Home Prices Keep Rising

Home prices continue to rise despite higher mortgage rates. The S&P/Case-Shiller home price index was up 12.2% compared to a year ago, slightly better than the 12.1% rise in April. It was the biggest year-over-year jump in prices since March 2006, near the peak of the housing bubble.

The national index, which measures prices in the 20 largest markets, is still 24.4% below the peak of June 2006.

Just a year ago, the index posted a 12-month decline in prices. Sellers had been struggling while their homes sat on the market for months, or even years. But prices have increased every month since June 2012, and each month the increase has been greater than the month before.

The gain in home prices has now made this a good time to sell a home. Many sellers are finding themselves in the midst of bidding wars, with buyers eager to make a purchase in a market with a tight supply of houses available for sale. House hunters are also eager to lock in a mortgage while rates are still low, at least by historic standards.

But the rapid price gains over the last year are at a level that no expert thinks can be sustained. Some have even suggested it was unhealthy for the market, raising the risk of a new housing bubble, at least in some regions. The rapid rise of home prices in the middle of the decade eventually sparked the crisis in the financial markets and the Great Recession.

With values up 5.8 percent year-over-year at mid-year and 2.4 percent from the first quarter, they are expected to rise another 5 percent over the next 12 months, according to the Zillow Home Value Forecast. "This kind of market behavior won't last," said Zillow Senior Economist Svenja Gudell.

In reality, typical home values have appreciated at roughly half this pace for the past several months, which is still very robust. Looking ahead, a combination of rising mortgage interest rates, flagging investor demand and more inventory entering the market should all help to moderate the pace of home value appreciation and stabilize the market.

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Foreclosures Down From a Year Ago

Lenders completed fewer foreclosures in June than they did a year ago, while the number of properties sitting in the foreclosure pipeline also decreased as the housing market continued to improve. There were 55,000 foreclosures finished last month, down from 68,000 in June of last year.

Before the housing market's downturn in 2007, completed foreclosures averaged 21,000 per month between 2000 and 2006. Since the financial crisis began in September 2008, there have been about 4.5 million foreclosures.

Over the past year and a half, the battered housing market has gotten back on its feet as prices rose, sales climbed and the foreclosure landscape improved.

There were approximately 1 million homes in some stage of foreclosure, down from 1.4 million a year ago. That foreclosure inventory represented 2.5 percent of all mortgaged homes, down from 3.4 percent in June last year.

Foreclosures are completed when a home is either seized by the lender or sold at auction.

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Reasons To Improve Your Credit Even If No Loan Is In Your Future

When most people think of their credit, they think "loans." Obviously, the condition of your credit will determine whether you get a loan or not, as well as the terms of the loan, IF you qualify.

What many people don't realize is, a credit history influences a lot more than just loan approvals and interest rates. The information collected by credit agencies is used in a number of non-credit financial decisions.

Insurance Premiums

Insurance premiums are set, in part, by consumers' credit histories. Your credit score is pretty much universally used to determine premiums these days. While life insurance premiums aren't usually set with the help of credit history, most property and casualty (particularly auto) premiums use a special version of the information in consumer credit histories known as an "insurance score."

Consumers without good credit pay more for their insurance, regardless of other factors. For some companies, the discount on insurance is as much as 38% for the best credit scores.

Rental Opportunities

The Federal Trade Commission (FTC) provides guidelines for landlords who want to use consumer credit reports as they make decisions about tenants. If an applicant has poor credit, the landlord can require a co-signer on the lease, require a larger security deposit, raise the rent, or even deny the housing application altogether. Consumers with poor credit can find their rental choices limited, as well as find that it costs them more to pay for their housing.

Checking Accounts

The Consumer Financial Protection Bureau (CFPB) points out that some banks look at a credit report prior to allowing consumers to open checking accounts. One of the most commonly used reports is the ChexSystems report, which compiles information on consumer banking behaviors, particularly overdrafts and bounced checks. However, there are banks that check depositors' credit scores before allowing them to open checking accounts. If a consumer has a low score, he or she might be required to open a checking account with a monthly fee, or with restrictions.

Telecommunication Services

Internet service providers, cell phone providers and cable/satellite providers all use your credit information to make decisions. Most service providers look at credit scores when you open a new account.

When you walk into the phone store to buy a new phone, they check your score to determine if they should ask for a deposit. Your credit score will even determine the size of the deposit, if they decide they need one from you. The same rule generally applies to satellite, cable, and Internet providers. The lower a consumer's credit score, the greater the chance that he or she will be subject to a deposit when seeking telecommunication services.

Getting a Job

While potential employers aren't supposed to look at applicants' credit scores when hiring, they can — in states where it isn't prohibited by law — ask to view a credit report as part of the screening process. A survey from the Society for Human Resource Management indicates that nearly 60% of its member employers use credit reports as part of the background screening for at least some positions.

For the most part, positions that involve a fiduciary duty, or some level of access to sensitive information, are the jobs most likely to require a credit check as part of the hiring process. However, a recent survey by Demos indicates that even some entry-level applicants are subject to credit screening.

Summary

As you can see, even consumers who don't plan to apply for a loan need to pay attention to their credit. Credit reports, and even credit scores, are used by a variety of financial service providers, and poor credit can cost consumers hundreds of dollars, a place to live, and even a job.