Memorial Day marks the unofficial start of summer, and most parts of the country are already feeling the heat. Temperatures reached record highs in more than 50 cities yesterday.
And, for homeowners in Cincinnati with ceiling fans, the turn of season offers a simple way to lower your home’s energy bill, too. All it takes is the flick of a button.
Ceiling fans are designed to circulate the air in a room. During colder months, ceiling fans push warm air down from the ceiling, raising the temperature of a room. During warmer months, ceiling fans push cold air back into circulation, creating a windchill effect, of sorts.
When your heating system is on, rotate fan blades clockwise
When your cooling system is on, rotate fan blades counter-clockwise
As compared to adjusting your home’s overall temperature in the summer, ceiling fans are economical and “green”. Using the equivalent amount of energy as 100-watt light bulb, a single ceiling fan can reduce a room’s effective temperature by 4 degrees. There’s similar benefits in the colder winter months, too.
If your home is without ceiling fans, they’re relatively inexpensive, and simple to install. There are tutorial videos online for the do-it-yourselfers, or you can call a qualified electrician for assistance. Need an electrician’s name and a reference? Call or email me — I’m happy to offer a referral.
Home affordability moved higher last quarter, buoyed by stable mortgage rates and falling home prices in Ohio and nationwide. The National Association of Home Builders reports that Q1 2011 Home Opportunity Index reached an all-time high for the second straight quarter last quarter.
Nearly 3 of 4 homes sold between January-March 2011 were affordable to households earning the national median income of $64,400. It’s the 9th straight quarter in which home affordability surpassed 70 percent, and the highest reading in more than 20 years of record-keeping.
From metropolitan area-to-metropolitan area, though, affordability varied.
In the Midwest, for example, affordability was high. 7 of the 10 most affordable markets were in the Midwest, including Kokomo, Indiana, in which 98.6% of homes were affordable to median income-earning families. Indianapolis, Indiana placed second for “big city” affordability.
The most affordable “big city” last quarter was Syracuse, New York. With a 94.5% affordability rate, Syracuse ranks 8th nationally in the Home Opportunity Index. It’s the second time that Syracuse placed first in the last 4 quarters.
Meanwhile, on the opposite end of home affordability, the “Least Affordable Major City” title went to the New York-White Plains, NY-Wayne, NJ area for the 12th consecutive quarter. Just 24.1 percent of homes were affordable to households earning the area median income, down more than 1 percent from the last reading.
Regardless of where you live, remember that rising mortgage rates can levy more pain on your household budget than can rising home values. And mortgage rates are expected to rise long before home prices do.
The rankings for all 225 metro areas are available for download on the NAHB website.
Home values dropped for the sixth straight month in March 2011, according to the Federal Home Finance Agency’s Home Price Index. The Home Price Index is a government-sponsored home value tracker.
The HPI report is the latest in a string of “falling home values” stories — a trend that’s troubling home sellers across Cincinnati and nationwide.
However, although the Home Price Index says home values are falling, that doesn’t necessarily mean that they are. Like most statistics in the housing sector, the Home Price Index is plagued by poor methodologies and a lack of timeliness.
In short, the Home Price Index is flawed. In three ways.
The first big flaw in the Home Price Index is that it only measures the values of homes with mortgages backed by Fannie Mae or Freddie Mac. Homes financed via FHA, or via other means are specifically excluded from the calculation. For today’s purchase market, that leaves more than 1 in 4 homes “uncounted” — a big percentage of the market.
Second, the Home Price Index determines home values by measuring price change from sale to subsequent sale. This eliminates new homes — a major market segment.
And, lastly, the Home Price Index reports on a 60-day delay; we’re only now seeing data from March. This two-month lag renders the HPI a trailing indicator for the housing market instead of a forward-looking one. If you’re a home buyer looking for market insight, the HPI can’t give it — it’s out-dated and out of season.
Despite its shortcomings, though, we can’t ignore the Home Price Index completely. It’s among the most thorough home valuation models available, and it’s used in public policy discussions. When the HPI says prices are down, Wall Street and Capitol Hill take notice, and that trickles down to everyday life on Main Street.
Since peaking in April 2007, the Home Price Index is off 19.1 percent.
Sales of newly-built homes surprised Wall Street, jumping 7 percent to an seasonally-adjusted, annualized 323,000 units last month.
In addition, the supply of new homes dropped to 6.5 months — a 2-month decrease from October 2010 and the best reading in a year.
The report runs counter to recent reports from the National Association of Homebuilders and the National Association of REALTORS® which suggest a looming housing slowdown. April’s New Home Sales report runs counter to that theory; it shows ongoing, steady, staggered improvement in terms of sales volume and sales inventory.
Broken-down by sales prices, the New Home Sales report also showed that homes are selling across all price tiers. The “luxury market” improved most:
Up to $199,999 : +1,000 homes from March
$200,000 to $399,999 : +2,000 homes from March
$400,000 and over : +3,000 homes from March
These figures suggest that that move-up buyers — not first-timers — are driving the new home market. Homes under $200,000 now account for just 40% new home sales, down from 46% a year ago.
However, as with most months, it’s important that we recognize the New Home Sales data’s margin of error. Although New Home Sales showed a 7% improvement in April, the reported margin of error was ±17%. This means that the actual reading could have been as high as 24 percent, or as low as -10 percent.
It’s a huge range, and because it encompasses both positive and negative values, the Census Bureau assigned its April reading “zero confidence”. It’s right there in the footnotes.
For home buyers in Cincinnati , rising sales and falling supply may mean higher home prices. And, combined with the issuance of fewer building permits, supplies may be constrained into the summer months. This, too, would pressure home prices higher.
Mortgage rates across the state are near year-to-date lows, but locking them in this week may be difficult. As Memorial Day nears, and Wall Streeters get a head-start on the long weekends, trade volume in the mortgage bond markets will dip.
When bond volume drops, mortgage rates get jumpy. It’s a relationship based more on scarcity than actual market fundamentals.
It works like this:
Conforming and FHA mortgage rates are based on the “market price” of a mortgage-backed bond
Mortgage-backed bonds can’t be bought or sold without a buyer and a seller at a specific price
As Friday gets closer this week, and more and more Wall Street traders will leave for their “extended” 3-day weekend, and bond markets will be left with fewer and fewer participants. This will create a market situation in which it’s harder to match a buyer and seller at any given bond price, resulting in larger mortgage rate shifts than usual.
These jumps in rates are exaggerated during periods of economic uncertainty like these. What’s more, there’s a lot of economically-important data due for release this week. That, too, can put markets in hysterics.
If this were a “normal” week, mortgage rates would be volatile. The coming of Memorial Day is just adding to the mix.
Mortgage rates may rise in Cincinnati this week, or they may fall. Either way, if you have the opportunity to lock something favorable, consider doing it. Rates are low and likely won’t last.
If you’ve spent time making your garden look great this spring, you’ll want to spend time helping it stay that way through the summer. This brief video will teach you how to keep your yard pest- and weed-free using eco-friendly products and nature, itself — all without the use of dangerous chemicals.
Planting flowering nectar-bearing plants to attract “beneficial” insects
Using electronic repellents and netting to keep pests away
Adding a bird feeder to your yard
And, of course, you’ll want to use all-natural pesticides made from the extracted oils and fruits and spices which, when combined, keep weeds and bugs under control.
One thing to remember with respect to lawn care, though, is that ”organic” doesn’t always mean “greener”. Spot-application of a chemical-based product may best for your lawn’s particular needs, and you should consider using harsher, traditional pesticides when needed.
The housing market recovery stalled last month. At least temporarily.
According to the National Association of REALTORS®, Existing Home Sales slipped 1 percent in April from the month prior, falling to 5.05 million units on a seasonally-adjusted, annualized basis. The reading is exactly in-line with report’s 6-month average which also reads 5.05 million units.
The data may appear “average”, but there’s another angle to consider.
In April, as compared to March, the supply of existing homes for sales spiked. At the current pace of home sales, it would now take 9.2 months to exhaust today’s complete home inventory. This is almost one full month worse than March. It’s the worst home supply reading of the year.
There are also more homes “on the market” today than at any time since September 2010.
31 percent of all homes sold in April were purchased with cash
First-time home buyers bought 36 percent of all homes in April
Distressed properties typically sold at a 20 percent discount
This “discount”, it should be noted, is a major reason why distressed properties accounted for 37 percent of the home resales in April. Home buyers are finding bargains when they’re willing to consider homes in various stages of foreclosure and short sale.
Overall, the April Existing Home Sales report represents opportunity for home buyers in and around Cincinnati. Home sales are stagnant, supplies are rising and there’s no shortage of properties from which to choose. Furthermore, mortgage rates remain low.
If you’re considering a home purchase this fall, home supply may not be as ample, and financing conditions may not be as favorable, post-Labor Day. Talk to your real estate agent about what’s possible today. You may want to move up your time frame.
The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Ohio are higher by 1/8 percent this morning, at least.
The “Fed Minutes” is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve’s official recap of the conversations and debates that shaped the prior FOMC session.
Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.
By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.
The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.
Here is some of what the Fed discussed last month:
On inflation : Higher levels are “transitory”; will level-off with commodity prices
On housing : The market remains depressed. “Vacant properties” are harming construction.
On stimulus : The Fed will stick to its $600 billion support plan
In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon.
Wall Street estimates that a gradual economic tightening will begin within 12 months.
Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.
As bond markets fall, mortgage rates in Cincinnati rise.
Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.63% — the lowest of the year.
Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.
The Housing Starts report measures the number of homes on which new construction “broke ground”. It’s tracked by the U.S. Department of Commerce which releases new data monthly.
Single-family housing starts fell 5 percent as compared to March 2011, and 30 percent as compared to April one year ago.
The figures were worse than what Wall Street expected. For just the second time in 2 years, monthly single-family housing starts dropped below 400,000 units. In addition, single-family Building Permits fell in April as well, shedding 2 percent from March.
A building permit is a local government’s approval to start home construction and when permits are down, new construction follows. This is because 93 percent of homes begin construction within 60 days of permit-issuance.
Fewer permits, as a consequence, means fewer new homes. Therefore, if you’re looking at new construction in or around Cincinnati , April’s numbers may spark a sense of urgency.
Home builder confidence can’t shake its range, according to the National Association of Home Builders. The group’s monthly Housing Market Index put May’s builder confidence reading at a level of 16.
The Housing Market Index is scored on a scale of 1-100. A reading above 50 suggests favorable conditions for the new home housing market, as reported by home builders. A reading below 50 suggests unfavorable conditions.
May marks the sixth time in 7 months that the HMI posted a 16, the longest such plateau in the index’s history.
The HMI has not posted higher than 50 since April 2006.
As an index, the HMI is a composite of three separate surveys sent to home builders each month. The surveys are meant to capture the current and projected single-family home sales volume, in addition to buyer foot traffic levels.
Versus April, there was little change:
Current single-family sales : 16 (+1 from April)
Projected single-family sales : 20 (-2 from April)
Buyer foot traffic : 14 (+1 from April)
Broken down, the Housing Market Index for May shows that home builders are experiencing a boost in sales and foot traffic today, but expect that boost to fade between today and November. For home buyers in Cincinnati , this can present an opportunity.
With home builder confidence stagnating, and with a worsening sales expectation for the next 6 months, builders may be more willing to negotiate with you on home prices and/or the costs of upgrades. Builders may also be more willing to make concessions in your sales contract that would otherwise be unavailable to you.
Your real estate agent can help you to identify the negotiable items of your offer.
In addition, today’s home buyers can exploit the recent strength of the mortgage market. Surging mortgage bond demand since April has pushed mortgage rates down to their lowest levels of the year. If you can find a home you love, therefore, it can be financed on the (relative) cheap, too.
Conforming mortgage rates in Ohio fell through 5 consecutive weeks before rising last week.
With large swaths of the country bracing for an historic Mississippi River flood, it’s important to remember that floods aren’t just regional.
Flood waters can strike any city, in any state, at any time. According to FloodSmart.gov, floods are the #1 most common disaster in the United States. $709 million in flood insurance claims were paid to households, businesses, and renters in 2010 — more than one-third of which went to people outside of “high-risk areas”.
Should a flood hit your home or place of business, will you know what to do? The first 24 hours are crucial.
First, make sure that your home is safe from danger. Floods can damage a home’s structural integrity, creating cracks and gaps in its foundation, among other problems. If you see any such damage, your home may be unsafe for re-entry.
Next, check for exposed power lines and damaged gas and sewer pipes. Notify your local utility company and be prepared to wait for a service representative. During times of natural disaster, utility companies receive a lot of inbound phone calls.
A good follow-up is to disconnect your home’s power at its circuit breaker. This way, electricity can’t mix with water in your home by accident — a potentially lethal combination.
Once your home is safe, use a camera to document damage. Note: Do this before you start removing water or making repairs because it’s evidence for the insurers.
You’ll also want to throw out food and other items that have come into contact with flood waters. Flood waters may contain raw sewage and other contaminants that can harm you.
Lastly, contact your insurer and explain your situation. Be sure to follow your insurer’s exact instructions because you don’t want to do something that will void your claim. If you plan to make an immediate repair, notify your agent. Document your conversation with date, time, and topics discussed.
Like utility companies, your insurer may be overwhelmed with phone calls during a local flood. Optionally, you may call your insurer’s headquarters instead.
Just one inch of water can cause serious damage to your home. When flood waters hit, know what to do.
Another day, another piece of evidence that the U.S. economy is expanding.
Thursday, the Census Bureau released the April Retail Sales report. Excluding cars and auto parts, retail receipts rose for the 10th straight month and, at $321 billion, reached an all-time high.
For home buyers and rate shoppers in Cincinnati , the sales figures have positive and negative implications.
On the positive side, more retail sales suggests more confidence in the U.S. economy. This can spark a growth cycle that benefits the country, on the whole.
Consumers spend more money
Businesses sell more product
Businesses expand payroll to meet new product demand
Governments collect more taxes; fund more projects
Consumers gain more confidence and the cycle repeats
Furthermore, rising employment rates help to support higher levels of home sales which, in turn, can lead to higher home prices in Ohio.
This is why Retail Sales data is so important to Wall Street and economists. It can hold clues to the future of the U.S. economy.
On the negative side, however, rising Retail Sales figures can harm home affordability. In addition to the aforementioned pressure on home prices, a strengthening economy can lead to higher mortgage rates. The weak economy of 2009-2010 is a major reason why mortgage rates were so low for so long.
As the economy improves, therefore, it follows that rates should reverse.
Each 1/8 percent increase to mortgage rates raises a mortgage payment $8 per $100,000 borrowed.
Foreclosure activity continues to drop nationwide.
Based on data from foreclosure-tracking firm RealtyTrac, foreclosure filings nationwide fell below 220,000 in April 2011, a 9 percent decrease from March.
A “foreclosure filing” is defined as any foreclosure-related action including Notice of Default, Scheduled Auction, or Bank Repossession.
April marks the seventh straight month in which foreclosure filings have dropped and total filings are down more than one-third year-over-year.
One reason why filings are down is that banks are letting more time pass between delinquency and foreclosure, exploring alternative courses of actions such as short sales and loan modifications. It now takes, on average, 400 days from an initial default notice to bank repossession.
That’s more than double the 151-day average of early-2007.
Another reason may be that job growth is returning to the U.S. and job creation is associated with fewer home loan defaults.
Regardless, in the states in which foreclosures are occurring, bank repossessions are concentrating among just a few.
5 states accounted for half of the country’s April REO:
On the other end of the chart, Vermont accounted for a measly 0.007% of April’s foreclosure filings.
If you’re a first-time home buyer considering foreclosed homes in Cincinnati , or a seasoned investor adding to your portfolio, the good news is that foreclosures are selling at steep, 20 percent discounts relative to non-distressed homes. Just make you know what you’re buying. Foreclosure purchases carry different risks and follow different procedures than “traditional” sales.
Rely on a seasoned real estate agent to navigate the deal.
When a mortgage applicants chooses an adjustable-rate mortgage over a fixed-rate one, he accepts a risk that — at some point in the future — the mortgage’s interest rate will rise. Lately, though, that hasn’t been the outcome.
Since mid-2010, conforming mortgages have adjusted below their initial “teaser” rate consistently, giving homeowners in Ohio and nationwide reason to ride their respective adjustable-rate mortgages out.
For example, this month, conforming 7-year and 5-year ARMs are adjusting near 3.011 percent based on the most common loan terms of 2004-2006. It’s because of how adjustable-rate mortgages are structured.
Adjustable-rate mortgages follow a defined lifecycle. First, the ARM’s mortgage rate is pegged; held fixed for a set number of years. This period ranges from one year to 10 years; periods of five and seven years are most common.
When the initial fixed-rate period ends, the mortgage rate then adjusts based on a pre-set formula. The formula is established by contract in the mortgage closing paperwork, and is commonly defined as:
Next, every 12 months, based on the same formula as above, the ARM adjusts again until 30 years have passed and the loan is paid is full.
It’s important to recognize that in the above equation, LIBOR is a variable so as LIBOR goes, so goes your adjusted mortgage rate. And because LIBOR is ultra-low right now, adjusted mortgage rates are ultra-low, too. LIBOR is expected to stay this way until the global economy has recovered more fully. Analysts predict a higher LIBOR by mid-2012.
So, if you have an adjustable-rate mortgage that’s due to reset this season, don’t rush to refinance. For at least one more year, you can benefit from low rates and low payments. As for the next adjustment, though, that’s anyone’s guess.
With housing prices down across the country, there are a lot of homeowners in Cincinnati barely breaking even on their respective home sales. Some are even losing money.
You may find yourself in that position, too; wanting to sell, but worried about bringing cash to your own closing.
It creates an interesting dilemma. You want your home to “show nicely” relative to comparable properties, but you don’t want to invest big dollars that may never be recouped into upgrades or renovations. So what do you do?
The answer is simple. Do the bare minimum.
From an advice piece in the Wall Street Journal, we learn of 10 basic home improvement projects that will help your home have better showings. The advice requires almost no technical skills, and the projects be tackled in a weekend.
The theme? Handled your home’s delayed maintenance.
Repair or remove screen doors with holes and tears
Pressure wash windows, sidewalks, and siding
Paint your front door and polish the doorknob
Pull weeds, seed bare spots, and lay down mulch
Touch up holes, dings and cracks in paint
Clean grout and re-caulk sinks, bathtubs and showers
Buy new cabinet hardware
Fix leaky faucets and toilets
Spray lubricant on squeaky doors
Get clutter into storage and out of the way
Now, you’ll notice that none of these projects can be considered “major”. By contrast, each is minor; they’re the items you’d add to your to-do list for work on “another day”. However, they’re extremely important for a home that’s about to be listed.
Here’s why. A prospective buyer doesn’t notice that the above repairs were made. He only notices if they weren’tmade. When a buyer sees ripped screens or chipped paint in your home, it makes him wonder what else hasn’t been cared for. This is the why you should also hire an exterminator prior to selling your home. If a buyer spots a trail of ants in your home, it’s unlikely you’ll get an offer.
You don’t need to spend big bucks to get your home ready for sale, but you may to use apply elbow grease. The good news is that time spent up-front can be worth it in the end. Homes that show better tend to sell faster, and at higher prices.
Home values dropped for the sixth straight month in March 2011, according to the Federal Home Finance Agency’s 
Sales of newly-built homes surprised Wall Street, jumping 7 percent to an seasonally-adjusted, annualized 323,000 units last month.
The housing market recovery stalled last month. At least temporarily.
The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Ohio are higher by 1/8 percent this morning, at least.
Single-family housing starts dropped by 21,000 units in April on a seasonally-adjusted annual basis.
Home builder confidence can’t shake its range, according to the National Association of Home Builders. The group’s monthly Housing Market Index put 
With large swaths of the country bracing for 
Another day, another piece of evidence that the U.S. economy is expanding.
Foreclosure activity continues to drop nationwide.
With housing prices down across the country, there are a lot of homeowners in Cincinnati barely breaking even on their respective home sales. Some are even losing money.
