One More Reason Why Predicting Home Sales Is Challenging

March 30, 2007 by · Leave a Comment
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The University of Michigan Consumer Sentiment Survey slipped to 88.4 in March, down from February’s 91.3 and its lowest level in six months.

Why should you care about the UofM survey as a homeowner? In a nutshell, you shouldn’t. But, you sort of have to.

Here’s why: Consumer confidence is considered important by markets because hundreds of “real people” are telling the surveyors how they feel about the economy.

The better they feel, the more likely they are to spend money on things like electronics, automobiles, and homes.

But, confidence surveys can be worthless because what people say and what they do are often two very different things.

For example, on the heels of today’s terribly weak UofM survey, the Commerce Department released their Personal Spending report.

We would expect that the falling University of Michigan confidence numbers would translate into lower levels of Personal Spending. On the contrary! Personal Spending was up by whopping 0.6%.

People are less confident about the economy, but are still choosing to spend more.

This is just one more reason why home sales and real estate is an unpredictable market. Emotional decisions rarely follow a predictable path.

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Give Your Home A Regular Check-Up

March 29, 2007 by · Leave a Comment
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As a home owner, it’s a good practice to have your home and its appliances serviced regularly.

There is no wrong way to maintain your home — you just need to do it.

The biggest advantage to routine maintenance is that problems can be identified and corrected prior to a complete breakdown.

When the roof starts leaking, for example, you’re going to “discover it” on a rainy day and the interior damage to your home is already done (and getting worse!).

In addition, a contractor will generally not be available that day to come out and make the fix for you — it may take a week or longer.

The same is true for your home’s heating and cooling system, foundation, exterior and other typical trouble points.

Routine maintenance costs money, but small repairs are always going to be less expensive than emergency repair or outright replacement.

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Tumbleweeds Roll Over Montana Neighborhoods

March 28, 2007 by · Leave a Comment
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Tumbleweed takes over Montana neighborhood

Every town has its own history and issues unique to its neighborhoods.

Near Bozeman, Montana this morning, one neighborhood is dealing with a tumbleweed problem that is so bad that residents are resorting to using snowplows and pitchforks to clear driveways, backyards, and streets.

This is not an every year event, of course, but before buying a home it’s important to understand what the nuances of the area that won’t show up on a MLS listing sheet.

Tumbleweed is the more common name for Salsola and has been romanticized by Western films as a sign of a ghost town, or nothingness. For the residents of Shooting Star Lane, the six-foot tall piles of plants are anything but.

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Would You Have Answered The Mortgage Type Quiz Correctly?

March 27, 2007 by · Leave a Comment
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The pie chart at right comes from a Bankrate.com survey, sampling 1,000 adults about their current housing situation.

The question asked: What type of mortgage do you currently have?

While the 34% “Don’t Know” figure is troubling, even more frightening is the 6% “ARM” figure.

The sample size was small, but far more than 6% of homeowners carry adjustable rate mortgages. Some of the survey responders may have mistaken their “5-year fixed rate mortgage” for a true fixed rate mortgage — even though they are aware that the rate can change after 60 months.

According to the Federal Reserve, ARM holders tend to be unaware of how often their home loan can adjust, the maximum interest rate to which it can adjust, or even the rules by which the new, adjusted interest rate is calculated. That all can lead to financial stress in a household.

If you own a home, you need to understand the basic structure of your own mortgage the same way that you need to balance your checkbook each month. Even if you have a fixed rate mortgage — you may be mistaken, after all.

It’s never too late to look over your mortgage statement or reviewing your closing documents. If you don’t know how to interpret what you’re reading, get help from a professional.

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It’s DIY Season — Don’t Injure Yourself

March 26, 2007 by · Leave a Comment
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160,000 people are injured in DIY ladder accidents each year

It’s Do-It-Yourself Season for projects around the home and that makes this a fantastic time to remind everyone to be safe around your home.

Just because the “guy on TV ” makes it look simple doesn’t mean that the project is within your personal skill set.

When a ceiling is being repaired on the DIY Network, the camera rarely reveals the support measures that the DIYer is undertaking, or the full scope of safety preparation.

According to the U.S. Consumer Product Safety Commision, ladder accidents send more than 160,000 people to the emergency room each year. To me, that’s 160,000 people that should have hired a professional instead of going DIY.

There is a lot of knowledge to be gleaned from books and television programs, but it’s important to recognize your personal limits. The cost of using a licensed professional will almost always be less than the medical costs resulting from a DIY home accident.

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The Headlines On Housing Aren’t Telling The Whole Story

March 23, 2007 by · Leave a Comment
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As a consumer, it’s very easy to be misled by newspaper headlines. Today provides a great example.

“Sales of Existing Homes Up 3.9% For The Biggest Monthly Gains In Three Years”

What was not mentioned in the headline was that total inventory rose by 5.9%, adding more supply than for which there is demand.

More supply usually pushes prices down and last month was no exception. The median sale price was down 1.3% from February 2006.

This is the second time this week that real estate headlines were misleading.

Monday, you probably saw this headline in your preferred news source: “9% Jump in New Home Construction“. The headline was followed by an article highlighting strength in the housing sector because more homes are being built.

Missing from the articles, though, was that the Housing Starts survey’s Margin of Error was 10.2%.

Without getting into the math behind it, if Margin of Error exceeds the measurement, the data measured is worthless. The headline could have read “1.2% Drop In New Home Construction” and that would have been “true”, too.

(Author’s Note: If you want to know more about how Margin of Error works, check Google and find an answer that suits you. Or, just trust me on it.)

Housing may be strong or housing may be weak. But, most likely, housing is both of these things. It all depends on your particular street because all real estate is local. Either way, look deeper than the headlines — there’s always more to the story.

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Clean Windows Improve A Home’s Natural Lighting And Appearance

March 22, 2007 by · Leave a Comment
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As we move into Spring and the sun moves to higher position overhead, sun rays are not as “linear” as during the Winter. That doesn’t mean that a sunny day won’t reveal dirty windows and window treatments, however.

Whether you plan to sell your home or plan to entertain friends, visitors notice how natural light strikes the windows of your home. Even a well-maintained interior can look neglected if the exterior of the home is caked in grime or dirt.

Spring is a terrific time to clean your window treatments and to wash your windows — inside and out. Your home’s natural lighting and appearance of overall cleanliness will improve dramatically.

If you can’t reach your windows, or want the help of a window cleaning professional, reach out to me anytime; I am happy to make a recommendation for you.

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Why The Fed Matters To Everyday People

March 21, 2007 by · Leave a Comment
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This afternoon, the Fed adjourns after a two-day meeting and it is widely expected that they will leave the Fed Funds Rate unchanged at 5.250%.

So, what is the Fed Funds Rate and why does it matter to everyday people?

The Fed Funds Rate matters to you and me because it is used to calculate Prime Rate, a popular consumer interest rate used for credit cards and home equity lines of credit.

And why is it called “Prime Rate”?

That’s because banks are smart.

Banks know that if Prime Rate was called something like “Consumer Loan Interest Rate”, we would all have our guard up. Instead, it’s named “Prime Rate” and that makes us feel warm and fuzzy. “Prime” is a strong word with a positive connotation.

It’s important understand, though, that when the Fed makes changes to the FFR, it directly impacts Prime Rate; the two move in lock-step.

Prime Rate is always 3.000% higher than the Fed Funds Rate.

For example, in June 2004, the FFR was 1.000% and Prime Rate was 4.000%. Since that date, however, the two have increased to today’s levels of 5.250% and 8.250%, respectively.

Because of the increase, credit card balance-carrying Americans have faced a 4.00% APR increase and homeowners with home equity lines of credit have watched their HELOCs more than double in payment.

The Fed is widely expected to leave the Fed Funds Rate unchanged today, but may provide clues about the future path of the benchmark rate. Any hints that the FFR will be lowered should provide a boost to the housing market.

Of course, the opposite is true, too. If the Fed cites economic strength and that FFR may have to be increased, it should have a detrimental effect on housing.

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How Many Homes Will I Need To See Before Finding The One I Love?

March 20, 2007 by · Leave a Comment
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How many homes until I find a home I love

A questions that buyers often ask is: “How many homes will I need to see before I find the right one?”

This is a hard question to answer because it varies from buyer to buyer.

For example, buyers that use the Internet for research usually need to see fewer homes than buyers who do not.

Research — on the Internet or otherwise — help home buyers get a feel for what is available is their market, and how much homes cost

In addition, each buyer has its own decision-making process. Some buyers take the first home they see, others prefer to see a slew of homes before making a decision.

In our current market — which some call a “buyer’s market” — the best homes still sell quickly and sometimes sell with multiple offers.

For that reason: if you find a home you love, don’t wait to see if somebody else will make an offer.

Make an offer of your own before that can happen.

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From An Impartial Observer: Housing Is Pacing Along With Historical Norms

March 19, 2007 by · Leave a Comment
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The OFHEO is an outside-the-industry reporter of real estate-related news

When real estate data comes from the National Association of REALTORS, it has an industry-insider feel to it. The data may be accurate, but it is hardly “impartial”.

So, it’s nice to see data from the Office of Federal Housing Enterprise Oversight (OFHEO) that supports on-going strength in the U.S. housing markets.

The entire report is 74 pages long and contains some real gems about the state of Real Estate as of Q4 2006.

For example:

  1. Home values are not rising at the meteoric levels of 2004 and 2005, but they are still increasing along the lines of historical norms
  2. At 5.9%, housing increased in price faster than the other goods we purchase/consume in our lives (0.9%)
  3. For the 282 locales tracked by OFHEO, 256 showed positive appreciation in the prior year, led by Bend, Oregon at 21.4%. 25 locales showed declines, led by Kokomo, Indiana at -5.3%.

Also of note: areas impacted by Hurricane Katrina showed double-digit growth, reflecting a housing supply shortage.

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