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How Today's Employment Data Is Hurting Mortgage Rates 2007-10-05 10:36:42 On the first Friday of each month, the Bureau of Labor Statistics releases its employment report for the United States. Last month, the jobs report showed that the economy actually lost jobs for the first time since 2003. The total loss of jobs equaled 4,000 and contributed to the Federal Reserve's decision to lower the Fed Funds Rate for the first time since that same year. Of course, today is First Friday so a new employment report hit the wires earlier this morning. The news was good for the economy, but not so good for people in the market for a new home loan. The employment report showed that 110,000 new jobs were created in the United States, reversing the negative trend from August. More employed workers means more money earned means more money spent. That's why the news is good for the economy. Now, for the bad news. An important detail about the employment report is that it quantifies the number of jobs created in the month prior, and it also revises its calculations ...

Have You Ever Wondered Where The Money Goes? 2007-10-04 08:17:43 Where does your money go? If you're like most Americans, more than half of it goes towards housing and transportation alone. This is according to the Consumer Expenditure Survey performed by the Bureau of Labor Statistics. The most recent study shows American household spending habits from 2005, but the percentages change little from one year to the next. The largest expenditures by household are: 32.7% for housing 18.0% for transportation 12.8% for food 5.7% for healthcare 5.1% for entertainment 4.1% for apparel 2.0% for education 1.2% for personal care products/services 0.8% for life and personal insurance With this industry-by-industry breakdown, we can see how changing where you live and how long you commute can be the best ways to keep your household budgets in check. Saving money on haircuts, clothing and food can make an impact, too, but not nearly as much as living in less expensive home or changing driving habits. ...

The Changing Nature Of Home Remodeling 2007-10-03 10:10:33 Along with the housing market, home remodeling trends are changing. Earlier this decade, home remodeling projects tended to maximize a home's resale value. Upgrades centered on replacing appliances, finishes and flooring with more "upscale" product. That line of thinking appears to be changing. Many designers are now focusing on comfort and livability, reflecting the changing needs of homeowners. Carefully consider how you live in your home before planning a remodel. In what rooms do you spend the most time? How does the home's layout impact the "flow" of your home? These conversations will help you understand the work that your home really wants. Small changes such as widening a doorway, adding lighting, or replacing moulding can make more of difference than buying new extra-deep kitchen cabinets. Homeowners are tending towards warmth-creating practical projects as opposed to purely modernization. The subtle irony that their changes are rendered the home more inviting to w ...

FHA Bans Seller-Financed Downpayment Assistance Programs 2007-10-02 08:42:28 Effective November 7, 2007, the Federal Housing Administration is expected to ban home buyers' use of seller-financed Downpayment Assistance programs. DPAs are (were?) very popular in FHA mortgage circles as a way to help buyers finance their new homes. FHA loans currently require a downpayment of at least three percent on a home purchase. That three percent, however, is not required to come from the buyer's own funds; it can come from a "gift" as long as the gifter is a family member or a non-profit organization. Downpayment assistance programs are the latter, incorporated as non-profit organizations. Typically, DPA programs works like this: Buyer makes an offer for a home Seller accepts the offerSeller contributes the necessary three percent to non-profit organization Non-profit organization "gifts" the three percent to the buyer while keeping a $500 service fee Buyer buys home with three percent gift as downpayment The main reason cited for the ban is that downpayment assist ...

How Much Does A 2,200 Square Foot Home Cost? 2007-10-01 09:09:27 So, what does it cost to buy a 2,200 square foot home with 4 bedrooms, 2.5 bathrooms and a 2-car garage? It depends on where you live. In a study of 317 U.S. markets, Coldwell Banker concluded that the average price for such a home is $422,343. Beverly Hills, CA ($2,206,883) sits on one end of the spectrum and Killeen, TX ($136,725) on the other. The #1 and #317 markets are consistent with the respective neighboring towns. California and other coastal markets accounted for 35 of the 40 most expensive cities, while Texas is host to eight of the 40 most affordable ones. New York City was omitted from the list because it lacks the number of homes required to make a fair comparison. (Image courtesy: CNN Money) ...

Investing In Your College Student's Housing 2007-09-28 08:00:00 For parents with children in college, or nearing college age, this video from NBC's Today Show is worth watching. Investing in collegiate housing is not for everyone, but if the angle interests you, don't forget to purchase an accompanying personal liability insurance for injuries that may occur on-site. ...

Americans Will Spend $179 Million More On Gasoline Today Than One Year Ago 2007-09-27 09:01:55 Economists worry about rising oil prices because it tends to generate higher pump prices for Americans. With more money spent on gasoline, there's (theoretically) less money available to spend on goods and services. Today, GasBuddy.com says that the average price for a gallon of unleaded gasoline is $2.792, up from $2.344 last year at this time. Now, as a country, it is estimated that we consume 146,000,000,000 gallons of gasoline annually. That converts to 400 million gallons each day. Therefore, the 44.8-cent difference between today and last year at this time, costs Americans an additional $179,000,000 in fuel charges daily. And this doesn't account for premium gasoline or diesel fuel charges. Consumer spending makes up roughly two-thirds of our economy so when gas prices rise, economists worry -- it means that less money is available to pump back into businesses, and that the economy should slow down. The good news in this type of story is that people in the market for ...

What Happens On The National Real Estate Scene Doesn't Matter To You 2007-09-26 08:44:39 The National Association of Realtors® released its monthly Existing Home Sales report for August 2006 and, as usual, you should be ignoring it. The report discusses real estate on a national level and we all know that real estate is a local phenomenon. It's not that the report isn't helpful -- it is. The Existing Home Sales report paints a broad picture of our nation's housing market which has implications for the economy as a whole. The reason why the EHS report is not helpful to individual homeowners is because the process of buying and selling real estate is not a national occurrence -- it's a very, very local one. When you buy your next home, you won't be buying a home that exists in all 50 states. You'll be buying a very specific home on a very specific street in a very specific neighborhood. So, when the NAR -- a national group! -- reports that home supply is up and home sales are down, it is lumping every street in every town together into one giant chunk of irreleva ...

If You're Wondering Where That Cash Disappeared To, You Likely Ate It Or Drank It 2007-09-25 08:29:26 In a study of 2,036 U.S. adults commissioned by Visa USA, nearly half of all Americans are losing track of their money. An average of $45 in cash is "lost" each week in what Visa dubs "mystery spending". Mystery spending is Visa's version of "I know I had this money in my wallet but I can't figure out what I spent it on." Averaged out over the course of a year, mystery spending accounts for $2,340 -- enough to fund a Roth IRA or other investment plan. According to the study, events most likely to cause "mystery spending" include: Out for a night on the town (58 percent) Grocery shopping (55 percent) Out with children (50 percent) Shopping during a sale (40 percent) Shopping with friends (33 percent) How people spend money isn't the point of the survey but it does raise an interesting point about how careless we can all be with our dollars. On one hand, we wonder how will we fund retirement, or pay for college, or send our children to tennis lessons. On the other hand, we are ...

Why Paying Mortgage Insurance Isn't So Bad Anymore 2007-09-24 10:50:46 As if home financing isn't complicated enough, The Tax Relief and Health Care Act of 2006 included new tax code for homeowners. The act grants itemized deductions for private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007. For all loans "started" in the 2007 calendar year, mortgage insurance is tax-deductible provided that two tests are met: The homeowner's household income is $100,000 or less in 2007 The home loan is for a primary or secondary residence For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000 So, if a single person earns $90,000 in 2007 and buys a home using MI, the MI expenses are tax-deductible in 2007. However, there's a catch! Because the new tax code is due to expire December 31, 2007, there is no guarantee that the MI will be tax-deductible in 2008. Until the tax code changed, mortgage insurance was a relativ ...

Why Mortgage Rates Are Higher After The Fed Funds Rate Cut 2007-09-21 09:14:50 As we've discussed a few times lately, the Federal Reserve does not control mortgage rates. When the Fed makes headlines for "lowering rates", that is a reference to the Fed Funds Rate, a special lending rate between banks. Sometimes, mortgage rates will fall when the FFR falls, but not always. Consider what happened this week: The Fed dropped the FFR by 0.500% Tuesday. Immediately, mortgage rates fell by at least 0.1250% across the board. Then, mortgage rates reversed. In the two days since the Fed's meeting, mortgage rates have approached their highest levels of the month. Mortgage rates are determined by the price of mortgage bonds and after the Fed's rate cut devalued the U.S. dollar, mortgage bonds are worth less as an investment. When an investment loses its value, the market tends to be over-weighted with sellers and that pushes the supply-and-demand balance to the supply side. Extra supply means lower prices and -- in the bond market -- lower prices leads to higher ...

How Your Personal Debts Are Impacted By The Change To The Fed Funds Rate 2007-09-20 10:40:18 Prime Rate is currently 7.750%. Prime Rate is the "shorthand" name for the Wall Street Journal Prime Rate, a variable interest rate that is used in pricing many types of consumer loans. These loans include: Home equity lines of credit Credit card loans Auto loans Prime Rate's variable nature is tied to the Fed Funds Rate. Prime Rate moves in tandem with the FFR and is always three percentage points higher. So, after the FFR's 0.500% drop Tuesday, consumer loans tied to Prime Rate dropped by 0.500%, too. Prime Rate was 4.000% in June 2004 before the Federal Reserve started a string of 17 rate hikes to 8.250%. Tuesday's drop is the first reversal since the rate hikes began. ...

Making English Out Of Fed-Speak (September 2007 Edition) 2007-09-19 10:30:45 The Fed lowered the Fed Funds Rate by 0.50% yesterday. A rate decrease was expected by most market participants, but the 50 basis points movement seemed to catch some players off-guard. Mortgage rates dipped in the wake of the announcement, but the real winners are homeowners with balances on their home equity lines of credit and holders of credit card debt. Each saw their respective borrowing rates drop 0.50% yesterday because the interest rates for HELOCs and credit cards are based on Prime Rate. Prime Rate moves in lock-step with the Fed Funds Rate. In the statement above -- as explained by The Wall Street Journal -- the Fed expressed concern about a broader economic slump and the half-point reduction is attempting to prevent it from worsening. SourceParsing the Fed StatementThe Wall Street Journal OnlineSeptember 18, 2007http://online.wsj.com/mdcapp/public/page/2_3024-info_fedparse_shell.html ...

How The Fed Will Disappoint No Matter WHAT It Does Today 2007-09-18 10:21:36 It's all eyes on the Fed today; the market anxiously awaits the central bank's 2:15 P.M. ET press release. Some of the market bias towards a 0.50% rate cut has decreased in favor of a 0.25% cut. This shift is largely psychological. Markets are trying to "get inside the head" of Fed chief Ben Bernanke, speculating about how he will react in the first Federal Open Market Committee meeting since the credit crunch reached a head in mid-August. The speculation and guessing tells us that there is tremendous uncertainty about how the FOMC will vote today. Uncertainty in markets leads to volatility. No matter which course the Fed chooses - 50 basis points reduction, 25 basis points reduction, or something else -- there will be a lot of traders scrambling to reposition their portfolio because of "bad bets". Mortgage rates are calm this morning. The calm likely won't last. If you are floating your mortgage rate and don't like taking on additional risk, locking your rate prior to the ...

How Shoulder Season Can Help Buyers And Sellers Alike 2007-09-17 11:43:34 Once September hits and the kids head back to school, real estate markets enter the "Shoulder Season", a time in which markets are neither in their strongest nor their weakest cycles. Shoulder Season is exemplified by a trip to Disney World after Hurricane Season, but before Winter Break. The crowds are smaller, the hotels are cheaper, and the Disney World experience is still 100% Disney. Because real estate markets are typically slow beginning in late-Fall, real estate is now entering its Shoulder Season. There are a lot of willing buyers and sellers right now and many of them want to make a deal before the winter gets too close. In the winter, activity tends to slow on both sides of the table. Shoulder Season has no official end date, but "Winter Season" tends to begin in late-October, continuing until the "Spring Market" start sometime in early-March. Homes are still bought and sold during the typically slow Winter Season, but the market just doesn't move as quickly. For buyer ...