The number of homes under contract to sell increased in May.
It's the fourth straight month in which sales volume increased, corroborating the growing notion that housing is on the mend in most U.S. markets.
Consider these other housing-related stories from the past month:
Put it all together and it looks like the housing market is about to reach its bottom (if it hasn't already).
But just because homes are going under contract to sell doesn't mean that they actually will sell. A "deal" can fall apart for all sorts of reasons including failed home inspections, buyer-seller disputes, and mortgage-related problems.
In general, though, as the number of pending contracts increase, we find that Existing Home Sales rise, too, some 45-60 days into the future. And so long as buyers' demand for homes remains strong, we would expect that home prices edge higher.
It's too soon to say that housing has turned the corner for certain, but there's an awful lot of data lately that suggests that it has.
Tuesday -- for the first time in a long while -- members of the press met the monthly Case-Shiller Index data with enthusiasm. And why shouldn't they? 19 of the 20 measured markets showed a slowing pace of home price decline in April.
Here are some of the headlines about the story:
Now, the headlines feel negative, but they're actually highlighting some key strengths in April's figures. For example, nearly half of the Case-Shiller markets posted gains in April and all but one showed month-over-month improvement.
It's a step in the right direction but doesn't mean that housing has turned around for good.
We have to be careful about how we interpret the Case-Shiller Index because it's an imperfect housing gauge. The most obvious Case-Shiller flaw is that it only measures home values in 20 cities nationwide and they're not even the 20 biggest cities.
Houston, Philadelphia, San Antonio and San Jose are excluded from the report and each ranks among the country's 10 most populous areas.
That said, the report is still important because the Case-Shiller Index identifies broader housing trends and that helps to shape economic policy.
Not only versus last month but also versus last year, the pace at which home values are falling appears to be getting slower. This is the third straight month Case-Shiller has reported as such.
Now, three months makes a trend, but the data has to stay strong through the summer months to mark a bona fide turnaround. If the Case-Shiller Index shows strength for May and June, it could be the signal for which the markets have been waiting.
At the start of the year, the "experts" made a lot of predictions about the U.S. economy and what to expect in 2009.
And nobody predicted just how big the government's stimulus package would be.
Now, on June 30, with the year officially half-over, it's as good a time as any to remember that people are much better at interpreting the past than predicting the future. Economists can make educated guesses about the future, but they're guesses nonetheless.
It's like watching the Weather Channel. A meterologist can look at the data and say it's going to rain next week, but the forecast is never 100%.
So far this year, mortgage rates have been up and down, credit availability has been higher and lower, and home prices have varied immensely from neighborhood to neighborhood.
There's another 6 months until 2010 and there's no reason to expect the current volatility and uncertainty to change.
The world is unpredictable and so is the U.S. economy. Therefore, consider making your personal finance decisions based on the information at hand today instead of on an educated guess about the future.
After all, the weatherman's been wrong before.
In between visits from the exterminator, it's not uncommon to see the occasional ant, spider or roach or insect around the house.
But what to do about it?
One solution is Terminix SafeShield, a new, eco-friendly home pest control product introduced earlier this year.
Formulated by an independent pesticide company, Terminix SafeShield is a non-aerosol bug spray whose active ingredients are all-natural. The formula is said to control 25 types of in-home pests and kills bugs fast.
Because of its natural composition, SafeShield is safe for use around kids and pets -- a huge advantage over chemical-laden, off-the-shelf products. However, this same composition is also the product's weak spot. Its oils and ingredients are most effective as spot treatments -- not long-lasting ones.
Although it's meant to complement a professional Terminix treatment, SafeShield can be purchased by-the-bottle at the Terminix website.
If you only saw the headlines this week, you may have missed another positive sign in the housing market.
According to the Census Bureau, the supply of newly-built homes for sale fell to 10.2 months in May, its lowest level in 10 months.
Unfortunately, the New Homes Sales story wasn't positioned as a positively by the press. Instead, the most common headline on the data read "New Home Sales Dip 0.6%" with many journalists referring to the figures as "weak" or "disappointing".
Only, that's not completely true.
See, one of the nice elements of the monthly New Home Sales report is its footnote section in which the Census Bureau talks about statistical Margin of Error and that section tells us that if the Margin of Error is larger than the measurement itself, the report is useless.
And that's exactly what happened in May.
New Home Sales were measured to have fallen by 0.6 percent but that data point was dwarfed by its 17.8 percent Margin of Error, The "headline data", in other words, was just a guess.
The press reported it anyway.
Nonetheless, as it relates to the economy, falling home inventories are a positive. Having 10-plus months of homes on the market is still high historically, but a definite improvement over what we saw earlier this year.
So long as low mortgage rates and aggressive pricing persists from builders, we expect even less supply in the months ahead.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.
The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.
In its press release, the FOMC noted that the U.S. economy is not slowing with the same speed versus just two months ago and that financial markets, in general, are improving.
These are two signs that the country may be emerging from recession, if it hasn't already.
The news isn't all good, however. The Fed made a point to highlight the potential hazards the nations faces on its path to economic recovery:
- The prices of energy and commodities have been rising
- Job losses are still mounting nationally
- Businesses are reducing capital expenditures
Also in its statement, the Fed acknowledged a plan to hold the Fed Funds Rate near zero percent "for an extended period" and a re-commitment to the U.S. Treasury and Mortgage Bond markets.
Market reaction to the Fed's press release has been muted.
With no new stimulus and no new "tools" to spur the economy unveiled, Wall Street is business as usual. Mortgage rates are unchanged post-FOMC today.
The FOMC's next scheduled meeting is August 11-12, 2009.
The housing market got another dose of good news yesterday.
According to the National Association of REALTORS, the number of homes sold in May increased for the third straight month and the national housing supply fell by 5 months.
Furthermore, first-time home buyers are accounting for nearly one-third of the market activity.
But, before we declare a bottom in housing, it's important that we remember the First Rule of Real Estate:
All Real Estate Is Local
National housing statistics like Existing Home Sales are painted with a very broad brush. They lump disparate locales such as San Francisco and Seattle into one sample set and don't account for regional differences, let alone neighborhood ones.
Furthermore, getting down to a city-by-city, or even street-by-street basis, we can always find homes that are selling quickly and home that are languishing. Real estate is highly local and subject to countless influences.
That said, the national data isn't completely useless. From the patterns, we can infer that low mortgage rates, ample home supply and available tax credits are providing a quantifiable boost to the broader real estate market.
And based on recent pending sales data, we can expect June and July's Existing Home Sales figures to be similarly strong to May.
Therefore, if you're in the market for a new home right now -- or plan to be soon -- be conscious of home inventory levels in your target neighborhoods. Fewer homes on the market usually means less ability for buyers to negotiate and that leads to higher sales prices.
Plus, the NAR is reporting buyer activity up 10 percent from last year.
The housing market may not be fully recovered in every housing market just yet, but in studying the data, a lot of the pieces appear to be falling into place.
The Federal Reserve begins its scheduled two-day meeting this morning.
It's one of 8 scheduled meetings for the Federal Open Market Committee this year.
When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.
The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to "near-zero" percent in an attempt to stimulate growth.
But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.
Now, if you'll remember, the Fed made that pledge in two parts:
- Part 1 came in November 2008 for $500 billion
- Part 2 came in March 2008 for $750 billion
After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.
The Fed isn't expected to increase its mortgage market commitment this week, but because mortgage rates are above the government's "target zone", it's possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.
A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.
It's for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person's pending home loan.
The Fed's press release hits the wires at 2:15 PM ET Wednesday. If you're the cautious type, consider locking your mortgage rate prior to its release.
Water high in mineral content -- specifically calcium and magnesium -- is more commonly known as "hard water".
There's no negative link between hard water and human health, but hard water has been known to mess with a homeowner's penchant for cleanliness. Over time, mineral deposits can collect and "stain" anywhere that there's running water.
In the home, hard water stains are most commonly found in bathrooms.
In this 2-minute video from Rachel Yatuzis, we see the Hard Water Stain Remedy in action. It doesn't take much time, or even much effort. Removing the stains can be as simple as mixing lemon juice, vinegar, and baking soda.
Mortgage rates are suffering through another volatile week, causing problems for home buyers.
After falling Monday and Tuesday, mortgage rates surged Wednesday and Thursday. The momentum higher appears to be carrying into the weekend, too.
There are several data-related reasons for the mortgage market's spastic activity this week:
- Unemployment claims fell
- Leading Economic Indicators rose
- Inflation readings are tame
But while each of the data points above fueled mortgage rate volatility, it's not the data that's making markets move the most. It's the psychological impact of the data.
See, data tells us about the past. It measures and reports on what's already happened. Unfortunately for rate shoppers, mortgage markets are not made on data from the past -- they're made on the expectations of what will happen next.
Mortgage rates reflect Wall Street's opinion of the future.
In reading the papers and watching the news, you'll notice ongoing debate about the U.S. economy. It's unclear whether the recession is worsening or improving.
On one hand, data is weak and sub-optimal. On the other hand, the data is not nearly as weak as it was 6 months ago and, in some cases, it's strong. To some, this is a signal that a recovery is already underway.
Or, it may just be a blip.
We can't be certain in which direction the economy is headed and the same can be said for mortgage rates. Because sentiment is changing so often, though, it forces us to be on our toes.
The last few months have been marked by large mortgage rate swings across small windows of time. A rate that's offered in the morning, for example, is rarely available in the afternoon. Therefore, do your rate shopping in a compressed period of time and be ready to lock at a moment's notice.
When markets move, they tend to move quickly.
Moving to a new metropolitan area requires adjustments. There's new streets to learn, new weather patterns to get used to, and new social cultures to assimilate.
There's also new costs.
Just like home values vary by area, so does the Cost of Living. To visit a doctor in Chicago, as an example, costs a person more than to visit a similar-type doctor in Des Moines.
Cost of Living adjustments can't be ignored between two cities because it changes a household's budget.
And while it's a challenge to know exactly how far your dollar can stretch in a new town, Bankrate.com hosts a helpful Cost of Living Comparison Calculator to make the math a little easier. With categories such as dry cleaning, groceries and beauty salon, the calculator goes extra deep into the typical costs to a household, and can help families to make more realistic budgets.
The calculator also shows the equivalent household income between any two metropolitan areas.
After being range-bound since the start of the year Housing Starts unexpectedly jumped in May, surprising analysts and Wall Street.
It's the latest in a string of housing-related data that suggests a real estate recovery is already underway.
Housing Starts is an important statistic for a number of reasons, but to homebuyers and home sellers, its immediate impact is on home inventory.
Home values are based on supply and demand. When the demand for homes exceeds the supply, values tend to rise. Conversely, when supply exceeds demand, values tend to fall.
When Housing Starts increase as they did in May, therefore, unless there's a corresponding increase in demand, home prices get pressured downward.
Lately, that off-setting demand appears to be present.
With home affordability near record-high levels, mortgage rates well below historical averages, and the first-time homebuyer tax credit in place, Existing Home Sales are up 16 percent on a "raw numbers" basis versus last month and home supplies are lower versus last year.
Rising Housing Starts can a double-edged sword to a recovering economy. It's a strength signal that builders are more optimistic right now, but too much optimism can lead to a glut of unsold homes that pushes housing back to the brink.
So long as demand outpaces supply, however, inventories should reduce and values should move higher.
Americans are feeling better about their budgets right now, raising the possibility of a full economic recovery.
According to a University of Michigan and Reuters, Consumer Sentiment rose for the fifth straight month in June.
Consumer Sentiment is now at its highest levels since September 2008, the month in which Lehman Brothers failed, Fannie Mae and Freddie Mac were nationalized, and the global financial crisis is believed to have peaked.
Rising confidence levels are important to the economy -- and to housing --because a confident consumer is more likely to make the big-ticket purchases that propel the economy forward.
This includes buying new homes.
That said, the Consumer Sentiment Survey has its flaws.
For one, the survey's sample set includes just 500 families. This is hardly a cross-section of America. Secondly, when people feel better about their finances, it doesn't always lead to additional consumer spending -- it could lead to more saving.
What people say they'll do and what they actually do can be two very different things, but if consumer spending does increase in the months ahead, expect home sales to benefit on the willingness of families to "take more chances" and expect mortgage rates to suffer on concerns for inflation.
Motorized garden tools come in two varieties -- gas-powered and electric-powered.
If you take a close look, however, you'll notice that professional landscapers and gardening experts almost always choose the gas-powered types. This is because gas-powered garden tools both outperform and outlast their electric counterparts.
On the downside, they're an environmental nightmare.
According to the California Air Resources Board, a typical 5-horsepower, gasoline-powered lawnmower produces more pollution in 60 minutes of operation than a Toyota Prius produces in 800 miles of driving.
The environmental pollution created by lawn care products is one of the reasons why the Eco Trimmer by Lehr
is getting such good buzz. As the first propane-powered garden tool, the Eco Trimmer combines the lawn care power of a gas-powered tool with the environmental accountability of an electric one.
The propane-powered tool emits 96 percent fewer carcinogens than a gas-powered tool and is completely non-toxic to ground and soil. Its performance is highly-rated, too.
The Eco Trimmer sells for about $200 on Amazon.com and is available in most major hardware stores. You can read more about the product and its environmental impact at the official Lehr website.
When finances are tight, homeowners are often forced to choose between making home repairs right away, and putting them off until finances improve.
Some repairs, though, become more expensive if not tackled on the double. The hard part is knowing which fixes those are.
In this 5-minute piece from The Today Show on NBC, a Consumer Reports editor talks about important, must-make-them-now home repairs, including:
- Re-sloping soil for runaway rainwater
- Replacing curled and cracked roofing shingles
- Sealing damaged vinyl siding
- Replacing soft wood
- Treating mold issues -- both major and minor
Maintaining a home preserves its long-term integrity and can help support resale value, too. Not every minor fix must made today, but left unchecked, some minor fixes can turn into major ones -- and that's when costs can pile up.
The Pareto Principle is a statistical concept most commonly known as the 80/20 Rule.
It says 80 percent of the effects come from 20 of the causes.
Apparently, the 80/20 Rule applies to foreclosures, too -- at least according to data compiled by foreclosure-tracking firm RealtyTrac.
Based on data from May, 11 states accounted for 80% of the country's foreclosure activity. The remaining 20% was spread across the 39 others.
That's 80/20 almost to the tee.
The disparity goes deeper that that, though. The top three states in RealtyTrac's list -- California, Florida, Nevada -- were home to half of May's foreclosure-related actions.
Clearly, foreclosures are concentrated in certain geographies.
But, no matter in which state you live, foreclosures still impact you. This is because mortgage lenders are often national companies, lending in all 50 states.
When home loans go bad -- in any state -- lenders respond by increasing downpayment requirements and by adding new borrowing hurdles. If you've applied for a mortgage in the last 18 months, you've experienced this phenomenon personally.
On the other side, if you're a home buyer in a foreclosure-heavy state, you're finding terrific value versus several years ago. It's one reason why Existing Home Sales in the West Region are up by 19 percent from last year, for example.
Tighter mortgage guidelines since late-2008 are forcing home buyers to make bigger downpayments. Anecdotally, the change has led to a surge in buyers taking gifts of cash from family members.
If you're among those accepting a cash gift from family, it's important to know that you can't just deposit the money in your bank account.
There is a proper way to accept a cash gift and it requires 3 distinct steps:
- Complete and sign an acceptable gift letter
- Document the gifter's withdrawal of funds with teller receipts
- Document the giftee's deposit of funds with teller receipts
See, mortgage lenders pay close attention to gifts-for-downpayments. For one, lenders have to make sure that downpayment cash is "clean" (i.e. not laundered). And, secondly, they want the gift to really be a gift and not a loan-in-disguise.
This is why lenders will often require that a signed, dated letter accompany the home loan application.
As an example:
I am the [relationship to recipient] of [name of recipient] and this letter serves as evidence that I am gifting [name of recipient] [amount of gift] to be used for the purchase of the home at [complete address of property].
This is a gift -- not a loan -- and there is no expectation of repayment.
Signed,
[Signature of gifter]
To further appease lenders, gift recipients should make sure that gift funds are not commingled at the time of deposit. If the gift is for $12,000, for example, the bank's deposit slip should indicate that a $12,000 deposit was made -- nothing more, nothing less.
Don't add a random $50 check to the deposit, in other words. If you have a separate deposit to make, make it as a subsequent transaction with its own receipt.
It's also worth noting that gifting funds between family members can create both legal and tax liabilities. If you're unsure about how donating or receiving a gift may impact you, call or email me directly. If I can't help you with your questions, I can refer you to somebody that can.
Since Memorial Day, conforming mortgage rates have jumped by more than 1.125 percent, adding thousands of dollars to the annual cost of homeownership.
To the casual observer, the moves may seem random. There's a reason this is happening, however.
It starts with inflation.
As an economic force, inflation erodes the value of the U.S. Dollar. Left unchecked, it drives up the Cost of Living as each dollar "buys less" at the supermarket, gas station, or anywhere else.
But with respect to mortgage rates, inflation's impact is more immediate. Because inflation devalues the dollar over the long-term, it renders long-term mortgage bonds a less attractive investment for traders.
If bond investors are repaid in U.S. Dollars, after all, it would make the investment worth less if the dollar is in an inflationary freefall.
Therefore, in situations when inflation is likely to present, we find that traders often sell out of their mortgage bond positions which, in turn, drives down the bond prices. Then, because bond yields move in the opposite direction of bond prices, rising rates are the inevitable result.
Lately, Wall Street is fearing inflation for a number of reasons:
- Job losses are slowing, adding to consumer spending expectations
- Gas prices have risen 41 days in a row
- The federal government is increasing the money supply
These 3 factors -- plus a few others -- are all coming to a head around the same time and traders are getting defensive with their portfolios. As a result, they're selling their mortgage bond positions and it's driving mortgage rates higher.
Rates may continue to trek toward 7 percent through July and August, or they may retreat toward 5 percent. We can't know for sure. What we can know, though, is that volatility in rates should continue until the economic picture gets more clear. That could be next week, or next year.
For now, be ready to lock at a moment's notice. Mortgage rates are changing quickly.
When it comes to controlling pests, bugs and insects in the home, chemical deterrents are a common and effective remedy.
Recently, however, because of environmental and safety concerns, electronic methods are growing in favor. Pest control chemicals can be very dangerous to humans.
Often, an electronic pest repellent is less effective than a similar, home-wide chemical treatment. This is because of how electronic pest repellents work.
Rather than dosing pests with poison to kill them, the electronic devices work by emitting high-frequency soundwaves to disrupt insect communication patterns.
The soundwaves may also disrupt mating and reproduction.
There are a number of "name-brand" products for electronic pest control. Among the more popular is Pest Offense
, a plug-in device that retails for $30 and which has sold over 4 million units. Black & Decker and Sunbeam have products in the space, too.
Electronic pest control isn't perfect, but it's safe for humans, pets and the environment. It can also be less expensive than traditional pest control treatment.
Suze Orman recently appeared on The Today Show and gave 5 minutes of practical money management advice. Not everyone's a fan of Ms. Orman, but this is an interview worth watching.
The segment's theme is "What should you do first?", pitting real-life financial scenarios against each other, including:
- Pay off credit card debt, or save for an emergency?
- Pay off student loan debt, or pay off credit card debt?
- Save for retirement, or save for a child's college tuition?
The advice is practical and relevant to most homeowners' lives and, although financial tips are never one-size-fits-all, there's some real gems in the segment.
Watch the entire interview at The NBC Today Show website.
In choosing its 2009 lineup of Top 100 Places To Live In America, Relocate America focused on areas with stable local economies and in which the housing market has avoided precipitous price drops.
It's not a bad formula and topping the list of Top 100 Places To Live In America is Tulsa, Oklahoma, a city in which unemployment rates are 3 percent below the national average and the housing stock is, in general, considered affordable.
This was a common theme among the cities included, the Top 10 of which are:
- Tulsa, Oklahoma
- Dallas/Ft Worth, Texas
- Pittsburgh, Pennsylvania
- Raleigh/Durham, North Carolina
- Huntsville, Alabama
- Houston, Texas
- Albuquerque, New Mexico
- Lexington, Kentucky
- Little Rock, Arkansas
- Oklahoma City, Oklahoma
Relocate America notes that the cities on its 2009 list are poised to make a faster comeback from the economic recession than other U.S. cities, and few experienced the effects of the housing boom earlier this decade.
View the complete Top 100 Places To Live In America 2009 list at the Relocate America website.
The number of homes under contract to sell soared in April, climbing nearly 7 percent nationwide versus a month ago.
It's the third straight month in which the Pending Home Sales Index gained and the biggest monthly jump since October 2001, the month prior to the end of the Early 2000s Recession.
A "pending" home sale is one that's under contract to close, but has yet to do so.
The Pending Home Sales Index is an imperfect statistic because not every home under contract makes it to closing, but the data can a reliable indicator of home buyer activity.
It's not tough to understand why homes-under-contract are spiking:
- There's a $8,000 tax credit for first-time home buyers
- Conforming and FHA mortgage rates are hovering near 5 percent
- Home prices are still soft nationwide
These elements are combining to make homes more affordable than they've been in the recent past. Indeed, in April, the Home Affordability Index posted its second highest reading since 1970.
We can't know if home prices will rise or fall going forward, but if Pending Home Sales translate into closed home sales, values will be pressured to rise. This is because each closed transaction takes a home "off the market", reducing the supply of available properties.
If demand rises while supplies fall, sellers regain the upper-hand in negotiations and higher prices are the inevitable result.
An estimated 80 percent of all Pending Home Sales close within 2 months.
Mortgage rates soared again Monday, tacking on a half-percent in a day for the second time in under a week.
Each half-percent adds $62 to a $200,000 home loan's monthly payment, or $744 per year.
For home buyers recently under contract, it's a gut-wrenching time to be shopping for a home loan. Morning mortgage rates have been typically gone by early-afternoon and -- in some cases -- lenders have changed rates five times in one-day span.
The reasons for surge in rates are varied, but each is related to the idea that the economic recession may be nearing its end.
Each of these points bodes well for the economy and pushes Wall Street investors towards more risky investments. As a result, "safe" investments get sold -- including mortgage-backed bonds, the basis for conforming mortgage rates.
For as long as the future of the economy remains in question, expect mortgage rates to remain volatile. We won't get half-point rate swings or five pricings in a day every day, but both are becoming more common.
Be careful when shopping for a mortgage -- the rate you're quoted may not last long.
Most often referred to as just-plain "points", discount points are an up-front fee charged by a mortgage lender in exchange for a lower mortgage rate.
The dollar value of one point is one percent on the loan size. Discount points appear on Good Faith Estimates and HUD-1 Settlement Statements on Line 802.
Historically, each 1 point paid by a borrower lowers an offered interest rate by a quarter-percent. Since the late-2008, however, this relationship is skewed.
Depending on market conditions, 1 point paid by a borrower can lower a mortgage rate by up to 0.875 percent.
As an example of how points work, a $200,000 home loan may be offered at 5.500 percent with 0 points. With 1 discount point paid at closing -- $2,000 -- the mortgage rate may lower to 5.125 percent.
In addition to lowering your interest rate, discount points may be tax-deductible, too. Therefore, be sure to provide your home settlement statements from the previous calendar year to your accountant during Tax Season.
As this week's signal that homebuyers are returning to the market, both Existing Home Sales and New Homes Sales posted improvement versus month-prior figures this April.
According to the National Association of REALTORS, the number of Existing Home Sales rose by 130,000 units in April.
New Home Sales rose by a modest 1,000 units in April.
As a twist in the story, however, although sales activity is rising, the available housing inventory is rising faster.
Versus March 2009, there were 300,000 more homes for sale in April -- an increase of 9 percent. In addition, the "housing supply" rose to 10.2 months, its highest level since October.
This is good news for home buyers, of course, because home prices are a product of Supply and Demand. Depending on local conditions, buyers may find themselves in a position to demand lower sale prices or additional seller concessions.
The housing market has not fully rebounded but it continues to show signs of strength. With a few more months like March and April, it's reasonable to assume that homebuyers will lose some of their leverage for contract negotiation.
When that happens, expect home prices to rise.
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Conforming mortgage rates rose by 0.625 percent Wednesday. Yes, you read it right. Zero-point-six-two-five percent.
The surprise surge in pricing started shortly after 1:00 P.M. ET, then continued all the way until the market's closing. It was the sharpest one-day surge in mortgage rates in recent history. Perhaps ever.
For mortgage rate shoppers swept up in the surge, monthly payments are now higher by $29 per $100,000 borrowed.
That's a significant shift.
For as rare as Wednesday's events were, though, middle-of-the-day, 0.625 percent rate changes don't just happen. Yesterday, the action was the result of a confluence of factors, including:
In addition, momentum trading played a role.
As markets worsened, selling begat more selling, amplifying Wall Street's total losses. As mortgage bond prices fell, mortgage rates went up. By a lot.
Mortgage markets are notoriously fickle and yesterday's events proved it. Days like Wednesday are precisely why insiders recommend shopping for mortgage rates in a compressed timeframe. The faster you finish, the lower the risk of losing low interest rates to new market conditions.
Each month, researchers measure home values in 20 large U.S. cities, then compile their findings in a report called the Case-Shiller Index. It's a popular measurement of housing health across the country, but it's far from perfect.
As 3 examples:
- It gives more weight to expensive homes than inexpensive ones
- Its sample set includes just 37 states of 50 states
- Real estate isn't a "national" market -- it's local
All that said, however, the data is still important. The Case-Shiller Index helps identify broader trends in housing and it's widely believed that the economy won't recover until the sector starts to stabilize.
We may be at that recovery point now.
Despite newspaper headlines blaring about 19 percent drops from March 2008, the month-to-month values appear to be stabilizing and the latter is the more important development. 15 of the 20 markets covered by Case-Shiller either improved, stayed flat, or declined by 0.2 percent or less.
Versus 2008, the rate of speed at which home values are falling is slowing.
Furthermore, because the Case-Shiller Index is on a 2-month delay, it doesn't account for all of this year's Spring Buyers, or first-timers taking the $8,000 first-time homebuyer tax credit.
Two months don't make a trend, but if Case-Shiller Index continues to report similar data for April and May, it could be the signal that housing finally bottomed.
When sinks deliver low water pressure or "spray", homeowners like to blame faulty plumbing. A more likely culprit, however, is a neglected faucet aerator. Built-up dirt and sediment eventually slow down water delivery on most faucet types.
In this 1-minute-40-second video, DIY expert Ron Hazelton demonstrates how to properly clean an aerated faucet, restoring pressure and water flow to the sinks in your home.
The steps are basic:
- Close the drain so you don't lose parts down the pipes
- Unscrew the aerator with your hands
- Disassemble and clean the parts
- Reassemble the parts
- Screw the aerator back on the faucet
Sometimes, weak water pressure isn't a plumbing issue, but a cleanliness one instead. Clean your aerators as part of your annual Spring Cleaning rites.
Rates go up, rates go down. Catch them while you can.
After Wednesday's mortgage market rally drove rates down by a bunch, Thursday's sell-off pushed them right back up.
This has been a common pattern in the skittish world of mortgage rates this year.
With the U.S. economy still teetering between recession and growth, markets are looking for signals anywhere it can find them. Thursday's clue came from a government report showing that more Americans are collecting unemployment benefits than at any point in history.
Strangely, mortgage rates rose on the news.
We call it "strange" because weak economic data has tended to draw mortgage rates lower lately to the benefit of prospective home buyers and would-be refinancers. Lower rates make homes more affordable.
Thursday, though, the pattern broke.
The main reason why mortgage rates rose Thursday isn't because of the employment report or any other piece of data. Rates rose Thursday for the same reason that they had dropped the day prior -- the Federal Reserve.
On Wednesday, the released minutes from the Fed's last meeting suggested that the group might make a larger mortgage market intervention. On Thursday, in the face of worsening jobs data, markets bet the Fed wouldn't.
Mortgage rate shoppers, unfortunately, got caught in the crosshairs.
Rates can -- and do -- change quickly, without warning. And, thus far this year, the changes have been extra sudden. This is one reason why it's often prudent to lock a mortgage rate as soon as you find one that's agreeable. Wait too long, and it could be gone.
Expect more volatility today with traders leaving early for Memorial Day Weekend. Less volume means more chances for rates to change.
Mortgage rates fell after the Federal Reserve released its April 28-29, 2009 meeting's internal notes Wednesday.
Officially known as "Fed Minutes", the report is an in-depth account Federal Reserve's last get-together, detailing the discussions and decisions that create our country's monetary policy.
It's the lengthy companion to the Federal Reserve's brief, post-meeting press release.
For comparison's sake, the Federal Reserve's April 29 announcement contained 383 words. The minutes of that same meeting held 5,754 words. The extra words offer extra details about what the next monetary steps might be for the nation's policymakers.
This is a big deal to markets because investors are always looking for clues about what's next -- especially considering how the April Fed Minutes showed that group discussed increasing its $1.25 trillion mortgage market commitment to something bigger.
Remember that the Fed's mortgage-buying program is largely credited with keeping mortgage rates low this year. If there's more buying ahead, that should help rates stay similarly low. Mortgage rates fell Wednesday in anticipation of a move like that. For now, though, the Fed Minutes are just talk.
As economic conditions change later this year, so might the Federal Reserve's stance.
A "housing start" is a new home on which construction has started and, for the fourth straight month, single-family home construction remained flat in April.
For the battered housing market, this is the latest in a series of signals that a long-awaited turnaround is coming.
The current plateau in Housing Starts may indicate that builders are more confident in the economy, and that Americans are, too. Especially in light of the freefall over the past few years.
Single-Family Housing Starts have hugged the 360,000 mark since January 2009.
However, there is a footnote to the story.
As noted by the Commerce Department in its official report, the April Housing Starts conclusion is suspect because of the data's large Margin of Error. Had the government's sample set included a different series of data, in other words, it may have concluded that housing starts had fallen instead of staying flat. Or risen.
We won't know the final results of the report until 3 months from now but if the initial figures hold, it will fortify the argument that the housing market has, indeed, found its bottom.
According to the American Resort Development Association, there are more than 4 million timeshare owners across the United States. There are ample buying opportunities, but what if you want to sell your timeshare?
In this 4-minute piece with NBC's The Today Show, Barbara Corcoran talks about the difficulties today's timeshare sellers face with respect to a down economy, revealing sales strategies in the meanwhile.
Among the advice:
- Know what your share's worth, then lower it by 20%
- Don't overlook obvious marketing techniques
- Consider auction sites to sell a timeshare
- Donating to charity open up tax breaks
Selling timeshares is always more difficult than selling a "regular" home; and today's recessionary economy doesn't make it any easier. Watch the complete clip for more tips on selling timeshares at MSNBC.com.
More than 18 million freight containers make 200 million trips per year, moving the world's goods from port-to-port. It's system that's been in place for 50 years.
But ever since a California architect used the containers to build the world's first Uniform Building Code-compliant 2-story home, the boxes have been on the fringe of the Green Home Movement.
Look at these few examples container-based housing from around the world:
Shipping containers are popular among architects because they're cheap, plentiful, and easily shaped into designs. They're popular among consumers for their small eco-footprint.
They'll likely never replace traditional building materials, but shipping container homes should become more commonplace over the next decade.
Getting approved for a home loan isn't getting easier, but it doesn't appear to be getting much more difficult, either.
In its quarterly survey to member banks, the Federal Reserve asked senior bank loan officers whether "prime" residential mortgage guidelines had tightened in the last 3 months.
Nearly 50 percent of banks said guidelines tightened last quarter, a much lower figure than during all of 2008 and a signal that mortgage lending may be turning a corner.
Guidelines remain restrictive, however.
Versus 18 months ago, lenders subject would-be borrowers to all of the following:
- Higher minimum credit score thresholds
- Larger minimum downpayments
- Lower debt-to-income requirements
- Mandatory fees based on certain loan traits
In addition, the availability of subordinate financing has all but disappeared when a home's loan-to-value exceeds 80 percent.
Combined, these changes preclude a lot of Americans from getting access to today's low rates but that could change in the coming months if the Fed's reported trend continues.
Some experts believe that credit tightening started the recession. Credit loosening, therefore, could help lead us out.
Home affordability improved again Wednesday after the government reported worse-than-expected results for April's Retail Sales.
Mortgage rates edged lower for the third consecutive day.
The impetus for the rate rally this week may be a long-awaited stock market correction. After touching multi-year lows in mid-March, the Dow Jones added 30 percent going into last Friday.
It has since lost close to 300 points and as those dollars leave the stock market, they're finding their way toward bonds.
The demand is pushing bond prices up which, in turn, causes rates to fall.
Yesterday morning, the rally in rates picked up steam on the heels of April's Retail Sales report. With figures off a half-percent from March and roughly 7 percent from 2008, investors are concerned that consumer spending may not be as strong into the summer months as previously expected.
Consumer spending is important because it comprises two-thirds of the economy and is believed to be the way out of the current recession.
If expectations of a recovery caused mortgage rates to rise recently, it makes sense that a revision of those expectations would cause rates to fall.
Markets are fickle, however, and the slightest bit of "good news" could pump cash back into stocks at the expense of bonds. Until then, however, enjoy the low rates -- they may not last long.
For the second month in a row, the country's foreclosure activity was dominated by a small number of states.
As shown by the latest stats from RealtyTrac.com
, more than half of the country's foreclosure actions from April were concentrated in just 3 states:
- California
- Florida
- Nevada
Those 3 states are home to but 19 percent of the U.S. population.
No matter in which state you live, however, it's important to understand the far-reaching ramifications of foreclosures.
Although real estate is local, mortgage lending is not. Fannie Mae and Freddie Mac insure loans in all 50 states and when those mortgages go into default, the government entities often take losses.
This is the primary reason both Fannie and Freddie asked for government aid to the tune of $19 billion and $6 billion, respectively, last week. It's also the reason why loan fees have increased over the last 12 months -- another way to shore up balance sheets is to raise consumer charges.
Furthermore, downpayment requirements are larger than before foreclosures proliferated and private mortgage insurance is more expensive, too.
These are important changes to homeowners in all states -- not just the 3 named above. In some cases, they can be the difference between a home loan approval and an underwriting turndown.
Search the complete April 2009 foreclosure report for yourself on RealtyTrac's website.
After a series of increases starting April 30, mortgage rates finally took a dip Monday. It was a welcome surprise for home buyers that went under contract over the weekend.
Same for homeowners looking to pull the refinance trigger.
Versus mortgage rates on Friday afternoon, many lenders were already showing lower rates Monday morning before a late-afternoon rate sheet reprice even lower.
The drop in rates lowered annual mortgage payments by roughly $180 per $100,000 borrowed.
Rate dips like this aren't expected, of course, bringing us to the one of the most important axioms of shopping for a mortgage rate: You can't shop for good luck. This is because mortgage rates are inherently unpredictable.
- On some days, rates are higher
- On some days, rates are lower
- On some days, rates are unchanged
Occasionally, there are days when rates are all three.
Monday's rate dip, though -- while sharp -- may not last. Early this morning, markets were pressuring mortgage rates to rise and lenders are often quick to pass rate hikes on to consumers.
With a little bit of luck, you'll get your rate locked in before changes for the worse.
Most U.S. cities provide clean, healthy tap water to households but large numbers of homeowners still filter their tap water in-home for its perceived health benefits or "fresher" taste.
Now, that taste can be flavored like fruit.
Voted 2009 Product of the Year by the Consumer Survey of Product Innovation, the PUR Flavor Options system can be faucet-mounted or used traditional pitcher-style, injecting natural fruit flavors into your home's water.
PUR Flavor Options are calorie-free and contain no sugar or dyes. Flavors include grape, raspberry, peach, lemon, and strawberry.
The PUR Flavor Options system sells for 35% off retail on Amazon; there's less savings on the replacement cartridges.
The economy shed 539,000 jobs in April, raising the 6-month total to nearly 4 million jobs lost.
And while the April data may look bad, it's actually 10% better than what was expected.
As a result, it's turning into a bad day to be shopping for mortgage rates.
After bottoming out early last week, conforming, 30-year fixed rate mortgages have risen in cost by as much as three-quarters of a percent. Today's good-for-the-economy report may push costs higher still.
Now, it may seem odd to categorize 539-thousand lost jobs as "good-for-the-economy", but it's important to remember that on Wall Street, expectations are everything.
Investors are constantly buying and selling securities based on what they think will happen in the future. And, up until this morning, there was an expectation that 600-thousand jobs had been lost in April.
As it turns out -- relative -- the actual job loss data wasn't so bad.
Now, markets are making adjustments and re-forming expectations of what's ahead for the economy. They're preparing for things like higher levels of consumer spending in the months ahead, and fewer home foreclosures nationwide. Both outcomes would help to spur the economy from recession.
This helps explain the stock market's early rally, too.
For now, mortgage markets remain sensitive to whiffs of an economic recovery. In general, if there's good news for the country, it going to be bad news for mortgage rates.
Mortgage rates are off slightly in advance of the weekend.
The retail price of gasoline is rising nationwide, now up 30 percent since the New Year.
It's a similar run-up to what we've seen for retail gas prices in each of the last 5 Spring Seasons.
For people trying to time the mortgage market's bottom, clues about the future of mortgage rates may be at the local gas station.
Rising gas prices are indicative of the rising cost of energy and, indeed, crude oil is closing in on its 2009 highpoint. As these energy costs grow, so do inflationary pressures on the U.S. economy.
Inflation, of course, is awful for mortgage rates. When it's present, mortgage markets deteriorate and rates tend to rise -- often sharply and with little advance warning.
So, for today's homebuyers-in-process and would-be refinancers, prices at the pump may foreshadow bad news for the future of housing affordability. Even a modest, quarter-percent increase would have a palpable effect on payments, adding $372 in annual costs to a $200,000 home loan.
Since last week, gas prices are already up by 10 cents per gallon.
