Wanda Mooney

Blog :: 11-2011

Artisans of Western Mass - Buy Handmade Shop Local

Shopping for handmade local gifts from the convenience of your home can now be done under one web site.   You can browse the different artisans sites and complete your holiday shopping all under one site.   You can sign up and receive updates of upcoming shows and be kept informed of ongoing specials.   Check it out - Artisans of WMASS

Real Estate Update - NAR Chief Economist

Lawrence YunStrange Days

By Lawrence Yun, NAR Chief Economist

These are strange times we live in. The economy has officially and statistically been out of recession for two years. Still, consumer confidence (as measured by The Conference Board) is at or near its lowest point ever. Consumer inflation - as reported by the Bureau of Labor Statistics - has reached four percent - the highest inflation rate in years. Yet the 10-year government borrowing rate is barely over two percent; that means that a creditor is in essence getting two percent more money next year to buy products that are four percent more expensive.

Then there's the bank and lending environment. Most of the qualified households with the highest credit scores are paying higher mortgage interest rates than most other borrowers (because of higher interest rates on jumbo mortgages). Perhaps most puzzling of all is this. The U.S. banking system has been healing nicely since its near-death experience in late 2008, and banks have seen their profits soaring to record heights in 2010 and will likely see profits just as high in 2011.Yet bank stock prices are in the tank and banks' abundant cash reserves and profits have not translated into more lending. It is doubly puzzling and frustrating for the real estate industry since mortgages originations since 2009 have been performing outstandingly with exceptionally low default rates. Those elevated default rates that the media love to report are not recent loans but simply the "legacy" toxic mortgages that were originated during the housing bubble years that are still moving through the pipeline.

One rationale for constrained lending that some of the banks invoke is lawsuit threats from robo-signing scandals. Another reason why they claim to need to hold on to their extra cash is the regulatory uncertainty from the Dodd-Frank legislation and how that will all play out (compliance costs money). But the extra cash holding could also be due to nice steady income stream that flows when there is a lack of competition in the marketplace. We've seen significant consolidation in the banking industry in the past few years. Economic textbooks say fewer firms mean easier tacit collusion to raise fees and interest rates for consumers.

Let's not, however, put all of this on the shoulders of the banks. Policymakers are also at fault for letting the conforming loan limit slide downward. That has forced more consumers to take out jumbo mortgages - especially in certain high cost markets -- which do not carry government backing from FHA, Fannie Mae, or Freddie Mac. As of this writing (early November), the average 30-year jumbo mortgage rate was near five percent. Compare that to the conforming mortgage loan rate of near four percent. On a $500,000 mortgage, the difference in those mortgage rates results in a significantly different monthly mortgage payment (principal and interest only) which could be $250 per month. In other words, people with highest credit scores - those who have demonstrated the highest ability of financial responsibility - are being forced to fork over extra money to the banks that are already flushed with cash. That is an absolute pity. Reinstating the loan limits to where they were so fewer people would have to take out jumbo mortgages should be an easy one for policymakers to support - particularly close to an election year. Apparently convoluted thinkers in Washington disagree.

Despite these strange days in which we find ourselves, let's not overlook some good developments. Several housing market indicators have shown stabilizing - although not yet definitive recovery - signs. Here's one that garnered little press. The U.S. homeownership rate rose a notch in the third quarter of 2011 - 66.1 percent of U.S. households owned their own home. That is an increase - albeit small - from the 66.0 percent homeownership rate in the prior quarter. The ownership rate matches the level back in 1998. Back then, there was no mention of a housing bubble or about unsustainability in the media or in the academic literature.

It's quite possible that the current homeownership rate of 66.1 percent may indeed be the right stabilizing level for the country. Remember - that still represents two thirds of American households. If the homeownership rate stabilizes at the current 66 percent or so level then the natural increases in population (three million a year) and households (about 1.1 million a year in normal times) in the U.S. will bring about 700,000 additional potential homeowners each year. That presents home sales and business opportunities for REALTORS®, not just from these entrants into the housing marketplace, but also from those resulting from a "turnover rate" among the existing 75 million home-owning families. That turnover rate had been exceptionally low in recent years due to the weak economy and from the many underwater homeowners who could not move without a short-sale approval from the banks.

Other housing data in recent months have also pointed to stabilization. Despite the ever present discussion and consumer perception of when home values will stop dropping, the Case-Shiller price index has actually been rising for five consecutive months. Furthermore, Case-Shiller's low point was set in 2009, two years ago. Since then there have been only low single-digit increases and decreases. In essence that says that home values have stabilized.

Home sales have also shown stabilizing patterns. Home sales rose five percent in 2009 nationally, then retreated five percent in 2010. Sales are expected to be roughly the same this year as in 2010. So again, it is only of some small single-digit percentage movements and nothing of cataclysmic changes. Housing starts have also been at 500,000 to 600,000 annualized pace for the past three straight years.

But perception is reality - in both "normal" as well as strange times. Many consumers have been pounded with messages from the media about the continuing sharp falls in home values, home sales, and housing starts. That is not a confidence builder for consumers or for the broader economy. Strange times, indeed. Looking at the real numbers - and what's behind them - shows us that things may actually be better than we think.

Great tips to Prevent Mold in Your House

10 Ways to Prevent Costly Mold Damage to Your Home

Published: March 16, 2011
Fixing mold damage is an expensive and time-consuming home repair. But you can save time and money by implementing these 10 ounces of prevention.
Mold spores are always present indoors, particularly in humid areas. You can minimize mold growth, however, by buying a humidity monitor, which helps you keep track of home moisture that lets these spores colonize.
Here are 10 more ways to control and combat mold in your home.
1. Eliminate clutter
Cast a critical eye on household clutter, and pare down your stuff. Clutter blocks airflow and prevents your HVAC system from circulating air. Furniture and draperies that block supply grilles cause condensation. All this moisture creates microclimates in your home that welcome and feed mold growth.
So throw out things you don't love or don't use. Push furniture away from vents and grilles to keep air circulating. On humid, still days, run a couple of fans to keep air moving.

2. Control indoor climate

Mold problems often emerge during hot, humid summers when you're tempted to play with the air conditioner. But set the thermostat too high, and the air conditioner won't dehumidify your air effectively; set it too low, and you create cold surfaces where water vapor can condense.

To prevent moisture problems, and maximize energy efficiency, set the thermostat at 78 degrees F.

3. Shut windows and doors when AC is on

When you open windows and doors, you let air conditioning escape, waste money, and invite humid air into your cooler home: This causes condensation, which mold loves. So keep doors and windows shut when the AC is humming.

Also, maintain your home at around 80 degrees when you're on vacation or at work. Too often, we bump the thermostat up to 85 degrees, or turn off the AC when we're away. This raises temperature and humidity, which creates the ideal home for mold.

4. Properly size your AC unit

Make sure your air conditioning unit is properly sized for your house. If it's too small, the unit will run constantly, elevating costs but not the temperature; too big, and the unit will constantly start and stop, which wastes energy, too.

Install an HVAC unit that is just right. For guidance, call an HVAC professional, or consult Energy Star's square footage/AC capacity chart. 

5. Monitor humidity

An indoor humidity monitor will help you keep track of moisture levels that, ideally, fall between 35% and 50% relative humidity; in very humid climates, at the height of summer, you may have to live with readings closer to 55%.
But if you reach 60% relative humidity, it's time to look for the source of the added moisture; above 70% relative humidity, certain species of mold can begin growing.
Indoor humidity monitors start at about $20; more sophisticated models that simultaneously and remotely track several rooms can climb to $300.

6. Evaluate your AC

If you get a high humidity reading, first make sure your air conditioning is doing its job.
  • Is it set to the proper temperature?
  • Is it cycling on and off periodically?
  • Does it blow cold air when it reaches the set point?
  • Are coils clean?
Inspect the condensate drain pipe (the narrow white pipe sticking out the side) to make sure it's dripping regularly. If it isn't, the pipe is blocked and water may be accumulating inside the unit--or on your floor. If you suspect a problem, call your HVAC professional.

7. Look for standing water

If the air conditioner isn't the issue, search for standing water or chronic dampness that is increasing indoor humidity and providing a lovely environment for mold.

Check for puddles or dampness around hot water tanks, sump pumps, freezers, refrigerators, basement doors, and windows. Inspect crawl spaces for ground water dampness or foundation leaks.

8. Cover crawl space

Ground water seeping into crawl spaces can add gallons of moisture vapor into your house every day. The simplest defense is to cover crawl space floors with a plastic vapor barrier--6 mil polyethylene (landscapers plastic)--that traps moisture in the ground.

If you crawl in your crawl space, use a heavier plastic that won't rip as easily: Some 20 milplastic coverings are on the market.

9. Add a dehumidifier

A dehumidifier removes excess moisture from the air.
You can buy a whole house dehumidifier ($1,100 to $1,800) that attaches to your furnace, treats air throughout the house, and connects to a drain so you never have to empty a tank. If you live in very humid areas, a whole-house system is the way to go.
If you have occasional bouts of dampness and musty smells, a portable dehumidifier will suffice ($150 to $200).
Most models have an auto shutoff that keeps the unit from overflowing when the storage tank is full. Some portables have a hose hookup that automatically sends water into a nearby floor drain.

10. Call a professional

If you can't find the moisture problem on your own, or you aren't sure how to correct a problem you do find, call a home inspector or indoor air quality consultant. Look for credentials from a respected industry organization, such as the American Society of Home Inspectors or the Indoor Air Quality Association. A house call will likely run $250 or more.
Mold remediation isn't necessarily covered by home owners insurance, which typically pays only if the problem results from a sudden emergency covered in your policy, such as a burst pipe. Insurance usually doesn't pay if the problem results from deferred maintenance or floodwaters (unless you have flood insurance).

Small Business Saturday - Shop Local in Franklin County, Mass

This Saturday is Small Business Saturday which promotes shopping at your local stores.  When you shop local you are helping the local community and it makes a huge different.   The holiday shopping season is now here so support your local merchants and shop local!   For a list of participating stores visit the Small Business Saturday website and enter your zip code.   Wishing you a wonderful holiday season!


Restoring Antique Windows featured This Old House

If your antique home has the original windows and they need work and the thought of replacing with modern day windows is something you don't want to do, read about this company who specializes in restoring old windows.  I love the name of this company "Window Woman of New England".  She was featured on "This Old House".   I was reading her web site and came across this bit of information about old windows and energy efficiency.  
 According to the Field Study of Energy Impacts of Window Rehab Choices conducted by the Vermont Energy Investment Corporation, the University of Vermont School of Civil and Environmental Engineering and the U.S. Army Cold Regions Research and Engineering laboratory the estimate first year energy savings between a restored wooden window with a good storm window vs. a replacement window was $0.60. Yup, less than a buck. In their conclusions section they noted "The decision to renovate or replace a window should not be based solely on energy considerations, as the difference in estimate first year savings between the upgrade options are small." Broken glass, failed glazing, no weather stripping - these small and repairable items are what really effect energy efficiency in windows.

Interesting . . . if you have interest in restoring your windows - check out her website!

U.S. Will Remain a Nation of Homeowners

The U.S. will not become a nation of renters; there are just too many benefits, both financial and otherwise, to own versus rent. That's according to the combined findings of several recent studies presented during the "Buyer or Renter Nation?" session today at the 2011 Realtors® Conference & Expo.
An analysis over a 31-year period across 23 metropolitan areas compared the ownership benefits in terms of appreciation and interest deductibility and the costs homeowners incur with downpayment, taxes, insurance and maintenance. When it was assumed that renters reinvested any savings in rent (versus a higher monthly mortgage payment), maintenance and downpayment, renters had a greater portfolio than buyers in 91 percent of the areas examined. However, when the model allowed renters to spend any savings rather than reinvest those savings, 84 percent of buyers came out ahead.
"We knew that homeowners, on average, accumulate more wealth than renters," said Ken Johnson, editor, Journal of Housing Research at Florida International University. Johnson spoke at the session and conducted the analysis with Eli Beracha. "These findings indicate that homeownership is a self-imposed savings plan. Not everyone should own a home, but from a financial perspective, people who are planning to stay in a property over the long term can benefit from buying."
According to the most recent data from the Federal Reserve Board, a homeowner's net worth is 45.9 times that of a renter's.
Another analysis conducted by Johnson, Beracha, Hilla Skiba and Mark Hirschey determined that housing affordability is at record levels. Twenty-three states are at 30-year record levels of affordability based on price-to-income ratios, and all 50 states are at 30-year record affordability levels based on mortgage payment-to-income ratios.
"Homeownership is more affordable today than at anytime over the last 30 years," said Johnson.
Beyond the financial advantages of homeownership, Johnson also cited several studies that have demonstrated how homeownership enhances civic pride, improves voter turnout, increases personal happiness, reduces crime, and provides a better familial environment.
"These findings are no surprise to Realtors®," said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. "We, like the nation's 75 million homeowners and many other who aspire to one day own a home, know homeownership is an investment in the future of our families, communities, and nation. That is why we will continue to fight for public policies that promote responsible, sustainable homeownership; we believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream."

Profile of Home Buyers & Sellers

The 2011 National Association of Realtors® Profile of Home Buyers and Sellers was released on Friday, November 11 at the 2011 Realtors® Conference & Expo in Anaheim, CA. The 2011 edition is the latest in a long-running series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers. Some highlights from this year's publication:
  • Demographics of home buyers is the biggest change from 2010. The median age of buyers jumped to 45 years old from 39 years old.
  • Only 10% of recent sellers sold via FSBO. 87% of recent sellers sold through a real estate agent or broker.
  • The top reason among sellers to sell their home was a job relocation, at 17% of all sellers, up from 9% in 2006.
  • The typical home seller lived in their home for 9 years - a number that has consistently increased in recent years.
  • About 9 in 10 recent home buyers purchased their home through a real estate agent or broker.
  • Over one-third of home buyers look online at properties for sale as their first step in the home buying process.
  • The 2011 report saw the highest share of married couple home buyers since 2001, and the lowest share of single females since 2004.
  • The income of home buyers rose with tighter underwriting. The median income of buyers in 2011 was $80,900. This is up from $72,200 in 2010.

Jessica Lautz is the Survey Research Manager. Jessica analyzes data and writes annual studies such as the Member Profile, the Profile of Home Buyers and Sellers, and the Commercial Member Profile.

National Real Estate News - New FHA Loan Limits

The New FHA Loan limits does impact the middle class. Many consumers have recently faced higher rates or have been forced to put down larger downpayments due to a change to the way loans are classified. In some areas, the maximum size of a loan that can be financed by the FHA was reduced, forcing some borrowers to make larger downpayments. The minimum size for jumbo loans (i.e., loans not eligible for FHA, Fannie Mae, or Freddie Mac financing) may also have been lowered forcing many prospective buyers to increase their downpayments and/or pay higher mortgage rates. 

  • To attain a better understanding of the borrowers impacted by the reduction of the conforming loan limits in high cost areas, NAR Researched looked at FHA purchase originations data reported for the portion of 2011 prior to the change in the loan limits (e.g. January 1st through September 30th).
  • Data from FHA's Single Family Snapshot (loan amount, product type, and contract rate) were coupled with assumptions about the amortization period, debt-to-income ratio as well as insurance and taxes (30 years, 28%, and 1.5%, respectively) to estimate the household incomes of affected borrowers.
  • The vast majority of borrowers, 85%, who used a loan above the new conforming limits prior to October 1st, had a household income below $150,000
  • "Impact of New Conforming Loan Limits" survey, click here

Ken Fears, Manager, Regional Economics

Ken Fears is the Manager of Regional Economics. He focuses on regional and local market trends found in the Local Market Reports and the Market Watch Reports . He also writes on developments in the mortgage industry and foreclosures.
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Housing Investment for the Long Haul - NAR Chief Economist

Home prices took a rough ride in the past decade. The past 10 years were  an anomaly fueled by easy credit availability. Those days are over - and for the better. Most Americans believe in hard work (and not easy credit) before being able to enjoy the fruits of their labor.
The chart below shows the long historical trend in median prices of a single-family home in the U.S.   A typical buyer purchased a $23,000 home back in 1970. The monthly mortgage payment on that home, assuming a 5 percent down payment, would have been $153 per month for 30 years. So a homeowner who did not do a cash-out refinance would  have paid off their mortgage by the year 2000. So imagine no further rent or mortgage payments. Currently in America there about 25 million homeowners who own their homes free-and-clear.
On top of no mortgage payments, the median price of a home in 2000 was $143,000. This is something a person could bequeath to their loved ones when the time arrives or even use for charity donations: the fruits of one's lifetime labor being put to a good use.
Home prices took a rough ride in the past decade, it's true. But let's not forget about the very basic and long-term benefits of homeownership for those who are willing to stay well within their financial capacity.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.
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