Snohomish rambler

Economic Indicators – Keep track, because now is a great time to buy!

Analysts, policy makers and investors closely follow economic indicators that track the condition of the housing market. Here’s some background information on these important indicators.

Housing Starts

Housing starts is considered the most important report on the housing sector due to its large ripple effect in the economy when buyers purchase appliances and household furnishings. Construction of single-family homes accounts for about 85% of the industry. Work on multi-family units makes up the rest of the market and is considered highly volatile.

Home Sales

New homes sales account for less than 10% of the market. They are tabulated when the contract is signed. This is different from the way that existing home sales are tallied. They’re counted when the transaction closes and thus reflect contracts signed a month or two earlier. Existing home sales account for more than 80% of the market.

Another important home sales figure is the pending home sales index. This is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. Because it usually takes four to six weeks to close a contracted sale, it’s considered a leading indicator.

Housing Price Indices

There are two housing price indices: the S&P/Case-Shiller home-price index and the Federal Housing Finance Agency (FHFA) index. The FHFA index is a national measure that tracks houses bought with mortgages purchased by Fannie Mae or Freddie Mac and excludes many of the foreclosure sales and properties bought with non-conventional mortgages. Homes with these loans did not experience the sharp rise and subsequent decline in prices throughout the last decade and represent a more stable pricing index.

In contrast, the S&P/Case-Shiller report is focused on large metropolitan areas and includes distressed properties and those bought with non-conventional loans such as jumbo mortgages. These home prices tend to be much more volatile.

“Trendy interior paint colors are leaning towards the more relaxing and soothing shades. We are seeing paint colors from light, pale pink to yellow on one hand and then on the other, we are seeing more earth tones that help to reflect the “green” side that people are feeling. Bringing the outdoors in with browns, tans, greens and so on is very popular in 2010 interior paint colors.Other shades that are reflecting the souls of the consumers are black, white, and even grays. White adopts that clean and fresh feeling that everyone loves and if accented correctly, can make the room feel alive with color. Black and gray is reflecting other natural elements, as in stone and minerals. Color trends 2010

• Stop it before it comes in.  Before you bring in something new, really be sure that you know you will use it and know where you will store or display it.
• Just because it’s a good deal doesn’t mean you have to have it.
• If someone wants to give you something you really don’t need or want, politely tell them no thank you.  It’s ok.
• Don’t be a storage facility for someone else, if they don’t live there-make them take it!
• Keep a donation box or bag handy at all times and toss in things you are done with regularly.

Decide When to Refinance by Dailyworth.com

in MORTGAGES | by MP Dunleavey | Jan 19th, 2010

Q: How do I decide whether it makes sense to refinance my mortgage at a lower interest rate?

In this example, imagine that you’re refinancing a $160,000, 30-year fixed mortgage that is currently at 6.5%, into a 30-year fixed at 5.5%. Your current payment is $1,011 and you have 25 years left on your mortgage.

A: Start by doing a cost-benefit analysis. A step-by-step guide:

Ask your lender to give you a detailed breakdown of closing costs, which are usually 2% to 4% of the total loan, and typically include an application fee, appraisal and inspection fees, credit check, and attorneys’ fees.
In this example the approximate closing cost would be: $3,630

By refinancing, you will lower your payment. Ask your lender what that lower amount is.
By refinancing, your monthly payment would drop by $103 to $908.

Divide the refinancing cost by the monthly savings–$3630 divided by $103 = 35.17. That’s the number of months that you would need to remain in your house to break even.
You would have to live in the house for about 35 months or three years to break even on what you spent refinancing.

If you plan to in your house for less than three years, it doesn’t make sense to refinance your mortgage. Use this calculator to do your own ballpark estimate.

Other considerations:

By refinancing, you start from scratch; thus you pay mostly interest and little principal on your loan for several years.

Still, you would about $23,557 in interest over the full term of the loan (i.e. 30 years).

If you’re not going to stay in the house long enough to pass the break-even point AND reap some of the interest gains (say, 10-15 years), then a refi would only serve to lower your monthly payments.