Wednesday, November 26, 2008

Existing Housing Sales Stable!

12-month history for Existing Home Sales ending in October 2008In real estate, the term existing home refers to a "used" property; one that can't be classified as new construction.

The number of existing homes sold each month is tracked by the National Association of REALTORS. The report is often used as a gauge for the health of the real estate market nationwide.

In October, nearly 5 million existing homes sold across the U.S. This figure represents a slight drop from September's reading, and a equally slight drop from the October 2007 data.

But, October's Existing Home Sales figures marked the 14th straight month in which Existing Home Sales straddled 5-million units. This is a remarkable statistic because 14 months of anything is a pattern, not a blip. Despite what the news tells us, Americans are buying and selling real estate at a somewhat steady clip.

In Philadelphia, our real estate market has seen some decline in the number of homes sold through the MLS this year, but a remarkable stability in price. Combined with the affordable interest rates available to buyers to day, our city is poised (according to Smart Money Magazine) for a housing recovery. Smart buyers who can should be out there buying right now.

As we head into the Holiday Season, buyer activity should slow, reducing demand for homes. At the same time, however, widespread foreclosure moratoriums should reduce the number of homes available to buy. These forces should counter-act to help keep the market (and prices) in balance.

(Image courtesy: USA Today)

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Monday, November 24, 2008

Deflation and What it Means -

Plunging consumer prices brings on fears of deflationBusiness television and newspapers have made deflation a hot topic this week and, since Monday, Google has tracked 13,000 mentions of it.

Deflation is a recurring cycle in which the prices of goods and services fall. Isolated to one industry or sector, falling prices is the natural result of competition.

For example, when DVD players were first introduced, they were tagged at $800.

Today, you can buy them for less than $20.

Across many industries, however, and happening at the same time, falling prices can shut down the economy. Rather than buy things on the cheap, people stop buying anything at all. And why would they? The same items will cost less tomorrow.

And this is the problem with deflation -- it halts consumer spending and consumer spending makes up two-thirds of the U.S. economy. When it stops, the economic result is dwindling corporate revenues which leads to:

  1. Layoffs of the workforce, which leads to...
  2. Less consumer spending, which leads to...
  3. Dwindling corporate revenues, which leads to...

And the spiral continues.

Deflation can be much more insidious that its expansionary counterpart -- inflation. Inflation is when the prices generally rise over time and it's an economic condition through which governments can comfortably navigate. Deflation, on the other hand, is more rare and, therefore, fewer practical control measures exist.

Whether the U.S. economy will slip into deflation is a matter of debate.

The Fed has cut the Fed Funds Rate to promote economic growth and those changes can take up to 12 months to work their way through the economy. Deflationary pressures we're seeing today, in other words, may have already been addressed and corrected by Ben Bernanke's 10 rate cuts in the last 14 months.

Until the market figures it out, though, expect that each mention of deflation will hurt the stock market and help the bond market -- including the mortgage-backed variety. This should help lower mortgage rates and make homes more affordable.

(Image courtesy: The Wall Street Journal)

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Friday, November 21, 2008

Vacuum cleaners are meant clean our homes, but in addition to picking up dirt, dust and mites, most vacuum cleaners also spread harmful bacteria.

As revealed in this this 4-minute video from NBC's Today Show, E. Coli, salmonella and other virus-causing entities are commonly found on vacuum cleaner under-bristles and, in some cases, bacteria can be 100 times more concentrated than on a public toilet seat.

The video goes on to give some general rules to limit indoor germ exposure -- some more practical than others. The rules include:

  • Avoid wearing shoes indoors
  • Wash your hands after playing on the carpets and rugs
  • Don't stop vacuuming

And, of course, having the right hardware can help, too.

If it's time to replace that old vacuum, start your search online with a discount store like Most online sites will have a wider selection than your local hardware store and shipping is usually free.

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Tuesday, November 18, 2008

2009 Jumbo Loan Limits

2009 Conforming Loan Limit TableFor the 4th consecutive year, the government has set the conforming mortgage loan size limit at $417,000.

A conforming mortgage is one that, quite literally, conforms to the mortgage guidelines set forth by Fannie Mae or Freddie Mac.

The 2009 conforming loan limits, as released by the government, are:

  • 1-unit properties : $417,000
  • 2-unit properties : $533,850
  • 3-unit properties : $645,300
  • 4-unit properties : $801,950

Loans in excess of conforming loan limits are more commonly called "jumbo", or "super jumbo" home loans, depending on their size.

Out-sized mortgages like these are often more costly than their conforming-mortgage counterparts because jumbo loans are not guaranteed by the U.S. government like Fannie Mae loans are.

There are exceptions to the loan limits, however.

Left over from the Economic Stimulus Act of 2008, specific, "high-cost" areas around the country have their own conforming loan limits, not to exceed $625,500. There are 59 designated high-cost regions in the U.S., most of which are in California.

Loan limits are re-assigned each year, based on "typical" housing costs around the country. Since 1980, as home prices have increased, so have conforming loan limits. As home prices have fallen in recent years nationwide, however, the conforming loan limit has not.

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Saturday, November 15, 2008

Not Caulking Your WIndows? Might As Well Leave Them Open!

Windows of a brick building in Washington DCImage via Wikipedia

If the amount of air that leaked from a typical home's gaps and cracks was measured, it would equal the amount of air that leaves through an open window.

This is why so many Home & Garden experts recommend a recaulking of your home prior to the Winter -- a solid caulk job can reduce a home's Winter energy bill by 20 percent.

In this 2-minute video from Home Depot, learn how you can to identify leaky windows, and then how to fix them using caulk, putty knives and a host of other tools. Or, if DIY is not your style, find a competent contractor online.

The project is small so the costs should be low.

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Predictions always make me uneasy. If they're correct I want them to be true right away. If they're inaccurate, I hate the false hope, but I've always felt pretty confident about the real estate market in Philadelphia.

Our market doesn't get the benefit of the huge wall street salaries that Manhattan has, nor the large compensation earned by entertainers and the entertainment industry in Los Angeles, so our peaks are not stratospheric, but our valleys are not as deep either. And obviously, our recoveries come earlier as well.

Recently Smart Money published an article about entitles "Home Prices: Now for the Good News" which had the following information;

Philadelphia bashers like to note how the city doesn’t quite keep pace with its northeastern neighbors New York and Boston. When it comes to real estate, that may be a good thing. While prices in the Big Apple and Beantown soared during the bubble years from 2003 to 2006, the City of Brotherly Love charted slow and steady growth. Over the past year, Philadelphia prices have stayed stable, while New York and Boston suffered small declines. And only 7 percent of Philly-area homeowners sold for a loss in the past year, according to Zillow—well below the national average of almost 24 percent.

The region did see some overbuilding, but employers such as pharmaceutical and other health care companies are drawing an influx of newcomers to the suburbs.

That’s especially true in Collegeville, a former bedroom community 30 minutes northwest of Philly’s city center that is now home to operations of both Wyeth and GlaxoSmithKline, with mutual fund giant Vanguard just a few towns down the road. So named for the leafy campus of Ursinus College, Collegeville offers multi-acre horse farms and country estates for executive types, with more quaint accommodations in town for tweedy academics. Prudential Fox & Roach, a brokerage with about 4,000 agents in greater Philadelphia, says Collegeville prices are up 16 percent this year. “We are getting a lot of lowball offers, but we are negotiating them up,” says realtor Megan Goldstein. Other Philly suburbs are benefiting from the more traditional migration of young families from the city center. The Boyds, the couple who sold their house in town at a profit, are using the proceeds to buy a four-bedroom, 3,000-square-foot home in a new development in Skippack, Pa.

So it seems that once again, a third party source is telling people that Philadelphia's real estate market is a good bet - And that now is probably a good time to get out there and buy-

Its nice to be validated....

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Friday, November 14, 2008

Get your Mortgage Now - Not Later!

75 percent of banks surveyed reported that prime mortgage guideline got tougher in Q3 and Q4 2008The Federal Reserve confirmed what most of us already knew -- getting qualified for a "prime mortgage" is increasingly more difficult.

In a quartely survey of 84 banks, 75 percent of respondant banks tightened mortgage guidelines over the last 3 months for the most qualified of home loan applicants.

"Prime" is a vague term when it comes to mortgages, but, historically, a prime borrower is one that can document:

  • A well-documented credit history
  • Very high credit scores
  • Very low debt-to-incomes

Historically, banks bent over backwards to lend money to this class of borrower. Today, they're thinking twice.

The chart's steep ascent reinforces that members of all tax brackets face consequences from the current credit market turmoil. And, although some corners of credit looked poised to recover -- interbank lending, for one -- the mortgage market is yet unaffected and should be among the last to thaw.

All prospective home buyers should prepare for the likelihood that mortgage guidelines continue to toughen before they start to ease. Mortgage applicants on the cusp of being approved today will almost certainly be turned down for a mortgage in 2009.

Owning real estate can require a tremendous amount of advance planning and, sometimes, looking at the past is the best way to prepare for what's coming ahead.

According to the Federal Reserve's survey, what's coming ahead is more mortgage application scrutiny.

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Thursday, November 13, 2008

How Unemployment May Make your House More Affordable

The economy shed 240,000 jobs in October 2008On the first Friday of every month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly, it's called the "jobs report" and the October's data is trending with the rest of 2008.

After shedding another 240,000 jobs last month, the economy has now put 1.2 million Americans out of work this year and unemployment rates have climbed to 14-year highs.

As a strange twist, though, today's weak jobs data may lead to a positive turn for the economy and for housing in 2009.

In the wake of the jobs report, members of Congress are already calling for both tax cuts and direct stimulus to reverse the course of the economy. Both of these actions would put money back into U.S. citizens' household budgets, spurring consumer spending nationwide.

Because consumer spending accounts for 70 percent of the economy, this would be expected to push the economy forward at a time when it natural forces are slowing it down.

In addition, markets are betting that the Federal Reserve will cut the Fed Funds Rate below its current 1.000 percent level. This, too, would spur spending because the Fed Funds Rate is directly tied to consumer credit card rates and business credit lines.

Expectations for stimulus are one reason why mortgage rates have not risen today as high as they otherwise would have if this were a "normal" market.

Mortgage rates are slightly elevated as we head into the weekend, but don't be surprised if there's a late-afternoon push that brings them lower. For active home buyers, this could help home affordability as we cruise towards the holiday season.

(Image courtesy: USA Today)

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Tuesday, November 4, 2008

The Pesidential Election is Finally Here!

Tina Fey & Sarah Palin  side-by-side on SNLImage by TaraLivesOn via Flickr
I don't about you, but I'm really glad that election day is here.

Not because I'm so glad that my candidate might win the election, or because I think that somehow everything will get better tomorrow after the election is done and the people have made their decision. I'm not even glad about it because of the obvious historic imapct of the election - that no matter what happens today, tomorrow will be a first for our country. Either the first African American President or the First Female Vice President.

No, I'm almost embarrassed to say I'm glad today is election day becuase it may mean an end to the ongoing speculation analysis ad second guessing done by the media. Though I must admit that i Loved Tina Fey's impressions of Sarah Palin (possibly the only thing about the election I have not tired of) I am over the endless accusations and suppositions and analysis.

Maybe tomorrow, whoever it is, can possibly get started thinking about actually running the country and getting our economic problems resolved in an expeditious manner. It would be a real relief!

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