The Case-Shiller Index posted awful numbers in its most recent reading. Each of the index’s 20 tracked markets showed home price deterioration between September’s and October’s respective reports. Some markets fell as much as 2.9 percent.
The drop in values is nothing about which to panic, however. The Case-Shiller Index is just re-reporting what we already knew. It’s a common theme with the Case-Shiller Index, actually; a trait traced to the report’s methodology.
The Case-Shiller Index is an imperfect housing indicator with 3 inherent flaws.
The first flaw is that the index makes use of a limited data set, tracking values in just 20 cities nationwide. That data set is then projected across the more than 3,100 other municipalities in the United States. The “national figures”, therefore, aren’t really national.
The second flaw is that, even within the tracked 20 cities, not all home sales are included. The Case-Shiller Index only tracks sales of single-family, detached homes, and within that market subset, it only uses homes that are “repeat sales”. This specifically excludes sales of condominiums and multi-family homes, and new construction.
Lastly, Case-Shiller Index’s third flaw is its “age”. The Case-Shiller Index reports on a 60-day delay, and the values it reports are tied to contracts written even longer ago. Sales contracts from July and August are responsible for October’s closings so when we see the Case-Shiller Index as reported in December, some of the data it’s reporting is 5 months old already. That’s too old to be relevant.
Looking back at 2010, housing was at its weakest between May and August. Therefore, it’s no surprise that the most recent Case-Shiller Index shows significant weakness. Looking forward, we should expect the report to improve — especially because of how strong New Home Sales and Existing Home Sales have been since summer.
The Case-Shiller Index is helpful for economists and policy-makers. It’s not much good for individual homeowners, however. For accurate, real-time housing data, talk to a real estate professional instead.
With 2010 coming to a close, the “experts” are out in full force, making predictions for next year’s housing and mortgage markets on business television and in the papers.
The problem with housing and mortgage predictions is that — like all predictions — they’re just educated guesses about the future. Nobody knows what will really happen with the housing and mortgage markets in 2011. All anyone can do is theorize. As laypersons, though, it can be hard to separate theory from fact.
Television can make that task even more difficult at times.
As an example, when a well-dressed economist goes on CNBC and presents a clear, succinct argument for why home prices will fall on 2011, we’re inclined to believe the analysis and conclusion. After all, the outcome seems plausible outcome given the facts. But then, immediately after, a different economist presents an opposite argument — that home prices will rise in 2011 – and her analysis seems sound, too.
Even Freddie Mac can’t see the future.
Last year, the government group predicted mortgage rates to 6 percent in 2010. That never happened, of course. Instead, conforming mortgage rates dropped over a 7-month period this year to levels best be described as “historic”. Freddie Mac couldn’t have been more wrong.
So, what’s a Cincinnati homeowner to believe?
About the only thing that’s certain right now is that mortgage rates remain low by historical standards, and that home prices do, too. Also, that both housing and mortgage markets appear to be riding momentum higher into 2011. This suggests that it will be more expensive to buy and finance a home by the end of 2011.
Until that time, however, predictions are just guesses.
Like most housing data in November, the most recent New Home Sales report showed sales volume increasing last month, and home supplies falling.
According to the U.S. Department of Commerce, sales of new, single-family homes increased to 290,000 in November on an annual basis, a figure equal to the New Home Sales 6-month rolling average, and a 6 percent improvement from October.
At the current pace of sales, the national supply of new homes for sale will be exhausted in 8.2 months — a strong 0.6-month improvement from October.
This data is consistent with the most recent Existing Home Sales report. It showed sales volume rising 6 percent, too, and a similarly-strong inventory drop.
For the housing market in Cincinnati , it’s another step in the right direction. Since May’s post-tax credit plunge, home prices have stabilized and a foundation for growth has been built. Home builder confidence data highlights this point.
Also interesting in the November New Home Sales report is the volume breakdown by price point. Less expensive homes powered the market:
Homes under $200,000 : 47 percent of all sales
Homes between $200,000-$299,999 : 29 percent of all sales
Homes between $300,000-$399,999 : 14 percent of all sales
Luxury homes accounted for less than 2 percent of sales last month suggesting that builders count first-time and move-up buyers as their core market.
As 2010 comes to a close, housing looks poised for a rebound. Sales in all categories are improving, relative to 6 months ago, and the economy is improving. In conjunction with rising mortgage rates, the best time to buy a new home may be now.
Americans spend a lot of time cooking and eating in their kitchens. What are you doing to keep yours germ- and bacteria-free?
In this two-part, 6-minute video from NBC’s The Today Show, you’ll first ride alongside a county health inspector as he visits a home and inspects its kitchen. The tested areas include the refrigerator, the cutting boards, the sponges, the utensils, the ovens, and more. Ultimately, the home “passes”, but not before the inspector points out some problems from which we all can learn.
Then, in the video’s second part, you’ll learn how to keep your own kitchen clean and healthy.
How much bleach to dilute to clean sinks, and how often to clean them
Why “time-to-evaporate” is an important metric when shopping for disinfectants
Comparing wood vs. glass vs. plastic cutting boards, and how to sanitize them, respectively
Keeping a germ-free kitchen requires constant attention and a routine cleaning schedule. Thankfully, it’s a simple process. Follow the basic steps as outlined by The Today Show, and your home would pass inspection.
Existing Home Sales jumped another 6 percent in November, the report’s third month of improvement since bottoming in July.
According to the National Association of REALTORS®, a quarter-million more existing homes were sold during the annual period ending in November as compared to October. An “existing home” is a home that cannot be considered new construction.
Additionally, the national housing supply dropped by a full month. At the current pace of existing home sales, the complete stock of homes for sale will be exhausted in 9.5 months.
November’s strong housing data is yet another signal to buyers in Cincinnati that the housing market’s foundation has been rebuilt, and that a rebound is imminent. It’s helped that there are great “deals” on which for buyers to pounce.
In November, short sales and foreclosures accounted for one-third of all existing homes sold, and carried an average price discount of 10 percent and 15 percent, respectively, as compared to non-distressed sales.
Repeat buyers continue to power the market, too, representing more than half of all home buyers.
First-time buyers : 32% of all buyers
Investors : 19% of all buyers
Repeat buyers : 51% of all buyers
This breakdown suggests that housing has regained its footing. First-time buyers can’t support a market long-term like repeat buyers can and, as compared to 12 months ago, the percentage of repeat buyers is now up 14 points.
Home buyers take note. Raw sales volume is rising and available inventory is dropping. Basic supply-and-demand tells us that this will lead home prices higher. Furthermore, mortgage rates are rising quickly, increasing the cost of homeownership.
If buying a home is a part of your plan for 2011, consider accelerating your purchase time frame. Existing homes account for more than 80% of homes sold nationwide. If the market keeps improving like this, your home affordability will worsen.
The number of single-family Housing Starts increased in November, adding 30,000 units as compared to October.
The Census Bureau defines a “housing start” as a home on which construction has started.
November’s starts represents a 7 percent increase from the month prior. However, if you see the Housing Starts story online or in the papers, you’ll notice that the press is calling the market gain at 4 percent.
So which result is right? The answer is both.
The government’s monthly Housing Starts data is published as a composite report; lumping activity among 3 separate housing types into a single, group reading.
The 3 housing types are:
Single-family homes (i.e. 1-unit)
Multi-unit homes (i.e. 2-4 units)
Apartments (5 units or more)
The group reading is a fair description of the market and it’s easy-to-understand. As a result, it’s what the press tends to report. However, for home buyers in Ohio , it’s the single-family category that’s most relevant.
The reason why single-family homes accounted for 84% of November’s Housing Starts is because that’s the type of home that most buyers buy. Few purchase 2-4 unit properties, and even fewer buy entire apartment complexes.
That said, it’s possible that November’s Housing Starts data is wrong. Within the press release, the government placed an asterisk next to the data, indicating that the figure’s margin of error exceeds its actual measurement.
Against a 7 percent gain, the reported margin of error is 13.5%. There is no statistical evidence, therefore, to prove the actual change was different from zero.
If Housing Starts did fall in November, it will help to reduce the Cincinnati housing inventory, which will, in turn, help keep home prices high. For home sellers, this could mean good news. Fewer homes for sale increase competition among buyers.
According to foreclosure-tracking firm RealtyTrac, the foreclosure filings fell 21 percent in November to 262,339 units nationwide. A foreclosure filing is defined as default notice, scheduled auction, or bank repossession.
November marked the first time since February 2009 that the number of monthly filings failed to surpass 300,000 units.
There were other notable November statistics, too, included:
November’s 21 percent month-to-month decrease was the largest in RealtyTrac’s recorded history
November’s 14 percent year-to-year decrease was the largest in RealtyTrac’s recorded history
Nevada led the nation in foreclosure activity for the 47th straight month
However, we can’t read into November’s RealtyTrac reporttoo much; ultimately, history may treat it with an asterisk. Controversy surrounding the so-called robo-signers forced some of the biggest banks to institute a temporary halt to foreclosures in November. Foreclosure activity did fall last month, but the moratorium makes the figures look better for housing than if there had been no interference.
The halt in foreclosures is also why Utah leaped into the #2 state for foreclosures nationwide. Perennial foreclosure-leading states like California, Michigan and Arizona posted double-digit improvements in November whereas Utah did not.
Banks have since resumed foreclosure activity so December’s results may be a better gauge for how the market is truly performing.
Foreclosures tend to be sold at discount and low home prices can entice home buyers to make an offer. If you’re such a buyer in Cincinnati and want to look at foreclosed homes, talk to a real estate agent first.
Although there’s a host of online search engines that specialize in foreclosures, a licensed agent may have access to broader inventory, plus the ability to negotiate it more effectively.
Over time, wooden furniture shows signs of age. Wear-and-tear from everyday use can lead to dings and scratches that are both distressing, and unsightly. But before you bring your piece to a specialist for repair, you can try the much-less-expensive, do-it-yourself route.
In this 50-second video from HowCast, you’ll learn how to use a walnut and a soft cloth to “erase” scratches from furniture:
Remove the nut from its shell
Rub the nut on the scratch
Wait 3 minutes
Buff the area with a soft cloth
The repair works by allowing the nut’s natural oils to soak into the wood, which reduces the “white” appearance of a scratch. Other nutes work, too, including almonds and pecans. Or, you can opt for a professional product like what’s offered at Amazon.com.
Anything deeper than a surface scratch, however, and you’ll want a specialist involved.
Home builder confidence is holding firm this month, according to the National Association of Home Builders.
The group’s monthly Housing Market Index survey posted 16 for December. That’s the same value as from November. It’s also equal to this 2010’s average HMI reading.
HMI is scored on a scale of 1-100, and is a composite of 3 separate home builder surveys measuring single-family sales; projected single-family sales over the next six months; and prospective buyer foot traffic.
The results of the 3 surveys were as follows:
Single-Family Sales : 16 (unchanged from November)
Projected Single-Family Sales : 25 (unchanged from November)
Prospective Buyer Foot Traffic : 11 (from 12 in November)
Values of 50 or better indicate favorable conditions for home builders. Values below 50 indicate unfavorable conditions.
In other words, although improving, conditions for home builders remain less from excellent. Home buyers in Cincinnati can use this to their advantage. When builders feel pressure from the market, they’re more likely to offer discounts.
On the other hand, job growth is returning, the economy is expanding, and mortgage rates are rising. These 3 factors are thought to boost housing markets. So, despite an unfavorable HMI reading, home builders might still be less willing to “make a deal”; holding out for a better 2011.
If you’re buying a newly-built home in the Mt Lookout area , or expect to buy sometime in 2011, keep an eye on home builder sentiment surveys. The better the builders feel, the more you may be asked to pay to buy your next home.
Loan-level pricing adjustments are mandatory loan fees based on a borrower’s specific default risk.
First introduced in 2008, LLPAs were Fannie Mae’s and Freddie Mac’s logical response to massive balance sheet losses. At the time, the housing market was deteriorating and mortgage delinquencies were rising.
To “better align with loan risk characteristics”, the two entities created specific fees to be associated to specific loan traits, to be charged to all borrowers.
LLPAs are still in existence today.
Today’s loan-level pricing adjustments can be grouped into 5 basic categories. Application exhibiting any of the 5 traits can trigger LLPAs, adding to a borrower’s loan fees:
Credit Score (i.e. the borrower’s FICO is below 740)
Property Type (i.e. the subject property is multi-unit)
Occupancy (i.e. the subject property is an investment home)
Structure (i.e. there is a subordinate/junior lien on title)
Equity (i.e. mortgage insurance is required by the lender)
In many respects, loan-level pricing adjustment are similar to auto insurance. All things equal, the driver of a “fast” car will pay higher costs than the driver of a “safe” car. The same is true for mortgages.
Loan-level pricing adjustments are public information. Fannie Mae publishes the complete LLPA matrix on its website. The chart can be confusing, however. If you have questions about how LLPAs work, talk with your loan officer.
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that since November’s meeting, the “economic recovery is continuing”, but at a pace deemed too slow to make a material impact on unemployment rates. It also said that household spending in increasing, but remains constrained by joblessness, tight credit and lower housing wealth.
In addition, the Fed used its press release to re-affirm its plan to keep the Fed Funds Rate near zero percent “for an extended period” while also opting to keep its $600 billion bond market support package in place.
And lastly, of particular interest to home buyers and mortgage rate shoppers, the FOMC statement devoted an entire paragraph to the Federal Reserve’s dual mandate of keeping inflation and employment at acceptable levels.
The Fed acknowledges making progress toward this goal, but calls it “disappointingly slow”. Currently, inflation is too low for what the Fed deems acceptable, and unemployment is too high.
Over time, the Fed expects both measurements to improve.
Mortgage market reaction to the FOMC statement has been negative thus far. Mortgage rates in Cincinnati are unchanged post-FOMC, but appear poised to worsen.
The FOMC’s next scheduled meeting is a 2-day affair, January 25-26, 2011. It’s the first scheduled meeting of 2011.
The FOMC is part of the Federal Reserve, the government group that sets U.S. monetary policy. The Fed’s primary policy-setting tool is an interest rate known as the Fed Funds Rate. The Fed Funds Rate is the interest rate at which banks borrow money from each other.
2 years ago Thursday, in an effort to jump-start the economy, the FOMC met and voted to lower the Fed Funds Rate to as close to zero percent as possible without actually going tozero percent; the benchmark rate was prescribed to a range of 0.000-0.250 percent.
The Fed Funds Rate had never been set so low before, but ever since, it’s been held to that range. It will likely be there until early-2011, too, but that doesn’t mean that mortgage rates won’t change today when the Fed adjourns today.
Because the Fed Funds Rate has been so low for so long, businesses and consumers have been able to borrow money cheaply. As a result, both capital and household spending have been on the rise lately, creating tailwinds for the economy.
The Fed is expected to acknowledge this today which, in turn, should lead mortgage rates higher. This is because, in the current recovery cycle and until markets find balance, what’s good for the economy tends to be bad for rates in Cincinnati.
The Fed’s press release today will be a focal point for markets. Talk of higher-than-expected inflation or better-than-expected growth, and mortgage rates should rise. Talk of a slowdown should lead rates lower.
Either way, we can’t be certain what the Fed will say — or do — this afternoon. If you’re floating a mortgage rate, the safe move is to lock before 2:15 PM ET today.
2010 marks the second straight year that a Chicago suburb took top honors. Last year’s winner was Mount Prospect, Illinois.
The BusinessWeek survey uses data from Onboard Informatics, compiling statistics in areas including education, crime, and access to parks, jobs and affordable homes. Selections are limited to towns with 45,000 residents or fewer, and a median income of between $40,000 and $125,000.
One winner and 2 runner-ups are named for each state; the 10 most populous of which are listed below:
California : Arcadia (Monterey Park, Diamond Bar)
Texas : San Marcos (San Antonio, Houston)
New York : Tonawanda (Irondequoit, Cheektowaga)
Florida : Pembroke Pines (Sunrise, Tamarac)
Illinois : Tinley Park (Arlington Heights, Schaumburg)
Pennsylvania : Scranton (Erie, Allentown)
Ohio : Lakewood (Parma, Strongsville)
Michigan : Ann Arbor (Royal Oak, Portage)
Georgia : Warner Robins (Valdosta, Roswell)
North Carolina : Chapel Hill (Cary, Jacksonville)
Rankings like this BusinessWeek report can be useful for home buyers, but like all of real estate, it’s important to remember that statistics don’t apply to all parts of town equally. Some parts will have better schools, or better crime prevention, or more amenities.
Therefore, before you make a buying decision, talk with a real estate agent who has local market knowledge. It’s the most reliable way to get data that matters.
Fannie Mae rolls out new mortgage guidelines Monday. Therefore, if you’re in the process of applying for a conforming home loan, consider giving your complete application by the close of business Friday.
All Fannie Mae applications taken on, or after, December 13, 2010, are subject to the changes.
As compared to mortgage guidelines updates of the last 3 years, Monday’s roll-out is relatively small. There is no change to the maximum debt-to-income ratio, for example; nor is there an increase in the minimum FICO score requirement.
Most mortgage applicants in Cincinnati and nationwide will be unaffected.
Others, however, will find getting approved to be more difficult.
The most major change is with respect to revolving and installment debt. This category includes credit cards, charge cards, and student loans, among others. Going forward:
Debt with fewer than 10 payments remaining must now be included in an applicant’s monthly obligations.
Debt not reporting a monthly payment must be assigned a payment equal to 5% of the outstanding credit balance.
These edits will raise applicants’ debt-to-income ratios, and may push some of them beyond the maximum allowable limits, resulting in a denial. People with relatively large car payments are especially susceptible.
Another change relates to receiving gift funds for a purchase. Unlike debt calculations, though, the “gifting” process is getting easier.
Under the new Fannie Mae guidelines, buyers of owner-occupied, 1-unit properties (i.e. single-family homes, condos, townhomes) can forgo Fannie Mae’s customary, minimum 5% downpayment contribution from personal funds. Downpayments can be comprised 100 percent of gifted and/or granted monies.
Buyers of second or investment homes, or multi-unit properties must still make a 5% downpayment from their own funds.
And, lastly, Fannie Mae is easing some of its documentation requirements. Salaried applicants from whom commissions and/or bonuses paid account for less than 25% of annual income will have fewer paystubs to produce for underwriting.
Fannie Mae’s complete guideline changes are available online at http://efanniemae.com.
Last quarter, with home prices still relatively low and mortgage rates making new, all-time lows almost weekly, the cost of home ownership was extraordinarily low in Ohio and most U.S. markets.
According to the National Association of Home Builders’ quarterly Home Opportunity Index, 72.5 percent of all new and existing homes sold between June-September 2010 were affordable to families earning the national median income. This ties the all-time high for home affordability, set in the first quarter of 2009.
The data also underscores that, when compared to historical norms, it’s a fantastic time to be a Cincinnati home buyer.
Prior to 2009, the Home Opportunity Index rarely topped 65. The index has remained above 70 ever since.
All real estate is local, though, and on a city-by-city basis, home affordability varied last quarter.
For example, 96% of homes sold in Kokomo, IN are affordable for families earning the area’s median income. This handily beat the average figure and led the nation. Looking at major cities, Indianapolis led the pack.
93% of homes in Indianapolis are affordable to families earning the area’s median income. This ranks #9 nationwide.
On the opposite end of the affordability scale is the New York-White Plains, NY-Wayne, NJ region. For the 10th consecutive quarter, the New York Metro region ranks last in U.S. home affordability. Just 23% of homes are affordable to families earning the local median income, although this is 3 points higher versus Q1 2010.
Regardless of where your hometown ranks relative to its neighbors, home affordability remains high as compared to historical values. That said, with mortgage rates rising and home sales expected to climb this winter, it’s unlikely that the Home Opportunity Index will improve.
Buying a home may never be this inexpensive again. If you planned to buy in mid-2011, consider moving up your time frame.
With 2010 coming to a close, the “experts” are out in full force, making predictions for next year’s housing and mortgage markets on business television and in the papers.
Like most housing data in November, the most recent New Home Sales report showed sales volume increasing last month, and home supplies falling.
Existing Home Sales 
The number of single-family Housing Starts increased in November, 
Home builder confidence is holding firm this month, according to the National Association of Home Builders.
Loan-level pricing adjustments are mandatory loan fees based on a borrower’s specific default risk.
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its target range of 0.000-0.250 percent.
The Federal Open Market Committee holds a one-day meeting today, its 
Fannie Mae rolls out new mortgage guidelines Monday. Therefore, if you’re in the process of applying for a conforming home loan, consider giving your complete application by the close of business Friday.
