Dale's Real Estate and More Report -- Dale Schmidt, Real Estate Blogger

Wouldn't You Know It? As Consumer Confidence Falls, Home Sales Rise

Fri, 13 Feb 2009 10:12:51 -0700

Consumer Confidence fell this month for the first time in three months, reflecting Americans' concern for the economy, housing, and the financial system.

The reading isn't much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.

Despite falling confidence, however, the housing industry appears to be reviving. Sales of existing homes are on the rise and an increasing number of homes are under contract to sell. And, if these statistics seem out of place, consider the external forces that are accompanying this "down" economy:

In some markets, home values have plummeted to early-2000 levels
Government intervention has brought mortgage rates to near-5 percent
Congress is pledging key support to housing and mortgage markets

These points can't be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like "Do you think you'll be better off a year from now?" and "What's your attitude toward buying major household items?". It's useful information for economists, but not so much for home buyers.

Anecdotally, a lot of the country's housing markets have already started their recovery. Couple that with the natural momentum of Spring Buying and the stimulus package's proposed first-time home buyer tax credit and you can clearly see the disconnect.

Just because confidence is down doesn't mean that home prices will be, too.

The Stimulus Package Helps More Than Just First-Time Home Buyers

Thu, 12 Feb 2009 09:59:11 -0700

With Congress reaching agreement on a $789 billion stimulus package for Americans and the President expected to sign it into law, the clock may be ticking for this year's home buyers and homeowners.

The package contains two benefits related to housing.

The first provision is fairly well-known. It gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and August 31, 2009.

This is a true tax credit.

To reduce misuse and abuse, however, the $8,000 credit is contingent on home buyers holding property for at least 3 years. If the home is sold in fewer than 3 years, the tax credit must be repaid to the government. It's also worth noting that the date range applies closings and not sales agreements.

Closings must occur within these 8 months to be eligible.

A second noteworthy feature in the package is that the stimulus package gives existing homeowners incentive to "green" their homes. With available tax credits for energy-efficient windows and doors, furnaces and insulation, homeowners can claim larger tax deductions based on home improvement, up to $1,500.

But, just because the government provides housing-related tax benefits doesn't mean you should just act on them blindly. Tax liability is a highly individual item and you may be ineligible for any number of reasons. Be sure to discuss your plans with a qualified accountant before committing to a plan.

Forget The Dow Jones: How The Treasury's Economy Revival Outline Helped Home Affordability

Wed, 11 Feb 2009 09:20:28 -0700

His speech was much anticipated, but it was what Treasury Secretary Tim Geithner didn't say Tuesday that helped home affordability.

Mostly it was because of "safe-haven" buying on Wall Street.

Safe-haven buying is when investors move cash to the safest investments possible for fear of losing their money elsewhere.

This existence of the pattern is evident in looking at yesterday's Dow Jones Index timeline. Stock markets were down some in the morning. Then, at 11:00 AM ET, in the moments immediately following the public release of Geither's speech as text, stock market plunged by about 2 percent.

As the speech was delivered live, markets fell by 1 percent more.

It's not that Geithner's speech was a bad one, per se. It's just that Wall Street was looking for a detailed plan that included remedies for banking, housing, and the economy overall. What it got instead was an outline for a plan and a frank discussion about the complexity of the economy.

Stock markets had been bid up last week in anticipation of a bailout. Yesterday's action was the subsequent sell-off because economic uncertainty continues to linger.

It all ended up being good news for mortgage rate shoppers, though. When the dollars fled the stocks, they made their way towards safer, less-risky investments like mortgage bonds. And, because mortgage-backed bonds set the "going rate" for conforming mortgages nationwide, the added demand yesterday caused mortgage rates to fall, making mortgaged homes less expensive on a monthly basis, relative.

For now, rates remain near the bargain levels set in early-January. As the Treasury clarifies its plan in the coming weeks, however, rates are susceptible to big swings.

(Image courtesy: The Wall Street Journal)

Fannie Mae Officially Eliminates Its 4-Financed Property Limit

Tue, 10 Feb 2009 09:00:00 -0700

Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months.

Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties. The restriction reversal does come with new minimum requirements, however.

Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:

720 credit score
25% downpayment for a 1-unit (30% for a 2-4 unit)
No mortgage delinquencies in the last 12 months
6 months of reserves for each investment property

In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.

According to Fannie Mae, the change rationale is that experienced investors can "play a key role in the housing recovery". Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.

Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.

And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they've been stymied by the 4-property restriction, too.

12 Easy Changes To Save $1,600 Per Year At Home

Mon, 09 Feb 2009 09:03:32 -0700

As Americans move from net spenders to net savers, it seems that we're all looking for ways to save some extra cash. As part of its ongoing "Save-a-Buck" series, NBC's The Today Show offers some pointers.

Among the tips, there's a split between common sense items and I-never-thought-of-that advice including:

Why you should cook with your microwave more often
Why you should keep closet doors closed
How your dryer's positioning may impact your energy bill

In all, the tips from the 4-minute video can save $125 per month -- $1,600 per year. They're not all practical, but they're easy to implement.

10 Cities For Job Growth in 2009

Fri, 06 Feb 2009 09:12:06 -0700

Employment figures released this morning show that the economy has now shed 3.6 million jobs since December 2007, included close to half that in the last 3 months alone. The Unemployment Rate is now 7.6%.

But jobs aren't fading in every housing market equally.

As reported by Ajilon Professional Staffing, there are still areas around the country in which unemployment rates are low and job outlooks are strong.

Led by Madison, WI, Ajilon calls them "10 Cities For Job Growth in 2009" and they are:

Madison, WI
Washington, D.C.
Boston, MA
Richmond, VA
Milwaukee, WI
Pittsburgh, PA
Baltimore, MD
Seattle, WA
Houston, TX
Dallas, TX

There's no common denominator uniting the list -- cities are buffered by industries as varied as healthcare, energy, and technology. However, it's worth noting that -- in each of these 10 towns -- housing markets seem to be performing above-average versus the rest of the nation.

Clearly, there's a link between jobs and housing.

(Image courtesy: Forbes.com)

How Today's Mortgage Rates Impact Home Affordability

Thu, 05 Feb 2009 08:40:55 -0700

Comparing July's conforming mortgage rates to today's average rates, there's a 1.5 percent difference in favor of homeowners.

Rate drops like that make big differences in a household budget. Look at these before-and-after payments, based on rates from the chart:

$150,000 mortgage ($144 savings/month)

July 2008: $958 monthly
February 2009: $814 monthly

$250,000 mortgage ($240 savings/month)

July 2008: $1,597 monthly
February 2009: $1,357 monthly

$350,000 mortgage ($335 savings/month)

July 2008: $2,235 monthly
February 2009: $1,900 monthly

Of course, the other side of the story is that while mortgage rates fell through late-2008, the mandatory lender fees that accompanied them rose. That lessened some of the benefits of getting lower rates, but certainly not all of them.

According to recent housing data, buyers are back writing contracts and listed homes are selling quickly. Considering how mortgage rates have led monthly payments lower, maybe it shouldn't be much of a surprise.

(Image courtesy: The Wall Street Journal)

Home Buyers Are Out In Full Force

Wed, 04 Feb 2009 09:35:15 -0700

A real estate trade group reported Tuesday that Pending Home Sales ticked higher in December 2008. A "pending home sale" is a home under contract to sell, but not yet closed.

The group positions Pending Home Sales report as a predictor of future activity, suggesting that home sales will spike 60 days hence.

This is good news for the economy.

However, despite the Pending Home Sales report's correlation to the actual number of homes sold in the future, that connection may not be the report's best use. This is because of what Pending Homes Sales doesn't measure.

Specifically not included in Pending Homes Sales are:

Sales of new construction homes
Sales of For Sale By Owner properties
80 percent of non-surveyed MLS transactions

And, lastly, it should be noted that Pending Home Sales tracks contracts -- not closings -- and until a home is sold and closed, nothing has really happened in the economy. That's especially relevant in a market like this in which finding financing isn't always so easy.

Pending Home Sales still has its place, though, because it's a terrific look at the current buy-side demand for homes. Clearly, low mortgage rates and falling home prices are making an impact and this is why the December's Pending Home Sales report is so important. It's the third housing report this month that shows the demand for homes rising while the supply of homes falls.

The other two reports:

The number of "used" homes sold monthly is rising
The number of new homes being built are falling

This is good news for home sellers and for the economy. If housing is expected to lead the U.S. out of recession, the seeds for that recovery may have already been planted.

(Image courtesy: The Wall Street Journal)

More Good News For Home Buyers : Mortgage Guidelines Ease Up

Tue, 03 Feb 2009 09:20:23 -0700

If the unfreezing of credit is paramount to an economic rebound, the first signs of a thaw may be here.

Monday, the Federal Reserve released its quarterly survey of 84 member banks. In it, the Fed says that fewer than half of its responding banks tightened "prime" mortgage guidelines over the last 3 months.

This is good news for active home buyers and other Americans in want of a new mortgage.

"Prime" is a vague term with respect to home loans, but it usually refers to mortgage applicants who can document:

Equity or downpayment in a home
Credit scores over 740
Excessive income versus debt

In looking at the Fed's survey, we can infer that because less than 50% of banks made credit less available, more than 50% did not. Borrowing may not be easier for prime borrowers, in other words, but it's not harder, either. Count this as a small victory for the housing market.

All of this said, however, guidelines remain restrictive.

In the 12-month period beginning late-2007, banks continuously clamped down on low credit scores, low downpayments, and high debt-to-income levels. In addition, Fannie Mae added new fees based specific loan traits and second mortgages practically vanished from the marketplace.

The cumulative outcome of these actions precludes many Americans from participating in the current Refi Boom. However, if the trend reported by the Fed continues, lending may open up a bit later this year, providing a boost to housing and to the economy.

Experts believe that the tightening of credit helped create this recession. The loosening of credit, therefore, may be the way out.

The Flashing Garage Parking Signal Protects Your Car From Nicks And Dents

Mon, 02 Feb 2009 08:45:00 -0700

In an organized garage, every car has its space.

Unfortunately, getting a car into that space isn't always so easy. At some point, most homeowners have pulled their car too far forward into the garage, nicking the car's paint and finish.

The Flashing Garage Parking Signal aims to solve the parking dilemma.

The device is an adjustable, 44-inch tall parking aid that light up red when touched by a car. It comes with a weighted base to prevent slippage and its pole is flexible to protect cars from damage.

Aside from 2 batteries, there's no assembly required. Just place the device on the floor of your garage where you want your front bumper to stop and you'll get a perfect, nick-free park job every time.

The Flashing Garage Parking Signal costs $17 at Amazon.

Sell Your Home For 17% More, 40% Faster This Spring

Fri, 30 Jan 2009 09:49:10 -0700

Super Bowl Weekend traditionally marks the start of the Spring Buying Season in real estate. Anecdotally, real estate agents will tell you that buyer activity tends to tick higher at this time of the year.

Meanwhile, with mortgage rates still trolling near all-time lows and Congress debating a first-time homebuyer tax credit, 2009 may bring out even more buyers than we've seen in the past.

Just having your home on the market may not be enough to attract an offer, though -- the home has to have appeal. That brings us to home staging -- the process by which a homeowner re-organizes and re-presents his home to appeal to as many potential buyers as possible.

Home staging is part-science, part-art, and part-psychology. Homebuyers tend to judge homes within the first 8 seconds of seeing them so making a quality first impression can mean the difference between getting multiple bids, and just getting a lot of foot traffic.

The 4-minute video gives some quick-and-easy tips, including:

Create more light in the home
Clean up the closets and thin them out
Remove the clutter from every room in the house

Even though home inventories are falling, supplies are still higher than in previous years. Home sellers wanting to stand out in a crowd may want to consider staging their homes to help them sell more quickly.

Staged homes sell for as much as 17% more money and as much as 40% faster than non-staged ones.

Explaining What The Federal Reserve Did In Plain English (January 28, 2009 Edition)

Wed, 28 Jan 2009 15:48:01 -0700

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today. It remains within a target range of 0.000-0.250 percent.

In its press release, the FOMC reiterated most of the key points from its December 2008 statement, including:

The U.S. employment outlook continues to deteriorate
Consumers and businesses continue to cut spending
The housing sector is still showing weakness

In addition, the FOMC addressed the "extremely tight" credit conditions for U.S. households and business, even as it said some financial markets are showing signs of improvement.

To the Fed, the latter is a precursor for the former. For Americans needing new mortgages or other forms of credit, it may mean that getting approved gets easier sometime late this year.

Most importantly, the Fed's press release again mentioned the policy-setting group's intention to "employ all available tools" to promote economic growth. This includes the open-market purchasing of mortgage-backed debt that has helped fuel the current Refi Boom. The Fed indicated a willingness to extend the program beyond the initial $500 billion, if necessary.

For each of the Fed's interventions, though, there is a trade-off.

Buying securities costs money and the Fed -- literally -- comes up with the cash by printing it. The extra supplies devalue the U.S. dollar which, if left unchecked, can cause the Fed's plan to backfire in the form of runaway money supply-led inflation. The Fed is aware of this risk and is pledged to monitoring it closely.

Overall, mortgage rates worsened today after the Fed's statement.

Source
Parsing the Fed Statement
The Wall Street Journal Online
January 28, 2009
http://online.wsj.com/internal/mdc/info-fedparse0928.html

How Today's Federal Reserve Meeting Could Change Home Affordability

Wed, 28 Jan 2009 09:33:50 -0700

The Federal Open Market Committee adjourns from its 2-day meeting today.

The monetary policy-setting group is expected leave the Fed Funds Rate within its current target range of 0.00-0.250 percent.

This is the lowest range for the Fed Funds Rate in history and, frankly, there isn't much room left to go lower. Therefore, markets aren't really concerned about what happens to the benchmark lending rate today.

Instead, markets will focus on the Fed's ideas to revive the U.S. economy.

In its post-FOMC press release last month, the Federal Reserve pledged to "employ all available tools" to get the economy moving in the right direction. At the time, some of those tools were already in play, including making direct loans to large companies and buying bad debts from commercial bank balance sheets.

And since that meeting, the Fed has put its money where its press release is.

Early this year, the Fed started a program to buy $500 billion in mortgage-backed debt and those ongoing purchases are part of what's keeping mortgage rates relatively low. The Fed has since made it easier for member banks to borrow money, too.

Each of these steps is meant to pour gas into the U.S. economic engine and the Fed is pledged to keep trying new approached until something works. And this is what mortgage markets will be concerned with today.

If the Fed's next stimulus plan is deemed ineffective or too costly for its own good, mortgage markets will likely sell off, causing mortgage rates to rise and making housing payments more expensive. The jump could be somewhat sudden because Fed announcements are often met with emotional, knee-jerk reactions.

By contrast, if the Fed's next steps are deemed on target, expect mortgage rates to fall only slightly. To some extent, this outcome is already priced into rates as of this morning.

The FOMC's official press release hits at 2:15 PM ET.

(Image courtesy: The New York Times)

Did We Just See The First 2 Signs Of A Housing Recovery?

Tue, 27 Jan 2009 08:45:00 -0700

Don't let the plunging median sales price fool you -- December's Existing Home Sales data has home sellers smiling.

Just one month after falling below the 5-million unit trend line, sales volume roared back by 300,000 homes in December, surprising housing analysts and making a case that this spring's Buying Season could be a competitive one.

Falling home prices helped fuel home sales. Nationally, the median sales price -- the point at which half of all homes sold for more and half sold for less -- was $175,400, down $32,000 from last year.

However, the most important part of December's Existing Home Sales report isn't making headlines.

At December's sales pace, it would now take 9.3 months to exhaust the existing home supply. Last month it was 11.2 months. This means that buyers are competing to purchase fewer homes which, in turn, puts upward pressure on home prices.

This is Supply and Demand at its most basic definition.

Economists have long said that the keystone of housing's recovery will be rebalancing in home supply. Coupled with the all-time low in housing starts, December's Existing Home Sales data signals future strength.

(Image courtesy: The New York Times)

Circular Thermostats Vary By 6 Degrees And Other Money-Saving, Home Heating Tips

Mon, 26 Jan 2009 08:45:00 -0700

Winter's halfway over, but that doesn't mean it's too late to make smart, money-saving, winter heating choices.

This 4-minute video from the NBC Today Show covers the important stuff:

Because "circular" thermostats are only accurate to within 6 degrees, what you should do about it
How to know if your furnace is energy-efficient
How "pull-away" caulking can seal window that leak heat
Using eco-heaters for room-by-room warming

The video's highlighted ways to winterizing your home range in cost from a few dollars to a few thousand dollars. Each, however, pays for itself via home heating bill savings in time.

Move-Up Homebuyers Face New Lending Challenges This Spring

Fri, 23 Jan 2009 09:55:23 -0700

When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence -- sell it, keep it, or rent it.

Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.

Mortgage guidelines are dramatically tighter for people "carrying two mortgages".

Among the changes this spring's buyers face:

Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home -- even if it's only by a day -- both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.

Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.

Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.

In other words, being a move-up buyer isn't as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.

Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or -- at least -- planning ahead for it.

Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.

Could Mortgage Rates Have Already Bottomed Out?

Thu, 22 Jan 2009 09:46:01 -0700

After improving through 11 straight weeks, mortgage rates finally ticked higher last week. This, according to Freddie Mac's weekly mortgage rate survey. The Freddie Mac survey showed that mandatory mortgage fees rose last week, too.

Unfortunately, the bad news for rate shoppers doesn't stop there.

Because Freddie Mac's rate survey is conducted on Tuesday but its reports aren't released until Thursday, the published data doesn't even account for the previous 48 hours of activity in which rates and fees have risen further.

Versus last week, 30-year fixed, conforming mortgage rates are up 0.16% on average nationwide. On a $200,000 home loan, this equates to a roughly $20 extra per month, or $7,055 over the life of a 30-year loan.

The Era of Low Rates may not be over, but it may be time to get off the fence.

(Image courtesy: Freddie Mac)

An Interactive Chart For Home Values

Wed, 21 Jan 2009 08:45:00 -0700

The S&P/Case-Shiller Home Price Index is a popular measure of domestic home prices, released monthly.

The index reports on the largest 20 U.S. markets, painting a broad picture of real estate values nationwide.

Despite the Case-Shiller Index's two obvious flaws -- (1) it only counts repeat sales on single-family residences, and (2) it only includes 20 major housing markets -- the model makes it easier to identify broader real estate trends in our nation's largest cities.

Data, though, is just data. It often takes a good picture to bring it all home. Enter The New York Times.

On its website, The Gray Lady has posted an interactive Case-Shiller graphic. For each of the 20 cities studied, users can compare how home values rose versus the national composite throughout the early part of the decade, and how values have fallen since.

Not surprisingly, of the 20 cities that showed stable growth pre-2006, nearly all are outperforming in the current real estate climate.

Home Safety Tips : Portable Electric Space Heaters

Tue, 20 Jan 2009 08:45:00 -0700

For spot heating, many homeowners turn to portable electric space heaters; it's often more efficient to plug one in than to raise the household thermostat by a degree or two.

But using a space heater isn't as safe as it is simple. According to the National Fire Protection Association, in 2005, space heaters were responsible for:

32% of home heating-related fires
57% of home heating-related property damage
73% of home heating-related civilian deaths

Space heaters cause a disproportionate amount of damage versus central heating systems and fireplaces. Therefore, it's important to practice safety and care when using space heaters.

Some basic space heater safety tips include:

Don't place anything that can burn within three feet away of the space heater.
Make sure that your space heater has the label of a recognized testing laboratory such as Underwriters Laboratory.
Never use an extension cord on a space heater.
Turn space heaters off when leaving the room or going to bed.

And, of course, be sure to follow the manufacturer's safety instructions.

Source
Heating Safety Tips
National Fire Protection Agency

Mortgage Rates Are Falling But Loans Require More "Points"

Fri, 16 Jan 2009 09:24:15 -0700

Another week, another headline screams how mortgage rates have falled to an all-time low.

Freddie Mac published its weekly mortgage rate survey Thursday and found that the "average" mortgage rate is now 4.96 percent, the lowest since the survey started in 1971.

But, if we look beyond the headline, we find that there's another part of the story worth watching. Mortgage rates are falling but the number of points required to lock those rates is not.

Lenders now require an average payment of 0.7 points to get the 4.96 percent rate from the headlines. That's up from 0.6 percent last week and 0.4 percent a year ago.

A "point" is a fee equal to 1 percent of the loan size.

Therefore, to get access to a 4.96 percent interest rate on a $200,000 home loan, today's lender would require an extra $200 versus last week and $600 versus last year. Today's mortgage borrower would be subject to a $1,400 closing cost in addition to the "typical" closing costs accompanying a purchase or refinance.

This is a period of historically low rates -- there's no doubt about that. However, the cost of getting access to low rates is increasing. The press doesn't always tell that part of the story and it's one more reason to look deeper than the headlines.

(Image courtesy: The Wall Street Journal)