Cincinnati Real Estate Blog -- Brenda Ashcraft, Real Estate Blogger

The Case-Shiller Shows Home Prices Are Still On Their Way Up

Wed, 30 Sep 2009 07:45:00 -0700

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.

Fannie Mae Passes New, Tougher Mortgage Guidelines

Tue, 29 Sep 2009 07:45:00 -0700

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 Extension Cord Idea You've Been Waiting For

Mon, 28 Sep 2009 07:45:00 -0700

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.

Existing Home Supply Falls By Nearly A Month

Fri, 25 Sep 2009 07:45:00 -0700

As reported by the National Association of REALTORS�, the number of Existing Home Sales dipped last month, ending the metric's 5-month winning streak.

Newspaper headlines today are overwhelmingly negative on housing. You'd almost believe this year's housing recovery had ended.

That's hardly the case.

See, the other side of the Existing Home Sales story is that -- while the number of units sold did fall by 3 percent -- the existing supply fell by nearly an entire month.

To home buyers and home sellers, this is huge. Home prices are based on supply and demand and with supplies plummeting, it means that home prices are poised to rise.

Indeed, dwindling inventory isn't "news" to today's buyers. Multiple offer situations have been common since the start of the summer and, should supplies fall further, they may soon be the home-buying rule rather than the exception.

Since peaking in November 2008, existing home supplies are down 23%.

A Simple Explanation Of The Federal Reserve Statement (September 23, 2009 Edition)

Wed, 23 Sep 2009 13:37:59 -0700

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.

Home Prices Rise Again In July

Wed, 23 Sep 2009 07:45:00 -0700

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.

Should You Lock Your Mortgage Rate In Advance Of Tomorrow's Federal Reserve Announcement?

Tue, 22 Sep 2009 07:45:00 -0700

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.

How To Maintain A Lawn In The Fall

Mon, 21 Sep 2009 07:45:00 -0700

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 Slip, But Don't Think The Recovery's Been Halted

Fri, 18 Sep 2009 07:45:00 -0700

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.

The Housing Market Index Reaches A 16-Month High

Thu, 17 Sep 2009 07:45:00 -0700

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.

Ben Bernanke Leaves Clues About The Future Of Mortgage Rates

Wed, 16 Sep 2009 07:45:00 -0700

On the 1-year anniversary of the Lehman Brothers collapse, Fed Chairman Ben Bernanke said Tuesday that the "recession is very likely over at this point".

His comments were supported by a Retail Sales report for August that was much better-than-expected.

Equities improved on the day, mortgage markets worsened, and home affordability suffered.

The days of ultra-low mortgage rates may be coming to an end.

Since last September, mortgage bonds markets have been in Rally Mode. As the Financial Crisis of 2008 worsened, investors fled the relatively risky world of stocks and moved dollars into safer investments like cash and bonds -- including the mortgage-backed kind.

Risk aversion is common when market uncertainty exists but last year's aversion was so strong that, by late-November, it had forced mortgage rates down to an all-time low.

Since November, however, rates have been on the rise. Stronger economic data and a general feeling of optimism have helped stock markets recover and some of those gains are coming at the expense of low mortgage rates.

Therefore, if you're wondering what mortgage rates might do going forward, listen to the words of the Federal Reserve Chairman. If he sees economic recovery ahead, it's probably going to happen.

It should spell higher mortgage rates into 2010.

Using 401(k) Funds For A Downpayment? First, Consider The Tax Implications.

Tue, 15 Sep 2009 07:45:00 -0700

As downpayment requirements increase, anecdotally, home buyers are tapping 401(k) plans for extra cash.

Classified as a "hardship withdrawal", loans against your retirement funds can be cheap and simple.

There's no credit check or approval process
There's only a small set of paperwork
Money can be available in as little as a day

But just because you can get access to your retirement money doesn't mean that you should. 401(k) withdrawals should only be made after careful consideration.

There are some serious negatives, specifically with respect to taxation.

If you open a 401(k) loan and don't repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2.

That's a stiff penalty.

But, even if you do repay the loan on time, you're still getting leaving yourself subject to double-taxation.

Taxation #1 occurs when the loan is repaid using post-tax dollars
Taxation #2 occurs upon final withdrawal at retirement

Furthermore, when you borrow against a 401(k), you assume the opportunity costs of having that money out of the market. Since March, the Dow Jones Industrial Average is up 44 percent. If your 401(k) was empty, you'd have missed those gains forever.

Taking a loan against a 401(k) isn't necessarily a bad idea, there just may be better choices. If you're planning to withdraw from your 401(k) to make a downpayment on a home, talk with a qualified financial professional first.

You can never have too much good information.

How To Get Rid Of Fruit Flies In Your Kitchen

Mon, 14 Sep 2009 07:45:00 -0700

At some point, every home fights with fruit flies. 2.5 millimeters in length, the airborne animals linger near garbage and circle fresh fruit, hanging around for weeks at a time.

Fruit flies are pests, but they can be dealt with.

In addition to the large number of homemade remedies, there are inexpensive, commercial ones, too.

One notable product is the Terro Fruit Fly Trap. Shaped like an apple, the Terro trap sits in your kitchen. It's filled with a vinegar-like solution meant to attract and trap nearby fruit flies. Once the flies are contained, they can no longer breed, and the pest problem subsides.

The Terro product sells for about $8 at local hardware stores. It's sold for $5 on Amazon.com.

Why An 800 Credit Score Doesn't Really Matter

Fri, 11 Sep 2009 07:45:00 -0700

Since 2007, mortgage lenders have clamped down in many areas of underwriting, but none more so than in the area of credit scoring.

Minimum FICO levels are up 120 points or more and conforming mortgage lenders now levy large fees on borrowers whose scores are below 740.

Keeping your credit scores high is a worthwhile goal, but it's not always easy to do -- especially when you don't know the ins-and-out of how the credit scoring system works.

The Wall Street Journal wrote a terrific piece on credit scoring this week. It's full of helpful, relevant tips for home buyers, homeowners, and everyone else.

Aside from covering the five basic components of a credit score -- shown at right -- the piece provides insightfukl advice on credit-related topics including:

The difference between a "hard inquiry" and a "soft inquiry"
Why paying for your credit report is a foolish use of funds
Why it doesn't matter if you have an 800 FICO

The article also talks about the optimal balance a person should carry on their credit cards to get the biggest FICO boost.

Credit scores determine your mortgage rate. Therefore, do what you can to keep your scores high. Follow the tips in the Wall Street Journal article and lean on public resources like myFICO.com.

Having good credit can be a real money-saver. Month after month after month.

The Geographical Concentration Of Foreclosures

Thu, 10 Sep 2009 07:45:00 -0700

Once again, the country's foreclosures are concentrated in just a few states.

As reported by foreclosure-tracking company RealtyTrac.com, more than 50 percent of the country's foreclosure-related actions in August occurred in just four states:

California : 25.76 percent
Florida : 17.4 percent
Michigan : 5.4 percent
Nevada : 5.0 percent

The rest of the "Top 10" foreclosure states included Arizona, Illinois, Georgia, Ohio, Texas and New Jersey.

Versus July's numbers, the U.S. foreclosure rate improved last month. However, the August data is awful in comparison to last year -- foreclosures are up nearly 18 percent.

The silver lining? High foreclosure rates are yielding tremendous opportunities for today's home buyers. Buyers of distressed properties now account for about one-third of all home sales and low mortgage rates and a federal tax credit are spurring sales.

Search the complete August 2009 foreclosure report for yourself, including foreclosure heatmaps and other trends on the RealtyTrac website.

Simple Real Estate Definitions : Quitclaim Deed

Wed, 09 Sep 2009 07:45:00 -0700

By its most common definition, a quitclaim deed is a document by which one person passes legal and financial ownership of a home to another person.

It's also a way for an owner of a home to remove himself from the title to the property.

Often misspelled as "quick claim deed" or "quit claim deed", quitclaim deeds have a multitude of applications, including:

Assigning a home to a trust or entity
Adding a partner to title after marriage
Removing a partner from title after divorce

In order to quitclaim a property, the grantor must have the legal right to assign the property to a grantee, or else the quitclaim deed is worthless. For example, you can quitclaim your interest in City Hall to your neighbor, but it would have no practical or legal consequence because you don't actually own City Hall.

This is where quitclaim deeds vary from warranty deeds (or grant deeds) -- the types of transfers that occur when real estate is sold. In instances of the former, the title to a home is guaranteed to be clear.

Before using a quitclaim deed on your own home, consult an estate planning attorney. Transferring real property can trigger ruin a will, or trigger taxes -- it's important to consult a professional for help.

Help! My Garbage Disposal Is Clogged!

Tue, 08 Sep 2009 07:45:00 -0700

If you've ever dealt with a broken garbage disposal, you know that just having a plumber show up costs in the neighborhood of 65 dollars -- even if the repair takes 30 seconds.

That's why every homeowner should have basic, garbage disposal-fixing skills. Most disposal repairs are the simple kind.

In this 2-minute video from eHow.com, we learn the basic tools for fixing a jammed garbage disposal. It's nothing more than a broomstick, an allen wrench, and needle-nose pliers. Anyone can do it, and it's cheaper than calling for a pro.

Of course, for disposal problems bigger than a simple jam, there's always Angie's List.

Why The Day Before Labor Day Weekend Is Tough On Home Affordability

Fri, 04 Sep 2009 08:08:55 -0700

Volume figures to be light on Wall Street today as traders get a head start on Labor Day weekend. It could make shopping for a mortgage a bona fide challenge.

Expect rate volatility this morning and afternoon and, therefore, by extension, expect wild swings in the Home Affordability Index.

As mortgage rates rise and fall, monthly mortgage payments do, too.

The relationship between "vacation days" and mortgage rate volatility stems from 2 facts -- (1) Conforming mortgage rates are based on the price of mortgage-backed bonds, and (2) mortgage-backed bonds trade just like stocks. You can't make a deal without matching a buyer and a seller at a specific price.

With so many traders on vacation today, therefore, there are fewer opportunities to match buyers and sellers. As a result, expect mortgage bond prices to rise and fall with more velocity than on a "normal" day -- especially because the August jobs report was just released.

So far this morning, mortgage rates have been jumpy and are higher versus Thursday's close.

That said, mortgage pricing is fluid, changing every minute of every day. Today, expect those changes to be exaggerated. If you have a chance to lock a favorable rate, consider taking it because, before long, the rate could be gone.

How To Increase Your Household Cashflow By $500 Monthly

Thu, 03 Sep 2009 07:45:00 -0700

There are two ways to boost your personal cash flow -- increase your income or reduce your spending. The former can be a challenge but the latter doesn't have to be.

The headline of the above video -- "Cut Your Spending By $500 Per Month" -- is somewhat sensational but the advice given during the video is spot-on.

From NBC's The Today Show, the 5-minute piece offers a half-dozen ways to reduce your cash outflows each month, including:

How to negotiate a lower credit card interest rate
Why it's important to go grocery shopping with "a list"
How to "time" certain purchases like tires, linens, and clothing

It also covers saving money on a family pet.

It's often easier to save money than to make money. This video shows how easy it can be.