New Home Sales Down in June

When new home sales drop in the month of June, it’s cause for concern. June is traditionally one of the best months of the year for home sales, but the fact that June sales numbers were down after several months of increases, tends to indicate there are some underlying economic fundamentals that have just not recovered as much as first thought.

New home sales fell to 350,000, setting a five-month low in June. Economists had expected new home sales to inch up slightly from the preliminary sales report in May. May sales were revised up to 382,000 from the originally reported 369,000.

The report is a disappointment for the housing sector, which had seen some encouraging signs in recent data on builder confidence and housing starts. The 8.4 percent month-over-month drop in sales was the steepest since sales fell 11.4 percent from January to February 2011.

The June new home sales drop comes on the heels of another recent report from the National Association of Realtors that existing home sales fell in June to an eight month low, falling for the fourth time in five months.

June also saw a decline in the sales of existing homes. Home builders, however, remain optimistic. NAHB Chief Economist David Crowe said the lower number of new-home sales in June represents an adjustment from a robust level of activity in May, “yet overall results for the second quarter show we are still on track for continued improvement.”

Some economists are blaming a steady decline in the level of housing inventory for the drop in sales.

Since sales figures are a couple of months behind, it will be September and October before we know whether the traditional summer selling season was a bust or a boom. We’ll update you again in our September and October newsletters on July and August numbers. But heading into the elections in November, the economy certainly appears to be the number one issue for the candidates this time around. We’ll keep you posted.

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Home Refinancing: What You Need to Know

Mortgage refinancing means getting a new mortgage to replace your old one with the goal of reducing monthly payments, lowering your interest rate, or taking cash out of your home for other purchases.

According to the Mortgage Bankers Association, the average American refinances his or her mortgage every four years. With interest rates continuing to go lower and lower almost weekly, it’s no wonder so many people are trying get their mortgage refinanced.

The most popular reason for refinancing is to get a better interest rate. You can save a considerable amount of interest by just lowering your rate a point or two over a 30 year loan. For example, you have a $250,000 mortgage with a 30-year fixed rate of 6 percent. Your monthly mortgage payment is approximately $1,500. If after four years of owning your home you refinanced to a mortgage with an interest rate of 4 percent, your monthly mortgage payment would be $1,300 – a savings of $200 per month.

Another popular reason for mortgage refinancing is to switch mortgage types. Maybe you have an adjustable rate mortgage because that’s all you qualified for 5 years ago, and now the rate is about to adjust, and you want to switch to a fixed rate term. Likewise, maybe you have a 6 or 7 percent fixed rate mortgage and want to switch to the attractive rates an ARM offers.

Some people use mortgage refinancing to take some cash out of the equity they’ve built up in their home. Although more and more people are finding they have lost a lot of the equity they once had because home values have dropped so much over the past 5 years, many people are still fortunate enough to have the equity necessary to refinance and take cash out to pay for other things.

Is Refinancing Right For You?

Before you contact a lender, make sure it makes sense for you. Ask yourself these questions:

How long will I be in my home? The general rule is that unless you are planning to stay in your home at least another five years, then refinancing may not make sense.

Is there a prepayment penalty on my current mortgage? Since many mortgages carry a penalty if you pay off your existing mortgage, find out if you will be charged a “prepayment penalty.”

What are the costs of the new mortgage? Lenders almost always charge fees for taking out a new loan. Unless your new rate is at least a half a percentage point lower than your current rate, the fees may eat up your potential savings.

Can I reduce my monthly payments? For those whose cash flow has changed, refinancing for a longer term will likely lower your monthly payments. This will increase interest owed, but it could provide relief given a new set of financial considerations.

Can I cash out some of my equity? Taking out a new mortgage with a larger principal could provide a cash infusion for a major project or other needs. The advantage is that you can get a lower interest rate than if you used a credit card or an unsecured loan for the cash. This makes sense if the current interest rate is lower than your existing rate.

Whether or not refinancing is right for you depends on your individual circumstances. Just make sure you do the math and understand how the new loan will affect you.

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Is The Housing Crisis REALLY Over?

The news on the housing front has been mostly positive for the past few months, making many analysts and forecasters say, “The housing crisis has finally ended.”  But has it?

The country is still mired in record levels of personal debt, and more than 50% of the population is upside down in their homes and basically stuck in them for the foreseeable future. Add to all that the worsening crisis in Europe and Greece along with the instability of the Euro and you have the makings for a double-dip housing crisis.

A recent poll by Reuters shows most economists thinking the housing market has bottomed and prices should rise nearly 2 percent for 2013 after a mostly flat 2012. The main thing holding the market back now is the lack of any growth in the labor market.

In nearly every city in the U.S. it now costs less to buy a home than it does to rent. But many would-be homeowners can’t buy. They are virtually locked out of the market because they don’t qualify for a mortgage due to the strict underwriting standards. Some believe this credit freeze is only going to get worse.

Still, there’s no doubt that in most places the housing market appears to have bottomed out and is now gathering strength. We’ll stay on top of the market and pass the most up-to-date housing news to you here, good or bad. Stay tuned!