Mar

12

Where Are You Investing Your Money?

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Where Are You Investing Your Money?

So has your financial advisor or family member (Mom) asked you lately, “Where are you investing your money?”

Interesting tidbit. Did you know that if you invested $100,000 in the NASDAQ on January 1, 2000, as of March 1, 2012, you would have about $75,600 to show for it…total (not a gain but a loss)?

Of course, I’m not a financial advisor and this graph below is only going to show the average and overall return from these investments, but I find it interesting that real estate, overall, during the last 12 years, still has over a 35% return.

Real Estate Vs. Stock Market

If you’re like most “nonprofessional” stock investors who don’t spend a few hours a day looking at P/E ratio’s and listening to board meeting conference calls, then you invest your money with a broker or you do it yourself. Many “investors” put money in a 401k and don’t read the statement.

So for this example, if you put $100,000 in “the market” in 2000, in the stock market, you’d be around even (which means you’ve just about lost money as the value of the dollar has declined). However, if you put it in real estate, despite all the turbulence it has suffered in the past 6 years, you’d be up about 37%.

Food for thought.

Bottom Line

Now that prices are down about 42% here on Long Island, on average, and rates are as close to the lowest ever in our lifetime, maybe it’s time to consider putting your money in real estate market, whether it’s for a personal home or strictly investment properties.

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Feb

28

Mortgage Insurance Premiums for FHA Loans Going Up

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FHA Mortgage Insurance Premiums Going Up

As of April 1st, FHA loans will cost more. The mortgage insurance premiums that buyers must pay will be increasing come April 1st. Case numbers after April 1st will be charged more.

As you may (or may not) know, the FHA charges two kinds of mortgage insurance premiums. One is called the upfront premium, which can be financed and added into the loan amount and the other is the monthly premium.

Monthly “MIP’s” (mortgage insurance premiums) are going up 10 basis points. So if you’re qualified for a loan of 4.5%, after April 1st, if you are not in contract to buy a home, and you’re financing via FHA, your mortgage loan will be 4.6%.

The upfront premium increase will will go up 3/4%. Currently at 1%, after April 1st, this upfront cost will be 1.75%. The upfront premium will be 1.75% of the loan amount.

What does this boil down to? Well on a $300,000 loan, you will be paying about $36 more a month for a home. This isn’t so bad, but when you stretch that out over time, it makes a big difference.

Bottom Line

Why pay more? That’s my question. You may be reading this article and maybe you’ve been hemming and hawing your way through the last few months or years about buying real estate. My question to you is, “Do you want to pay more on your mortgage per month or less?”

Why wait any longer? Seriously. I can’t make the decision for you and I provide this information as a courtesy to my readers and clients so at the very least, I hope you find it useful.

I will expand on this information later in the week as more defined information comes out. But remember, you heard it first – here.

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Feb

27

Long Island Housing Market: February 2012 Buyer Updates

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Long Island Housing Market: February 2012 Buyer Updates

So is the Long Island housing market primed for a boom in Spring 2012? Home sales will be up. Do not confuse “home sales” with home prices however. So if you’re a buyer, you’re in the driver seat. The only thing you have to worry about is your competition (other buyers in the market seeing and making offers on the same homes).

However, there are some buyers out there that still aren’t quite sure if it’s a “good time to buy a home”. Well, let’s take a look at some interesting facts.

The Buffet Opinion

If you know who Warren Buffet is, there’s nothing else for me to say. If you don’t, google him and you’ll find out that he knows what he’s talking about.

Mortgage Affordability

Due to historically low mortgage interest rates mixed with household income averages and home prices currently, the affordability of home ownership is at a forty year benchmark. It’s more affordable to buy a home than it was in 1971.

Mortgage Rates

This next slide is very important. The best way to look at it is to look at the $400,000 loan amount and follow the 4% interest rate price. It’s $1910. Now look at the $360,000 loan amount and follow the 5% interest rate price. That’s $1933.

That’s a $40,000 swing in buying power. The lower the mortgage rate, the more buying power you have because the payment remains the same (and it’s actually better at the higher loan amount with the lower rate).

Bottom Line

If you are thinking of buying a home, or you know someone who is, call me.

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Feb

20

Long Island Housing: Mortgage Rate Outlook Update February 2012

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Long Island Housing: Mortgage Rate Outlook Update February 2012

How might mortgage rates be impacted and how will that affect the Long Island housing market?

A tale of three stories. That’s a great way to describe last week’s news, as a string of positive economic reports, news out of Greece, and hints that inflation is heating up all worked together to impact Bonds and home loan rates. Here are the details!

A breakfast buffet of better than expected economic data hit the wires last week. In the housing arena, Housing Starts came in better than expected, while both the New York Empire State Index and the Philadelphia Fed Index reported positive manufacturing news. There was also decent labor market news, as Weekly Initial Jobless Claims fell by 13,000 in the latest week to 348,000 – the lowest level since March 2008! Meanwhile, Retail Sales rose in January by 0.4%, the largest gain since October.
Remember, strong economic news often cause money to flow out of Bonds and into Stocks, as investors hope to take advantage of gains. That’s partly what caused Bonds (including Mortgage Bonds, to which home loan rates are tied) to worsen late last week.

Also weighing on Bonds and home loan rates was the news that inflation is heating up. Despite the Fed’s claim that inflation is moderating, the Core Consumer Price Index (CPI), which strips out volatile food and energy, rose to its highest levels since October 2008. Meanwhile, as you can see in the chart, the wholesale measuring Core Producer Price Index (PPI) rose double the expectations of 0.2%, coming in at 0.4%. Any hints of inflation can serve to spook Bond investors – causing both Bonds and home loan rates to worsen – as inflation can reduce the value of fixed investments like Bonds. This is one story to keep a close eye on in the weeks ahead.

The drama in Greece is another key story to monitor, as it also impacted Bonds and home loan rates last week. Greece sent the markets into the weekend with assuring messages that a deal for them to avoid default is close, and this sense of optimism weighed on Bonds and home loan rates. Our Bonds and home loan rates have benefitted from all the uncertainty in Greece, as investors have seen our Bond Market as a safe haven for their money. Time will tell whether this uncerta inty and safe haven trading will continue.

Bottom Line
It is a great time to purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

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Feb

17

Long Island Real Estate: February 2012 Update

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The Long Island real estate market’s greatest challenge during the last 5 years has been a consistent flood of available homes for sale that far exceeded buyer demand. Today, the supply and demand factor is still playing a part in keeping downward pressure on pricing, but the market is definitely moving the right direction overall.

If you’ve been a frequent reader of my blog, you’ll know that I have been providing updates on the market in the form of Inventory Vs. Sales. The slide below demonstrates that while sales dropped in January 2011, so did the inventory. You’ll note from my article on the Long Island real estate market in September, 2011, that the market had over 33,000 homes for sale (condo and residential). This decline in inventory represents a 14.2% drop in homes for sale since then.

Even with a “seasonal adjustment” (inventory usually drops in winter), that decline most likely represents a market direction that will see fewer homes coming to market overall. This is good news. Of course, the 31.8% drop in sales is also significant, but the seasonal adjustment would probably account for most of this decline (fewer homes sell in winter and September sales represent mainly June/July contracts – the height of the buying season).

Bottom Line
For sellers, it’s important to note that we are nearing the gradual incline of home appreciation. How near are we is subject to ebbs and flows of the overall economy, but from the best in the business, conventional wisdom has us gaining ground anywhere from 12 to 24 months from now. Selling now is mainly advantageous if you are looking to buy another home (at a discounted price) so selling low is okay as long as you’re buying low. And with mortgage rates so ridiculously low now, the investment return is compounded.

For buyers, what else is there to say. The market is primed for purchasers. Enough said. Word of caution though, you should pay attention to some of the previous articles I’ve posted here on my site:
What is a G-fee?
Will the 30 Year Mortgage Disappear?

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« go back — keep looking »

Mar

12

Where Are You Investing Your Money?

Feb

28

Mortgage Insurance Premiums for FHA Loans Going Up

Feb

27

Long Island Housing Market: February 2012 Buyer Updates

Feb

20

Long Island Housing: Mortgage Rate Outlook Update February 2012

Feb

17

Long Island Real Estate: February 2012 Update

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