12 Hidden Costs of Homeownership
July 29, 2010 · · 3 Comments

Hi everybody! I know, it’s been awhile..but here’s an awesome article I found earlier this year that would benefit first-time home buyers especially!

-via Luke Mullins, USNews.com (April 8, 2010)

As the selling season gets underway, many Americans will be looking to take advantage of the lower real estate prices, attractive mortgage rates, and federal tax credit by purchasing a home. But remember: Not all of the costs associated with homeownership are reflected in the listed price. Indeed, many buyers — particularly first-time buyers — may be surprised by the amount of cash they’ll need to set aside for housing-related expenses that they hadn’t previously considered. These often-overlooked expenses can include everything from title insurance to lawn mowing. To give would-be home buyers a better sense of the budget they’ll need to buy and maintain a home, U.S. News spoke with a handful of real estate experts and compiled a list of 12 hidden costs of homeownership:

1. Home inspection. Since a home purchase is likely to be the largest financial investment of your life, it’s a good idea to have it professionally inspected beforehand. A home inspector can point out areas of the property that may need repairs. Buyers can use this information as leverage during home-price negotiations or simply to determine whether or not the property is worth purchasing. “It’s not required, but certainly I recommend it to buyers,” says Judy Moore of Re/Max Landmark Realtors in Lexington, Mass. “It is actually very helpful in that [buyers] learn about the property and how to maintain it and it also alerts them to any potential issues that may be coming up in the near future or need to be taken care of.” The cost of a home inspection, which can run several hundred dollars or more, is typically incurred by the buyers before they go to closing, Moore says.    Read more

Dean Rizzi

The Costs are Outweighing the Benefits
June 29, 2010 · · 3 Comments

We’ve stated that the benefits of low interest rates have run their course. We hold to our contrary opinion that low rates are actually hindering more than helping markets these days. Consider the mortgage market: Even though mortgage rates are dwelling in the basement, fewer people are applying for mortgages. The MBA reported that purchase activity declined 1.2 percent to the second-lowest level since 1997 last week, while refinancing activity slid 7.3 percent from its May 2009 highs.

The Federal Reserve’s low-rate policy is hardly inspiring confidence. “Rates must be low because the economy is circling the drain,” so the man-on-the-street rationale goes. It’s the wrong message to send, because promoting risk aversion also means promoting inertia. Risk-averse markets are simply less willing to engage in riskier, but worthwhile, economic activity.

This risk-averse sentiment is readily reflected in the capital markets, where the relatively non-productive assets of gold and Treasury securities continue to be the investments of choice. That’s unfortunate, because we’d all be better off if there were more investment in the very productive (though riskier) assets of home purchases and renovation and mortgage lending.

 www.deanrizzi.com

Dean Rizzi

The Farther They Fall, The Higher They Could Rise
January 26, 2010 · · 2 Comments

Richard Carson and Samuel Dastrup, two university professors, recently published an interesting academic paper (a synopsis is posted at Econbrowser.com). Carson and Dastrup examined how the magnitude of housing-price declines correlated with various factors, such as overbuilding, extent of sub-prime lending, and median income. Not surprisingly, these factors were related to price declines. However, the most important factor was the magnitude of the previous price run-up, which accounted for more than half of the observed variance in the size of the price decline. Read more

Dean Rizzi

A Look at the Past and a Look at the Future
December 30, 2009 · · 1 Comment

This time last year we predicted that 2009 would end a lot better than it began. We were right, though it wasn’t a great accomplishment to be right considering how low the housing market, stock market, and overall economy had sunk during the latter half of 2008. As we’ve stated repeatedly over the past year, a low base and a dour outlook provide an excellent buying opportunity, so we weren’t surprised when buyers stepped forward to exploit the opportunities.

Looking ahead to 2010, we see continued improvement in home sales and home prices. In fact, we wouldn’t be surprised if the market turns to a sellers’ market from a buyers’ market by year’s end. We are almost certain that will be the case if we see a two to three percentage point drop in the unemployment rate. Low mortgage rates and income tax credits are contributing factors in stabilizing the market, to be sure, but no factor is more important than employment in not only maintaining stability but stimulating activity.     Read more

Dean Rizzi

Up, Down, or Sideways?
October 11, 2009 · · 3 Comments

We are speaking of mortgage rates, which continue to move down. Bankrate’s latest survey had them averaging their lowest levels in over four months last week, with the 30-year fixed-rate mortgage averaging 5.25% and the 15-year fixed-rate mortgage averaging 4.64%. Given the recent qualms over unemployment, rates would seem likely to move down further.

And they could, but they could also move up. Last week, Dallas Federal Reserve President Richard Fisher said that the winding down of the Fed’s stimulative monetary policies needed to start as soon as the economy shows signs of sustained improvement. “When it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity to that with which we pursued monetary accommodation,” Fisher said in a speech to the Texas Christian University Business Network of Dallas.       Read more