Home builder confidence in the newly-built, single-family housing market is down for the third straight month this month.

After reaching a 3-year high just 90 days ago, the National Association of Homebuilders’ Housing Market Index is now at a multi-year low. It’s since dropped by almost half.

As an economic indicator, the HMI’s goal is to “take the pulse of the single-family housing market”. It surveys home builders across the country and asks them to report on 3 facets of their business:

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

Responses are then collated, weighted, and presented as the Housing Market Index.

The August HMI reading of 13 is the lowest since March 2009.

Not surprisingly, the main reasons why HMI is down echo the main reasons why consumer confidence is down. Jobs growth continues to be weak; credit guidelines remain restrictive; and, home values are recovering slowly, pressured by distressed properties.

Builders report watching foot traffic stagnate and most likely won’t want to be stuck with excess inventory into the fall and winter months. For home buyers , drops in builder confidence like this can be an excellent negotiation tool.

Builders may be more likely to offer incentives and/or price reductions into an uncertain economy, as compared to a strong one. Furthermore, weakness in home building indirectly drags mortgage rates lower.

This one-two combination can make for cheaper homes with cheaper monthly payments.

Mortgage markets worsened last week, putting a pause on the mortgage rate rally that dates to mid-April. Mortgage rates rose last week and home affordability suffered.

The Refi Boom remains in full effect, but rates are not as dazzling as they were a week ago.

It’s somewhat strange that mortgage rates rose last week given the heavy dose of negative-bending news.

• The Federal Reserve noted that the economy “has slowed“
• New unemployment claims rose to a 6-month high
• Retail sales — excluding auto sales — rose less than expected

Mortgage rates often to fall on such news, but last week, they rose. The biggest reason was weak demand on a new 30-year bond issuance from the government. In turn, that weakness spilled over into mortgage bonds, which pushed rates up.

This week, mortgage rates could rise or fall — it depends on how new data influences market sentiment.

• Monday : Home builder confidence survey
• Tuesday : Housing Starts and Building Permits; Producer Price Index
• Thursday : Jobless claims; 2 Fed members make speeches

Keep a close eye on the housing-related data early in the week. It’s widely believed that housing will lead the economy forward so a rebound in home builder confidence, or a jump in building permits, for example, should push rates even higher. Weakness

In the meanwhile, if you haven’t spoken with your loan officer about a refinance, consider reaching out this week. Rates are lower than they’ve ever been in history and more people are getting financing than the news would have you believe. You can’t know until you ask so make that call today.

For the second time this year, the FHA is modifying mortgage insurance.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

• Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
• Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners , this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”. The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different. Yes, loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA.

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email your loan officer for help.

NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.

Foreclosure filings rose 4 percent nationwide last month versus June, according to foreclosure-tracking firm RealtyTrac.com. For the 17th straight month, total filings topped 300,000.

A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.

As with most months, just a handful of states dominated foreclosure activity nationwide.

• California : 14.9 percent of all activity
• Florida : 11.6 percent of all activity
• Arizona : 6.4 percent of all activity
• Michigan : 6.2 percent of all activity
• Georgia : 6.1 percent of all activity
• Texas : 4.9 percent of all activity

Together, these 6 states represent just 30 percent of the overall U.S. population.

The other 44 states (and Washington D.C.) were home to the remaining 49.0%.

Despite this imbalance, though, in all markets, foreclosures and REO are making a profound impact on pricing and product. “Distressed” homes now represent 32 percent of the overall resale market nationwide, according to the National Association of Realtors®.

Buying a foreclosed home can make for a terrific “deal”, but buying in the REO market is decidedly different from buying a non-foreclosed property.

As 3 examples:

1. Buying bank-owned homes can take 120 days to close.
2. Foreclosures aren’t always listed for sale publicly. Some inventory is privately-held.
3. Bank-owned homes are often sold “as is”. There may be defects that render the homes mortgage-ineligible.

If you have an interest in buying REO, consider talking with a real estate agent first. Even the negotiation process is different as compared to a non-distressed sale. It helps to have an experienced professional representing your interests.

Today, in its first meeting in 6 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged.

The Fed Fund Rate remains at a historical low, within a prescribed target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since June, the pace of economic recovery “has slowed”. Household spending is increasing but remains restrained because of high levels of unemployment, falling home values, and restrictive credit.

Today’s statement shows less economic optimism as compared to the prior year’s worth of FOMC statements dating back to June 2009. The Fed is looking for growth to be “more modest in the near-term” than its previous expectations.

Weaknesses aside, the Fed highlighted strengths in the economy, too:

1. Growth is ongoing on a national level
2. Inflation levels remain exceedingly low
3. Business spending is rising

As expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”.

There were no surprises in the Fed’s statement so, as a result, the mortgage market’s reaction to the release has been neutral. Mortgage rates are unchanged this afternoon.

The FOMC’s next meeting is scheduled for September 21, 2010.

The Federal Open Market Committee holds a one-day meeting today, its fifth scheduled meeting of the year, and sixth overall since January.

The FOMC is the government’s monetary policy-setting arm and the group’s primary tool for that purpose is an interest rate called the Fed Funds Rate.

The Fed Funds Rate is the prescribed rate at which banks borrow money from each other and, since December 16, 2008, the Federal Reserve has voted to keep the benchmark rate within a target range of 0.000-0.250 percent.

It’s the lowest Fed Funds Rate in history.

Because the Fed Funds Rate is near zero, it’s accommodative of economic growth, spurring businesses and consumers to borrow money on the cheap. This, in turn, fosters economic growth within a U.S. economy that is somewhat tentative and facing headwinds.

The Fed has said over and again that it will hold the Fed Funds Rate “exceptionally low” for as long as conditions warrant. It’s expect that the Fed will reiterate that message in today’s post-meeting press release.

However, just because the Fed Funds Rate won’t be changing today, that doesn’t mean that mortgage rates won’t. Mortgage rates are not set by the Federal Reserve; open markets make mortgage rates.

Mortgage rates tend to be volatile when the Fed is meeting. This is because the Fed’s press release highlights strengths and weaknesses in the economy and, depending on how Wall Street views those remarks, bond markets can undulate and mortgage rates are based on the price of mortgage-backed bonds.

When Ben Bernanke & Co. speak, Wall Street listens.

The Fed’s press release today will be dissected and analyzed. Talk of higher-than-expected inflation, or better-than-expected growth should have a negative effect on rates. Talk of an economic slowdown may help rates to fall.

Either way, we can’t be certain what the Fed will say or do this afternoon so if you’re floating a rate right now and wondering whether the time is right to lock, the safe choice is to lock before 2:15 PM ET today.

Mortgage markets improved again last week on softer-than-expected economic data, punctuated by Friday morning’s weak jobs report. Conforming mortgage rates dropped on the news, making new, all-time lows.

Mortgage rates have been on an extended rally dating back to mid-April.

This week, there’s a lot of data and news due for release, the most influential to markets of which is the Federal Open Market Committee’s scheduled policy meeting.

8 times annually, the FOMC meets to discuss the nation’s monetary policy with respect to the current and projected U.S. economic conditions. Sometimes the FOMC takes action on the economy. Other times, it does not.

Either way, Fed meetings are market movers and it’s a gamble to float a mortgage rate ahead of an FOMC get-together.

There’s other’s stories to watch this week, too. Each has the ability to change mortgage rates.

• Tuesday : FOMC meeting; Consumer Confidence data
• Thursday : Jobless Claims
• Friday : Retail Sales; Consumer Price Index

It’s a busy week on Wall Street, to be sure, and rate shoppers would do well to pay attention. Not only can the FOMC meeting change mortgage rates for every product in every market, but it can also change the outlook for mortgage rates going forward.

Rates are at an all-time low and low rates can’t last forever. We’re in the middle of a Refi Boom today and, soon, the boom will be over.

If you haven’t spoken to a loan officer about refinancing your home, or locking a mortgage rate, your best time to make the call is prior to the FOMC’s Tuesday afternoon adjournment at 2:15 PM ET. Mortgage rates will get jumpy leading up to the meeting, and will most certainly be volatile afterward.

According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide. This, after a half-percent monthly increase in prices in May, on average.

Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.

In contrast to “national markets”, the real estate markets in which you and I live are decidedly local. It’s a major difference and the distinction renders the Home Price Index somewhat less important.

After all, the HPI doesn’t account for housing activity in individual neighborhoods , nor does it track value across cities. Instead, it summarizes data in giant chunks of geography.

A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average. The others varied by as much 1.3 percent.

As a sample:

• Mountain Region : + 1.7 percent
• New England : + 0.2 percent
• South Atlantic : +1.0 percent

And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.

Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood. That type of granularity can’t be tracked in a report like the Home Price Index.

The best place to get that data is from a local real estate agent that knows the market well.

Mortgage rates have been falling since April but that momentum could reverse tomorrow.

The Bureau of Labor Statistics releases the July jobs report at 8:30 A.M. ET Friday. With a stronger-than-expected reading, mortgage rates should rise, harming home affordability. Jobs are a keystone in economic growth and growth is tied to rates.

Earlier this year, job growth went positive and reached as far north as 431,000 jobs created in May. That figure slipped negative last month, however, as the temporary, decennial census workers left the workforce.

Jobs matter to the U.S. economy. Among other concerns, unemployed Americans spend less on everyday goods and services, and are more likely to stop payments on a mortgage. These effects retard the economy, spur foreclosures, and harm home values.

The reverse is also true. More workers means more disposable dollars and, in theory, a stronger economy.

Analysts expect that a net 65,000 jobs were lost in July. Wall Street — and Main Street — have a big interest in those results.

Poor jobs data would likely result in a stock market sell-off which would, in turn, boost the value of government-backed mortgage bonds. This is because bonds tend to perform well when the economy is sagging and higher bond prices mean lower mortgage rates.

Strong jobs data, however, would likely push stock markets up and bond markets down. This would cause mortgage rates to rise. The stronger the employment figures, the higher mortgage rates should go.

So, if you’re happy with where mortgage rates are today and you’re concerned about what the jobs report may do to them tomorrow, consider talking to your loan officer about locking your rate as soon as possible.

Once the jobs report is released, it may be too late.

The Pending Home Sales Index failed to rebound from a cliff-dive in May, falling by another 3 percent more in June. The index remains at record-low levels.

A “pending home sale” is a home under contract to sell, but not yet closed. The data is culled from local real estate associations and large brokers and accounts for 20 percent of all purchase transactions in a given month nationwide.

The Pending Home Sales Index is a future indicator for the housing market; there is a high correlation between the PHSI and the monthly Existing Home Sales report. This is because of the relatively large sample set used for the PHSI, and because 80 percent of homes under contract close within 60 days, according to the National Association of Realtors.

June’s Pending Home Sales Index is weak by most measures, but if you’re a home buyer , the headlines aren’t so bad. Fewer home sales can push negotiation leverage to the buy-side of a transaction.

Plus, there’s other positives in the market for today’s buyers:

• Home supplies are up, which creates competition among sellers
• Builder confidence is down, which leads to “free” upgrades and incentives
• Mortgage rates are low, which increases cash flow and disposable income

All things equal, the current home buying conditions haven’t been this favorable in years.

The falling figures in June’s Pending Home Sales Index hint that home sales will be down through the rest of the summer and into early-Fall. However, mortgage rates may not and higher mortgage rates can do more to change a monthly payment that a small reduction in home price.

If you’re planning to buy a home later this year, consider moving up your time frame.

It’s an excellent time to be a buyer.