Ridiculous.
Thursday, January 28, 2010
Wednesday, January 20, 2010
Interesting Article from Business Week
Link to Business Week Article
Roth on Real Estate December 8, 2009, 4:01PM EST text size: TT
If You Don't Buy a House Now, You're Stupid or Broke
Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth
By Marc Roth
Well, you may not be stupid or broke. Maybe you already have a house and you don't want to move. Or maybe you're a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don't act soon, you will regret it. Here's why: historically low interest rates.
As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.
In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.
And it is exactly that, based on what the graph shows us. Let's look at the point on the far left.
In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers.
But they weren't happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.
Interest Rate Lessons
And when rates started to decline after that, they took a long time to recede to previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We've since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable.
So, what can we learn from the historical trends and numbers?
First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.
Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.
Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.
Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let's assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.
Loan Costs
Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.
Let's put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is "more stable" and it's safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.
If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you're borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.
What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.
Marc Roth is the founder and president of Home Warranty of America, which touches just about every part of the real estate industry since it sells through builders, real estate agents, title companies, mortgage companies, and directly to consumers.
Roth on Real Estate December 8, 2009, 4:01PM EST text size: TT
If You Don't Buy a House Now, You're Stupid or Broke
Interest rates are at historic lows but cyclical trends suggest they will soon rise. Home buyers may never see such a chance again, writes Marc Roth
By Marc Roth
Well, you may not be stupid or broke. Maybe you already have a house and you don't want to move. Or maybe you're a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don't act soon, you will regret it. Here's why: historically low interest rates.
As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.
In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.
And it is exactly that, based on what the graph shows us. Let's look at the point on the far left.
In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers.
But they weren't happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.
Interest Rate Lessons
And when rates started to decline after that, they took a long time to recede to previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We've since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable.
So, what can we learn from the historical trends and numbers?
First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.
Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.
Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.
Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let's assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.
Loan Costs
Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.
Let's put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is "more stable" and it's safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.
If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you're borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.
What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.
Marc Roth is the founder and president of Home Warranty of America, which touches just about every part of the real estate industry since it sells through builders, real estate agents, title companies, mortgage companies, and directly to consumers.
Friday, January 15, 2010
New Credit Card Protections go into effect Feb 22nd
Check this out!
Whole article available at Federal Reserve Website
Press Release
Federal Reserve Press Release
Release Date: January 12, 2010
For immediate release
The Federal Reserve Board on Tuesday approved a final rule amending Regulation Z (Truth in Lending) to protect consumers who use credit cards from a number of costly practices. Credit card issuers must comply with most aspects of the rule beginning on February 22.
"This rule marks an important milestone in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Federal Reserve Governor Elizabeth A. Duke. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts."
Among other things, the rule will:
* Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.
* Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.
* Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.
* Limit the high fees associated with subprime credit cards.
* Ban creditors from using the "two-cycle" billing method to impose interest charges.
* Prohibit creditors from allocating payments in ways that maximize interest charges.
In December 2008, the Federal Reserve adopted final regulations prohibiting unfair credit card practices and improving the disclosures consumers receive in connection with credit card accounts. This rule amends aspects of those regulations to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009.
The final rule represents the second stage of the Federal Reserve's implementation of the Credit Card Act. On July 15, 2009, the Board issued an interim rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In addition to finalizing that interim rule, this rule implements the provisions of the Credit Card Act that go into effect on February 22, 2010. The remaining provisions of the Credit Card Act go into effect on August 22, 2010 and will be implemented by the Federal Reserve at a later date.
Consumers can learn more about changes to their credit card accounts by accessing a new online publication. "What You Need to Know: New Credit Card Rules." It explains key changes consumers can expect from their credit card companies as a result of the new rules. The Board plans to release additional "What You Need to Know" publications in conjunction with other major rulemakings.
Whole article available at Federal Reserve Website
Press Release
Federal Reserve Press Release
Release Date: January 12, 2010
For immediate release
The Federal Reserve Board on Tuesday approved a final rule amending Regulation Z (Truth in Lending) to protect consumers who use credit cards from a number of costly practices. Credit card issuers must comply with most aspects of the rule beginning on February 22.
"This rule marks an important milestone in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Federal Reserve Governor Elizabeth A. Duke. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts."
Among other things, the rule will:
* Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.
* Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.
* Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.
* Limit the high fees associated with subprime credit cards.
* Ban creditors from using the "two-cycle" billing method to impose interest charges.
* Prohibit creditors from allocating payments in ways that maximize interest charges.
In December 2008, the Federal Reserve adopted final regulations prohibiting unfair credit card practices and improving the disclosures consumers receive in connection with credit card accounts. This rule amends aspects of those regulations to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009.
The final rule represents the second stage of the Federal Reserve's implementation of the Credit Card Act. On July 15, 2009, the Board issued an interim rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In addition to finalizing that interim rule, this rule implements the provisions of the Credit Card Act that go into effect on February 22, 2010. The remaining provisions of the Credit Card Act go into effect on August 22, 2010 and will be implemented by the Federal Reserve at a later date.
Consumers can learn more about changes to their credit card accounts by accessing a new online publication. "What You Need to Know: New Credit Card Rules." It explains key changes consumers can expect from their credit card companies as a result of the new rules. The Board plans to release additional "What You Need to Know" publications in conjunction with other major rulemakings.
Thursday, January 14, 2010
Link to my Weekend Update!
Everyone is always asking me how they can check out my weekly email without checking their email.
Here is the solution!
LINK TO WEEKEND UPDATE 25
Here is the solution!
LINK TO WEEKEND UPDATE 25
Client Appreciation Party STILL Coming Soon!
Hey Everyone,
I'm still accepting ideas for the client appreciation party. So far, I'm leaning towards an all early 90's hip hop and new jack swing party-- (wear some starter jackets, jean jackets, fanny packs, neon, and hypercolor T-shirts etc?)
Sound fun? --maybe there is something that would be MORE fun? You call it!
Also, still taking votes on what kind of beer you want. Please give me your two cents!
Bryce
I'm still accepting ideas for the client appreciation party. So far, I'm leaning towards an all early 90's hip hop and new jack swing party-- (wear some starter jackets, jean jackets, fanny packs, neon, and hypercolor T-shirts etc?)
Sound fun? --maybe there is something that would be MORE fun? You call it!
Also, still taking votes on what kind of beer you want. Please give me your two cents!
Bryce
Client Appreciation Party Coming Soon!
**Hey Everyone,** **Keep your eyes peeled for an invitation to my next Client Appreciation Party, which will be out in a few weeks.** **I'm planning on giving back to all of you who have continued to refer me to your friends and family with regard to financing for their homes. You've made 2010 a great year for me, amid a very difficult market, and I intend to show you how much I appreciate that.** **I'm currently looking for a good venue to host this, as well as interviewing DJ's, and taking votes for what kind of beer I should buy. (In kegs of course!) Yeah, I'm not joking kids! This is going to be a fun time! --For any of you that were at the pool party I threw last summer--you know!** **I'm also weighing the prospect of whether or not this will be a themed party, so please give me your two cents on that too! (60's, 70's, 80's or 90's attire? PimpsnHo's Ball? ..something dressy? Or not?)** **So please email me with ideas for places, people, and things you'd like to see, and I'll tally the votes! It will be what we make of it!** **So with the business done, now to the fun!** **(Though the difference between business and fun in THIS email, are pretty darned blurry! Just the way I like it!)** **Here's what's going on this week.** Bryce
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