Thursday, September 29, 2016

Build Your Disaster Kit - What's Needed!

Jill Childers of the Vacaville Fire Department shares what you need to have in your disaster kit.

Monday, September 26, 2016

Rising Interest Rates Are Creeping Closer

Although it is has not happened as of yet, the likelihood of the Fed raising interest rates is creeping closer.  The spread between board members for versus against an increase tightened.  More members moving toward raising rates but there continue to remains holdouts that want to wait a little longer.  The tightening of the votes keeps the possibility of a rate hike alive before the end of the year.

The assessment of the economy by the Fed has changed minimally since the July meeting.  The pace of the economy continues to be described as moderate with less emphasis of strength being placed on the labor markets.  The pro’s and con’s to this month’s report is that household spending is described as strong and business investment is being seen as soft.  Household spending is once again described as strong and business investment is once again noted as soft. Inflation remains the same and the concern over global affairs impacting the U.S. economy remains high.

This week contained a lot of real estate reports and data.  New home sales remain strong and home builders remain optimistic about the near future.  The housing market index jumped six points to the highest reading since October of last year.  The expectation of future sales also is up more than expected to the highest level since all the way back in 2005.   Traffic to builder sites remains strong well.

New home sales continues to be one of the positive areas of the current economy with housing permits for single family homes rising 3.7 percent in the month of August.  Permit increases are a strong indicator for the expectation of future home sales.  Actual housing starts and permits did fall in August down by 5.4 percent however since single family permits are the strongest indicator of the future of housing growth, it makes sense to pay less attention to the headlines and more focus on the meat of the report.

The momentum of home prices, which had been softening in recent reports seems to be firming back up with the July report.  The FHFA house price index rose a solid 0.5 percent and June was revised up by 0.1 percent.  The spread of prices from this year to last year increased slightly by 0.1 percent up to 5.8 percent.   All nine census divisions showed gains for the month.

The final report for the week on existing homes sales showed weakness with a decline of 0.9 percent down to an annualized rate of 5.33 million.  This is only slightly above the reading of 5.29 million from the same time last year.  The problem is simply a lack of inventory.  There is plenty of buyer demand in almost all markets in the country, however the lack of inventory is stifling growth.  Supply of homes is only 4.6 months.

Mortgage applications for both purchases and refinances declined for the week of September 16th.  Purchase applications were lower by 7.0 percent while refinances were hit even harder with an 8.0 percent decline.  The edging up of interest rates in recent weeks is felt strongest in the refinance market.

Next week’s potential market moving reports are:

·        Monday September 26th – New home Sales
·        Tuesday September 27th – S&P Case-Shiller House Price Index
·        Wednesday September 28th - MBA Mortgage Applications & Durable Goods Orders
·        Thursday September 29th – First Time Jobless Claims & GDP
·        Friday September 30th – Personal Income and Outlays

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Friday, September 23, 2016

Fixed Mortgages vs ARMS

Fixed-rate and adjustable-rate mortgages are the two main types of mortgages of the home-lending world. Let's take a look at the differences.

A fixed-rate mortgage is very straightforward. The borrower knows from the beginning what the interest rate will be for the entire duration of the mortgage, and the monthly payments due are likewise fixed. By far, the most popular fixed-rate mortgage is the 30-year mortgage, but you can also get 15-year loans easily, and some banks offer other terms as well. Simple.
The adjustable-rate mortgage, or ARM, is slightly less simple. With these mortgages, your rates will change from time to time, depending on what type of ARM you have. With a 5/1 ARM, for example, you'll have a fixed rate for the first five years, but after that, your rate will reset from year to year, depending on prevailing interest rates. If rates are plummeting, your rate will also drop -- and vice versa. ARMs typically have an extra-low "teaser rate" for the first year, as well as an upper limit, or cap. The amount that an ARM can rise each year is also limited, so that it won't rise too quickly.
Fixed-rate mortgages are good because they come with no surprises. In exchange for essentially allowing you to lock in a rate for a long period of time, however, you'll often pay a slightly higher rate than you would with an ARM. Fixed-rate mortgages are good for people who enjoy stability. They're also especially attractive during periods when interest rates are low. At such times, fixed-rate mortgages permit you to lock in low rates for many years to come.
Conversely, if the prevailing interest rates are very high, and you think rates are more likely to fall than rise, an ARM might make more sense. In addition, since ARM rates are typically slightly lower than fixed rates, they permit people to borrow a little bit more, and the difference can help you buy a slightly spiffier house. ARMs are often recommended for those who will be in a house for only a few years, since the rate is not likely to change too much in that time. Beware, though -- don't enter into an ARM unless you're sure you'll be able to handle the worst-case scenario of having your rate quickly rise to the cap.

Tuesday, September 20, 2016

Mortgage Strategies For Different Life Stages

Becoming a homeowner represents a major life milestone. But from a financial point of view, purchasing a home is not a one-time event; it is the foundation for a variety of strategies over the course of a lifetime.

Before settling on any mortgage strategy, it is important to think through what you want financing to accomplish. As with any major financial decision, your particular circumstances and goals should shape your choices. Are you most concerned with saving money overall? Minimizing your interest expense? Securing the lowest possible monthly payment? Some buyers may want to maximize their equity - the market value of the property less the remaining mortgage - while others may have the goal of becoming debt-free by a certain age or milestone. How you weight each of these objectives will shape how you approach a mortgage. Beyond your goals, think about your circumstances. Your stage in life, your family situation and the other assets available to you may all affect your decision.

Once you have answered these questions, you can consider a variety of mortgage strategies appropriate for your goals. While there is certainly no particular age limit, upper or lower, for any of the strategies I will discuss, some make more sense at certain life stages than others.

For first-time homebuyers, often in their late 20s to mid-30s, the main goal of a mortgage will generally be to secure the particular home they have in mind. Before deciding on a mortgage type, these buyers should seriously consider how much of a down payment they can afford and the size of the mortgage they plan to take.

A few years ago, securing a mortgage often required a down payment of 20 percent or more. These days, lenders have relaxed that standard. Even when it is not required, a substantial down payment certainly offers advantages, such as the potential for a lower monthly payment. But the current low-interest-rate environment and reasonable housing prices in many markets may make buyers hesitant to wait.

In this situation, there are some options. The Federal Housing Administration offers insured loans to buyers who can only afford very small down payments, potentially as little as 3.5 percent. Borrowers must also meet other FHA criteria to qualify, and should expect more paperwork and a higher interest rate than those of a traditional mortgage.

Borrowers who cannot make substantial down payments might also consider "piggyback" mortgages to avoid private mortgage insurance, often abbreviated PMI. All borrowers will want to avoid PMI if possible, since it will increase the monthly payment amount, though this is offset slightly by the fact that premiums can be deducted as interest if you itemize deductions on your federal tax return. If a homeowner's down payment is under 20 percent, a lender typically requires PMI. Piggyback loans allow borrowers to take out second mortgages to cover some portion of the down payment. These arrangements avoid PMI, but typically involve higher interest rates than single mortgages do.

Lenders may offer a buyer the option of paying points on the mortgage at closing. The buyer pays set fees outright in exchange for a lower interest rate. While this may seem appealing because of a lower monthly payment, most homebuyers should avoid paying points. If you pay interest upfront, it becomes a sunk cost that you cannot recover if you sell your home before the end of the mortgage term.

Once a borrower decides on a down payment, the next decision is what type of financing to secure. Adjustable-rate mortgages offer relatively low interest rates for a fixed term, often five or 10 years, after which the rate becomes variable. These mortgages are especially attractive to buyers who know they plan to sell their homes before the variable rate takes effect.

While many borrowers can and do refinance when the fixed term is up, the rates are likely to be higher, possibly much higher, five to 10 years from now. In White Plains, New York, 30-year fixed mortgage rates for buyers with good credit hovered between 3.5 and 4 percent as of this writing; by historical standards, these rates are incredibly low. Buyers will not want to be hit with the inevitably higher rates down the line. However, if a buyer firmly plans to sell the property during the fixed term, the lower rates can be attractive. Buyers should always avoid adjustable-rate mortgages with very short terms.

For many people, if not most, a traditional 30-year fixed-rate mortgage remains the best choice. If you are buying your "forever home," where you plan to raise children or build your life for the long term, a 30-year fixed rate will almost always be the right way to go, since it locks in a reasonable rate virtually for life.

Even if you do not intend to stay in your home very long, life happens and many people's plans change. Time moves quickly and only seems to go faster as we age. Not only might inertia keep you in place past your initial plan, but a financial setback could also mean an original moving timeline is no longer practical. Even if you grow into a larger home, you may wish to keep your starter property, especially if it is a condo or apartment. You could then rent it out, even once you have made your home elsewhere.

The major downside of a 30-year fixed-rate mortgage is that you will pay the most interest over the life of the loan because of the long term and the rates that outpace the fixed portion of an adjustable-rate mortgage. For those interested in obtaining home equity more rapidly, a 15-year fixed-rate mortgage may be an attractive alternative. The downside is that a shorter term means significantly higher monthly mortgage payments. In addition, your overall financial picture will include less liquidity, since more of your assets will be tied up in home equity.

There are a few mortgage types that all borrowers should avoid outright. An interest-only mortgage is one in which the borrower pays only interest for a set period, often five or 10 years, while the principal remains unchanged. While some borrowers find them appealing because the early payments are substantially lower than later ones, these loans almost always involve taking on too much risk; the homeowner builds no equity at the beginning of the loan, so a decline in the property's value can quickly become a disaster.

Borrowers should also avoid loans structured so that the borrower owes a large lump sum at the end of the mortgage, often called a "balloon payment." Unlike a typical mortgage, the full value of the loan is not amortized over its term, which makes monthly payments lower. However, many homeowners concerned about securing a lower monthly payment will lack the cash to make a balloon payment, meaning that they will either need to sell their home - trusting that property values have not dropped so far that the sale will not cover the payment - or refinance at rates that are almost sure to be higher five to 10 years from now.

Different strategies become available to borrowers who have held their mortgages for some time. For instance, by the time homeowners reach their late 30s or 40s, it is likely that their earning power has increased. Many may find themselves in a position where they could pay their mortgages down faster than the standard amortized schedule because they have paid down other debts or reduced expenses. But just because borrowers can pay their mortgages faster does not necessarily make it a good idea.

First, borrowers should double-check to make sure their mortgages have no prepayment penalties. While you should never accept a mortgage that has such fees in the first place, if you failed to look for this provision, you certainly should not incur any penalties to pay faster.

Even if no penalties stand in the way, the current low-rate environment means that many people would be better off investing their extra cash in diversified portfolios. If the expected rate of return is higher than the mortgage interest, allowing for the benefit of deducting that interest, an investor essentially creates leverage.

That said, a very conservative investor who is especially averse to debt may find paying off his or her mortgage is the right choice. If the borrower is considering sticking the money in a low-yield money market or savings account, the mortgage's interest rate will still beat the rate of return on such vehicles, even allowing for its tax treatment.

For some homeowners, making extra mortgage payments offers the added bonus of imposing forced budgetary discipline. Some borrowers know that they will spend any cash that is available to them; by paying down the principal, these people will build their home equity by tying up their money in an illiquid form.

Homeowners in this life stage may also start to consider a second mortgage. While once relatively rare, home equity loans - another name for second mortgages - became nearly standard in the 1990s and early 2000s. In part, this is because mortgage interest is generally deductible on income taxes (up to certain limits), regardless of the loan's purpose. While such loans can occasionally be useful, the housing crash demonstrated the real hazards of excessive borrowing using one's home as collateral, including losing the home itself and marring one's credit history through default. This strategy should be pursued very cautiously, if at all.

A home equity loan is different from a home equity line of credit, or HELOC, though both carry many of the same risks. Rather than taking out a loan for a fixed amount, a HELOC is set up as a line of credit using the home as collateral. The borrower can draw on the credit line much like a credit card, with the loaned amount subject to variable interest rates.

By the time you consider a second mortgage or a HELOC, you may be nearing the end of your original mortgage. Smart homeowners have refinanced their mortgages within the past seven years to take advantage of the current low rates; those who have not should do so as soon as possible before rates start to rise again.

Homeowners who have been in their houses for a few decades are likely to be in their prime earning years, with an eye toward retirement. Some of them may be financing their children's college educations or considering big-ticket purchases, and may want to use their home equity. Beyond the options discussed above, borrowers may have the option to refinance a principal amount that is higher than their current principal balance. The lender will present the difference as cash. Some lenders, however, may be reluctant to allow such a strategy in today's strict lending environment.

Furthermore, this technique can be dangerous. Effectively using a home as an ATM means that the homeowner will be paying a mortgage for longer than originally intended, face higher monthly payments or both. It can be tempting to view a home as a source of ready cash, but if the home's value suddenly falls, the owner could end up in an uncomfortable situation. In fact, widespread use of this strategy was a major component of the 2008 financial crisis.

Retiree homeowners may have a problem opposite that of younger adults buying first homes. They may well own their homes outright, but could find their finances constrained by too-small retirement nest eggs or unexpected expenses. They may wish to consider reverse mortgages in order to turn some of their equity into cash. In a reverse mortgage, the lender does not require repayment until the borrower dies or sells the home. In theory, the loan is structured in a way that the loan amount will not exceed the home's value over the loan's term.

A home is a major financial asset and creates many opportunities over a homeowner's lifetime. By carefully weighing your needs and realistically assessing your overall financial situation, you can wisely settle on the mortgage strategy that serves you best at any life stage.

Article Source:

Thursday, September 8, 2016

What's The Plan - Breweries, Distilleries and more!

In this episode of "What's the Plan," Barton Brierley talks about the new zoning rules from breweries, distilleries and other Community Development news!

Monday, September 5, 2016

Positive Home Data Slipping

S&P Case-Shiller Home Price Index:  It seems that positive home data is beginning to slip.  According to Case-Shiller home prices in the 20 major cities measured for the month of June slipped by 0.1 percent.  This is the 3rd straight month of declining prices.  Compared to the same time last year, prices remain higher by 5.1 percent.  Although still in positive territory, the distance between prices today versus a year ago is also slipping.  The highest breath between this year and last year was 5.7 percent back in January.

The Pacific Northwest continues to be the main area of the country where declining housing trends are non-existent.  Prices in Portland Oregon are 12.6 percent higher than last year and Seattle remains in double digits with a 11.0 percent spread.  California continues to remain higher with the difference between last year and this year sitting in the mid-single digits.

Pending Home Sales:  The good news is that pending home sales jumped higher in July by 1.3 percent.  The not so good news is that the jump occurred from the prior month’s revision from a positive 0.2 percent down to a negative 0.8 percent.  This is one of the largest revisions we have seen and has many cautious about July’s increase in that it may very well be revised next month into negative territory the same as what just occurred for June.

Pending sales are up 1.4 percent from the same time last year.  Although this does not show this sector of the market growing, it does bode well for a positive existing home sales report to be released later in the month.

Mortgage Rates and Applications:  Mortgage rates continue to remain within striking distance of record lows.  In a nice trend reversal, applications for purchases and refinances are both up for the week of August 26th.  Purchase applications rose 1.0 percent and refinance apps jumped 4.0 percent.  The prior week’s report showed declines of 0.3 percent and 3.0 percent respectively.  Overall mortgage applications are up 5.0 percent from the same time last year according to the Mortgage Bankers Association of America.

Construction Spending:  After the Census Bureau back in November revised 10 years of data lower due to a calculation error, many analysts are calling into question the overall accuracy of this index moving forward.  The data continues to be looked at, however many experts are not willing to accept this data as a real trend indicator for the housing market.  The latest data shows that from June to July spending remained unchanged.  Compared to the same time last year construction spending is up 1.5 percent.

Next week’s potential market moving reports are:

·        Monday September 5th – US Holiday: Labor Day – All Markets Closed
·        Tuesday September 6th – Labor Market Conditions & ISM Non-Mfg Index
·        Wednesday September 7th - MBA Mortgage Applications & JOLTS Report
·        Thursday September 8th - First Time Jobless Claims & EIA Petroleum Status

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Friday, September 2, 2016