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered.

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode.  As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds — including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year’s aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low.

Since November, however, rates have been on the rise.  Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you’re wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it’s probably going to happen.

It should spell higher mortgage rates into 2010.

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It also reiterated plans 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 ”leveling off” and that financial markets continue to improve.

The change in verbiage is the rosiest from the Fed since the start of the recession and it may signal that the downturn’s end is near.

That said, the Fed highlighted lingering economic soft spots that could still impact a recovery through the end of 2009 and into 2010.

1. Ongoing job losses
2. Reduced “housing wealth”
3. Tight credit conditions

Furthermore, rising energy costs remain a threat to inflation.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.

Market reaction to the Fed’s press release is muted.  With no real change in message and a basic confirmation of what most investors already knew, Wall Street sees no reason to panic.  Mortgage rates are unchanged.

The FOMC’s next scheduled meeting is September 22-23, 2009.

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After better-than-expected consumer spending, housing and employment data, stock markets rallied and mortgage markets suffered.

Mortgage rates unwound completely their gains of the last six weeks and now rest near the loftiest levels from June.

Headed into Monday’s market activity, mortgage rate momentum is moving away from home buyers and would-be refinance.

This week, there isn’t much data to reverse the tide but there is a Federal Open Market Committee meeting.

The FOMC is the policy-setting group of the Federal Reserve and, each time the FOMC meets, markets can get volatile.  This is because of the Fed’s power to speed up or slow down economic growth via the Fed Funds Rate.

When the Fed Funds Rate is rising, the economy is generally expanding at too fast of a pace for the Fed’s comfort and when the Fed Funds Rate is falling, the economy is generally slowing.

Today, the Fed Funds Rate is as low as it’s even been — resting in a “target range” of 0.000-0.250 percent.  The Fed isn’t expected to change that.

However, just because the Fed Funds Rate won’t be changing doesn’t mean that mortgage rates won’t be changing.  Depending on what the FOMC says in its post-meeting press release, mortgage rates could rise or fall — maybe even by a lot.

If the Fed shows concern for inflation, rates should jump; worry of a recession retread would draw rates down.

The FOMC adjourns from its 2-day meeting Wednesday at 2:15 PM so consider locking prior the official announcement.

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