For the second month in a row, 18 of the 20 Case-Shiller real estate markets posted higher home values. It’s the 6th consecutive strong showing for the benchmark private-sector housing index.
Combined with falling home supplies and rising sales figures, this month’s Case-Shiller Index suggests that housing may have bottomed sometime earlier this year.
It’s cause for optimism.
Even Case-Shiller respresentatives seem excited. In its press release, the publishers singled out the index’s winning streak, commenting on the recent “stabilization in national real estate values”.
But, in that statement, we see the Case-Shiller Index’s biggest flaw. The index ipurports itself to be a national real estate metric but, in reality, there is no such thing as a national real estate market.
All real estate is local.
The Case-Shiller Index reports home values for 20 U.S. cities. Each of those cities, however, is comprised of smaller neighborhoods, each with its own character, desirability, and price points. Case-Shiller attempts to lump it all together — an impossibility.
As an example, New York City posted a nearly 1 percent increase in July but that figure is just a city summary. The actual market in three distinct neighborhoods — Upper East Side, Chelsea, and Flatbush — vary tremendously. Not to mention Long Island, too.
Flaws aside, though, Case-Shiller is still important. It helps to identify broader trends in housing and housing may hold the key to our economic future.
With July’s Case-Shiller Index, we see that the housing market’s recovery is being sustained.
Getting approved for a mortgage is about to get harder.
For the second time in less than 3 months, Fannie Mae announced changes to its mortgage guidelines.
In its official announcement, Fannie Mae details the updates, meant to reduce the mortgage firm’s overall risk.
The first major change is with respect to credit scoring. All Fannie Mae loans — whether underwritten electronically or manually — require a 620 credit score minimum. There are very few exceptions.
A second change relates to loans with private mortgage insurance. Homeowners whose loan-to-value exceeds 80 percent now have a choice:
- Accept higher mortgage insurance premiums month-after-month
- Accept a one-time fee paid at closing to compensate for higher risk
Both options pass higher costs to consumers.
Then, a third change relates to maximum debt-to-income ratio. As announced in a separate document, Fannie Mae will no longer approve expense ratios exceeding 45 percent except with very strong assets and credit to back it up. In no case can expense ratios exceed 50 percent.
There are other changes, too, including the elimination of seldom-used mortgage products and new risk-based pricing on “expanded level” approvals.
Fannie Mae implements its updates during the weekend of December 12.
Therefore, if you’re going to need (or want) a new mortgage later this year, consider moving up your timeframe to October or November. Once the guidelines change, getting approved for a mortgage is going to be tougher.
The traditional, 6-socket surge protector is a ubiquitous product in American homes.
It also happens to be rife with design flaws, the most glaring of which is the socket layout.
Traditional surge protectors are built for skinny-plugged devices only. Few of today’s electronics are “skinny plug”.
The Socket Sense Expandable Surge Protector corrects the flaw.
The Socket Sense matches form and function. It features 6 angled, expandable sockets that make room for even the biggest and boxiest plugs. Its casing stretches from 13 to 18 inches, as needed, and has a slim, fit-anywhere design.
By providing for 6 input devices, the Socket Surge does the job of two traditional surge protectors. You can buy Socket Surge at most hardware stores and on Amazon.com, too.
The device retails for about $25.
As reported by the National Association of REALTORS
The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
It also reiterated plans to support the mortgage market to the tune of $1.5 trillion.
In its press release, the FOMC noted that the U.S. economy is “picking up following its severe downturn” and that financial markets have “improved further”.
It’s the second consecutive post-FOMC statement in which the Fed appears somewhat optimistic — a signal that the recession will end soon, or has already ended.
That said, the economy still has some soft spots and the Fed made a point to single them out. Each poses a distinct threat to economic recovery.
- Ongoing job losses
- Sluggish income growth
- Tight credit conditions
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.
However, the FOMC changed its timeframe on the mortgage-backed bond buys, extending its deadline to March 2010. This move should help the Fed keep mortgage rates from rising too high as the economic expansion takes hold.
Market reaction to the Fed’s press release is positive. After an early day sell-off that drove rates higher by about a quarter-percent, most of the pressure is easing. Pricing is worse on the day overall, but well off its lows.
The FOMC’s next scheduled meeting is November 3-4, 2009.
As reported by the government, home prices are rising nationwide, up 0.3 percent in July.
Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged.
The housing market appears to be holding its own.
However, we have to be careful about putting our full faith in the Federal Housing Finance Agency’s data. It’s somewhat flawed.
- The Home Price Index is a national statistic and all real estate is local
- The Home Price Index’s methodology specifically excludes key housing demographics
As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking.
As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past. Furthermore, the HPI sample set also excludes newly-built homes and multi-unit properties.
Because of these exclusions, some analysts call the HPI incomplete. The same could be said of all home price metrics, however — including the venerable Case-Shiller Index.
Therefore, what should be of interest to today’s buyers and sellers is that all of “popular” home valuation models seem to be telling the same story — home prices have stopped falling and look like they’re beginning to rebound.
For a region-by-region breakdown of the Home Price Index, visit the FHFA website.
The Federal Open Market Committee starts a 2-day meeting today in Washington.
The scheduled get-together ends at 2:15 PM ET Wednesday after which the FOMC will issue a press release to the markets.
Consider locking your mortgage in advance of the press release.
The FOMC meets 8 times annually and its adjournments are among the biggest market-movers of the year.
The Fed’s post-meeting press release is a direct look into the mind of the Federal Reserve and Wall Street is looking for clues anywhere it can find them.
After its August 2009 meeting, the FOMC said in its press release:
- Financial markets have improved, relative
- Household spending remains constrained
- Although weak, the economy is “leveling off”
Since then, however, credit risks have lessened on Wall Street, consumer spending has shown signs of life and Fed Chairman Ben Bernanke said the recession is “very likely over”.
This is why tomorrow’s FOMC press release is so important. Markets don’t expect the Fed to raise or lower the Fed Funds Rate, but they do expect the Fed to shed light on its next series of moves.
If the Fed alludes to inflation and stronger growth ahead, mortgage rates should rise. By contrast, reference to slower growth ahead should help keep rates steady.
The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history. However, it’s what the Fed says Wednesday that will matter more than what the its does.
If you’re floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.
Lawn care needs change with the season. How your cut it, how you water it, and how you feed it depends on the weather and the forecast.
In the video above from YouTube, the gardening expert clearly covers how to maintain a lawn in the Fall.
- Why to keep leaves off the grass at all times
- How to set your watering schedule
- How to set a mowing schedule
We also learn why it’s important to fertilize.
With October’s cooler temperatures on the way, it’s time to start planning for Fall. This 150-second video covers important ground. It’s far from comprehensive with respect to lawncare, but it is a terrific start.
Housing Starts on single-family homes took a step backwards last month, falling month-over-month for the first time since January.
A “housing start” is new home on which construction has started.
Don’t let the slowdown fool you, however — the housing market’s recovery is still very much underway.
- Sales volume is up in most cities
- Home values are up in most places
- Low mortgage rates are making homes affordable
Builders were bound to take a construction breather sometime — especially with the looming expiration of the First Time Home Buyer Tax Credit. The last thing they want is to be saddled with excess supply.
Some of the news coverage categorized August’s Housing Starts as troubling. That’s likely overstating it. One down month after 8 consecutive increases is not only acceptable, but it’s expected, too.
Single-family starts are up 34 percent on the year. The housing market is recovering just fine.
According to the country’s home builders, the housing market is looking good.
Each month, the National Association of Home Builders releases its Housing Market Index report, a survey geared at taking “the pulse of the single-family housing market”.
Respondents report on three facets of their business, each series weighted and averaged:
- How are market conditions today?
- How do market conditions look 6 months from now?
- How is the traffic of prospective buyers of new homes?
For the 3rd straight month, the Housing Market Index improved. It’s now at its highest level since May 2008.
The housing market has shown signs of life since March. Both Existing Home Sales and New Homes Sales have soared and home values are up in a lot of towns. Builders showing confidence is another positive signal.
Fed Chairman Ben Bernanke said that the recession is “very likely over” and strong housing data corroborates that statement.
As the economy strengthens and housing does, too, home sellers will start to regain the upper-hand in contract negotiations. If you’re an active home buyer, therefore, and looking for “a deal”, be aware that time is close to running out.