Thursday, July 28, 2011

Why to Buy NOW in Silicon Valley!

Summer is the busiest time of year for real estate purchases and sales in Silicon Valley. If you are thinking about buying a new home but still haven’t dipped into the Santa Clara Real Estate market, I understand that it may stem from uncertain times in the industry right now. You don’t know if prices will continue to drop, and you don’t know if the market will ever improve.

Let’s take these concerns one at a time. First off, if you want to hold off on purchasing a home because you’re hoping that the prices will continue to fall, and you’ll score a better deal further down the road, I’m here as your Silicon Valley Real Estate agent to tell you the smart thing to do is buy now. As a buyer, you are living in a time with mortgage rates at an unprecedented low. Even if prices do continue to drop, you have to remember that you’re still scoring an amazing deal and purchasing a house for less than it’s worth!

Another reason to buy now rather than wait is because statistics show that renting is increasing in popularity. In order for homes to be available to renters, investors must purchase homes. Therefore, not only are average homebuyers snatching up great deals right now, but many investors are buying as well. It’s a buyer’s market, but that also means there are lots of buyers! By waiting, you might lose out on the home of your dreams.

The second concern you may have is that the real estate market will continue to worsen. I know, we keep hearing that the economy will improve, or already has, but it’s hard to find the proof. Still, looking at the situation logically, you purchase a home now that is within your financial means, and you live in it for numerous years. Because of the low mortgage rates, you might even get it paid off before you sell. Even if you don’t, as long as you keep up with your doable payments, your credit score will improve. It’s a win-win situation.

Even if the market hasn’t ended it’s downfall as of today, most homebuyers plan on living in their new homes for a many years to come. Chances are that by the time you’re ready to move, the market will have improved! Don’t give up the American dream because of an uncertain future. In the present moment, if you find a house that you love for a great price, let me help you in the buying process.

If you’d like more information on these topics, check out this video from CNNMoney.com, which discusses these issues in-depth with real estate experts. As always, I am your Santa Clara County Real Estate agent, here to make sure that local buyers find the best deals around in the Silicon Valley Real Estate market. I’m also here to make sure you find the home of your dreams, and the home you’ll want to spend many years of your life in, creating unforgettable moments and lasting memories.

Wednesday, July 27, 2011

Housing Starts Surge 9 Percent; Signal A Strong Fall Season

Single-family housing starts

Builders are busy once again.

According to the Census Bureau, Single-Family Housing Starts rose to 453,000 on a seasonally-adjusted, annualized basis in June -- a 9 percent spike from the month prior and the highest reading in 3 seasons.

A "Housing Start" is defined as a home breaking ground on new construction.

June's reading is largest one-month jump since June 2009. The reading surprised Wall Street despite that the Homebuilder Confidence survey may have foreshadowed the results.

Monday, the National Association of Homebuilders reported that builders are more confident about the future of the new home sales market, and forecast a large increase in sales over the next 6 months.

For buyers of new construction, the news is mixed. Rising confidence may mean that builders are less willing to negotiate on upgrades and/or price, but rising construction levels add inventory to an already fragile market.

Adding to the nation's home supply without a corresponding increase in buyer demand shifts negotiation leverage away from builders. 

The Census Bureau also reported on Building Permits.

In June, permits for single-family homes rose by 1,000 units nationwide on a seasonally-adjusted, annualized basis. This, too, bodes well for housing because 89 percent of homes with permits start construction within 60 days.

Momentum should carry forward into fall.

If you're buying new construction in California , ask your real estate agent about local home supply, and how the market is trending. With mortgage rates low and the fall buying season approaching, you may find some of your best deals in the next few weeks.

Led By Expectations Of A Strong Fall Season, Homebuilder Confidence Bounces Back

Housing Market Index (Homebuilder Confidence)

Homebuilder confidence is bouncing back.

One month after an unceremonious dip highlighted by poor sales figures and dim prospects for the future, the National Association of Homebuilder's Housing Market Index rebounded two points to 15 in July.

The monthly Housing Market Index is scored on a 1-100 scale. Readings above 50 indicate favorable conditions for homebuilders and the "new home" market. Readings below 50 indicate unfavorable conditions.

The Housing Market Index has not read higher than 50 in more than 5 years.

As a housing metric, the HMI is actually a composite of three separate surveys, self-reported by builders. The surveys ask about current single-family home sales volume; projected single-family home sales volume; and current buyer foot traffic levels.

In July, the responses read as follows : 

  • Current single-family sales : 15 (+2 from June)
  • Projected single-family sales : 22 (+7 from June)
  • Buyer foot traffic : 12 (Unchanged from June)

The most noteworthy reading is the rapid rise in Projected single-family home sales. Although builders aren't experiencing more foot traffic, they think sales will spike between now and the New Year. 

That could spell bad news for home buyers.

When builders harbor higher expectations for the future, they're less willing to make concessions for upgrades and/or price. Your likelihood of getting "a great deal" as a buyer diminishes.

That's why it's good that mortgage rates are still so low. Low mortgage rates help with home affordability and can offset slight jumps in sale price.

Mortgage rates remain just above their lowest levels of 2011, and of all-time. 

There Are 3.7 Million Homes For Sale. Is Yours Standing Out From The Crowd?

According to the National Association of REALTORS®, there are more than 3.7 million homes for sale this month. If your home is among them, are you doing what it takes to stand apart from the crowd?

This 4-minute piece from NBC's The Today Show pulls no punches. It's titled "5 Mistakes Sellers Can't Afford To Make" and it covers falling home prices, buyer mentality, and the need to be smart when faced with that first offer.

Some of the tips include:

  • Why you should list your home at a price within 5 percent of its "true value"
  • How to turn "low-ball" offers into legitimate ones
  • How to interview and select a real estate agent to sell your home

In addition, based on the truth that "people shop with their eyes" and then review home details, the video includes advice on using great photographs and making the most of an online listing.

It can be tough to find buyers in any market. But if you follow the tips outlined above, you can get more showings, and do more with them.

Retail Sales Rise For 12th Straight Month In June

Retail Sales 2010-2011The American Consumer will not be deterred.

Despite worsening jobless figures and an increase in the Cost of Living, Retail Sales are climbing. In June, for the 12th straight month, retail receipts rose, excluding cars and auto parts.

Analysts expected no change from May. Instead, receipts topped $321 billion -- an all-time record.

For home buyers and would-be refinancers , this is a bit of unwelcome news. Mortgage rates are rising in the wake of the Retail Sales data release.

This is because Retail Sales account for roughly half of consumer spending, and nearly one-third of the economy overall. A rise in Retail Sales, therefore, suggests stronger growth ahead.

Here's how it happens.

As consumers spend more money, businesses sell more product. So, to accommodate burgeoning demand, business hire additional employees, and are forced to make additional capital expenditures as well. 

This rise in spending prompts other businesses to hire and spend; to meet their own respective demand surges. There's a chain reaction-like effect.

Then, with businesses carrying larger payrolls and bigger staffs, federal, state and local governments realize bigger tax bases and can fund new and existing projects. 

This, too, leads to hiring and the cycle repeats.

A weak economic outlook dragged down mortgage rates last week. This week's Retail Sales data reversed that flow. Mortgage rates are higher by 1/8 percent -- roughly $8 per $100,000 borrowed.

Retail Sales are up 8 percent from a year ago.

For The 9th Straight Month, Foreclosure Filings Fall

Foreclosure changes 2010-2011

For the 9th straight month last month, foreclosure activity slowed.

According to foreclosure-tracking firm RealtyTrac, the number of foreclosure filings dropped 29 percent nationwide on an annual basis in June. The phrase "foreclosure filing" is a catch-all term, comprising default notices, scheduled auctions, and bank repossessions.

June marked the ninth consecutive month of sub-300,000 filings after 20 months above it -- a promising signal for the housing market in California and nationwide.

It's also noteworthy that each of the 10 most foreclosure-heavy states showed fewer foreclosures in June 2011 as compared to June 2010, led by Florida's 54% decline. Florida is one of 4 states on the leading edge of foreclosure activity since 2007.

The other 3 states performed similarly well in June:

  • California : -22% on an annual basis
  • Arizona : -7% on an annual basis
  • Michigan : -25% on an annual basis

The decrease in foreclosure filings comes at a time when buyer demand is highest. According to the National Association of REALTORS®, "distressed properties" account for more than 30 percent of all home resales and no wonder -- homes in various stages of foreclosure or sold by short sale are selling with discounts of 20 percent versus comparable non-distressed homes.

For buyers in search of foreclosures , talk with a licensed real estate. Buying homes in foreclosure follows a different process path as compared to buying a "traditional" home. Make sure you seek the help of a professional.

Fed Minutes Hint At New Economic Stimulus

FOMC Minutes June 2011The Federal Reserve released its June 2011 Federal Open Market Committee meeting minutes Tuesday. It contained no surprises and, as such, mortgage rates in California have idled in the hours since.

The Fed Minutes is published 8 times annually, three weeks after each scheduled Federal Open Market Committee meeting. It's the official log of the meeting's conversations and debates.

The Fed Minutes is the lengthier companion piece to the FOMC's more well-known, post-meeting press release. As compared to the brief-and-focused press release,by comparison, the Fed Minutes are long and detailed.

June's press release was 458 words long. Its minutes totaled 6,889 words.

The June minutes reveal some interesting perspectives from within the Federal Reserve, too.

  • On growth : Economic recovery had been slower than the committee expected
  • On housing : The market remains depressed. Foreclosures are "holding back" construction.
  • On rates : The Fed Funds Rate should remain low for an "extended" period

In addition, the Federal Reserve discussed whether a new round of economic stimulus was necessary. Committee members agreed that a poor outlook for employment in the medium-term would make this move more likely.

There was little that surprised Wall Street in the June Fed Minutes. This is why market reaction has been muted since its release.

The FOMC meets next August 9. If jobs data continues to weaken between now and then, expect the stimulus chatter to continue. It's unclear, however, how this would impact mortgage rates.

For now, mortgage rates remain near their all-time lows, and they have much more room to rise than to fall. If you're shopping for a loan, therefore, the timing is right for a lock.

What Is Annual Percentage Rate (APR)?

Truth-In-Lending snapshot

More commonly called APR, Annual Percentage Rate is a government-mandated mortgage comparison tool. It measures the total cost of borrowing over the life of a loan into dollars-and-cents.

A loan's APR is printed in the top-left corner of the Federal Truth-In-Lending Disclosure, as shown above. When quoting an interest rate, loan officers are required by law to disclose a loan's APR, too.

APR is meant to simplify the process of choosing between two or more loans. The theory is that the loan with the lowest APR is the "best deal" for the applicant because the loan's long-term costs are lowest. However, the loan with the lowest APR isn't always best.

APR makes assumptions in its formula that can render it moot.

First, APR assumes you'll pay your mortgage off at term, at never sooner. So, if your loan is a 15-year fixed rate, its APR is based on a full 15 year term. If you sell or refinance prior to Year 15, the math used to make your loan's APR becomes instantly flawed and "wrong".

Example: Let's compare two identical loans in California -- one with discount points and a lower interest rate; and one without discount points and a higher mortgage rate. The loan with discount points will have a lower APR in most cases. However, if the homeowner sells or refinances within the first few years, the loan with the higher APR would have been the better option, in hindsight.

Second, APR can be "doctored" early in the loan process.

Because the APR formula accounts for third-party costs in a mortgage transaction, and third-party costs aren't always known at the start of a loan, a bank can inadvertently understate them. This would make the APR appear lower than what it really is, and may mislead a consumer.

And, lastly, APR is particurly unhelpful for adjustable-rate loans. Because the APR calculation makes assumptions about how a loan will adjust during its 30-year term, if two lenders use a different set of assumptions, their APRs will differ -- even if the loans are identical in every other way. The lender whose adjustments are most aggressively-low will present the lowest APR.

Summarized, APR is not the metric for comparing mortgages -- it's a metric. For relevant comparison points, talk to your loan officer.

Removing Stains On Walls : Crayon, Mildew And More

Cleaning stains from wallsPainting rooms in a home can be a do-it-yourself project. Armed with paint, tape, tarp and some brushes, there's nothing you can't re-color.

While some rooms call for a complete sand-down, there are some that don't, and for those, Rule #1 is that your walls must be stain-free before adding the next coat of paint.

Stains can come in all varieties and the most basic stains can be treated with a damp rag or a Mr. Clean Magic Eraser. For everything else, you'll need a more cleaning power.

For example, of all the stain-types, "grime" is the most common. To remove ground-in dirt and oil, start with 1 gallon of warm water in a bucket, then add 1 cup of ammonia, 1/2 cup of distilled white vinegar, and 1/4 cup of baking soda.

Rub gently and follow up with a clean water rinse.

For other common stains, try these remedies:

  • Permanent Marker : Blot the stain with a rubbing alcohol-soaked cotton ball. Allow to air dry.
  • Mildew : Add 1 tablespoon of vinegar to 4 cups of water. Spray and allow to air dry.
  • Crayon : Dust a damp sponge with baking soda and scrub. Baby wipes work, too.

If your wall stains are "water stains"; the result of a leak or something similar, make sure the water source is corrected prior to painting. Then, to remove spots, mix 1 part bleach to 4 parts water, thoroughly rinse the stain, and use a hair dryer to dry the solution on the wall.

Once cleaned, your walls are ready to paint.

Mid-Year Review : Were The Experts Right About The Market?

Predictions are risky businessThe year is half-over. It's an opportune time to take stock of analyst predictions made at the start of the year, and to recognize that the "experts" can be wrong as often as they are right.

For as much experience and authority an expert brings to the conversation, though, nobody can accurately predict the future.

As such, there's often disagreement.

Looking back to December, some housing analysts called for a market rebound this year; while others called for a fall. With respect to mortgages, some said rates had nowhere to go but up; while others expected more dips.

As a layperson, how do you know who will be right?

In short, you can't.

Predictions are a tricky business because they're guesses about the future based on the world as it exists today. When the predictions listed earlier were made, the world was a different place.   

A lot has changed since January:

  • Slowing job growth has suggested to slower U.S. economic growth
  • Food and energy costs have spiked, adding inflationary pressures to the economy
  • Eurozone debt issues have grown, punctuated by a near-Greek default
  • Tsunamis have caused widespread damage in Japan
  • Earthquakes, floods and volcanoes have harmed economic output

None of these events had occurred as of December, when the original predictions were made. Yet, each of these developments has made a deep impact on housing, and on the economy.  

So, what's a homeowner to do? Think of the present instead.

First, mortgage rates are low today -- extremely low by historical standards. Second, home values have been slow to rebound through most U.S. markets. Combined, these factors have made homes more affordable than it any time in recorded history. It's not only cheap to buy a home right now, it's cheap to refinance one, too.

Analysts are saying the home prices will rise this year, and mortgage rates will, too. Those predictions may ultimately be proven true. Until the future arrives, though, those predictions are just guesses.

Economy Expected To Have Added 80,000 Jobs In June

U.S. job growth since 2000

Friday morning, at 8:30 AM ET, the Bureau of Labor Statistics releases its June Non-Farm Payrolls report. If you're currently shopping for a mortgage, or floating a mortgage rate, be prepared. Mortgage rates can change following the monthly report's release.

Often, by a lot.

More commonly called "the jobs report", Non-Farm Payrolls reports on the U.S. workforce by sector, summarizing its findings in terms of total workforce size, and as a national Unemployment Rate. Jobs are considered a keystone in the continuing U.S. economic recovery. 

More working Americans means:

  1. More consumer spending, a boost to businesses
  2. More tax collection, a boost to governments
  3. More personal savings, a boost to households

For June, analysts expect the government to report 80,000 net new jobs created, and no change in the 9.1% Unemployment Rate.

Although these figures are slightly below than what can be considered "strong growth", that's not what should concern rate shoppers. Mortgage markets react to a deviation from estimates more than to the actual results themselves.

This is because Wall Street placed bets in advance of the jobs report's release. If jobs growth tallies more than 80,000, therefore, it signals better news for the economy than what was expected. This will push banks and investors towards equities, and away from bonds -- including the mortgage-backed kind.

With less demand for mortgage bonds, mortgage rates will rise.

Conversely, if jobs growth is less than 80,000, mortgage rates should fall.

Mortgage rates remain near their lows for the year, but if the June Non-Farm Payrolls report beats estimates of 80,000 jobs made in June, look for mortgage rates to spike. The safe move is to lock today.

How To Make More Space In Your Garage

How do you use your garage? If you're like most homeowners, you park your car(s) in it, then use the remaining available space for the random storage of "things that don't go in the house". 

Your garage can do so much more -- all it needs is a little bit of organization.

In this 4-minute video from Lowe's YouTube series, you'll see how cabinetry, shelving, hooks and a master plan can add purpose to the non-car areas of your garage, and help you "make space". You'll even de-clutter parts of your home.

The video is rife with pointers for doing your garage right, including:

  • How to create "storage zones" of exactly the right size
  • How to organize sporting goods for easy access and optimal space-saving
  • Where to place trash receptacles, garden equipment, and seasonal decorations

According to the video, building out a garage should be a weekend project. You may finish faster, or slower, however, depending on the complexity and size of your garage and your storage needs.

Finishing a garage creates "space" -- a helpful addition to any home. In addition, it enhances a home's appeal to prospective buyers. Use the video above as a starting point and inspiration, and consider shopping storage specialty stores to finish out your project.

Demand Is Rising, Supplies Are Falling : Home Prices Set To Rise?

Existing Home Sales Mar 2010-Mar 2011Home resales rose 4 percent last month, according to the March Existing Home Sales report. A total of 5.1 million homes were sold on an annualized, seasonally-adjusted basis.

The strong results re-establish the national, long-term trend toward rising home resales.

March marked the 6th month out of eight in which sales volume has increased and sales are up 32 percent from July 2010 lows.

Home supply has resumed its downward trajectory, too.

At the current pace of sales, the entire home resale inventory would be depleted in 8.4 months. This is 0.1 months faster as compared to February, and a full month faster than the 12-month average.

The Existing Home Sales report also included a breakdown by buyer-type.

  • First-time buyers bought 33% of homes, down from 34% in February
  • Repeat buyers bought 45% of homes, down from 47% in February
  • Investors bought 22% of homes, up from 19% in February

35 percent of buyers paid in cash.

And, perhaps most noteworthy, according to the National Association of REALTORS®, 40 percent of March home resales were "distressed properties". Distressed homes include foreclosures, short sales, and REO and typically sell at discounts "in the vicinity" of 20 percent.

Home prices are based on the basic economic theory of Supply and Demand. So, with home supplies dropping and demand for homes rising, it's reasonable to expect home values to rise later this year.

If you're in the market for a home, play the recent trends to your advantage. Today, homes are affordable and mortgage rates are low. This may not be the case later this year. The best "deals" of the year may be what you buy now.

Building Permits Rise In All 4 Regions

Housing Starts (Apr 2009 - Mar 2011)According to the Census Bureau, seasonally-adjusted, single-family Housing Starts rebounded in March, increasing 8 percent over February's 2-year low.

We can't put too much faith in the data, however, because for the second straight month, the government reports that the data's margin of error -- 15 percent -- exceeds its actual measurement.

As written in the footnotes, there's no "statistical evidence to conclude that the actual change [in Housing Starts] is different from zero."

In other words, single-family Housing Starts may have dropped up to 7 percent last month, or may have increased by as much as 22 percent. We won't know for certain until several months from now. As the Census Bureau gathers more data, it will revise its initial monthly findings.

Such adjustments are common. February's starts were revised higher by 4.5%, for example.

Also included in the Census Bureau's report is the March 2011 Building Permits tally. As compared to February, permits were higher by 6 percent nationwide. This is a noteworthy development because permits-issued is an excellent forward-predictor for housing.

When permits are issued, 86 percent of them will start construction within 60 days. This means that new home sales and housing stock should follow the Building Permits report trend, but on a 2-month delay.

Permits were strong in all 4 regions last month:

  • Northeast : +2.6 percent from February
  • Midwest : +10.0 percent from February
  • South : +5.3 percent from February
  • West : +5.3 percent from February

With Building Permits rising, we can infer that the housing market is improving.

Therefore, if you're currently looking for new construction, consider that the market may be less favorable for buyers 4-6 months from now than it is today. Especially because homebuilders are already projecting higher sales volume.

The better time to buy new construction -- relative -- may be now.

As Buyer Traffic Grows, Homebuilder Confidence Slips

NAHB Homebuilder Confidence Survey

Homebuilder confidence is falling -- a good sign for buyers of newly-built homes.

According to the National Association of Homebuilders, the Housing Market Index slipped one point to 16 in April. It's the 5th time in 6 months that the index read 16 -- a figure exactly in line with the 1-year average, but still considered "poor". The Housing Market Index reports on a scale of 1-100.

Values of 50 or better representing "favorable conditions". Values below 50 are considered "unfavorable".

It's been 5 years since the Housing Market Index read north of 50.

As an index, the HMI is actually a composite of three separate surveys, the results of which can be as telling as the final, compiled results. The surveys focus on specific aspects about a homebuilder's business, and use the broader responses to gauge overall market "sentiment".

The 3 questions are: 

  1. How are market conditions for the sale of new homes today?
  2. How are market conditions for the sale of new homes in 6 months?
  3. How is prospective buyer foot traffic?

In April, interestingly, home builders felt market conditions were worse across the board, but still cited higher buyer foot traffic. This may be the result of a combination of rising mortgage rates and falling home values. Both tend to be bad for builders, and both tend to spur home buyers into action.

As a home buyer this spring, therefore, use the HMI data to your advantage. When home builders feel less confident on housing, buyers can often exact better concessions and/or upgrades during the negotiation process.

And, so long as mortgage rates continue to rise, that pressure on builders should build.

Which Is Better : Fresh Produce Or Frozen Produce?

Frozen Fruit and Fresh Fruit : Which Is Better?There's a long-standing myth that freezer-section produce is "worse for you" than fresh produce from a farm. The truth, however, is often the opposite.

Because of upgrades in packaging and delivery methods, frozen produce is often more fresh than "fresh produce", and contains higher nutrient levels, too.

The key is to know how to shop for it.

The main advantage that frozen produce carries over fresh produce is that frozen produce is picked in its most ripe -- and most nutrient-rich --  state. Then, when the produce is flash-frozen, its nutrients become locked-in and sealed.

Fresh produce, by contrast, tends to be picked before it's ripe, and is left to ripen in transit.

Because food nutrients degrade with exposure to heat and/or light, the longer it takes produce to get from the farm to the supermarket, the fewer nutrients the produce will have. 

Did you know? Fresh fruit and vegetables might sit for up 2 weeks before they're sold by your local supermarket. And not to mention how long it may take you to consume them.

Another advantage of frozen produce is that it's often less expensive than fresh fruit. For example, looking at the cost of strawberries bought in bulk:

This isn't to say that frozen produce is "better" than fresh produce. It just depends on your circumstance. If you plan to consume the produce within a short period from purchase, and can account for its ripeness and freshness, fresh produce may be preferred. Or, if you eat organic produce, free from pesticides and chemicals -- certain produce may be better eaten fresh.

But know the facts. Frozen produce can be healthier and cheaper -- a good combination for your household.

Foreclosures Drop 35 Percent Year-Over-Year

Foreclosure concentration by stateForeclosure activity is much slower this year than last.

According to foreclosure-tracking firm RealtyTrac, the number of national foreclosure filings plunged 35 percent in March 2011 as compared to March 2010, a statistic that reflects a more healthy housing market and more robust outlook for 2011.

A "Foreclosure filing" is defined as any of the following : a default notice, a scheduled auction, or a bank repossessions. Foreclosures filings were down in all but 8 states last month.

Activity remains concentrated, too. More than half of all bank repossessions can be tied to just a handful of states.

In March, 6 states accounted for 51% of activity.

  1. California : 15% of all repossessions
  2. Florida : 9% of all repossessions
  3. Arizona : 7% of all repossessions
  4. Michigan : 7% of all repossessions
  5. Texas : 6% of all repossessions
  6. Nevada : 5% of all repossessions

At the other end of the spectrum is Vermont. With just 5 repossessions for all of March, Vermont accounted for 0.008% of repossessions nationwide.

Distressed homes remain in high demand among today's home buyers, accounting for almost 40% of all home resales. It's no wonder, either. Distresses home typically sell at a steep, 15 percent discount as compared to non-distressed properties.

Buying foreclosures can be a great "deal". However, make sure you've done your homework.

Buying homes from banks is different from buying a homes from "people". Contracts and negotiations are different, and homes are often sold with defects.

If you plan to buy a foreclosure, therefore, make you you speak with a licensed real estate professional before submitting a bid. You can research a home online and learn a lot of the process, but when it's time to purchase, put an experienced agent on your side.

Inflation Pressures Mounting; Mortgage Rates Rising

Consumer Price Index (March 2009 - February 2011)Inflation pressures are mounting in the United States. And, Friday, the Consumer Price Index should prove it.

More commonly called "The Cost of Living Index", CPI measures cost changes in the typical items bought by American households. Among others, CPI measures goods and service in apparel and recreation; medical care and education; and housing and transportation.

The March CPI data is expected to show an increase in the cost of living for the 17th straight month -- a reading that would take CPI to an all-time high.

If you've filled your gas tank, sent a child to school, or shopped for groceries, you're likely not surprised. Household budgets have been squeezed from all angles lately. The dollar's purchasing power is waning.

This is inflation, defined. And a weaker U.S. dollar is bad for mortgage rates. 

The connection between the U.S. dollar and mortgage rates is direct. When inflation pressures rise, mortgage rates tend to rise, too, because mortgage rates are based on the price of mortgage-backed bonds -- a security bought, sold and paid in U.S. dollars

Inflation, in other words, renders mortgage bonds less valuable to investors, all things equal, so investors sell them as inflation pressures grow. More sellers leads to lower prices which, in turn, causes mortgage rates to rise.

It's why March's Cost of Living data is so important to rate shoppers and home buyers. Higher levels of CPI can harm home affordability, and stretch your household budget uncomfortably.

As Memorial Day approaches, gas prices are projected to spike, offering little relief from the inflationary pressures in the economy. It's one reason why mortgage rates should trend higher over the next few months.

If you're wondering whether to lock or float your mortgage rate, consider locking in. At least today's rates are a sure thing. Tomorrow's rates could be much higher.

Retail Sales Report Should Spell Higher Mortgage Rates For Wednesday

Retail Sales Rising -- 8 Straight Months

Consumer spending is alive and well, it seems -- unwelcome news for today's home buyers. 

Wednesday, the Census Bureau will release its March Retail Sales figures and the report is expected to show higher sales receipts for the 9th straight month. A strong reading like that should spell higher mortgage rates nationwide.

The connection between Retail Sales and mortgage rates is fairly tight. Retail Sales are "consumer spending" and consumer spending accounts for the majority of the U.S. economy. The U.S. economy, of course, is a dominant force in setting the direction in which mortgage rates are headed.

For example, in 2010, it was a weak economy and murky outlook that helped drive mortgage rates to all-time lows. Since last year, however, the jobs market has started its recovery, monthly receipts have returned to all-time highs, and the Federal Reserve is revising growth estimates for 2011.

Not surprisingly, mortgage rates have reversed, too.

As compared to 6 months ago, conforming rates are higher by 0.750%. Home affordability across California is taking a hit. Plus, the stronger the economy appears to be, the more likely for mortgage rates to climb more.

It's why tomorrow's Retail Sales report is so important. 

If you're under contract for a home, or even evaluating the merits of a refinance, there's a lot of risk in "floating" your mortgage rate. The more prudent plan is to find a rate at which you're comfortable with the payment, and lock it in.

And you may want to take that lock sooner than you had planned -- if only to protect your monthly payments. Once tomorrow's Retail Sales report hits, it may be too late. Especially if receipts rise for the 10th straight month.

The Retail Sales report is due for release at 8:30 AM ET.

Get Your Applications In : FHA Mortgage Insurance Premiums Rising 0.25 Percent April 18, 2011

FHA Mortgage Insurance Changes

After this week ends, the FHA is raising mortgage insurance premiums on its new borrowers. It's the FHA's third such increase in the last 12 months.

Beginning with FHA Case Numbers assigned April 18, 2011, mortgage insurance premiums will be higher by 25 basis points per year, or 0.25%.

Against a $200,000 loan size, the MIP increase adds $500 to an FHA-insured borrower's annual cost of homeownership. All new FHA loans are subject to the increase -- purchases and refinances.

Existing FHA-insured homeowners across California are unaffected. Premiums do not rise for loans already made.

The FHA is increasing its mortgage insurance rates because, as a group, the FHA is insuring a much larger percentage of the U.S. housing market. 

In 2006, the FHA held a 4 percent market share. By 2010, that share ballooned to 19 percent and, today, it's estimated to be even higher.

In its official statement, the FHA says that the quarter-point MIP bump will "significantly strengthen" its reserves which are depleted because of delinquencies and defaults. By law, the FHA's capital reserves must meet certain levels. 

Therefore, to meet these requirements, the FHA is rolling out its new mortgage insurance premium schedule:

  • 15-year loan term, loan-to-value > 90% : 0.50% MIP per year
  • 15-year loan term, loan-to-value <= 90% : 0.25% MIP per year
  • 30-year loan term, loan-to-value > 95% : 1.15% MIP per year
  • 30-year loan term, loan-to-value <= 95% : 1.10% MIP per year

In order to calculate what your FHA monthly mortgage insurance premium would be, multiply your beginning loan size by your insurance premium in the chart above, then divide by 12. 

The FHA also charges a 1 percent, up-front mortgage insurance premium at closing. That figure remains unchanged.

How Healthy Is Your Bedroom?

Most people spend about one-third of their life in the bedroom. So, how healthy is yours?

In this 5-minute piece from NBC's The Today Show, you'll learn about dust mites, mold and the other hidden health risks in your bedroom. Some may be compriming your sleep, and others your well-being.

The interview is comprehensive and covers a lot of ground, including:

  • The importance of an excellent vacuum with HEPA filters
  • The advantage of latex pillows over other pillow-types
  • Why blackout curtains can help reduce blood pressure

The piece also talks on several goods reasons to leave your bedroom electronics-free.

For as much time as we all spend in our respective bedrooms, we should want it to be a healthy, clean place. Following the video's advice is a step in the right direction.

How Does Your Real Estate Tax Bill Compare To Other Parts Of The Country?

Real Estate Taxes compared to local household income

Mortgage rates may be a function of free markets, but real estate taxes are a function of government. And, depending on where you live, your annual real estate tax bill could be high, low, or practically non-existent.

Compiling data from the 2009 American Community Survey, the Tax Foundation, a non-partisan educational organization in Washington D.C., published property taxes paid by owner-occupied households, county-by-county.

The report shows huge disparity in annual property taxes by region, and by state.

As a percentage of home valuation, Southeast homeowners tend to pay the fewest property taxes overall, while Northeast homeowners tend to pay the most. But statistics like that aren't especially helpful. What's more useful is to know how local real estate taxes stack up as compared to local, median household incomes.

Not surprisingly, real estate taxes are least affordable to homeowners in the New York Metro area. The 10 U.S. counties with the highest tax-to-income ratios physically surround New York City's 5 boroughs. The areas with the lowest tax-to-income, by contrast, are predominantly in southern Louisiana.

A sampling from the Tax Foundation list, here is how select counties rank in terms of taxes as a percentage of median income:

  • #1 : Passaic County (NJ) : 9.7% of median income
  • #6 : Nassau County (NY) : 8.6% of median income
  • #15 : Lake County (IL) : 7.2% of median income
  • #18 : Cheshire County (NH) : 7.1% of median income
  • #70 : Travis County (TX) : 5.0% of median income
  • #90 : Marin County (CA) : 4.6% of median income
  • #110 : Middlesex County (MA) : 4.4% of median income
  • #181 : Sarasota County (FL) : 3.9% of median income
  • #481 : Douglas County (CO) : 2.4% of median income
  • #716 : Maui County (HI) : 1.3% of median income

The U.S. national average is 3.0 percent.

The complete, sortable list of U.S. counties is available at the Tax Foundation website. For specific tax information in your neighborhood or block, talk with a real estate agent.

Military Members : You Have 3 Weeks To Buy A Home, Claim Up To $8,000 In Tax Credits

Military tax credit expirationIf you're an eligible federal employee or qualified military personnel, you have 3 weeks from this Saturday to use the federal home buyer tax credit, and to claim up to $8,000 in federal income tax credits. 

According to the IRS, eligible persons include members and spouses of the uniformed services, members and spouses of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010, and their spouses.

Eligible persons must be under contract for a new home on or before April 30, 2011, with the home's closing occurring on or before June 30, 2011.

The federal home buyer tax credit is a true credit, too. Eligible buyers receive a dollar-for-dollar tax reduction equal to 10 percent of the subject home's purchase price, not to exceed $8,000 for first-time home buyers, and not to exceed $6,500 for repeat home buyers.

Repeat buyers must have lived in their "main home" through 5 of the last 8 years in order to be eligibke.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

  • The home may not be purchased from a parent, spouse, or child
  • The home may not be purchased from an entity in which the seller is a majority owner
  • The home may not be acquired by gift or inheritance
  • The home sale price may not exceed $800,000
  • Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete program description is published on the IRS website.

For additional information regarding your tax credit eligibility, you may want to speak with an accountant or other tax professional. It's often worth the cost.

March Fed Minutes Show Inflation Risks And Rate Hikes On The Horizon

Fed Minutes March 2011The Federal Reserve released its March 15 meeting minutes Tuesday. The notes revealed a Federal Reserve split between optimism and caution for the U.S. economy.

The minutes' official name is "Fed Minutes". It's a periodic publication, published 3 weeks after each meeting of the Federal Open Market Committee. The FOMC meets 8 times annually, so the Fed Minutes is published 8 times annually, too.

The Fed Minutes is similar to the meeting minutes released after a condo board gets together, or after a meeting of the Board of Directors at a large corporation. The minutes give a detailed account of the important conversations and debates that occurred among the attendees.

At the Federal Reserve, those conversations are deep and, as such, the minutes are long; much longer than the more well-known, post-meeting press release anyway.

Whereas the press release is measured in paragraphs, the minutes are measured in pages.

Here is some of what the Fed discussed last month:

  • On inflation : Pressures are rising, but largely because of food costs and oil costs.
  • On housing : The market remains "depressed" with large inventory and weak demand.
  • On stimulus : The Fed will keep its $600 billion bond plan in place.

In addition, there was talk about ending the Federal Reserve's accommodative monetary policy (i.e. the near-zero percent Fed Funds Rate). The FOMC's voting members unanimously elected to leave the Fed Funds Rate near 0.000 percent last month, but there was talk of raising the benchmark rate later this year.

Conforming and FHA mortgage rates are mostly unchanged since the Fed Minutes release.

Plan To Sell Within 5 Years? Consider An Adjustable-Rate Mortgage.

Comparing 5-year ARM to 30-year fixed

Which is better -- a fixed-rate mortgage or an adjustable-rate mortgage? It's a common question among home buyers and refinancing households in California.

The answer? It depends. 

Fixed-rate mortgages give the certainty of a known, unchanging principal + interest payment for the life of the loan. This can help you with budget-setting and financial planning. Some homeowners say fixed-rate loans they offer "peace of mind".

Adjustable-rate mortgages do not.

After a pre-determined, introductory number of years, the initial interest rate on the note -- sometimes called a "teaser rate" -- moves up or down, depending on the existing market conditions. It then adjust again every 6 or 12 months thereafter until the loan is paid in full.

ARMs can adjust higher or lower so they are necessarily unpredictable long-term. However, if you can be comfortable with uncertainty like that, you're often rewarded with a very low initial interest rate -- much lower than a comparable fixed rate loan, anyway.

Freddie Mac's weekly mortgage survey highlights this point.

The interest rate gap between fixed-rate mortgages and adjustable-rate mortgages is growing. It peaked 2 weeks ago, but remains huge at 1.16 percentage points.

On a $200,000 home loan, this 1.16 FRM/ARM spread yields a monthly principal + interest payment difference of $136, or $8,160 over 5 years, the typical initial teaser rate period.

Savings like that can be compelling and may push you toward an adjustable rate loan.

You might also consider a 5-year ARM over a fixed-rate loan if any of these scenarios apply:

  1. You're buying a new home with the intent to sell it within 5 years
  2. You're currently financed with a 30-year fixed mortgage and have plans to sell the home within 5 years
  3. You're interested in low payments, and are comfortable with longer-term payment uncertainty

Furthermore, homeowners whose existing ARMs are due for adjustment might want to refinance into a brand new ARM, if only to push the teaser rate period farther into the future.

Before choosing ARM over fixed, though, make sure you speak with your loan officer about how adjustable rate mortgages work, and their near- and long-term risks. The payment savings may be tempting, but with an ARM, the payments are never permanent.

How To Clean A Gas Grill

Keep a clean grillWhether you barbecue for friends or family once annually, or through all 4 seasons, it's important to keep a clean gas grill. A well-maintained grill will help your food taste its best -- no matter what you're cooking up.

Cleaning a gas grill is simple and should be performed at least once every 12 months for light use, and once every 6 months for heavy use. You'll need the following tools:

  1. A drop cloth
  2. Aluminum foil
  3. A regular scrub brush plus a wire brush
  4. An active garden hose
  5. Dish detergent
  6. A soft sponge
  7. A bucket
  8. Rubber gloves

With these tools in-hand, follow these basic steps.

First, disconnect the propane tank and move the grill onto the drop cloth. Open the grill and remove its grates and the flame guards (the v-shaped metal pieces on top of the burners). Then, disconnect the igniters and remove the burners. Soak the grates in hot water if they're excessively dirty.

Set the pieces aside for cleaning.

Next, clean out any loose debris from the bottom of the grill. Use the detergent to make a soapy mixture and scrub the bottom of the grill, including its grill pans and grease trays. Clean the grates at this time, too.

Gently brush the outside of the burners with the wire brush, then allow running water from the garden hose to flow through the tubes to clean out the insides. If the burners appear to be cracked, replace them according to the grill manufacturer's instructions.

Allow all of the above cleaned pieces to air dry, then reassemble the grill.

Next, clean the outside of the grill using a soapy mixture and a soft sponge, treating early-stage corrosion with some cooking oil applied like car wax. If your grill has a stainless steel exterior, wipe with the grain to minimize streaking. And that's it!

Cleaning a gas grill can be time-consuming, but better tasting food is worth it. Plus, your grill will last longer.

How Does Your Work Commute Compare To Other Cities?

Average Commute Times In The US, By County

As part of the Census Bureau's data collection activities from 2005-2009, a number of interesting charts have been published at http://census.gov.

The data should not be confused with Census 2010 -- a separate survey conducted every 10 years. This is the first-ever, 5-year American Community Survey. Based on data from 3 million households, it details social, economic, housing, and demographic data "for every community in the nation".

Among the surveys:

  • Median Household Income, Inflation-Adjusted To 2009 Dollars (Chart)
  • Median Housing Value Of Owner-Occupied Housing Units (Chart)
  • Percent Of Households That Are Married, With Children Under 18 (Chart)

The ACS survey also charts average commute time by county. The chart is shown at top.

Whether you live in a "long commute" town like Richmond, NY (40 minutes), or a "short commute" town like King, TX (3.4 minutes), rising gas prices have made commute times and distances relevant to everyone.

Since the start of 2011, the average price for gasoline is higher by 54 cents per gallon. Assuming 22 miles per gallon on a passenger car, that's an increase of 2.5 cents of gasoline per mile driven in the last 90 days. It's a cost that adds up quickly, and can affect a household budget. Plan for higher pump prices moving forward, too. Historically, gas prices surge between April and June.

The American Community Survey is loaded with charts and data. It can tell you a lot about your current neighborhood, and any neighborhood to which you may want to relocate. Then, to bridge the ACS data with community details such as school performance and typical home prices, talk to a real estate professional.

January 2011 Case-Shiller Index : Weak And Flawed

Case-Shiller Annual Change January 2011

Standard & Poors released its Case-Shiller Index for the month of January this week. The index is a home valuation tool, measuring the monthly and annual changes in home prices in select cities nationwide.

January's Case-Shiller Index gave a poor showing. As compared to December 2010, home values dropped in 19 of the Case-Shiller Index's 20 tracked markets. Only Washington, D.C. gained. The results were only modestly better on an annual basis, too.

18 of 20 markets worsened in the 12 months ending January 2011.

According to the report, values are down 3.1% from last year, retreating to the same levels from Summer 2003. As a buyer or seller in today's market, though, don't read too much into it. The Case-Shiller Index is far too flawed to be the final word in housing.

The index has 3 main flaws, in fact.

The first flaw is the Case-Shiller Index's lack of breadth. The report is positioned as a national index, but its data is sourced from just 20 cities nationwide.

Putting that number in perspective: the Case-Shiller Index tracks home values from fewer than 1% of the 3,100 U.S. municipalities -- yet still calls the report a "U.S. Average".

A second flaw in the Case-Shiller Index is how it measures home price changes, specifically. Because the index only considers "repeat sales" of the same home in its calculations, and only tracks single-family, detached property, it doesn't capture the "full" U.S. market. Condominiums, multi-family homes, and new construction are ignored in the Case-Shiller Index algorithm. 

In some regions, homes of these excluded types represent a large percentage of the market.

And, lastly, the Case-Shiller Index is flawed because of the amount of time required to release it.

Today, it's almost April and we're talking about closed home resales from January which is really comprised of homes that went under contract in October -- close to 6 months ago. Sales prices from 6 months ago is of little value to today's home buyer, of course.

The Case-Shiller Index can be a helpful tool for economists and policy-makers trying to make sense of the broader housing market, but it tends to fail for individuals like you and me. When you want accurate, real-time housing figures for your local market, talk to your real estate professional instead.

Lock Now? Friday's Job Report Expected To Push Mortgage Rates Up.

Net new jobs (2009-2011)Friday is a pivotal day for mortgage markets and conforming mortgage rates across California. At 8:30 AM ET, the government will release its March Non-Farm Payrolls report.

More commonly known as "the jobs report", the monthly Non-Farm Payrolls is a market-mover and home buyers would do well to pay attention. Depending on the report's strength, mortgage rates could rise, or fall, by a measurable amount tomorrow morning.

It's because so much of the today's mortgage market is tied to the economy, and economic growth is dependant on job growth.

With more job growth, there's more consumer spending and consumer spending accounts for the majority of the U.S. economy. Additionally, it generates more payroll taxes to local, state and federal governments. This, too, puts the broader economy on more solid footing.

Between 2008 and 2009, the economy shed 7 million jobs. It has since recovered 1.5 million of them. Friday, analysts expect to count another 190,000 jobs created. If the actual figure falls short, expect mortgage rates to ease.

Otherwise, look for rates to rise. Probably by a lot.

If you're shopping for a mortgage right now, consider your personal risk tolerance. Once the BLS releases its data, it will be too late to lock in at today's interest rates. If the idea of rising mortgage rates makes you nervous, execute your rate lock today instead.

On a 30-year fixed rate loan, each 1/8 percent increase to rates adds roughly $7 per $100,000 borrowed.

Pending Home Sales Rebound; Suggest Brighter Spring For Housing

Pending Home Sales (Aug 2009 - Feb 2011)

On a seasonally-adjusted basis, the Pending Home Sales Index rose 2 percent last month, according to the National Association of REALTORS®. A "pending home sale" is defined as a home under contract to sell, but not yet closed.

February's Pending Home Sales Index rebound breaks a 2-month losing streak, and reverses the recent downward momentum in housing. Both Existing Home Sales and New Home Sales volume showed a sizable loss last month. 

For buyers and sellers of real estate , the Pending Home Sales Index is of particular import. It's one of the few forward-looking indicators in housing, and February's data suggests a stronger spring season than was the winter.

Region-by-region, Pending Home Sales data varied:

  • Northeast Region: -10.9%
  • Midwest Region : +4.0%
  • South Region : +2.7%
  • West Region : +7.0%

3 of 4 regions showed marked improvement, which is good for housing. In the fourth -- New England -- it's likely that inclement weather hampered results.

February was colder-than-normal and the month capped a record-breaking snowfall season for the region. Anecdotally, fewer homes are sold in the cold-and-snow of winter and it's likely that the weather affected local housing markets.

Looking to March and April, therefore, we should expect Existing Home Sales data to rebound. This is because 80% of "pending" homes close within 60 days, and because improving weather should release pent-up demand for housing.

More sales plus higher home demand tends to lead home prices higher. If you're in the market for a new home, consider that your best negotiation leverage comes in a weak market. As the seasons turn, your leverage looks poised to slip.

The best time to buy this year may be right now.

Water Conservation Tips For Your Home And Garden

 

According to the EPA, the average U.S. household spends close to $500 each year on water and sewage bills. But by making just a few small changes, that figure could drop by as much as $170 annually. It's all in how you use your water.

In this 4-minute video from Lowe's, you'll learn basic water conservation techniques that you can immediately put to work.. 

Some examples:

  • Don't rinse food from dishes before putting them in a dishwasher. Scrape the dishes instead.
  • When brushing your teeth or shaving, turn off the water at the sink.
  • Use a rain barrel to capture rain, then use the rain to water plants and shrubs.

There's a host of tips in the video but the recurring theme is that you should never "leave water running". This is because water at home is "treated" water and the amount of energy required to treat 5 minutes' worth of water from a faucet is equivalent to the amount of energy required to run a 60-watt light bulb for 14 hours.

That's a lot of energy.

Water is a precious resource, and it can be expensive, too. Therefore, help the environment and your budget at the same time -- practice water conservation at home.

15-Year Fixed Rate Mortgages Look Cheap Compared To Comparable 30-Year Fixeds

New Home Sales Fall To All-Time, Recorded Low. Maybe.

New Home Sales (2010 - 2011)Sales of newly-built homes plunged 17 percent to an seasonally-adjusted, annualized 250,000 units in February, and the supply of new homes rose to 8.9 months in February -- a 1.5 month jump from January.

It's the lowest New Home Sales reading in recorded history, according to the Census Bureau, and the third straight report to signal that home values may be slow to rise nationwide this season.

Earlier this week, the National Association of REALTORS® reported Existing Home Sales down 10 percent from February, and the Federal Home Finance Agency said home values slipped 0.3 percent between December and January.

The media has picked up on the trend, too. 

  • No Spring In Housing's Step (WSJ)
  • Is Housing Really In Recovery (CNBC)
  • Experts See Weak Recovery (UPI)

There's two interesting angles here. First, the one that's largely neglected in the stories online.

Although New Home Sales read -17% last month, the data's Margin of Error read ±19%. This means that, once additional homes are added to February's New Home Sales tally, it's possible that the reading actually rose 2%.

Because the Margin of Error exceeds the measured reading, February's New Home Sales figures are of "zero confidence". The Census Bureau even says as much in its report.

Or, if the initial reading is accurate, a second story emerges. Namely, how an increase in home supply may help this season's buyers to negotiate better prices for a home, and upgrades from a builder.

There's often more to a real estate story than its headline and February's New Home Sales proves it.

10 U.S. Cities With The Steepest Rent Increases (2010)

Rent is risingHome sales data is easing so far in this calendar year. Home resales and new construction have dropped to multi-month lows and, in many cities, home supplies are rising. One housing sector that's not slowing, however, is rentals.

The rental market is booming.

As reported by the Wall Street Journal, the average apartment vacancy rate is 6.6% nationwide, down from 8.0% last year. In addition, the number of occupied apartments rose by more during Q4 2010 than during any comparable period of the last 10 years.

It's a major reason why rents are up 2.3%.

Some areas, however, fared worse than others. This study of rent increases as published on MSNBC, for example, lists the 10 U.S. cities in which rents increased the most last year. And they may not be the cities you'd expect.

In order:

  1. Greenville, SC (+11.2%; $669 average monthly rent)
  2. Chattanooga, TN (+10.4%; $726 average monthly rent)
  3. Savannah, GA (+8.4%; $866 average monthly rent)
  4. Portland, OR (+8.1%; $875 average monthly rent)
  5. San Jose, CA (+8.0%; $1,716 average monthly rent)
  6. Nashville, TN (+8.0%; $786 average monthly rent)
  7. Tacoma, WA (+8.0%; $900 average monthly rent)
  8. Denver, CO (+7.5%; $873 average monthly rent)
  9. Washington, DC (+7.4%; $1,473 average monthly rent)
  10. Raleigh, NC (+7.4%; $785 average monthly rent)

Big cities New York (#18), San Francisco (#19), and Chicago (#24) showed modest gains, by comparison.

Not everyone across California wants to be a homeowner, but renters are facing a squeeze. With mortgage rates historically low and home values slow to recover, in many cities, the cost-benefit analysis is shifting toward buying.

Existing Home Sales Unexpectedly Drop In February

Existing Home Sales (Feb 2010 - Feb 2011)Existing Home Sales fell 10 percent last month, according to a report from the National Association of REALTORS®.

On an annual basis, 4.88 million homes were sold in February -- the first time annualized home resales dropped below 5,000,000 since November 2010.

An "existing home" is one that's not considered new construction.

And it's not just sales volume that's down. Home inventory is higher, too. At the current pace of sales, the number of months needed to sell the complete home resale inventory rose by 1.1 months, to 8.6 months nationally.

It's the biggest one-month jump in supply since July 2010 -- the month after last year's federal home buyer tax credit program expired.

The data is somewhat unexpected, too. NAR's Pending Home Sales report is a reliable predictor for the housing market and, based on recent findings, home sales were projected to climb in February. It's unclear why they didn't.

Regardless, the February sales data reveals an interesting breakdown by buyer-type. Notably, the percentage of first-time home buyers in the market grew by more than any other segment.

  • First-time home buyers : 34% of all sales, +5% from January
  • Repeat buyers : 47% of all sales, -1% from January
  • Real estate investors : 19% of all sales, -4% from January

Cash buyers represented 33 percent of all sales, up 1 tick from the month prior.

For home buyers, February's Existing Home Sales data suggests more home supply and lower home prices this spring. However, rising mortgage rates could eliminate the monthly savings attributed to falling home values.

To get the most from your mortgage-buying dollar, lock while rates are low.

Get That Last Drop Of Ketchup (And Other Household Money-Stretchers)

According to Consumer Reports, Americans waste as much as 25% of the products they purchase. From food to pharmaceuticals, pesky packaging is making it hard for consumers to use "the last drop" of the things they buy and, as such, products are thrown out prematurely.

It doesn't have to be that way. Using household tools and basic steps, you, too, can make less waste and stretch your household dollar. This 5-minute interview on NBC's The Today Show shows you how.

For example, you'll learn:

  • How to get the last bit of ketchup from the jar (without adding water)
  • How to get the last bit of hair gel from the plastic bottle
  • How to get the last bit of body lotion from the bottom of the "pump" jar

Furthermore, you'll learn how to rescue over-ripe bananas.

The less you waste at home, the more money you'll save in the bank. Watch the video, take notes, and start making less waste.

Good News For Sellers -- Housing Starts Plummet In February

Housing Starts (March 2009 - Feb 2011)Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.

February's figures represents the worst 1-month drop in housing starts since May 2010 -- the month that followed the expiration of last year's federal home buyer tax credit -- and puts single-family housing starts at a 24-month low.

In addition, single-family Building Permits plunged last month, too, shedding 9 percent from January. A building permit is a local government's certification and approval to begin home construction.

Housing permits are an excellent forward-indicator for the housing market. This is because 93 percent of homes start construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers looking at new construction or existing homes, this news should create a sense of urgency.

Home prices are based on supply and demand and overall home supply looks headed for a fall. Plus, with mortgage rates retreating and homebuilders projecting higher sales this summer, buyers may face rising home prices before long.

Sellers look poised to regain negotiation leverage.

For now, though, home affordability remains high with properties inexpensive and mortgage rates still low, historically. If you plan to buy a home in 2011, the February 2011 Housing Starts data may be reason to move up your time frame.

With home supplies dropping, prices are likely to rise.

Homebuilders Expect More Sales Volume This Year

NAHB Housing Market Index (April 2009-March 2011)Homebuilders are optimistic about the housing market this spring, relative to recent months.

According to the monthly Housing Market Index as published by the National Association of Homebuilders, after 4 straight months of reading 16, March homebuilder confidence ticked 1 point higher to 17.

It's the highest confidence reading in 10 months.

A value of 50 or better indicates "favorable conditions" for home builders; with more builders viewing sales conditions as "good" than "poor".

HMI hasn't read higher than 50 since April 2006.

Regionally, the Housing Market Index showed mixed results. Confidence fell 1 point in the Northeast, held firm in the Midwest, and rose in the Southeast and West regions by 2 points and 4 points, respectively.

As an index, the monthly survey is actually a composite of three separate homebuilder surveys -- a report on single-family sales; a report on current buyer foot traffic; and a projection for single family sales in the next 6 months.

March's HMI breakdown shows that builders expect sales to be brisk over the next few months. Projected Single-Family Sales is running at its highest level since May 2010 -- right as the $8,000 federal homebuyer tax credit was ending.

  • Single-Family Sales : 17 (Unchanged from February)
  • Buyer Foot Traffic : 12 (Unchanged from January)
  • Projected Single-Family Sales : 27 (+2 from February)

For home buyers , the March Housing Market Index may signal the end of "builder discounts" and free upgrades. As home sales increase, builders are often less likely to make concessions.

In conjuction with rising mortgage rates and new, mandatory loan costs, buying a newly-built home may never be as inexpensive as it is right now.

If you expect to buy a newly-built home this year, consider moving up your time frame. The longer you wait, the more it may cost you.

A Simple Explanation Of The Federal Reserve Statement (March 15, 2011 Edition)

Putting the FOMC statement in plain EnglishToday, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.

The vote was 10-0.

In its press release, the FOMC noted that since its January 2011 meeting, the economic recovery "is on firmer footing", and that the labor markets are "improving gradually". In addition, household spending "continues to expand". Nonetheless, the Fed said, the economy remains constrained by rising commodity prices and the "depressed" housing sector.

The FOMC statement also re-affirms the group's plan to keep the Fed Funds Rate near zero percent "for an extended period", and to keep its $600 billion bond market support package -- more commonly called "QE2" -- intact.

And, lastly, for the third straight time, the Federal Open Market Committee's post-meeting release statement included a paragraph detailing the Federal Reserve's dual mandate of managing inflation levels, and fostering maximum employment. Although it acknowledged inflationary pressures on the economy, the Fed said inflation remains too low for the economy currently, and that unemployment remains "elevated". 

In time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC has been negative since the statement's release. Mortgage rates are unchanged, but poised to worsen.

The FOMC's next scheduled meeting is a 2-day event, April 26-27, 2011.

Your Mortgage Rate Strategy For Today's FOMC Meeting

Fed Funds Rate Nov 2007 - March 2011The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.

The FOMC's official schedule calls for 8 meetings annually at which it reviews the nation's economic and financial conditions, and chooses whether to change existing monetary policy.

The group's last rendez-vous was a 2-day affair, January 25-26, 2011.

Today's FOMC meeting represents a bona fide risk to home buyers and rate shoppers across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability. 

Rate shoppers learned this the hard way after the FOMC's last meeting.

In January, Wall Street deemed the Fed's status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.

This may happen again beginning today.

At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn't mean mortgage rates will idle, however.

Depending on the verbiage of the Fed's statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET -- just to be safe.

Once the Fed adjourns, you're at the market's mercy.