Archive for July, 2009
VIDEO : Who Should — And Should Not — Be Paying Down Their Mortgage
July 31st, 2009 categories: General, Market Trends
Financial advice is rarely one-size-fits-all, but this interview with Suze Orman is worth a watch.
In 5 minutes with NBC’s The Today Show, Ms. Orman covers a ton of relevant ground for homeowners and the public-at-large:
- Who should — and shouldn’t — be paying down their mortgage
- What backlash to expect from the Dow’s 40% run-up since March
- Why July 2009 is so different of an environment from July 2008
Then, as a bonus, Orman explains the relationship between bond prices to bond yields. It’s the heart of why mortgage rates rise when inflation is present.
A lot of what Orman talks about is spot-on, but that doesn’t necessarily make it appropriate for your individual situation. Before acting on Orman’s opinions, talk to your financial professional first.
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The Little-Known Reason Why Mortgage Rates Are Rising This Week (And Why They May Go Higher Still)
July 30th, 2009 categories: General, Market Trends
After starting the week with a run lower toward 5 percent, mortgage rates have reversed course.
It started mid-day Tuesday and the culprit is Basic Economics. Here’s why.
Mortgage rates are based on the price of mortgage-backed bonds and — like most things — mortgage-backed bonds prices are based on Supply and Demand.
When bond supplies grow faster than the corresponding demand for them, bond prices tend to fall and when bond prices are down, bond yields are up.
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Using The Case-Shiller Index To Predict The End Of The Recession In Knoxville
July 29th, 2009 categories: Buyers
For May, the Case-Shiller Index showed home values up in 15 of its 20 tracked U.S. markets. It’s the first time in nearly 3 years that the index showed such strength and a signal that home prices may be turning higher for good.
According to a Case-Shiller Index spokesperson, “this could be a signal that home price declines are finally stabilizing.”
However, just because the Case-Shiller Index indicates home values are stabilizing, doesn’t necessarily make it true. Real estate is a local phenomenon and the Case-Shiller Index tracks just 20 U.S. cities.
Residents of every other town are unaccounted for.
Additionally, even within the 20 tracked cities, there are distinct neighborhoods and pockets that are under-performing the general market — just as there are those that are over-performing. The Case-Shiller Index can’t get that granular.
Despite its imperfections, the Case-Shiller Index remains a helpful, broader measurement of U.S. real estate. Economists believe that housing led the U.S. into the recession and they believe housing will lead us out, too.
If that’s true, May’s figures are the next step in the right direction.
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More Housing Strength : New Home Sales Surge In June
July 28th, 2009 categories: General, Market Trends
Once again, the housing market is showing that its worst days may be over.
According to the Census Bureau, the number of new homes sold in June leapt by 11 percent from the month prior. It stands as the biggest one-month jump in 8 years.
A “new home sale” is when a home in any stage of construction — not yet started, under construction, or already completed — goes under contract, often with a builder. It’s the opposite of an “existing home sale”.
In addition to surging sales, the monthly supply of new homes fell to its lowest level in 11 years.
Because home values are based on the relative supply and demand for a particular home in a particular area, anytime that demand for homes grows faster than supply, we would expect prices to rise.
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How Burglars Can Get Into Your Home In Less Than A Second
July 27th, 2009 categories: General
The above video may be among the most disquieting 4 minutes of your day.
Home burglaries are on the rise and many burglars are using a lock-picking technique called “Lock Bumping” to enter into homes. Using a special key and a hammer-like tool, pin-tumbler locks can be “broken” in less than a second, according to NBC’s The Today Show, 95 percent of U.S. homes are “protected” by such locks.
In the video, you can see how it’s done first-hand. After the video, you’ll probably want to start looking for new locks for doors.
Now, replacing locks can be a do-it-yourself project, but you may want to leave it to a professional. Rather than searching the Yellow Pages for a locksmith, however, consider using Angie’s List instead — the site features an unbiased “customer review” section that you can’t get from the phone book.
If you’ve never used Angie’s List, note that it does require a membership fee, but annual and multi-year memberships come with a 110% Money-Back Guarantee. If the service isn’t everything you hoped, there’s very little risk.
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Home Supply Falls To An 8-Month Low
July 24th, 2009 categories: General, Market Trends
The national home supply is falling, down to its lowest levels since December 2008.
In June, there was 9.4 months of supply, down from a year-ago level of 11.0 months. It’s one more sign that the housing market may be mending itself.
Housing supply is an important metric because home values across every U.S. market are rooted in Supply and Demand. When the supply of available homes outpaces buyer demand, home values tend to fall. And, by contrast, when homes are relatively scarce, values tend to rise.
We’re still a long way from historical averages, but dwindling home inventory may be one reason why the national median sale price rose by $7,000 last month.
A reduction in inventory may also explain why two other popular home value metrics — the government’s Home Price Index and the private-sector’s Case-Shiller Index — are each showing signs of a rebound, too.
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The Home Price Index Shows That Home Values Increased In May
July 23rd, 2009 categories: General, Market Trends
Home values around the country appear to be leveling.
The Federal Housing Finance Agency’s latest Home Price Index report shows values up by nearly 1 percent in May versus the month prior.
Since peaking in April 2007, values remain off by 11 percent nationwide.
The FHFA Home Price Index is an interesting metric. Different from the Case-Shiller Index which collects data from just 20 U.S. markets, the Home Price Index reflects every U.S. home that backs a mortgage sold to Fannie Mae and Freddie Mac.
In this sense, the FHFA Home Price Index is more “national” than the Case-Shiller Index but the HPI has its flaws, too.
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Mortgage Rates Drop On Ben Bernanke’s “Exit Strategy”
July 22nd, 2009 categories: General, Market Trends
Mortgage markets rallied Tuesday while Fed Chairman Ben Bernanke gave his semi-annual testimony to Congress.
By the time the day was over, some conforming mortgage rates were down by as much as 0.250 percent.
One of the leading causes for the market rally was Chairman Bernanke revealing an “exit strategy” from its massive market stimulus.
Until Tuesday, the Fed hadn’t gone into much depth about means and methods by which it would unwind its interventions. In addition to penning a widely-read Op-Ed piece in the Wall Street Journal Tuesday, Bernanke testified to Congress that the Federal Reserve has a viable “exit strategy”.
Wall Street was pleased to hear it.
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Housing Starts Make Its Largest Leap Since 2004
July 21st, 2009 categories: General, Market Trends
Housing Starts soared in June, thumping analyst expectations for the second straight month.
A “housing start” is a new home on which construction has started. Last month’s jump in single-family starts is the largest one-month jump since 2004.
To Wall Street, June’s figures are the latest signal that the country’s housing markets may be on the mend.
For home sellers, however, the news may not be so rosy. With more homes expected to come on the market, price competition among sellers could intensify and — all things equal — that would push sales prices lower.
So far in 2009, that hasn’t happened.
As home supply has grown, it’s been met by off-setting buyer demand. Spurred by low mortgage rates and an $8,000 first-time homebuyer tax credit, Americans appear to find today’s home buying conditions somewhat ideal.
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Housing Starts Make Its Largest Leap Since 2004
July 21st, 2009 categories: General, Market Trends
Housing Starts soared in June, thumping analyst expectations for the second straight month.
A “housing start” is a new home on which construction has started. Last month’s jump in single-family starts is the largest one-month jump since 2004.
To Wall Street, June’s figures are the latest signal that the country’s housing markets may be on the mend.
For home sellers, however, the news may not be so rosy. With more homes expected to come on the market, price competition among sellers could intensify and — all things equal — that would push sales prices lower.
So far in 2009, that hasn’t happened.
As home supply has grown, it’s been met by off-setting buyer demand. Spurred by low mortgage rates and an $8,000 first-time homebuyer tax credit, Americans appear to find today’s home buying conditions somewhat ideal.
As a result, purchase activity has been strong and first-time home buyers now account for close to 30 percent of existing home sales.
Rising Housing Starts can be a double-edged sword. It shows strength that builders are more optimistic about the economy, but too much optimism can lead to a glut of unsold homes and that could reverse the recovery’s momentum.
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