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. These are not the types of predictions we get from the pundits.

There’s another 6 months until 2010 and there’s no reason to expect the current trends 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 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.