A Home is More Than an Address - 8/19/2013  A home is a place to call your own, raise your family, share with your friends and feel safe and secure. It is also one of the largest investments most people have. Leverage is the ability to control a larger asset with a smaller amount of cash through the use of borrowed funds. It has been described as using other people’s money to increase your yield and it applies to homeowners and investors alike. Positive leverage causes the yield to increase as the loan-to-value increases.  Even a modest amount of appreciation combined with the amortization of a loan can cause a substantial rate of return on the down payment and closing costs. Homes build equity as the price goes up due to appreciation and the unpaid balance goes down due to amortization... 08/19/2013

Low inventory is a relative term depending on how you're comparing it.  Would the comparison be to total number of homes on the market last year, homes in a certain price range or homes in a certain area?  In some situations, it's a combination of all of those things. In any given market, inventories will fluctuate based on area and price range.  The National Association of REALTORS® considers a balanced market to be six months' supply of homes.  If it takes longer than six months to sell, it is thought to be a buyer's market and less than six months, a seller's market.  Most buyers and sellers probably feel inventory equilibrium is more like three month's supply of homes. Inventory has a direct impact on price.  During the housing bubble, demand decreased, supply ballooned to four mill... 08/16/2013

Get Regular Check-ups - 8/12/2013  Following his heart surgery last week, after an issue was discovered during his annual physical, President George W. Bush encouraged everyone to get regular check-ups.  Another important checkup that should be done on a regular basis and can be just as beneficial for your finances is an annual homeowner advisory. Why would you treat your investment in your home with less care than you treat your car or even your HVAC system? Consider investigating the following: • Know the value of your home by obtaining a list of comparable sales in your immediate area as well as what is currently on the market for sale. • Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes? • Even if you’ve r... 08/12/2013

You’ve saved for a rainy day or retirement. Congratulations but don’t get too comfortable yet; where is it invested? It’s estimated that over 25% of Americans have their long-term savings in cash instead of investments like stocks, bonds or real estate. The memories of the financial crisis of 2008 are recent enough to understand why some people may want to avoid the stock market and real estate. Even though Wall Street and housing have rebounded considerably, uncertain investors are sitting on their cash. However, trying to avoid a bad decision can have serious costs too. If your money is not earning at least the current inflation rate, you’re losing the purchasing power of your dollars. Bankrate.com estimates the average money-market deposit yields 0.11% and the average five-year certi... 08/07/2013

It Can't Hurt to Wait, Can It? - 7/29/2013  It’s been said that more money has been lost due to indecision than was ever lost because of a bad decision. Regardless of whether you agree with the statement, delaying the decision to buy in today’s market is going to cost the buyer more.  Home prices have gone up considerably in almost every market in the country in the past year and while inventories are beginning to grow, prices are expected to continue to rise. Mortgage rates jumped 1% from the beginning of May to now. They could easily reach 5% by the end of the year and continue to rise in 2014. Many of the financial experts in the country believe that the economy will not be strong until rates are in the 7% area. The two components that move the cost of housing are price and mortgage ... 07/30/2013

If I'd Known... - 7/22/2013  We’ve probably all said or at least thought “if I knew then, what I know now, I would have done things differently.” We should have stayed in school longer. We should have listened to our parents. We should have bought Apple stock in 2002 for $8.50 that sells for $400 today. Or we could have bought gold in 2000 for under $300 for a four-fold profit today. Years from now, if we look back at 2012, we may say that it was the best buyer’s market ever. Even now, in 2013, it’s apparent that both housing and mortgage prices are going up and they may never return to the record low levels. The housing affordability index, which is considered to be good at 100, had increased to over 200 this past December, January and February. Shrinking inventories and rising prices ... 07/23/2013

FHA & VA Assumptions - 7/19/2013  Not many buyers have assumed a mortgage in the past 25 years. Most people think it was because FHA and VA in the late 80’s began to require that buyers qualify for the assumptions. Not having to qualify for a mortgage would certainly benefit certain buyers.  If a homeowner must qualify for an assumption like a new loan, they'll generally choose the mortgage with the lower interest rate.  Over the past 25 years, rates have been trending down but it appears that rates have bottomed out and will gradually increase.   As they continue to rise, the lower rates on the FHA and VA loans created in the last few years will appeal to buyers even if they do have to qualify for the assumption. There are significant advantages to assuming one of these government insu... 07/19/2013

Retirement Without a Mortgage - 7/15/2013  Planning for retirement is obviously important and many times, an activity plagued by procrastination. Some people plan to have their home paid for by that magical date so they won’t have payments after they retire. It makes sense to eliminate a large recurring expense before they quit working. One strategy would be to be make regular principal contributions in addition to the payments so that it will eliminate the debt by the target retirement date. Let’s say that a homeowner refinanced their $200,000 mortgage at 4% last year with the first payment due on May 1, 2012. Under normal amortization, the home would be paid for at the end of the term; 30 years in this example. By making additional principal contributions with each payment, it would a... 07/15/2013

When Rates Go Up - 7/8/2013  Rising interest rates are great if you are renewing a certificate of deposit but not so much when you’re borrowing money. With interest rates on the rise as well as home prices, housing affordability is a concern for would-be homeowners. A rough rule of thumb is that a person’s or family’s housing should not exceed 28% of their monthly gross income. While rental rates and home prices have been consistently increasing, mortgage rates have been soaring in the past month. In one week, according to the Freddie Mac Primary Mortgage Market Survey, they jumped by .5%. This means that people have to pay a larger percentage of their income for housing unless their incomes have been increasing at an equal pace.  A $200,000 mortgage would be over $100 more per month if... 07/08/2013

Inventory is dramatically shrinking and it is commonplace in many markets to have multiple offers on a home. While the sellers would prefer to be able to choose the best offer for them, it can be incredibly frustrating for the buyers who might consider the following tips to get their offer accepted.  1. Remove the uncertainty that you may not be approved for a mortgage by having a pre-approval letter from your mortgage company. 2. Show your sincerity by increasing the normal amount of earnest money customary for the area and price of the home. The earnest money will be applied toward your down payment and closing costs. Consider placing even more money in escrow when the contingencies have been met. 3. Specify a closing date in the contract but acknowledge that you can be flexible to ac... 06/19/2013

What's It Worth? - 6/3/2013  How much is a one carat diamond worth? Anyone who has shopped for one knows that the price could have a significantly wide range of value. It's been said that purchasers  should consider the color, cut, clarity and carat size to compare stones but when it gets down to decision time, buyers still want to know “how much is it worth?” Real estate valuation can be equally as confusing to the public. There are three commonly used tools that today’s home buyers rely on to make decisions but they vary significantly in the methods used to make the determination as well as the possible final consideration. Appraisals are an opinion or estimate of value based on specific guidelines made by individuals who are licensed and possibly certified. Buyers and sellers may be ... 06/07/2013

Breathe Easy - 5/24/2013  The benefits of regularly changing the heating and air-conditioning filters are obvious to homeowners; the real challenge is creating a system to make sure it gets done.  A reasonable schedule would be to replace it with a new one-inch pleated filter every 60-90 days. Households with shedding pets should consider replacing them every month. Some people change their filters every month when they pay their electric bills.  A simple system would be to set a recurring appointment on your calendar like Outlook or Google. Filters trap dust, mold and bacteria which can directly affect the air quality and play havoc with your allergies. When a filter is dirty, it prevents proper airflow and allows dust, dirt and allergens to blow through your home. Changing your filter... 05/24/2013

Don’t be afraid of those two words-expert advice. Remember: An expert doesn’t mean you’re going to give perfect advice. An expert means you’re going to give excellent advice. Here’s the difference: If you go to a doctor with a serious illness, she can’t tell you how it’s all going to wind up in the end. She can’t know for sure. Therefore, she can’t offer perfect advice. However, your doctor can only give you excellent advice. She can tell you about your illness and your options, whether it be surgery or medications. She can also explain what she believes to be the best option for you based on your history, symptoms, and overall health. Ultimately, though, you’re going to make the final decision of whether you go through with the treatment plan. Once you make that decision, your doctor w... 05/17/2013

Whose Commission Is It? - 5/13/2013  One of the most common reasons buyers want to deal directly with the seller is because they feel they can save the commission. It’s a valid consideration but interestingly, it’s the same reason the seller isn’t employing an agent. Both parties cannot save the commission. The buyer feels they have earned it because they’ve had to find the home, determine its value and negotiate with the seller. They had to arrange their own financing, title and inspections. The seller equally feels that they have earned the commission because they too have had to research value, financing and title work.  They have incurred all of the marketing expenses and have invested hours upon hours to be available to show the property, hold open houses and answer inquiries.  The... 05/14/2013

I've been keeping an eye on sales volume and trends in the Missoula MLS and I wanted to quickly share some numbers that have stood out to me.  In particular April, which was a huge month for our area.  This is not just sales in the Missoula valley but within our entire MLS.  What we're seeing so far is continued market volume recovery.  The most recent numbers that I've pulled show our reported amount of sales in the MLS puts the greater area at higher volume than this time in 2008 and just under the pace of this time in 2007.  At this point in 2008 the market was changing but the local bubble had not yet burst and we were coming off our two peak years of 2006 and 2007.     The amount of sales activity is very encouraging.  We saw this April almost did the same amount of volume in the e... 05/09/2013

The "Right Size" Home - 5/9/2013 Work hard, buy a home, start a family and continue to upgrade your home until everyone has enough room. This has been the blueprint for lots of homeowners for the last fifty years but there is certainly a shift in thinking that could change all of that. Interestingly, Americans live in much larger homes than most people in other countries throughout the world. The U.S. Census reported in 2006 that the average single family home completed had 2,469 square feet which was 769 feet more than in 1976. Once the children are grown and have moved out, homeowners are finding they have too much room. Even if their home is paid for, they have higher property taxes, insurance, utilities and maintenance on the larger home than they'd have if they were living in the "... 05/09/2013

It’s interesting that the housing climate has changed so quickly. Some buyers, who think they’re still in the driver’s seat, find the market is now going up and they’re losing the home that they really want. Multiple offers are increasingly more common and buyers are frustrated because even full-price offers don’t guarantee that they’re going to get the home. In an effort to personify a contract offer and add emotional appeal, buyers are including a personal letter to the seller. In most cases, the seller wants to maximize the net proceeds from the sale by getting the highest price with the least expenses and an assurance that the home will actually close on time without surprises. When a seller is faced with multiple offers that may be close to the same net, an emotional appeal might m... 05/06/2013

It's a beautiful Sunday morning, I've got a group of friends on their way over to my house for brunch, and life is good.  Spring in Missoula has been cold and snowy up until this weekend when we've finally had some warm weather and clear skies.   This weekend as an alumnus member of the local Sigma Phi Epsilon Fraternity we inducted a new member to our alumni ranks through a process known as the Renaissance of Brotherhood passage.  He wasn't an undergrad like the rest of us but he was a close friend at the time and has continued to be an advisor and role model to the chapter.  This process allowed him to become a fellow brother among our ranks.  It was a great weekend for it. It's been real nice to just unplug (for the most part) and take the weekend to have fun with my friends and my f... 05/05/2013

Cut Refinancing Expenses - 4/29/2013  Every single day, homeowners who are excited about lowering their rate have a tendency to ignore the refinancing costs because they’re being rolled back into the new mortgage. If the payment is lower than what they’re currently paying and there’s no money out of pocket, it seems like a good deal. Refinancing your home because a lower rate is available is one thing but the closing costs associated with that new loan could add several thousand dollars to your mortgage balance. By following some of the suggestions listed below, you may be able to reduce the expense to refinance. Tell the lender up-front that you want to have the loan quoted with minimal closing costs.  Check with your existing lender to see if the rate and closing costs might be cheape... 05/01/2013

Shifting Debt to Tax Deductible - 4/24/2013  The Mortgage Interest Deduction is available to homeowners for up to $1,000,000 of acquisition debt on the combination of their first and second home.  They can also deduct interest on up to an additional $100,000 of Home Equity debt. While Acquisition Debt is used to buy, build or improve a principal residence, the Home Equity Debt can be used for any purpose.  It can be used for educational or medical expenses, to purchase a personal car or boat, consolidate debts or pay off credit cards. A homeowner with $15,000 of credit card debt at 19% and sufficient equity in their home could replace it with a home equity loan at much lower interest rate. Not only would the interest rate on the home equity loan be about 1/3 of the rate paid on the cred... 04/24/2013