The Aftermath
We have had a week
to consider the barrage of data released during the last week of the month and
the first days of August. The markets were very volatile during this period
with the Dow moving from record territory by mid-July to a 2.5% loss in one
week and negative territory for the year as of August 1. Other markets moved as
well during this period as oil moved down below $100 per barrel the same week
and long-term interest rates were also volatile.
Previously we asked
why rates are staying so low if it looks like the economy is rebounding. As a
matter of fact, one of the reasons the stock market reacted so negatively to
the good news regarding the economy is that there was a concern the Federal
Reserve Board might raise rates more rapidly than expected. The Fed even noted
in its recent announcement that inflation was moving closer to their target
numbers. We note that this was just one reason for the negative reaction in the
stock market. There were others. For example, there continues to be plenty of political
and financial turmoil overseas. Plus, with the Dow and S&P reaching record
territory again and again in the first half of the year, the markets could have
been due for a correction.
Keep in mind that
if the Fed does raise their benchmark rates, short-term rates will rise. But
this is no guarantee that long-term rates will also rise. With international
turmoil and plenty of negative economic news to balance the overall good
reports we have seen, long-term rates are more likely to go up if the markets feel
that the Fed is over-stimulating the economy. In other words, the Fed paring
down the purchases of Treasuries and Mortgage Backed Securities and talking
about raising rates can actually ease the concerns of the markets and keep
long-term rates stable. At least for now. The Fed and the markets will be
watching the real estate markets closely from here because this is the one area
which has been weak and the economy is not likely to overheat while real estate
sales continue to be sluggish.
If you’ve ever shopped for a house, or are thinking about doing
that in the future, then chances are you have thought about mortgage
pre-approval at one time or another. What is pre-approval? Why should you get
pre-approved? Is it just something lenders cooked up to rope you in? Now that
I've shopped for and bought a house, I have had the time to research the topic
and understand the value and significance of it. There are several advantages
to getting pre-approved for a home loan. The first is that by getting your
preapproval, you can focus only on houses that are within the range of what the
lender will finance for you. Secondly, getting pre-approved gives you a leg up
over other potential buyers who are not pre-approved. If two people have put in
the same offer on a house, the seller is more likely to go with the person who
is pre-approved, knowing that he already has his ducks in a row, and knows what
he can afford. From the seller's perspective, that could make the whole process
go more smoothly, with less chance of the buyer backing out because of
financing issues. It is also important to note that there is a difference
between pre-approval and pre-qualification. Pre-qualification is a very simple
process that takes your word for your income and credit and then estimates what
the lender would be willing to finance for you. Pre-approval, on the other
hand, requires that you submit documentation proving your income, as well as
your credit history, giving the bank a more accurate basis on which to pre-approve
you. It is best to get a pre-approval before you even start looking for a
house. Once you have pre-approval in hand, you’ll know exactly how much the
lender will finance for you, as well as the down-payment expectation on such a
loan, which will allow you to fully realize the financial responsibility of
purchasing a house. Source: Retch Lindow, Market
Intelligence Center Looking to purchase a home in the near future? We
can provide a pre-approval so that you can enjoy all of the advantages stated
in this article. Just contact us — it is easy to get started.
The
S&P/Case-Shiller home price index, a closely watched measure of home
values, posted a 9.3% annual increase in its May reading, down from the 10.8%
rate in April. The rate of increase was as high as 13.7% in November before
slowing every month since. The good news for homeowners is that the index has
now been up every month over the last two years -- after posting drops almost
every month over the previous five years. And some experts say the current
growth is better for the market, because rapid price increases can keep some
buyers on the sidelines. "Today's Case-Shiller data is consistent with the
slow glide-path down towards a more normal housing market," said Stan
Humphries, chief economist for real estate Web site Zillow. "Almost
across the board, lower-priced homes have been appreciating more quickly than
the most expensive homes, a welcome reversal from prior years."
Prices rose in all 20 cities measured by the index, and nine of those markets
posted double-digit percentage gains. A drop in foreclosures and
unemployment rates and pent-up demand for people who had wanted to buy
homes have combined to help lift home prices. A recovery in home sales and
prices has been a major driver of the rebound of the U.S. economy so far this
year, as the jump in prices has increased household wealth. The price
increases and low rates also helped many homeowners refinance and lower their
home payments. But even with two years of increases, prices are still 17% below
the peak reached at the height of the housing bubble in early 2006. Source: CNN/Money
Baby boomers aren't
showing any signs of leaving the single-family home market that has defined
their generation's real estate habits, despite many predictions that they would
by now. As boomers hit age 65 and become empty nesters, many housing analysts
forecasted that a huge wave of them would downsize and move into an apartment,
condo, or townhouse. But Fannie Mae researcher Patrick Simmons says that isn't
happening yet. "There's a perception, particularly in many media reports,
that this massive generation born between 1946 and 1964 is altering its housing
consumption," Simmons, the director of strategic planning for Fannie Mae’s
economic group, told the Chicago Tribune. "It's true that they're becoming
empty nesters in droves. But by one measure, the proportion of boomers who live
in single-family homes actually increased between 2006 and 2012." Baby
boomers' mobility has gone down. Nine out of 10 boomers surveyed by AARP
reported that they wanted to stay in their current home as long as possible.
Some boomers could still be underwater and are waiting to recoup more on their
house before they sell. Others may be holding on to their home because they
snagged a record low rate in recent years, and they know borrowing won't be any
cheaper if they do decide to sell. Some baby boomers are downsizing but
choosing to stay in smaller single-family homes rather than move to a condo or
townhome. But,"eventually, boomers will slow down with age and have the
same physical frailties that their predecessors had," Simmons told the
Tribune. "My sense is that it's not going to be a major shift — something
we see in the numbers in a year. It will likely unfold over a decade or
more." Source: Chicago Tribune
