Economy Archives - Page 9 of 40

Existing Home Sales Surge in October

: Image by Getty Images via Daylife

Housing starts may have slowed in October, but the news isn’t all bad on the housing market front. Indeed, existing home sales are heading higher, surging in October to levels not seen since February 2007 — before the mortgage market collapse began. CNN Money reports on existing home sales in October:

The National Association of Realtors reported that existing home sales rose 10.1% last month to a seasonally adjusted annual rate of 6.1 million units, up from the downwardly revised rate of 5.54 million in September.

The sales beat forecasts of 5.7 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, and were 23.5% above the 4.94 million-unit pace of 12 months ago.

Clearly, there are home buyers out there who are interested in finding great deals on distressed homes and homes in foreclosure. Additionally, these great deals receive even greater weight with the extension of the first time home buyer tax credit.

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National Debt Illustrates the Power of Interest

by Miranda Marquit 1 Comment

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Over the next decade, the U.S. government is expected to build up right around $9 trillion in debt. But is all of that $9 trillion spending for a variety of programs? Actually, no. CNN Money reports that $4.8 trillion of that debt — more than half — will actually be due to interest. More than half our debt over the next decade will build up because we are paying for the privilege of borrowing money. We won’t see additional services or benefits. We’ll be paying to keep things going.

This is a rather large reminder about the power of interest. Indeed, Albert Einstein is credited with calling compound interest the most powerful force in the universe. While there is no way to determine the authenticity of this statement, it nevertheless rings true. It still rings true even if you are talking about simple interest. Whether you are getting a home mortgage, using a credit card or buying a car, interest adds to the total cost you will end up paying.

And it is vital to remember that interest doesn’t net you any advantages beyond allowing you to borrow in the first place. So, even though you may have to borrow for some things, it is in your best interest to get the best possible interest rate, and to get as short a term as you can manage, so that you pay less in interest overall.

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Housing Starts Slow in October

by Miranda Marquit 1 Comment

: Image by tamaki via Flickr

Today, the numbers for October housing starts came in, and it appears as though things slowed down in a major way during October. The fact that there was such a slowdown in October only reinforces the idea that recent progress made by the housing market was largely due to the first time home buyer tax credit. The news is that, with the extension of the credit (perhaps it’s time to buy a home), there are expectations that things will pick up again.

However, Wall Street isn’t feeling as sanguine about the whole thing. Since it is clear that recent progress was due to government help, there are concerns that the economy is not doing as well as hoped. As a result, it is little surprise that stocks are down this morning. Some are evening wondering if a double-dip recession is on the way.

If that is the case, and the housing market sees another fall, the buyer’s market may continue.

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Housing Market Slump Affects Home Improvement Businesses

by Miranda Marquit Leave a Comment

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Sometimes we forget that the housing market affects more than just, well, housing. Indeed, home improvement businesses have been having difficulty at this time as falling home values and other conditions make it more difficult for home owners to get home equity loans for home improvement. Additionally, the economic climate has many consumers putting off large purchases. MarketWatch reports on the situation Lowe’s is in:

While consumers continued to curtail buying of orders above $500, the Mooresville, North Carolina-based company said it’s seen some improvement in some of its worst-hit housing markets including in California, Florida and areas of the desert Southwest. Lowe’s shares zigzagged in pre-market trading and last traded up 2%.

“The broad-based pressures of the macro environment are clearly evident in our sales as consumers continue to delay large purchases until they feel better about the economic outlook,” said Chief Executive Robert Niblock.

Of course, it is encouraging that Lowe’s is seeing some improvement in areas like California. It means that things are starting to pick up — at least a little bit. Lowe’s issues (and the likelihood that rival Home Depot will report its profits down tomorrow) are not stopping the stock market as whole, though. The Dow has surged ahead more than 125 in early trading on the news that retail sales have improved, and expectations that consumer spending will pick up by the end of the year.

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JPMorgan Plans to Hire More Mortgage Loan Officers

by Miranda Marquit 1 Comment

: Image by Getty Images via Daylife

It’s not been a bad year for JPMorgan Chase. In spite of the financial meltdown and the recession, JPMorgan has managed to see good profits, and stabilize. The company has even managed to be part of what are expected to be record bonus payouts this year for Wall Street types. And now JPMorgan plans to hire more mortgage loan officers.

Even though there was a lull in mortgage applications as would-be home buyers awaited the fate of the first time home buyer tax credit, it is likely that, with an extension to said credit, mortgage applications will pick up again. Additionally, refinancing is quite popular right now, with the lower rates and government programs aimed at helping home owners get out of their current mortgage arrangements. And with the recession over, and with the housing market expected to pick up, it is little surprise that the financial giant is looking to meet what is expected to be great demand.

The only question is what happens when the housing market is no longer supported with tax credits and special government programs. Will a round of layoffs ensue?

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Investing In Real Estate: REITs

by Miranda Marquit Leave a Comment

: Image by Getty Images via Daylife

Even though the recession has come to a technical end, there are still concerns about the housing market and the labor market. And, even with the extension of the first time home buyer tax credit, many are finding that they do not quite have enough to buy real estate. However, with real estate prices so low, it is a good time to buy. So what is there to do?

Real Estate Investment Trust

If you are interested in investing in real estate, but don’t have enough capital to buy property, or you are concerned about another mortgage, you can consider a Real Estate Investment Trust (REIT). REITs are basically companies that own different properties that generate income. They are traded on the stock market, and can provide you with the opportunity to get a piece of the real estate market.

There are also REIT ETFs. Exchange traded funds that are comprised of REITs can help you invest in a variety of REITs, further increasing your stake in real estate. However, you should be careful. Like all investments, there are costs and risks involved. Not to mention different tax issues. (ETFs, in general, are often low cost with pretty good tax efficiency.) But it is worth thinking about if you are interested in using real estate as a way to add a little more diversity to your investment portfolio.

Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.

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Friday Fun Video: $100 Level Who Wants to be a Millionaire

by Miranda Marquit Leave a Comment

I haven’t watched Who Wants to be a Millionaire since it first came out ages ago. But a couple years ago, this college kid apparently missed the first question, which is the easiest. Which is too bad. With unemployment at 10.2%, I’d imagine he could use the money…

Do you think that you could answer this question?

Happy Friday!

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Deed for Lease Program from Fannie Mae

by Miranda Marquit 1 Comment

There are thousands of people that would like to stay in their homes, but can’t because foreclosure is coming and they aren’t eligible for loan modification. In an effort to help these people stay in their homes, Fannie Mae is offering what is known as the Deed for Lease program for some home owners that meet certain requirements. Here is what Fannie Mae mentioned about the program in a press release:

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

These might be an elegant solution for those who are desperate to stay in their homes rather than lose them to foreclosure. However, it is important to note that if you participate in this program, you will no longer own your home. The money you have put into so far is basically gone, and when you pay your lease, it will be like you are renting again. Although, there is a strong possibility that you will avoid the credit stigma that can come with foreclosure.

In the end, you need to weight the pros and cons of your situation, and see what would work best for you: Deed for Lease or a strategic default.

Update, 11-19-09: Chris Thorman offers a great comparison of rental v. mortgage rates in top metro areas, and breaks it down with regard to the program and whether it might make sense to from owning your home to renting it.

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Expediting the Home Buying Process

by Miranda Marquit 1 Comment

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As Congress considers extending the first time home buyer tax credit, and as the recession comes to an end, many people are interested in getting into a home. The process, though, can be rather long. The good news, though, is that there are some things you can do to help expedite the home buying process. Carolyn Warren, author of Homebuyers Beware: Who’s Ripping You Off Now? — What You Need to Know About the New Rules of Mortgage and Credit, has these three tips that can help you get things moving a little faster:

1. Beware of short sales that will never close– A short sale property can seem like a bargain, but it’s nothing more than a mirage if it can’t close. What surprises a lot of people is that some short sale properties will never sell, because there is a second—and sometimes a third—mortgage. The lender in second position is going to lose; therefore, they cannot and will not agree to your price. And since the values have declined, no one will offer enough to satisfy the second mortgage holder. This is a property that will end up going to auction to an investor who has cash, so don’t waste your time. When considering a short sale property, the first thing you need to find out is whether there is a second mortgage lien on the property. If so, pass it up and look for a “more eligible” home.

2. Set a deadline on your offer– Give the seller a deadline for responding to your purchase offer. Home buyers who fail to do this open themselves up for more competitors to outbid them. In addition, if you’re making an offer on a bank-owned property, if you don’t have a deadline, you could be left waiting in suspense for months. I know homebuyers whose offers have been simmering on the back burner for over 90 days. In the meantime, they’re wasting a lot of money on rent and a lot of energy worrying about what will happen.

3. Make sure your pre-approval is solid– A homebuyer who presents a pre-qualification letter rather than a solid pre-approval is setting himself up for a disappointment. In today’s uncertain market, sellers want to know your offer is backed by solid financing. It’s a good idea for your loan officer to be available to answer any questions the seller’s agent may have. For your own peace of mind, you want to know your financing is secure, too. After all, who needs an ugly surprise after your offer is finally accepted?

You can see how the above can help. And, if mortgage rates remain relatively low, and as long as Congress really does decide to extend the first time home buyer tax credit, you are likely to find a good deal, and get it done.

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Is It Really Time To Hold Out for Lower Mortgage Rates?

by Miranda Marquit 1 Comment

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Even though there are weekly releases of average mortgage rates over the span of a week’s time, the fact of the matter is that mortgage interest rates change faster than that. Indeed, mortgage lenders have been updating rates around every four hours. Things are quite volatile right now. But with economic data getting ready to come in this week, a technical end to the recession and the possibility that the first time home buyer tax credit will be extended, things are likely to inch a bit higher overall.

And this makes sense. Mortgage rates rise faster than they fall. Dan Green at The Mortgage Reports points this out about holding out for lower mortgage rates:

Unless you’re willing accept a higher mortgage rate, stop trying to beat the market for a lower one. More often than not, you’re going to lose.

This is especially true because mortgage rates tend to rise a lot faster than they fall. We even having a saying about it in the business: Mortgage rates take the elevator up and the escalator down.

The bottom line is that a small change in mortgage rates isn’t going to impact you a great deal. Holding out for 1/8 or even 1/4 of a difference may not be worth it. In the end, you have to figure that right now, mortgage rates are better than they have been for years. Nearly any rate you get is going to be a victory. And, just like trying to time the stock market, trying to time the mortgage market is not likely to work all that well for you.

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