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For the 7th consecutive month, the Case-Shiller Index showed a reduction in annual home price declines.  That's more than two seasons, folks. Surely, by now, we can say housing is in recovery.

And, even more impressive than the annual Case-Shiller figures are the monthly ones. 

According to the data, 17 of the 20 Case-Shiller markets improved between July and August 2009.  It's one fewer than last month's 18-of-20, but impressive nonetheless.

Market-by-market, the funk is ending. Home values are rising.

Lest we get carried away, let's remember that the Case-Shiller methodology is flawed:

1. It measures home values in just 20 U.S. cities.  Those 20 cities account for a paltry 9% of the U.S. population.
2. Its data is on a 60-day delay.  Case-Shiller doesn't reflect the "right now" of housing. It reflects the "just was".
3. It ignores the "all real estate is local" adage.  Case-Shiller lumps large metropolitan areas into one data reading.

Despite its flaws, however, the Case-Shiller Index remains relevant to housing.

See, as the economy progressively worsened throughout 2007 and 2008, Wall Street put the blame on housing, citing the Case-Shiller Index in support of the argument.  Analysts seemed to revel in the 33 percent drop in home values nationwide.

But now, as the Case-Shiller Index shows improvement, it's making a case that the economy is coming back from the brink.

An improving economy will harm home affordability.

Soon, government stimulus will fade, mortgage rates will rise, and sellers will regain the upper-hand in negotiations. Based on the Case-Shiller home value data, the "right time" to buy a home may have been in 7 months ago -- while the status of the recovery was still in doubt.

For a pre-approval letter for your next home, just and I'll get you started. You may have missed the market bottom, but this is definitely not the market top.  You may want to buy before the Case-Shiller runs its streak to a dozen.

Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.

The Bankrate.com survey is for conforming mortgages only. It is not specific to Cincinnati, nor does not apply to FHA mortgages, VA mortgages, jumbo mortgages, or reverse mortgage. For a personal rate offer, .

Here's the group's 30-day prediction for mortgage rates:

• 18% predict mortgage rates will increase
• 18% predict mortgage rates will decrease
• 64% predict mortgage rates will remain unchanged

I am bucking the trend, predicting that mortgage rates will decrease over the next 30 days.

My advice not be appropriate for your individual situation and I'm not always accurate besides. Heck, you may find watching the "Don't Call Me Shirley" clip to be a better use of your time.

Either way, here's what I told Bankrate.com:

"Demand for dollars-denominated bonds helps rates to ease lower."

Now, there are a lot of reasons why mortgage rates change.  Economics, politics, trends -- take your pick.  Each plays an important role. But of equal importance is the value of the U.S. dollar.

The U.S. dollar matters to mortgage rates because it's the currency in which mortgage bond investors are repaid.  When the dollar loses value, so does the value of those repayments.  Therefore, mortgage-backed securities lose their luster and rates rise in order to entice investors back.

When the dollar gains, the chain reaction flips in reverse.  And, as a result, mortgage rates fall.

The dollar should gain in the coming weeks.  The U.S. economy appears to be recovering from recession -- probably faster than our global peers.  As a result, whenever there's a perceived risk in the global economy, global cash seems to flow to the U.S. markets. To investors, it's the safest place to be.

This partly explains why stocks and bonds have moved in the same direction of late.  The same forces that are pushing stock markets higher are helping the U.S. dollar to gain, too.  It's causing bond prices to rise and rates to fall.

That said, markets remain volatile and rates do, too.  The global economy is in flux and there are countless outside influences for which to account.

As a loan officer, I watch mortgage-backed securities and track rates on a real-time basis.  If you're not working with a loan officer and want to work with me, I'm never too far from my phone or so just reach out anytime. I'll help you try to time a market bottom so you don't overpay on your rate or your fees.

Or, watch my running market commentary on Twitter.

The Federal Reserve meets next week for a policy-setting meeting. 

It’s one of 8 scheduled Fed meetings this year in which the Federal Open Market Committee votes on whether to raise, lower, or leave unchanged the Fed Funds Rate. The Fed Funds Rate is the rate at which banks lend money to each other overnight, often to be repaid the following morning.

If the idea of banks borrowing money just for an overnight period sounds like jive to you, you're not alone. Banks have do it, though, because banking regulators make lenders keep a certain percentage of "cash reserves" on hand at all times. When bank cash levels fall, they borrow the funds from another Federal Reserve member bank in the interim.

Banks can also borrow from the Federal Reserve directly, often at a slightly higher rate.

So, because the Fed Funds Rate is directly tied to bank interest payments, it exerts a palpable influence on the economy.  By changing the borrowing costs for banks, borrowing costs change for businesses and consumers, too.  Prime Rate, for example, is the basis of most business and consumer loans and is expressed as:

When the Fed Funds Rate is lowered, therefore, “cheap money” propels the economy forward.  When the Fed Funds Rate is raised, by contrast, more costly borrowing often slows the economy down.

Changes to the Fed Funds Rate do not directly correlate to changes in mortgage rates, though.  One way to understand this is to look at the Fed Funds Rate as an "overnight rate" where mortgage money is often a 30 year rate. 

30 years is 10,957 overnight rates strung together -- a completely different risk class.

The Fed Funds Rate's macroeconomic implications, in part, led to the creation of the Fed Funds Futures market.  Traded on the Chicago Board of Trade, Fed Funds Futures options contracts lets investors "bet" on what the Federal Reserve will do to the Fed Funds Rate at the next Fed meeting.

Based on data compiled by the Federal Reserve Bank of Cleveland, here's the market's expectation for the April 28-29, 2009 meeting:

• 97 percent expectation that the Fed Funds Rate will hold at 0.000 to 0.250%
• 3 percent expectationthat the Fed Funds Rate will raise to 0.750%.

There is zero expectation for a 0.500% Fed Funds Rate.

Because Wall Street is nearly unanimous in its Fed Funds Rate prediction, expect the market’s FOMC focus to be on what the Fed says next week rather than what it does. 

If Bernanke & Co. express concerns about long-term inflation and the need to contain growth, mortgage rates should rise.  On the other hand, if the Fed expects growth to be within a tolerable range, mortgage rates should idle. 

In other words, if you're shopping for mortgages right now, there’s little reason to wait for the Fed's next move before making your “Float or Lock” decision.  In a worst-case scenario, mortgage rates rise.  In a best-case scenario, they idle.

The Fed’s two-day meeting adjourns Tuesday, April 29 at 2:15 PM ET.

(Post adapted with permission from Bring the Blog)