Nationwide, home affordability has received a serious boost from the combination of falling home prices and falling mortgage rates.

Today, because of the sagging economy, in most parts of the country, the cost of owning a home versus renting one is now very close to its historical average.

That said, though, near every major city, there are some neighborhoods in which home affordability and quality of life are stand-out. Using real estate data from OnBoard Informatics, Business Week highlights these areas in a report it calls the “Best Affordable Suburbs“.

Now, the country’s “Best Affordable Suburbs” doesn’t list the nation’s most affordable suburbs, but instead, a group of cities, towns, and villages in which the populace sits between five and sixty-thousand, and the economy, the schools, the lifestyle and the crime levels are all within a desirable range.

As concluded by Business Week, these are areas in which buying a home is a good value.

At the top of the list is Awake, Wisconsin, a suburb 20 minutes west of Milwaukee, prized for its outdoor lifestyle and healthy jobs market. The complete 50-state listing is posted at Business Week’s website.

In reading the headlines this morning, you’d think that last month’s Existing Home Sales figure signaled more trouble ahead for the housing market.

Quite the contrary.

Beyond the attention-grabbing headlines is the real story; the one that shows — once again — that housing market fundaments are coming back into balance.

As home values tick lower, it appears, value buyers are stepping in and snapping up supply. It’s true that the number of homes sold fell to its lowest levels in 12 years, but we can’t ignore the fact that the number of homes available to buy fell, too.

• Banks have put the brakes on foreclosures
• Economic uncertainty is reducing job-related relocations
• Builders have all but stopped building new homes

The national housing supply is as low as it’s been in more than a year.

Based on the current rate of sales activity, the national housing supply would be 100% sold in 9.6 months — a two-month improvement from the high point set in June 2008.

Demand for homes is expected to rise, too:

• The Federal Reserve is trying to hold mortgage rates low
• Fannie Mae is opening its checkbook to real estate investors
• The stimulus package is granting tax credits to first-timers

So, it’s not that the headlines are wrong; it’s just that they’re incomplete.

In looking at all of the data and not just one sliver of it, we can find hope. Falling supply plus rising demand leads home values higher and that’s the basis for a recovery.

One popular housing theory is that — before a bona fide housing recovery can begin — the cost of owning a home versus renting one must return to historical levels.

If that belief is a truth, a national return to rising home prices may be in store for 2009.

Falling home prices coupled with falling mortgage rates, too, have dropped the relative, after-tax cost of owning a home to 125% of the cost of renting a home.

This is the exact 18-year historical average and not since 2001 has the gap been this small.

As reported by the Wall Street Journal, though, the study has some flaws. For example, the data doesn’t account for ongoing home maintenance costs, nor does it consider real estate tax bills and insurance policies.

But, combining a relatively low cost of ownership with the government’s $8,000 tax credit for first-time home buyers is likely to convert long-time renters into never-before homeowners.

This, too, is thought to be a key element of the housing recovery.

In many markets (but not all), home prices are expected to edge lower through 2009. Provided mortgage rates stay low, the cost gap between owning and renting will shrink even more.

As part of the stimulus package passed last week, Congress authorized a temporary increase to conforming loan limits in certain high-cost parts of the country.

“High cost” is defined by a regions’ median sales price.

With the temporary increase, a greater share of Americans can now qualify for Fannie Mae- and Freddie Mac-backed loans, usually the least expensive source for mortgage money.

Higher loan limits can be good for the housing market and the broader economy for two reasons:

1. Cheaper money can spur new home demand, supporting home values.
2. Higher loan limits render more homeowners refinance-eligible, freeing up cash for spending, saving, or investing.

The complete county-by-county loan limit list is available on the OFHEO website.

Of the 3,232 U.S. counties, 10 percent are considered “high-cost”. Residents of these areas can expect the same low rates offered to the rest of the country, but with a slight premium. Be sure to ask your loan officer about how it works.

Food-borne illness is three times more likely to occur at home than in a commercial kitchen. It’s a fact that surprises a lot of people and one that experts attribute to a myriad of blunders including the improper storage of food, lack of cleanliness and unsafe food handling.

As it turns out, keeping your fridge clean and orderly is just a start.

Here’s a few other helpful tips:

• Produce for salads often grows low to the ground and, therefore, is exposed to fertilizers. Wash thoroughly before placing in the produce bin.
• Never put washed produce back into its original, contaminated container.
• Even if fruit comes with a “peel”, wash it. Whatever’s on the outside transfers to the inside when you cut it.
• Keep milk and cold cuts off the refrigerator door — it’s the warmest part of the interior.
• Adhere to expiration and “use by” dates.
• If you see mold on bread, throw out the entire loaf.

Lastly, remember to wash your hands before handling your food. You don’t have to be playing in dirt to get your hands dirty. The simple act of typing on a keyboard is enough to spread germs.

Clean food + dirty hands = dirty food.

Source
I love you … Let’s clean out the fridge
Kristen Browning-Blas
Denver Post, February 11, 2009
http://www.denverpost.com/ci_11666028

Everything old is new again.

Conforming mortgages are limited by loan size, based on “typical” housing costs around the country. The current conforming limit on a single-unit property is $417,000.

In 2008, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increases in “high-cost” areas around the country. In Los Angeles County, for example, a mortgage could be as large as $729,750 and still be considered “conforming”.

Those temporary increases rolled back effective January 1, 2009, to a maximum of $625,500.

However, as part of the American Recovery and Reinvestment Act of 2009 signed into law this week, conforming loan limits in high-cost areas have been returned to their elevated levels of 2008.

You can see the text on the bottom of page 111 of 407.

Changes to conforming loan limits impact everyone with a stake in real estate, even if their neighborhoods are not considered “high-cost”. This is because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates. The widespread availability of conforming mortgages helps to support home sales nationwide as well as providing ample refinancing options for people that need it.

Lenders have yet to pick up the change, but are expected to shortly. Once they do, more homeowners will be eligible for cheap home financing.

To lookup your neighborhood’s conforming loan limits, visit the HUD Web site. Or, if you have specific questions related to your home or an upcoming purchase, contact me directly anytime.

In Mesa, Arizona, Wednesday, the President presented the Homeowner Affordability and Stability plan, a multi-pronged effort to support the housing market.

The story made the front page of nearly every newspaper in the country.

The president’s plan is sweeping:

• Incent mortgage servicers to work with at-risk homeowners before delinquency starts
• Let homeowners with good credit but little equity refinance to today’s low rates
• Fund Fannie Mae and Freddie Mac to support mortgage markets

It’s a broad plan with many positive angles, but for now, we can’t forget that it’s just a plan. Although the White House shapes and influences housing policy, Congress, Loan Servicers, and the Federal Agencies must still implement and execute it. Until that implementation occurs, these reforms exist only on paper.

It’s a key aspect of the speech that’s not getting coverage.

One thing we learned during the stimulus package debate was that just because the President wants something to happen doesn’t mean that it will. There are always details to be worked out and that’s one reason why the Homeowner Affordability and Stability Plan couldn’t go into effect immediately. There are still loose ends to tie and details to define.

According to its website, the White House lists March 4, 2009 as the plan’s effective date. Until March 4, therefore, nothing in Wednesday’s speech is guaranteed.

The American Recovery and Reinvestment Act of 2009 was signed into law Tuesday in Denver, Colorado. Also on Tuesday, stock markets fell near their November 2008 lows.

The two moves are related.

With each new stimulus; with each potential jumpstart of the economy, Wall Street questions whether the federal push will be enough to make an impact.

Traders ended undecided on that issue yesterday, but resolute in something else — that whatever change stimulus bill brings, it’s not going to come fast enough to help.

The sell-off in equities was a boon to home buyers. For the first time since early-December, mortgage markets gave a sustained rally, extending gains from the 8:30 AM market open through the 4:00 PM market close. Conforming mortgage rates were down on the day.

Longer-term, though, it’s not likely that pattern will last. Not only will the stock market eventually find balance, but, more importantly, there was verbiage in the stimulus bill that increased the nation’s debt ceiling by 53.4 percent. Debt, of course, is often financed with the printing more money and that leads to inflation.

Inflation is the enemy of mortgage rates.

So, for now, the stimulus plan is helping mortgage markets, albeit indirectly. If you’re shopping for home loan, consider locking quickly. When markets flip — and they always do — it figures to be sudden.

(Image courtesy: Recovery.gov)

It looks like a propane tank, but this device is a washing machine, if you can believe it.

Pictured at right is the WonderWash, an environmentally- and budget-friendly laundry product that fits on a countertop and washes with even less water than hand-washing.

From Laundry Alternative, the WonderWash washes 5 pounds of clothes in just a few minutes with a couple of turns on the crank. Its internal pressure system forces detergent through clothes at very high speeds — up to 100 times faster than by a machine.

WonderWash is safe for delicates, too.

So how much is 5 pounds worth of clothes? It’s 10 t-shirts, 30 pairs of socks, or 2 pairs of jeans — the kind of stuff that needs a frequent wash and sometimes in a hurry. It’s great for camping and RV trips, too.

WonderWash comes with a 1-year warranty and a 30-day, money-back policy. It costs $42.95.

Consumer Confidence fell this month for the first time in three months, reflecting Americans’ concern for the economy, housing, and the financial system.

The reading isn’t much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.

Despite falling confidence, however, the housing industry appears to be reviving. Sales of existing homes are on the rise and an increasing number of homes are under contract to sell. And, if these statistics seem out of place, consider the external forces that are accompanying this “down” economy:

• In some markets, home values have plummeted to early-2000 levels
• Government intervention has brought mortgage rates to near-5 percent
• Congress is pledging key support to housing and mortgage markets

These points can’t be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like “Do you think you’ll be better off a year from now?” and “What’s your attitude toward buying major household items?”. It’s useful information for economists, but not so much for home buyers.

Anecdotally, a lot of the country’s housing markets have already started their recovery. Couple that with the natural momentum of Spring Buying and the stimulus package’s proposed first-time home buyer tax credit and you can clearly see the disconnect.

Just because confidence is down doesn’t mean that home prices will be, too.

With Congress reaching agreement on a $789 billion stimulus package for Americans and the President expected to sign it into law, the clock may be ticking for this year’s home buyers and homeowners.

The package contains two benefits related to housing.

The first provision is fairly well-known. It gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and August 31, 2009.

This is a true tax credit.

To reduce misuse and abuse, however, the $8,000 credit is contingent on home buyers holding property for at least 3 years. If the home is sold in fewer than 3 years, the tax credit must be repaid to the government. It’s also worth noting that the date range applies closings and not sales agreements.

Closings must occur within these 8 months to be eligible.

A second noteworthy feature in the package is that the stimulus package gives existing homeowners incentive to “green” their homes. With available tax credits for energy-efficient windows and doors, furnaces and insulation, homeowners can claim larger tax deductions based on home improvement, up to $1,500.

But, just because the government provides housing-related tax benefits doesn’t mean you should just act on them blindly. Tax liability is a highly individual item and you may be ineligible for any number of reasons. Be sure to discuss your plans with a qualified accountant before committing to a plan.

His speech was much anticipated, but it was what Treasury Secretary Tim Geithner didn’t say Tuesday that helped home affordability.

Mostly it was because of “safe-haven” buying on Wall Street.

Safe-haven buying is when investors move cash to the safest investments possible for fear of losing their money elsewhere.

This existence of the pattern is evident in looking at yesterday’s Dow Jones Index timeline. Stock markets were down some in the morning. Then, at 11:00 AM ET, in the moments immediately following the public release of Geither’s speech as text, stock market plunged by about 2 percent.

As the speech was delivered live, markets fell by 1 percent more.

It’s not that Geithner’s speech was a bad one, per se. It’s just that Wall Street was looking for a detailed plan that included remedies for banking, housing, and the economy overall. What it got instead was an outline for a plan and a frank discussion about the complexity of the economy.

Stock markets had been bid up last week in anticipation of a bailout. Yesterday’s action was the subsequent sell-off because economic uncertainty continues to linger.

It all ended up being good news for mortgage rate shoppers, though. When the dollars fled the stocks, they made their way towards safer, less-risky investments like mortgage bonds. And, because mortgage-backed bonds set the “going rate” for conforming mortgages nationwide, the added demand yesterday caused mortgage rates to fall, making mortgaged homes less expensive on a monthly basis, relative.

For now, rates remain near the bargain levels set in early-January. As the Treasury clarifies its plan in the coming weeks, however, rates are susceptible to big swings.

Friday, Fannie Mae rolled-back one of its least popular mortgage guidelines updates of the last 12 months.

Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties. The restriction reversal does come with new minimum requirements, however.

Homeowners buying a 5th, 6th, 7th, 8th, 9th or 10th home must meet the following standards, as set forth by Fannie Mae:

1. 720 credit score
2. 25% downpayment for a 1-unit (30% for a 2-4 unit)
3. No mortgage delinquencies in the last 12 months
4. 6 months of reserves for each investment property

In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves.

According to Fannie Mae, the change rationale is that experienced investors can “play a key role in the housing recovery”. Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit.

Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.

And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they’ve been stymied by the 4-property restriction, too.

As Americans move from net spenders to net savers, it seems that we’re all looking for ways to save some extra cash. As part of its ongoing “Save-a-Buck” series, NBC’s The Today Show offers some pointers.

Among the tips, there’s a split between common sense items and I-never-thought-of-that advice including:

• Why you should cook with your microwave more often
• Why you should keep closet doors closed
• How your dryer’s positioning may impact your energy bill

In all, the tips from the 4-minute video can save $125 per month — $1,600 per year. They’re not all practical, but they’re easy to implement.

Employment figures released this morning show that the economy has now shed 3.6 million jobs since December 2007, included close to half that in the last 3 months alone. The Unemployment Rate is now 7.6%.

But jobs aren’t fading in every housing market equally.

As reported by Ajilon Professional Staffing, there are still areas around the country in which unemployment rates are low and job outlooks are strong.

Led by Madison, WI, Ajilon calls them “10 Cities For Job Growth in 2009” and they are:

1. Madison, WI
2. Washington, D.C.
3. Boston, MA
4. Richmond, VA
5. Milwaukee, WI
6. Pittsburgh, PA
7. Baltimore, MD
8. Seattle, WA
9. Houston, TX
10. Dallas, TX

There’s no common denominator uniting the list — cities are buffered by industries as varied as healthcare, energy, and technology. However, it’s worth noting that — in each of these 10 towns — housing markets seem to be performing above-average versus the rest of the nation.

Clearly, there’s a link between jobs and housing.