Don't Fall Into A Money Pit

Making mistakes with money is bad enough. Making mistakes when buying or selling a home could sink you. It's important to know what you can afford and make a purchasing decision based on that information. Only get a mortgage payment that is no more than 25% of your take-home pay on a 15-year fixed-rate note with at least 20% down. Spend any more of your monthly budget than that, and you could be putting yourself out on the street.

If you are buying a home, have the mentality of an investor. Only pay with cash, and get a deal on the front end. If you are selling, get your home cleaned, repaired, landscaped and show-worthy. Make someone proud and eager to buy. If you do, they will.

- Dave Ramsey

More Affordable To Buy in 98% of Major Metros

Last week, Trulia released their Winter 2012 Rent vs. Buy Index. In the index, they report that:

“After years of home price declines and tightening rental markets, home ownership is now more affordable than renting in all but two of the 100 largest metros – even in expensive real estate markets such as New York, Los Angeles and Boston.”

The two metros where renting was more affordable were Honolulu and San Francisco. However, Trulia explains that, even in these markets, buying a home:

“…might make sense for people who plan to stay in their next home for at least five years and can benefit from the mortgage-interest tax deduction.”

This rent/buy ratio favors buying more so then at almost any time in history. In a recent article, Forbes Magazine quotes Jed Kolko, Trulia’s chief economist:

“Certainly prices have continued to fall nationally, but rents have been rising so this would be the lowest price-to-rent ratio that we’ve seen.”

Bottom Line
It might be time to talk to a local real estate professional about the possibility that buying a home makes sense for you and family.

Keeping Current Matters

Buyer Beware!

Click here to see Ellen’s funny real estate ads

Even A 14-Year Old Knows It's Time to Buy

We try to give our readers great real estate information each and every day. This information is usually in the form of analysis of the most current reports and studies on housing. We almost never use anecdotal stories. Today, we are making an exception because we were moved by this story.

Willow Tufano is a 14 year old who lives in Florida. One thing that differentiates her from her friends is that she just bought her first house, a rental property. She bought it with her mother, but anted up her fair share with money she saved for over a year by selling free items she had previously found and fixed up.

The area was hard hit by the housing crisis and Willow and her mother were able to buy the home which was once valued at $100,000 for just $12,000. Why would a 14 year old even consider buying a property?

She is using her half of the rent they charge ($700) to pay back her mom for the second half of the house and the renovations they put into the house. Willow says she’ll have it all paid off in six years. Then she’ll keep the house as a source of income.

“It was definitely a lot of inspiration from my mom and my grandma,” Tufano said. Her mom is a successful real estate agent who owns several investment properties.

Keeping Current Matters 3/20/2012

Buying a Home? The COST is More Important Than the PRICE!

We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost. Recently, there are more people talking about the possibility that mortgage rates could begin to increase.

HSH.com studies trends in mortgage rates. They explain:

“A better economic climate almost always brings higher rates, and a lessening of the troubles in Europe from massive central bank assistance adds to the movement of money from safe havens to more risky assets, driving rates upward.”

Dan Green of The Daily Market Reports recently stated:

“The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.”

Lawrence Yun, chief economist for the National Assoc of Realtors, recently wrote:

“Mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent.”

Yun explains his logic here.

We do not attempt to predict future interest rates. We leave that up to the experts in the field. However, we want our readers to understand the potential impact on the cost of purchasing a home if they do rise. Here is a simple table that shows, even if the PRICE of a home softens, the COST of a home could increase.

Bottom Line

Many purchasers think they should wait until they are sure that prices have hit bottom. Deciding whether or not to wait should be determined by where the COST of a home is headed.

Keeping Current Matters

Time To Renew Your 2012 Resolutions

Like millions of other Americans, you probably made some New Year's resolutions regarding your health. Maybe you wanted to lose some weight, or exercise more, or quit smoking.

And like the vast majority of Americans who made such resolutions, you probably haven't met your goal. Polls have found that by springtime, 68% of Americans who made a New Year's resolution have broken it. After one year, only 15% claim success.

Recommended Related to Diet & Weight Management

By Joanna Powell, Weight-loss woes.? You're not alone. Four of The Biggest Loser contestants share their diet difficulties. Recently, a mysterious bag of Doritos has been appearing on contestants' beds at The Biggest Loser ranch in Calabasas, CA. No one's been fingered yet, and perhaps more remarkable, no one's opened it, either. Or maybe that's not so surprising: This season — the seventh for the hit NBC weight-loss competition — has been a nail-biter, as the original 22 contestants have been fighting...

But don't despair. The secret to self-improvement is persistence, not perfection. Spring is the perfect time to renew your resolutions -- or to make new ones.

"People do it all wrong," says Robert Butterworth, PhD, a clinical psychologist in Los Angeles. "The worst time to make New Year's resolutions is on New Year's Eve. We're exhausted after the holidays. We're stressed out. The weather is bad. Everybody is talking about it and watching what your resolutions are."

Still, at least half of Americans make New Year's resolutions, which is why health clubs, diet programs, and smoking-cessation clinics spend so much on advertising at the end of the year; they know millions of people on Dec. 31 are going to resolve to lose weight and get fit.

Springtime Advantages

Spring, however, is a better time to set such goals, according to Butterworth.

"The weather is getting better," he says. "It's a less stressful time; we feel more energized."

Spring is also an ideal time to reassess your resolutions and modify your strategy for success, according to psychologist Stephen Kraus, PhD. Kraus is the author of Psychological Foundations of Success: A Harvard-Trained Scientist Separates the Science of Success from Self-Help Snake Oil.

"I do it quarterly," Kraus says. "One of the goals my wife and I set this year was to get back into meditation. We got off to a pretty good start in January, but one thing led to another and we fell out of the habit. Now we're coming up to the end of March -- the end of the first quarter. So it's time for us to look at our goals and make plans for the second quarter. And we're going to recommit ourselves to that goal."

Ultimately, Kraus says, success depends on two things -- desire and the right strategy. The trick, therefore, is to renew your desire to achieve your goal and keep modifying your strategy until you succeed.

5 Keys to Reaching Goals

The best way to pursue success, Kraus believes, is to focus on five techniques.

• Adopt a realistic vision of success. "No one can safely lose 50 pounds in a month," Kraus says. "Yet these and other unrealistic expectations about weight loss abound."
• Adopt an effective strategy. "Focus on relatively short-term goals," he says. "Instead of focusing on losing so many pounds over the coming year, tell yourself, 'I'm going to eat vegetables four times a day and do at least 20 minutes of cardio a day for the next two weeks.' A lot of research shows the benefits of such short-term goals."
• Renew your commitment. "I think if there's a problem with resolutions it's that people don't make them often enough," Kraus says. "Once a year is not enough for you to step back and take a look at your life and say, 'this is working well,' or 'this is not working well.' Do this at least quarterly, and better yet, once a month."
• Don't despair. "People are much more likely to overlook their success and to beat themselves up over setbacks," Kraus says. "Instead of saying, 'I did pretty well for two weeks so I'm going to forgive myself for this one little setback,' people start to think, 'I've failed.' That sets them up for the snowball effect where one little setback snowballs into a complete collapse."
• Learn from your mistakes. "As if the failures in the first four steps weren't bad enough, a lot of people then repeat the entire process," Kraus says. "They return to their unrealistic vision, pursue the same strategy without modifying it, and give up when things go badly. That's why by March, all those gyms and health clubs that filled up with new members in January are pretty much back to normal."

Long-Term Strategy vs. Short-Term Fix

Diane Vives, owner of Vives Training Systems in Austin, Texas, tries to avoid working with clients who have made New Year's resolutions because their enthusiasm wanes so quickly.

"New Year's resolutions are a short-term fix, not a lifestyle change," said Vives, a strength and conditioning specialist certified by the National Strength and Conditioning Association. "They create a false sense of urgency. People tend to be more successful when they make the decision at some other time of the year."

To help her clients remain motivated, Vives tries to break down their long-term goals into weekly goals.

"For example, if the long-term goal is weight loss, I help them create weekly goals regarding their weight and percentage of body fat. Or maybe we'll focus on preparing for a 5K race in the community."

Ultimately, the best advice about getting healthy is, "just do it … and keep doing it."

"Set well-defined and achievable goals, and then focus on participation rather than performance," said Cedric Bryant, PhD, chief exercise physiologist at the American Council on Exercise. "People should make exercise like punching a clock -- they should focus on doing things on a regular basis. Don't worry about reaching your target heart rate. Just focus on doing so many minutes of exercise a day for 30 consecutive days. Develop the habit of being physically active, and then readjust your efforts."

And if you need more motivation, Kraus suggests the technique known as the deposit and refund method.

"Give a good friend $500," he says. "That's the deposit. Then have the friend refund the money at the rate of, say, $50 for every pound you lose, or $5 for every visit to the gym. That way you reward your own progress and make instant gratification work for you."

By Tom Valeo

March Madness for Real Estate and Mortgages

It’s the time of year when the so-called experts tell you how to fill out your brackets for college basketball. The frenzy has been coined March Madness. Well, in the mortgage industry, we are seeing a frenzy of headlines, offers of so-called expert advice, and an unusually high level of buzz around real estate and mortgages. Here are some of the things I keep hearing…

• “The bank bailout settlement is going to allow all the shadow inventory to come to market at lower prices, which is going to drive home prices even lower.” Likely true. How much and how fast prices fall will be determined by the speed at which lenders proceed with the foreclosures.
• “The bank bailout settlement means people will get large principal reductions in their loans, if they are underwater.” Some will, most won’t. In its settlement, Bank of America will exclude loans owned by FannieMae/FreddieMac. This agreement will probably be mirrored by others, and therefore, won’t help a good portion of the population.
• “The government has finally helped the homeowner who is underwater yet still maintained a good payment history.” Semi-true. If you have an FHA loan closed prior to June 2009, you are able to do a streamline IF rates make sense in June (too soon to tell). If you closed after June 2009, no such luck. On the conventional front, HARP 2.0 may offer some help to those who have had their loan held by FannieMae/FreddieMac as long as there was no private mortgage insurance. Not exactly all inclusive – but applaudable.
• “You need to put 20% down to get a mortgage these days.” I hear this crazy notion from people far too often. Besides the FHA insuring loans with as little as 3.5% down (on loans up to $729,250 in high cost areas), people often forget that veterans can still finance 100% of the purchase price, and that Private Mortgage Insurance Companies are still insuring loans with 5-10% down.
• “Costs associated with loans are going up.” Most definitely. The hike in the guarantee fees has already caused a 3/8 – 1/2 increase in conventional loans and will raise FHA loans by 10 basis points in April. The FHA is also changing its premium structure to increase the cost of the mortgage—regardless of where rates themselves are headed.
• “Rates will stay low through 2014.” While every indication from Ben Bernacke & friends is consistent in their rhetoric that rates will stay low, we have already seen some significant swings in rates based on market conditions (unemployment numbers, problems in Greece, and so on). Rates will likely stay low, but getting the best rate will still require staying on top of everything.

Amongst the whirlwind of sound bites and headlines, there is some good news about real estate and mortgages. Never as rosy as it may sound, there is relief and opportunity for many if you can sort through the hyperbole and consult with a true professional to make sure you have all the facts.

Keeping Current Matters 3/15

Is The Housing Market Actually Recovering?

Everyone wants to know if the housing market is truly showing signs of a recovery. There are conflicting headlines every day. One day, we hear sales are up. The next day it is reported that prices are down. Is the real estate market coming back? The answer is ‘yes’ and ‘no’.

There are two aspects that must be evaluated: house sales and house prices. They will not recover at the same time. Sales are already increasing rather nicely while prices will still soften in many markets through 2012.

Home Sales

The National Association of Realtors (NAR) issues a Pending Home Sales Report each month. We can see by the graph below that sales have been increasing nicely over the last twelve months. Real estate professionals across the country are reporting that activity has increased compared to last year. The sales side of the recovery is starting to show great promise.

Home Prices

Many price indices have shown that national home prices are continuing to stumble. Even with demand increasing, we must look at where the supply of housing stock stands. Though ‘visible’ inventory (homes currently on the market) is shrinking, there is still a large overhang of ‘shadow’ inventory (Foreclosures about to come on the market as a result of the National Mortgage Settlement). This increase in inventory will outpace the increase in demand and thereby cause prices to continue to soften in many parts of the country.

Bottom Line

Housing is coming back. However, sales will come back before prices. We will not see prices appreciate until we work through the oversupply of homes on the market.

The History of March Madness

Interestingly enough, the term March Madness has been around to describe basketball tournaments since 1939. However, it initially described the Illinois State High School tournament, not the NCAA tournament. Over the years, it has become associated with the NCAA tournament to the point where it overshadows its true roots.

Illinois Roots

Peoria HS, 1908 State Champs

“March Madness” was born in Illinois. The annual tournament of high school boys basketball teams, sponsored by the Illinois High School Association, grew from a small invitational affair in 1908 to a statewide institution with over 900 schools competing by the late 1930′s. A field of teams known as the “Sweet Sixteen” routinely drew sellout crowds to the University of Illinois’ Huff Gymnasium. In a time before television, before the college game became popular with the average fan, before professional leagues had established a foothold in the nation’s large cities, basketball fever had already reached epidemic proportions in the Land of Lincoln.

The term March Madness is actually a registered trademark held jointly by the NCAA and the Illinois High School Association. Illinois, and the rest of the world, can thank a man named H.V. Porter for coining the term.

“Porter was born in Manito, Illinois and grew up on a farm near Washington, (Illinois). Graduating from Illinois State Normal University, Porter taught at high schools in Mount Zion, Keithsburg, and Delavan. From 1919 to 1928 he served as principal of Athens High School. But it wasn’t until 1928, when Porter was hired as assistant manager of the Illinois High School Association that his career blossomed.”

“A gifted writer, Porter published an essay named March Madness in 1939 and in 1942 used the phrase in a poem, Basketball Ides of March. Through the years, the use of March Madness picked up steam, especially in Illinois. During this period the term was used almost exclusively to the state high school tournament. In 1977 the IHSA published a book about its tournament titled March Madness.”

“Becoming a member of several influential committees including the National Basketball Committee, Porter helped develop the fan-shaped backboard that was used at the high school level from the 1930s through the 1990s and the molded basketball that, free of the laces that made dribbling difficult, revolutionized the game. Porter also spearheaded the effort to write basketball and football rule books specifically for high school competition.”

Porter’s Words

Most importantly, though, Porter became editor of the IHSA’s magazine. Nearly every magazine contained an article or essay from the editor himself. The Illinois state high school basketball tournament grew to become a statewide icon in the 1930′s. It was in 1939 when Porter wrote an affectionate essay in the IHSA’s magazine titled “March Madness“. The term itself is thought to have come from the old English saying, ‘Mad as a March Hare.’ The essay’s punctual line was,

“When the March madness is on him, midnight jaunts of a hundred miles on successive nights make him even more alert the next day.”

After that Illinois position, Porter left the IHSA to become the executive secretary of the National Federation of State High School Associations. In 1942 he wrote one last literary contribution to the IHSA’s magazine, a poem titled “Basketball Ides of March“. The poem, below, is truly inspirational:

Basketball Ides of March

The gym lights gleam like a beacon beam
And a million motors hum
In a good will flight on a Friday night;
For basketball beckons, “Come!”
A sharp-shooting mite is king tonight.
The Madness of March is running.
The winged feet fly, the ball sails high
And field goal hunters are gunning.

The colors clash as silk suits flash
And race on a shimmering floor.
Repressions die, and partisans vie
In a goal acclaiming roar.
On a Championship Trail toward a holy grail,
All fans are birds of a feather.
It’s fiesta night and cares lie light
When the air is full of leather.

Since time began, the instincts of man
Prove cave and current men kin.
On tournament night the sage and the wight
Are relatives under the skin.
It’s festival time, sans reason or rhyme
But with nation-wide appeal.
In a cyclone of hate, our ship of state
Rides high on an even keel.

With war nerves tense, the final defense
Is the courage, strength and will
In a million lives where freedom thrives
And liberty lingers still.
Now eagles fly and heroes die
Beneath some foreign arch
Let their sons tread where hate is dead
In a happy Madness of March.

During the tournament’s “Golden Era” of the 1940′s and 1950′s, “March Madness” became the popular name of the event. It was an era of some of Illinois’ most legendary teams, including the undefeated 1944 Taylorville squad and Mt. Vernon’s unstoppable back-to-back champions of 1949 and 1950. But the one champion remembered more than any other is tiny Hebron, a school of only 98 students, which won the tournament in 1952.

It wasn’t until the early 1980′s that fans of NCAA basketball began to use the term to describe the playoff series that takes place at the college/university level. Most historians would agree that March Madness was popularized in the college arena by Brent Musburger, a CBS sportscaster who had worked in Chicago for many years prior to joining CBS.