Mortgage rates drop to lowest in decades Mortgage rates fell to the lowest level in decades for the ninth time in 10 weeks, as concerns grow that the economy is weakening.
Mortgage buyer Freddie Mac said Thursday that the average rate for a 30-year fixed loan was 4.36 percent this week, down from 4.42 percent last week. That's the lowest since Freddie Mac began tracking rates in 1971.
The average rate on 15-year fixed loan dropped to 3.86 percent from 3.90 percent the previous week. That's the lowest on records starting in 1991.
Rates have fallen since spring as investors shifted money into the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.
The low rates have fueled borrowers to refinance their home loans. Refinancing is at its highest level since May 2009 and made up 82.4 percent of all new loan activity.
However, low rates haven't budged home sales, Those have been stymied by high unemployment, slow job growth and strict credit standards, and have dropped sharply since the expiration of home-buying tax credits in April.
To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Average rates on five-year adjustable-rate mortgages were unchanged at 3.56 percent. Rates on one-year adjustable-rate mortgages fell to an average rate of 3.52 from 3.53 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year and 1-year mortgages. They averaged 0.6 of a point for 15-year and 5-year mortgages.
Amount of Negative Equity Declines Slightly
Nearly 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the second quarter of 2010, down from 11.2 million and 24 percent from the first quarter of 2010, according to housing analyst CoreLogic.
• Negative equity remains concentrated in five states: Nevada, which had the highest percentage negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent), and California (33 percent).
• The biggest declines in negative equity were concentrated in the hardest-hit states. Nevada experienced an 11.8 percentage point decline in negative equity share, followed by California (-1.3), Florida (-1.3), and Arizona (-1.3). About two-thirds of all states experienced a decline in negative equity share. Since peaking in the fourth quarter of 2009, the number of borrowers in a negative equity position has declined by about 350,000.
• The declines were entirely due to foreclosures, not the stabilization or small increases in prices in some markets. The largest decrease in negative equity occurred among those with loan-to-value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, down from 5 million last quarter.
• Homes with more equity are appreciating faster than underwater homes. The average values of properties with 50 percent or more equity increased over 1 percent between the fourth quarter of 2009 and the second quarter of 2010. Properties with 25 to 50 percent in equity increased an average of 0.2 percent in that period. However, values fell for every segment in negative equity, with the biggest value decline occurring for properties that are 50 percent or more in negative equity.
"Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time," says Mark Fleming, chief economist with CoreLogic.
Source: CoreLogic (08/26/2010)
• Negative equity remains concentrated in five states: Nevada, which had the highest percentage negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent), and California (33 percent).
• The biggest declines in negative equity were concentrated in the hardest-hit states. Nevada experienced an 11.8 percentage point decline in negative equity share, followed by California (-1.3), Florida (-1.3), and Arizona (-1.3). About two-thirds of all states experienced a decline in negative equity share. Since peaking in the fourth quarter of 2009, the number of borrowers in a negative equity position has declined by about 350,000.
• The declines were entirely due to foreclosures, not the stabilization or small increases in prices in some markets. The largest decrease in negative equity occurred among those with loan-to-value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, down from 5 million last quarter.
• Homes with more equity are appreciating faster than underwater homes. The average values of properties with 50 percent or more equity increased over 1 percent between the fourth quarter of 2009 and the second quarter of 2010. Properties with 25 to 50 percent in equity increased an average of 0.2 percent in that period. However, values fell for every segment in negative equity, with the biggest value decline occurring for properties that are 50 percent or more in negative equity.
"Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time," says Mark Fleming, chief economist with CoreLogic.
Source: CoreLogic (08/26/2010)
Real Estate Outlook: Fannie Forecast
If you want a good sense of where we are in housing and where we're headed, check out the latest forecast from Fannie Mae chief economist Doug Duncan.
Never known as a Pollyanna or wild optimist, Duncan acknowledges that this summer has been a challenging time for just about anyone in real estate.
The slump was widely predicted earlier this year by economists -- including Duncan -- who saw sales and building starts essentially sucked out of the summer months into the spring months by the expiring tax credit deadline in April.
Though there's a statistical lull at the moment, Duncan sees some positives taking shape: "Consumers are lowering their leverage" he says-cutting their debt burdens - and "positioning themselves to resume consumption" - including home purchases.
But they're understandably worried about the unemployment situation and not sure how solid the economic recovery is going to be.
Despite all this, Duncan suggests in his forecast, "the upside potentials are there." He sees modest economic growth for the balance of the year - around a two and a half percent expansion in the GDP or gross domestic product.
Duncan's colleague at the National Association of Home Builders, chief economist David Crowe, has a similar outlook.
New construction by builders "is essentially in a holding pattern" at the moment, says Crowe, constrained by the country's persistent high unemployment. In the Census survey released last week, starts of new housing were up 1.7 percent, but single family starts were down by four percent.
Despite that, Crowe believes that favorable home buying conditions "are taking shape for consumers, led by "historically low mortgage rates and low (home) prices."
Together these factors "should help spur additional demand (later this year) as the job market gradually improves."
One of the encouraging signs out there to spur that additional demand is the relative strength being shown on the pricing front. According to the latest survey by real estate data company Corelogic, most areas are seeing either stable prices or modest growth in home values.
Corelogic found that homes nationwide gained one point four percent last month in market value on average -- the fifth straight month of increases.
Many local markets did better than that, like Maine and California where prices gained 6 percent, the District of Columbia at 5 percent and Virginia at 4 percent.
There were some negatives in the same survey: Oregon, Washington state and New Mexico were down by more than 3 percent, but overall the price direction was up.
That sort of report, in turn, gives potential buyers confidence about something important: They won't lose money on a house they buy today.
Never known as a Pollyanna or wild optimist, Duncan acknowledges that this summer has been a challenging time for just about anyone in real estate.
The slump was widely predicted earlier this year by economists -- including Duncan -- who saw sales and building starts essentially sucked out of the summer months into the spring months by the expiring tax credit deadline in April.
Though there's a statistical lull at the moment, Duncan sees some positives taking shape: "Consumers are lowering their leverage" he says-cutting their debt burdens - and "positioning themselves to resume consumption" - including home purchases.
But they're understandably worried about the unemployment situation and not sure how solid the economic recovery is going to be.
Despite all this, Duncan suggests in his forecast, "the upside potentials are there." He sees modest economic growth for the balance of the year - around a two and a half percent expansion in the GDP or gross domestic product.
Duncan's colleague at the National Association of Home Builders, chief economist David Crowe, has a similar outlook.
New construction by builders "is essentially in a holding pattern" at the moment, says Crowe, constrained by the country's persistent high unemployment. In the Census survey released last week, starts of new housing were up 1.7 percent, but single family starts were down by four percent.
Despite that, Crowe believes that favorable home buying conditions "are taking shape for consumers, led by "historically low mortgage rates and low (home) prices."
Together these factors "should help spur additional demand (later this year) as the job market gradually improves."
One of the encouraging signs out there to spur that additional demand is the relative strength being shown on the pricing front. According to the latest survey by real estate data company Corelogic, most areas are seeing either stable prices or modest growth in home values.
Corelogic found that homes nationwide gained one point four percent last month in market value on average -- the fifth straight month of increases.
Many local markets did better than that, like Maine and California where prices gained 6 percent, the District of Columbia at 5 percent and Virginia at 4 percent.
There were some negatives in the same survey: Oregon, Washington state and New Mexico were down by more than 3 percent, but overall the price direction was up.
That sort of report, in turn, gives potential buyers confidence about something important: They won't lose money on a house they buy today.
30-Year, 15-Year Fixed-Rate Mortgages Continue to Inch Downward
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), and for yet another week, the fixed-rate mortgages reached another low, while the 5-year adjustable rate remained tied at its low for this survey.
30-year fixed-rate mortgage (FRM) averaged 4.42 percent with an average 0.7 point for the week ending August 19, 2010, down from last week when it averaged 4.44 percent. Last year at this time, the 30-year FRM averaged 5.12 percent.
15-year FRM this week averaged a record low of 3.90 percent with an average 0.6 point, down from last week when it averaged 3.92 percent. A year ago at this time, the 15-year FRM averaged 4.56 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.57 percent.
1-year Treasury-indexed ARM averaged 3.53 percent this week with an average 0.7 point, unchanged from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.
Amy Crews Cutts, deputy chief economist of Freddie Mac, reports, "Investors in long-term bonds appear very confident that inflation will remain in check, and as a result long-term fixed mortgage rates have continued to fall. This week marks the ninth straight week in the Primary Mortgage Market Survey® that 30-year-fixed mortgage rates have met or set a new record low."
She continued, "This week's release of the Consumer Price Index indicates that current inflation is very low. The 12-month growth in the core consumer price index has held at only 0.9 percent for four straight months ending in July. The last time price growth was this low was the year ending January 1966. ... The housing market is in a lull following the expiration of the homebuyer tax credits. Single-family starts fell for the third straight month in July to an annual pace of 432,000 homes, the fewest since May 2009. In addition, homebuilder confidence fell for the third consecutive month in August to the lowest since March 2009, according to the NAHB/Wells Fargo Housing Opportunity Index. Even confidence among realtors was at a 16-month low in June, according to the National Association of Realtors ®."
30-year fixed-rate mortgage (FRM) averaged 4.42 percent with an average 0.7 point for the week ending August 19, 2010, down from last week when it averaged 4.44 percent. Last year at this time, the 30-year FRM averaged 5.12 percent.
15-year FRM this week averaged a record low of 3.90 percent with an average 0.6 point, down from last week when it averaged 3.92 percent. A year ago at this time, the 15-year FRM averaged 4.56 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.56 percent this week, with an average 0.6 point, unchanged from last week when it also averaged 3.56 percent. A year ago, the 5-year ARM averaged 4.57 percent.
1-year Treasury-indexed ARM averaged 3.53 percent this week with an average 0.7 point, unchanged from last week when it also averaged 3.53 percent. At this time last year, the 1-year ARM averaged 4.69 percent.
Amy Crews Cutts, deputy chief economist of Freddie Mac, reports, "Investors in long-term bonds appear very confident that inflation will remain in check, and as a result long-term fixed mortgage rates have continued to fall. This week marks the ninth straight week in the Primary Mortgage Market Survey® that 30-year-fixed mortgage rates have met or set a new record low."
She continued, "This week's release of the Consumer Price Index indicates that current inflation is very low. The 12-month growth in the core consumer price index has held at only 0.9 percent for four straight months ending in July. The last time price growth was this low was the year ending January 1966. ... The housing market is in a lull following the expiration of the homebuyer tax credits. Single-family starts fell for the third straight month in July to an annual pace of 432,000 homes, the fewest since May 2009. In addition, homebuilder confidence fell for the third consecutive month in August to the lowest since March 2009, according to the NAHB/Wells Fargo Housing Opportunity Index. Even confidence among realtors was at a 16-month low in June, according to the National Association of Realtors ®."
Americans Still Want to Own a Home
More than 72 percent of American adults say that home ownership is a part of their personal American dream, down from 77 percent six months ago, according to a survey for Trulia.com.
About 23 percent said their attitude toward homeownership has grown more positive in the last six months, while 19 percent say they feel more negatively.
Among those adults who are renting a home, 27 percent say they never intend to buy. Of the renters who do plan to purchase eventually, 68 percent said it would be more than two years before they do.
The factors that would encourage them to buy now are:
• Able to save a down payment, 47 percent• Land a new job, 28 percent• Interest rates stay low or fall lower, 27 percent• Some other factor that persuades them that buying makes financial sense, 24 percent• Get a raise, 23 percent• Local real estate market stabilizes, 9 percent
About 23 percent said their attitude toward homeownership has grown more positive in the last six months, while 19 percent say they feel more negatively.
Among those adults who are renting a home, 27 percent say they never intend to buy. Of the renters who do plan to purchase eventually, 68 percent said it would be more than two years before they do.
The factors that would encourage them to buy now are:
• Able to save a down payment, 47 percent• Land a new job, 28 percent• Interest rates stay low or fall lower, 27 percent• Some other factor that persuades them that buying makes financial sense, 24 percent• Get a raise, 23 percent• Local real estate market stabilizes, 9 percent
Three Reasons To Buy a Home Now!
Stocks are up 50 percent from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World Investor stock newsletter.
As a result, Murphy is advising investors to buy now for these three reasons:
• Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.
• Little competition. Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.
• Low rates. Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.
Source: MarketWatch, Michael Murphy (08/19/2010)
As a result, Murphy is advising investors to buy now for these three reasons:
• Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.
• Little competition. Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.
• Low rates. Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.
Source: MarketWatch, Michael Murphy (08/19/2010)
Social Benefits of Housing
Recent research from the National Association of Realtors (NAR) outlines the importance of homeownership's relationship with the economy, but of the social benefits it provides.
NAR reports, "The economic benefits of the housing market and homeownership are immense and well documented. The housing sector directly accounted for approximately 14 percent of total economic activity in 2009."
What sorts of social benefits are provided through homeownership?
According to the study entitled, "Effects of Homeownership on Children: The Role of Neighborhood Characteristics and Family Income", teens from households of homeownership have a higher rate of staying in school than teens from rental households. In addition, daughters of homeowners also experience a lower rate of teen pregnancy.
In terms of education, in the study, “Measuring the Benefits of Homeowning: Effects on Children,” there have been significant findings that homeownership has a strong positive effect on educational achievement.
The NAR report goes even further to show that "the average child of homeowners is significantly more likely to achieve a higher level of education and, thereby, a higher level of earnings."
Homeowners deal daily with issues pertaining to home maintenance and financial responsibility, something NAR research shows teaches children "life management skills."
Studies have also found that homeownership increases the amount of civic participation in a community. This is due in part to homeowners feeling that they have a higher, more permanent stake in their community and its issues.
For example, a study by Glaeser and DiPasquale found that 77 percent of homeowners said they had at some point voted in local elections, compared with 52 percent of renters.
In addition to these great social benefits, higher levels of homeownership have shown to reduce crime rates in communities. "Homeowners have a lot more to lose financially than do renters. Property crimes directly result in financial losses to the victim. Furthermore, violent non-property crimes can impact the property values of the whole neighborhood. Therefore, homeowners have more incentive to deter crime by forming and implementing voluntary crime prevention programs." (NAR)
NAR reports, "The economic benefits of the housing market and homeownership are immense and well documented. The housing sector directly accounted for approximately 14 percent of total economic activity in 2009."
What sorts of social benefits are provided through homeownership?
According to the study entitled, "Effects of Homeownership on Children: The Role of Neighborhood Characteristics and Family Income", teens from households of homeownership have a higher rate of staying in school than teens from rental households. In addition, daughters of homeowners also experience a lower rate of teen pregnancy.
In terms of education, in the study, “Measuring the Benefits of Homeowning: Effects on Children,” there have been significant findings that homeownership has a strong positive effect on educational achievement.
The NAR report goes even further to show that "the average child of homeowners is significantly more likely to achieve a higher level of education and, thereby, a higher level of earnings."
Homeowners deal daily with issues pertaining to home maintenance and financial responsibility, something NAR research shows teaches children "life management skills."
Studies have also found that homeownership increases the amount of civic participation in a community. This is due in part to homeowners feeling that they have a higher, more permanent stake in their community and its issues.
For example, a study by Glaeser and DiPasquale found that 77 percent of homeowners said they had at some point voted in local elections, compared with 52 percent of renters.
In addition to these great social benefits, higher levels of homeownership have shown to reduce crime rates in communities. "Homeowners have a lot more to lose financially than do renters. Property crimes directly result in financial losses to the victim. Furthermore, violent non-property crimes can impact the property values of the whole neighborhood. Therefore, homeowners have more incentive to deter crime by forming and implementing voluntary crime prevention programs." (NAR)
About That Real Estate Sales Tax
If you haven't received an email about the alleged real estate sales tax, you will. Probably, many readers have already received more than one. They go something like this: "Did you know that the new health care bill will make all real estate transactions subject to a 3.8% sales tax? Just think, if you sell your home for $400,000, there will be a $15,200 tax!"
It isn't true. (And if you don't believe me, check with Snopes.com or FactCheck.org. Everyone believes them.) But it's easy to understand how some have been misled. The National Association of Realtors® (NAR) has been putting out "Myth Buster" commentaries on this topic since the spring of this year (2010), but the rumors persist.
Part of the problem is semantics. The health care legislation does contain a variety of new taxes, and one of them can be influenced, in certain circumstances, by a sale of real estate. (For those who like to check things out, we are talking about Section 1402 of HR 4872, the Health Care and Education Affordability Reconciliation Act of 2010 which was signed into law by President Obama on March 23, 2010.) But it's not a sales tax. If it were, it could be computed simply by knowing the facts of the sale. This tax is not that simple. Nothing that Congress does is that simple.
The new tax has been called a Medicare tax, because that is where the money will go. It is one of those taxes – to use the language of its supporters – that targets "high income" people. You know: the singles whose Adjusted Gross Income (AGI) is over $200,000 and the couples whose AGI exceeds $250,000.
To understand all this, we need the concept of "unearned income." (Bear with me now. These aren't my ideas. I'm just trying to convey what those people in Washington think.) "Unearned income", in the minds of those who live in the Beltway, is income you don't receive from your day job. It includes capital gains, rents, dividends, and interest income. To soften the concept, it is sometimes referred to as "investment income."
Now – stay with me here – for tax purposes your AGI (Adjusted Gross Income) consists of both your "regular" income (i.e. your job or your occupation) plus your net investment ("unearned") income. For most real estate professionals, who are independent contractors, the earned income would be the net Schedule C income; whereas for wage earners it would be reflected in the W-2.
Suppose you are a real estate salesperson and that your annual gross commission income was $150,000 with expenses of $75,000. That gives you $75,000 of earned income. Next, suppose you had gross rental income of $50,000 with expenses of $25,000. That gives you net investment income of $25,000. Your AGI, then, would be $100,000. (Good for you; you had a better year than a lot of us.)
Where does the sale of real estate come into all this? Well, your capital gains, if you had any, contribute – as investment income – to your AGI. Suppose the same set of facts as above, but add that during the year you sold a piece of investment real estate and realized a $50,000 capital gain. Now, your AGI for the year would be $150,000. Pretty good, but still not "high income."
So, what is the new tax? The Medicare tax applies only when AGI exceeds the limit of $200,000 for singles or $250,000 for couples. If those limits are exceeded, then the tax is 3.8% of the lesser of (1) net investment income or (2) the excess of AGI over the above-mentioned limits.
In the examples above, the limits were not exceeded, so no Medicare tax applied. There was no real estate sales tax. Next we'll look at two examples where the Medicare tax would apply.
(1) A couple earns $200,000 in their regular jobs; plus, they have net rental income of $100,000. They have exceeded the AGI limit by $50,000. The tax is triggered. Because the excess over the limit (that is, $50,000) is smaller than the net investment income of $100,000, the 3.8% tax is applied to the $50,000.
(2) This couple earns $350,000 in their occupations. A sale of investment property yielded a $50,000 capital gain; and their net rental income equaled $50,000. Their AGI is $450,000, exceeding the limit by $200,000. Their net investment income is $100,000. Because the net investment income is smaller than the excess over the AGI limit, it is the $100,000 that will be taxed 3.8%. (By the way, is this now a real estate sales tax? The sale only represented ½ the net investment income. You might just as well call it a "rent tax".) Just one more, and we'll be through. Suppose a couple earned $250,000 in their regular jobs, and that they sold their principal residence in which they had lived for ten years for a gain of $300,000. Would the Medicare tax apply? No, because they would be able to take the $500,000 exclusion. Gains from the sale would only be taxed if they exceeded that amount. Again, where's the sales tax?
This special Medicare tax does not kick in until January 1, 2013. Who knows? Maybe everything will have been changed again by then.
Published: August 17, 2010
It isn't true. (And if you don't believe me, check with Snopes.com or FactCheck.org. Everyone believes them.) But it's easy to understand how some have been misled. The National Association of Realtors® (NAR) has been putting out "Myth Buster" commentaries on this topic since the spring of this year (2010), but the rumors persist.
Part of the problem is semantics. The health care legislation does contain a variety of new taxes, and one of them can be influenced, in certain circumstances, by a sale of real estate. (For those who like to check things out, we are talking about Section 1402 of HR 4872, the Health Care and Education Affordability Reconciliation Act of 2010 which was signed into law by President Obama on March 23, 2010.) But it's not a sales tax. If it were, it could be computed simply by knowing the facts of the sale. This tax is not that simple. Nothing that Congress does is that simple.
The new tax has been called a Medicare tax, because that is where the money will go. It is one of those taxes – to use the language of its supporters – that targets "high income" people. You know: the singles whose Adjusted Gross Income (AGI) is over $200,000 and the couples whose AGI exceeds $250,000.
To understand all this, we need the concept of "unearned income." (Bear with me now. These aren't my ideas. I'm just trying to convey what those people in Washington think.) "Unearned income", in the minds of those who live in the Beltway, is income you don't receive from your day job. It includes capital gains, rents, dividends, and interest income. To soften the concept, it is sometimes referred to as "investment income."
Now – stay with me here – for tax purposes your AGI (Adjusted Gross Income) consists of both your "regular" income (i.e. your job or your occupation) plus your net investment ("unearned") income. For most real estate professionals, who are independent contractors, the earned income would be the net Schedule C income; whereas for wage earners it would be reflected in the W-2.
Suppose you are a real estate salesperson and that your annual gross commission income was $150,000 with expenses of $75,000. That gives you $75,000 of earned income. Next, suppose you had gross rental income of $50,000 with expenses of $25,000. That gives you net investment income of $25,000. Your AGI, then, would be $100,000. (Good for you; you had a better year than a lot of us.)
Where does the sale of real estate come into all this? Well, your capital gains, if you had any, contribute – as investment income – to your AGI. Suppose the same set of facts as above, but add that during the year you sold a piece of investment real estate and realized a $50,000 capital gain. Now, your AGI for the year would be $150,000. Pretty good, but still not "high income."
So, what is the new tax? The Medicare tax applies only when AGI exceeds the limit of $200,000 for singles or $250,000 for couples. If those limits are exceeded, then the tax is 3.8% of the lesser of (1) net investment income or (2) the excess of AGI over the above-mentioned limits.
In the examples above, the limits were not exceeded, so no Medicare tax applied. There was no real estate sales tax. Next we'll look at two examples where the Medicare tax would apply.
(1) A couple earns $200,000 in their regular jobs; plus, they have net rental income of $100,000. They have exceeded the AGI limit by $50,000. The tax is triggered. Because the excess over the limit (that is, $50,000) is smaller than the net investment income of $100,000, the 3.8% tax is applied to the $50,000.
(2) This couple earns $350,000 in their occupations. A sale of investment property yielded a $50,000 capital gain; and their net rental income equaled $50,000. Their AGI is $450,000, exceeding the limit by $200,000. Their net investment income is $100,000. Because the net investment income is smaller than the excess over the AGI limit, it is the $100,000 that will be taxed 3.8%. (By the way, is this now a real estate sales tax? The sale only represented ½ the net investment income. You might just as well call it a "rent tax".) Just one more, and we'll be through. Suppose a couple earned $250,000 in their regular jobs, and that they sold their principal residence in which they had lived for ten years for a gain of $300,000. Would the Medicare tax apply? No, because they would be able to take the $500,000 exclusion. Gains from the sale would only be taxed if they exceeded that amount. Again, where's the sales tax?
This special Medicare tax does not kick in until January 1, 2013. Who knows? Maybe everything will have been changed again by then.
Published: August 17, 2010
Second-Quarter Mortgage Delinquencies Slide
Credit reporting agency TransUnion reports that the rate of home mortgage delinquencies – payments 60 days or more late – during the second-quarter was 6.67 percent, up from 5.81 percent in the second quarter of 2009, but down from 6.89 percent in the fourth quarter of 2009. It was also marginally better than the 6.77 percent first-quarter 2010 rate.
"We're seeing signs of recovering in terms of delinquency," says FJ Guarrera, vice president in TransUnion's financial services unit.
TransUnion expects the delinquency rate to fall further for the next two quarters, reaching 6.4 percent by the end of 2010.
Source: Associated Press, Eileen AJ Connelly (08/17/2010)
"We're seeing signs of recovering in terms of delinquency," says FJ Guarrera, vice president in TransUnion's financial services unit.
TransUnion expects the delinquency rate to fall further for the next two quarters, reaching 6.4 percent by the end of 2010.
Source: Associated Press, Eileen AJ Connelly (08/17/2010)
Contingent Offers Regaining Popularity
Offers contingent on a buyers’ ability to sell his current residence are increasing in popularity. They were almost unheard of during the go-go early 2000s, but common 20 years before that.
Sellers generally don’t like these kinds of offers because it puts them in limbo. If their buyers’ home doesn’t sell, they can be back at square one. Also, once sellers accept a contingent sale offer, they must disclose this to other potential buyers and that can discourage a buyer prepared to make a better offer.
Sellers who accept contingent-sale offers can include an escape clause in the contract. This clause allows the sellers to notify the contingent-sale buyers of a competing offer and they must remove the contingency in 72 hours (on average) or lose the home.
Source: Inman News, Dian Hymer (08/16/2010)
Sellers generally don’t like these kinds of offers because it puts them in limbo. If their buyers’ home doesn’t sell, they can be back at square one. Also, once sellers accept a contingent sale offer, they must disclose this to other potential buyers and that can discourage a buyer prepared to make a better offer.
Sellers who accept contingent-sale offers can include an escape clause in the contract. This clause allows the sellers to notify the contingent-sale buyers of a competing offer and they must remove the contingency in 72 hours (on average) or lose the home.
Source: Inman News, Dian Hymer (08/16/2010)
Santa Clara County Housing Sees Continued Price Appreciation
SAN JOSE, Calif., Aug. 12 /PRNewswire/ -- Vital housing statistics from July continued to indicate that the Santa Clara County housing market was strong and getting stronger, a trend uninterrupted since January.
The average sales price for a home – including single family homes, townhomes and condos – rose to $710,475, a 2.20 percent increase from June and a 12.42 percent increase from July 2009, according to MLSListings. It climbed higher each month this year except for a slight dip in May.
The higher inventory is another sign of the market momentum. 6,636 homes were for sale in July, a 2.80 percent increase from June and a 25.37 percent increase from July 2009. For condos and townhomes, the jump in inventory was even more remarkable. 1,998 of these properties were on the market in July, up 43.02 percent from July 2009.
"Higher home prices demonstrate that homebuyers have regained full confidence in the property value of our region," said Karl Lee, president of the Santa Clara County Association of REALTORS®. "They realize this could be the once-in-a-life-time opportunity to buy, with home prices still far below the peak, mortgage interest rates at new 50-year lows, and a big supply of homes to select from. Well priced homes often attract multiple offers. We urge sellers to carefully price their properties for fast sale by working with a knowledgeable REALTOR®."
The average sales price for a home – including single family homes, townhomes and condos – rose to $710,475, a 2.20 percent increase from June and a 12.42 percent increase from July 2009, according to MLSListings. It climbed higher each month this year except for a slight dip in May.
The higher inventory is another sign of the market momentum. 6,636 homes were for sale in July, a 2.80 percent increase from June and a 25.37 percent increase from July 2009. For condos and townhomes, the jump in inventory was even more remarkable. 1,998 of these properties were on the market in July, up 43.02 percent from July 2009.
"Higher home prices demonstrate that homebuyers have regained full confidence in the property value of our region," said Karl Lee, president of the Santa Clara County Association of REALTORS®. "They realize this could be the once-in-a-life-time opportunity to buy, with home prices still far below the peak, mortgage interest rates at new 50-year lows, and a big supply of homes to select from. Well priced homes often attract multiple offers. We urge sellers to carefully price their properties for fast sale by working with a knowledgeable REALTOR®."
"Judge a man by his questions rather than by his answers."
François-Marie Arouet (1694–1778), better known by his pen name Voltaire, embodied the French Enlightenment. He was known for his wit, philosophical outlook, and defense of civil liberties, including freedom of religion. After being imprisoned in the Bastille from 1917-1918 for lampooning the Duc d'Orléans, he adopted the name Voltaire which is an anagram of Arovet Li, the Latinized spelling of his last name. The name also echoes the syllables of a familial chateau, Airvault. It is also possible that the name was intended to connote speed and daring - volt being a French fencing term meaning to make a sudden dexterous movement to avoid a thrust, from which comes words such as volte-face.......
I find it curious that in many cases, we need to look to the past, to understand our future. So many politicians don't ask questions at all, they can only make statments. Even if they do ask questions.... they will not listen to our answers. "Food for thought"
I find it curious that in many cases, we need to look to the past, to understand our future. So many politicians don't ask questions at all, they can only make statments. Even if they do ask questions.... they will not listen to our answers. "Food for thought"
The Worst Is Over, Some Experts Conclude
With housing recovering slowly, most economists predicted in a recent survey that it will take at least five years for average home prices to climb back to the levels they commanded in 2006.
This year, some hard-hit areas may see another dip, but properties values will most likely rise.
"Softness in the summer months will be followed by firming conditions and momentum as the year unfolds and the economy strengthens," says Robert Denk, an economist for the National Association of Home Builders.
Source: Reuters News (08/12/2010)
This year, some hard-hit areas may see another dip, but properties values will most likely rise.
"Softness in the summer months will be followed by firming conditions and momentum as the year unfolds and the economy strengthens," says Robert Denk, an economist for the National Association of Home Builders.
Source: Reuters News (08/12/2010)
Bathroom Remodels Becoming More Popular
While kitchens are still high on the interest list for buyers and homeowners, the National Association of Home Builders (NAHB) is reporting that remodeler survey respondents say that a bathroom remodel was one of their most common projects during the first six months of 2010--as much as 61 percent of their remodels were done on bathrooms.
"In previous years, kitchen remodeling was reported as the most common activity by more than 70 percent of remodeler respondents," according to the NAHB news release.
NAHB reported that its Remodeling Market Index sunk to 40.7 from 47.9 in the first quarter. The survey also showed a decline in larger remodeling projects "such as room additions, whole house remodeling, bathroom additions, and second story additions. But NAHB is forecasting encouraging news. "While remodelers are continuing to struggle, we expect the rest of 2010 to be a period of stabilization for remodeling, with the first stages of recovery emerging by the end of the year, followed by a robust recovery beginning early next year," said NAHB Chief Economist David Crowe.
However, these market conditions are making now the right time to take on remodeling projects that can not only increase comfort and functionality but also add value to your home.
No matter which room you're going to remodel, doing your homework and knowing exactly what you want will save you not only money but also potential headaches. Things like checking references and visiting some of the recently remodeled projects are a great way to determine if the company you plant to hire will be suitable for your needs. Neglecting to do this could mean that you bring in the wrong company and, worst case scenario, a simple job turns into months of work and extra expenses.
Here are a few things to consider when remodeling. Some experts say, if you're planning to stay in the home for five years, remodel it how you like. In other words, put in the countertops that make you happy--even if they're not the most popular. Use the color paint that expresses your inner feelings. However, I always say, remember there's a balance. If you remodel and create something that is so unusual, you may run the risk of it not appealing to the masses and therefore you will have to find the few that are searching for that particular look. That doesn't mean you shouldn't design and decorate based on your likes, it's just a matter of considering how the remodel will impact you when it comes time to sell the home and then choosing the best option for you for both short and long term.
1. Write it down. Just like your goals in life are more likely to come to fruition when first penciled out on paper, your ideas for your remodeling project also need to be clearly spelled out. When you do this you are able to clearly see which projects you want to tackle first, how much money you can afford/want to spend on the remodeling projects, and if your goals conflict with your ultimate objectives. You will find clarity by writing down what you hope to accomplish. This step alone can turn the project into a success from the start.
2. Slow down. Don't rush into a project. If you just purchased a home, some experts recommend living in it a year before you start to knock out walls. Your taste and needs might change. Get to know your surroundings and then thoughtfully consult with design-build companies to help ensure the project's success. Visit other people's homes and see how they increased storage and used space-saving techniques in their design. I am frequently visiting remodeled homes and am amazed at the creative ideas that add functionality for the homeowner and aesthetic beauty.
3. Let there be light. Light and bright is a commonly used term when listing a home. It's popular because it's appealing to buyers. If you're in the design phase of your remodel, especially for a bathroom--but other areas too, be sure to make sure that you will end up with enough light. The folks over at HouseLogic.com concur. Making lighting a priority. "When it comes to adding creature comforts, your first thoughts might be multiple shower heads and radiant-heat floors. But few items make a bathroom more satisfying than lighting designed for everyday grooming," writes author and residential builder, John Rhia.
4. Keep it clean. One of my pet peeves is yucky bathroom air. Poor ventilation creates enormous problems in the future. Homes that were designed without bathroom windows that open can quickly develop mold, mildew, and stale air if there isn't a very good ventilation system installed. High-quality bathroom fans help. These are often not thought of because they're not obvious "fun toys" like heated floors, but bathroom ventilation systems that exhaust to the outside are vital. Consult with your remodeling expert for the best choice for your room.
Before beginning any remodel, talk to lots of experts, get all your ideas out on paper, and prioritize wants and needs. Taking the time and steps to create a plan with your hired experts will ensure your needs and desires are met in a timely fashion.
"In previous years, kitchen remodeling was reported as the most common activity by more than 70 percent of remodeler respondents," according to the NAHB news release.
NAHB reported that its Remodeling Market Index sunk to 40.7 from 47.9 in the first quarter. The survey also showed a decline in larger remodeling projects "such as room additions, whole house remodeling, bathroom additions, and second story additions. But NAHB is forecasting encouraging news. "While remodelers are continuing to struggle, we expect the rest of 2010 to be a period of stabilization for remodeling, with the first stages of recovery emerging by the end of the year, followed by a robust recovery beginning early next year," said NAHB Chief Economist David Crowe.
However, these market conditions are making now the right time to take on remodeling projects that can not only increase comfort and functionality but also add value to your home.
No matter which room you're going to remodel, doing your homework and knowing exactly what you want will save you not only money but also potential headaches. Things like checking references and visiting some of the recently remodeled projects are a great way to determine if the company you plant to hire will be suitable for your needs. Neglecting to do this could mean that you bring in the wrong company and, worst case scenario, a simple job turns into months of work and extra expenses.
Here are a few things to consider when remodeling. Some experts say, if you're planning to stay in the home for five years, remodel it how you like. In other words, put in the countertops that make you happy--even if they're not the most popular. Use the color paint that expresses your inner feelings. However, I always say, remember there's a balance. If you remodel and create something that is so unusual, you may run the risk of it not appealing to the masses and therefore you will have to find the few that are searching for that particular look. That doesn't mean you shouldn't design and decorate based on your likes, it's just a matter of considering how the remodel will impact you when it comes time to sell the home and then choosing the best option for you for both short and long term.
1. Write it down. Just like your goals in life are more likely to come to fruition when first penciled out on paper, your ideas for your remodeling project also need to be clearly spelled out. When you do this you are able to clearly see which projects you want to tackle first, how much money you can afford/want to spend on the remodeling projects, and if your goals conflict with your ultimate objectives. You will find clarity by writing down what you hope to accomplish. This step alone can turn the project into a success from the start.
2. Slow down. Don't rush into a project. If you just purchased a home, some experts recommend living in it a year before you start to knock out walls. Your taste and needs might change. Get to know your surroundings and then thoughtfully consult with design-build companies to help ensure the project's success. Visit other people's homes and see how they increased storage and used space-saving techniques in their design. I am frequently visiting remodeled homes and am amazed at the creative ideas that add functionality for the homeowner and aesthetic beauty.
3. Let there be light. Light and bright is a commonly used term when listing a home. It's popular because it's appealing to buyers. If you're in the design phase of your remodel, especially for a bathroom--but other areas too, be sure to make sure that you will end up with enough light. The folks over at HouseLogic.com concur. Making lighting a priority. "When it comes to adding creature comforts, your first thoughts might be multiple shower heads and radiant-heat floors. But few items make a bathroom more satisfying than lighting designed for everyday grooming," writes author and residential builder, John Rhia.
4. Keep it clean. One of my pet peeves is yucky bathroom air. Poor ventilation creates enormous problems in the future. Homes that were designed without bathroom windows that open can quickly develop mold, mildew, and stale air if there isn't a very good ventilation system installed. High-quality bathroom fans help. These are often not thought of because they're not obvious "fun toys" like heated floors, but bathroom ventilation systems that exhaust to the outside are vital. Consult with your remodeling expert for the best choice for your room.
Before beginning any remodel, talk to lots of experts, get all your ideas out on paper, and prioritize wants and needs. Taking the time and steps to create a plan with your hired experts will ensure your needs and desires are met in a timely fashion.
NAR: Home Prices Are Firming
The trend in firming home prices solidified in the second quarter with more metropolitan areas showing increases from a year ago, aided by a surge in home sales driven by the home buyer tax credit, according to the latest survey by the National Association of REALTORS®.
In the second quarter, 100 out of 155 metropolitan statistical areas (MSAs) had higher median existing single-family home prices in comparison with the second quarter of 2009, including 14 with double-digit increases; two were unchanged and 53 metros showed price declines. In the first quarter of this year 91 areas had higher prices, while only 26 MSAs experienced annual price gains in second quarter of 2009.
The national median existing single-family price was $176,900 in the second quarter, up 1.5 percent from $174,200 in the same period of 2009. The median is where half sold for more and half sold for less. Distressed homes accounted for 32 percent of second quarter sales, down from 36 percent a year ago.
Lawrence Yun, NAR chief economist, says the correction in home prices appears to have ended in 2009. “All year we’ve been seeing relatively flat national home prices, which appear to be supported by market fundamentals,” he said. “Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market we don’t expect any consequential movement in home prices for the foreseeable future. Very low inventory of newly built homes also will help to support home values.”
Yun urged caution on interpreting price data. “The median price is influenced by the mix of homes that were sold and do not reflect pure appreciation or depreciation,” he says. “The recorded home prices in many markets were significantly depressed last year because of a large percentage of distressed homes sold at discount. Now as more normal, non-distressed home sales are occurring, the median price in many areas is showing higher values.”
Total state existing-home sales, including single-family and condo, rose 9.1 percent to a seasonally adjusted annual rate of 5.61 million in the second quarter from 5.14 million in the first quarter, and were 17.3 percent above the 4.78 million-unit pace in the second quarter of 2009.
Sales increased from the first quarter in 44 states and the District of Columbia; 47 states and D.C. had increases over year-ago sales levels.
NAR President Vicki Cox Golder says record low mortgage interest rates will help cushion a summer slowdown. “As expected, sales are slowing down now that the home buyer tax credit has expired, but record-low mortgage interest rates, along with stable and affordable home prices in most areas, provide opportunities for buyers who weren’t able to take advantage of the credit,” she said.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.91 percent in the second quarter, down from 5.00 percent in the first quarter; it was 5.03 percent in the second quarter of 2009.
“Job creation will give home buyers more confidence, but the market over the next few months is likely to be below what we would expect for the size of our growing population,” Golder says. “With improving bank balance sheets, credit restrictions should gradually improve ."
In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas – showed the national median existing-condo price was relatively flat at $175,700 in the second quarter, down 0.5 percent from the second quarter of 2009. Twenty-six metros showed increases in the median condo price from a year ago and 29 areas had declines; the first quarter of 2010 showed 24 metros up, while only four metros saw annual price gains in second quarter of 2009.
Northeast: Regionally, the median existing single-family home price in the Northeast declined 3.2 percent to $238,000 in the second quarter from a year earlier. Existing-home sales in the Northeast jumped 14.9 percent in the second quarter to a level of 980,000 and are 23.6 percent above the second quarter of 2009.
Midwest: In the Midwest, the median existing single-family home price increased 1.4 percent to $148,500 in the second quarter from the second quarter of last year. Existing-home sales in the Midwest rose 14.5 percent in the second quarter to a pace of 1.30 million and are 20.9 percent above the same period in 2009.
South: In the South, the median existing single-family home price slipped 2.0 percent to $155,500 in the second quarter from the second quarter of 2009. Existing-home sales in the South increased 10.9 percent in the second quarter to an annual rate of 2.10 million and are 18.8 percent above a year ago.
West: The median existing single-family home price in the West rose 2.6 percent to $219,700 in the second quarter from a year ago. Existing-home sales in the West fell 2.6 percent in the second quarter to an annual rate of 1.23 million but are 7.6 percent higher than the second quarter of 2009.
— NAR
In the second quarter, 100 out of 155 metropolitan statistical areas (MSAs) had higher median existing single-family home prices in comparison with the second quarter of 2009, including 14 with double-digit increases; two were unchanged and 53 metros showed price declines. In the first quarter of this year 91 areas had higher prices, while only 26 MSAs experienced annual price gains in second quarter of 2009.
The national median existing single-family price was $176,900 in the second quarter, up 1.5 percent from $174,200 in the same period of 2009. The median is where half sold for more and half sold for less. Distressed homes accounted for 32 percent of second quarter sales, down from 36 percent a year ago.
Lawrence Yun, NAR chief economist, says the correction in home prices appears to have ended in 2009. “All year we’ve been seeing relatively flat national home prices, which appear to be supported by market fundamentals,” he said. “Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market we don’t expect any consequential movement in home prices for the foreseeable future. Very low inventory of newly built homes also will help to support home values.”
Yun urged caution on interpreting price data. “The median price is influenced by the mix of homes that were sold and do not reflect pure appreciation or depreciation,” he says. “The recorded home prices in many markets were significantly depressed last year because of a large percentage of distressed homes sold at discount. Now as more normal, non-distressed home sales are occurring, the median price in many areas is showing higher values.”
Total state existing-home sales, including single-family and condo, rose 9.1 percent to a seasonally adjusted annual rate of 5.61 million in the second quarter from 5.14 million in the first quarter, and were 17.3 percent above the 4.78 million-unit pace in the second quarter of 2009.
Sales increased from the first quarter in 44 states and the District of Columbia; 47 states and D.C. had increases over year-ago sales levels.
NAR President Vicki Cox Golder says record low mortgage interest rates will help cushion a summer slowdown. “As expected, sales are slowing down now that the home buyer tax credit has expired, but record-low mortgage interest rates, along with stable and affordable home prices in most areas, provide opportunities for buyers who weren’t able to take advantage of the credit,” she said.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.91 percent in the second quarter, down from 5.00 percent in the first quarter; it was 5.03 percent in the second quarter of 2009.
“Job creation will give home buyers more confidence, but the market over the next few months is likely to be below what we would expect for the size of our growing population,” Golder says. “With improving bank balance sheets, credit restrictions should gradually improve ."
In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas – showed the national median existing-condo price was relatively flat at $175,700 in the second quarter, down 0.5 percent from the second quarter of 2009. Twenty-six metros showed increases in the median condo price from a year ago and 29 areas had declines; the first quarter of 2010 showed 24 metros up, while only four metros saw annual price gains in second quarter of 2009.
Northeast: Regionally, the median existing single-family home price in the Northeast declined 3.2 percent to $238,000 in the second quarter from a year earlier. Existing-home sales in the Northeast jumped 14.9 percent in the second quarter to a level of 980,000 and are 23.6 percent above the second quarter of 2009.
Midwest: In the Midwest, the median existing single-family home price increased 1.4 percent to $148,500 in the second quarter from the second quarter of last year. Existing-home sales in the Midwest rose 14.5 percent in the second quarter to a pace of 1.30 million and are 20.9 percent above the same period in 2009.
South: In the South, the median existing single-family home price slipped 2.0 percent to $155,500 in the second quarter from the second quarter of 2009. Existing-home sales in the South increased 10.9 percent in the second quarter to an annual rate of 2.10 million and are 18.8 percent above a year ago.
West: The median existing single-family home price in the West rose 2.6 percent to $219,700 in the second quarter from a year ago. Existing-home sales in the West fell 2.6 percent in the second quarter to an annual rate of 1.23 million but are 7.6 percent higher than the second quarter of 2009.
— NAR
Fed Considers Ways to Perk Up Slow Economy
Following a disappointing July jobs report, the Federal Reserve is under pressure to stimulate economic growth. At their Aug. 10 meeting, officials likely will debate whether to hold down short-term interest rates for the long term or use proceeds from mortgage-backed securities investments to buy a small amount of government debt to lower long-term interest rates; but analysts say the impact of such moves would be minimal.
While the Fed could restart programs to purchase MBS and government debt on a large scale to boost growth, there is concern that a Wall Street sell-off could occur if investors panic.
Source: Associated Press, Jeannine Aversa (08/10/10)
© Copyright 2010 Information Inc.
While the Fed could restart programs to purchase MBS and government debt on a large scale to boost growth, there is concern that a Wall Street sell-off could occur if investors panic.
Source: Associated Press, Jeannine Aversa (08/10/10)
© Copyright 2010 Information Inc.
10 Low-Cost Tips to Improve Your Home's Appeal
When selling your home, the goal is to sell it quickly for the highest price while investing as little as possible in renovations. With a limited budget and a little effort, you can greatly increase your home's appeal by focusing on what prospective buyers can see on their first visit.
Tip #1: Refresh the exteriorFirst impressions count when it comes to selling a home. Most buyers won’t even leave their car if they don’t find the exterior appealing. The best ways to improve your home’s exterior include: -Repairing and/or replacing trims, shutters, gutters, shingles, mailboxes, window screens, walkways and the driveway. -Painting siding, trim and shutters and lamp and mailbox posts. -Pressure washing vinyl siding, roofs, walkways and the driveway. -Washing windows.
Tip #2: Spruce up the lawn and landscapeHome buyers associate the condition of your lawn and landscaping with the condition of your home’s interior. By improving the outside, you affect buyers’ impression of the entire property. The best ways to enhance the yard include: -Mowing and edging the lawn. -Seeding, fertilizing and weeding the lawn. -Keeping up with regular lawn maintenance by frequent watering.-Trimming and/or removing overgrown trees, shrubs and hedges. -Weeding and mulching plant beds. -Planting colorful seasonal flowers in existing plant beds. -Removing trash, especially along fences and underneath hedges. -Sweeping and weeding the street curb along your property.
Tip #3: Create an inviting entranceThe front door to your home should invite buyers to enter. The best ways to improve your entry include: -Painting the front door in a glossy, cheerful color that complements the exterior. -Cleaning, polishing and/or replacing the door knocker, locks and handles. -Repairing and/or replacing the screen door, the doorbell, porch lights and house numbers. -Placing a new welcome mat and a group of seasonal potted plants and flowers by the entry.
Tip #4: Reduce clutter and furnitureA buyer cannot envision living in your home without seeing it. A home filled with clutter or even too much furniture distracts buyers from seeing how they can utilize the space your home offers. If you have limited storage space, you may want to consider renting a temporary storage unit to place items you wish to keep. The best ways to declutter your home include: -Holding a garage sale to prepare for your move, getting rid of unnecessary items.-Removing clutter such as books, magazines, toys, tools, supplies and unused items from counter tops, open shelves, storage closets, the garage and basements. -Storing out-of-season clothing and shoes out of sight to make bedroom closets seem roomier. -Removing any visibly damaged furniture. -Organizing bookshelves, closets, cabinets and pantries. Buyers will inspect everything.-Putting away your personal photographs, unless they showcase the home. Let buyers see themselves in your home.-De-personalize rooms as much as you can.
Tip #5: Clean, clean, cleanThe cleanliness of your home also influences a buyer's perception of its condition. The appearance of the kitchen and bathrooms will play a considerable role in a buyer's decision process, so pay particular attention to these areas. The best ways to improve these areas include: -Cleaning windows, fixtures, hardware, ceiling fans, vent covers and appliances. -Cleaning carpets, area rugs and draperies. -Cleaning inside the refrigerator, the stove and all cabinets. -Removing stains from carpets, floors, counters, sinks, baths, tile, walls and grout. -Eliminating house odors, especially if you have pets. -Considering air fresheners or potpourri.
Tip #6: Make minor repairsThe small stuff does count, especially with first-time home buyers. Without dismissing the importance of repairing major items such as a leaky roof or plumbing, you do not need to spend money on replacing these items. Instead, focus on the minor repairs that will make your home visually appealing. The best ways to improve your home include: -Repairing ceilings and wall cracks. -Repairing faucets, banisters, handrails, cabinets, drawers, doors, floors and tile. -Caulking and grouting tubs, showers, sinks and tile. -Adding fresh paint to ceilings, walls, trim, doors and cabinets. -Tightening door handles, drawer pulls, light switches and electrical plates. -Lubricating door hinges and locks.
Tip #7: Showcase the kitchenThe heart of any home is the kitchen. If you are going to spend any money on renovations, this is the one area where you will see the greatest return. Even with a modest budget, focusing on a few key areas can make a great difference in getting the asking price for your property. The best ways to showcase the kitchen include: -Replacing cabinet doors and hardware. -Installing under-cabinet lighting. -Replacing light fixtures. -Replacing outdated shelving with pantry and cabinet organizers to maximize space. -Baking cookies or cupcakes for a showing, to create a homey smell.
Tip #8: Stage furnitureFurniture placement can enhance the space of your home while giving buyers an idea of how to best utilize the space with their own belongings. Take some time to rethink how different areas in your house could be used. Some ideas to think about include: -Moving couches and chairs away from walls in your sitting and family rooms to create cozy conversational groups. -Creating a reading corner in the master bedroom. -Clearing an empty room to set up a reading space. -Turning an awkward space into a home office. -Setting the dining room table with your best china.-Set wine glasses in front of the fireplace or next to a Jacuzzi tub.
Tip #9: Light up the houseCreate a sense of openness and cheerfulness in your home through its lighting. To improve the lighting try: -Opening shades and drapes to let the sunshine warm and brighten rooms. -Installing brighter light bulbs in rooms that tend to be dark. -Adding additional lamps for ambient lighting. -Turning on all the lights for a showing.
Tip #10: Add fresh touchesYou can easily add color and style to your home by adding fresh touches throughout. Some ideas to consider include: -Placing fresh floral arrangements in the entry and master bedroom. -Placing bowls of bright-colored fruit in the family room and the kitchen. -Filling an empty corner with a potted leafy plant. -Setting new hand soap in the bathrooms.-Displaying fresh towels near sinks.
Tip #1: Refresh the exteriorFirst impressions count when it comes to selling a home. Most buyers won’t even leave their car if they don’t find the exterior appealing. The best ways to improve your home’s exterior include: -Repairing and/or replacing trims, shutters, gutters, shingles, mailboxes, window screens, walkways and the driveway. -Painting siding, trim and shutters and lamp and mailbox posts. -Pressure washing vinyl siding, roofs, walkways and the driveway. -Washing windows.
Tip #2: Spruce up the lawn and landscapeHome buyers associate the condition of your lawn and landscaping with the condition of your home’s interior. By improving the outside, you affect buyers’ impression of the entire property. The best ways to enhance the yard include: -Mowing and edging the lawn. -Seeding, fertilizing and weeding the lawn. -Keeping up with regular lawn maintenance by frequent watering.-Trimming and/or removing overgrown trees, shrubs and hedges. -Weeding and mulching plant beds. -Planting colorful seasonal flowers in existing plant beds. -Removing trash, especially along fences and underneath hedges. -Sweeping and weeding the street curb along your property.
Tip #3: Create an inviting entranceThe front door to your home should invite buyers to enter. The best ways to improve your entry include: -Painting the front door in a glossy, cheerful color that complements the exterior. -Cleaning, polishing and/or replacing the door knocker, locks and handles. -Repairing and/or replacing the screen door, the doorbell, porch lights and house numbers. -Placing a new welcome mat and a group of seasonal potted plants and flowers by the entry.
Tip #4: Reduce clutter and furnitureA buyer cannot envision living in your home without seeing it. A home filled with clutter or even too much furniture distracts buyers from seeing how they can utilize the space your home offers. If you have limited storage space, you may want to consider renting a temporary storage unit to place items you wish to keep. The best ways to declutter your home include: -Holding a garage sale to prepare for your move, getting rid of unnecessary items.-Removing clutter such as books, magazines, toys, tools, supplies and unused items from counter tops, open shelves, storage closets, the garage and basements. -Storing out-of-season clothing and shoes out of sight to make bedroom closets seem roomier. -Removing any visibly damaged furniture. -Organizing bookshelves, closets, cabinets and pantries. Buyers will inspect everything.-Putting away your personal photographs, unless they showcase the home. Let buyers see themselves in your home.-De-personalize rooms as much as you can.
Tip #5: Clean, clean, cleanThe cleanliness of your home also influences a buyer's perception of its condition. The appearance of the kitchen and bathrooms will play a considerable role in a buyer's decision process, so pay particular attention to these areas. The best ways to improve these areas include: -Cleaning windows, fixtures, hardware, ceiling fans, vent covers and appliances. -Cleaning carpets, area rugs and draperies. -Cleaning inside the refrigerator, the stove and all cabinets. -Removing stains from carpets, floors, counters, sinks, baths, tile, walls and grout. -Eliminating house odors, especially if you have pets. -Considering air fresheners or potpourri.
Tip #6: Make minor repairsThe small stuff does count, especially with first-time home buyers. Without dismissing the importance of repairing major items such as a leaky roof or plumbing, you do not need to spend money on replacing these items. Instead, focus on the minor repairs that will make your home visually appealing. The best ways to improve your home include: -Repairing ceilings and wall cracks. -Repairing faucets, banisters, handrails, cabinets, drawers, doors, floors and tile. -Caulking and grouting tubs, showers, sinks and tile. -Adding fresh paint to ceilings, walls, trim, doors and cabinets. -Tightening door handles, drawer pulls, light switches and electrical plates. -Lubricating door hinges and locks.
Tip #7: Showcase the kitchenThe heart of any home is the kitchen. If you are going to spend any money on renovations, this is the one area where you will see the greatest return. Even with a modest budget, focusing on a few key areas can make a great difference in getting the asking price for your property. The best ways to showcase the kitchen include: -Replacing cabinet doors and hardware. -Installing under-cabinet lighting. -Replacing light fixtures. -Replacing outdated shelving with pantry and cabinet organizers to maximize space. -Baking cookies or cupcakes for a showing, to create a homey smell.
Tip #8: Stage furnitureFurniture placement can enhance the space of your home while giving buyers an idea of how to best utilize the space with their own belongings. Take some time to rethink how different areas in your house could be used. Some ideas to think about include: -Moving couches and chairs away from walls in your sitting and family rooms to create cozy conversational groups. -Creating a reading corner in the master bedroom. -Clearing an empty room to set up a reading space. -Turning an awkward space into a home office. -Setting the dining room table with your best china.-Set wine glasses in front of the fireplace or next to a Jacuzzi tub.
Tip #9: Light up the houseCreate a sense of openness and cheerfulness in your home through its lighting. To improve the lighting try: -Opening shades and drapes to let the sunshine warm and brighten rooms. -Installing brighter light bulbs in rooms that tend to be dark. -Adding additional lamps for ambient lighting. -Turning on all the lights for a showing.
Tip #10: Add fresh touchesYou can easily add color and style to your home by adding fresh touches throughout. Some ideas to consider include: -Placing fresh floral arrangements in the entry and master bedroom. -Placing bowls of bright-colored fruit in the family room and the kitchen. -Filling an empty corner with a potted leafy plant. -Setting new hand soap in the bathrooms.-Displaying fresh towels near sinks.
Improve Your Credit Score
Healthy credit scores have never been more important. As banks tighten their lending standards, it's important to have your score as high as possible.
A FICO score is a number, in general from 300 to 850, that is formulated from your payment history, including such things as amounts of money owed, length of your credit history, new credit accounts open, and how you have used your credit. Age, salary, race, education, and religion do not affect your score. You can't buy a good score; you can only build one over time by demonstrating that you are a responsible borrower.
To improve your credit score, start with these steps.
1. Pay your bills on time. This seems like a simple enough feat, but in hard economic times, more and more borrowers are finding themselves hard-pressed with the decision of what bill to pay. If you find yourself having a hard time paying bills, be sure to talk with the lender or company you owe. They may have programs or suggestions that will help you avoid having your bill sent to collections.
2. Don't let items go to collections. Once an item is sent to collections, your credit report will suffer. This ding will stay on your report for seven years.
3. Don't open other new credit lines when applying for a home loan. You may want the new car or living room set, but the home buying process is not the time to open multiple new accounts. This is a sure-fire way to temporarily reduce your credit score. If you do this before finalizing your mortgage, you many find yourself stuck with a higher interest rate.
4. Monitor your report on a regular basis for errors and cases of identity theft. Errors do happen. To get them corrected quickly, be sure to contact both the organization that provided the erroneous information, as well as the credit bureau. Identity theft happens. And it is your responsibility to identify it and address it!
5. Pay down credit cards. Carrying high balances on credit cards can severely affect your credit score. Think of it this way. If you have a grand total of $10,000 worth of credit limits available, but you owe $5,000 on all of your cards put together, you are using half of your available credit!
The best loans and mortgages are available to borrowers with FICO scores 700 and above. Experian, one of the major credit reporting agencies, reports that the average credit score is 693.
For a look at your credit report, visit the government sponsored site, myannualcreditreport.com. You may access your report three times a year free of charge.
A FICO score is a number, in general from 300 to 850, that is formulated from your payment history, including such things as amounts of money owed, length of your credit history, new credit accounts open, and how you have used your credit. Age, salary, race, education, and religion do not affect your score. You can't buy a good score; you can only build one over time by demonstrating that you are a responsible borrower.
To improve your credit score, start with these steps.
1. Pay your bills on time. This seems like a simple enough feat, but in hard economic times, more and more borrowers are finding themselves hard-pressed with the decision of what bill to pay. If you find yourself having a hard time paying bills, be sure to talk with the lender or company you owe. They may have programs or suggestions that will help you avoid having your bill sent to collections.
2. Don't let items go to collections. Once an item is sent to collections, your credit report will suffer. This ding will stay on your report for seven years.
3. Don't open other new credit lines when applying for a home loan. You may want the new car or living room set, but the home buying process is not the time to open multiple new accounts. This is a sure-fire way to temporarily reduce your credit score. If you do this before finalizing your mortgage, you many find yourself stuck with a higher interest rate.
4. Monitor your report on a regular basis for errors and cases of identity theft. Errors do happen. To get them corrected quickly, be sure to contact both the organization that provided the erroneous information, as well as the credit bureau. Identity theft happens. And it is your responsibility to identify it and address it!
5. Pay down credit cards. Carrying high balances on credit cards can severely affect your credit score. Think of it this way. If you have a grand total of $10,000 worth of credit limits available, but you owe $5,000 on all of your cards put together, you are using half of your available credit!
The best loans and mortgages are available to borrowers with FICO scores 700 and above. Experian, one of the major credit reporting agencies, reports that the average credit score is 693.
For a look at your credit report, visit the government sponsored site, myannualcreditreport.com. You may access your report three times a year free of charge.
Avoid Common First-Time Buyer Mistakes
If you are in the market to buy your first home, you may have already realized that the process involves many different levels of knowledge and understanding. Chances are many steps of the process are completely foreign to you.
By arming yourself with an arsenal of important questions, as well as with a team of professionals, you are sure to avoid some of the most common first-time homebuyer mistakes.
1. Hire the Right Agent. Personalities and experience levels range greatly, just as with any profession. Consider interviewing several local agents before deciding on which one to hire. Do you want a new agent who is sweet, patient, and ready to answer lots of questions? Or would you prefer a seasoned agent who gets you the best deal, but has less than stellar people skills? The choice is entirely yours, neither one being better than the other, but will make a big difference on how you feel about the process.
2. Interrogate the Lender. There's no need to play good cop, bad cop. This simply means you need to ask every question that comes to mind. In the wake of the predatory lending storm, its important to be sure you understand exactly what your mortgage will entail. Be sure to compare rates with other lenders to be sure you are getting the best rate. You can also ask for par pricing, which is the rate without points.
3. Be Ready To Act. In many markets, highly desirable areas come with a large amount of competition. Many buyers may be looking at the same homes as you. If you hesitate, you may very well lose out on your dream home. The best advice? Don't begin the process of viewing homes unless you are really ready to buy.
4. Think Long Term. You love the house, and you can deal with the small bedrooms and laundry room in the garage, but will the next set of buyers? If you are planning on selling the home in the next few years, you must remember to consider the resale value of a home. Is this neighborhood appreciating quickly, or are homes losing value?
5. Be Competitive. We all want to buy a home for the best bargain price possible, but a careful consideration is respecting the seller. You may view a low ball offer as a starting point, but a seller may view it as an insult and refuse to answer your offer. If you really want a home, be reasonable with your starting bid.
Use these simple tips to avoid some of the most common buyer mistakes!
By arming yourself with an arsenal of important questions, as well as with a team of professionals, you are sure to avoid some of the most common first-time homebuyer mistakes.
1. Hire the Right Agent. Personalities and experience levels range greatly, just as with any profession. Consider interviewing several local agents before deciding on which one to hire. Do you want a new agent who is sweet, patient, and ready to answer lots of questions? Or would you prefer a seasoned agent who gets you the best deal, but has less than stellar people skills? The choice is entirely yours, neither one being better than the other, but will make a big difference on how you feel about the process.
2. Interrogate the Lender. There's no need to play good cop, bad cop. This simply means you need to ask every question that comes to mind. In the wake of the predatory lending storm, its important to be sure you understand exactly what your mortgage will entail. Be sure to compare rates with other lenders to be sure you are getting the best rate. You can also ask for par pricing, which is the rate without points.
3. Be Ready To Act. In many markets, highly desirable areas come with a large amount of competition. Many buyers may be looking at the same homes as you. If you hesitate, you may very well lose out on your dream home. The best advice? Don't begin the process of viewing homes unless you are really ready to buy.
4. Think Long Term. You love the house, and you can deal with the small bedrooms and laundry room in the garage, but will the next set of buyers? If you are planning on selling the home in the next few years, you must remember to consider the resale value of a home. Is this neighborhood appreciating quickly, or are homes losing value?
5. Be Competitive. We all want to buy a home for the best bargain price possible, but a careful consideration is respecting the seller. You may view a low ball offer as a starting point, but a seller may view it as an insult and refuse to answer your offer. If you really want a home, be reasonable with your starting bid.
Use these simple tips to avoid some of the most common buyer mistakes!
Fixed-Rate Mortgage Rates Inch Downward to Another New Low for the Sixth Consecutive Week
McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), with the 30-year and 15-year fixed-rate mortgages reaching record lows for this survey. (The 30-year fixed-rate survey began in 1971, and the 15-year began in 1991.)
30-year fixed-rate mortgage (FRM) averaged 4.54 percent with an average 0.7 point for the week ending July 29, 2010, down from last week when it averaged 4.56 percent. Last year at this time, the 30-year FRM averaged 5.25 percent.
15-year FRM this week averaged a record low of 4.00 percent with an average 0.7 point, down from last week when it averaged 4.03 percent. A year ago at this time, the 15-year FRM averaged 4.69 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.76 percent this week, with an average 0.7 point, down from last week when it averaged 3.79 percent. A year ago, the 5-year ARM averaged 4.75 percent.
1-year Treasury-indexed ARM averaged 3.64 percent this week with an average 0.7 point, down from last week when it averaged 3.70 percent. At this time last year, the 1-year ARM averaged 4.80 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac, says, "For the sixth week in a row, interest rates on fixed-rate mortgages eased to all-time record lows during a week of mixed housing data reports. The number of local markets experiencing annual increases in home prices appears to be growing. For instance, 13 metropolitan areas in the S&P/Case-Shiller® 20-city index experienced price appreciation over the 12-months ending in May, compared to 11 in April and 10 in March."
He continues, "However, existing home sales in June slowed to an annualized pace of 4.37 million units, the fewest since March. Moreover, although new home sales jumped by almost 24 percent to 330,000 dwellings, it represented the second slowest rate since 1963."
30-year fixed-rate mortgage (FRM) averaged 4.54 percent with an average 0.7 point for the week ending July 29, 2010, down from last week when it averaged 4.56 percent. Last year at this time, the 30-year FRM averaged 5.25 percent.
15-year FRM this week averaged a record low of 4.00 percent with an average 0.7 point, down from last week when it averaged 4.03 percent. A year ago at this time, the 15-year FRM averaged 4.69 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.76 percent this week, with an average 0.7 point, down from last week when it averaged 3.79 percent. A year ago, the 5-year ARM averaged 4.75 percent.
1-year Treasury-indexed ARM averaged 3.64 percent this week with an average 0.7 point, down from last week when it averaged 3.70 percent. At this time last year, the 1-year ARM averaged 4.80 percent.
Frank Nothaft, vice president and chief economist, Freddie Mac, says, "For the sixth week in a row, interest rates on fixed-rate mortgages eased to all-time record lows during a week of mixed housing data reports. The number of local markets experiencing annual increases in home prices appears to be growing. For instance, 13 metropolitan areas in the S&P/Case-Shiller® 20-city index experienced price appreciation over the 12-months ending in May, compared to 11 in April and 10 in March."
He continues, "However, existing home sales in June slowed to an annualized pace of 4.37 million units, the fewest since March. Moreover, although new home sales jumped by almost 24 percent to 330,000 dwellings, it represented the second slowest rate since 1963."
Real Estate Outlook: Sales Jump
The economic recovery continues to bump along in a "fits and starts" pattern, but what's important to keep in mind is that the core trendline remains positive.
Take the latest housing numbers released last week. New home sales, which had been anemic following the expiration of the tax credit deadlines, bounced back with vigor in June, according to the Commerce Department.
Single family sales jumped by 24 percent seasonally-adjusted basis over May, and were 19 percent above the totals for June 2009.
The sales rebound verged on spectacular in the Northeast region -- up 46 percent over the prior month. Gains were 33 percent in the South, and 21 percent in the Midwest.
Only the Western states saw a drop in new sales, and that was by 7 percent.
Bob Jones, chairman of the National Association of Home Builders, called the latest sales figures "an encouraging sign" that housing activity is springing back from the expected deep lows experienced after the credits expired.
Prices of all homes -- existing and new -- also continue on a path of modest recovery, according to the latest Standard & Poor's Case-Shiller index. The widely-watched report on values in 20 major markets found gains in all but one area -- Las Vegas, where distressed sales transactions dominate real estate activity.
On a national average basis, home prices were 1.3 percent higher compared with the month before, but they gained 4.6 percent year-over-year.
Three metropolitan markets tracked by Case-Shiller recorded year-over-year price increases in double digits: Minneapolis and San Diego, up by 12 percent, and San Francisco by 18 percent.
Other markets also saw noteworthy annualized gains: Los Angeles prices were up by nearly 10 percent, Phoenix and Washington DC by 7 percent, and Boston by 5 percent.
Still another positive sign: mortgage applications to buy houses continue to increase, after weeks of being down. The Mortgage Bankers Association reported a 2 percent jump in purchase applications last week - even while refinancing applications dropped 4 percent despite record low mortgage rates.
On the sobering side of the fits and starts pattern, we saw consumer confidence decline by four points in the latest month, according to the Conference Board - in large part because of continuing worries about unemployment.
And the Federal Reserve's monthly "beige book" survey of economic conditions around the country offered only mild optimism about how fast employment is likely to expand.
Though the Fed found gradual improvement in jobs in several large market areas, including New York and Chicago,lit still does not forecast any upside employment breakouts in store nationwide.
Slow and modest are more likely.
Take the latest housing numbers released last week. New home sales, which had been anemic following the expiration of the tax credit deadlines, bounced back with vigor in June, according to the Commerce Department.
Single family sales jumped by 24 percent seasonally-adjusted basis over May, and were 19 percent above the totals for June 2009.
The sales rebound verged on spectacular in the Northeast region -- up 46 percent over the prior month. Gains were 33 percent in the South, and 21 percent in the Midwest.
Only the Western states saw a drop in new sales, and that was by 7 percent.
Bob Jones, chairman of the National Association of Home Builders, called the latest sales figures "an encouraging sign" that housing activity is springing back from the expected deep lows experienced after the credits expired.
Prices of all homes -- existing and new -- also continue on a path of modest recovery, according to the latest Standard & Poor's Case-Shiller index. The widely-watched report on values in 20 major markets found gains in all but one area -- Las Vegas, where distressed sales transactions dominate real estate activity.
On a national average basis, home prices were 1.3 percent higher compared with the month before, but they gained 4.6 percent year-over-year.
Three metropolitan markets tracked by Case-Shiller recorded year-over-year price increases in double digits: Minneapolis and San Diego, up by 12 percent, and San Francisco by 18 percent.
Other markets also saw noteworthy annualized gains: Los Angeles prices were up by nearly 10 percent, Phoenix and Washington DC by 7 percent, and Boston by 5 percent.
Still another positive sign: mortgage applications to buy houses continue to increase, after weeks of being down. The Mortgage Bankers Association reported a 2 percent jump in purchase applications last week - even while refinancing applications dropped 4 percent despite record low mortgage rates.
On the sobering side of the fits and starts pattern, we saw consumer confidence decline by four points in the latest month, according to the Conference Board - in large part because of continuing worries about unemployment.
And the Federal Reserve's monthly "beige book" survey of economic conditions around the country offered only mild optimism about how fast employment is likely to expand.
Though the Fed found gradual improvement in jobs in several large market areas, including New York and Chicago,lit still does not forecast any upside employment breakouts in store nationwide.
Slow and modest are more likely.
'Strategic Defaults' Can Damage Credit for Years
Home owners who choose to default on their mortgage even though they can afford the monthly payments can expect to take a significant hit to their creditworthiness, some credit rating firms say.
A record of the default — initially as much as 200 points — stays on a credit report for seven years. This will have an impact on the defaulter’s ability to get credit of all kinds and potentially his or her ability to buy insurance and even get a job.
The debt that foreclosure erases may be considered income, and Uncle Sam may want to collect taxes.
"It's by no means a move to be undertaken lightly," says Maxine Sweet, vice president of public education for Experian.
Source: ARA Content (07/30/2010)
A record of the default — initially as much as 200 points — stays on a credit report for seven years. This will have an impact on the defaulter’s ability to get credit of all kinds and potentially his or her ability to buy insurance and even get a job.
The debt that foreclosure erases may be considered income, and Uncle Sam may want to collect taxes.
"It's by no means a move to be undertaken lightly," says Maxine Sweet, vice president of public education for Experian.
Source: ARA Content (07/30/2010)
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