According to the June 2008 Case-Shiller Home Price Index, home prices in 15 of the 20 largest U.S. real estate markets either improved, or showed growth from the month prior.
This is the fourth straight month in which that happened which means that a national housing recovery may already be underway.
Now, it's worth stating that all real estate is local and that there's no such thing as a "national real estate market", but for home buyers looking to to maximize their negotiation power to get the best possible "deal", spotting trends like this before the media does is a good thing.
So far, only Bloomberg and a few others have chosen to highlight the positives from the otherwise-negative Case-Shiller report. By contrast, most publishers are focusing on annual home price figures which show a hefty drop of 15.9 percent.
We shouldn't dismiss annual trends because they're helpful in the theoretical sense, but for real, live home buyers trying to identify trends and market bottoms, it's the month-to-month data that matters most.
After looking at 4 consecutive months of Case-Shiller data, the month-to-month data appears to show that home prices have stabilized in most major markets. And, in some, they've already started to recover from their lows.
Source
U.S. House-Price Slide Eases, S&P/Case-Shiller Shows
Courtney Schlisserman
Bloomberg.com, August 26, 2008
When a homeowner buys a new home, he has 3 options of what to do with his current residence:
- Sell the home, paying off the mortgage in full
- Keep the home as a second/vacation home
- Convert the home to an investment property
The most common action plan is the first one -- sell the home and pay off the mortgage. However, with home prices poised to rebound, some savvy homeowners are trying to avoid "selling low".
Unfortunately -- as of August 1, 2008 -- waiting out the market won't be so easy.
Burned by foreclosures and wary of risk, Fannie Mae issued new conforming mortgage guidelines that specifically apply to home buyers planning to convert an existing primary residence into a second home or investment property.
Among the highlights of Fannie Mae's changes:
Selling the primary residence
If the new home being purchased closes prior to the existing home's sale, both payments must be used to qualify the buyer for the new mortgage.
Converting to a second home
If the home has less than 30 percent equity in it, the home buyer must show 6 months of PITI reserves for both properties to qualify for the new mortgage.
Converting to an investment property
If the home has less than 30 percent equity, its rental income may not be used to help the buyer qualify for the new mortgage.
If it seems like mortgage rules are getting strict, that's because they are. And they're expected to get tougher, too. With each foreclosure and high-profile bank collapse, mortgage lenders tighten up their guidelines just a bit, freezing out the "fringe" borrower from access to mortgage money.
Mortgage rates may rise through 2009, or they may fall. We don't know. But what we do know is that borrowing money to buy a home will be tougher.
If you plan to buy a home in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead. Understanding the mortgage rules and how they can change may be the difference between getting approved for a home loan, or getting turned down.
As compact fluorescent bulbs gain favor across the country, it's important to remember that they contain mercury and mercury is harmful to humans.
Because even though CFLs contain small amounts of mercury -- less than 4 milligrams per bulb -- it's still enough mercury to cause brain damage.
If you're interested, this 4-minute video from the University of Calgary shows how mercury damages neurons in the brain.
But don't let the presence of mercury stop you from using CFLs -- they are much more positive than negative if you exercise good care.
The Environment Protection Agency provides some basic handling tips:
- CFLs are made from glass. Therefore, screw and unscrew the bulb using the base and not the bulb.
- Never force a CFL into a light socket.
- When the bulb burns out, take it to a specially-designated recycling center in your area. Do not throw out a CFL with the "normal" trash.
In addition, the EPA drafted guidelines for dealing with broken bulbs within a household. Among the recommendations: Don't wash your mercury-covered clothing, and don't vacuum up the poison. This is somewhat counter-intuitive for most people.
The EPA's review of CFL safety is 3 pages long and can be viewed on its Web site.
CFLs are more expensive than traditional bulbs but offer long-term savings in both energy and environment costs. And, with common sense care, CFLs pose no household health risks.
Stories on TV about the national real estate market are misleading to Americans.
This is because there is no such thing as a "national real estate market".
Consider the latest American Housing Survey. It found that there are 124,377,000 homes in America spread across:
- 50 states, with
- More than 30,000 incorporated cities, and with
- An innumerable number of neighborhoods
And yet, the media repeatedly groups all 124 million homes into one giant lump and then gives an analysis. No matter how you slice and dice the data, a home in Oregon can't be compared to a home in Mississippi.
This is why national real estate statistics are somewhat useless.
To get real estate analysis that matters, look local instead. And I don't mean stats from your state -- I mean stats from your neighborhood. It's the only way to know what's driving home prices on your street.
Unfortunately, finding local data like this isn't easy; it's far too narrow to be covered by the press. So, the best place to get local real estate data is from a local real estate agent or from somebody else with access to raw real estate data in and around your neighborhood.
By talking to "in the market" professionals that know your backyard, you'll get a much clearer picture of your local market -- good or bad -- than the national media could ever provide.
Real estate is a local market so your real estate data should be local, too.
Private Mortgage Insurance (PMI) is an insurance policy paid to a lender in the event that a homeowner defaults on his home loan.
With the growing number of mortgage defaults nationwide, mortgage insurers are finding their balance sheets under attack and their revenues in the red.
So far this year, mortgage insurers have paid out $6 billion in claims.
In response to the losses, the mortgage insurance industry is using two tactics to return to profitability -- and both mean bad news for homeowners.
- Raise the minimum standards to get insurance
- Raise the annual mortgage insurance cost
This is very similar to what Fannie Mae and Freddie Mac are doing to shore up their respective balance sheets; lending to only the most credit worthy, and making sure to charge them for their commensurate risk.
Because of the higher PMI rates, it's getting more expensive for small-downpayment home buyers to finance their homes. And that's if they can even still get mortgage insurance.
Some mortgage insurers now require a 10 percent minimum downpayment in certain states.
So with the number of mortgage defaults expected to rise through 2009, qualifying for PMI should get more expensive and more difficult. If you plan to make a small downpayment on your next home -- or plan to remortgage your current low equity home -- consider moving up your timeframe.
It may not be as cheap or as easy to get financing as it is today.
(Image courtesy: The Wall Street Journal)
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The Producer Price Index is a business inflation meter and it's now up 9.8 percent annually.
This is a huge number for PPI and represents the highest year-over-year rate of inflation since 1981.
Normally, blowout inflation like this would be terrible for mortgage rates but mortgage markets are actually improved since Tuesday's data release.
Usually, a rocketing PPI would create an inflation expectation on Wall Street which would, in turn, cause mortgage rates to rise, impacting home affordability.
Yesterday, however, that's not what happened.
Upon the PPI release, Wall Street looked at the 9.8 percent number and simply shrugged it off. "Of course PPI is high," traders thought. "Did you see how high energy costs were last month?"
Traders know that in July, oil prices reached an all-time high of $147.27 per barrel and, since then, crude is down more than 20 percent. Because of this, Wall Street has now turned its attention to the August PPI data, thinking it will much more calm than July's.
In other words, instead of fearing inflation, traders believe the worst of it is over, providing an unexpected boost to home buyers in need of mortgages. As inflation expectations fall, mortgage rates are following suit.
Housing Starts measure the number of new housing "units" on which construction has started and in July, Housing Starts fell to its lowest levels since March 1991.
For homeowners, this is a welcome bit of good news because as fewer homes are built, there is less inventory from which home buyers can choose.
With fewer homes for sale, the supply-and-demand curve shifts in favor of home sellers and this adds a support floor for home prices.
For home buyers, though -- and for the opposite reason -- the low number of Housing Starts may not be as welcome.
With fewer new homes on the market, owners of "used" homes may feel less pressure to lower their asking prices or to make other concessions to interested buyers. This means that home buyers may pay more for a home, or get fewer "throw-ins" on the contract.
For all of the hocus-pocus that surrounds real estate data, in the end, home prices are based on the supply of homes versus the demand for homes. When supply outpaces demand, home prices fall.
Homebuilders learned this lesson and July's Housing Starts data supports that.
(Image Courtesy: Wall Street Journal Online)
What is the definition of a "First Time Home Buyer?" It is anyone who has not owned a property for the past three years. Meaning, you could have owned a property prior and sold it...been living in an apartment for three years and now buying a home. You would be considered a "First Time Home Buyer." Interesting...anyway highlights from the new tax law.
The highlights of this federal tax credit are as follows:
- The amount of the federal tax credit is for 10% of the cost of the home, up to a maximum credit of $7,500. In essence, this is an interest-free loan that enables consumers to receive a tax credit on a dollar-for-dollar basis on their personal income tax return in the calendar year following the year of closing on their home. They begin paying the tax credit back the year after that and make equal installments during the next 15 years. If the homeowner sells the home at any point during the 15-year payback period, then the remaining amount is recaptured, unless they sell the home at a loss, at which point the balance is forgiven.
- e.g., If a home costs $65,000, the allowable credit would be $6,500. If a home costs $120,000, then the allowable credit would be $7,500.
- Eligibility is for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the past three years, but who may have done so previously. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
- Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.
- Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.
- Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
- The federal income credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between April 9, 2008 through July 1, 2009. Individuals should consult a professional tax advisor for exact tax calculations.
- e.g., If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.
- e.g., If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
- This tax credit is required to be repaid without interest in equal installments of 6.67% of the total credit each year for 15 years beginning the year after the tax credit is claimed.
- e.g., If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.
Frequently asked questions, click here. Quick reference chart, click here.
Keep in mind this tax credit is retroactive. First time buyers who either closed on or after April 9, 2008 or curently under contract to close in the near future.
·“Do you know anyone else who may be thinking of buying and may be eligible to take advantage of this tax credit?”
·“Do you know anyone who is providing financial assistance to a first-time homebuyer, perhaps their parents, grandparents, aunt or uncle, who may inform them of this tax credit?”
Home staging is the art/science of preparing a residence for sale. It includes combines elements of lighting and color, use of space, and emotional triggers to help make a home appear "more desirable" to a potential buyer.
In this 5-minute video from the NBC Today Show, real estate expert Barbara Corcoran shows how to stage within a budget, and how to do it quickly.
In less than 48 hours, Corcoran and her crew convert a "stale" listing that's been listed for 6-plus months, turning it into a home with curb appeal and good looks. And they do it for less than $700.
Home staging can be do-it-yourself endeavor, but hiring a professional usually helps squeeze extra dollars from a sale price. If you'd like a referral to a trusted home staging professional, reach out to me by phone or by email.
Each month, the National Association of Realtors® releases a study called the Existing Home Sales report. It's a detailed look at "used" home sales data from all four regions of the country.
One of the key findings in each Existing Home Sales report is something called the "median sales price", the statistical price point at which half of the homes in the U.S. sold for more, and half sold for less.
Last month, the median sales price in the United States fell to $215,100, off 6.1 percent from a year ago.
But, just because the median sales price is falling doesn't mean that housing is necessarily in the doldrums. Real estate is tied to local markets and the national statistics rarely make sense when applied to any given city.
For example, the $215,100 median sales price for the nation is as outrageously inappropriate as a sales price to New York City as it is to Minot, North Dakota. In fact, it's the very definition of "median" that discounts its ability to reflect the health of the national housing market.
If large numbers of homes are sold and the price tags are high, the median sales price will trend higher. Conversely, if large numbers of homes are sold and the price tags are low, the median sales price will trend lower.
The median is just the middle point.
The falling median home sales price in June may indicative of first-time home buyers outnumbering luxury ones, or banks successfully unloading homes in foreclosure. And this idea may be supported by the data which shows that the West and Northeast led the decline.
So if you're trying to gauge the health of your local real estate market, consider asking a local real estate agent for help. A skilled agent's analysis will be infinitely more practical and useful than the national data pumped out by the industry trade group.
(Image courtesy: The Wall Street Journal Online)
The connection between the world's political events and home affordability here at home is not always clear, but Russia's invasion of Georgia provides a strong working lesson.
Georgia is a former Soviet republic on the eastern shores of the Black Sea. Oil pipelines within its territory supply about 1 percent of the world's daily oil needs, mostly to ports in Western Europe.
Last week, Russia bombed Georgia's oil and natural gas transport systems. None of the bombs struck the pipelines, but several exploded close to it. Pipeline part-owner BP shut down two of its oil lines as a precaution, but Russia is reported to have struck one of BP's other pipelines this morning.
The cost of oil is generally based on the normal economics of supply and demand so when oil supplies are threatened, damaged, or shutdown -- because of war, weather or otherwise -- oil prices respond by moving higher.
Higher oil prices, of course, are considered inflationary and that causes mortgage rates to rise here in the United States. High oil prices, for example, are one reason why mortgage rates spiked throughout June and July of this year. And as oil prices have settled, rates have calmed a bit, too.
It's easy to ignore politics and news when it's not happening in your own country, let alone your own hometown. But that doesn't make it any less important.
When you're buying a home, or thinking of refinancing one, you'll likely need a mortgage and the rate you pay on that mortgage will be influenced by every geopolitical event in the world.
Especially when the event involves oil.
Source
Russia-Georgia conflict raises worries over oil and gas pipelines
Elizabeth Douglass
Los Angeles Times, August 13, 2008
(Image courtesy: LA Times)
It's not your imagination -- getting approved for a home loan is becoming increasingly more difficult.
Taken from the Federal Reserve's quarterly survey of 84 banks, it illustrates the changing dynamic of mortgage guidelines.
Most notable is the steep curve for "prime" mortgages, a type of home loan given to applicants exhibiting:
- A well-documented credit history
- High credit scores
- Low debt-to-incomes
Americans have come to expect sub-prime loans to be tougher, but it's the sharp tightening of prime guidelines shows us that nobody is exempt from the newfound underwriting prudence that banks are exhibiting right now.
If you plan to buy or remortgage a home over the next year, consider a popular expression in financial circles -- the trend is your friend.
Know that mortgage guidelines will get tougher before they get easier and applicants on the cusp of being approved today will almost certainly be denied a mortgage three months down the road.
Owning real estate and making sound financial decisions requires a tremendous amount of advance planning and, sometimes, looking at the past is the best way to prepare for what's coming ahead.
According to the Federal Reserve's survey, what's coming ahead more mortgage application scrutiny.
When home sellers accepts a contract on MLS-listed property, the property's official status changes from "Active" to "Pending".
By measuring the number of "Pending" homes nationwide, the National Association of Realtors® publishes its once-monthly Pending Homes Sales Index.
The real estate industry group positions the report as a predictor of future home sales activity, stating that 80 percent of homes under contract will "close" within 60 days, and most others will close within 120 days.
But, although using the Pending Home Sales report as a crystal ball may be its intended use, it may not its best use.
This is because of the index's methodology:
- It doesn't measure new construction homes
- It doesn't track For Sale By Owner properties
- Its sample set covers just 20 percent of MLS transactions
In addition, in a tough mortgage climate such as the one we're in now, a greater percentage of pending sales will fail to close at all because of lack of financing.
The Pending Home Sales Index still has its place, however -- it's a terrific look at the buy-side demand for homes.
When the Pending Home Sales Index is rising, we can infer that more buyers in the market for homes and this is a signal of market strength. After all, pending sales can't happen unless there are buyers out there. And with more buyers competing for homes, home prices tend to rise.
This is why the June's Pending Home Sales report is so intriguing.
In June -- for the second time in three months -- the Pending Home Sales Index posted a large gain even as economists were calling for a loss. The inference here is that buyers are not only finding good value in all four regions of the country, but are willing to make bids on homes listed for sale.
Now, again, the uptick doesn't mean that the pending sales will necessarily close, but it does tell us that more home buyers are finding "now" to be a good time to buy real estate.
That sort of insight is what make the Pending Home Sales Index worth tracking. When buyer demand is rising, the real estate market isn't usually far behind.
Any plumber will tell you -- toilets are among the least efficient appliances in a person's home. 20 percent of them leak up to 200 gallons of water per day -- the equivalent of an 80-minute shower.
At an average cost of $2 per 1,000 gallons, the EPA estimates that homeowners literally flush $146 of water down the drains each year.
But toilets also waste money by overfilling with water; even low-flush varieties waste 32 ounces per flush. Because of overfills, an average household of 4 people with 2 toilets squanders an additional 6,575 gallons of water in a calendar year, or $13.15.
Enter the $15 HydroClean toilet valve.
Built by a plumber, the HydroClean product prevents toilet overfills, detects leaks, and cleans the toilet tank for you. It installs in 5 minutes and the Web site says no special skills are needed.
Within the next 5 years, 36 states expect to suffer water shortage. Using HydroClean, you can help conserve water and conserve dollars.
HydroClean is available at retail stores and online.
Source
Drinking Water Costs and Federal Funding
EPA.gov, June 2004
The next time you think you may have outgrown your home, consider what it would be like living in The Little House.
Barely bigger than a school bus, the 312-square-foot home featured by CTV News occupies land once reserved for a city alleyway. When the alley went unfinished, a contractor decided to buy and build on the lot.
The home is so small that an adult with outstretched arms can touch the opposite walls inside of it.
But, of all things little about The Little House, it's sale price is not one of them. Well-decorated and recently renovated, the home at 128 Day Avenue recently sold for the U.S.-equivalent of $159,300, or $511 per square foot.
Fannie Mae announced a new risk-based pricing model and additional mortgage delivery fees this week, adding to the cost of buying a home.
Risk-based pricing was first introduced by Fannie Mae this past April. It added new, mandatory loan fees for high-risk borrowers while rewarding a small group of low-risk borrowers with fee credits.
In the updated model, even 720 credit scores with a 20 percent downpayment won't protect mortgage applicants from the risk-based fees and they can range as high as 2.750 percent, depending on credit scores and downpayment size.
Fannie Mae will continue the practice of rewarding high-downpayment borrowers with fee credits.
Fannie Mae's second pricing change involves the Adverse Market Delivery Charge and it is not risk-based -- it applies to all applicants equally.
First introduced in December 2007, Adverse Market Delivery Charges are mandatory surcharges on all conforming mortgages. The fee was initially a quarter-percent. It's now doubled to 0.500 percent.
Combining risk-based pricing and delivery fees, mortgage applicants have two choices to pay them:
- As a one-time fee, paid at closing, payable to the lender
- As an interest rate increase, payable month-after-month to the lender
The one-time fee is calculated by multiplying to fee amount by the applicant's loan size and dividing by 100. The interest rate increase is calculated as a general rule, where each 0.500 percent in fees can be substituted for a 0.125 percent increase to a mortgage rate.
The fees become "official" October 1, 2008, but lenders are expected to deploy them much sooner.
For the second consecutive meeting, the Federal Open Market Committee left the Fed Funds Rate unchanged at 2.000 percent.
In its press release, the Federal Reserve addresses inflation, saying that it "has been high", fingering energy and commodity costs as culprits. The Fed does expects inflation to moderate later this year, however.
Regarding recession, the Fed addressed softening labor markets and tightening credit, and said that high energy prices may slow down economic activity in the months ahead.
The key comment, repeated from the June statement, was this:
Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
Translated, it reads:
The Federal Reserve expects that its policy changes to-date will help the markets find balance and order.
In other words, the Fed is biased towards a Fed Funds rate pause at its September 16, 2008, meeting barring new developments.
Stock markets are reacting favorably to the FOMC statement, bouncing higher after the 2:15 PM ET release. This movement is pulling money away from mortgage bonds and, as a result, rates are at their worst levels of the day.
Source
Parsing the Fed Statement
The Wall Street Journal Online
August 5, 2008
http://online.wsj.com/internal/mdc/info-fedparse0808.html
The Federal Open Market Committee meets today and is widely expected to hold the Federal Funds Rate at 2.000 percent.
This does not mean that mortgage rates will stay flat, too, however.
The Fed Funds Rate is a different type of interest rate from the ones charged to American homeowners for their mortgages.
The Fed Funds Rate is an interest rate paid for an overnight loan between banks; it's the shortest-of-short-term loans made to borrowers with exceedingly deep reserves.
By contrast, mortgage loans are borrowed over 30 years and are offered to borrowers of all credit types.
If the direction of the Fed Funds Rate and of mortgage rates were truly related, the chart above wouldn't show mortgage rates rising throughout the 12 months ending February 2008 while the Fed Funds Rate fell by 2.250 percent.
So, just because the Fed Funds Rate may remain on pause today doesn't mean that mortgage rates will, too. Mortgage rates are notoriously volatile post-Fed announcements.
Mortgage rate shoppers may be prudent to lock in ahead of Ben Bernanke and Company's 2:15 P.M. ET press release.
(Image courtesy: The Wall Street Journal Online)
Lock Bumping is a lock-picking technique described as bring so easy "that a 10-year could do it." It's why this 3-minute news video from WMC-TV in Memphis is a must-see.
If the video leaves you feeling vulnerable to home burglers, or you're unsure if your home's locks are bump-proof, consider calling a locksmith for help. There are a number of solutions including upgrades to your locks, or add-on hardware such as Secure-A-Lock.
According to the video, 90% of American homes can be lock bumped.
Conforming mortgage guidelines are the Home Loan Rule Book, delineating between applicants that approved for a mortgage and those that do not.
Effective today, the rule book just got a little bit tougher.
According to Fannie Mae, homeowners converting their primary residence into a second home or investment property will be subject to additional underwriting scrutiny. Fannie Mae is leery of lending to people that may be over-extended.
The complete underwriting update is available at the Fannie Mae Web site but some of the more important points are summarized below, divided into Second Home and Investment Property.
Second Home Guideline Changes
- Without 30 percent equity in the second home, mortgage applicants must have 6 months worth of PITI reserves for both properties in their bank accounts.
- With 30 percent equity, the PITI reserve can be reduced to 2 months.
Previously, there was no minimum reserve requirement.
Investment Property Guideline Changes
- With 30 percent equity in an investment property, 75% of the monthly rental income can be applied toward the applicant's monthly household income.
- Without 30 percent equity, rental income may not be applied to the applicant's monthly household income and 6 months PITI is required for both properties.
Previously, 75% of the rental income was allowable regardless of equity, and minimum reserve requirements were 2 months.
Even though just a small percentage of Americans own second homes or investment properties, the conforming mortgage guideline changes impacts homeowners everywhere.
This is because more restrictive guidlines lead to two separate, but concurrent, outcomes:
- The demand for homes reduces because fewer buyers qualify for mortgages
- The supply of homes increases because fewer sellers can refinance into more affordable home loan
Less demand and more supply places downward pressure on home prices.
Now, remember that mortgage guidelines continuously evolve and what's accurate as August 1, 2008, may not be accurate six months down the road. In other words, confirm what you're reading about mortgages online with your loan officer before making any real estate-related decisions.
Monday, President Bush signed the Housing and Economic Recovery Act of 2008 into law and the press jumped on the obvious storylines:
- First-time home buyers get a $7,500 purchase "credit"
- Conforming loan limits move to $625,000
- Delinquent homeowners get a lifeline from the FHA
- Local governments get federal money for buying and restoring foreclosed homes
However, tucked away on the last few pages of the text, in a section called "Revenue Offsets", there's an important tax implication. The new housing law changes the way in which capital gains exclusions are calculated on the sale of a residence.
Under the old system, a taxpayer was entitled up to $250,000/$500,000 of tax-free gains from the sale of a home if filing separately/jointly provided he lived in the residence for at least 2 of the preceding 5 calendar years.
Savvy homeowners exploited this verbiage, moving from home-to-home every 2 years to avoid paying capital gains.
The new law thwarts this tactic.
Capital gains exclusions are now calculated by taking the capital gains on the sale of the home and multiplying it by a ratio of how long a person has lived in a home, by how long that person owned the home.
In the example above, a person living in a home for 2 of 5 years would be entitled to 40 percent of tax-free gains on a home sale instead of all of it. As always, however, it's best to talk with a qualified accountant about how tax code changes may impact you personally.
The new capital gains rules go into effect starting January 1, 2009.
Falling gas prices is doing more than saving Americans money at the pump -- it's also helping to pressure mortgage rates lower.
Mortgage rates had spiked between mid-June and mid-July, mostly because economists identified inflationary signals in the U.S. economy.
The largest signal, of course, was the ever-rising cost to fill a car with gasoline. As gas prices rose, so did the overall inflationary pressure on the U.S. economy.
Mortgage rates tend to rise when inflation is present because inflation devalues the U.S. dollar. Higher rates are necessary to offset this consequence.
But, the opposite is also true. The absence of inflation tends to be good for rates; it's why we're cheering the gas price chart above. As gas prices drop, the Cost of Living drops, too, relieving at least one of the economy's inflation sources.
Everyday drivers are cheering today's pump prices but active home buyers and mortgage rate shoppers should be, too. It's creating one less upward tug on the cost of financing a home.
Since mid-July, gas is down 19 cents per gallon nationwide and has fallen over 13 consecutive days.
(Image courtesy: GasBuddy.com)
Move to Plymouth, Minnesota, says Money Magazine in its 2008 100 Best Places To Live survey.
According to the report, the Twin Cities satellite has all of the makings of a desirable home town:
- Affordable homes
- Excellent schools
- Low crime
- Lots of jobs
- Abundant "outdoor life"
The top 5 cities as listed by Money Magazine are the aforementioned Plymouth, Fort Collins (CO), Naperville (IL), Irvine (CA), and Franklin Township (NJ).
The 100 Best Places To Live survey is also sortable by specific metrics, including housing affordability, job growth potential, and cleanest air.
According to the National Fire Protection Agency, the number of liquid propane-related accidents and deaths are statistically small.
However, a family can't be too careful when it comes to household safety and flammable gases.
Manufactured by Davom Products, the PROLOCK Propane Safety Cap is a lock-and-key device that prevents children (and anyone else) from opening the propane gas tank value and starting the flow of propane.
The device installs quickly, includes simple-to-understand directions, and was an Inventor's Spotlight winner at the 2008 National Hardware Show.
The PROLOCK Propane Safety Cap sells for $19.95 online.
Statistics won't always tell the whole story, but they often provide good perspective.
The graph at right shows Existing Home Sales data going back three years. An "existing home" is one that can't be called new construction; a "used home", so to speak.
Note the steep decline from 2005 through late-2007.
Since November, however, Existing Home Sales have remained within a very tight range and appear to have reached a flattening point.
The Existing Home Sales data supports the word-on-the-street from real estate agents nationwide that buyers are returning to the housing market in search of good values.
But let's not forget -- demand is only half of the story. There is the supply factor, too, and the supply side of the housing market is showing the same leveling signs as the demand part.
Looking at the national inventory at left, the number of existing homes for sale has hovered near 4.5 million for the last several months. No change suggests strength.
Now again, statistics won't tell the whole story but there are plenty of positive signals from the real estate market right now, just like there are negative ones, too.
This is one reason why real estate data causes so much debate -- people want to take an either/or proposition about the state of the real estate and it doesn't work like that. Real estate can be simultaneously strong and weak and when it is, buyers look for value.
Perhaps this is why the national housing data is beginning to level off after a 3-year slide. There's good values to be had, and today's home buyers know it.
(Images courtesy: Wall Street Journal Online)
Sometimes, the hardest part about news is knowing where to find it.
In its filing with the SEC last week, Freddie Mac stated that it will "pursue increases" to its middleman fee. This would likely make buying a home more expensive for every conforming borrower in the country.
The exact verbiage from the filing is extremely opaque and unless a person knew what things like "delivery fees" were, or "bulk and flow transactions", he'd be inclined to skip right over the offending passage, tucked away on Page 72 in a paragraph labeled Business Outlook.
But, if we paraphrase the passage and simplify it for laypersons, it reads something like the following:
We didn't charge enough fees in 2007 to account for the massive number of defaults. We don't plan to make that mistake again in 2008.
Strangely, in the entire 1,394-page filing, this passage is the only mention of "future default costs" leading to more loan charges. In other words, it's easy to see why this story didn't get picked up by the major news outlets.
To the media, the major angle in Freddie Mac's filing was that it registered to sell $10 billion worth of securities. For everyday Americans, though, the major story was a different one -- mortgage fees may never be as low as they are today.
Therefore, if you know that you'll need a new, conforming home loan soon -- for either a home purchase or a refinance -- consider moving up your timeframe. Whether rates rise or fall, it's likely you'll pay a more money to borrow money only because you waited.
The implied fee increase would be the third this fiscal year, following increases in December 2007 and in April 2008.
After falling 7 cents per gallon over the last 7 days, gas prices are being pressured higher today as Hurricane Dolly barrels through the Gulf of Mexico.
The first landfall hurricane of the season is expected to flood the southern Texas coast and cause minor disruptions to the nation's oil supplies.
Versus Hurricane Katrina in 2005, Dolly's impact on oil supplies is expected to be small but that doesn't stop traders from bidding up oil prices "just in case" their expectations are wrong.
For instance, oil prices rose almost 2 percent Monday as Dolly drifted into the Gulf. Oil prices then receded as the storm's path was better defined.
Regardless, when hurricanes form in the Gulf of Mexico, it's going to be bad news for home buyers.
Because the Gulf of Mexico is stocked with oil refineries and shipping ports, when specific areas are hit by heavy rains and power outages, supply and demand takes over, pushing oil prices higher. This causes gasoline prices to rise and that is considered an inflationary pressure on the economy.
Inflation, of course, causes mortgage rates to rise so when hurricanes are brewing, it generally means that housing is about to get less affordable for Americans.
This week, mortgage rates are up by about 0.125 percent overall so far -- roughly $8 monthly per $100,000 borrowed.
(Image courtesy: Marketwatch.com)
The phrase "Consumer Price Index" can be intimidating and unclear to Americans. It's an economic term, after all, and not a part of everyday American language.
It even has its own abbreviation to add to the confusion -- CPI.
So, when a layperson hears that "CPI is rising", it's not always clear what it means. The tendency, therefore, is to ignore the news.
This is one reason CPI is commonly substituted with the more down-home expression of "Cost of Living".
In contrast to the term "CPI", the phrase "Cost of Living" is a lot more clear. When people hear that the Cost of Living is rising, instinctively, they get it. And now they can see how it works in numbers, courtesy of the Bureau of Labor Statistics.
The Inflation Calculator at the government Web site helps a person compare household income to the changing Cost of Living between any two years since 1913. For example, a U.S. household earning $48,201 in 2007 would have to increase that income to $50,868 just to keep up with "life".
CPI touched a 17-year high in June, jumping 5.000 percent year-over-year. Without a 5.000 percent increase an income, a household falls behind.
Every homeowner's basic toolkit should include caulk, a sealing agent for sinks, bathtubs, windows and other places where seams exist.
And now, with the mass-market availability of Caulk Singles, that toolkit can be made a bit smaller.
Caulk Singles are a one-time-use caulk package, squeezable from the bottom-up and billed as easier-to-control and clean-up than the familiar caulking gun and tube.
But, at a cost of $2.50 per package, it's also considerably more expensive than "the old packaging". By comparison, a tube of traditional caulk costs about $6.00 per package and holds close to 8 times as much material as its single-use cousin.
Caulk Singles are marketed by GE and available for sales at Lowe's Ace Hardware and True Value. Free samples are available with sign-up at http://www.caulksingles.com.
For the first time in its history, the FHA changed its funding fees and mortgage insurance structure this week. FHA-insured home loans are now subject to a risk-based pricing adjustment, as shown by the table above.
Because of risk-based pricing, FHA home loans are now more expensive for borrowers with less-than-ideal credit profiles, and less expensive borrowers with perfect ones.
Prior to the changes, most FHA borrowers paid an up-front fee of 1.500 percent, plus on-going annual mortgage insurance payments equal to one-half-percent on the amount borrowed.
FHA-insured mortgages have grown in popularity this year because, while the guidelines of other mortgage products have tightened, FHA program guidelines have remained loose. FHA allows 3 percent downpayments on purchases, for example, and allows "cash out" refinances to 95 percent.
Fannie Mae and Freddie Mac do not.
(Image courtesy: FHA.gov)
