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There’s A Very Good Reason Why The New Home Sales Data Plunged In November

One day after November’s Existing Home Sales report blew away estimates, the Census Bureau’s related New Homes Sales report failed to impress.

A “new home” is a home that is newly-constructed; not bought as a resale.

In a lackluster showing, New Home Sales dropped 11 percent in November, falling to the lowest levels since April. Furthermore, the all-important “months of supply” climbed by a half-month to 7.9.

The press pounced on the figures and if you only read the headlines, you’d think that housing had cratered. Some of the angles were quite bold, even:

• Weak U.S. Home Sales Show Recovery’s Shakiness (Reuters)
• New Home Sales Plunge In November (CNNMoney.com)
• Housing Forecast : Off Life Support, Still In Critical Care (CBS News)

These headlines, although technically accurate, only tell half the story, however. The other half relates to November 30’s role as the original First-Time Home Buyer Tax Credit ending date.

See, different from home resales, when a contract is written on a newly-built home, the home is rarely finished. According to the Census Bureau, just 1 in 4 new homes are sold “move-in ready”. The other 3 of 4 are in various stages of construction when a buyer signs on the dotted line.

Some have yet to break ground, even.

Regardless, it’s at this date of signing that the Census Bureau counts the home as “sold” — not at the actual closing. This is the main driver of the November New Home Sales data dip.

First-time home buyers would have risked up to $8,000 in federal tax credits if they bought a newly-built home and it wasn’t ready for move-in by November 30, 2009. And it wasn’t until November 5 that the credit was officially extended.

Suddenly, first-timers representing more than half of last month’s Existing Home Sales isn’t so shocking. Buying new carried a lot risk.

There’s always more to the story than the headline. Sometimes, you have to dig deeper. Looking back over 10 months, the housing market is on a steady course of improvement. November’s New Home Sales data — although weak — is not terrible.

Despite what the papers might say.

When It’s A Holiday Week, Mortgage Rate Shoppers Should Be Extra Vigilant

Mortgage pricing worsened Monday, driving mortgage rates to their highest levels since October.

The day’s action was drastic, too.

Some banks issued as many as 3 rate sheets Monday — each worse than the preceding and one reason why rates got so bad, so quickly, is because this week marks the beginning of mini-Vacation Season on Wall Street.

Between now and January 4, 2010, be prepared for big swings in pricing from day-to-day. Shopping for a mortgage could be a challenge.

The relationship between vacation days and mortgage rate volatility is rooted in how mortgage rates are “made”.

1. Conforming mortgage rates are based on the price of mortgage-backed bonds, a security that is sold on Wall Street
2. Mortgage-backed bonds can’t sell without a bond buyer and a bond seller agreeing to a specific sale price

So, during vacation week, when the total number of market participants are less, there are fewer opportunities for buyers and sellers to meet at a specific price. As a result, bond prices rise and fall with a higher velocity than on a “normal” day. Rallies and momentum plays are exaggerated, too.

Now, mortgage market action like this can work in your favor, or it could work out of your favor. Unfortunately, on Monday, rates moved out of favor.

This rest of this week is stacked with market-moving economic data. The data could be better-than-expected, or worse-than-expected. Either way, markets will react a little more feverishly than normal. Therefore, if you have a chance to lock a favorable rate, consider taking it.

Before long, the rate could be gone.

Keep Your Home Safe : The Consumer Product Safety Commission Recalls 50 Million Window Coverings

The U.S. Consumer Product Safety Commission has issued a recall on 50 million window coverings, specifically Roman and roll-up blinds. 8 million such products are sold annually.

According to representatives of the CPSC, the danger of Roman and roll-up blinds relates to stangulation — specifically of young children. The blinds’ design has led to 8 deaths and 16 near-strangulations this decade.

Despite the relatively small number of incidents as compared to the 125 million blinds sold since 2001, the Window Covering Safety Council is embracing the recall, offering safety tips and free retro-fit kits.

• Move cribs, beds and furniture away from window cords
• Keep window pull cords out of the reach of children
• Lock cords into position whenever possible — even if resting on a windowsill

The video from NBC News highlights the risk of Roman and roll-up blinds. Order your free retro-fit kit online.

Strong Retail Sales Data Could Hamper Home Affordability

If you wonder what mortgage rates and home affordability will look like next year, today’s Retail Sales data may hold your answer.

Versus October, November’s ex-auto sales were up by more than 1 percent. Analysts expected the increase, but not an increase of this magnitude.

“Ex-auto” means that motor vehicles and parts are excluded from the data.

Home values are increasing in many parts of the country and household net worths are rising, too. Therefore, we can infer from the Retail Sales report that U.S. consumers are starting to feel better about their individual finances, and about the economy overall.

To homebuyers and rate shoppers, strong Retail Sales data may foreshadow higher rates for mortgages ahead. This is because sales data is a by-product of consumer spending and consumer spending accounts for more than two-thirds of the economy.

As spending increases, the economy tends to expand, drawing investment dollars into stock markets and away from bond markets — including mortgage-backed bonds, the basis for conforming mortgage rates.

Less bond demand leads to higher rates and, therefore, lower levels of home affordability.

Despite the Holiday Season momentum, however, 2009 will likely mark just the second time that Retail Sales data fell year-over-year since the government started tracking it 40 years ago. The other year was 2008.

But, if November’s Retail Sales is a reliable indicator of consumer sentiment overall, we should expect 2010 to rebound strongly. And when it does, mortgage rates should suffer.

The housing market is recovering, mortgage rates are still near all-time lows, and the government is offering an $8,000 tax credit to qualified buyers through April 30, 2010. If you plan to buy a home next spring, you may want to consider moving up your timeframe. Waiting may be costly.

Because Of The Federal Reserve, You Should Lock Before 2:15 PM ET Today

The Federal Open Market Committee caps off a scheduled, 2-day meeting today in the nation’s capital, its 8th meeting of the year.

The group adjourns at 2:15 PM ET and, as is customary, will issue a press release reviewing its monetary policy and the health of the U.S. economy.

The FOMC’s post-meeting statements are brief but comprehensive. They’re a window into the mind of the Federal Reserve and Wall Street picks apart every sentence for clues.

It’s why FOMC meetings tend to shake up the mortgage markets — for good and for bad.

After its September 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved
   
2. Housing activity has increased
   
3. Economic activity has “picked up”

Since September, the momentum has picked up. Credit risks have reduced further, home sales are surging, and, although unemployment remains high, the Fed remains optimistic about a full economic recovery.

Today’s FOMC press release will be closely watched. If the Fed alludes to strong growth with inflation in 2010, mortgage rates should rise. Reference to slower growth should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history. However, it’s what the Fed says Wednesday that will matter more than what it does.

If you’re floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.

Higher Home Prices Ahead, Says The Pending Home Sales Index

The housing market continues to steam forward.

As reported by the National Association of Realtors®, the Pending Home Sales Index posted its 8th consecutive monthly gain in September.

It’s the longest winning streak in the history of the index and Pending Home Sales are now at their highest levels since December 2006.

A Pending Home Sale is a home under contract to sell, but not yet closed. It’s the precursor to an Existing Home Sale.

Trade group data shows that nearly 80 percent of “pending” homes close within 2 months. The majority of those remaining close within months 3 and 4.

When the Pending Home Sales Index rises, it tells us that market activity has picked up. September’s data confirms what we’ve been noticing since February — the Buyers Market is ending.

With more homes under contract in the marketplace, homebuyers typically face one or more of the following:

1. Competitive, multiple-offer situations
2. Reduced purchase price leverage over sellers
3. Fewer seller concessions

Therefore, if you’re buying a home in the next several months, know that the 8-month run in Pending Sales will lead to a run in closed sales. It should result in higher home prices, too

Indeed, we’re already seeing it.

How To Test A Home Smoke Alarm

According to the United States Fire Administration, there were an estimated 1.5 million domestic fires last year, resulting in more than 3,400 deaths.

Many of these deaths occurred in homes with no smoke detectors or no working smoke detectors.

When detectors fail, it’s often because its batteries are dead or missing. Therefore, make a point to test your smoke detectors annually.

Here’s how to do it:

1. Have somebody go to the farther point of the house from the detector


2. Push and hold the testing button for 5 seconds to activate the alarm


3. Confirm the alarm is audible by all parties

You should also buy smoke detector aerosol and spray it directly into the device. This will simulate a real fire. If the alarm doesn’t sound, the smoke detector will fail when it’s needed most. Replace the device immediately — even if it beeps when you push the Test button.

Smoke detectors are inexpensive and essential. Make sure the devices in your home are working properly. Test them at least once per year.

Falling Home Supplies Mean More Multiple-Offer Situations For Buyers

The national housing supply fell to a 2-year low last month, according to the National Association of Realtors®.

At the current sales pace, existing home inventories would sell out in 7.8 months — 30 percent faster versus November 2008.

For a 10-month window, that’s a major housing supply reduction and it helps to explain why multiple-offer situations have been so common lately.

Moreover, the same report from NAR showed sales activity reaching its highest point since July 2007, too.

If you’re looking for evidence that the long-standing Buyers Market is ending, this month’s Existing Home Sales report might be it.

Even median sales prices — typically dragged lower by distressed and foreclosed properties — declined at its slowest pace in a year. The market may have turned a corner.

Home prices are rooted in the basic economics of supply and demand.

• When supply outweighs demand, home prices fall


• When supply lags demand, home price rise

Since March 2009, the market has been moving in the right direction. Low mortgage rates, ample housing supply and a first-time home buyer tax credit fueled buy-side demand so that home prices are now rising in many U.S. markets.

If home supplies stay on this path into 2010, expect home prices to rise even more.

Powermat : The Wireless Battery Charger For Cell Phones

Tired of “wire clutter” where your mobile phones, MP3 players and gaming devices compete for outlet space?

The Powermat may be your solution.

The Powermat is a 12-inch long wireless battery charger that’s conspicuously missing “plugs”. Instead, it uses magnetic induction to safely recharge up to 3 devices at once.

Just place your phone(s) on the pad and they charge automatically.

The Powermat debuted at the 2009 Consumer Electronic Show and was reviewed in video. The reviewers had many positive comments on the Powermat, but highlighted some negatives aspects, too. Give a look and see what you think.

Powermat retails for $99 on Amazon.com and is usually shipped for free.

How Often Should You Change Your HVAC Air Filter? It Depends.

If you haven’t changed your home’s air filters lately, this 1-minute video will demonstrate just how much energy your HVAC unit is wasting. A clogged air filter operates with a lot less efficiency.

Air filters should be changed at least once per quarter. In certain circumstances, however, more frequent replacements are warranted.

• Homes with shedding pets
  
• Homes under construction
  
• Brand-new homes with dust in the air
  
• Homeowners with asthma or allergies

Also, when you replace your filters, don’t reach for the $0.99 cheap ones. Plainly, they don’t work. Instead, spend $15 to get a filter that works. Or, buy in bulk to save 15% from Amazon.com or a local hardware store.

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