By Tim McLaughlin, Senior Vice President, Weichert Financial

As we enter 2012, here are some money saving tips specifically related to the housing sector to help you manage your financial budget and capitalize on savings.

Buying a home: What size is right?

According to a survey by the National Association of Realtors, home construction firms expect U.S. houses to average 2,152 square feet in 2015, down 10% from last year. This means that if you’re buying with the goal of selling it in the future, trends suggest that oversized homes may be a declining trend in the future. So an astute buyer needs to decide what size home is right for them.

Selling a home: What price is right?

According to Joe Magdziarz, president of the Appraisal Institute, sellers and their agents should look at comparable sales data just within the past 90 days to find the right price. You don’t want to be one of the 75% of homeowners who believe their home is worth more than it is. Your knowledgeable Weichert Realtor can help you assess what price point the market will dictate to help sell your home.

Already a home owner: Shorten your loan

Refinancing your mortgage to a shorter term can save you significantly. For instance, a $250,000 mortgage, going from a 30 year at 4.25% to a 15 year at a 3.50% would save you $12,000 in interest over the life of the loan (assuming full term duration).

Don’t want to do a 15 or 30 year term loan? Terms of 10, 20, and 25 years are also available. Your educated Weichert Financial Gold Services Manager can help you custom fit the term that works best for you.

Already a home owner: Refinance, Refinance, Refinance

Even if you don’t think you have enough equity (or any equity) in your existing property, there are new product offerings coming on the market each day, so where you may have gotten a “no” in the past, you may be able to get a “yes” today or in the near future. Additionally, there are options to do a cash-in refinance, where you bring some cash to closing. If disposable cash is an issue, there are also options to build closing costs into the structure to come to the table with little or no cash in many cases.

Have questions? Need help analyzing what is best for you? Ask us….we can help!

This month’s newsletter features articles on:

Who Needs an Agent?

According to the National Association of Realtors, 85 percent of homeowners are assisted by a real estate agent when selling their home, while 79 percent of buyers purchase their home through a real estate agent or broker.  Most buyers and sellers know they need help with their real estate transactions, and here’s why.

Sweet Dreams

Most of us are sleep deprived and overstressed.  If you consider yourself to be among the majority, here are some words of advice on how to turn your bedroom into an oasis of relaxation and get a better night’s sleep.

Showing Success

Your home is on the market and generating buyer interest.  Congratulations!  Now keep that success rolling by avoiding these critical mistakes some sellers make when showing their homes.

Ready for Seconds

Are you thinking about buying your second home?  Or your third, fourth or even fifth property?  Here are a few signs that you’re ready to make the move to a new address.

Save Your Energy

Lessening your impact on environmental damage is an admirable thing to do, but let’s face it — there’s no better incentive for making your house more energy efficient than saving money every month.  Here’s how to do just that.

Read this month’s newsletter here.

By Tim McLaughlin, Senior Vice President, Weichert Financial

It seems like each week, the markets have a new focus on a different country that drives volatility; this week the focus is on Italy. Take a look at the week that was: Global Equity markets all rose (and Fixed Income rates sold off) Tuesday when Silvio Berlusconi agreed to resign as Italy’s Prime Minister. That’s because a lot of people think Berlusconi is the reason Italy is teetering on the edge of financial disaster. Wednesday, Equity markets were down because those same people realized that they were wrong. Thursday, another rally as maybe they were right.

The idea was that without Berlusconi, the Italian government will get its fiscal house in order and be able to pay back all the money it has borrowed. Italy depends on borrowed money to service its debt, which is significant, but not huge like that of either Greece or the US. In fact, the nation’s fiscal deficits have actually been lower than what they were projected to be.
So with that said why is the US concerned with Italy? As the International Monetary Fund reports, the problem is a “mounting concern among investors about the two way relationship between sovereign and financial risks, and about prospects for policymakers to craft a convincing and durable crisis resolution framework in the euro area. Without significant progress, there is a risk that market worries could become self-fulfilling, with consequences that could prove difficult to contain”.

In simpler terms, the fear is that the government can’t deal with the deficit. More than anything else, that worry is driving up the cost of borrowing money to service the debt. Despite the news about Berlusconi, on midday Wednesday, Italy’s 10 year bonds were at 7.68% and 2 year notes were yielding 7.10%. The magic number here is 7%. When bond yields for Greece, Portugal and Ireland hit 7%, they all had to call on the European Central Bank and the IMF to bail them out.

But unlike the other three nations, Italy has a huge economy. It is Europe’s third largest, trailing only Germany and France. This has enabled it to borrow a lot of money from other people. As of March non-Italians held $1.1 trillion in Italian bonds. This is more than the combined total of foreign-held bonds for Ireland, Portugal, and Greece. So even with the help of the ECB and the IMF, they probably aren’t going to be able to save Italy by themselves.

So why is this concerning to the US? US banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults. According to the Bank for International Settlement, guarantees provided by US lenders on government, bank and corporate debt to those countries rose by $80.7 billion to $518 billion. Almost all of that was CDS. If Italy defaults, or even just looks like it is in danger of defaulting, institutions are going to want to make sure that the loan guarantors can pay off. The fear is what if the US banks can’t?

by Tim McLaughlin, Senior Vice President, Weichert Financial

On Wednesday, Federal Reserve policy makers raised their assessment of the economy while saying “significant downside risks” remain and refrained from taking any additional steps to ease monetary policy.

“Economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year,” the Federal Open Market Committee stated after a two day meeting. At the same time, it repeated that “there are significant downside risks to the economic outlook, including strains in global financial markets.”

The statement may reflect the desire of policy makers led by Chairman Ben Bernanke to see if the unconventional policy steps unveiled at their last two meetings help the expansion gain strength before embarking on new initiatives. While the economy grew last quarter at the fastest pace in a year, that is still insufficient to push down the unemployment rate, and officials have said the U.S. remains vulnerable to shocks from the European debt crisis.

The Fed left unchanged its pledge to keep the benchmark interest rate near zero through at least mid-2013 as long as unemployment remains high and the inflation outlook stays “subdued.” The central bank has kept the target federal funds rate in a range of zero to 0.25 percent since December 2008.
“The committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability,” the statement said.

The central bank also said it would continue its plan to purchase $400 billion of longer-term U.S. bonds by June 2012 while selling the same amount of short-term debt, a program known as Operation Twist. It also will continue reinvesting proceeds from housing debt into mortgage backed securities.

From a market perspective, investors viewed this as a “no change/stay the course” announcement, and all eyes in the mortgage sector continue to focus on the events in Greece/Europe, and on the impending HARP 2.0 release.

Secondary Marketing Takeaways: In terms of employment data, a mostly positive release for the economy this morning. Nonfarm Payroll numbers for the month were the only minor negative in the report (80K vs. projected 95K), however, last month was revised upwards 55K (from 103K to 158K). Additionally, the Unemployment Rate dropped to 9.0% from 9.1%, while Fed Chairman Ben Bernanke commented on Wednesday that we could be in the mid 8% range by 2Q12.

With only eight weeks left until the end of the year, the major market focuses for the mortgage sector are:

1) The resolution of the Greece debt crisis
2) The implementation of HARP 2.0 in December
3) If a broader MBS purchase program by the Fed comes to fruition in the coming months.

This month’s newsletter features articles on:

Good timing

With U.S. mortgage rates lower than they have been in decades, and homes in many areas offered for sale below previous market value, many people are viewing this as the perfect time to buy real estate.

A Place For Everything

Have you just moved into a new place and are loking for room for all of your belongings?  Are you having trouble accommodating all the things you’ve accumulated in your home throughout the years?  Whatever your reasons for wanting more storage space are, there are plenty of ways to get it  .

Holiday Shopping

If you think there’s little point to hunting for a new home during the holidays, think again.  The holiday season can yield some great deals for homebuyers willing to put in the effort at that time of the year.  Here’s why.

Price it Right

Pricing your home right is critical for a quicker sale.  To help prevent your property from lingering on the market longer than it needs to, avoid the following mistakes many seers unfortunately make when establishing their asking price.

It’s A Lock!

Gone are the days when sellers’ keys hung on pegs in real estate offices.  Today it’s sophisticated lockboxes that make your house accessible — and easier to sell.

Read this month’s newsletter here.

By Tim McLaughlin, Sr. Vice President, Weichert Financial

This was the headline of a great article that ran in the Wall Street Journal’s weekend section last week. For those of you who didn’t get a chance to see it, here is a synopsis.

• The nation’s ratio of house prices to yearly rents is nearly restored to its pre-bubble average, U.S. house prices have plunged by nearly a third since 2006, making it a terrific value proposition.
• Taking historically low mortgage rates into consideration, houses are the most affordable they have been in several decades.
• “Price to Rent” ratios are among the lowest since the 1960’s, with the combination of housing prices coming down and rents maintaining their price levels of 5 years ago (even increasing to some degree in some cases):

• The Philadelphia region tri-state price to rent ratio is reported at 11.6
• Washington/Southern MD/Northern VA is at 13.3 o The New York Metro Area is at 17.6
• All three of these regions are down significantly from where they were in 2005 to 2008
• Nationwide, the average is 11.3, down significantly from the peak of 18.5 according to Moody’s

• The numbers are quickly turning in the buyers favor: stock-oriented individuals can think of a house’s price/rent ratio in line to a stock’s price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

So how does the value conscience consumer capitalize on this? Your first step is to meet with your knowledgeable Weichert Realtor and your trusted Weichert Financial Gold Services Manager to strategize a plan and set your course of action. With the buy vs. rent equation never being more in your favor, coupled with near historically low interest rates, the time to capitalize is now. Ask me how…I can help!

By Tim McLaughlin, Sr. Vice President, Weichert Financial

Rates are near historical lows. Housing prices haven’t been this affordable in years, So what are the top reasons supporting the fact that it is a great time to buy that home you have had your eye on (according to the WSJ)?

1. You can get a great deal = buyer’s market. Many of the summer 2011 buyers have purchased or are waiting for spring 2012. An excellent time to beat them to the punch and grab that house of your dreams.

2. Mortgages are cheap. You can get a 30 year loan in the high 3%/low 4% range. What’s not to like? These are the lowest rates on record. As recently as three years ago they were about 6.25%. That drop slashes your monthly repayment by a fifth. When the economy and employment do recover, it is a fair bet that you won’t see these mortgage rates again in your lifetime.

3. You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains down the line when you sell.

4. It’ll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension, or paint everything bright orange if you so desire.

5. You’ll get a better place to live. In many parts of the country right now, it can be really hard to find a good rental given the glut of renter in the marketplace.

6. It offers some inflation protection. No, it’s not perfect. But studies by Professor Karl “Chip” Case (of Case-Shiller), and others, suggest that over the long term housing has tended to beat inflation by a couple of percentage points a year. That’s valuable inflation insurance, especially if you’re young and raising a family and thinking about the next 30 or 40 years.

7. It is forced savings. If you can rent an apartment for say $2,000 month instead of buying one for say $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won’t. Most, I dare say. Thus where is the true value and the savings?

8. Weichert will help make the transaction seamless…ask me how!

by Tim McLaughlin, Sr. Vice President, Weichert Financial

The 30 year Fixed Rate mortgage, continuing to test new lows, dropped below 4% last week for the first time in modern history to 3.99% with .68 points during the week ending Oct. 6, according to Freddie Mac’s weekly survey. A spokesman confirmed that the 30 year’s average of 4.01% with .66 points last week was previously the lowest the weekly rate has been. Freddie has been following rates since its startup in 1970.

While the week to week drop below 4% is only a matter of two basis points, it marks a benchmark level that could have more of a psychological impact on borrowers who qualify for new loans and have a rate high enough to benefit enough from a refinance.

A year ago at this time, the average weekly 30 year rate was 4.27% and the average 15 year rate was 3.72%.
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Pew Research Center out of Washington conducted a survey of over 2,100 adults, of which 57% were current homeowners, 30% were renters, and 13% were prospective buyers, with some interesting results:

• 64% of homeowners whose homes lost value said they expect to recoup the equity losses in the next 3 to 5 years.
• 81% of homeowners (more than 4 out of 5) believe purchasing a home is the best investment an adult can make. By comparison, the number was at 84% back in 1991.

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Did you know?

Fiction: Credit scores can change only once per month or every 30 days.

Fact: On the contrary; each creditor reports information to each credit bureau at different times of the month. This will cause the information and potentially the credit scores to change on a daily basis. For example, American Express may report to Experian on the 1st of the month, Equifax on the 15th and Transunion on the 25th. Thorough review of the credit report is needed to determine what caused the score to change from report to report.

This month’s newsletter features articles on:

As One Door Closes, Another One Opens

In 2010, 37.5 million people changed residences in the U.S.  Of these, an estimated 43.7 percent of the movers cited housing-related reasons, such as the desire to live in a new or better home or apartment.

Say “Ahhhh…”

As life grows increasingly stressful, people are increasingly viewing their homes as retreats–and decorating them as such.  Bathrooms are often a primary focus, and the rend today is to design a space devoted to relaxing and rejuvenating.

Table Talk

Negotiating the purchase agreement is arguably the most challenging aspect of byiing a home, particularly in markets that favor sellers.  To strengthen your position at the negotiating table, consider this advice.

Show Ready

How you live in your home when it’s on the market is different from how you normally live in it.  If you’re serious about selling, you need to be prepared for buyers’ eyes at all times.

Stop Loss

Air leaks make your house a less comfortable place to live and a more expensive place to maintain.  Here’s how to spot leaks so that you can remedy them, and prevent money from floating out your windows.

Read this month’s newsletter here.

by Tim McLaughlin, Sr. Vice President, Weichert Financial Services

On Wednesday, the Fed put what is termed as “Operation Twist” into action. “Operation Twist” is a strategy enacted by the Federal Reserve to sell short term Treasuries while simultaneously purchasing longer term Treasuries. The Fed mandated that it would “swap” $400B of short term debt into longer dated securities.

The last time the Fed purchased long term Treasuries was back in the 1960s during the Kennedy administration. The project, started in 1961, was called “Operation Twist.” It was intended to lower long term interest rates (to stimulate investment) while propping up short term interest rates (to attract capital from abroad and support the dollar). Economists generally seem to think the experiment flopped, though Fed policy has changed so much between then and now, and the experiment was on such a small scale, that it’s hard to draw too many conclusions on how “Operation Twist” will fare today.

In addition to the $400B short/long swap, the Fed also announced that it would be reinvesting proceeds of the $1.25T Mortgage Backed Security purchase initiative from the last two years back into the MBS market as the securities pay off to further support the mortgage sector and continue to stimulate low interest rates.

What does this mean for interest rates and tocks? Well, we are two days in, and it has been bad news for Equities (combined with concerns of the European debt crisis) and very good news for Fixed Income Rates. The initial knee jerk reaction is warranted on the announcement. The question is will the momentum sustain for a prolonged period of time, or will the markets start to retrace as the global markets digest the news over the weekend?

For now, 3.99% and lower on a 30 year Fixed Mortgage sounds awfully appetizing. And 2.99% with points on a 15 year Mortgage sounds like the refinance opportunity everyone has been waiting for. Purchase or refinance, the opportunity to capitalize on historically low interest rates is right now. Weichert Financial can help…ask me how!