Home Price Index Rises 0.3% in March 2010

May 26, 2010 by · Leave a Comment
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Home Price Index from April 2007 peakHome values rose in March, according to the Federal Home Finance Agency’s most recent Home Price Index. Values were reported higher by 0.3 percent, on average, from February.

We use the phrase “on average” because the Home Price Index is broad-reaching, national housing statistic. It ignores the dynamics of neighborhood real estate markets like Mt Lookout as well as citywide markets like Cincinnati , too.

Instead, the Home Price Index focuses on state and regional statistics.

For example, in March 2010 as compared to February:

  • Values in the East South Central region rose 2.5%
  • Values in the Mountain states rose 1.1%
  • Values in the Middle Atlantic states fell 1.0%

Of course, none of this data is especially helpful for today’s home buyers and sellers.

Real estate is a local phenomenon that can’t be summarized by state or region. What matters most to buyers and sellers is the economics of a neighborhood and that level of granularity can’t be served up by a national housing report like the Home Price Index.

The Home Price Index data is additionally unhelpful to buyers and sellers in that it reports on a 2-month delay.

In other words, Home Price Index is not even a fair reflection of today’s market — it highlights the real estate market as it existed 60 days ago.

So why is the Home Price Index even published? Because government, business and banks rely on the reports.  As a national indicator, the Home Price Index helps governments make policy, businesses make decisions, and banks make guidelines. This, in turn, trickles down to Main Street where it impacts every one of us — and eventually influences real estate.

Since peaking in April 2007, the Home Price Index is off 13.44 percent.

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The Headlines Were Overly Rosy On February’s Case-Shiller Index

April 30, 2010 by · Leave a Comment
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Case-Shiller Change In Home Values Jan-Feb 2010

Earlier this week, Standard & Poors released its February Case-Shiller Index, a home price tracker for select metropolitan areas.

Overwhelmingly, home values fell in the 20 markets tracked by the Case-Shiller. Only San Diego showed a modest increase. The other 19 markets averaged a 1.23 percent decline between January and February.

However, that’s not the story you read in the most papers. Instead, headlines read that home values were up in the United States, citing annualized data.

Unfortunately for active home buyers and sellers, year-over-year data isn’t all that helpful when making a real estate decisions. It’s the month-to-month data that matters. Month-to-month changes in home prices are what defines a housing market. Month-to-month is what sets the tone for contracts and negotiations on a purchase.

The rosier, annualized data published this past week just doesn’t capture the reality of what was the February 2010 market. And even then, the data is somewhat useless because it’s from February and May will be upon us next week.

Case-Shiller is on a 2-month lag — hardly reflective of the “right now” of real estate.

When you’re looking for real estate data that actionable, consider using sources that are more “real-time”. A real estate agent may be the right place to start. Because for all the data that Case-Shiller and the other housing indices collect, it can never be as relevant to your individual needs as a well-executed, timely market analysis.

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Hello world!

April 30, 2010 by · Leave a Comment
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Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

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A Simple Explanation Of The Federal Reserve Statement (April 28, 2010 Edition)

April 28, 2010 by · Leave a Comment
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Putting the FOMC statement in plain EnglishToday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.250 percent.

In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”. This is a step up from the last meeting after which the Fed said jobs were “stabilizing”.

It also reiterated that business spending “has risen significantly”.

Today’s statement marks the 7th straight press release in which the Fed shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.

Threats remain to growth, however. The Fed fingered a few:

  1. Employers are reluctant to hire new workers
  2. High unemployment threatens consumer spending
  3. Consumer credit (still) remains tight

Also in its statement, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”. This was expected.

Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance.

Mortgage market reaction has been muted thus far. Mortgage rates are unchanged post-FOMC.

The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010. The 55-day span between meetings will be the FOMC’s longest of 2010.

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The Fed Adjourns From A 2-Day Meeting Today And What It Means For Mortgage Rates

April 28, 2010 by · Leave a Comment
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Comparing 30-year fixed mortgage rate to Fed Funds Rate since 1990The Federal Reserve adjourns from a scheduled, 2-day meeting today. It’s one of 8 scheduled Fed meetings for 2010.

Upon adjournment, Fed Chairman Ben Bernanke & Co. will release a formal statement to the market. In it, the Fed is expected to announce “no change” in the Fed Funds Rate.

The Fed Funds Rate is currently in a target range of 0.000-0.250 percent.

The Fed Funds Rate is an inter-bank lending rate. It’s also the basis for Prime Rate, a consumer interest rate on which credit card payments are based, among other consumer loans. Prime Rate is equal to the Fed Funds Rate + 3 percent. Credit card rates, therefore, will likely stay flat today, too.

Mortgage rates, however, should change. Possibly by a lot. The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).

The reason mortgage rates will change today is because, in its statement, the Federal Reserve will highlight vrious parts of the economy, identifying strengths, weaknesses and probable threats to growth.

These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip — mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.

It’s a difficult time to be shopping mortgages.

Further complicating matters is Greece’s recent debt downgrade to junk status. A small contagion fear is budding worldwide and, as a result, the flight-to-quality has picked up steam. Mortgage rates are down because of it but could reverse higher at any moment.

Therefore, if you’re actively shopping for a mortgage today, it may be prudent to lock your rate ahead of the Fed’s announcement and any major market reversal. Mortgage rates may fall today, but there’s very little room for them to fall. This is, however, a lot of room for them to rise.

The Fed adjourns at 2:15 PM ET. Call your loan officer to lock your rate.

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New Homes Sales Were Strong in March, But Not As Strong As The News Would Have You Believe

April 27, 2010 by · Leave a Comment
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New Home Sales Mar 2009-Mar 2010The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

  • Sales of new homes rocketed up 27 percent in March (WaPo)
  • New-home sales rise fastest in 47 years (CNNMoney)
  • Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading. The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history.

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program. The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low. Along with stronger home demand, this should push home prices higher throughout the coming months.

It’s no wonder builders are bullish on the economy.

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How To Clean Your Grill For Better Tasting Food

April 26, 2010 by · Leave a Comment
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A well-maintained grill is the key to great tasting food, season after season — chicken, meats, fish or other. And keeping your grill clean is simple.

In this 4-minute from Lowe’s, you’ll learn basic, pre-grilling cleaning tricks, plus how to breakdown your gas grill completely and clean its parts.

Some of the pointers from the video:

  • Clean your grill before every use using the grill’s own heat and a wire brush
  • Don’t try to clean rusted and/or broken grill grates — replace them
  • After long periods of non-use, check your burners for insects and pests

The video is geared at beginners and includes a step-by-step tutorial. Even the most seasoned griller could probably pick up a tip or two.

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Home Resales Boom Into The End Of The Tax Credit; Home Values Seen Rising.

April 23, 2010 by · Leave a Comment
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Existing Home Sales Mar 2008-Mar 2010Existing Home Sales rose in March, as expected. U.S. home buyers closed on 7 percent more homes as compared to February.

Furthermore, versus March 2009 — a month many people equate to the low point of the U.S. economy — sales volume was up 16 percent.

“Existing home sale” is the technical term for a home resale; a home previously inhabited by a person. It’s the opposite of a “new home sale” which is a sale of a newly-constructed home.

Existing Homes Data is tracked by the National Association of Realtors

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Fight Your Real Estate Property Tax Bill Without A Lawyer

April 22, 2010 by · Leave a Comment
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More than 60 percent of U.S. homes are “over-assessed”, says an industry trade group. Homeowners pay more in property taxes than they otherwise should have to. You might be one of them.

Have you considered fighting your real estate tax bill?

In this 4-minute piece from The Today Show, you’ll learn:

  • When to file your tax bill dispute for the best chances of winning
  • How to pull your “property card” and check for tax bill-raising errors
  • What to do if the taxing authority turns down your request

Most importantly, you’ll learn that don’t need to hire an attorney to fight your tax bill. You just need to be prepared. Do your research and make your case. It’s estimated that nearly half of all contesting homeowners are successful.

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How Iceland’s Volcanoes Are Helping Mortgage Rates Fall

April 21, 2010 by · Leave a Comment
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Mortgage rates react to natural disastersMortgage rates and home affordability have improved lately, thanks to an unlikely ally — Mother Nature.

In the 7 days since Iceland’s Eyjafjallajökull erupted, ash clouds have grounded planes, disrupted businesses, and stranded exports in warehouses worldwide.

It’s a drag on commerce that’s spilled over onto Wall Street. As experts debate the potential for future seismic activity, traders are taking some of their investment risk off the table.

In trading circles, it’s called “safe haven buying”. When the market gets cloudy, investors often move their cash into relatively safe assets. This includes government-backed securities — mortgage-bonds among them.

Demand for bonds rise, pushing up prices and driving down rates.

Conforming and FHA mortgage rates touched a 3-week low earlier this week.

Volcanic eruptions and like natural disasters remind us: mortgage rates change for all sorts of reasons. Some we can predict, most we cannot. There’s literally thousands of influences on the U.S. mortgage market.

If you’ve been shopping for a home or floating a mortgage rate, luck’s been on your side. Mortgage rates have fallen post-Eyjafjallajökull. However, as ash clouds dissipate and business resumes worldwide, investors will regain their collective appetite for risk and safe haven buying will reach its natural end.

When that happens, mortgage rates will rise.

Therefore, use the seismic uncertainty to your advantage. Consider locking your mortgage rate sooner rather than later — while rates are still low.

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