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)
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)
California gets $700,000 slice of special $1.5 billion homeowner bailout pie
California struck gold, receiving the biggest chunk of a special $1.5 billion federal fund pie for programs that target struggling homeowners in states hardest hit by the housing crash.
California Housing Finance Agency (CalHFA) recently announced the fat $700,000 slice would go toward four different programs ultimately assisting 40,000 homeowners.
Earlier this year President Obama announced the $1.5 billion infusion for state housing agencies in Arizona, California, Florida, Michigan and Nevada, where home values have fallen more than 20 percent from peak 2006 and 2007 markets.
The $1.5 billion will be withdrawn from funds set aside for housing under the Emergency Economic Stabilization Act of 2008 (EESA).
The money is earmarked for state agency programs that reduce so-called "preventable" foreclosures faced by unemployed home owners, so-called "underwater" home owners and home owners struggling with second mortgages.
In addition to California's $699.6 million stake, Florida gets $418 million; Michigan, $154.5 million, Arizona, $125.1 million and Nevada, $102.8 million.
"We are very grateful that the Obama Administration recognizes that California and several other states have been severely impacted by the twin problems of unemployment and home price depreciation," said Steven Spears, executive director of CalHFA
The details aren't finalized and homeowners, who needn't be CalHFA loan holders, must otherwise quality before approval. CalHFA's federally approved "Keep Your Home" programs are:
• Mortgage payment assistance for jobless. Up to six months of mortgage payment assistance, with a $1,500 cap for homeowners who have lost their jobs.
• Mortgage payment assistance for past-due homeowners. Up to $15,000 each, with a mandated match from the mortgage lender, the help those with past-due payments.
• Mortgage principal reduction. Underwater borrowers, who owe significantly more on their loans than their homes are worth, get a mortgage principal reduction to "market levels."
• Transition assistance. For those who can't afford to stay in their homes and are completing a short sale or handing over the deed in lieu of a foreclosure, financial assistance for the transition will be provided.
For more details contact CalHFA's Keep Your Home program online or by phone (916) 373-2585.
California Housing Finance Agency (CalHFA) recently announced the fat $700,000 slice would go toward four different programs ultimately assisting 40,000 homeowners.
Earlier this year President Obama announced the $1.5 billion infusion for state housing agencies in Arizona, California, Florida, Michigan and Nevada, where home values have fallen more than 20 percent from peak 2006 and 2007 markets.
The $1.5 billion will be withdrawn from funds set aside for housing under the Emergency Economic Stabilization Act of 2008 (EESA).
The money is earmarked for state agency programs that reduce so-called "preventable" foreclosures faced by unemployed home owners, so-called "underwater" home owners and home owners struggling with second mortgages.
In addition to California's $699.6 million stake, Florida gets $418 million; Michigan, $154.5 million, Arizona, $125.1 million and Nevada, $102.8 million.
"We are very grateful that the Obama Administration recognizes that California and several other states have been severely impacted by the twin problems of unemployment and home price depreciation," said Steven Spears, executive director of CalHFA
The details aren't finalized and homeowners, who needn't be CalHFA loan holders, must otherwise quality before approval. CalHFA's federally approved "Keep Your Home" programs are:
• Mortgage payment assistance for jobless. Up to six months of mortgage payment assistance, with a $1,500 cap for homeowners who have lost their jobs.
• Mortgage payment assistance for past-due homeowners. Up to $15,000 each, with a mandated match from the mortgage lender, the help those with past-due payments.
• Mortgage principal reduction. Underwater borrowers, who owe significantly more on their loans than their homes are worth, get a mortgage principal reduction to "market levels."
• Transition assistance. For those who can't afford to stay in their homes and are completing a short sale or handing over the deed in lieu of a foreclosure, financial assistance for the transition will be provided.
For more details contact CalHFA's Keep Your Home program online or by phone (916) 373-2585.
Sales Slow But Remain Above Last Year
With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.
Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said. “Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74 percent in June from 4.89 percent in May; the rate was 5.42 percent in June 2009.
The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.
NAR President Vicki Cox Golder said softer home sales expected this summer don’t tell the whole story. “Despite these market swings, total annual home sales are rising above 2009 and we’re looking for overall gains again this year as well as in 2011,” she said. “Conditions have become more balanced in much of the country, which is good for both buyers and sellers. However, consumers find it even more challenging to navigate the transaction process, especially for distressed properties, which only underscores the value REALTORS® bring to buyers and sellers in this market.”
A parallel NAR practitioner survey shows first-time buyers purchased 43 percent of homes in June, down from 46 percent in May. Investors accounted for 13 percent of sales in June, little changed from 14 percent in May; the remaining purchases were by repeat buyers. All-cash sales were at 24 percent in June compared with 25 percent in May.
Total housing inventory at the end of June rose 2.5 percent to 3.99 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.3-month supply in May.
“The supply of homes on the market is higher than we’d like to see. But home prices are still holding their ground because prices had already overcorrected in many local markets,” Yun said. Raw unsold inventory remains 12.7 percent below the record of 4.58 million in July 2008.
Single-family home sales fell 5.6 percent to a seasonally adjusted annual rate of 4.70 million in June from a level of 4.98 million in May, but are 8.5 percent above the 4.33 million pace in June 2009. The median existing single-family home price was $184,200 in June, up 1.3 percent from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in June in comparison with June 2009. In addition, existing single-family home sales rose in 12 of the 19 areas from a year ago while two were unchanged.
Existing condominium and co-op sales slipped 1.5 percent to a seasonally adjusted annual rate of 670,000 in June from 680,000 in May, but are 20.5 percent higher than the 556,000-unit pace in June 2009. The median existing condo price was $180,100 in June, which is 1.4 percent below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 960,000 in June and are 17.1 percent above June 2009. The median price in the Northeast was $244,300, down 1.2 percent from a year ago.
Existing-home sales in the Midwest dropped 7.5 percent in June to a pace of 1.23 million but are 11.8 percent higher than a year ago. The median price in the Midwest was $155,900, down 0.1 percent from June 2009.
In the South, existing-home sales fell 6.5 percent to an annual level of 2.01 million in June but are 11.0 percent above June 2009. The median price in the South was $163,600, unchanged from a year ago.
Existing-home sales in the West dropped 9.3 percent to an annual pace of 1.17 million in June but are 0.9 percent higher than a year ago. The median price in the West was $221,800, up 1.5 percent from June 2009.
Source: NAR
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May, but are 9.8 percent higher than the 4.89 million-unit pace in June 2009.
Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said. “Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 4.74 percent in June from 4.89 percent in May; the rate was 5.42 percent in June 2009.
The national median existing-home price for all housing types was $183,700 in June, which is 1.0 percent higher than a year ago. Distressed homes were at 32 percent of sales last month, compared with 31 percent in May; it was also 31 percent in June 2009.
NAR President Vicki Cox Golder said softer home sales expected this summer don’t tell the whole story. “Despite these market swings, total annual home sales are rising above 2009 and we’re looking for overall gains again this year as well as in 2011,” she said. “Conditions have become more balanced in much of the country, which is good for both buyers and sellers. However, consumers find it even more challenging to navigate the transaction process, especially for distressed properties, which only underscores the value REALTORS® bring to buyers and sellers in this market.”
A parallel NAR practitioner survey shows first-time buyers purchased 43 percent of homes in June, down from 46 percent in May. Investors accounted for 13 percent of sales in June, little changed from 14 percent in May; the remaining purchases were by repeat buyers. All-cash sales were at 24 percent in June compared with 25 percent in May.
Total housing inventory at the end of June rose 2.5 percent to 3.99 million existing homes available for sale, which represents an 8.9-month supply at the current sales pace, up from an 8.3-month supply in May.
“The supply of homes on the market is higher than we’d like to see. But home prices are still holding their ground because prices had already overcorrected in many local markets,” Yun said. Raw unsold inventory remains 12.7 percent below the record of 4.58 million in July 2008.
Single-family home sales fell 5.6 percent to a seasonally adjusted annual rate of 4.70 million in June from a level of 4.98 million in May, but are 8.5 percent above the 4.33 million pace in June 2009. The median existing single-family home price was $184,200 in June, up 1.3 percent from a year ago.
Single-family median existing-home prices were higher in 10 out of 19 metropolitan statistical areas reported in June in comparison with June 2009. In addition, existing single-family home sales rose in 12 of the 19 areas from a year ago while two were unchanged.
Existing condominium and co-op sales slipped 1.5 percent to a seasonally adjusted annual rate of 670,000 in June from 680,000 in May, but are 20.5 percent higher than the 556,000-unit pace in June 2009. The median existing condo price was $180,100 in June, which is 1.4 percent below a year ago.
Regionally, existing-home sales in the Northeast rose 7.9 percent to an annual level of 960,000 in June and are 17.1 percent above June 2009. The median price in the Northeast was $244,300, down 1.2 percent from a year ago.
Existing-home sales in the Midwest dropped 7.5 percent in June to a pace of 1.23 million but are 11.8 percent higher than a year ago. The median price in the Midwest was $155,900, down 0.1 percent from June 2009.
In the South, existing-home sales fell 6.5 percent to an annual level of 2.01 million in June but are 11.0 percent above June 2009. The median price in the South was $163,600, unchanged from a year ago.
Existing-home sales in the West dropped 9.3 percent to an annual pace of 1.17 million in June but are 0.9 percent higher than a year ago. The median price in the West was $221,800, up 1.5 percent from June 2009.
Source: NAR
Wall Street Reform Encourages Safe Loans
The new financial overhaul law that President Obama signed into law is still being dissected, but some regulations that affect homebuying and mortgages have already been defined. Here are the key tenets:
• Lenders must prove that borrowers can afford their mortgages. Government guarantees will be voided if lenders don’t demonstrate that they have thoroughly investigated a borrowers’ ability to pay.
• Banks and other entities that pool mortgages and sell them to investors must keep at least 5 percent of the investments on their own books – an incentive to avoid poor quality loans.
• Low-risk mortgages, mostly 30-year fixed-rate loans, are exempt from many regulations. That should encourage lenders to put homebuyers into “plain vanilla” mortgages.
• Bonuses for brokers based on the cost of a mortgage are banned.
[Editor's note: For more, watch http://speakingofrealestate.blogs.realtor.org/2010/07/15/financia/ for an interview with a financial services analysts on the mortgage-related portions of the new law.]
Source: Associated Press, Daniel Wagner (07/21/2010)
• Lenders must prove that borrowers can afford their mortgages. Government guarantees will be voided if lenders don’t demonstrate that they have thoroughly investigated a borrowers’ ability to pay.
• Banks and other entities that pool mortgages and sell them to investors must keep at least 5 percent of the investments on their own books – an incentive to avoid poor quality loans.
• Low-risk mortgages, mostly 30-year fixed-rate loans, are exempt from many regulations. That should encourage lenders to put homebuyers into “plain vanilla” mortgages.
• Bonuses for brokers based on the cost of a mortgage are banned.
[Editor's note: For more, watch http://speakingofrealestate.blogs.realtor.org/2010/07/15/financia/ for an interview with a financial services analysts on the mortgage-related portions of the new law.]
Source: Associated Press, Daniel Wagner (07/21/2010)
Frugal Tips for Making a Home More Appealing
Homeowners who want to sell but don’t have a lot of cash to spruce up their properties might consider these tips from Bankrate.com for upgrading a property without spending a fortune.
Polish up the kitchen. Add new cabinet door handles, replace lighting and update the faucet set. Unless the cabinets are mica, give them a fresh coat of paint. Order new doors for kitchen appliances.
Tidy up the bath. Replace the toilet seat. Clean up the floor with vinyl tiles or sheet vinyl applied over the old floor. Re-grout the tub and, if the tub is dingy, add a new prefabricated tub and shower surround.
Paint the walls.
*Add closet systems to all the bedrooms, pantry, and entry closets.
*Hire a plumber and an electrician to fix anything that is loose or that leaks.
*Clean the carpets or, if they are worn, cover them with area rugs.
*Replace ceiling lights with inexpensive but attractive fixtures.
*Refinish or repaint the front door and replace the hardware.
*Mow the lawn, edge the sidewalks, mulch all the beds and put two big planters at either side of the front door.
Polish up the kitchen. Add new cabinet door handles, replace lighting and update the faucet set. Unless the cabinets are mica, give them a fresh coat of paint. Order new doors for kitchen appliances.
Tidy up the bath. Replace the toilet seat. Clean up the floor with vinyl tiles or sheet vinyl applied over the old floor. Re-grout the tub and, if the tub is dingy, add a new prefabricated tub and shower surround.
Paint the walls.
*Add closet systems to all the bedrooms, pantry, and entry closets.
*Hire a plumber and an electrician to fix anything that is loose or that leaks.
*Clean the carpets or, if they are worn, cover them with area rugs.
*Replace ceiling lights with inexpensive but attractive fixtures.
*Refinish or repaint the front door and replace the hardware.
*Mow the lawn, edge the sidewalks, mulch all the beds and put two big planters at either side of the front door.
A Wish List for a Dream Home
Your real estate agent may not be your fairy godmother, but they have powers to grant you many of your home buying wishes.
Your first step in finding your dream home? You must develop a strong image in your mind, and a sound list for your agent, of what you want of your dream home.
To make this process a little less daunting, consider these categories:
Location: It has been lauded for years as the most important factor when it comes to the saleability and pricing of home, and it's a good place to start when compiling your wish list. Do you want a short commute to work? Are you looking for a waterfront property? Do you want to be near family? Is there a particular neighborhood you want to make home? These are all important questions that will help your agent narrow their search for your dream home.
Neighborhood: If you are looking for a family home, then you need to research the local schools. Is there a particular school district you want to be in, or perhaps to stay in? Are you wanting a neighborhood within walking distance to shops and restaurants? Or perhaps you prefer something more quiet, or on a cul-de-sac.
Home Styles: Do you prefer large, open floorplans and Modern architecture? Or are you a fan of cozy and functional Country style plans? A Tudor style home is exemplified by tall, narrow windows with small panes and a reminiscence of Medieval looks. Or how about Victorian style homes, which feature elaborate details on the exterior and interior of the home?
Home Features: Not every buyer is seeking the same features. What is it that you desire most? Fireplaces, guest bathrooms, an open floor plan, formal dining, a media room, covered porches, a screened porch, a large finished garage, or a pool? The same concept goes for decorative features, including flooring preferences, crown molding, and exterior siding.
Condition: Are you on the lookout for a fixer-upper? Some buyers thrive on the challenge of restoring a former beauty to its original glory. Or are you the type that wishes for new construction, so you can put your own mark on the property? Also consider the idea of townhomes and condos, which can afford the homeowner even more freedom from maintenance.
Use these categories as a starting point for creating your own wish list. And then pass it on to your own fairy godmother!
Published: July 13, 2010
Your first step in finding your dream home? You must develop a strong image in your mind, and a sound list for your agent, of what you want of your dream home.
To make this process a little less daunting, consider these categories:
Location: It has been lauded for years as the most important factor when it comes to the saleability and pricing of home, and it's a good place to start when compiling your wish list. Do you want a short commute to work? Are you looking for a waterfront property? Do you want to be near family? Is there a particular neighborhood you want to make home? These are all important questions that will help your agent narrow their search for your dream home.
Neighborhood: If you are looking for a family home, then you need to research the local schools. Is there a particular school district you want to be in, or perhaps to stay in? Are you wanting a neighborhood within walking distance to shops and restaurants? Or perhaps you prefer something more quiet, or on a cul-de-sac.
Home Styles: Do you prefer large, open floorplans and Modern architecture? Or are you a fan of cozy and functional Country style plans? A Tudor style home is exemplified by tall, narrow windows with small panes and a reminiscence of Medieval looks. Or how about Victorian style homes, which feature elaborate details on the exterior and interior of the home?
Home Features: Not every buyer is seeking the same features. What is it that you desire most? Fireplaces, guest bathrooms, an open floor plan, formal dining, a media room, covered porches, a screened porch, a large finished garage, or a pool? The same concept goes for decorative features, including flooring preferences, crown molding, and exterior siding.
Condition: Are you on the lookout for a fixer-upper? Some buyers thrive on the challenge of restoring a former beauty to its original glory. Or are you the type that wishes for new construction, so you can put your own mark on the property? Also consider the idea of townhomes and condos, which can afford the homeowner even more freedom from maintenance.
Use these categories as a starting point for creating your own wish list. And then pass it on to your own fairy godmother!
Published: July 13, 2010
Home Owners Still Love Their Houses
Despite declining home prices, 90 percent of Americans don’t regret buying their current home, according to a survey for Bankrate.com.
Among the 9 percent who do regret the purchase, most say they are unhappy that they can’t sell their home and move elsewhere or they can’t afford their monthly mortgage.
Some 79 percent of those polled say they have a fixed-rate mortgage on their homes. Among those making over $75,000 per year, 90 percent say they have a fixed rate mortgage.
Source: Bankrate.com (07/12/2010)
Among the 9 percent who do regret the purchase, most say they are unhappy that they can’t sell their home and move elsewhere or they can’t afford their monthly mortgage.
Some 79 percent of those polled say they have a fixed-rate mortgage on their homes. Among those making over $75,000 per year, 90 percent say they have a fixed rate mortgage.
Source: Bankrate.com (07/12/2010)
Mortgage Rates Hit Another Record Low
The average interest on a 30-year fixed mortgage dipped to a new record low of 4.57 percent this week — down from 4.58 percent a week ago, according to Freddie Mac, which began tracking rates in 1971.
Still, the low rates may not provide much of a boost for the housing market because many people do not qualify for new mortgages or have already obtained loans at low rates this year.
Source: Indianapolis Star (07/09/10) © Copyright 2010 Information Inc.
Still, the low rates may not provide much of a boost for the housing market because many people do not qualify for new mortgages or have already obtained loans at low rates this year.
Source: Indianapolis Star (07/09/10) © Copyright 2010 Information Inc.
Relocation News Is Getting Better
Relocation News Is Getting Better The economy is normalizing with only 1 percent of those in a recent survey saying they were moving because they lost their home to foreclosure, according to Relocation.com, which has been tracking people who move for the last year using a series of surveys.
In February of this year, a survey found 5 percent of respondents saying that was the case.
Also in February, 13 percent of respondents said they were moving because of job loss, but in June only 4 percent moved for that reason.
In the June survey, 4 percent said they planned to purchase a first home when they moved, while 10 percent said they planned to move to a better home in a nicer neighborhood.
Some 18 percent of June movers were previous homeowners who moved and were purchasing a new home, up from 12 percent in February, while 12 percent were former renters who planned to purchase a home in the new locale.
Source: Relocation.com (07/07/2010)
In February of this year, a survey found 5 percent of respondents saying that was the case.
Also in February, 13 percent of respondents said they were moving because of job loss, but in June only 4 percent moved for that reason.
In the June survey, 4 percent said they planned to purchase a first home when they moved, while 10 percent said they planned to move to a better home in a nicer neighborhood.
Some 18 percent of June movers were previous homeowners who moved and were purchasing a new home, up from 12 percent in February, while 12 percent were former renters who planned to purchase a home in the new locale.
Source: Relocation.com (07/07/2010)
Underwater? Alternative to Walking Away..
Home owners who are "underwater" with their home loan and seek to come up for air by walking away from the debt, could still be gasping for relief years down the road.
There are occasions when walking away from your home -- and down the road to foreclosure -- is your only option, but seldom is it the best alternative.
Mortgages are "underwater" or "upside down" when the property experiences negative equity -- the mortgage is larger than the current value of the property. Negative equity is caused by a decline property value, an increase in mortgage debt or, most likely, both.
The consensus among experts is to consider the alternatives before abandoning your home, talk with your lender and seek counseling from a U.S. Department of Housing and Urban Affairs (HUD) certified counselor.
Don Bisenius, the head of Freddie Mac's home-loan guarantee business, recently asked borrowers to stick it out through the crisis.
Bisenius said foreclosures lead to degraded neighborhoods, more expensive mortgages and reduced home values.
"In the end, borrowers considering a strategic default should recognize the damaging impact their actions can have on others," he wrote.
The Obama Administration's frequently updated and strengthened multi-tiered MakingHomeAffordable.com program and other government efforts offer a good start with a host of options.
• Refinancing, turning in your existing mortgage for a new one, is perhaps the toughest option to accomplish. A refinance requires meeting stiff underwriting requirements -- an excellent credit report, a high credit score of 720 or more, documented career level income and little debt, for starters.
Federal programs, including the Federal Housing Administration's refinance effort, can be a good bet for those who haven't yet faced hardship and can qualify for a new loan.
• A mortgage modification reworks the terms of existing loans to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal -- or do some combination of all three. Modifications can be used by qualified home owners who aren't yet struggling as well as those who are in a pinch.
• Short sales
Modifications and short sales can impact your credit, but not necessarily with the force of a foreclosure.
Bottom line, exploring all the options is a better first step than walking away.
I understand feeling financial pressure is difficult and embarrassing, but there is a point at which everyone has time to explore the options. In just about every case, that's much better than doing nothing at all. I strongly feel there is no reason for anyone to get a foreclosure" said Zdenka Mahan, a real estate agent with Intero Real Estate in Los Gatos.
There are occasions when walking away from your home -- and down the road to foreclosure -- is your only option, but seldom is it the best alternative.
Mortgages are "underwater" or "upside down" when the property experiences negative equity -- the mortgage is larger than the current value of the property. Negative equity is caused by a decline property value, an increase in mortgage debt or, most likely, both.
The consensus among experts is to consider the alternatives before abandoning your home, talk with your lender and seek counseling from a U.S. Department of Housing and Urban Affairs (HUD) certified counselor.
Don Bisenius, the head of Freddie Mac's home-loan guarantee business, recently asked borrowers to stick it out through the crisis.
Bisenius said foreclosures lead to degraded neighborhoods, more expensive mortgages and reduced home values.
"In the end, borrowers considering a strategic default should recognize the damaging impact their actions can have on others," he wrote.
The Obama Administration's frequently updated and strengthened multi-tiered MakingHomeAffordable.com program and other government efforts offer a good start with a host of options.
• Refinancing, turning in your existing mortgage for a new one, is perhaps the toughest option to accomplish. A refinance requires meeting stiff underwriting requirements -- an excellent credit report, a high credit score of 720 or more, documented career level income and little debt, for starters.
Federal programs, including the Federal Housing Administration's refinance effort, can be a good bet for those who haven't yet faced hardship and can qualify for a new loan.
• A mortgage modification reworks the terms of existing loans to get the payment down to a more affordable level. To add greater affordability, lenders lower the interest rate, lengthen the term of the loan or reduce the principal -- or do some combination of all three. Modifications can be used by qualified home owners who aren't yet struggling as well as those who are in a pinch.
• Short sales
Modifications and short sales can impact your credit, but not necessarily with the force of a foreclosure.
Bottom line, exploring all the options is a better first step than walking away.
I understand feeling financial pressure is difficult and embarrassing, but there is a point at which everyone has time to explore the options. In just about every case, that's much better than doing nothing at all. I strongly feel there is no reason for anyone to get a foreclosure" said Zdenka Mahan, a real estate agent with Intero Real Estate in Los Gatos.
Treasury Secretary Defends Recovery Efforts
U.S. Treasury Secretary Timothy Geithner in a PBS television interview on Tuesday defended government efforts to reduce foreclosures.
He said the federal programs helped millions of families stay in their homes because of reduced monthly payments, while tax credits allowed million of Americans to purchase property.
He said the programs aren’t helping “the most fortunate Americans who bought very, very expensive homes or a second home. … They’re not going to reach people who lied about their income, were unable to prove that they had income -- weren’t able to prove they were eligible.”
Source: Reuters News (07/06/2010)
He said the federal programs helped millions of families stay in their homes because of reduced monthly payments, while tax credits allowed million of Americans to purchase property.
He said the programs aren’t helping “the most fortunate Americans who bought very, very expensive homes or a second home. … They’re not going to reach people who lied about their income, were unable to prove that they had income -- weren’t able to prove they were eligible.”
Source: Reuters News (07/06/2010)
Treasury Secretary Defends Recovery Efforts
U.S. Treasury Secretary Timothy Geithner in a PBS television interview on Tuesday defended government efforts to reduce foreclosures.
He said the federal programs helped millions of families stay in their homes because of reduced monthly payments, while tax credits allowed million of Americans to purchase property.
He said the programs aren’t helping “the most fortunate Americans who bought very, very expensive homes or a second home. … They’re not going to reach people who lied about their income, were unable to prove that they had income -- weren’t able to prove they were eligible.”
Source: Reuters News (07/06/2010)
He said the federal programs helped millions of families stay in their homes because of reduced monthly payments, while tax credits allowed million of Americans to purchase property.
He said the programs aren’t helping “the most fortunate Americans who bought very, very expensive homes or a second home. … They’re not going to reach people who lied about their income, were unable to prove that they had income -- weren’t able to prove they were eligible.”
Source: Reuters News (07/06/2010)
What Causes Borrowers to Walk Away?
While borrowers with “super prime” credit scores accounted for just 5 percent of the mortgage delinquencies, about 28 percent of their defaults were calculated and strategic.
This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.
Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.
People with small amounts of negative equity also are more likely to stay and pay.
Source: Washington Post (07/03/2010)
This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.
Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.
People with small amounts of negative equity also are more likely to stay and pay.
Source: Washington Post (07/03/2010)
All Rates But 1-Year ARM Hit Record Lows In Freddie Mac Weekly Survey
McLean, VA – Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.69 percent with an average 0.7 point for the week ending June 24, 2010, down from last week when it averaged 4.75 percent. Last year at this time, the 30-year FRM averaged 5.42 percent.
The 15-year FRM this week averaged 4.13 percent with an average 0.6 point, down from last week when it averaged 4.20 percent. A year ago at this time, the 15-year FRM averaged 4.87 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.84 percent this week, with an average 0.7 point, down from last week when it averaged 3.89 percent. A year ago, the 5-year ARM averaged 4.99 percent.
The 1-year Treasury-indexed ARM averaged 3.77 percent this week with an average 0.7 point, down from last week when it averaged 3.82 percent. At this time last year, the 1-year ARM averaged 4.93 percent. This is the lowest the 1-year ARM has been since the week ending May 6, 2004 when it averaged 3.76 percent.
"Mortgage rates for all but traditional 1-year ARMs hit all-time record lows this week in our survey while activity in the housing market slowed in May following the expiration of the homebuyer tax credit," said Frank Nothaft, Freddie Mac vice president and chief economist. "Freddie Mac began collecting rates for 30-year fixed loans in April 1971, 15-year fixed mortgages in September 1991 and 5-year hybrid ARMs in January 2005. The record low for traditional 1-year ARMs of 3.36 percent occurred during the week of March 25, 2004."
"Both new and existing home sales showed unexpected declines in May. Existing sales fell 2.2 percent, compared to the market consensus forecast of a 6.0 percent gain, based on figures published by the National Association of Realtors®. Sales of new homes fell 32.7 percent to an annualized rate of 300,000 units, which was the largest monthly drop and slowest pace since records began in 1963, according to the Census Bureau."
The 15-year FRM this week averaged 4.13 percent with an average 0.6 point, down from last week when it averaged 4.20 percent. A year ago at this time, the 15-year FRM averaged 4.87 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.84 percent this week, with an average 0.7 point, down from last week when it averaged 3.89 percent. A year ago, the 5-year ARM averaged 4.99 percent.
The 1-year Treasury-indexed ARM averaged 3.77 percent this week with an average 0.7 point, down from last week when it averaged 3.82 percent. At this time last year, the 1-year ARM averaged 4.93 percent. This is the lowest the 1-year ARM has been since the week ending May 6, 2004 when it averaged 3.76 percent.
"Mortgage rates for all but traditional 1-year ARMs hit all-time record lows this week in our survey while activity in the housing market slowed in May following the expiration of the homebuyer tax credit," said Frank Nothaft, Freddie Mac vice president and chief economist. "Freddie Mac began collecting rates for 30-year fixed loans in April 1971, 15-year fixed mortgages in September 1991 and 5-year hybrid ARMs in January 2005. The record low for traditional 1-year ARMs of 3.36 percent occurred during the week of March 25, 2004."
"Both new and existing home sales showed unexpected declines in May. Existing sales fell 2.2 percent, compared to the market consensus forecast of a 6.0 percent gain, based on figures published by the National Association of Realtors®. Sales of new homes fell 32.7 percent to an annualized rate of 300,000 units, which was the largest monthly drop and slowest pace since records began in 1963, according to the Census Bureau."
Fed: Interest Rates to Stay at Record Low Levels
In the wake of a slowing real estate market, the Federal Reserve said Wednesday that the economy is “proceeding” and pledged to hold interest rates at record low, near zero rates.
One piece of good news, released simultaneously with the Fed’s report, was a survey of CEOs of large U.S. companies, 39 percent of whom said they expect to increase the number of people on their payrolls in the second half of 2010.
One piece of good news, released simultaneously with the Fed’s report, was a survey of CEOs of large U.S. companies, 39 percent of whom said they expect to increase the number of people on their payrolls in the second half of 2010.
Advise for Home Buyers
You may be asking yourself, "Is now a good time to buy?" It's a very important question. As a buyer, you're concerned with getting the best deal possible. Will you be buying at the top of the market? Or will you purchase when the market is in favor of you, the buyer?
According to the National Association of Home Builders (NAHB) and their Home Builders/Wells Fargo Housing Opportunity Index (HOI), affordability is high for the 5th consecutive quarter.
How is affordability calculated? In general terms, if housing costs don't exceed 30 percent of the monthly household income, then it meets the standards. Anything more than 35 percent is too high.
"Today’s report is very encouraging because it indicates that homeownership continues its more than year-long trend of remaining within reach of more households than it has for almost two decades," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "With interest rates still hovering at low levels, companies starting to hire new employees and the economy beginning to rebound, this should encourage more home buyers to enter the market and help further stabilize housing and the economy."
The HOI indicates that 72.2 percent of all new and existing homes sold in the first quarter of this year were affordable to families earning the national median income of $63,800.
Some of the best markets for affordability is:
Syracuse, New York
Dayton, Ohio
Grand Rapids-Wyoming, Michigan
Indianapolis, Indiana
Youngstown, Ohio, and
Bay City, Michigan
Of course, affordability, like most aspects of the housing market, is a local issue. The local economy has a direct effect on home prices, market favor (buyers or sellers), and the like.
Take for example, New York-White Plains-Wayne, New York-New Jersey. The NAHB says this region continued to lead the nation in poor affordability. Less than 21 percent of all homes sold in the 1st quarter 2010 were affordable.
Other markets where affordability is low:
San Francisco, California
Honolulu, Hawaii
Santa Ana-Anaheim-Irvine, California, and
Los Angeles-Long Beach-Redwood City, California
According to the National Association of Home Builders (NAHB) and their Home Builders/Wells Fargo Housing Opportunity Index (HOI), affordability is high for the 5th consecutive quarter.
How is affordability calculated? In general terms, if housing costs don't exceed 30 percent of the monthly household income, then it meets the standards. Anything more than 35 percent is too high.
"Today’s report is very encouraging because it indicates that homeownership continues its more than year-long trend of remaining within reach of more households than it has for almost two decades," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "With interest rates still hovering at low levels, companies starting to hire new employees and the economy beginning to rebound, this should encourage more home buyers to enter the market and help further stabilize housing and the economy."
The HOI indicates that 72.2 percent of all new and existing homes sold in the first quarter of this year were affordable to families earning the national median income of $63,800.
Some of the best markets for affordability is:
Syracuse, New York
Dayton, Ohio
Grand Rapids-Wyoming, Michigan
Indianapolis, Indiana
Youngstown, Ohio, and
Bay City, Michigan
Of course, affordability, like most aspects of the housing market, is a local issue. The local economy has a direct effect on home prices, market favor (buyers or sellers), and the like.
Take for example, New York-White Plains-Wayne, New York-New Jersey. The NAHB says this region continued to lead the nation in poor affordability. Less than 21 percent of all homes sold in the 1st quarter 2010 were affordable.
Other markets where affordability is low:
San Francisco, California
Honolulu, Hawaii
Santa Ana-Anaheim-Irvine, California, and
Los Angeles-Long Beach-Redwood City, California
Where is Real Estate Headed?
Many have watched the real estate market with bated breath, wondering what lies ahead. The Norris Group, a California-based company that produces an annual report on the state of real estate and predictions, provides some insight. The company recently released the Tip of the Iceberg report by Bruce Norris, an active investor, hard money lender, and real estate educator with 29 years of experience. While the report focuses on California, there are many other national predictions included. Here's a look at what Norris is predicting in the coming eight years.
"Real estate isn't even the first domino. Everything that happens in real estate can happen because of other things," Norris said at a conference earlier this year. In this report, I'm looking at all those other things and finally seeing that they play a big part, if not the biggest part, in how things work out," said Norris.
The report shows the various government programs for delinquent and financially challenged homeowners and reveals a disturbing fact. "All the delinquency trends for all the types of loans are up," said Norris. "It doesn't matter if it's prime or subprime." "The national average is 13.2 percent for total non-current (both delinquencies and foreclosures). California ranks at 15 percent, Illinois at 14 percent, Pennsylvania at 10.7 percent, and Florida, the highest, at 23.5 percent. "My friend Alex lives in Florida in Orlando and houses that were selling for $180,000 to $220,000, he's regularly buying for $20,000 to $22,000," said Norris.
The national average for the total non-current FHA loans (including delinquencies and foreclosures) is 17.4 percent. California is at 9.7 percent, Illinois at 21.3 percent, Pennsylvania at 15.3 percent, and Florida is at 23.8 percent.
Norris thinks this will provoke more usage of the 203(k) Mortgage by HUD (U.S. Department of Housing and Urban Development). The "Streamline (K)" Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. "They'll actually loan you more than the house is worth, intentionally," said Norris. "Right now it's only available for owner-occupants but I'm sure that's about to change," he said.
"All of us who thought that we were going to see REOs (real estate owned by lending institutions) all over the place for the last few years are quite surprised," he said. "It's because there was intervention." But how will that intervention and the aging population impact us? The report states that having a Federal debt that is trillions of dollars (and growing) and the size of the baby boomer generation will cause big changes that affect finances and real estate. "You're going to expect higher taxes," he said. Norris predicts, maybe even up to 45 percent for top tax bracket in 2011 and possibly higher after that. "If we're going to try to resolve some of our problems and pay for stuff that's gone on in the past, I think you're going to have to say 'We're going to have to pay some higher taxes.'" Norris also predicts higher unemployment, aging consumers buying less and saving more which he says will mean more burden on the government due to fewer tax revenues and greater expense for government.
Perhaps the good news is the prediction for consistently low interest rates. "This is one of the conclusions that I didn't think I was going to come up with. I really thought that we'd probably have some scary interest rates but I just don't think so. Without an overheated economy, I don't see the big inflation risk for the next period of time. I see the big picture that it could be very scary but for the length of time that I'm trying to cover in this report, I'm not as afraid of it as I thought I'd be," said Norris.
He thinks over the next eight years, interest rates will be under 8 percent "and you may have times where they are as cheap as they are now." Norris anticipates milder price increases in real estate as well as a decline in ownership coupled with a constant inventory available. The report also points out something that buyers are already facing, "regulation of finance markets might make it harder to get finance." He predicts the median price to increase for California to approximately $460,000 in the beginning of 2018 due to factors such as migration. And if the employment conditions improve in the state, Norris thinks migration numbers will do even better, helped in part due to retirees moving into the state. Norris expects more emphasis on housing for seniors, which seems to be a trend in many states.
"I view the next eight years as a pivotal time for us, as a country, to make sure that we don't end with bigger problems than we've got," said Norris.
The good news is that Norris predicts less volatility in the real estate market and expects increases, albeit, not as drastic as in the past.
"Real estate isn't even the first domino. Everything that happens in real estate can happen because of other things," Norris said at a conference earlier this year. In this report, I'm looking at all those other things and finally seeing that they play a big part, if not the biggest part, in how things work out," said Norris.
The report shows the various government programs for delinquent and financially challenged homeowners and reveals a disturbing fact. "All the delinquency trends for all the types of loans are up," said Norris. "It doesn't matter if it's prime or subprime." "The national average is 13.2 percent for total non-current (both delinquencies and foreclosures). California ranks at 15 percent, Illinois at 14 percent, Pennsylvania at 10.7 percent, and Florida, the highest, at 23.5 percent. "My friend Alex lives in Florida in Orlando and houses that were selling for $180,000 to $220,000, he's regularly buying for $20,000 to $22,000," said Norris.
The national average for the total non-current FHA loans (including delinquencies and foreclosures) is 17.4 percent. California is at 9.7 percent, Illinois at 21.3 percent, Pennsylvania at 15.3 percent, and Florida is at 23.8 percent.
Norris thinks this will provoke more usage of the 203(k) Mortgage by HUD (U.S. Department of Housing and Urban Development). The "Streamline (K)" Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. "They'll actually loan you more than the house is worth, intentionally," said Norris. "Right now it's only available for owner-occupants but I'm sure that's about to change," he said.
"All of us who thought that we were going to see REOs (real estate owned by lending institutions) all over the place for the last few years are quite surprised," he said. "It's because there was intervention." But how will that intervention and the aging population impact us? The report states that having a Federal debt that is trillions of dollars (and growing) and the size of the baby boomer generation will cause big changes that affect finances and real estate. "You're going to expect higher taxes," he said. Norris predicts, maybe even up to 45 percent for top tax bracket in 2011 and possibly higher after that. "If we're going to try to resolve some of our problems and pay for stuff that's gone on in the past, I think you're going to have to say 'We're going to have to pay some higher taxes.'" Norris also predicts higher unemployment, aging consumers buying less and saving more which he says will mean more burden on the government due to fewer tax revenues and greater expense for government.
Perhaps the good news is the prediction for consistently low interest rates. "This is one of the conclusions that I didn't think I was going to come up with. I really thought that we'd probably have some scary interest rates but I just don't think so. Without an overheated economy, I don't see the big inflation risk for the next period of time. I see the big picture that it could be very scary but for the length of time that I'm trying to cover in this report, I'm not as afraid of it as I thought I'd be," said Norris.
He thinks over the next eight years, interest rates will be under 8 percent "and you may have times where they are as cheap as they are now." Norris anticipates milder price increases in real estate as well as a decline in ownership coupled with a constant inventory available. The report also points out something that buyers are already facing, "regulation of finance markets might make it harder to get finance." He predicts the median price to increase for California to approximately $460,000 in the beginning of 2018 due to factors such as migration. And if the employment conditions improve in the state, Norris thinks migration numbers will do even better, helped in part due to retirees moving into the state. Norris expects more emphasis on housing for seniors, which seems to be a trend in many states.
"I view the next eight years as a pivotal time for us, as a country, to make sure that we don't end with bigger problems than we've got," said Norris.
The good news is that Norris predicts less volatility in the real estate market and expects increases, albeit, not as drastic as in the past.
Tips for a Successful Garage Sale
Tips for a Successful Garage Sale
Whether you are jump-starting a move, decluttering for a showing, or looking to make some extra cash, a garage sale can be a great way for a homeowner to declutter. Here are some helpful tips to make your next garage sale a success.
1. Plan Ahead: Some cities require that you have a permit or a license to hold a garage sale. These may be free, or they may cost a small fee. After you've gotten a permit, be sure to give yourself plenty of time to organize in preparation for the event. It can take more time than you'd expect to select items, price them, and then move them to your sale area.
2. Group Effort: Ask neighbors in your community if they'd be interested in having a sale the same day! This can be quit a draw to the garage sale crowd. Can't get the neighbors interested? Ask if any friends or family want to bring items over to have a combined sale. Simply use different colored price stickers to keep the profits separate. A block or "multi-family" sale is a great way to draw a crowd.
3. Advertise: There are a ton of great, and free, places to advertise your sale. Most of these are online. Be sure to mention in your add the following items: the neighborhood or area of town you are located in, especially if in a big city; your address; the date and run time; some of the items you are offering (appliances, women's clothing, baby items, etc.) The day of the sale be sure your home is easy to find. Use signs and balloons to direct traffic off of main roadways.
4. Price Items: When you price items, keep in mind that you are marketing to a customer that wants a deal. Be realistic about what an item is worth. Pricing items ahead of time can speed up the buying process.
5. Set Up Shop: Arrange items by type. Put furniture together, glassware on a table, and have clothes hanging. Also provide access to an electrical outlet for customers who want to turn on appliances and electronics to verify their condition.
6. Plenty of Change: Visit the bank the day before the sale to have lots of change. There will be buyers who use twenties, and will use of lots of your smaller bills. Stock up on ones, fives, tens, and lots of small change.
7. Take Care: If you have extra newspapers and plastic bags on hand, then keep them by your cash desk during the sale. Use the newspaper to wrap breakables. And use the plastic bags to help customer get small items conveniently to their car.
8. Eagle Eye. Be sure to keep an eye on your cash box! Never leave the box unattended.
9. Salvation Army: There will be items that don't sell. To expediate your clutter cleanse, look up local donation centers ahead of time to find out about donation pickup and drop-offs.
10. Free box: For items that need cleansed, but you aren't worry about making any money on, consider setting up a free box. You'll be surprised what other people will consider "treasure"!
11. Emily Post Touches: If morning weather is chilly, consider having small cups of coffee for sale. In summertime, have the kids set up a cookie and lemonade stand!
12. Have fun. A garage sale can be a stressful event, but if you stay committed to making it a positive and fun experience, it will be just that.
Good luck with your sale!
Lenders Warn Foreclosure May End in Lawsuit
The housing crisis will spark a wave of lawsuits filed by lenders seeking to recoup loses on home sales and foreclosure auctions that do not return enough money to pay the mortgages in full, according to real estate and legal experts.
Experts predict that mortgage companies will begin to sue home owners in the next two years, including borrowers who ransack a house that has been lost to foreclosure and those who walk away from "underwater mortgages," with hopes of discouraging others from such behavior.
Lenders are unlikely to target borrowers who negotiate in good faith or have defaulted on their home due to job loss or other unforeseen circumstances; other borrowers could be hounded by collection agencies that have purchased their mortgage debt from their lender.
Source: RISMedia (06/08/10)
Experts predict that mortgage companies will begin to sue home owners in the next two years, including borrowers who ransack a house that has been lost to foreclosure and those who walk away from "underwater mortgages," with hopes of discouraging others from such behavior.
Lenders are unlikely to target borrowers who negotiate in good faith or have defaulted on their home due to job loss or other unforeseen circumstances; other borrowers could be hounded by collection agencies that have purchased their mortgage debt from their lender.
Source: RISMedia (06/08/10)
Builders Report Improving Spring Sales
Home builders are seeing their sales improve after the slowdown that followed the end of the home buyer tax credits.
JMP Securities analyst James Wilson says sales activities in California, Texas, and Arizona are approaching pre-April numbers in many markets. In some markets, builders are able to continue to raise prices and homes are selling at the strongest pace since before spring 2009, he says.
Wilson said he expects home sales to continue to be up and down, but he believes that the market has already hit bottom and is on the upswing.
Source: Associated Press (06/07/2010)
JMP Securities analyst James Wilson says sales activities in California, Texas, and Arizona are approaching pre-April numbers in many markets. In some markets, builders are able to continue to raise prices and homes are selling at the strongest pace since before spring 2009, he says.
Wilson said he expects home sales to continue to be up and down, but he believes that the market has already hit bottom and is on the upswing.
Source: Associated Press (06/07/2010)
Real Estate Outlook: Positive Trends
Positive news on housing and real estate keep rolling in -- thanks in large part to federal home purchase tax credits and continuing near-record low mortgage rates.
Last week's pending home sales report from the National Association of Realtors illustrates the trend: Pending contracts jumped for the third straight month -- up by six percent in April -- and now stand 22 percent higher than the year before.
Every region but one -- the South -- racked up sizable gains in transactions heading for settlement. Contracts in the Northeast were up by nearly 30 percent for the month. In the West, they rose nearly eight percent, and in the Midwest the gain was about four percent.
The South's pending sales were less than one percent off from the previous month, but are still an impressive 31 percent above where they were 12 months before.
Home prices also appear to be moving on an upward curve, according to the latest Clear Capital Home Data Index -- which tracks price movements in thousands of local markets and Zip codes.
Clear Capital's national report for the month of May found prices up by 6.8 percent year over year.
Consumer confidence is definitely powering some of these sales and price numbers, economists say. The Conference Board's index for consumer confidence in May rose by five points -- a good sign for consumers' willingness to spend money.
Lynn Franco, who directs the Conference Board's survey research center, noted that the "expectations" component of the index was particularly strong -- and is now at its highest point in nearly three years.
According to Franco, consumers' previous fears about the job market, incomes and the overall economy have been on the decline for a couple of months now.
Meanwhile, mortgage giant Fannie Mae released its latest economic projections for the rest of the year. Chief economist Doug Duncan says he sees a "self-sustaining economic recovery" gradually taking shape -- again good news for housing.
Of course, not all the latest numbers on real estate are upbeat. They never are. Now a closely watched index tied to likely new home purchase offers two to three months down the road has gone negative. The Mortgage Bankers Association's index of new loan applications declined again for the third straight week, and now is at its lowest point in 14 years.
What's going on here? Most likely its the tax credits. The April 30 deadline for signed contracts for the two tax credit programs -- and the phaseout of the entire credit program June 30 -- are definitely pushing loan applications down.
As we said last week, the credits -- which are part of the federal stimulus efforts -- pushed many purchasers to move up their transactions to the first half of the year. Lawrence Yun, chief economist for the National Association of Realtors, says the underlying strength of the economic recovery should allow sales and loan applications to recover in the second half, without any need for additional federal help.
Last week's pending home sales report from the National Association of Realtors illustrates the trend: Pending contracts jumped for the third straight month -- up by six percent in April -- and now stand 22 percent higher than the year before.
Every region but one -- the South -- racked up sizable gains in transactions heading for settlement. Contracts in the Northeast were up by nearly 30 percent for the month. In the West, they rose nearly eight percent, and in the Midwest the gain was about four percent.
The South's pending sales were less than one percent off from the previous month, but are still an impressive 31 percent above where they were 12 months before.
Home prices also appear to be moving on an upward curve, according to the latest Clear Capital Home Data Index -- which tracks price movements in thousands of local markets and Zip codes.
Clear Capital's national report for the month of May found prices up by 6.8 percent year over year.
Consumer confidence is definitely powering some of these sales and price numbers, economists say. The Conference Board's index for consumer confidence in May rose by five points -- a good sign for consumers' willingness to spend money.
Lynn Franco, who directs the Conference Board's survey research center, noted that the "expectations" component of the index was particularly strong -- and is now at its highest point in nearly three years.
According to Franco, consumers' previous fears about the job market, incomes and the overall economy have been on the decline for a couple of months now.
Meanwhile, mortgage giant Fannie Mae released its latest economic projections for the rest of the year. Chief economist Doug Duncan says he sees a "self-sustaining economic recovery" gradually taking shape -- again good news for housing.
Of course, not all the latest numbers on real estate are upbeat. They never are. Now a closely watched index tied to likely new home purchase offers two to three months down the road has gone negative. The Mortgage Bankers Association's index of new loan applications declined again for the third straight week, and now is at its lowest point in 14 years.
What's going on here? Most likely its the tax credits. The April 30 deadline for signed contracts for the two tax credit programs -- and the phaseout of the entire credit program June 30 -- are definitely pushing loan applications down.
As we said last week, the credits -- which are part of the federal stimulus efforts -- pushed many purchasers to move up their transactions to the first half of the year. Lawrence Yun, chief economist for the National Association of Realtors, says the underlying strength of the economic recovery should allow sales and loan applications to recover in the second half, without any need for additional federal help.
NEW YORK (CNNMoney.com)
A key measure of consumer confidence climbed for a third straight month in May, a research group said Tuesday, with the outlook for the next few months spiking to pre-recession levels.
The Conference Board, a New York-based research group, said its Consumer Confidence Index rose to 63.3 in May, the highest level since March 2008, when it stood at 65.9. The index climbed from a downwardly revised 57.7 in April.
Economists were expecting the index to increase to 58.3, according to a Briefing.com consensus survey. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation's economic activity.
The Conference Board said the survey cutoff date was May 18, meaning that the data took into account such events as the "flash crash" of May 6 and the ongoing European debt crisis. It would not have included some of the events that have roiled markets in recent days, such as the tensions in Korea.
"Consumer confidence posted its third consecutive monthly gain, and although still weak by historical levels, appears to be gaining some traction," said Lynn Franco, director of the Conference Board, in a statement. "Consumers apprehension about current business conditions and the job market continues to dissipate.
The overall index has been recovering slowly since reaching a record low of 25.3 in February 2009, but was still far from a reading above 90, which indicates the economy is stable, and 100 or above, which indicates strong growth.
The expectation index, which measures consumers' outlook over the next few months, rose to 85.3, the highest level since August 2007, when it came in at 89.2.
"The improvement has been fueled primarily by growing optimism about business and labor market conditions." Franco said.
The percentage of Americans expecting business conditions to pick up increased to 23.5% from 19.7% last month, and fewer expected circumstances to worsen.
The percentage of those expecting the job market to improve also edged higher to 20.4% from 17.7% the previous month. Last month, employers added the most jobs since March 2006, and economists expect payrolls to increase by 500,000 jobs this month, which would be the most since September 1997.
Those expecting a rise in their incomes improved modestly to 11.3% from 10.5%.
"The Consumer Confidence Index tends to reflect consumer impressions of the direction of the jobs market," said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors, in a research note. "The recent marked improvement in the pace of job creation is clearly lifting spirits."
But as spooked investors remain fixated on debt problems in Europe and growing tensions in Korea, Baird said the market's recent turmoil "will undoubtedly weigh" on consumer sentiment.
"We do not expect discretionary spending to return to pre-recession levels for some time," Baird said. "Nonetheless, should we see continued improvement in the jobs market as anticipated in the months ahead, improving personal income should be supportive of spending growth."
The Conference Board, a New York-based research group, said its Consumer Confidence Index rose to 63.3 in May, the highest level since March 2008, when it stood at 65.9. The index climbed from a downwardly revised 57.7 in April.
Economists were expecting the index to increase to 58.3, according to a Briefing.com consensus survey. The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation's economic activity.
The Conference Board said the survey cutoff date was May 18, meaning that the data took into account such events as the "flash crash" of May 6 and the ongoing European debt crisis. It would not have included some of the events that have roiled markets in recent days, such as the tensions in Korea.
"Consumer confidence posted its third consecutive monthly gain, and although still weak by historical levels, appears to be gaining some traction," said Lynn Franco, director of the Conference Board, in a statement. "Consumers apprehension about current business conditions and the job market continues to dissipate.
The overall index has been recovering slowly since reaching a record low of 25.3 in February 2009, but was still far from a reading above 90, which indicates the economy is stable, and 100 or above, which indicates strong growth.
The expectation index, which measures consumers' outlook over the next few months, rose to 85.3, the highest level since August 2007, when it came in at 89.2.
"The improvement has been fueled primarily by growing optimism about business and labor market conditions." Franco said.
The percentage of Americans expecting business conditions to pick up increased to 23.5% from 19.7% last month, and fewer expected circumstances to worsen.
The percentage of those expecting the job market to improve also edged higher to 20.4% from 17.7% the previous month. Last month, employers added the most jobs since March 2006, and economists expect payrolls to increase by 500,000 jobs this month, which would be the most since September 1997.
Those expecting a rise in their incomes improved modestly to 11.3% from 10.5%.
"The Consumer Confidence Index tends to reflect consumer impressions of the direction of the jobs market," said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors, in a research note. "The recent marked improvement in the pace of job creation is clearly lifting spirits."
But as spooked investors remain fixated on debt problems in Europe and growing tensions in Korea, Baird said the market's recent turmoil "will undoubtedly weigh" on consumer sentiment.
"We do not expect discretionary spending to return to pre-recession levels for some time," Baird said. "Nonetheless, should we see continued improvement in the jobs market as anticipated in the months ahead, improving personal income should be supportive of spending growth."
30-Yr Fixed Mortgage Rates Dip for Conforming and FHA Loans
30-yr fixed mortgage rates dipped last week thanks to gains in mortgage-backed securities prices. MBS prices, which drive mortgage rates their opposite, were pushed up by investors seeking the safety of bonds.
The conforming 30-yr fixed rate is at 4.625%, down from 4.75% according to FreeRateUpdate.com research of wholesale lenders' rate sheets. This rate is available to well-qualified borrowers paying a standard .07 to 1 point origination. The conforming 15-yr fixed rate is at 4.125%, down from 4.25.
The conforming 5/1 ARM rate is down to 3.5. FHA mortgage rates have improved as well. The current FHA 30-yr fixed rate is at 4.5%, an 1/8 lower than the conforming 30-year fixed rate. Despite having similar rates and origination fees, FHA loans come with highers cost and APR due to MI, at 2.25% of the amount financed, and other FHA fees.
The current jumbo 30-yr fixed rate, for jumbo loans exceeding the jumbo conforming loan limit, is 5.5%, down from 5.625. It's speculated the jumbo mortgage market will thaw now that the first private sale of jumbo mortgage securities in over 2 years has taken place (Redwood Trust).
Today's Mortgage Rates - available to well-qualified consumers at a standard .07 to 1 point origination.
30-yr fixed-rate - 4.625%
15-yr fixed-rate - 4.250%
5/1 ARM rate - 3.500%
FHA 30-yr fixed-rate - 4.500%
FHA 15-yr fixed-rate - 4.500%
FHA 5/1 ARM rate - 3.500%
VA 30-yr fixed-rate - 4.750%
Jumbo 30-yr fixed-rate - 5.500%
Jumbo Conforming 30-yr fixed-rate - 4.875%
FreeRateUpdate.com researches over 2 dozen wholesale lenders' rate sheets for brokers daily to determine the most accurate rates available to well-qualified borrowers at a standard origination fee of about 1 point. These rates are commonly referred to as "par rates" by loan officers.
The conforming 30-yr fixed rate is at 4.625%, down from 4.75% according to FreeRateUpdate.com research of wholesale lenders' rate sheets. This rate is available to well-qualified borrowers paying a standard .07 to 1 point origination. The conforming 15-yr fixed rate is at 4.125%, down from 4.25.
The conforming 5/1 ARM rate is down to 3.5. FHA mortgage rates have improved as well. The current FHA 30-yr fixed rate is at 4.5%, an 1/8 lower than the conforming 30-year fixed rate. Despite having similar rates and origination fees, FHA loans come with highers cost and APR due to MI, at 2.25% of the amount financed, and other FHA fees.
The current jumbo 30-yr fixed rate, for jumbo loans exceeding the jumbo conforming loan limit, is 5.5%, down from 5.625. It's speculated the jumbo mortgage market will thaw now that the first private sale of jumbo mortgage securities in over 2 years has taken place (Redwood Trust).
Today's Mortgage Rates - available to well-qualified consumers at a standard .07 to 1 point origination.
30-yr fixed-rate - 4.625%
15-yr fixed-rate - 4.250%
5/1 ARM rate - 3.500%
FHA 30-yr fixed-rate - 4.500%
FHA 15-yr fixed-rate - 4.500%
FHA 5/1 ARM rate - 3.500%
VA 30-yr fixed-rate - 4.750%
Jumbo 30-yr fixed-rate - 5.500%
Jumbo Conforming 30-yr fixed-rate - 4.875%
FreeRateUpdate.com researches over 2 dozen wholesale lenders' rate sheets for brokers daily to determine the most accurate rates available to well-qualified borrowers at a standard origination fee of about 1 point. These rates are commonly referred to as "par rates" by loan officers.
More homeowners choose to default on loans
Choosing not to pay has consequences beyond damaged credit scores!
CHICAGO (MarketWatch) -- "Strategic defaults" are on the rise as more borrowers who are underwater on their home loans decide it's not worth it to stay current on their payments each month. That trend could have repercussions for the housing market, and for borrowers, in the future.
Strategic defaults are when borrowers who owe more on their homes than they're currently worth choose to stop paying their mortgage but continue to meet other financial obligations, according to a definition by Morgan Stanley in a research report on the topic.
The Morgan Stanley report estimates that 12% of mortgage defaults in February were strategic. Other reports estimate an even higher proportion of this type of loan default.
Growing social acceptance of this behavior could have ramifications not only for personal credit histories and the health of neighborhoods, but also for the future of mortgage lending, according to those studying the issue.
For one, there's a contagion effect: As more people watch their friends or neighbors choose to default, the more it becomes a viable option for homeowners who may otherwise wait years just to return to a positive equity position in their properties, said Sam Khater, senior economist for CoreLogic, a provider of consumer, financial and property information. The volume of foreclosures on the market today is also chipping away at the stigma that used to come with defaulting on a home loan.
"If you know someone who has defaulted strategically, you're more likely to declare you're willing to do it," said Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago's Booth School of Business.
In areas where home prices are severely depressed, social acceptance of this decision could lead to pockets "where strategic default becomes the norm, versus the exception," Zingales said.
But look even farther in the future, and the repercussions of substantial strategic defaults could have a larger-scale effect.
"If it really does become a legitimate problem, the implications are pretty dramatic for anyone that wants to buy a home in the future," said Rick Sharga, senior vice president of RealtyTrac, an online marketplace of foreclosure properties. "The lenders would have to build this into their risk models with either larger down payments or higher interest rates."
Some owners 'mimic investors' Many agree the ranks of people taking this route are growing, but putting a number on the trend isn't as easy. To measure the number of people who are strategically defaulting on their mortgage obligations, you have to assess borrower intent.
"Take all the numbers with a grain of salt, because it's one of those topics which is really difficult to get a firm grasp on," Sharga said. "The projections are based on limited sample sizes, and [people are] doing projections that have a lot of implications on societal behavior and political policy."
Researchers believe that being underwater on a loan is a prerequisite to strategic default, and the more underwater you are, the likelier you are to consider defaulting -- even if you can afford to keep making payments.
"In our data, what we've noticed is at about 25% negative equity, the behavior of owners begins to mimic that of investors -- they're more ruthless and rational, they're looking at it from a cash-flow perspective," Khater said. "The default rate rises as the negative equity gets deeper and deeper."
CHICAGO (MarketWatch) -- "Strategic defaults" are on the rise as more borrowers who are underwater on their home loans decide it's not worth it to stay current on their payments each month. That trend could have repercussions for the housing market, and for borrowers, in the future.
Strategic defaults are when borrowers who owe more on their homes than they're currently worth choose to stop paying their mortgage but continue to meet other financial obligations, according to a definition by Morgan Stanley in a research report on the topic.
The Morgan Stanley report estimates that 12% of mortgage defaults in February were strategic. Other reports estimate an even higher proportion of this type of loan default.
Growing social acceptance of this behavior could have ramifications not only for personal credit histories and the health of neighborhoods, but also for the future of mortgage lending, according to those studying the issue.
For one, there's a contagion effect: As more people watch their friends or neighbors choose to default, the more it becomes a viable option for homeowners who may otherwise wait years just to return to a positive equity position in their properties, said Sam Khater, senior economist for CoreLogic, a provider of consumer, financial and property information. The volume of foreclosures on the market today is also chipping away at the stigma that used to come with defaulting on a home loan.
"If you know someone who has defaulted strategically, you're more likely to declare you're willing to do it," said Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago's Booth School of Business.
In areas where home prices are severely depressed, social acceptance of this decision could lead to pockets "where strategic default becomes the norm, versus the exception," Zingales said.
But look even farther in the future, and the repercussions of substantial strategic defaults could have a larger-scale effect.
"If it really does become a legitimate problem, the implications are pretty dramatic for anyone that wants to buy a home in the future," said Rick Sharga, senior vice president of RealtyTrac, an online marketplace of foreclosure properties. "The lenders would have to build this into their risk models with either larger down payments or higher interest rates."
Some owners 'mimic investors' Many agree the ranks of people taking this route are growing, but putting a number on the trend isn't as easy. To measure the number of people who are strategically defaulting on their mortgage obligations, you have to assess borrower intent.
"Take all the numbers with a grain of salt, because it's one of those topics which is really difficult to get a firm grasp on," Sharga said. "The projections are based on limited sample sizes, and [people are] doing projections that have a lot of implications on societal behavior and political policy."
Researchers believe that being underwater on a loan is a prerequisite to strategic default, and the more underwater you are, the likelier you are to consider defaulting -- even if you can afford to keep making payments.
"In our data, what we've noticed is at about 25% negative equity, the behavior of owners begins to mimic that of investors -- they're more ruthless and rational, they're looking at it from a cash-flow perspective," Khater said. "The default rate rises as the negative equity gets deeper and deeper."
Debt Management for Homeownership
Learning to manage your finances is a great first step towards owning the home of your dreams. Whether this is your first time to buy, or you are looking to move-up, managing your debt is important.
Among the most important of the debt management qualities is holding yourself accountable. What does this mean, exactly? Being accountable means taking an honest look at your budget and your spending. The $5 latte every morning on the way to work, the cash withdrawals spent without record, or even the extra martini with dinner adds up to money spent, not saved.
An easy was to increase your own accountability is to use a debit card and online banking for all of your purchases. Online banking is offered by nearly every banking institution, and allows you to access your account anytime, anywhere. Now you'll know if you are spending $100 a month on little extras.
The next step in accountability is to create a monthly budget. On a sheet of paper write down each of your monthly expenses. These might include: rent or house payment, car payments, insurance, phone bills, cable and internet, alimony, child support, and student loans. It's time to take a hard look at what you think you are spending versus what your real expenditures are. If you can, don't forget to add up how much you spend on all the extras, such as nights out, entertainment, books, hair cuts, and household products.
If you'd prefer to use an online calculator to show you a monthly budget, consider using financial guru Suze Orman's tools at Suzeorman.com.
Next, begin to cut and adjust your spending. In this economy, everyone can take note of this tip, even if they don't have debts. Where can you cut? Experts recommend limiting your trips for eating out.
According to Christine Bockelman with Smartmoney.com, "Americans now spend roughly half their food budget dining out, and restaurants expect revenue of more than $537 billion in 2007. That's a 67 percent increase since 1997." How much is the food really marked up? Bockelman notes, "At a fine-dining restaurant, the average cost of food is 38 to 42 percent of the menu price."
Make your morning coffee at home and take it in a travel mug to work. Rent movies, instead of paying $10 a ticket for each member of the family to go see a "new to the theater" attraction. If you have the money to spend and splurge, it's fine. That's what makes our economy go round, but spending what you don't have, and adding to your already mounting debt, is no way to work your way towards homeownership.
There is a difference between wants and needs, and this is a time to re-evaluate how you define them.
Once you have freed up some cash, you can start working on paying down debts and building up savings.
It is recommended you develop a savings schedule. After you've set your monthly budget, you will know how much can be earmarked for savings each paycheck. If you can't trust yourself to make the transfer yourself, then set up automatic deposits out of your account.
A separate savings consideration is an emergency fund. Review your budget and see how much you would truly need each month to get by. Multiply that number by 8, because that is the number of months you should be prepared to survive without a job. If you need $2,500 a month to pay all of your bills, then should have $20,000 in savings. Most Americans don't have a fraction of that, part of the reason for the foreclosure crisis running rampant across the nation.
The latest statistics indicate that most Americans have a personal savings rate of less than 5 percent, but owe $8,000 in credit card debt (MSN Money).
When it comes to credit cards, don't. It's as simple as that. If you can, avoid carrying a balance on credit card. We live in a society of margins, with 43 percent of American living beyond their means, but there is something quite liberating about living on your income and no more. If you must use a credit card to carry a balance, or if you already owe, then consider paying more than the minimum each month. Not only does a minimum payment set you up for possible interest rate and fee increases, it costs a whole lot more in the long run.
Consider this equation. If you owe $10,000 on a card with an 18 percent interest rate (fairly normal), and you make minium payments, according to bankrate.com, it will take you 342 months, that's 28 years, to be rid of your debt. In that time, you will pay $14,423.30 in interest!
On the other hand, at just an extra $25 dollars a month, or a fixed monthly payment of $275, it would take you 53 months, or 4 years, to be rid of your debt. In that time, you will pay $4,563.28 in interest. This is a deal compared to the minimum payment equation.
A common question that credit card users ask, "Should I close the account when I have paid off the card?" The answer is simple. If you owe any money on open cards, then no. This will negatively affect your FICO score. This is because the ratio of credit available to credit used will shrink. If you don't owe any money on any cards, then closing cards should have no impact on your FICO score.
So, take a moment to consider your finances, and see if you really are living within your means. If not, what can you do to adjust your spending and savings to get there?
Among the most important of the debt management qualities is holding yourself accountable. What does this mean, exactly? Being accountable means taking an honest look at your budget and your spending. The $5 latte every morning on the way to work, the cash withdrawals spent without record, or even the extra martini with dinner adds up to money spent, not saved.
An easy was to increase your own accountability is to use a debit card and online banking for all of your purchases. Online banking is offered by nearly every banking institution, and allows you to access your account anytime, anywhere. Now you'll know if you are spending $100 a month on little extras.
The next step in accountability is to create a monthly budget. On a sheet of paper write down each of your monthly expenses. These might include: rent or house payment, car payments, insurance, phone bills, cable and internet, alimony, child support, and student loans. It's time to take a hard look at what you think you are spending versus what your real expenditures are. If you can, don't forget to add up how much you spend on all the extras, such as nights out, entertainment, books, hair cuts, and household products.
If you'd prefer to use an online calculator to show you a monthly budget, consider using financial guru Suze Orman's tools at Suzeorman.com.
Next, begin to cut and adjust your spending. In this economy, everyone can take note of this tip, even if they don't have debts. Where can you cut? Experts recommend limiting your trips for eating out.
According to Christine Bockelman with Smartmoney.com, "Americans now spend roughly half their food budget dining out, and restaurants expect revenue of more than $537 billion in 2007. That's a 67 percent increase since 1997." How much is the food really marked up? Bockelman notes, "At a fine-dining restaurant, the average cost of food is 38 to 42 percent of the menu price."
Make your morning coffee at home and take it in a travel mug to work. Rent movies, instead of paying $10 a ticket for each member of the family to go see a "new to the theater" attraction. If you have the money to spend and splurge, it's fine. That's what makes our economy go round, but spending what you don't have, and adding to your already mounting debt, is no way to work your way towards homeownership.
There is a difference between wants and needs, and this is a time to re-evaluate how you define them.
Once you have freed up some cash, you can start working on paying down debts and building up savings.
It is recommended you develop a savings schedule. After you've set your monthly budget, you will know how much can be earmarked for savings each paycheck. If you can't trust yourself to make the transfer yourself, then set up automatic deposits out of your account.
A separate savings consideration is an emergency fund. Review your budget and see how much you would truly need each month to get by. Multiply that number by 8, because that is the number of months you should be prepared to survive without a job. If you need $2,500 a month to pay all of your bills, then should have $20,000 in savings. Most Americans don't have a fraction of that, part of the reason for the foreclosure crisis running rampant across the nation.
The latest statistics indicate that most Americans have a personal savings rate of less than 5 percent, but owe $8,000 in credit card debt (MSN Money).
When it comes to credit cards, don't. It's as simple as that. If you can, avoid carrying a balance on credit card. We live in a society of margins, with 43 percent of American living beyond their means, but there is something quite liberating about living on your income and no more. If you must use a credit card to carry a balance, or if you already owe, then consider paying more than the minimum each month. Not only does a minimum payment set you up for possible interest rate and fee increases, it costs a whole lot more in the long run.
Consider this equation. If you owe $10,000 on a card with an 18 percent interest rate (fairly normal), and you make minium payments, according to bankrate.com, it will take you 342 months, that's 28 years, to be rid of your debt. In that time, you will pay $14,423.30 in interest!
On the other hand, at just an extra $25 dollars a month, or a fixed monthly payment of $275, it would take you 53 months, or 4 years, to be rid of your debt. In that time, you will pay $4,563.28 in interest. This is a deal compared to the minimum payment equation.
A common question that credit card users ask, "Should I close the account when I have paid off the card?" The answer is simple. If you owe any money on open cards, then no. This will negatively affect your FICO score. This is because the ratio of credit available to credit used will shrink. If you don't owe any money on any cards, then closing cards should have no impact on your FICO score.
So, take a moment to consider your finances, and see if you really are living within your means. If not, what can you do to adjust your spending and savings to get there?
Real Estate Outlook: The Federal Reserve
What should we make of the latest reports on rising home sales and the Federal Reserve's promise to keep interest rates low indefinitely?
Should we worry that at least some of the sales are being pushed forward by the expiring tax credits? Though that may be the case, take a minute and join the economists at the Fed to see the bigger picture. What's going on in the economy nationwide?
In its "open markets committee" statement issued last week, the Fed pointed to the underlying positives: Overall national "economic activity continues to strengthen," it said, and "the labor market is beginning to improve." Of course there are challenges to keeping the rebound rolling along, but the direction for the year as a whole is good.
The Fed's statement provides useful context for some of the encouraging numbers being racked up in the housing market. For example:
The Commerce Department reported last week that new home sales in March were up by 27 percent -- hitting their highest levels since July of 2009. Even the median sale price was up by 4.3 percent compared with the same month the year before.
Home resales in some major markets were up impressively as well, such as in Chicago, where sales jumped by 50 percent last month over the year before, and were 48 percent higher than they were in February. Florida sales were 37 percent higher in March than February and were up by 24 percent compared with the year before. Las Vegas saw its highest sales totals in four years.
Not surprisingly, applications for new mortgages to purchase homes have been rising strongly as well. The Mortgage Bankers Association reported a 12 percent surge in purchase applications for the latest week. No question the expiring tax credits requiring signed contracts by April 30 played a role in that number.
Meanwhile, the National Association of Business Economics, a group that represents corporate and government economists, just came out with an upbeat forecast as well. Three-quarters of the economists surveyed expect growth in the national gross domestic product (GDP) of two percent or higher through the balance of the year.
Twenty two percent of the private companies polled reported their payrolls and employee numbers increased in March, up significantly from the month before.
So the bottom line to keep in mind about the latest statistics and projections is this: The underlying economic factors, growth in jobs, growth in output, rising consumer expenditures and confidence, are the critical numbers to watch for future housing activity.
And at the moment, the consensus is that they look pretty promising
Should we worry that at least some of the sales are being pushed forward by the expiring tax credits? Though that may be the case, take a minute and join the economists at the Fed to see the bigger picture. What's going on in the economy nationwide?
In its "open markets committee" statement issued last week, the Fed pointed to the underlying positives: Overall national "economic activity continues to strengthen," it said, and "the labor market is beginning to improve." Of course there are challenges to keeping the rebound rolling along, but the direction for the year as a whole is good.
The Fed's statement provides useful context for some of the encouraging numbers being racked up in the housing market. For example:
The Commerce Department reported last week that new home sales in March were up by 27 percent -- hitting their highest levels since July of 2009. Even the median sale price was up by 4.3 percent compared with the same month the year before.
Home resales in some major markets were up impressively as well, such as in Chicago, where sales jumped by 50 percent last month over the year before, and were 48 percent higher than they were in February. Florida sales were 37 percent higher in March than February and were up by 24 percent compared with the year before. Las Vegas saw its highest sales totals in four years.
Not surprisingly, applications for new mortgages to purchase homes have been rising strongly as well. The Mortgage Bankers Association reported a 12 percent surge in purchase applications for the latest week. No question the expiring tax credits requiring signed contracts by April 30 played a role in that number.
Meanwhile, the National Association of Business Economics, a group that represents corporate and government economists, just came out with an upbeat forecast as well. Three-quarters of the economists surveyed expect growth in the national gross domestic product (GDP) of two percent or higher through the balance of the year.
Twenty two percent of the private companies polled reported their payrolls and employee numbers increased in March, up significantly from the month before.
So the bottom line to keep in mind about the latest statistics and projections is this: The underlying economic factors, growth in jobs, growth in output, rising consumer expenditures and confidence, are the critical numbers to watch for future housing activity.
And at the moment, the consensus is that they look pretty promising
Risk wanes for real estate price declines - PMI sees improvements in nearly all markets
The risk of home-price declines decreased in 93 percent of the 384 markets tracked at the end of last year by analysts with PMI Mortgage Insurance Co., although half still showed an elevated or high risk of depreciation.
Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.
"House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom," PMI Chief Economist David Berson said in a statement accompanying the report.
PMI expects risk scores to continue falling, as unemployment rates should show improvement in the first quarter of 2010 and going forward, which should prove to be "an important new force in reducing the risk of lower prices."
Risky mortgage lending practices and loan products decreased sharply in 2009 "and are hardly present at all in 2010 lending," the report said.
Despite that, PMI's Risk Index -- which takes into account factors including unemployment, foreclosures and inventory levels -- still showed a 90 percent or greater chance of further price declines during the next two years in every market tracked in Florida and Nevada.
Most markets in the other "sand states" hit hard during the downturn, California and Arizona, were at high risk for price declines. All but three of 28 markets tracked in California showed improvement during the fourth quarter of 2009, however.
Seven of the 10 markets with the highest risk scores were in Florida: Naples, Cape Coral, Lakeland, Palm Coast, Miami, Port St. Lucie and Fort Lauderdale. Also making the top 10 riskiest markets list were Kingman, Ariz.; Riverside, Calif.; and Las Vegas.
Six of the 10 least risky markets were in North Dakota and Iowa: Grand Forks, Fargo and Bismark N.D.; and Iowa City, Ames and Cedar Rapids, Iowa. Also on the 10 least risky markets list were Killeen, Texas; Fayetteville N.C.; Morgantown, W.V.; and Texarkana, Ark.
Copyright 2010 Inman News
Overall risk of price declines "decreased dramatically" during the final three months of 2009, PMI said, largely because of improvements in affordability and declining foreclosure starts. Affordability was helped by falling home prices, lower mortgage rates, and increasing personal income.
"House prices have dropped sharply relative to incomes in most areas suggesting that prices have fully, or more than fully, adjusted for their unsustainable increases during the housing boom," PMI Chief Economist David Berson said in a statement accompanying the report.
PMI expects risk scores to continue falling, as unemployment rates should show improvement in the first quarter of 2010 and going forward, which should prove to be "an important new force in reducing the risk of lower prices."
Risky mortgage lending practices and loan products decreased sharply in 2009 "and are hardly present at all in 2010 lending," the report said.
Despite that, PMI's Risk Index -- which takes into account factors including unemployment, foreclosures and inventory levels -- still showed a 90 percent or greater chance of further price declines during the next two years in every market tracked in Florida and Nevada.
Most markets in the other "sand states" hit hard during the downturn, California and Arizona, were at high risk for price declines. All but three of 28 markets tracked in California showed improvement during the fourth quarter of 2009, however.
Seven of the 10 markets with the highest risk scores were in Florida: Naples, Cape Coral, Lakeland, Palm Coast, Miami, Port St. Lucie and Fort Lauderdale. Also making the top 10 riskiest markets list were Kingman, Ariz.; Riverside, Calif.; and Las Vegas.
Six of the 10 least risky markets were in North Dakota and Iowa: Grand Forks, Fargo and Bismark N.D.; and Iowa City, Ames and Cedar Rapids, Iowa. Also on the 10 least risky markets list were Killeen, Texas; Fayetteville N.C.; Morgantown, W.V.; and Texarkana, Ark.
Copyright 2010 Inman News
Slow Payments...How will this effect my Credit?
NEW YORK (CNNMoney.com) -- If you're delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 pointsForeclosure,
short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.
Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.
Here are the average hit your credit will take:
30 days late: 40 - 110 points
90 days late: 70 - 135 pointsForeclosure,
short sale or deed-in-lieu: 85 - 160
Bankruptcy: 130 - 240
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