Is it time to buy a home?

The Clouds Haven't Quite Parted, But the Long-Term Case for Home Ownership Is Looking Stronger

Back in June 2006, when the housing market peaked, the prospect of a five-year national housing bust seemed unimaginable to most people. And yet here we are, with the latest Standard & Poor's Case-Shiller index showing that prices hit new bear-market lows, falling back to 2002 levels nationally and to 1990s levels in some battered regions.

Despite all the gloom, however, there are growing indications that it is a good time to buy. Mortgage rates, which fell to 4.55% for the week ending June 2, according to Freddie Mac, are near 50-year lows. Homes have become more affordable than they have been in years: According to Moody's Analytics, the ratio of home prices to income is now 20.9% lower than the 15-year average through 2010, and 12.5% lower than the 1989-2004 average. A historic glut of homes, meanwhile, has created a buyer's market: There were about 15 million vacant homes in the U.S. last year, according to John Burns Real Estate ConsultingInc.—some 3.1 million more than normal.

Such conditions might not last long. Moody's Analytics predicts that the number of distressed sales will begin to fall in 2013, and that prices will begin to edge upward then. Home building is at a virtual standstill, so the supply overhang isn't likely to get much worse. Meanwhile, demographic indicators such as "household formation"—the number of new households each year—are on the rise, and promise to take a bite out of the glut in coming years.

The upshot: "While we might not see rapid growth in the next couple of years, there are a tremendous number of positive signs that could lead to a rebound," says Anthony Sanders, a real-estate finance professor at George Mason University.

The short-term outlook isn't encouraging. Job growth remains weak, foreclosure sales are making up more of the market, and economists are predicting that home prices will fall more in the coming months.

But the long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.

So what might the next five years look like? Once the foreclosure mess begins to clear up, say housing economists, the traditional drivers of the housing market—demographics, affordability, loan availability, employment and psychology—should take over.

Here is a glimmer of what the future may hold: While overall home prices fell by 7.5% in April over the same period a year earlier, according to CoreLogic, a Santa Ana, Calif., provider of real-estate data and analytics, if you exclude distressed sales, prices were off just 0.5%. So if you are in a market that isn't battered by foreclosures, you may be close to a bottom already.

Five key factors that will govern local markets over the next several years:

Lending

As rates hover near historic lows, experts expect banks to ease borrowing standards over time.

Psychology

If prices stabilize, it could tip the balance away from fear and pull more buyers back into the market.

Affordability

In several markets, it's becoming cheaper to own than to rent.

Demographics

The rate of "household formation" is expected to climb in coming years.

Employment

The strength of the housing recovery depends on job growth.

Why Use a REALTOR®?

All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.

Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.

But if you're still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one:

1. Your REALTOR® can help you determine your buying power -- that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.

6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.

7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.

8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.

11. Your REALTOR® can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

Inflation, all we've never wanted.

The Go-Go's may have sang about vacation being all we've ever wanted in the 1980's, but if we were to re-write the lyrics about last week, we could sing about inflation. Read on to learn why this matters.
We saw a double dose of inflation news last week and while the Producer Price Index (which measures inflation at the wholesale level) remained unchanged in August, the year-over-year Core Consumer Price Index (CPI) jumped up to hit the upper-end of the Fed's threshold of 2%.

So why is this significant? The concept is very simple: If inflation rises, investors in Bonds demand a higher yield to offset the lost buying power inflation imposes on a fixed payment. And as home loan rates are tied to Mortgage Bonds, this would mean home loan rates move higher.

What’s more, in light of last week’s higher consumer inflation reading, the Misery Index—which is the Unemployment Rate (9.1%) plus the level of year-over-year headline Consumer Price Index (3.8%)—is at a disconcerting 12.9, which is the highest in nearly 30 years. Our great country needs a whopping dose of certainty, clarity and confidence...and in the absence of it, this index will continue to rise.

Remember: Once inflation starts to emerge it can manifest rather quickly. Future inflation readings will be closely watched to see if a trend higher is emerging, and last week’s elevated number will certainly heat up the debate surrounding more stimulus, as more money into the system fuels inflation further. If inflation heats up even more, the Fed will likely back off their "low rates until mid-2013" mandate. Inflation really does change everything, and I will continue to follow this story closely and keep you informed.

The bottom line is that home loan rates remain near historic lows, and now is still a great time to purchase or refinance a home. If I can answer any  questions at all for you or your clients, call or email me anytime.

How to understand where you are ... Financially

The first step toward leaving credit challenges behind is understanding where you are right now. Because your credit report is used by lenders to assess your finances, it's a good idea to review it yourself beforehand. This gives you the chance to correct any errors and identify any continuing problems.

You can order a free credit report each year from each of the three national credit companies. Examine it closely to ensure it's correct. Your explanations of any negative entries can play an important role in determining your mortgage options.

Credit Reporting and Scoring

While many lenders use credit scores to help make lending decisions, other criteria play a significant role in determining the level of risk involved in making a loan. Those other criteria include income and debt, employment stability, and how the borrower's payment history has changed over time.

Factors that affect your score

There are five basic factors that determine your credit score. The levels of importance shown here are for the general population, and will be different for each individual:

1. Your payment history: What is your track record.

2. Amounts that you owe: How much is too much?

3. Length of your credit history: How established is it?

4. New credit: Are you taking on more debt?

5.Types of credit in use: Is it a "healthy" mix?

When lenders review your credit history, they are trying to determine how likely you are to repay the loan. How well you've done that in the past is one indicator of how likely you are to do it in the future.

The credit score identifies to the lender the level of the future risk associated with your credit history, as compared to hundreds of thousands of other credit reports. The higher the score, the lower the risk.

Moving Up

My goal is to do what it takes to meet your immediate financing needs and work with you to help you understand how to establish a positive payment history that can help you improve your standing in the future. As you move up the credit ladder, you'll have an increasing number of programs and rate options available, giving you even more ways to improve your financial security.

For more information, contact me today!

Remodeling? Don’t Forget the Permit

Home owners who fail to get a building permit for a remodeling project can jeopardize a sale.

When home owners take on a remodeling project, they’re often far more focused on choosing glistening fixtures for a new bathroom or debating the type of granite to use on a kitchen countertop than, say, navigating the intricacies of the building permit process. That could be a huge mistake, however, and it may not even come to light until the house is put up for sale. Ignoring local approval requirements not only poses safety and legal problems but also can potentially derail an otherwise smooth sale.
Home owners using licensed contractors for remodeling work typically don’t have to get involved with permitting. Most licensed contractors will handle the cumbersome process for them—filling out the paperwork with the municipality, collecting fees, and being present for the required inspections, says Michael Hydeck, president of the National Association of the Remodeling Industry. But when home owners tackle do-it-yourself projects or use unlicensed contractors, they risk problems later.
The permit process varies widely from city to city and state to state). But the purpose of the document is the same everywhere: It offers ­assurance by a municipal building department that the work being done meets all safety codes.

Ask Sellers Before You List

Home owners may be asked about permits in the process of selling a home. At closing, they may have to disclose any remodeling work they did and verify permits. A home inspector evaluating a property for a buyer may want to know whether a permit was obtained. Furthermore, the buyer’s appraiser may want to see permit records to check the legality of any home renovations.
“If no permits are found and it’s obvious the home has been renovated, the bank will likely refuse to make the loan,” according to the American Bar Association’s book Legal Guide to Home Renovation (Random House Reference, 2006). If the permitless work isn’t discovered until after closing, the home’s value could even be subject to a lawsuit, such as in cases when an addition added extra square footage to the home’s value but the construction wasn’t done legally with a permit.
That’s why contractors and legal experts say real estate practitioners are well advised to ask sellers before they take on a listing for a renovated home: “Did you get a permit for that?”
Remodeling contractor John Price in Merced, Calif., has been called in to help home owners after permit problems have been uncovered. He once worked with a home owner who installed siding by himself, but added it too far down along the wall of the house, so it rubbed up against dirt and picked up moisture. Eventually the poor installation led to mold growing in the drywall throughout the inside of the house.
Some home owners, however, are tempted to sidestep the permit process not wanting to pay the fees (municipalities generally charge a minimum issuing fee—such as $25—as well as an additional fee—sometimes 1 percent—of total construction costs), or they might not want to risk delaying a project or a sale by waiting for city inspections (obtaining permits can take anywhere from a day to six weeks or more).
“People have strong incentives to cheat, and some of that lays squarely on the feet of policymakers who have sometimes created a system that is time-consuming and frustrating,” Price says.
But caught without a permit during resale, home owners may face big consequences. They may have to pay fines (possibly up to quadruple the original permit cost) or may have to tear the project down and redo it.

Virtually No Job Is Too Small

Home owners making any changes to the structures of a home will likely need a permit—and you may need more than one, Price says.
While kitchen and bathroom remodels and housing additions are obvious permit candidates, people may not realize they might also need one for such projects as installing a window, adding a new light switch, or replacing a shower. “There are not too many jobs you don’t need a permit for,” Hydeck adds. “It’s better to be safe than sorry.”

It's a small world after all.

The wild ride over the last few weeks continued again last week, as the US markets danced to the tune of the European debt and economic crisis. Here's what it means to home loan rates here in the US.

Even inflation hasn't stopped Bonds. Last week, consumer inflation and producer inflation came in above expectations. Remember inflation is the archenemy of Bonds and home loan rates, so hotter inflation would normally negatively impact Bonds and home loan rates. But even last week's inflation news didn't impact Bonds.
Seeing Bonds dismiss that inflation news indicates that the Bond market senses that the economy (which is already hardly growing) is in a very vulnerable position with things in Europe uncertain and gloomy at best. And when the situation deteriorates further, it may push many world economies into a recession.

It's all about Europe. US Bonds - including Mortgage Bonds - have been seen by the markets as a safe haven bid on existing and growing fears that Europe's debt crisis is coming to a head…and global growth, which is already anemic, is being threatened further. Not helping the situation was the news last week that there is no concrete solution to the European debt problems. Last week, French President Nicolas Sarkozy and German Chancellor Angela Merkel met. However, following the meeting, Sarkozy stated that "EuroBonds can be imagined one day, but at the END of the European integration process, not at the BEGINNING."

That was a pretty clear message to the financial markets that the creation of a EuroBond is not within the remote daydreams of Germany, which is the strongest nation in Europe and who will determine whether it gets created or not. So let's be clear, the German taxpayers want no part of a EuroBond, since it would use the surplus that Germany has worked hard to create to fund the poor habits and debt of weaker and less responsible member States.

The bottom line is that the fear and uncertainty right now is pretty overwhelming, which is supporting Bonds and home loan rates. But Bonds are at "nose bleed levels" and sentiment can change very quickly.

Majority of Renters Say Owning a Home is a Top Priority

Most Americans still believe that owning a home is a solid financial decision, and a majority of renters aspire to home ownership as a long-term goal. According to the 2011 National Housing Pulse Survey recently released by the National Association of Realtors®, 72 percent of renters surveyed said owning a home is a top priority for their future, up from 63 percent in 2010.

Seven in 10 Americans also agreed that buying a home is a good financial decision while almost two-thirds said now is a good time to purchase a home. The annual survey, which measures how affordable housing issues affect consumers, also found that more than three quarters of renters (77 percent) said they would be less likely to buy a home if they were required to put down a 20 percent down payment on the home, and a strong majority (71 percent) believe a 20 percent down payment requirement could have a negative impact on the housing market. “Despite the economic setbacks Americans have experienced in today’s current climate, it is clear that a strong majority still believe in home ownership and aspire to own a home,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “However, achieving the dream of home ownership will become increasingly difficult for buyers if they are required to make a 20 percent down payment, which may be a reality for many of tomorrow’s buyers if a proposed Qualified Residential Mortgage rule is adopted. That is why Realtors® are strongly urging regulators to go back to the drawing board on the proposed rule.”

Defining the QRM rule is important because it will determine the types of mortgages that will generally be available to borrowers in the future. As currently proposed, borrowers with less than 20 percent down will have to choose between higher fees and rates today — up to 3 percentage points more — or a 9-14 year delay while they save up the necessary down payment.

Over half — 51 percent — of selfdescribed “working class” home owners as well as younger non-college graduates (51 percent), African Americans (57 percent) and Hispanics (50 percent) who currently own their homes reported that a 20 percent down payment would have prevented them from becoming home owners.

Pulse surveys for the past eight years have consistently reported that having enough money for a down payment and closing costs are top obstacles that make housing unaffordable for Americans. Eighty-two percent of respondents cited these as the top obstacle, followed by having confidence in one’s job security.

The survey also found respondents were adamantly against eliminating the mortgage interest deduction. Two-thirds of Americans oppose eliminating the tax benefit, while 73 percent believe eliminating the MID will have a negative impact on the housing market as well as the overall economy.

“The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hardworking American families,” said Phipps. “Home ownership offers not only social benefits, but also long-term value for families, communities and the nation’s economy.

We need to make sure that any changes to current programs or incentives don’t jeopardize our collective futures.” When asked why home ownership matters to them, respondents cited stability and safety as the top reason. Long-term economic reasons such as building equity followed closely behind. On a local level, respondents said neighbors falling behind on their mortgages and the drop in home values were top concerns. Foreclosures also continue to remain a large concern, with almost half of those surveyed citing the issue as a problem in their area.

The Top ‘Lifestyle Factors’ When Home Shopping

If you want to make a sale, selling the lifestyle in a community or neighborhood is becoming an important piece of the presentation of a home, according to a new survey. One in five home owners have moved or would like to move because they don’t think their neighborhood or community is a good fit to their lifestyle, according to a recent survey of more than 1,000 home owners and future home buyers
The majority of those surveyed said they would place more weight on lifestyle factors–such as family-friendly neighborhoods or easy access to cultural activities like museums and music venues–when shopping for a future home. The survey was conducted by Better Homes and Gardens Real Estate LLC and and Meredith Corp.
“While the relation of price to features has become very favorable in many areas throughout the country, ultimately the surrounding community may determine how happy you are with your home purchase,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate LLC, which used the survey results to launch a “Lifestyle Search” tool on its web site to help buyers factor in community preferences–such as “arts and recreation” and “family and community”–more in their search.
Here are some of the top lifestyle priorities survey respondents reported they’ll be looking for in their next home:

• Ease of commuting by car: 38%
• Access to health and safety services: 34%
• Family friendly neighborhood: 33%
• Availability of retail stores: 32%
• Access to cultural activities: 21%
• Public transportation access: 19%
• Nightlife and restaurant access: 18%
• Golf friendly area-access to golf courses: 6%

This week in history..."

And last week was indeed one for the record books, between the last minute debt ceiling debate deal, credit rating agency Standard & Poor's decision to downgrade the United State's credit rating one notch from AAA to AA-plus for the first time ever, the Dow Jones plummeting, and home loan rates approaching historic lows once again. Why does all of this matter? Here's what you need to know.
With just hours to spare before the deadline, Congress passed and the President signed the Debt Ceiling/Deficit Reduction Bill last Tuesday, which among other things called for a deficit reduction of $2.4 Trillion over the next 10 years. While this was certainly a good (albeit small) step towards lowering our enormous budget deficit, the uncertainty surrounding the deal combined with continued weak economic reports (including Personal Incomes for June, which grew by the lowest measure since November and Personal Spending, which was at the lowest levels in 2 years) and the credit crisis in Europe caused Stocks to plummet late last week.

Last Thursday was the single worst day for Stocks since October of 2008 and pushed the Dow, Nasdaq and S&P 500 Index into negative territory for 2011. In fact, the Dow has lost nearly 11% after hitting a 2011 high of 12,807 back on May 2. And while it is important for our economy to improve, one result we often see during weak economic times is an improvement in Bonds, including Mortgage Bonds, and therefore home loan rates, to which Mortgage Bonds are tied. Think of it this way: Investors move their money back and forth between Stocks and Bonds, moving their money into the safe haven of Bonds when there is uncertainty or weakness in the economy. That action last week helped Bonds and home loan rates approach their historic best levels once again.

But not all of the news last week was bad for our economy. Friday's Jobs Report from the Labor Department was better than expected, with 117,000 new jobs created during July, above the 84,000 that was expected.and better yet, May and June's numbers were revised higher to add 56,000 more jobs to the former tally! In addition, hourly earnings rose to 0.4% from 0.2% in June, which was a nice increase we haven't seen in quite some time, while the Unemployment Rate fell slightly to 9.1% from 9.2%. The Jobs Report was surprisingly good news, but it is only one report and we need to pay close attention to upcoming economic data. If future reports continue to improve, Bonds and home loan rates could worsen as investors would move their money back into Stocks, which is something we saw a little of late last week.

The bottom line is this: Home loan rates remain near some of the best levels we've ever seen, but about the only thing that is certain in the markets right now is the volatility.

The Heat is On

The title of that Glenn Frey song not only applied to the sweltering temperatures around much of the nation last week, it also applied to the debt ceiling debate, as the heat was on our leaders in Washington to finalize a solution to our debt situation. Why is this important? Read on for details.
It only takes a look at what is happening in Europe these days to understand why it’s crucial that the United States finds a solution to the debt ceiling issue. Not only have eight European banks recently failed a stress test, but last week there was news that Greek, Italian, Portuguese, and French "credit default swaps" (which are insurance policies against default) were trading at record levels. While the European Union is continuing to work to contain Europe’s debt problems and prevent a default in Greece (and elsewhere), these events bode a very important lesson for the US.

Why? Because solving our debt ceiling debate and finding a long-term plan for lowering our deficit and being fiscally sound will raise confidence in our debt and help the US keep its AAA credit rating from the various credit rating firms like Moody’s and Standard and Poor’s. This will help investors continue to see the US as the ultra safe haven for their money, which is a key aspect of our continued economic recovery.

Speaking of our economic recovery, there was some good news last week for the housing sector, as June Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn't make a trend, this is a good figure, and I will be watching closely for follow through in future readings.

Buyers ready to spend on green?

Heating and cooling a home today is not cheap. But neither is purchasing a solar heating system, installing new double-pane windows, or replacing old appliances. For a long time, the high expense associated with "going green" has kept many home owners from embracing energy-efficient features; instead, they've focused on the little things like weather-stripping and using compact fluorescent lightbulbs.
But there are indicators that more and more Americans are seriously considering green construction and adding new energy-efficient upgrades and determining that the cost is worth it.
"Expeditures on energy-efficient home improvements, which have been essentially flat over the last few years, will see a period of strong growth through 2014, reaching about $50.2 billion that year."
says the new Energy Efficient Homes report by Pike Research, a Boulder, Colo., market research and consulting firm focusing on clean technology.

In response to demand, some home builders are rolling out energy labels for new homes which provide estimates of monthly energy costs, triggering a different approach to home-shopping for energy-conscious buyers.

Consumers are "motivated to do the right thing about the environment, but they are also finding they can save money in the long run".

Utility costs may fall by 40% when outfitting a home with features including a solar water heater, Energy Star appliances, a solar oven, R50 insulation in the attic and a water reclamation system.

Over the past year, buyers have expressed concerns about increasing utility costs and some are rejecting homes with two-story great rooms and walls of windows - often costly to heat or cool.

Yes, the cost of going greeen is still an issue for buyers, practitioners say - especially because the upgrades that can cut utility bills by the greatest amounts are also priciest. Solar water heating systems can cost between $1,500 to $3,500 and solar panels can cost $15,000, but when used together, they can drop electricity bills to practically nil.

And that's one reason the price hurdle is getting easier to overcome. With consumer education, more buyers understand the benefit. A recent study by Lawrence Berkeley National Laboratory shows that home owners who install solar panels on their home likely will recoup that investment, and maybe even more, at resale.

Federal tax credits also are helping sway the buyer mind-set, and energy-efficient mortgages are another option to help home owners pay for costly "green" upgrades.

It's easy for homeowners to get overwhelmed with green ideas because there is so much they can do, but they don't have to to everything at once, they can start by picking one or two things, such as solar cooking or composting, give it a try and then add something again later.

Second Homes Hold Steady

Data from the recently released 2011 NAR Investment and Vacation Home Survey shows vacation-home sales accounted for 10 percent of all transactions last year and investment sales were 17 percent of the overall market.

Those figures are unchanged from the 2010 survey. The median vacation-home price was $150,000 in 2010, while the median investment home price was $94,000. The typical vacation-home buyer was 49 years old with a median household income of $99,500 and purchased a property that was a median distance of 375 miles from their primary residence. Investment-home buyers had a median age of 45, earned $87,600 and bought a home within a median distance of 19 miles

Thirty-four percent of vacation-home buyers said they plan to use the property as a primary residence in the future, as did 10 percent of investment buyers.

I’d Rather Grow Smarter!

A recent NAR study reveals Americans favor walkable, mixed-use neighborhoods over those that require more driving. Such "Smart Growth" communities are characterized by shops, restaurants and local businesses in walking distance from homes.
According to NAR’s Community Prefernce Survey, nearly 80 percent of survey respondents look for neighborhoods with abundant sidewalks and other pedestrian-friendly features when searching for a home.
While space is important to home buyers, many are willing to sacrifice square footage for less driving. Eighty percent of respondents would prefer a single-family detached home and a shorter commute, but if that isn’t an option, 60 percent of that group would chose a smaller home if it meant less driving.

"WHAT GOES UP... MUST COME DOWN?"

Gas prices have dropped at the pump lately, but the markets are more focused on movement in the rest of the economy. Here’s a look at where some important economic indicators are headed... and what they mean to you!
 
Fill ’er up... oil’s down! Late last week, crude oil fell under $90 per barrel after the International Energy Agency (IEA) said it would release 60 Million barrels of oil in the coming months to offset the loss of production in Libya.

Lower expectations for economic recovery. The big news last week was the Fed FOMC meeting and the release of the Fed’s Policy Statement. While there weren’t many surprises to come out of the meeting, the Fed did revise its forecast for the 2011 Gross Domestic Product (GDP) lower and acknowledged that the economic recovery is a little slower.

Frustratingly high. On Unemployment, the Fed stated that the pace of job growth is "frustratingly slow" and that it believes the Unemployment Rate will average 8.6% to 8.9% in the 4th quarter of 2011...which is actually higher than earlier forecasts of 8.4% to 8.7%.

Inflation on the rise? The Fed also raised expectations for Core Inflation, which strips out volatile food and energy costs. This is important because if inflation picks up, Bond prices will move lower - since yields have to move higher to attract buyers to compensate them for the pickup in inflation. And that means home loan rates may move higher as well.

Where are Stocks headed? The Fed said the second round of Quantitative Easing (known as QE2) will end as scheduled at the end of June - but there was no mention of a third stimulus package (which would be known as QE3). Their silence on this point was fairly deafening. Many experts have wondered about the possibility of a third round of QE, but it doesn’t look to be in the cards at this point. It’s important to note that the Stock market did not like that there was no mention of QE3, especially since Stocks have only risen the past couple of years when the Fed has been buying - like during both QE1 and QE2. It will be very interesting to see how Stocks behave once the QE2 support is removed.

Misery loves company? Here’s an interesting fact for you. Believe it or not, there’s actually a "Misery Index." This Index takes into account both inflation and the Unemployment Rate. Currently, it’s just slightly below the level seen in December 2009, which is when the economy was still in the midst of the credit crisis. To put this in perspective, we haven't seen the Misery Index this high since 1983. And what is a bit concerning is that the Index has climbed higher each month so far during 2011. With inflation rising higher still and unemployment not ticking down, the upward trend may well continue in the near future.

Better than expected... but what’s the catch? Durable Goods were reported better than expected last week. It wasn’t a blockbuster reading, but it was good news in light of concerns that the economic recovery is slowing. That said, there’s a catch to consider if you or someone you know is looking to refinance or purchase a home. The recent slowdown in the economic recovery has actually helped improve Bonds and home loan rates. But if the slowdown proves to be just a minor bump in the road to recovery and if future reports show modest improvements, home loan rates could move higher rather quickly.

The good news is that home loan rates are still at historical lows, making this a terrific time if you or someone you know might be thinking about purchasing a home. It only takes a few minutes to see if you can benefit from the situation. Call or email to get started.

• A double does of housing news with Tuesday’s Existing Home Sales Report and Thursday’s New Home Sales Report.
• The regularly scheduled Federal Open Market Committee meeting on Tuesday and Wednesday. Given last week’s hotter than expected inflation news, will the Fed still say inflation is transitory?
• Thursday also brings another weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Jobless claims fell 16,000 to 414,000 and while the decline is good news, this is the tenth straight week that Jobless Claims have remained back above the 400,000 level.
• Rounding out the week on Friday are two important reports on the state of the economy: Durable Goods Orders, which gives us an update on consumer and business buying behavior on big-ticket items, and Gross Domestic Product, which is the broadest measure of economic activity.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Bonds and home loan rates traded sideways last week, with inflation news keeping market improvements from the instability in Greece in check. I’ll be watching closely to see how world events and economic reports impact the markets this week.

Volatility was extremely high... but the bottom line is a tremendous opportunity

"SLOW DOWN... YOU MOVE TOO FAST." Maybe the economic recovery is taking acue from these 1960's lyrics by Simon and Garfunkel, as the economic recovery seems to be in a sluggish state at the moment. And while it doesn't leave too many Americans "feelin' groovy," there are some amazing opportunities at hand in housing. Here's what you need to know about the economy and housing industry - along with one sure thing about the current situation.

Volatility was extremely high last week - not just in the financial markets, but also in the economic reports and economic outlook. The big news of the week was the official Jobs Report, which came in well below expectations. In fact, in the private sector alone, the report indicated that only 83,000 jobs were created in May - and that number was almost 100,000 less than expected!

Although the Hourly Earnings component of the report came in a little better than expected, the overall report was just plain bad. Even for a market hungry for good news, there was no way to spin this report. Now the markets will have to wait and see if this was a one-off bad report and just a bump in the road to recovery... or if things have indeed slowed down once again.

Manufacturing slowing?

New data on the manufacturing sector of the economy also indicated a possible slowdown, as the Chicago PMI and the ISM Index - which both measure manufacturing - came in below expectations.

Rumors of a bailout lower the US Dollar.

In news across the pond, reports came out last week that Germany is putting together a plan to bailout Greece. The plan would "kick the can down the road" a little longer for Greece, allowing them more time to figure out a strategy to get their debt in order. As a result of these bailout hopes, the Euro was strengthened and the US Dollar dipped lower. Remember, a softer US Dollar helps US Stocks, as US companies benefit from stronger exports with a weakening Dollar. But a lower Dollar isn't so good for Bonds, so this news stalled the rise of Bonds early last week.

Home prices still very affordable.

Moving from Europe back home to the US, we also received new data last week on home prices across the country. According to the 20-city Case-Shiller Home Price Index, prices were down 0.8% in March. Overall, foreclosures and bank-owned sales continue to weigh on housing - and are expected to do so for a couple more quarters. That said, the housing market is very localized, so only a local real estate professional can help you understand where home prices are at in your community - let me know if you need a referral to someone great in your area.

One thing's for sure...

If you or someone you know is considering purchasing a home or refinancing, this is an ideal time to see how you can benefit from the current market conditions. Home prices are extremely affordable right now and home loan rates are near historic lows.

It only takes a few minutes to look at some options that fit your unique goals and situation. Call or email today to see how you can benefit from the current situation!

Mobile Technology in Real Estate

THe National Association of Realtors (NAR) reported that 56% of Realtors used a Smarphone daily in 2010 compared to only 42% in 2009. Another statistic is that by the end of 2011 it is expected that half of the US population will use a Smartphone. These statistics are straggering and warrant out attention since we can expect a good percentage of consumers to be using a mobile device to stay connected for real estate related information throughout the buying and selling process.

MLSLI is now available on handheld devices at MLSLI.mobi and it puts the mobile technology at the service of Realtors and customers.

Consumers simply type in http://mlsli.mobi and access the easy to read, formated information that can be clearly viewed on a mobile device. MLSLI.mobi provides consumers with a mobile connection to listings, open houses and more.

This definitely will enable all of us to take full advantage of the capabilities of our mobile devices and work more efficiently and effectively while we are on the go.

SLOW AND STEADY?

Housing Starts and Building Permits, which are leading indicators of the new home construction market, both came in below expectations that were already low. If you consider the significant amount of foreclosures and inventory overhang weighing on the market, it is no surprise to see a weak indicator on new home construction. Broadly speaking, foreclosures and short sales are expected to continue weighing on new home construction for the next couple of quarters... but as we all know, real estate is very local - so your particular market may be quicker or slower to improve.

Manufacturing reports were also disappointing last week. For example, Industrial Production, Capacity Utilization, and the Philadelphia Fed Manufacturing Index all came in below expectations - which helped Bonds last week.

So why didn't Bonds and home loan rates improve?

The recent rally in Bonds and home loan rates was partly sparked on the notion that US economic growth will slow - which the economic reports last week seemed to indicate. And when you also factor that the only two ways the government can lower the budget deficit is either by cutting spending or raising taxes - or some mix of both - the austerity measures could indeed slow the economy.

Normally, such soft economic data would help Bonds and home loan rates. But last week, Bonds had trouble making gains because - despite the negative economic headlines - some of the reports included data that was unfriendly to Bonds.

Here's an example...

Last week, the Empire State Manufacturing Index was reported a lot weaker than expected. But, when you look beyond the headline number, you see that the "Prices Paid" component of that report - which measures wholesale inflation - showed the highest rate of inflation in three years... and the second highest reading ever! Remember, inflation is the archenemy of Bonds and home loan rates.

Additionally, the employment index of the Empire State Index was positive, which suggests hiring. And, in a separate report released last week, the Labor Department's Initial Jobless Claims number also showed the lowest level of unemployment claims in a month. Not only was that a good number from the standpoint of beating expectations, but it also indicated that April's surge in unemployment claims was more likely due to temporary factors rather than a worsening labor market.

In the end, the positive employment news combined with the concerns over inflation offset some of the negative economic news last week and held Bonds and home loan rates in check. Both Mortgage Backed Securities and Treasuries traded dead on a ceiling of resistance last week. And unless Bonds can break above this ceiling, prices can't improve further. I'll be watching the markets closely this week to see if Bonds break above that ceiling this week.

Is the glass half empty... or half full?

That question is one many people are debating when it comes to our economy - yes, the economy is still sluggish... but the slow recovery has helped home loan rates improve. So what developed last week...and what was the impact on home loan rates? Let’s take a deeper look.
First, on the inflation front: 6.8%...that's the current year-over-year rate of Producer or Wholesale inflation. And that is hot - very hot! And while Producer or Wholesale inflation doesn't always get passed onto the consumer as evidenced by the relatively benign Consumer Price Index (CPI) inflation readings, at some point one of two things must happen.

• Businesses who are burdened with increased costs must pass the increase to the consumer by raising prices, thus boosting consumer inflation.
• If businesses aren’t in a position to raise prices because of weak consumer demand, they must absorb the increased costs...thereby lowering earnings and the ability to expand, thus furthering the present slow economic growth.

The takeaway here: One of the Fed's goals for their second round of Quantitative Easing (QE2) was to create inflation and avoid deflation in the hopes of strengthening our economic recovery. It appears that they have been somewhat successful in this goal, as the risks for deflation have somewhat abated. But remember, inflation is the arch enemy of Bonds and home loan rates. If inflation continues to heat up, this could hinder further improvement in home loan rates.

It’s also important to note that inflation in China is also on the rise, and inflation abroad becomes inflation here in the US as we import so many items from China. China's buying of our debt has helped keep our home loan rates relatively low for a long time. Home loan rates would likely move higher if China not only slows buying, but were to start selling some of their near $900 Billion worth of U.S. government debt holdings.
 
And speaking of our debt, Republicans in the U.S. House of Representatives are increasingly dismissive of Treasury Secretary Tim Geithner's warnings that Congress must raise the debt limit prior to August 2nd or risk economic "catastrophe." This will be an important development to watch in the weeks to come.

The bottom line is that, on the glass half full side of things, home loan rates still remain near some of the best levels we’ve seen this year. If you have been thinking about purchasing or refinancing a home, call or email me to learn more about why now is a great time to benefit from today’s historically low rates

Find out the story behind the latest employment numbers - and what they mean to home loan rates.

"LIFE IS A MIXED BLESSING, WHICH WE VAINLY TRY TO UNMIX" - author and journalist Mignon McLaughlin. The labor market and the economy saw their own mixed blessings last week, when three different employment reports were released. Unlike Mignon McLaughlin’s quote above about life, these mixed job reports can actually be untangled. So let’s break down what we learned about employment last week...and, just as importantly, what’s going on with home loan rates.

After two disappointing employment reports earlier last week - in the form of the ADP National Employment Report and the Initial Jobless Claims Report - the labor market finally received some good news on Friday when the Labor Department released their official Jobs Report that showed 244,000 jobs were created in April. That was far above all expectations... and it was the biggest private job increase since 2006!

But where did this number come from... and is it accurate?

This headline number comes from the Current Population Survey, which uses the birth/death model to guesstimate the amount of jobs lost or gained in different industries - based on how many businesses were "born" or "died." And it isn't until we get revisions to the previous month's reports that we get a more accurate and final number.

Furthermore, history has shown that the birth/death model used to estimate is lagging - and at the start of an improving labor market, like we are seeing, the future revisions will likely show more jobs created than previously reported. This dynamic was evident in this month's Jobs Report, as revisions to March showed that an additional 46,000 jobs were created.

Despite the better-than-expected number of jobs created, the Unemployment Rate ticked up to 9% from 8.8%. The data for the Unemployment Rate comes from an entirely different survey - which is called the Household Survey - and is a bit contradictory to the headline news. This shows that the jobs being created simply aren't enough to have yet made a significant dent in the number of jobless Americans.

Also in the Jobs Report, Average Hourly Earnings were reported up by 0.1% to $22.95 per hour. Hourly earnings have increased by 1.9% year over year, just not enough to create "wage-based inflation," which is where employers have to pump up the prices of their goods and services to cover increased wages. So this was somewhat Bond-friendly news.

Although the Jobs Report was mixed, the overall positive tone does validate that the labor market is gradually improving. As the labor market improves, so will the economy and housing - and with that, interest rates will gradually rise as well. In the short run, the recent rise in Bonds is encouraging. However, after such a strong run higher, it would not be surprising to see more downside follow through in Bonds - which could mean higher home loan rates. The good news is that home loan rates recently reached some of the best levels so far in 2011 - and rumors on Friday that Greece may leave the European Union helped Bonds, as traders sought a safe haven.

That means a window has opened up... but there’s one important point you should understand.

It’s important to note that the last time rates hit this level, they jumped significantly higher from here. What’s more, signs of inflation are beginning to creep into our economy, which never bodes well for home loan rates. And if the rumors of Greece leaving the European Union turn out to be untrue (as Greece has stated), the safe haven bounce we saw last Friday could quickly be erased. That’s why it’s important to take action now.

It doesn’t cost anything to check out your situation, and the choice of moving forward or not will be up to you. Don’t miss this window of opportunity to save significantly on your monthly budget.

This week will be jam-packed with economic reports that can have a big impact on the markets and home loan rates:

• We’ll see more housing news this week with the New Home Sales report right away Monday morning, followed by the Pending Home Sales report on Thursday.
• Consumers are also in the news this week. First, we’ll see the Consumer Confidence report on Tuesday, followed by the Consumer Sentiment Index on Friday. Both those reports give us some insight into how confident consumers are in the economy. Second, we’ll get a look at Personal Spending and Personal Income on Friday - which provide insight into the financial picture of consumers.
• The Federal Reserve holds its FOMC meeting this Tuesday and Wednesday, with the release of its Policy Statement coming Wednesday afternoon. As always, what the Fed says could impact home loan rates.
• Speaking of the Fed, we’ll see the Fed’s favorite gauge of inflation this Friday in the Personal Consumption Expenditures report.
• We’ll also get a read on the economic recovery with Wednesday’s Durable Good Orders, which gives us an update on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time, like furniture, televisions, appliances, vehicles, copy machines, and so on.
• On Thursday, the markets will see the latest report on Gross Domestic Product (GDP) - which is the broadest measure of economic activity - as well as Friday's Chicago PMI, which is a good indicator of overall economic activity.
• The Jobless Claims report also comes out Thursday. In the latest week’s report, Initial Jobless Claims fell but still remained above that pesky 400,000 level as the job market continues to be a thorn in the side of the economy. Until we can see a pattern of unemployment claims well below 400,000, we will not see a significant fall in the Unemployment Rate.
• Finally, on Friday the Employment Cost Index (ECI) will be released. The ECI is one way to evaluate wage trends and the risk of wage inflation, as well as possible price pressures. This is important to the housing industry because if wage inflation threatens, it is possible home loan rates will rise through Bond prices dropping.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.
As you can see in the parallel black lines on the right side of the chart below, Bonds hovered in a tight range and were unable to improve much last week due to rising Stocks and inflation concerns.
Those two elements only add to the headwinds for Bonds and indicate that now may be the ideal time to take advantage of low home loan rates. Call or email to see how you can benefit by acting now.

How is the housing industry holding up? And what does the labor market look like? We’ll see this week.

In the early days of this week, the news will shift to the health of the housing industry, and then end with more labor and manufacturing news. Here are some of the reports to watch:

• We’ll start out Tuesday morning with new reports on Housing Starts and Building Permits in March.
• Those reports will be followed on Wednesday by a report on Existing Home Sales in March. So by mid-week, we’ll have a good look at the health of the housing industry. Feel free to call or email me to discuss how these reports came in and what impact they may have.
• Thursday we’ll see the weekly Initial Jobless Claims Report. In the report released last week, Initial Jobless Claims climbed higher to 412,000, and above the psychologically significant 400,000 mark for the first time since March 5th. Funny how those round numbers work with our brains - it's the same logic as why something at the store costs $7.99, instead of $8.00. Overall, the report indicated that employment growth continues to muddle along.
• Also on Thursday, we’ll see more manufacturing news - this time in the form of the Philadelphia Fed Index, which is considered an important indicator of the manufacturing industry and, therefore, has the potential to move the markets depending on how it comes in.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.
As you can see in the chart below, Bonds climbed at the end of last week, due in large part to the report that inflation remained contained for now.
Remember, inflation is the archenemy of Bonds and home loan rates. So the news of contained inflation was good for Bonds and home loan rates - making this a good time to purchase or refinance a home. Call today to get started.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Apr 15, 2011)

The Jobs Report for March was released on April 1, and that’s no joke. But did the numbers give us something to smile about?

People say that "life is full of surprises." And last week’s Jobs Report offered a few surprises of its own. But were those surprises positive, and what do they mean for home loan rates overall? Read on for details.

The headline Jobs Report number showed that 216,000 jobs were created in March, which was a positive surprise as this was above expectations. In addition, 230,000 jobs were created in the private sector, which was also better than expectations and offset a decline in government jobs. A small 2,000 upwards revision to February's prior release added some more jobs as well.

In addition, the Unemployment Rate surprisingly dropped to 8.8%, which is the lowest unemployment rate since March of 2009. Remember, the Unemployment Rate is derived from the Household Survey (exactly as it sounds, from calls made to households), and is considered to be more accurate than the Current Employment Statistics or Business Survey (again as it sounds, from calls made to businesses), which is used to determine the headline jobs number.

The one negative within the report is Hourly Earnings coming in at 0.0%. This is the second month in a row where earnings growth is 0.0%. Why is this significant? If earnings don't grow, people have less to spend and as a forward looking indicator on job growth, it shows that businesses are presently not under any pressure to raise wages. This means they may not have to hire new people as quickly because they may have room to raise wages for present workers down the road.
Overall, the Jobs Report was a good report and reminds us that the trend in the labor market is improving. But keep in mind, while lowering unemployment is good for our economy overall – as are the other two goals (creating inflation and boosting Stock prices) of the Fed’s current Quantitative Easing (QE2) program – these goals can also lead to higher home loan rates over time.
In fact, inflation continues to be a growing concern both around the world and here in the U.S., as several members of the Fed, including St. Louis Fed President James Bullard, have expressed concern that if the Fed waits "too long (to remove accommodative monetary policy) we will get a lot of inflation in the United States and around the world."
What does this mean in the long run? Like the Treasury Department, at some point the Fed will start selling some of its massive holdings and unwind their QE1 and QE2 purchases. And when it does, not only will the Bond market lose a buyer in the Fed, but they will gain a seller and this will make it hard for Mortgage Backed Securities and home loan rates, which are tied to these types of Bonds, to meaningfully improve.
If you have been thinking about purchasing or refinancing a home, call or email me to learn more about how you can benefit. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.

"It’s not a matter of IF, but WHEN!"

That old adage proved true last week as the fiscal problems in Europe came back to roost as predicted - even after being overshadowed recently by news from Japan and the Middle East .

Despite all the focus on government debt in Europe , it’s important to note that the problems are more than just financial; there is also a ton of political capital at risk. The stronger and more fiscally conservative Euro member countries like Germany and France do not want to pick up the tab for poor performing countries like Ireland , Greece , Portugal and many others standing in line behind them. And as news flows out of Europe - either good or bad - Mortgage Bonds and home loan rates here in the US will move in sympathy.

One news item that pressured Bonds lower last week was word that inflation in the United Kingdom (UK) jumped to the highest level in two years in February. Remember, inflation is the archenemy of Bonds, and inflation around the globe seeps into the US .

In fact, we’re already seeing it as Producer Prices (which look at wholesale inflation) are running at very hot levels... with prices up 3.3% in just the last three months. If pricing pressures don't recede for producers of goods and services, companies will have one of two choices:

Either: Absorb the higher cost of goods - and, thereby, hurt earnings growth

Or: Pass those increased costs onto consumers - thereby, creating consumer inflation

Both of those scenarios would be bad for Stocks and Bonds. And since home loan rates are tied to Mortgage Backed Securities - which are a type of Bond - those scenarios would also be bad for home loan rates.

Speaking of Mortgage Backed Securities, last week the Treasury Department announced it is going to begin selling some of its massive Mortgage Backed Securities holdings. This is important to anyone looking to purchase or refinance a home. That’s because this announcement immediately pushed Bond prices significantly lower, as Traders tried to get their own positions sold. Think of it as a financial game of musical chairs... in which no one wants to be the last one standing with a mitt full of Mortgage Backed Securities. This isn’t the last we’ll hear about this - and since home loan rates are tied to Mortgage Backed Securities, this creates the potential for home loan rates to rise in the near future.

Fortunately, home loan rates are still at very attractive levels for now, despite the Bond market taking a hit for most of last week. So if you’ve been thinking about purchasing or refinancing a home, this is the time to see how you can benefit before rates possibly move higher. Because as bad as it was to lose some Bond pricing in the last few days, prices could move significantly worse depending on how they hold on to technical support.

For more information on what this means and how it may impact you or someone you know, call or email today. I’ll be happy to explain the situation and offer advice based on your unique situation.

Home Equity Lines of Credit and Your Credit Score

What You Need to Know and Do

Credit reports have always been important, but they’ve grown even more important in recent years. Now more than ever, you need to make sure you understand what’s on your credit report - and you need to know what steps you can take to improve your score.

For example, did you know that a Home Equity Line of Credit (HELOC) can impact your credit score quite dramatically... and sometimes unfairly... depending on how it is reported?

Here’s What You Need to Know... and Do!

First, you need to know that HELOC’s are commonly reported by the three credit bureaus as revolving accounts. In reality however, they do not fall under the typical revolving terms, even though they are set up in the same way as a revolving account. That’s because HELOC’s are secured by an asset.

Here’s the Good News...

The Fair Credit Reporting act requires reporting agencies to report true and accurate information. So when a HELOC is reported as a revolving account, you can actually send a letter to the three credit bureaus asking them to change the type of account from "Revolving" to "Line of Credit" or "Other."

This way, the account will not be rated by the scoring system using the "Balance to Limit" ratio scenario - which can drop a credit score by as much as 75 points if the HELOC is maxed out to the limit of the available credit line.

A Final Word of Advice

If you do decide to send a letter, you should send it as a Certified Letter, along with a copy of the HELOC agreement. You may have to send the letters more than once, but persistence is the key to accomplishing a positive result with the bureaus.

This article was adapted from information provided by national credit expert Linda Ferrari, author of "THE BIG SCORE: Getting It and Keeping It, Buying Power for Life." Learn more and check out her credit resources at http://www.lindaferrari.com/

"Double dose!" is the phrase of the week, as we’ll see multiple reports this week focusing on the same segments of the economy

• We’ll start off with some big news Tuesday, when the Federal Reserve holds its FOMC meeting and releases its Policy Statement later that afternoon. As always, what the Fed says about the economy, inflation, and its Quantitative Easing program could have an impact on home loan rates.
• There’s a double dose of real estate news with Wednesday’s release of data on Housing Starts and Building Permits in February. Check back with me on Wednesday to get the breakdown of how the news actually arrived!
• There’s also a double dose of manufacturing news. Tuesday’s Empire State Index looks at New York State ’s manufacturing sector and is a good gauge of manufacturing overall, while on Thursday we’ll also see another important manufacturing report in the Philadelphia Fed Index.
• A double dose of inflation news also comes our way this week with Wednesday’s Producer Price Index Report, which highlights inflation at the wholesale level, and Thursday’s Consumer Price Index Report, measuring inflation for consumers like you and me! Remember: The Fed is intent on creating inflation, which is unfriendly to home loan rates, and signs of inflation from these reports could be unfavorable for rates.
• Thursday we’ll get a read on employment with the weekly Initial Jobless Claims Report. Initial Jobless claims rose 26,000 in the latest week to 397,000, which was above expectations but still below that psychological barrier of 400,000.
• Finally, on Thursday we’ll see a double dose of manufacturing data with the release of reports on Capacity Utilization and Industrial Production in February. The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate climbs too high it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and decides how to set interest rates on the basis of whether production constraints are threatening to cause inflation.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see by the arrows in the chart below, Bond prices experienced some up-and-down volatility last week, but ended the week near where they began - meaning home loan rates are still near historic lows.

So what should you do if you or someone you know is in the market for a new home?

The bottom line is that even if housing were to drop a little further in some areas, the affordability coming from today's rates serves as a backstop against any moderate price reduction. Remember, housing will likely be in a much better position in the second half of the year and at that time rates could be a bit higher. Now’s the time to take advantage of the combination of low rates and affordable housing.

Real Estate Expectations

The demand for homes in our area has rebounded to a certain degree, due to such factors as continued growth of immigrant population, lack of vacant land and new development, proximity to New York City, well-performing schools and relatively low property taxes. In addition, the combination of historically low mortgage rates, lower home prices and relatively high income levels of two-earner house holds in New York City has created a favorable buying opportunity for many families. Buyers now are not speculators, they are buying a home to live in and they realize that their very large investment may not show any appreciation for a long time, therefore, they are pragmatic, they set up a budget, (often necessitated by strict lending guidelines), they shop and compare and they expect to get the best value they can find.

On the sellers' side, it's been only five years since the peak of the real estate market but many homeowners are still expecting those high prices to return before they can make important decisions about changing their lifestyle, retiring, downsizing, etc. Well, the truth of the matter is that these prices are not coming back this spring or anytime soon.

The strategy of pricing your home at the current market levels will create more exposure, resulting in more showings to savvy buyers who will appreciate the value and place realistic offers quicker out of fear of loss.

Comparing our statistics, we have maintained the same ratio of sell price to list price. 96% in both 2009 and 2010, and the average "days on the market" has stayed below 60 - 58 in 2010 and 56 in 2009, while it took an average of 70 days to sell houses in 2008.

This week’s schedule picks up with big reports on sales, manufacturing, and inflation. Find out what you need to watch!

After last week’s slow schedule of economic reports, we’ll see some influential reports this week... that have the potential to really move the markets.

• We’ll start off Tuesday morning with the January report of Retail Sales, which is considered a timely indicator of broad consumer spending patterns.
• We’ll also see manufacturing news this week with Tuesday’s Empire State Index, which looks at New York State ’s manufacturing sector and is a good gauge of manufacturing overall. Then on Thursday, we’ll see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the U.S.
• More news is headed our way on Wednesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. Then, the very next day on Thursday morning, we’ll see the Consumer Price Index (CPI) with a look at inflation at the consumer level. In light of last week’s news about inflation concerns around the globe - including in China and Brazil - it will be important to see what these reports reveal. Remember, inflation is important to keep an eye on because it is the archenemy of Bonds and home loan rates.
• Wednesday will also bring more housing industry news with reports on the number of Housing Starts and Building Permits in January.
• Finally, the busy week of reports caps off Thursday with the Initial Jobless Claims report. Last week’s report showed that Initial Jobless Claims hit the lowest weekly reading since July 2008. Overall, the labor market appears to be slowly gaining positive traction... and further improvement will lead to an improvement in the housing market, but also higher rates over time.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and home loan rates have had a tough time recently, but were able to stabilize at the end of last week. In the end, Bonds and home loan rates finished the week just slightly below where they started, but home loan rates are still near historic lows for now.