Friday, October 30, 2009

5 Purchases To Make In A Down Economy


Down economies reduce consumer spending, creating a bind for retailers.  As excess inventory collects dust, companies have little choice but to drop prices in hopes of selling more product.


For the bargain shopper with extra cash right now, there are some terrific deals to be had out there.  This 4-minute piece from NBC's The Today Show highlights a few of them.



  • Wines over $25 per bottle reduced up to 50%
  • High-quality diamonds reduced up to 30%
  • Summer rental homes reduced up to 50%

Furniture is another discounted item.


Now, these aren't everyday-type purchases, but when the economy turns around for good, the bargain-priced items highlighted in the video are expected to return to their former price levels. 


If you have the means, therefore, consider taking advantage while costs are down.



Thursday, October 29, 2009

What The Media Missed In September's New Home Sales Report

New Home Sales supply September 2009Some days, newspaper headlines are a terrible place to get your real estate news. 


Today is one of those days.


After the September New Home Sales report showed sales volume down from August, the mainstream media jumped on the story:



But the headlines miss the point, somewhat.  Yes, home sales volume is important to housing, but it's not as important as home supply.


A deeper look at the New Home Sales data reveals an interesting comparison point:



  • New home sales volume fell 3.6%
  • The number of new homes available for sale fell 3.8%

In other words, sales outpaced supply -- a running theme this year and a positive signal for housing.


Since peaking in January 2009, the supply of newly-built homes has now dropped by 40 percent.  The average sale price is up 15% over the same period.


This is why you can't get your real estate news from the headlines.  You have to dig a little bit deeper to get the real story.


September's New Home Sales report was plenty strong.  The housing market recovery continues.



Wednesday, October 28, 2009

Home Values In 95% Of Case-Shiller Markets Are Improving Year-To-Year

Case-Shiller August 2009


For August, the Case-Shiller Index showed annual home values improving across 19 of 20 U.S. markets. It's the first time in 3-plus years that the benchmark housing index has shown such strength.


According to a Case-Shiller Index spokesperson, "The rate of annual decline in home price values continues to improve."


It's yet another sign that housing may have already bottomed.


However, just because the Case-Shiller Index shows a stabilization in home values, that doesn't necessarily make it true. This is because real estate happens on the local level and the Case-Shiller Index is more "national". It tracks data in just 20 U.S. cities.


Homeowners everywhere else are unaccounted for.


Furthermore, even within the 20 tracked Case-Shiller markets, there's no allowance for the natural sub-markets that exist. Some neighborhoods under-perform and some neighborhoods out-perform.


Case-Shiller treats them all the same.


Despite its imperfections, though, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.


If that's true, August's Case-Shiller data is another step in the right direction.



Tuesday, October 27, 2009

Falling Home Supplies Mean More Multiple-Offer Situations For Buyers

Existing Home Supply September 2009The national housing supply fell to a 2-year low last month, according to the National Association of Realtors®.


At the current sales pace, existing home inventories would sell out in 7.8 months -- 30 percent faster versus November 2008.


For a 10-month window, that's a major housing supply reduction and it helps to explain why multiple-offer situations have been so common lately.


Moreover, the same report from NAR showed sales activity reaching its highest point since July 2007, too.


If you're looking for evidence that the long-standing Buyers Market is ending, this month's Existing Home Sales report might be it.


Even median sales prices -- typically dragged lower by distressed and foreclosed properties -- declined at its slowest pace in a year.  The market may have turned a corner.


Home prices are rooted in the basic economics of supply and demand.



  • When supply outweighs demand, home prices fall
  • When supply lags demand, home price rise

Since March 2009, the market has been moving in the right direction.  Low mortgage rates, ample housing supply and a first-time home buyer tax credit fueled buy-side demand so that home prices are now rising in many U.S. markets.


If home supplies stay on this path into 2010, expect home prices to rise even more.



Monday, October 26, 2009

Government : Home Values Edged Lower In August

Home Price Index month-to-month since the April 2007 peak


According to the government, home values edged lower last month.


The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.


The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index than its private-sector cousin, the Case-Shiller Index.


But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:



  1. Is considered new construction
  2. Is a multi-unit property
  3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.


Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.


In light of these shortcomings, therefore, what's most important is to recognize that both of the "popular" home valuation reports show similar patterns -- home prices have leveled and are showing signs of a rebound.


For a region-by-region breakdown of the Home Price Index, visit the FHFA website.



Friday, October 23, 2009

Government : Home Values Edged Lower In August

Home Price Index month-to-month since the April 2007 peak


According to the government, home values edged lower last month.


The Federal Housing Finance Agency's Home Price Index report shows values down by 0.3 percent from the month prior -- the index's first down month since April.


The Home Price Index is based on the value of homes financed via Fannie Mae or Freddie Mac and, in this sense, the FHFA Home Price Index is more of a "national" real estate index that its private-sector cousin, the Case-Shiller Index.


But like the Case-Shiller, the HPI is as notable for what it specifically excludes as for what it includes. Most notably, the Home Price Index doesn't account for homes meeting any of the following descriptions:



  1. Is considered new construction
  2. Is a multi-unit property
  3. Is financed by an entity other than Fannie Mae or Freddie Mac

Given the resurgence of FHA financing this year, this last exclusion is especially glaring.  FHA represents about one-third of all mortgage loans in 2009.


Because of these exceptions, some analysts label the Home Price Index incomplete.  The same could be said of every method of home valuation, however. Case-Shiller only collects data from 20 markets, for example.


In light of these shortcomings, therefore, what's most important to today's home buyers and sellers is to know that each of the "popular" home valuation reports show similar patterns -- home prices have leveled and may be starting to recover in earnest.


For a region-by-region breakdown of the Home Price Index, visit the FHFA website.



Thursday, October 22, 2009

Housing Starts Post 8th Gain in 9 Months

Housing Starts September 2009Housing Starts on single-family homes gained last month, marking the 8th time that's happened this year.


A "Housing Start" is a home for which the foundation has been excavated and, considered alongside other key market metrics, September data suggests that the housing market stabilization is complete.


Momentum in housing is overwhelmingly positive:



Despite the positive news, the press is calling September's Housing Starts data a "bummer". Citing a drop in monthly building permits, the media purports that housing will slow in the months ahead. 


The conclusion may be right, but the rationale may be wrong. 


The probable cause for fewer permits isn't that the housing market is overdone.  It's that home builders are choosing to exercise caution given the pending expiration of the First-Time Home Buyer Tax Credit and a still-growing number of foreclosed homes. 


It's unclear what housing demand will be beginning in December and the last present a builder wants for the holidays is an excess of inventory.


It makes sense that building permits are down, in other words.


Looking back at February of this year, there's a host of signs that housing is on the path to recovery.  Now, that path won't be a straight line and there's bound to be setbacks, but September's Housing Starts is not one of them.


Housing Starts are up 40 percent on the year.



Wednesday, October 21, 2009

Gas price breakdown from DOE.govWith crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week.


It's bad news for home buyers and mortgage rate shoppers.  The same force that's driving oil higher is linked to rising mortgage rates.


We're talking about the weakening U.S. Dollar which is now at its worst levels versus the Euro in 15 months.


Crude oil is priced in U.S. dollars, by the barrel.  When the dollar loses value, more of them are needed to buy the same barrel of oil.  As a result, predictably, the price of crude oil goes up.


Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it's why we're addressing it.


The dollar has a similar impact on mortgage rates.


Mortgage rates are based on the price of mortgage bonds that -- like crude oil -- are also denominated in dollars. As the dollar loses value, so do mortgage bonds.  This causes demand for bonds to drop and prices on bonds to fall.


Because bond prices and bond rates move in opposite directions, mortgage rates rise and thisis precisely what's happening on Wall Street today.


Since touching a 5-month low in early-October, mortgage rates have tacked on as much as 1/2 percent, depending on the product.  Moreover, with the dollar showing no signs of a rebound, the upward pressure on rates should continue.


If you're trying to time the market bottom, you may have already missed it. Consider locking your mortgage rate before rates increase even more.


And your everyday signal that rates are rising? Just check your price at the pump. If gas prices are up, it's likely that mortgage rates are, too.



Tuesday, October 20, 2009

The Fed Thinks The Economy Is Improving And What It Means For Home Affordability

FOMC Minutes September 23-23 2009Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting.


Known as the "Fed Minutes", the report details the conversation and cross-currents that led to the Federal Reserve's decision to vote "unchanged" on the Fed Funds Rate after its last meeting.


The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release.


As a comparison:



The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next.


In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010.  Fed Chairman Ben Bernanke even alluded to it, too.


The minutes revealed that the economy may improve even faster than was previously expected, too.


These acknowledgements are part of the reason why mortgage rates are up. Because the Fed Funds Rate rises to accommodate a growing economy, the prospect of economic recovery is drawing money into the stock market and away from mortgage-backed bonds.


Less demand for bonds means lower prices which, in turn, leads to higher rates.



Friday, October 16, 2009

The Fed Thinks The Economy Is Improving And What It Means For Home Affordability

FOMC Minutes September 23-23 2009Mortgage rates are higher after the Federal Reserve released the internal notes of its September 22-23, 2009 meeting.


Known as the "Fed Minutes", the report details the conversation and cross-currents that led to the Federal Reserve's decision to vote "unchanged" on the Fed Funds Rate after its last meeting.


The Fed Minutes are the lengthy companion to the more famous, succinct post-meeting press release.


As a comparison:



The extra level of details is a big deal because Wall Street is perpetually in search of clues about what the Federal Reserve is going to do next.


In the past week, multiple Federal Reserve members hinted that the Fed Funds Rate may rise as early as April 2010.  Fed Chairman Ben Bernanke even alluded to it, too.


The minutes revealed that the economy may improve even faster than was previously expected, too.


These acknowledgements are part of the reason why mortgage rates are up. Because the Fed Funds Rate rises to accommodate a growing economy, the prospect of economic recovery is drawing money into the stock market and away from mortgage-backed bonds.


Less demand for bonds means lower prices which, in turn, leads to higher rates.



Thursday, October 15, 2009

Foreclosures Concentrate In Just 4 States

Foreclosures September 2009For the seventh consecutive month, foreclosure activity in the U.S. was dominated by a tiny subset of states.


As reported by RealtyTrac.com, more than half of September's foreclosure-related activity occurred in just 4 states:



  1. California
  2. Florida
  3. Nevada
  4. Michigan

These states represent just 22.05 percent of the total U.S. population.


Overall, foreclosures are up 29 percent from September 2008 and, while, the data seems negative, defaults are creating some interesting buying opportunities.


Foreclosed homes often sell at a discount as compared to non-foreclosed homes. Cheap prices, low mortgage rates and willing buyers have helped to spur home sales in many U.S. markets.   In August, "distressed homes" accounted for one-third of all existing home sales.


That said, buying foreclosures isn't for everyone.


First off, foreclosed homes are often sold "as-is" and may be in perfect condition, or may be inhabitable. If the property falls into the latter category, it's important to get estimates for the work needed to make the home livable. Suddenly, the home may not seem like such a "steal".


And, secondly, buying a home in foreclosure can be a 3-month process or more.  For some people, this is just too long.


Buying a home in foreclosure is fundamentally the same as buying a "regular" home -- there's a contract and a closing.  But most of the steps in between are different. 


Read the complete foreclosure report, plus take a peek at foreclosure heat maps on the RealtyTrac website.  If you like what you see, talk to your real estate agent about what to do next.



Wednesday, October 14, 2009

Should Joint Homeowners Keep Separate Bank Accounts?


When you own a home with a spouse or partner, the issue of what's mine, what's yours, and what's ours can be a divisive one.


Each household has its own money management methodology and, according to financial talk-show host Suze Orman, most leave significant room for improvement.


In this 4-minute piece aired on NBC's The Today Show, Orman talks about co-managing finances with topics including:



  • How to determine how much money goes into a "personal" spending account versus a "family" spending account
  • The importance of both parties taking an active role in bill-paying
  • How to manage the money when one partner doesn't earn an income

Being aware of money is the first step towards protecting it.




Tuesday, October 13, 2009

The Sellers' Deadly Sins : How To Keep Your Home From Selling At Maximum Dollar

It's a sensational headline -- "The Sellers' Deadly Sins" -- but the message is clear. Home sellers make mistakes that not only cost themselves thousands, but sometimes cost the sale, too.

NBC's The Today Show lays it out cleanly in this 5-minute video:

  1. How to respond to an "insulting offer"
  2. How to handle the first purchase offer you receive
  3. What do when you can't leave your home for its Open House
  4. What room in the home should be kept the neatest

But, be aware. At the video's end, there's a piece of advice that may sound extremely self-serving coming from a real estate professional. Don't let it turn you off. The video's overall message is spot-on and the advice is real-world tested.

Selling a home is a process. Make sure to do it properly.



Monday, October 12, 2009

Pending Homes Sales Gain For The 7th Straight Month

Pending Home Sales September 2009Buoyed by a generous tax credit, affordable homes, and low mortgage rates, the Pending Home Sales Index posted its seventh consecutive monthly gain in August.

It's the longest winning streak in the index's history and the highest reading in 2-1/2 years.

It's also another signal that the housing market is in recovery.

"Pending home sales" are a forward-looking indicator, measuring the number homes under contract to sell, but not yet closed.

Historically, 80% of homes under contract close within 60 days. Most others close within 120 days.

It's no wonder home values are rising in so many markets.

Home buyers -- take note. If you're plan to purchase a home between now and the New Year, expect that the recent run in pending sales will turn into run of closed sales which, in turn, should pump prices up and drop home inventory.

With mortgage rates hovering near 4-month lows, the best way to find a value in housing may be to act sooner rather than later.

Saturday, October 10, 2009

The FHA Is Changing Its Streamline Refinance Guidelines November 2009

New FHA Streamline Refinance guidelinesBeginning November 17, 2009, the FHA will make it harder to qualify for its popular Streamline Refinance program.

Available exclusively to homeowners with existing FHA home loans, the streamline program is meant to help homeowners reduce mortgage payments as simply as possible.

As such, the program carries minimum eligibility requirements.

In fact, the FHA Streamline Refinance is more notable for what it doesn't require from applicants.

  • There's no income verification
  • There's no asset verification
  • There's no employment verification
  • There's no appraisal required

The two biggest qualifiers, really, are that the homeowner meets a minimum credit score and that the new loan doesn't exceed the original balance of the old loan.

The new program guidelines, however, are much stricter.

Effective next month, among other requirements, applicants must show evidence of employment and income, plus proof of cash required at closing.

Furthermore, homeowners can't finance closing costs into the mortgage without a complete home appraisal. In areas of declining value, this may render refinancing with the FHA impossible.

Therefore, if you're a homeowner with an FHA mortgage, consider contacting your loan officer before the November 17 deadline to explore your Streamline Refinance options. Mortgage rates are low and you never know for what you'll qualify.

The worst thing you can do is to wait too long to find out. Once the deadline passes, the old guidelines will be history.