The Home Price Index Shows Some Regions Up, Some Regions Down

Earlier this week, the private-sector Case-Shiller Index showed home prices slightly lower between November and December.  Thursday, the public-sector Home Price Index showed the same.

Publishing on a 2-month lag, the Federal Home Finance Agency said home prices fell by 1.6 percent nationally in December.  And that's an average, of course.  Some regions performed well in December as compared to November, others didn't.

• Values in the Middle Atlantic states improved slightly
• Values in New England were essentially unchanged
• Values in the Mountain states sagged, down 3.5%

These aren't just footnotes. They're an important piece toward understanding what national real estate statistics really mean. In short, "national statistics" are just a compilation of a bunch of local statistics.

For example, if we dig deeper into the FHFA Home Price Index 70-page report, we find that cities like Terre Haute, IN, Buffalo, NY, and Amarillo, TX posted year-over-year home price gains. You won't see that in a "national" report.

Furthermore, it's a sure bet that those same cities, you could find neighborhoods that are thriving, and others that are not.  Just because the city shows higher home values overall, it won't necessarily be the case for every home in the city.

Every street in every neighborhood of every town in America has its own "local real estate market" and, in the end, that's what should be most important to today's buyers and sellers.  National data helps identify trends and shape government policy but, to the layperson, it's somewhat irrelevant.

So, when you need to know whether your home in Irvine is gaining or losing value, you can't look at the national data.  You have to look at your block -- what's selling and not selling -- and start your valuations from there.

As The Supply Of New Homes Grows, So Does The Opportunity For A "Good Deal"

The housing recovery showed particular weakness in the New Homes Sales category last month -- good news for homebuyers in Newport Coast and around the country.

A "new home" is a home for which there's no previous owner.

New Home Sales fell 11 percent from the month prior and posted the fewest units sold in a month since 1963 -- the year the government first started tracking New Home Sales data.

Right now, there are roughly 234,000 new homes for sale nationwide and, at the current sales pace, it would take 9.1 months to sell them all. This is nearly 2 months longer than at October 2009's pace.

The reasons for the spike in supply are varied:

• The original home buyer tax credit expired in November
• Weather conditions were awful in most of the country in January
• Weak employment and consumer confidence continue to hinder big ticket sales

Now, these might be less-than-optimal developments for the economy as a whole, but for buyers of new homes, it's a welcome turn of events. Home prices are based on supply and demand, after all.

As a result, this season's home buyers may be treated to "free" upgrades from home builders, plus seller concessions and lower sales prices overall.

It's all a matter of timing, of course.  New Home Sales reports on a 1-month lag so it's not necessarily reflective of the current, post-Super Bowl home buying season.  And from market to market, sales activity varies.

That said, mortgage rates remain low, home prices are steady, and the federal tax credit gives two more months to go under contract. It's a favorable time to buy a new home.

December 2009 Case-Shiller Data Shows Battered Markets In Bona Fide Recovery

Using data compiled in December, Standard & Poors released its Case-Shiller Index Tuesday.  The report shows home prices down just 2.5% on an annual basis, a figure much lower than the 8.7% annual drop reported after Q3.

According to Case-Shiller representatives, the housing market is "in better shape than it was this time last year", but some of the summer's momentum has been lost. 15 of 20 tracked markets declined in value between November and December 2009.

Meanwhile, it's interesting to note the 5 markets that didn't decline -- Detroit, Los Angeles, Las Vegas, Phoenix and San Diego.  Each of these metro regions were among the hardest hit nationwide when home prices first broke.  Now, they're leading the pack in price recovery.

 

For some real estate investors, that's a positive signal.  But we also have to consider the Case-Shiller Index's flaws because they're big ones.

As examples:

 

1. Case-Shiller data is reported on a 2-month lag
2. The Case-Shiller sample set includes just 20 U.S. cities
3. There's no "national real estate market" -- real estate is local

That said, the Case-Shiller Index is still important. As the most widely-used private sector housing index, Case-Shiller helps to identify broader housing trends and many people believe housing is a key element in the economic recovery.

If the markets that led the housing decline will lead the housing resurgence, December's data shows that full recovery is right around the corner.

How You Can Get The Most Accurate, Real-Time Mortgage Rate Quotes Available

You can't get your mortgage rates from the newspaper. Last week proved it.  Again.

Friday morning, headlines in California and around the country read that mortgage rates were down 0.04 percent, on average, since the week prior.

A sampling of said headlines includes:

• US Mortgage Rates Drop For 2nd Straight Week (Reuters)
• Mortgage Rates On 30-year US Loans Fall To 4.93% (Business Week)
• 30-Year Fixed Mortgage Rate Falls Farther Below 5% (Marketwatch)

The story behind the headline was sourced from the Freddie Mac Primary Mortgage Market Survey, am industry-wide mortgage rate poll of more than 100 lenders.  The PMMS has reported mortgage rate data to markets since 1971 and is the largest of its kind.

Unfortunately, Irvine rate shoppers can't rely on it.

See, unlike governments and private-sector firms, when consumers are in need mortgage rate information, they need the information delivered in real-time; for making decisions on-the-spot.  Consumers need to know what rates are doing right now.

The Freddie Mac survey can't offer that.

According to Freddie Mac, the survey's methodology is to collect mortgage rates from lenders between Monday and Wednesday and to publish that data Thursday morning.  The survey results are an average of all reported mortgage rates. The problem is that mortgage rates change all day, every day.  The PMMS results are skewed, therefore, by methodology.

And, meanwhile, the issue was compounded last week because mortgage rates shot higher Wednesday afternoon -- after the survey had "closed".  The market deterioration ran into Thursday, too -- again, unable to be captured by Freddie Mac's PMMS.

Although the newspapers reported mortgage rates down last week, they weren't.  Conforming mortgage rates were higher by at least 1/8 percent, or roughly $11 per $100,000 borrowed per month.  In some cases, rates were up by even more.

Newspapers and websites can give a lot of good information, but pricing is far too fluid to rely on a reporter. When you need to know what mortgage rates are doing in real-time, make sure you're talking to a loan officer.  Otherwise, you may just be getting yesterday's news.

How To Replace Your HVAC Air Filter

Replacing a home's heating, ventilation and air conditioning (HVAC) air filter is one way to keep the unit's motor running right.  It's an oft-forgotten part of keeping a well-run home. And, it's simple, too.

In the two-minute video above, you'll learn how to replace an air filter from start-to-finish.  There's no need for tools and no need for experience -- the job is about as basic as home maintenance jobs come.

Air filters should be changed at least quarterly but it's okay to change on a monthly rotation, too -- especially if your home has shedding pets, or is under construction or repair. Just remember that not all air filters are created equal.

In this famous video, we see how $0.99 filters can fail to get the job done. Spending $10-15 for a filter that works is a better idea.

Save money by buying in bulk.

Housing Starts Soar To 6-Month High In January... Or Do They?

Sometimes, headlines for housing can be misleading and this week gave us a terrific example.

On Wednesday, the Commerce Department released its Housing Starts data for January 2010. The data showed starts at a 6-month high.

A “Housing Start” is a privately-owned home on which construction has started.

Headlines on the Housing Starts story included:

• U.S. Housing Starts Hit 6-Month High (Reuters)
• U.S. Economy Receives Home Building Boost (Shepparton)
• Housing Starts Post Sharp Rebound (ABC)

Based to the headlines, the housing market looks poised for rapid growth through the Spring Market.

The real story, though, is that although Housing Starts increased by close to 3 percent last month, the growth is mostly attributed to buildings with 5 or more units.  This includes apartments and condominiums -- a sector of the housing market that's notoriously volatile.

If we isolate Housing Starts for single-family homes only, we see that starts grew by just 7,000 units last month and have failed to break a range since June 2009.  January's tally is slightly below the 8-month average.

Perhaps more interesting than the Housing Starts, though, is the Commerce Department's accompanying data for Housing Permits. After a 5-month plateau that ended in November, Housing Permits posted multi-year highs for the second straight month.

According to the Census Bureau, 82% of homes start construction within 60 days of permit-issuance.

One reason permits are up is that home builders want to capitalize on the federal homebuyer tax credit's dwindling time frame.  Sales are expected to spike in March and April and more homes will come online to deal with that demand. Home buyers in Tustin should shop carefully, but with an eye on the clock.

As the tax credit's April 30, 2010 deadline approaches, competition for homes may be fierce.

Mortgage Rates Spike On The Federal Reserve's January 2010 Meeting Minutes

Mortgage markets reeled Wednesday after the Federal Reserve released the minutes from its January 26-27, 2010 meeting. Mortgage rates in California are now at their highest levels since the start of the year.

The Fed Minutes is a follow-up document, delivered 3 weeks after an official FOMC meeting. It's a companion piece to the post-meeting press release, detailing the debates and discussions that shaped our central bankers' policy decisions.

The Minutes is a terrific look into the Fed's collective mind and, yesterday, Wall Street didn't like what it saw.  Specifically, the report disclosed that:

1. The Fed plans to break support for mortgage markets after March 31, 2010
2. Raising the Fed Funds Rate will be a key part of the Fed's strategy to tighten monetary policy
3. The fundamentals behind consumer spending strengthened modestly

Furthermore, the Fed Minutes said that there is a growing risk of "higher medium-term inflation". Inflation, of course, is awful for mortgage rates.

Overall, the Fed's economic optimism appeared stronger after its January meeting as compared to its December one.  A stronger economy should lead to better job growth and higher home prices throughout 2010.

Mortgage rates were up yesterday but they remain historically low. And many analysts think that after March 31, 2010, rates will rise even more.  Therefore, if you're buying a home in the near-term, or know you'll need a new mortgage, consider moving up your time frame. 

Every 1/8 percent makes a difference in your household budget.

The Best And Worst Cities For Commuters (2010 Edition)

According to the Census Bureau, 2.8 million people commute to work 90 minutes or more each day, in each direction.

Now, your daily commute may not be as long, but time spent in cars, trains and buses is time away from work and from family. Drive-time can affect a person's Quality of Life and it's one reason why Forbes Magazine's Best and Worst Commutes is worth reviewing.

Measuring travel time, road congestion and travel delays in the 60 largest metropolitan areas, Forbes ranks city commutes from best-to-worst with Salt Lake City topping the list and Tampa-St. Petersburg finishing it.

The Top 5 Commutes, as compiled by Forbes:

1. Salt Lake City, Utah
2. Buffalo-Niagara Falls, New York
3. Rochester, New York
4. Milwaukee-Waukesha-West Allis, Wisconsin
5. Albany-Schenectady-Troy, New York

The bottom 5 are Tampa-St. Petersburg, Detroit, Atlanta, Orlando, and Dallas-Forth Worth.

Long commutes shouldn't deter you from moving to a particular city, but the potential commute should be consideration. Before making an offer on your next home, make a rush-hour commute to work from your potential new neighborhood.  Then imagine doing it every day.

You can read the complete Forbes list of Best and Worst Cities for Commuters on its website.

How To Remove Stickers And Adhesive-Based Price Tags From Just About Anything

Sometimes, price tags just don't want to unstick. No matter how hard you scrub and scrape, tacky residence stays behind. Turns out, getting "the stick" off your stickers isn't so hard when you have the right tools.

In this 2-minute video from eHow.com, you'll learn how to remove stickers and adhesive-based price tags from common household items including:

• Wooden furniture
• Glass vases and other glassware
• Plastic pieces
• Cardboard boxes

The best part? All the supplies you'll need are already in your home.

How Rising Consumer Sentiment Is Linked To Higher Home Prices

Consumer Sentiment has been on the rise since last February and it's something to which Tustin home buyers should pay attention. 

The affordability of your next home may hinge on consumer confidence.

As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place.  Business investment is returning, household spending is expanding, and financial systems are gaining strength. 

Consumer confidence is at a 2-year high.

What's missing from the recovery, though, is jobs growth.  Another net 20,000 jobs were lost in January. Data like that hinders economic growth.

That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it's still a net negative number.  Not only does household income drop when Americans lose jobs but so does the average American's confidence in his or her own economic future.

This is one reason why jobs growth is so closely watched by Wall Street -- jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.

Consumer spending represents 70% of the U.S. economy.

As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher. 

Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.

Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.

In Pictures: The Severity Of The Foreclosure Crisis Depends On Where You Live

Foreclosures stories dominate the national housing news. It seems at least one foreclosure-related story makes its way to the front page or the nightly news every week.

But for as much as the foreclosure filing statistics can be astounding -- over 300,000 homes were served last month alone -- the prevalence of foreclosures depends on where you live.

As reported by RealtyTrac, just 4 states accounted for more than half of the country's foreclosure-related activity last month.

• California : 22.7 percent of all activity
• Florida : 14.9 percent of all activity
• Arizona : 6.7 percent of all activity
• Illinois : 5.7 percent of all activity

The other 46 states (and Washington D.C.) claimed the remaining 49.9%.

However, just because foreclosures are concentrated geographically, that doesn't make them less important to homebuyers in Irvine and around the country.  There's been more than 1.4 million foreclosure filings in the last 12 months and that's a figure that can't be ignored.

Distressed properties now play a role in one-third of all home resales.

Therefore, if you're in the market for a foreclosed home, here's a few things to keep in mind.

1. Properties are usually sold "as-is" and may not be up to living standards. Be sure to physically inspect the home before buying it.
2. Buying a home from a bank is rarely as streamlined as buying from an individual homeowner. Be prepared for delays and long closings.
3. Foreclosures aren't always listed for sale publicly. Ask your real estate agent how to access the complete foreclosure inventory.

 

In order to use the federal homebuyer tax credit, you must be under contract for a home by April 30, 2010 and closed by June 30, 2010.  That doesn't leave much time to find a bank-owned home and make it to closing.  If you're serious about buying foreclosures, it's probably best to start your search soon.

Separating FHA Fact From Fiction : Mortgage Insurance Premiums

The mortgage lending landscape changes a lot.  Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers in Newport Beach that aren't paying in cash.

The loan you get today won't always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of "what's coming next".

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines.  Specifically, it announced 3 changes that will be effective starting April 5, 2010:

1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
2. Allowable seller concession reduced from 6% to 3%
3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums.  This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA's petition. 

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, that doesn't mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

Mortgage Approvals Are Getting More And More Scarce

The economy's improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.

Underwriting guidelines are tightening.

The data comes from the Federal Reserve's quarterly survey to its member banks.  The Fed asks senior bank loan officers around the country to report on "prime" residential mortgage guidelines over the most recent 3 months and whether they've tightened.

For the period October-December 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were "basically unchanged"

Just 2 of 53 banks said its guidelines had loosened.

Combine the Fed's survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it's clear that lenders are much more cautious about their loans than they were, say, in 2007.

Today's Newport Beach home buyers and would-be refinancers face a bevy of new borrowing hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

So, if you're on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later.  It doesn't necessarily matter that mortgage rates are low, or that there's an up-to-$8,000 home purchase tax credit for households that qualify.  With each passing quarter, fewer and fewer applicants are eligible to take advantage.

Household Safety Tips : Space Heaters

For spot and room heating, homeowners often turn to portable space heaters.  Often, it's cheaper and faster to heat a small space with a heater than it is to raise the entire home's temperature by a few degrees.

But space heaters can be dangerous.

According to the National Fire Protection Association, space heaters were responsible for a large percentage of overall fire-related damages in 2006, including:

• 43% of home heating-related injuries
• 51% of home heating-related property damage
• 73% of home heating-related civilian deaths

Clearly, as compared to central heating systems and fireplaces, electric space heaters cause a disproportionate amount of in-home damage.  This is why it's important to be safe when using them.

So, here's some basic space heater tips to follow at home:

• Never place anything flammable within three feet away of a space heater
• Never use an extension cord on a space heater
• Turn space heaters off when leaving a room or going to bed

Furthermore, make sure your space heater bears the label of a recognized testing laboratory such as Underwriters Laboratory.

Remember to test your smoke detectors monthly.

Source
Heating Safety Tips
National Fire Protection Agency

7 Ways To Protect Your Credit Score For Better Mortgage Rates

As mortgage lenders tighten approval standards   in California and nationwide, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit -- often by accident.  Some of the highlighted mistakes include:

• Closing open credit cards
• Making appliance buys on credit prior to closing
• Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.

The January 2010 Jobs Report May Lead Mortgage Rates And Home Prices Higher

On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls data from the month prior. The data is more commonly known as "the jobs report" and it swings a big stick on Wall Street.

Especially now -- many analysts believe job growth is tightly linked to the future of the U.S. economy.

Therefore, when January's jobs report hits the wires at 8:45 AM ET tomorrow, Tustin home buyers would do well to pay attention. A net job reading that is much higher (or lower) than Wall Street's expectations can make a serious change in home affordability.

Wall Street expects that the economy added 13,000 jobs last month.  It would mark the second time in 3 months that the jobs report showed a net monthly gain.

In November 2008, the economy added 4,000.

Jobs matter to the economy for a lot of reasons, but one of the biggest is that when Americans are working, Americans are buying and consumer spending accounts for 70 percent of the economy.

Job growth spurs the economy and draws money to the stock market. Unfortunately for rate shoppers, that kind of stock market growth happens at the expense of the bond market which is where mortgage rates are made.

Good jobs data usually means higher mortgage rates.

Also, job growth can lead to higher home prices. This is because working homeowners are less likely to default on a mortgage versus non-working homeowners.  In this way, job growth helps hold foreclosures to a minimum which, in turn, suppresses the housing supply.

Less supply means higher prices for home buyers.

Mortgage rates are idling this morning in advance of tomorrow's data.  If you're shopping for a mortgage rate, the prudent play may be to lock your rate before the jobs data is released.  A jobs figure that's higher than the 13,000 expected could cause rate to rise sharply.

Pending Home Sales Predicts A Stronger Spring Market

The Pending Home Sales Index rose slightly in December, climbing 1 percent from November.

A Pending Home Sale is a home that is under contract to sell, but not yet sold. It's a figure compiled by the National Association of Realtors® using sales data from over 100 regional listing services and more than 60 large brokerages around the country.

Because each pending sale is a true measure of sales activity, the Pending Home Sales Index is purported to be the most reliable forward-looking indicator for housing. 

Recent data supports this hypothesis.

After Pending Home Sales plunged 16 percent in November, Existing Home Sales fell by 17 percent in December.  Based on the most recent Pending Sales Index, therefore, we can expect January's closed sales to be similarly level.

For home buyers in Newport Beach , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today's market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With mortgage rates still low and a looming deadline on the homebuyer's tax credit, market activity should be strong between now and April.   Take your time and bid right. And when you're ready, be ready. The best deals likely won't last.

 

Simple Real Estate Definitions : Short Sale

A "Short Sale" is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, a Short Sale may be appropriate for a Newport Beach home seller whose mortgage balance is $250,000 but whose home wouldn't sell for more than $220,000.  Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.

Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.

For this reason, Short Sales are sometimes considered "the economical alternative" to default.

The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone -- speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.

Conserve More Energy With Motion-Sensored Light Switches

Courtesy of Black & Decker, energy-conscious homeowners in Irvine now have another way to conserve natural resources.

Introducing the Lights Out Autoswitch, a 135-degree, motion-detecting device that turns the lights on when people enter a room, and subsequently turns them off after everyone has left.  The timer can be set at 1 minute, 5 minutes, 15 minutes, or 30 minutes. 

Use it in bedrooms, home offices, children's playrooms and anywhere else a person may leave the lights on.

Best of all, the device is easy to install.

The Lights Out Autoswitch runs on 3 AA batteries and slips right over an existing toggle light switch. There's no electrical wiring or assembly required and the product ships with a 2-year warranty.

The Lights Autoswitch is available on Amazon.com for $23.