The South NJ RE Info Blog

Nearly a full third of households are still renting.  If you're one of them, you could be paying a hefty price.

Before talking about purchasing a house, it's important to note two things.  First-and this is extremely important-the housing market is actually localized.  So the outlook in your hometown may be different than another city across the state or on the other side of the country.  Second, home prices are tied to employment.  For example, if someone feels like their job is in jeopardy, it might be enough to stop them from making a move.  So, if your local job market is feeling a pinch, the home prices in your area may be down as well.

But with all those factors under consideration, it still makes sense to buy instead of rent.  In fact, renting may be costing you a bundle.

Take a look at this example...

If you are paying rent at $1,500 per month and your landlord increases your payment by a modest 5% each year, you would wind up paying just about $100,000 over a 5-year period!  Worse yet, after forking over $100,000, you would only have Rent Receipts to show for it.

Also, how about any improvements you might make to a rental property?  It's not uncommon for renters to freshen up the paint, install new light fixtures or plant some nice flowers outside.  But guess what... all your efforts, labor and the benefit of that improvement belong to the landlord, not to you.

With convenient down payment options still available for qualified buyers, affordable home prices and low interest rates, the very same money could be used towards home ownership.

Even using a standard 30-year fixed program, a mortgage of $300,000 could be obtained with a total monthly mortgage payment-including property taxes and insurance-of around $2,200.  Assuming a 25% tax bracket, this would be equivalent to the average amount spent on rent during the same period after your tax benefit.

Also the benefits of home ownership are quite considerable.  Because the mortgage is being paid down each month, equity is being built.  After just 5-years, the $300,000 mortgage could be reduced to $279,000, adding $21,000 to your net worth!

But if laying out the initial increase in monthly payment and having to wait for your tax benefit to show up next April is a tough nut to crack, the IRS wants to help.  Instead of waiting to file for the tax benefits derived from your new home purchase, you can simply adjust the amount of your withholding.  This allows you to have less tax withheld from each paycheck so you can handle the new mortgage payment more comfortably throughout the year.  In essence, you are taking your tax refund as you go instead of letting Uncle Sam hold it all year, interest free.

Visit www.irs.gov and use the IRS withholding calculator.  This very handy tool can quickly show you the impact that a change in withholding will do to your net paycheck.  Remember to balance this with the expected refund and it is always a good idea to check with your tax advisor.

Don't fall victim to the national headline hype.

Talk to a professional who understands your local market.

Keep in mind that  buying a home is a big step, but it is almost always one in the right direction.

Wednesday's bond market had initially opened down slightly but has since moved into positive territory during Fed Chairman Bernanke's congressional testimony. The stock markets are posting fairly strong gains after the Senate passed a $15 billion jobs creation bill. The Dow is currently up 75 points while the Nasdaq has gained 20 points. The bond market is currently up 4/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

January's New Home Sales report was posted late this morning, showing a surprising drop in sales of newly constructed homes. The 11.2% decline in sales last month dropped them to their lowest level on record. That indicates that the housing sector is not as stabile as some wanted to believe and can be good news for the bond market. However, this data covered only approximately 15% of all home sales in the U.S. Friday's Existing Home Sales report tracks the other 85% of sales.

Chairman Bernanke is in the process of delivering the Fed's semi-annual testimony on the status of the economy to the House Financial Services Committee. During his prepared statement he indicated concern about the employment sector and the unemployment rate that is expected to remain high for quite some time. He also said that he expects inflation to remain under control. Both were good news for the bond market and helped move bonds into positive ground.

He will continue to answer questions from committee members and any surprise answers could lead to more volatility in the markets today. He will repeat this performance for the Senate Banking committee tomorrow, but the second day usually does not bring many surprises. The prepared statement will likely be quite similar to today's speech, so any shocking developments will have to come from the Q & A part of the proceeding.

The only important data scheduled for release tomorrow is January's Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A smaller increase than the 1.4% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

We will also get weekly unemployment figures from the Labor Department, but unless there is a wide variance between the announced number of new claims and the 460,000 total that is expected, this data will probably have little impact on tomorrow's mortgage pricing.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of w hat I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Tuesday's bond market has opened strong following news of a surprising drop in consumer confidence. The stock markets are reacting negatively to the data with the Dow down 62 points and the Nasdaq down 28 points. The bond market is currently up 29/32, which should improve this morning's mortgage rates by approximately .250 - .375 of a discount point.

The Conference Board gave us today's important data with the release of February's Consumer Confidence Index (CCI). They reported a reading of 46.0 that was well below forecasts of a 55.0 reading. This means that consumers were far less optimistic about their own financial situations than many had thought. This is very good news for the bond market and mortgage rates because waning levels of confidence usually translates into lower levels of consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, related data gets watched closely.

This morning's data was great news for t he mortgage market and has turned many heads. If this is the start of a period of declining confidence, analysts will become concerned about consumer spending, the housing market and overall economic growth. If consumers are concerned about losing their job or their general financial situation, they are less apt to purchase a new home or make other large purchases in the near future. This would limit economic expansion and threaten the recovery that is supposedly underway. However, let's keep in mind that this is a single report that seems to be out of whack. Accordingly, I am still holding the concerned outlook for mortgage rates, at least for the time being. If we get further readings that support today's data, that stance will certainly change.

January's New Home Sales report will be posted late tomorrow morning. This is one of the least important reports of the week, and it is the sister report to Friday's Existing Home Sales release. They measure housin g sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. They are both expected to show an increase in sales.

Fed Chairman Bernanke will deliver the Fed's semi-annual testimony on the status of the economy late tomorrow and Thursday mornings. He will be speaking to the House Financial Services Committee tomorrow and the Senate Banking Committee Thursday. Market participants will watch the Fed Chairman's words very closely. He is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what he says during this testimony. Look for him to address the unemployment and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets flu ctuate during this session, possibly affecting mortgage rates also.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Monday's bond market has opened down slightly despite little action in the stock markets. The Dow is currently down 10 points and the Nasdaq nearly unchanged from Friday's close. The bond market is currently down 4/32, which will likely push this morning's mortgage rates higher by approximately .250 of a discount point.

There was no relevant economic data posted this morning. We do, however, have Congressional testimony by Chairman Bernanke late this morning. He will be speaking to a House Financial committee about employment growth and whether further stimulus is needed. These are hot topics so his words may influence the markets and possibly mortgage rates.

Tomorrow morning brings us the first of this week's data with the release of February's Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingnes s to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 55.9 in January to 55.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Wednesday or Thursday, but Friday may be fairly active also. This would be a very good week to maintain contact with your mortgage professional, especially if still floating an interest rate.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I w ould do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.