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How Far Can We Expect Mortgage Rates to Drop?
Mortgage rates have started to go back down, thanks mostly to the Federal Reserve's decision to hold off slowing its monthly bond purchases.
Mortgage buyer Freddie Mac reports that the average rate on the 30-year loan dropped to 4.32 percent from 4.50 percent last week. The average on the 15-year fixed loan declined to 3.37 percent from 3.54 percent.
Both are the lowest averages since July 25.
Mortgage rates are nearly a full percentage point higher than they were in May, when the Fed first signaled it might slow its $85-billion-a-month in bond buy program. But the Fed kept the pace steady after lowering its outlook for economic growth. The bond purchases are intended to lower long-term interest rates, including mortgage rates.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
So how far can we expect mortgage rates to drop this time? It's pretty much anyone's guess, but experts all seem to be in agreement that we may see rates drop another half to a full point before they level off and start back up again. Remember, at any time, the Fed could reverse their bond purchase program decision, and when that happens, it may be too late for you to do anything about taking advantage of the lower interest rates.
If you've been thinking about looking for a Columbia SC home, consider the time it takes to find the right home, in addition to the loan application process. By the time you go through all of that, rates may have fallen as far as they will fall and could even be starting back up again. Now is the time to get off the fence if you've been waiting on mortgage rates.
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Will Home Prices Rise Next Year?
It would appear that Americans' love affair with real estate has returned. Most think home prices will go up over the next 12 months, especially upper-middle-income households. This according to a new Bankrate.com report.
Among households earning between $50,000 and $75,000 per year, some 65% expect prices to rise and just 6% expect prices to fall. Twenty-seven percent say they will stay the same and just nine percent forecast a decline.
In July, Bankrate established that 23% of Americans believe real estate is the best way to invest money not needed for more than 10 years. That was the second-most common response, slightly behind cash.
Bankrate found that Americans' financial security turned negative in September for the first time since February. The Financial Security Index slipped from August's 100.5 reading to 99.5 in September. Readings below 100 indicate deteriorating financial security compared with one year previous.
The readings on debt, net worth and overall financial situation dropped from August to September. Americans' comfort level with their debt took the biggest hit; those feeling less comfortable than one year ago (21%) now outnumber those feeling more comfortable (17%).
On a bright note, just one-in-eight employed Americans feel less secure in their jobs now than 12 months ago, a new low since polling began in December 2010.
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Damage Control After Disaster Strikes
Last month we covered what to do to prepare for a storm or disaster. This month, let's look at what happens afterwards.
Of course, the size and scope of a disaster, be it from Mother Nature, or a fire, determines just how far a homeowner can go in repairing the damage him or herself.
Often times it will be necessary to call in a professional who specializes in disaster restoration. But if the damage is relatively minimal, a homeowner can sometimes handle most – if not all – of it on his or her own.
Before Getting Started:
Before attempting to clean up and repair any kind of damage to your home, there are some basic considerations to take into account. First and foremost, if your disaster comes in the form of fire, it's vital to wait until the fire is completely out before attempting any restoration. Also, if the homeowner has insurance, he or she should contact the insurance company and notify them of the damage. The insurance provider can suggest ways the homeowner should deal with the fallout and they may even be able to recommend a professional fire restoration company.
Prevent Further Damage:
Those who wish to perform cleanup and restoration themselves must first be cleared to enter the home by the fire marshal or other governing emergency agency such as FEMA. The first step after is to get air circulating. Whether it be fire or flood, you want to do what you can do get air moving in the home. That means opening the windows in the home as well as placing a fan near the affected areas in order to help ventilate the area. Wet items should be dried as soon as possible. Dehumidifiers and fans can be used to dry heavier items like drapes and carpeting.
Carpeting:
Carpeting should be cleaned (preferably by a professional) both before and after general fire repairs as well as flood repairs. Some carpeting may require total replacement. The last thing you want is mold growing under your carpet where you don't see it, but where it can still cause your family a great deal of harm.
Cleaning Walls:
If dealing with fire damage, to clean soot stains from walls, it is necessary to use a chemical sponge – available from cleaning supply companies – or even paint thinner or rubbing alcohol.
If you're cleaning walls from a flood, again, it's necessary to know what you're doing to prevent or stop mold. More times than not, if flooding is the issue, you're better off calling in someone who is certified in mold remediation to take care of things for you.
If a smoky smell persist for months, it may be necessary to hire a professional restoration company to perform a thermal fogging, which should permeate the home to the point it kills all smoke odor. The same goes for mold. And understand, mold can appear many months after water damage has long been dried out on the surface.
These are just a few things homeowners can do to reduce the effects of fire or water damage.
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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.
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More Robust Housing Recovery Forecast in 2013
It’s time once again to gaze deeply into our crystal ball to predict what the New Year may bring to our cherished housing industry.
Of course, everything hinges on whether we all find ourselves going over a Fiscal Cliff, but we’re not going to touch that red hot iron for now, we’ll save that for later if Congress and the President can’t agree on things.
Meanwhile, we’re devoting this entire newsletter to looking ahead, and hopefully assuming we won’t go over that cliff, so let’s get started…
Year-end reports and forecasts for the New Year are rolling in with ever more positive numbers for the housing recovery to continue.
November’s existing home sales rose 5.9 percent over October and are 14.5 percent higher than sales in November 2011, according to the National Association of Realtors (NAR). NAR says existing home sales are at the highest level they’ve been since November, 2009.
The national median existing-home price for all housing types was $180,600 in November, up 10.1 percent from November 2011 and the ninth consecutive monthly year-over-year price gain, which last occurred from September 2005 to May 2006 – during boom times.
In the new home sector, builders are puffing up with confidence. The NAHB/Wells Fargo Housing Market Index (HMI), which measures builder confidence in the single-family housing market, has posted gains for eight consecutive months and now stands at a level of 47.
That’s near the midpoint of 50, where an equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006.
Growing households are also boosting confidence. In the early 2000s, America was generating 1.4 million new households every year. The bust cut that by about two-thirds to 500,000. Right now, new households are formed at nearly 900,000 per year, according to NAHB.
Freddie Mac, however, recently released a forecast that projected household net growth at 1.20 to 1.25 million in 2013.
A segment of renters bracing to take the homeownership plunge are adding to the rosy 2013 forecast. More than one in three of today’s renters, 31 percent, plan to buy a home in the next two years, a 9-point increase from 22 percent in January 2011, according to Trulia’s American Dream survey.
Near record low interest rates shouldn’t hurt the recovery…
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Mortgage Rates Start 2013 Near Record Lows
Fixed-rate mortgages ended 2012 by hovering near record-breaking lows and keeping home buyer affordability high, Freddie Mac reports in its weekly mortgage market survey.
“The 30-year fixed-rate mortgage averaged 3.66 percent for 2012, the lowest annual average in at least 65 years,” says Frank Nothaft, Freddie Mac’s chief economist. “Rates on 30-year fixed mortgages were nearly 0.6 percentage points below that of the beginning of the year, which translates into an interest payment savings of nearly $98,600 over the life of a $200,000 loan. Moreover, opting for a 15-year fixed mortgage at today’s rates, a home owner could save an additional $138,400 in interest payments.”
Nationwide, the average 30-year fixed rate mortgage rate is starting 2013 at 3.35 percent. Last year at this time, 30-year rates were 3.95 percent. 15-year fixed rates are starting the new year at or around 2.65 percent, compared to a year ago at 3.24 percent. 1-year and 5-year adjustable-rate mortgages are also starting the new year below last year’s levels.
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Home Prices Projected to Continue Increasing in 2013
More 
evidence that the housing market is trying to dig out of the doldrums and set it sites on recovery came out with a panel of 105 professional forecasters projecting home prices will continue to increase in 2013 rising 3.1 percent for the year, according to the December 2012 Zillow Home Price Expectations Survey.
The most optimistic group of forecasters predicted an average increase of 6.3 percent in home prices for 2012. The most pessimistic predicted an average increase of 3 percent for 2012.
The most optimistic group for 2013 home prices predicted an average increase of 4.9 percent and the most pessimistic an average increase of 0.8 percent. There is much concern about a negative impact on the housing market recovery as a result of changes to the mortgage interest deduction (MID), if made.
Most of the forecasters feel that changes to the MID would have almost no impact on overall home prices in the U.S. and would instead just impact high-priced homes.
If the (MID) eligible mortgage is reduced to $500,000 and 2nd home deductions are eliminated, 55 percent of the respondents felt this would have “little to no near-term impact on overall home prices.”
If the MID is eliminated entirely over a period of several years, then the biggest negative impact on the market is expected by the panel, but even then just on high-end home prices with 70 percent of respondents saying they would not expect those home prices to fall moderately or significantly however that there would be “no overall impact” on U.S. home prices as a whole if that were to happen.
More good news in the housing sector – home prices are the strongest they’ve been in 9 years. It was the summer of 2003 the last time we saw housing prices as high as they are now.
For more Columbia SC real estate news updates, check our Columbia SC Real Estate News category to your right.
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Year End Tax Tips to Trim Your 2013 Taxes
Unless Congress intervenes, the Bush-era tax cuts expire when 2013 arrives. Also at risk if lawmakers don’t act before Dec. 31st are many popular tax breaks that expired at the end of 2011 that have long been considered sure-shots for revival. Those breaks include the authority to make direct contributions from traditional IRAs to charity.
Many believe Congress will extend current tax rates, at least temporarily, and probably for all taxpayers.
There are some year-end things you can do to trim your 2012 tax liability. Let’s review them briefly:
Prepare For a New Surtax – One of the biggest changes on the books for 2013 is a 3.8% surtax on investment income for married couples with modified AGI of more than $250,000 (singles, $200,000). As part of the new health care law, the tax applies to the smaller of net investment income or the amount by which taxable income exceeds the thresholds. Investment income includes dividends, interest, capital gains, annuities, royalties and rents. Investment income does not include distributions from IRAs or other retirement accounts.
To lower the potential tax bite, you could give away income-producing assets, such as stocks or investment property, to adult children whose income is far below the threshold. They would not be affected by that extra tax. This is a particularly good year to make large gifts because of a change in the federal gift tax law.
You could also consider accelerating plans to convert part of your traditional IRA to a Roth. Although IRA distributions are not investment income under the surtax law, they could boost your taxable income above the threshold to make otherwise protected investment income vulnerable. Plus, because tax-free Roth distributions are not included in AGI, they would not count toward the surtax threshold in future years.
Unless Congress intervenes, this will be the last year that taxpayers who are in the 10% and 15% tax brackets — joint filers with taxable incomes up to $70,700 and individuals with incomes up to $35,350 — can enjoy a 0% tax rate on long-term capital gains. However, the 0% rate only applies until your income breaks through the 15% ceiling. If you’re a married couple with income of $60,000 and sell a stock for a profit of $20,700, you’ll pay 15% capital-gains tax on $10,000.
Congress has yet to extend a tax break that enables IRA owners who are 70 and a half or older to send a tax-free distribution of up to $100,000 directly to charity. Don’t wait past mid December to direct your IRA custodian to withdraw your minimum distribution.
Give, and You’ll Receive a Break – No matter what happens with the federal estate tax next year, you can still give an unlimited number of individuals up to $13,000 each this year without worrying about federal gift tax. Your spouse can give another $13,000 each to the same people. Higher-income parents could consider giving appreciated stock to adult children in the 0% capital-gains bracket. An adult child in a lower bracket would pay a lot less in capital gains on a sale than if you sold the stock.
If you are considering giving away a vacation home, business interests or appreciating stock, this may be the time to do it either directly or through a trust. See an estate-planning lawyer for advice. The lifetime gift-tax exemption may never be this high again.
Boost Medical Expenses – Under the health care law, there’s a higher hurdle between you and medical expense deductions starting in 2013. Currently, write-offs are permitted only to the extent your qualifying bills exceed 7.5% of your adjusted gross income. Next year, the threshold rises to 10%. However, for the 2013 to 2016 tax years, the 7.5% threshold applies if either spouse turns 65 before the end of the year.
Consider accelerating the timing of planned elective surgery, dental work or other medical procedures. If you have the option to get some procedures done now, you may want to take care of those things before the year ends. Other expenses that could push you above the threshold: the cost of transportation to a medical facility and certain medically related home improvements.
As always, tax laws seem to be ever-changing, so it is advisable to consult a tax attorney or CPA before making any major changes in your tax filing status, or taking action that could affect your withholding.
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Housing in Midst of Recovery
Forecasting increases in home prices and completed transactions for the year, the National Association of Realtors is starting to report slow, but positive improvement for housing.
According to NAR, pending home sales jumped 14.5%, compared to September 2011. In comparison, August pending home sales grew 10.7%, suggesting overall improvement in 2012.
NAR chief economist, Lawrence Yun, stated it is the pending home sales that continue to hold a higher ground. “This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”
While housing has a long road ahead before anyone can call it a full recovery, small, yet positive economic indicators in housing are slowly emerging, with the PHSI being one of them, given that it has risen for 17 consecutive months on a year-over-year basis. This September revealed a significant increase in contract activity versus the previous year in every region except the West, which struggles with a limited inventory.
It is predicted that over the next year, the conditions of housing will remain affordable, with the 30-year-fixed-rate mortgage remaining remarkably low until it’s gradual 4% rise toward the second half of 2013.
Additionally, NAR says that completed existing-home sales in 2012 will total close to 4.6 million (an increase of 9.0 percent), and are projected to rise about 9.0 percent next year to nearly 5.1 million. With notably lower housing inventory, the national median existing-home price is expected to increase 6.0 percent this year and 5.0 percent in 2013.
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Home Prices at June 2004 Levels
The Federal Housing Finance Agency (FHFA) has released its House Price Index (HPI) for August which shows a 0.7 percent increase in prices compared to July. For the 12 months ending in August, U.S. prices rose 4.7 percent. July figures were revised downward in the report from a 0.2 percent increase to 0.1.
Home prices nationally are now at approximately the same level as in June 2004 and are 15.9 percent below the peak in prices reached in April 2007. FHFA’s bases its index on the purchase price of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac.
For the nine census divisions, seasonally adjusted monthly price changes from July to August ranged from -0.5 percent in the East South Central division to +3.0 percent in the Pacific division, while the 12-month changes ranged from 0.4 percent in the Middle Atlantic division to +11.4 percent in the Mountain division.
