Consumer Confidence Is Rising

Consumer confidence at the end of March reached the second-highest level in four years.

Lower interest rates on mortgages and credit cards were one reason for the more positive view. According to a USA Today analysis, American households paid an average of $8,731 for mortgage interest in 2007. For 2011, the average interest was $5,633.

Low interest rates mean more cash in your pocket.
Three-fourths of the interest savings were from falling interest rates, the rest were from debt reduction.
For the three-week period ending on March 25, The Bloomberg Consumer Comfort Index showed more than 30 percent of households said they had a favorable view of the buying climate. It was the longest stretch since early 2008.

The economic gain for borrowers is greater than other stimulus efforts or even high gas prices. A cut in the Social Security payroll tax, for example, saves households an average of about $70 a month.

Job and income growth are providing consumers with the means to withstand higher fuel costs and are the basis for sales of cars and other expensive items. Economists at the National Automobile Association say even if people aren’t paying attention to their falling interest rates, the money builds up in their checking accounts and especially benefits big-ticket items like cars.

The favorable reduction in household debt shows that many responsible Americans are using the extra cash to pay down credit card balances, which is always a wise move.

Consumer spending is a big factor in U.S. economic growth, so if you need a car or a fridge and can afford it, you’ll perk the economy if you go ahead and buy it.

Common First Time Homebuyer Mistakes

Many first-time homebuyers make simple and common mistakes that are easily avoidable.
They face multiple challenges anyway, such as finding the right home, the right agent, getting approved for a mortgage, and staying within their budget. By avoiding these common mistakes, the process of buying a home can be much less stressful.

1. Overlooking extra costs of homeownership
While some see themselves as ready for homeownership once they can afford a mortgage payment, it is important to remember the other fees that come along with owning a home. Property taxes, home owners association fees, maintenance, higher water and electrical bills, and property insurance are among the extra costs of owning a home, and should be calculated into your budget.

2. Not getting preapproved
It is very important to get preapproved for a loan before you go out searching for the perfect place. That way, you will be making financially sound decisions versus unrealistic emotional ones as to what you can afford.

3. Spending your entire savings on your down payment
This is one of the most common mistakes first time homebuyers make. Homebuyers who put 20 percent or more down don’t have to pay for mortgage insurance when getting a conventional mortgage, which often translates into substantial savings on the monthly payment. However, it is smarter to keep your rainy day savings intact instead.
photo credit: opensourceway

Financial Fitness

This article about being financially fit has great advice for small, inexpensive ways to save more money over time with your home.
Several tips that stand out are:

1. Be fire ready – Check that your fire extinguishers are functioning and easily available, and check your smoke detectors as well.

2. Prevent shocks – Outlets near water, such as in the bathroom or kitchen, should have a ground fault circuit to prevent shocks and electrocution. An inexpensive tool can alleviate this worry.
The major takeaway from this is that by making small investments in your home, you save yourself more in the long-run and protect the value of your property.

Full article here.

This Week’s Market Commentary

Happy New Year Everyone!
This week bring us the release of only three monthly reports that are relevant to the bond market and mortgage rates, but two of them are considered to be highly important.

In addition to those three reports, we also will get the minutes from the last FOMC meeting that may influence the markets and possibly mortgage rates. The financial markets are closed today due to the New Year’s Day holiday.

The first report is the Institute for Supply Management’s (ISM) manufacturing index for December late tomorrow morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened.

That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 53.4 reading in this month’s release, meaning that sentiment strengthened from November’s 52.7. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates tomorrow morning as it would point towards economic strength.

Also tomorrow is the release of the minutes from the last FOMC meeting. This will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours.

The Commerce Department will post November’s Factory Orders data late Wednesday morning. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see an increase of 2.1% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates. The smaller the increase, the better the news for mortgage rates.

The final report of the week comes Friday morning when the Labor Department will post December’s employment figures. The Employment report is arguably the most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and earnings would be ideal news for the bond market.

Current forecasts call for a 0.1% rise from November’s unemployment rate of 8.6%, 150,000 new jobs added to the economy and an increase in earnings of 0.2%. If we see weaker than expected results, mortgage rates should improve Friday. However, stronger than expected readings will likely raise optimism about the economy, pushing mortgage rates sharply higher.

Overall, the key data of the week will be Friday’s Employment report, but look for tomorrow and Wednesday to be active due to the economic data and FOMC minutes scheduled. If they give us favorable results, mortgage rates will likely move lower for the week. But if not, we can expect to see mortgage rates move higher on the week.

Higher Rates coming?

Check out this video blog from "Think Big Work Small" regarding HR 3630 that is expected to pass...
"Think Big Work Small"

Shadow Inventory Down By 16% From Last Year

The shadow inventory of distressed properties owned by lenders and not on the market decreased 16% from this time last year, according to a report released by CoreLogic today. The 1.6 million homes not on the market represent a five month supply.

A one month supply in a shadow inventory is more ideal for the housing market, but this is still an improvement over October 2010. This month last year there was a seven month supply.

California is among the six states that make up half of the current shadow inventory, along with Florida, Illinois, Texas, New Jersey and New York.

How to Hire A Contractor: Five Important Steps

Whether remodeling or making more simple home improvements, it is vital to find the right contractor. Times are tight, and horror stories about lingering projects abound. These five steps, outlined by the San Jose Mercury News, will help you hire the perfect contractor that you can trust to improve your home.

Step One: Get referrals
While there are many ways to find contractors, an easy way to start is simply asking friends and family--or your Mortgage Consultant about it. Put the question out to your contacts on Facebook, and a friend may refer you to a fantastic and trustworthy contractor.
Online sites such as Angie’s List, which requires a subscription fee, provide reviews of local contractors among other small businesses.

Step Two: Interview potential contractors
Prepare to ask the candidates questions about their professional background, recent experience with similar projects, their workers, professional associations, and obtain a list of references. Be sure to follow through and call all of the given references!

Step Three: Look for red flags
Contractors offering extremely low bids could be cutting corners with cheap labor and substandard materials. While times are difficult for many, the cheapest bid is not always the best.
Other red flags include asking for too much cash up front – more than a third – or demanding to be paid only in cash.

Step Four: Narrow it down
From those you have interviewed, narrow it down to three candidates and call all of their references. Ensure that those projects were completed on time and at the expected price. You can also check on your candidates with the Better Business Bureau for former complaints.
Meet with the three candidates face to face, and ask for a broken down price estimate that shows materials and labor expected.

 Step Five: Finalize the deal
Once you have chosen your contractor, get the agreement down in writing! This is crucial if any problems should arise later on. The Mercury recommends including the “beginning date, a completion date, and how payments will be made. It’s typical to pay a third up front, a third when the project is half done and the final third once the job is done and meets your expectations.”
Also ensure that the contractor has a certificate of insurance showing liability and workman’s compensation insurance in case of an accident.