Existing Home Sales Highest in Over 2 Years

Existing Home Sales are at their highest levels in over 2 years, according to an October report published by the National Association of REALTORS (NAR). Fueled by increased activity among first time home buyers, the existing housing market has shown gains in five of the last six months. Based on the recent 9.4 percent increase from August to September, NAR is predicting annual sales volume of 5.57 million units for 2009, up from the earlier prediction of 5.10 million units.

Buyers are taking advantage of low interest rates and a first time buyers tax credit available through the end of November. “Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” said Lawrence Yun, NAR chief economist. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Total housing inventory is trending down across the country, reaching its lowest level in two and a half years. Inventory fell to 3.6 million homes available for sale at the end of September. This represents a 7.8 month supply at our current sales pace. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year,” Yun said.

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10 Tips to Save Energy and Money in Your Home

A whopping 46 percent of home energy use is, umm, energy loss! In other words, no productive energy use at all! Here are simple ways of reversing this, mostly by changes of habit.

1. Each degree you turn down the heat saves 3 percent of heating costs, while each degree you raise the temperature of your air conditioner saves 3-4 percent of cooling costs. By changing the temperature by 2 degrees all year, you can save about 2,000 pounds of C02 a year.

2. Cook with a slow cooker or a toaster oven (or even a solar oven!) to reduce electrical use from kitchen appliances. For a meal that requires one hour to cook in an electric oven, and which uses 2.7 pounds of C02, a crock-pot uses 0.9 pounds of C02 for seven hours, a toaster oven takes 1.3 pounds of C02 for 50 minutes, and a microwave only 0.5 pounds of C02 for 15 minutes of cooking. A solar cooker requires NO C02!

3. Switch to a laptop instead of using a desktop computer and cut three-quarters off your electrical use. Turn off the laptop at the end of the day.

4. Switch to cold water washing and save 80 percent on energy used for laundry and save an estimated $60 a year. Hang dry your clothes instead of using the dryer and save 700 pounds of C02 a year.

5. Plug anything that can be powered by a remote control or that has a power cube transformer (little black box) into a power strip, and turn it off, and/or unplug, when not in use. (Power cubes are 60-80 percent inefficient.)

6. Turn off the lights when you aren’t using them and reduce your direct lighting energy use by 45 percent. Stop using heat-producing halogen lamps (they can also be fire hazards). Install occupancy or motion sensors on outdoor lights.

7. Switch to compact fluorescent from regular incandescent bulbs and use 60 percent less energy per bulb and save 300 pounds of C02 a year.

8. Wrap your water heater in an insulation blanket and save 1,000 pounds of C02 a year. Insulate your hot water pipes.

9. Use public transportation whenever possible, carpool, shop locally, and ideally switch to a hybrid or energy-efficient car (if you haven’t already).

10. Keep your tires inflated to improve gas mileage by 3 percent. Every gallon you save also saves 20 pounds of C02 emissions.
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Weekly Economic Summary – October 23, 2009

OVERVIEW ~ Mortgage rates rose insignificantly, as the Dow Jones Industrial Average for shares of stock swayed back and forth across the 10,000 mark. In the middle of investors’ greater inclination to leave aside the safety of Treasury securities and seek out investments with higher risks and therefore higher yields, the mortgage interest rate only accelerated from about 5 to 10 basis points, depending on whose data we’re looking at. The spread between the 10-year Treasury note and the average 30-year mortgage rate rose very inconsiderably from 1.96% to 2.04% (as of October 19^th’s close), indicative of sustainable interest rates with insufficient immediate inclination to rise or fall by a significant amount.

We should note once again that the average fixed mortgage rate includes not only the whole range of private and conforming mortgages but as well as the assorted jumbo mortgages. In the recent past, these have been priced much higher than have mortgages with lower ceilings, but they are now returning to levels that are closer to other rates and are more acceptable to buyers. Thus more jumbos are being written. Still, conforming loans, those that qualify for purchase by Fannie Mae and Freddie Mac, make up the greatest share of mortgages being written. Thus, the Freddie Mac average interest rate, which rose a slight 5 basis points last week, is very crucial. The average rate here remains below 5% at 4.92%.

THE WEEK ~ The focus of attention for much of the week was the Dow Jones Industrial Average. Investors watched closely to see if it could climb above the psychologically important 10,000 mark. For many, the rapid climb back to the 10,000 level indicated a nearly recovered stock market; for others, though, it raised questions about whether the stock markets could sustain their laudable gains.

The week saw a few other announcements that were similarly capable of raising questions among investors. For one thing, the holdings of Treasury securities by foreign central banks have risen to a record level ($2.098 trillion) in spite of the fact that the dollar’s exchange rate has declined. A declining dollar is powerful to foreign investors because an investor loses some of his or her profits when exchanging out of dollars and into their own currency. This erosion of profits often causes foreign investors to bid Treasury rates higher or to avoid the auctions, which results in the same thing. Why this is happening now no one knows, and some analysts are concerned that it lacks due caution in the face of a falling dollar.

News was released later in the week that the return on high-yield bonds (often referred to as junk bonds, which are considered the riskiest investments among bonds) had risen a stunning 50.23% over the past year. This is difficult to explain, even as such bonds are relatively rare today.

 Jutta “Utah” Burden

Keller Williams Realty

Email: Utah@UtahBurden.com

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Keeping Up With Your Mortgage

EARLY last year, Fannie Mae began offering a surprising option for struggling homeowners: an unsecured personal loan of up to $15,000 to cover missed mortgage payments.

But vast numbers of borrowers who took out these loans ultimately defaulted. And though still in operation, that program, called HomeSaver Advance, is now being de-emphasized.

Fannie Mae’s initiative was intended to help those who had missed at least two mortgage payments because of a temporary setback like a job loss. Borrowers were eligible only if they had overcome that hardship, but had not yet caught up on their mortgages. The program’s loan carried a 5 percent interest rate and a 15-year term.

But the Federal Housing Finance Agency, which oversees Fannie Mae, the government-sponsored company, said that the program’s participants got into trouble quickly. Of the first 3,300 loans made from February through April of last year, the agency said, almost 70 percent went to borrowers who subsequently defaulted again on their first mortgages. The agency said that Fannie Mae made more than 91,000 loans, averaging $7,100 each, in the first year.

The success rate has since risen slightly. Fannie Mae’s most recent quarterly financial report said that about 60 percent of the mortgages salvaged with HomeSaver Advances in the first nine months of 2008 were at least two months past due, or had failed.

Amy Bonitatibus, a Fannie Mae spokeswoman, would not say how many of the more recent loans were more than 30 or 45 days delinquent — levels that often indicate impending default. The fact that at least some of the loans have not gone into default, however, could help account for Fannie Mae’s decision to continue the HomeSaver Advance program. “HomeSaver Advance loans continue to be a viable foreclosure prevention solution,” Ms. Bonitatibus said.

But she added that other strategies — especially loan modifications like those recommended in the government’s “Making Homes Affordable” program — are increasingly a first line of defense against foreclosure.

Borrowing your way out of trouble is not an uncommon strategy, and can be useful for some people, said John Snyder, the manager of foreclosure programs at NeighborWorks America, a nonprofit group that assists homeowners. “But you have to do it carefully,” he added.

Credit card advances and payday loans, for example, amount to only short-term fixes with high interest rates, Mr. Snyder said. He noted that in many states, municipal agencies and nonprofit groups offer grants and “rescue loans” for those verging on foreclosure. But in almost all cases, borrowers cannot apply for these loans directly.

Rather, they must first seek counseling with a foreclosure-prevention specialist affiliated with the nonprofit group that offers rescue loans, or one that is sanctioned by the government agency that offers the loans.

In Fannie Mae’s HomeSaver Advance program, borrowers are not required to take part in financial counseling beforehand.

The counseling could account for the successes in some other rescue loan programs. The Neighborhood Economic Development Advocacy Project in New York City, for instance, last year started making foreclosure avoidance loans to those who receive financial counseling. Of the 15 loans made so far, none has defaulted.

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