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It's So Easy, Being Green

With oil and natural gas prices rocketing, stoking terror of long, cold and and expensive winters, a renewed interest in keeping heating costs under control has has been sparked. Homeowner's have an ignited passion in understanding energy saving methods. If you're in this boat, stuck in cold waters, here are some tips for energy saving tricks of the trade. If you're living in a home with a furnace that's more than 20 years old, you may have already attempted the "buy a sweater" method of keeping warm. This is certainly one approach, but these days upgrading your home's conditioning system is a much better option, and will bode well for you in the here and now, and in the long term, should you decide sell your home. More and more, home buyers are looking for homes with energy efficient systems already in place. So, think of these upgrades as a long term investment in the resale value of your home, as well a cost efficient and green alternative to your current conditioning system. Now, with that old choker of a furnace huffin' and puffin' away, guaranteed it's not as efficient as it could be, no matter what fuel type it uses. The newer gas furnaces are mid-efficiency (78-82%) or high efficiency (89-96%). Although the higher efficiency products can cost up to $1000 more than the mid-efficiency products, extra costs will be recouped in a couple years, as they will burn less fuel. And, you'll be the greenest frog on the block, sending less harmful emissions out into the atmosphere. "It's so easy being green", murmured Kermit, once he upgraded his furnace. With oil furnaces, there are again, much more efficient products on the market as of late. But, a oil furnace does need to partner with a good chimney, and so this may be an additional cost to keep in mind Take note, it's still the case that electric heat is more expensive than oil and gas, although a smart combination of central wood stove heat, supplemented by electric heat can be cost efficient. Let it Flow: Change Your Filters! Whether disposable or washable, all forced-air heating/cooling systems use filters. And, these filters need to be maintained and changed. Some filters require monthly changes while other last up to three months, and much depends on the conditions within your home. A dirty filter will restrict air flow and with clogged filters you're blocking heat that would otherwise be keeping you toasty warm. Do yourself a favor and keep on top of the regular changing of your heat filters. This is a pretty easy way to boost your energy efficiency and cut costs. Pump it up: Install a Heat Pump Air source heat pumps are the most common and they are generally used with a back-up heating system. In terms of function a heat pump works by extracting heat from the outside and bringing it in, (in heat mode), and by removing heat from the inside of the house and releasing it outside. ( in cooling mode). The king of heat pumps, though, are ground and water source, or geothermal. And while the initial investment may be great, the saving will be substantial in the long run. These pumps will use 25-50% less energy than conventional conditioning systems. At the end of the day, another simple method to help with soaring heat bills, is to keep an eye on the set temperature levels in your house, What is normally described as room temperature is around 68 Fahrenheit (20 degrees Celsius). Of course, only you can decide where to set the dial. But, if you'd rather avoid the " put on a sweater" method of winter energy conservation, you might consider investing in an improved conditioning system that will bring you warmth today, and will be a smart investment in the re-sale value of your home.  

Brandon Farber

Brandon Farber


Don't Sell Your Property Without It

For most people, the prospect of selling their home can be positively daunting. First of all, there are usually plenty of things to do just to get it ready for the market. Besides the traditional clean-up, painting, fix-up chores that invariably wind up costing more than you planned, there are always the overriding concerns about how much the market will bear and how much you will eventually wind up selling it for. Will you get your asking price, or will you have to drop your price to make the deal? After all, your home is a major investment, no doubt a rather large one, so when it comes to selling it you want to get your highest possible return. Yet in spite of everyone's desire to get the top dollar for their property, most people are extremely unsure as to how to go about getting it. However, some savvy sellers have long known a little financial technique that has helped them to get top dollar for their property. In fact, on some rare occasions, they have even sold their properties for more than they were worth using this powerful financing tool. Although that might be the exception rather than the rule, you can certainly use this technique to get the most money possible when selling your property. Seller carry-back, or take-back financing (also referred to as seller financing and self financing), has proven to be a surefire technique for closing deals. Even though most people do not think about this when it comes to selling a property, they really should consider using it. According to the Federal Reserve, there are currently over 100 Billion dollars of seller carry-back (seller take-back) loans in existence. By any standard, that is a lot of money. But most importantly, it is also a very clear indication that more people are starting to use seller take-back financing techniques because it offers many financial benefits to both sellers and buyers. Basically, seller take-back financing is a relatively simple concept. A seller-take back loan is created when a property is sold and the seller performs like a lender by assisting in financing all or part of the total transaction. In effect, the seller is actually lending the buyer a certain amount of money toward the purchase price, while a traditional mortgage company usually funds the balance of the purchase price. A seller take-back loan is secured with the property. The loan then becomes the primary mortgage and is fully secured by the property. In most seller take-back financing transactions, the buyer repays the seller with interest in accordance to mutually agreed terms over a period of time. Usually, the terms call for the buyer to send the payments, consisting of principal and interest, on a monthly basis. This is advantageous because it creates a steady monthly cash flow for the note holder. And if the note holder decides to cash out, he or she can always sell the note for a lump sum cash payment. Regardless of market conditions, seller take-back financing makes sound financial sense; whereas, it provides both buyer and seller with flexible financing options, makes the property easier to sell at higher price and shortens the sales cycle. It also has the added advantage of being an excellent investment that generates a steady cash flow and high return. If you ever need immediate cash, you can always sell the note through our office. If you are planning to sell a property, consider the many benefits of seller take-back financing.  

Brandon Farber

Brandon Farber


“Renting Back” After Your Home Is Sold

Sometimes it’s helpful to sell your home before you really want to move. This often happens when you are having a new home built, but aren’t sure of the completion date. Is there any way you can sell your home so you’re sure of the funds available for the new purchase, but continue to live in your old home until construction of the new one is complete. Yes, there is with the renting back strategy. Enter the Lease-Back or Rent-Back Agreement The particulars of this strategy vary from state to state, but in the strong seller’s market we’re experiencing, buyers will often agree to let the seller stay in the home for a period of time as long as rent is paid. In a competitive situation, the buyer willing to do this will often have the winning bid even though there is another offer as high as his. The agreement covering the situation states the length of time the seller will remain.  It can be done with a specific date named or wording that allows the seller to remain up to a specific date with the possibility of her moving sooner. The amount can be a fixed figure paid out of the proceeds of settlement or a monthly amount, or a daily amount. It is usually, but not always, tied to the amount of the mortgage payment under the buyer’s new loan. Sometimes there is a deposit against damage, sometimes not.  There is usually a clause saying the seller will hold the buyer harmless for any damage to himself or his property which occurs after the sale is consummated and before the seller moves. The attorney who draws up your contract offer can create such an agreement. If you’re using online forms, you should be able to find one for this situation. If you are working with The Lynchburg Team, we can assist you with this type of contract. An Example I’ve recently seen a very pleasant example of this idea in action. An elderly widow contracted to have a one level condo unit built in a new community which provides all exterior maintenance. She had had hip replacement surgery and wanted to get away from the drawbacks of the home in which she’d reared her children. The home was large, had stairs and was located on a large, partially wooded lot with many mature perennials and shrubs. Both the home and garden were beautiful, but high maintenance. Her contract to purchase required a series of deposits and a firm indication as to her source of funds well before settlement on her new condo. The widow put her home on the market. A young couple with two sons was very anxious to buy it. The situation was competitive. They made the widow an offer. She countered their original offer. She did not raise their offer price, which was slightly below her asking price.  She did not believe the young couple would qualify for a larger loan. Instead, she did something rather creative. The widow countered with a proposal that she “rent back” for a period of “up to” a certain date (a date beyond her scheduled completion date on the condo) in exchange for a modest flat sum to be paid to the buyer at settlement. The total rent back period was less than two months. The flat fee was less than the amount of the new mortgage payment for the buyers. However, since they made no payment on their new mortgage the first month, it wasn’t too far out of line. The couple really wanted the home, so they accepted the counter offer. Another win-win situation was created. The widow only had to move one time and the young couple got a house they probably wouldn’t have had in a straight bidding war. If you find yourself in a situation similar to either the widow or the young couple, perhaps you can work out a similar solution.  

Brandon Farber

Brandon Farber


Successful real estate investor tips

Becoming a successful real estate investor
Becoming a successful real estate investor requires being able to find good real estate investment deals and put them together. Your job is not to become a closing attorney, a management expert, or a repair person. Use professionals! You must learn how to appraise and find the true value of real estate. This information will help you make better investment decisions. Realtors, appraisers, and banks determine what a property is worth by looking at comparable sales, usually three to five sales of similar property that has recently sold in the same neighborhood. You must be able to do the same. Getting a list of comparable prices of properties bought or sold (and when they sold) for the neighborhood you need information about, and asking active real estate investors in your area what the market is like, will be helpful and make for a better investment decision. What is the ideal market for investing?
There is no such thing as an ideal real estate market for investing. It tends to be more difficult to find bargains in rising markets. If the market keeps rising, the probability of selling the property quickly for a large profit increases. In contrast, when property values are falling more bargains become available. You need to be able to assess the true value of properties based on when you expect to sell. Your purchase must be made at a good enough discount to allow for a profitable sale at a later date. Leverage
Leverage is very important for investors because the less cash you put down on each property the more properties you can buy. If the properties go up in value, your rate of return goes up. However if the properties go down in value and you have a lot of debt on the property this can result in negative cash flow. Since real estate is generally cyclical, negative cash flow is only a short-term problem and can be handled if you have other income or cash reserves. This makes "Nothing down" investing very helpful to protect against negative cash flow for a high leverage investor. If you are a long term real estate investor, leverage will work in your favor if the markets in which you invest appreciate in the long run and your income from the properties can pay for most of your monthly debt. Strategies to limit risk
To limit risk, become educated in your local real estate market first by understanding the large scale trends from global down to national, regional, and specific neighborhoods. Learn about target neighborhoods with the help of successful real estate investors in your area along the way. Real estate investors can help you interpret market indicators such as the average length of time houses have been on the market this month versus last month or last year. With this information it will help you make better investment decisions. Exit strategies
It is important not to guess the future of a local real estate market. You need to have a clear plan in mind when purchasing property. As a real estate investor you must know exactly how you will exit the property before you buy. And have a backup plan or two in case the first course of action doesn't work. You must know your market and your plan before you begin to invest. For more information about how we can help you begin your real estate investment journey, see our real estate investment page.

Brandon Farber

Brandon Farber


“Try On” Your New Home Before Buying

It’s commonplace to try on suits, dresses, trousers or shoes before buying them. People instinctively know they need to try on clothes to be sure they fit, feel comfortable and are attractive on them. What about a home?  It’s probably the most expensive purchase you’ll ever make. Isn’t it even more important to “try on” a home before you purchase it? What on earth do I mean?  Well, it’s usual to look for a home in places that are convenient to work and schools. Most folks take the daily commute into consideration when shopping for a home. Why not take the daily, weekly, and even monthly activities of family members consciously into account, too? Case Study I once helped a young, single woman named Wendy find and buy her first home.  She worked for Geico, was rising very nicely in the company and wanted a home of her own and the tax break home ownership affords.  She asked my advice about choosing, and we had a conversation in which I mentioned many of the sorts of things I’ve said here. We made a list of what mattered to her. Then we went shopping. We looked at a lot of houses. After we came out of each one, we had a talk about how it measured up to Wendy’s list. One of the houses we looked at belonged to the young woman who later became my daughter-in-law. It was brick, all on one level, had a fireplace in the living room, and had patio doors from the master bedroom and dining rooms to an enormous deck with a hot tub. It was beautifully decorated in a sort of “pared down Victorian” style. There was a brass bed, some wicker, lots of healthy house plants, and a few Victorian pieces of furniture that were actually old, family pieces. Silver framed family photos were clustered on top of the piano. After we emerged from the house, Wendy started down the two steps to the car and then froze in place. She had the oddest expression on her face. I asked what was wrong, and she began to look sheepish and confessed, “That house is so pretty and so nicely decorated, I just enjoyed looking at it and didn’t give any thought to how I’d live in it.  I just wanted it.” We went back inside.  Wendy still admired what had been done with the house, but decided it wasn’t right for her. Knowing what’s important to you can save costly mistakes.  The process of “trying on” a house helps you evaluate what’s important.  I think you’ll find it’s worth the effort.  

Brandon Farber

Brandon Farber


3 Pitfalls to Avoid When Playing in the Real Estate Game

So you’ve seen your umpteenth infomercial with the guy in his neatly pressed button-upped white T-Shirt grinning ear to ear waving his rock-solid no-money-down rags-to-riches real estate investment course for 3 easy payments of a gazillion dollars (but only if you call now) and now you are thinking, "wow this looks like a great deal, I better get it fast before the special offer expires." You notice how there’s always a special offer? Anyway, I am not saying this guy isn’t telling the truth, however regardless of which course or school of thought you buy into there are several key areas that one must avoid when engaging in any real estate related transaction. Pitfall Number 1: Don’t Overpay! The whole point in investing is to find properties that are undervalued. How does one find out what is undervalued versus overvalued? Without getting into technical details, the bottom line is you need experience. Yes much like shopping for anything else, real estate is essentially one of the highest ticket items in the shopping center of life. It’s advisable to stick with one market, perhaps the one closest to you in proximity as a starting point. Through your experience and asking the right questions, you will eventually have a feel for the pulse of the market you are looking after, and of course identify what is considered a good buy.  $100,000 will buy you a different sort of house in Lynchburg, VA compared to Brooklyn, NY for instance. Pitfall Number 2: Know the Market Yes, you are actually going to have to do more work! This part is really common sense though, but executing it is where the beauty and the payoff comes in. How do you make money in real estate? The most basic way is to buy low and sell high. So from the first step, you have identified general trends in the value of homes, and are pretty good at spotting undervalued homes. Assuming you acquire that home, you may want to profit from it by selling it off to someone else for a higher price. How can you do this? Well there are many ways. For one, most markets appreciate in value over time so if you want a longer term approach that will work. Making upgrades to the property will automatically raise the price of the home as well. Think in terms of what the market wants, not what you personally want. You aren’t the one buying it; you are trying to sell it to someone else for a higher price than you bought it. Pitfall Number 3: Know Your Budget It may be a fine philosophy to go through life on a whim, but real estate is serious business, and thus diligent financial planning and budgeting is critical to your success. Don’t worry, you don’t need to be a finance geek, however you need to be disciplined and know your budget from the onset, or you may find you are learning that you need to make certain renovations or upgrades and didn’t anticipate it going over to certain cost.  You also need to plan and budget for the mortgage, insurance and tax expenses incurred while holding the real estate before you sell it. Think ahead as to what is needed before actually going forth with investing in real estate.  

Brandon Farber

Brandon Farber


Last Week's Economic News in Review

While 2014’s existing home sales were slightly down, sales in December picked up steam, as did new home construction. Meanwhile, initial jobless claims fell, but not as far as the market had hoped.

Existing Home Sales

The pace of existing home sales rebounded last December, with transactions of single-family homes, townhomes, condominiums and co-ops rising 2.4 percent from November to an annual rate of 5.04 million, the National Association of Realtors reported last week.

Looking at the year in total, 2014 saw 4.93 million home sales, a 3.1 percent decline from 2013’s 5.09 million sales. That dip was chalked up to early lackluster activity that negatively impacted 2014’s overall performance. But while volume was down, prices hit their highest level since 2007. The national median existing-home price for 2014 hit $208,500, which marked a 5.8 percent gain over 2013’s median price of $197,100.

“Home sales improved over the summer once inventory increased, prices moderated and economic growth accelerated,” said NAR Chief Economist Lawrence Yun, summarizing the year. “Sales were measurably better in the second half — up 8 percent compared to the first six months of the year.”

Shifting back to December performance, total housing inventory for the month dropped 11.1 percent to 1.85 million existing homes for sale, which represented a 4.4-month supply at December’s sales rate. This was down from November’s 5.1 months and just 0.5 percent lower than December 2013’s 1.86 million.

Not surprisingly, that inventory drop had an effect on prices. December’s median existing-home price hit $209,500, which was 6 percent higher than December 2013’s median price, and marked the 34th straight month of year-over-year price increases. That’s a concern given that wages are not keeping pace with the real estate market, according to Yun.

“A drop in housing supply in December raises some affordability concerns in the months ahead as minimal selection and the potential for faster price appreciation could offset the demand from buyers encouraged by a stronger economy and sub-4 percent interest rates,” he explained.

New Home Construction

While existing home inventory might have dipped, new home construction, especially for single-family homes, saw healthy gains in December. Building permits issued in December for the construction of private housing hit an annual rate 1,032,000, which marked a 1.9 percent gain over November, and a 1 percent increase of December 2013, according to last week’s report from the Census Bureau. Permits for single-family homes issued in December hit a 667,000, which was 4.5 percent higher than November and the highest point since mid 2008.

“The strength is where you’d like to see it, in single-family housing,” Societe Generale senior U.S. economist Brian Jones told Bloomberg. “It bodes well for residential real estate. It’s another thing going in the right direction for the economy.”

Starts on construction of private housing in December rose to an annual rate of 1,089,000, which was 4.4 percent over November’s revised pace of 1,043,000 and 5.3 percent higher than the December 2013 rate of 1,034,000. Starts on single-family homes in December shot up to a rate of 728,000, which was 7.2 percent higher than November’s revised rate of 679,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed dropped, but not as far as expected, according to last week’s numbers from the Employment and Training Administration. Initial jobless claims filed during the week ending Jan. 17 dropped to 307,000, a decline of 10,000 from the prior week’s revised level of 317,000.

Employment watchers had expected 302,000 claims. The question on many analysts’ minds was whether the third week in a row of jobless claims over the 300,000 mark was indicative of any trend, or merely the lingering impact of holiday hire layoffs

“It has to do with noise surrounding the end of the holiday season,” RBS Securities Inc. economist Guy Berger explained in a Bloomberg interview. “There isn’t any real sign that layoffs are picking up in any real sense. It seems like the labor market is entering 2015 in pretty good shape.”

The four-week moving average, which is considered a more reliable measure of jobless activity, hit 306,500, an increase of 6,500 claims from the preceding week’s revised average of 300,000.




First-Time Homebuyers on the Comeback?

Jan. 23, 2015--Sorohan, Mike msorohan@mba.org
The past month has seen interest rate drops back under 4 percent; a surge in mortgage applications, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey; and now, an uptick in first-time homebuyer activity. The latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey said first-time homebuyer activity, buoyed by low interest rates, started to increase much earlier than the typical seasonal home buying trend. First-time homebuyers accounted for 36.3 percent of home purchases in December, based on a three-month moving average. Market share for first-time homebuyers increased in December after four consecutive months of declines, including a share of 35.0 percent in November. Tom Popik, research director for Campbell Surveys, noted that first-time homebuyer participation rebounded earlier than the seasonal pattern seen in previous years. “Market share for first-time homebuyers tends to decline throughout the winter and increase in the spring,” he said. The survey said in 2014, the market share for first-time homebuyers topped out at 37.6 percent in July, the highest level seen since 2010. “If the typical boost in market share for first-time homebuyers continues through the spring, the first-time homebuyer share of home purchases in 2015 will surpass the elevated activity seen last year,” the report said. MBA this week reports mortgage application volume increased last week to its highest level since June 2013, led by a 22 percent increase in refinance application volume, as 30-year fixed mortgage rates fell to its lowest level, 3.80 percent, since May 2013. MBA Chief Economist Mike Fratantoni said the recent reduction in FHA mortgage insurance premiums also played a role, noting FHA refinance applications increased 57 percent last week. Popik said a number of factors could help continue to increase first-time homebuyer activity in 2015, including sustained low interest rates, reduced FHA premiums, introduction of low down payment programs from Fannie Mae and Freddie Mac and strong mortgage origination activity in the Veterans Administration program. The report said time on market for non-distressed properties in December increased to an average of 10.3 weeks compared to 9.7 weeks a year ago. The sales-to-list price ratios on non-distressed properties in December fell by a larger amount than the more gradual decline seen at the end of 2013. In a separate report, FNC, Oxford, Miss., said its Residential Price Index showed the nation’s average home prices were largely unchanged from October to November. This trend occurs after prices declined for the first time in September following two-and-a-half years of modest-to-strong price increases nationwide. The report said weak housing activity, including sales of existing homes largely contributed to continued price weakness. The retreat in the annual rate of home price appreciation continues, down to 5.2 percent in November, compared to 7.9 percent in June. Year to year, average home price appreciation across the country dropped below 6 percent. This morning, Black Knight Financial Services, Jacksonville, Fla., said its First Look report said mortgage delinquencies dropped by 7.2 percent in December after spiking in November, bringing the national delinquency rate back under 6 percent and down to 5.6 percent for the month and nearly 13 percent down from this time last year The report said early stage delinquencies dropped by 220,000 from November; the number of loans 90 days or more delinquent decreased by 31,000. Prepayments jumped more than 25 percent from November, reaching its highest level since August 2013. While the report said the inventory of loans in foreclosure continued its decline, ending December at 820,000, down nearly 35 percent from the end of 2013. Foreclosure starts, on the other hand, saw a 21 percent month-over-month increase, although starts were still down by nearly 15 percent from a year ago.




Do Oil Prices Affect Mortgage Rates

It may be hard to see how the sharp decline in oil prices will affect the housing market. We can all see that home heating bills will be lower, and it will cost less to make trips to the home-improvement store! But there are relationships between oil, inflation, and interest rates that you may want to pay attention to that can help you instill a sense of urgency in your clients who are thinking of buying or selling anytime soon.

A really basic way oil and the housing market are connected is that when oil and gas prices drop, people have more disposable income, and therefore can spend more on a home purchase. According to housingwire.com, non-oil-producing states may see housing prices rise as the population realizes benefits from lower prices. Manufacturers may be able to increase production inexpensively and hire more workers as well. On the flip side, oil-producing states may see layoffs and a climb in unemployment, which translates to less disposable income and less money to put into a home purchase. Experts do caution that the changes may not take effect immediately.

A more complicated relationship exists between oil and interest rates and the bond market. In general, the bond market and interest rates have an inverse correlation — that is, when one goes down, the other goes up. Bond prices and interest rates are inversely related: as one goes down, the other goes up. However, bond yield — the interest earned — and interest rates move in the same direction: when one goes up, so does the other. So when a Treasury bond has a high yield, overall interest rates are also higher. With more disposable income, investors are looking to the bond market and putting more money there. More investors equates to a lower yield, or return, on the bond investment. So as the yield on bonds is dropping, so is the interest rate on mortgages. It's a complex relationship but ultimately it can benefit your business as more people look at investing in a new home.

Now, to throw a monkey wrench into that scenario, consider that if oil prices stay low, leading to lower unemployment and possibly wage increases as well, fewer people will buy bonds, yields will increase, and interest rates — including mortgage interest rates — will also increase. Whew!

So are declining oil prices good for the housing market? The answer is … kind of, for now. And how does that affect you? It’s a great way to let clients know that If they're looking to make a change in their home ownership, whether buying or selling, it's a good time to make a move while interest rates are low and home prices have not yet risen. Please encourage your clients to contact me today to discuss their personal financial situation and to see how they can benefit from today's economic situation.                                                                                                      




Last Week's Economic News in Review

Last week's voluminous economic headlines featured a mixed bag of gains in personal incomes and consumer credit, while consumer spending dipped, the unemployment rate saw a slight increase, and layoffs increased as well.


Let's start with the unemployment news: The economy added 257,000 jobs in January, while unemployment rate for January ticked up by a tenth of a percent to 5.7 percent for the month, according to last week's Bureau of Labor Statistics report. Also, hourly earnings went up 12 cents to an average of $24.75 for the month.

So why did the unemployment rate go up while the economy actually added jobs? The answer is that more employable people were joining the job market. The Bureau's civilian non-institutional population, which is a fancy way of saying, "all employable Americans", grew by 696,000 people to hit 249,723,000.

Moreover, the labor force participation rate, which describes the number of employable Americans either with a job or looking for one, increased by 0.2 percent to 62.9 percent, while the number of discouraged workers (out-of-work Americans who have given up on hunting for a job) dropped to 682,000, which was down 155,000 people from the same period a year ago.

The net-net is that employment is on good enough an upswing and more workers want in on an economy that has added 1 million jobs since November.
"These are pretty amazing numbers," IHS Inc. Chief Economist Nariman Behravesh told Bloomberg. "The January number is strong, but then you've got sizzling November and December numbers too. And then you've got the wage gains."

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed saw a moderate gain after a massive plummet from two weeks ago. Initial jobless claims for week ending Jan. 31 grew to 278,000, a gain of 11,000 claims from the preceding week's total of 267,000, the Employment and Training Administration reported last week.

The four-week moving average, considered a more reliable measure of lay-off activity, dipped to 292,750, a decline of 6,500 claim from the prior week's revised average of 299,250.

Incomes and Spending

Personal incomes grew by 0.3 percent to hit $41.3 billion, as did disposable personal income (DPI; income after taxes), which increased 0.3 percent $35.8 billion, according to last week's report from the Bureau of Economic Analysis. Meanwhile, personal consumption expenditures (PCE; consumer spending) dropped $40.0 billion, or 0.3 percent.

Meanwhile, personal saving — DPI less PCE, personal interest payments, and personal current transfer payments — grew to $643.2 billion in December from $568.2 billion in November. Similarly, the personal saving rate — personal saving as a percentage of DPI — grew 4.9 percent in December, compared with 4.3 percent in November.

"Consumers appear to be saving most of their recent windfall from lower gasoline prices," PNC Financial Services Group senior economist told Morningstar. "However, consumer spending growth will be solid in 2015 thanks to more jobs, higher wages, and lower energy costs. Households will be able to both spend more and save more this year."

Consumer Credit

Last but not least, consumer credit grew by 5.4 percent in December to hit a total of $3.3 trillion, a $14.7 billion gain, the Federal Reserve reported last week.

Encouragingly, the big gain was in revolving debt, such as credit cards, which grew 7.9 percent to $887.9 billion. This showed an increased willingness on the part of Americans to use credit cards for their spending. Meanwhile, non-revolving debt, such as student and car loans, showed a healthy 4.5 percent increase to reach $2.4 trillion for the month.

This week we can expect: Tuesday — Wholesale inventories for December from the Census Bureau. Wednesday — January budget from the Treasury Department. Thursday — Initial jobless claims for last week from the Employment and Training Administration; retail sales for January and business inventories for December from the Census Bureau. Friday — January important and export prices from the Census Bureau and the Bureau of Economic Analysis




An Overview of 2014's home sales

The year of 2014 started out slow but moved into a healthy trend towards the summer and has continued to stay strong.  Median price for 2014 was $208,500, an increase of 5.8%. We appear to be nearing the end of the bounce-back effect on home prices and are moving back to a long-term growth path.   On an annual basis home prices appreciated 5.8% for 2014, returning close to the longterm average as we predicted last year.   Coming soon U.S. Economy: Provided by The Lynchburg Team - Lynchburg Real Estate Services - KW Call 434.879.3275 or email contact@thelynchburgteam.com for more information.       

Katherine Farber

Katherine Farber


Life After Cable TV

The number of American households ditching cable TV in favor of streaming or pay-as-you-go services is steadily climbing. New alternatives seem to be popping up all over as more people become frustrated with paying high fees for bundled packages that include many “junk” channels that they are just not interested in. Are you ready to stop paying for channels you don’t want?

Saving Money
Financially, it could be very much worth your while. If you’re paying $100 per month for a cable subscription, that comes out to $1200 per year — for many homeowners, a full mortgage payment. Alternatives such as Netflix ($7.99 to $11.99 per month), Hulu + ($7.99 per month) and Amazon Prime Instant Video (included with your Prime subscription, $99 per year) can provide films and TV shows on multiple devices at a fraction of the cost.

Another plus to most of these cable alternatives is their portability. You can watch on your TV, through a gaming device, on a tablet, on a smartphone, on a laptop, on your desktop at work … all for one price. No extra equipment is needed to adapt your gadgets (are you paying for multiple cable boxes in your home?). Most can also pick up where you left off on another device: You started watching a movie on the TV in your living room, then picked it up on your smartphone during your lunch hour, and then on your tablet later that evening in bed. It’s entertainment when and where you want it; you can feel like you are in charge.

The inability to watch live TV is one reason you may be reluctant to disconnect from cable TV. Enter CBS All Access ($5.99 per month), which provides live streaming in many cities. New on the horizon is Sling TV, a Dish Network service that plans to offer live cable channels — including ESPN — for $20 per month, with no contract. Sling TV made a major splash at the 2015 Consumer Electronics Show, winning the Best of the Best award.

Of course, none of these services provides what we all really want: an a la carte menu of channels that we put together into a custom TV package. Luckily, innovation isn’t going anywhere anytime soon. And more choices are appearing on the horizon: HBO is considering offering HBO Go as a standalone to people who don’t subscribe to the cable channel; Showtime is also apparently getting aboard that wagon. PlayStation Vue is a cloud-based service that “reinvents the television experience,” according to its parent Sony. It plans to launch with 75 channels, contract-free, and it appears they will offer live CBS local stations in select markets.

The future may not be now, but it’s certainly stepped up the pace when it comes to entertainment options. As homeowners, ditching the cord — literally, in most cases, and how great will it be to get rid of those tangled wires? — is looking like a better option all the time.                                                                                 




Last Week's Economic News in Review

Last week’s economic headlines were a mixed bag, with producer prices and new home construction falling, while layoffs declined further than analysts had expected. 

Producer Price Index 

Producer prices witnessed their biggest decline since 2009, as cheap oil dragged the producer price index for final demand — the prices that businesses get for their goods and services — down by 0.8 percent in January, according to last week’s report from the Bureau of Labor Statistics. 

The decline in final demand prices was led by the index for gasoline, which fell a whopping 24 percent, the Bureau reported. Prices for diesel fuel, jet fuel, basic organic chemicals, and home heating oil also fell. 

January’s drop marked the third-straight monthly drop in PPI for final demand. Should the drop lend any credibility to jitters over possible deflation? Not according to Ian Shepherdson, chief economist for Pantheon Macroeconomics. 

“It’s absolutely not going to happen,” Shepherdson told the Wall Street Journal. “You need to have a broad decline in prices, and at the moment we absolutely do not have that by any stretch of the imagination.”

Housing Starts 

New home construction fell in January, with starts on construction of homes of all types dropping 2 percent to an annual rate of 1,065,000, the Census Bureau reported last week. Starts on single-family homes fell a sizable 6.7 percent to an annual rate of 678,000. 

Building permits issued for construction of private housing also declined, dipping 0.7 percent to an annual rate of 1,053,000. Permits for single-family homes dropped 3.1 percent to an annual rate of 654,000.

A key contributor to the attenuation in new home construction would be factors preventing first-time buyers from entering the market, such as student debt and rising prices. That said, increased employment — and hopefully future improvement in wages — will improve new home construction.

“We’re getting there, though gradually,” First Trust Portfolios LP deputy chief economist Robert Stein told Bloomberg. “We see the housing recovery continuing this year. It’ll be choppy, but we’ll see consistent improvement over the previous year.” 

Initial Jobless Claims 

First-time claims for unemployment benefits filed by the newly unemployed fell below expectations, after lay-offs saw an equally unexpected rise the week before. 

Initial jobless claims filed during the week ending Feb. 14 fell to 283,000 claims, a drop of 21,000 claims from the preceding week’s level of 304,000, the Employment and Training Administration reported last week. Last week’s jobless activity outperformed analysts’ expectations of a smaller drop to 295,000 claims.

The four-week moving average, considering a more stable gauge of lay-off activity, dropped to 283,250 claims, a decline of 6,500 from the preceding week’s average of 289,750. 

“It appears that once we come out of the Veterans Day to Presidents Day fog bank, when the individual readings tend to be prone to gyrations, we may settle at a pace of layoffs consistent with where we were before mid-November,” Amherst Pierpont Securities chief economist Stephen Stanley wrote in a public statement. 

This week we can expect: Monday — Existing home sales for January from the National Association of Realtors. Tuesday — Consumer confidence scores for February from The Conference Board. Wednesday — New Home sales for January from the Census Bureau. Thursday — Initial jobless claims for last week from the Employment and Training Administration; January consumer price index from the Bureau of Labor Statistics; durable goods orders for January from the Census Bureau. Friday — The Bureau of Economic Analysis’ second GDP estimate for the fourth quarter of 2014; consumer sentiment for January from the University of Michigan and Thomson-Reuters Survey of Consumers.




Last Week's Economic News in Review

Real estate was the big newsmaker last week, with existing and new home sales showing middling performance. While real estate was mixed, initial jobless claims took an unexpected bounce upward.

Existing Home Sales 

Sales of existing homes for January were a mixed bag. Transactions of existing single-family homes, townhomes, condominiums and co-ops, fell 4.9 percent to an annual rate of 4.82 million in January, according to the National Association of Realtors. This was their lowest pace in nine months, but 3.2 percent higher than the same period a year ago. 

“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows,” said Lawrence Yun, NAR chief economist. “Realtors are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”

Existing home inventory did tick up for January, growing 0.5 percent by the end of the month to 1.87 million existing homes available for sale, but was 0.5 percent lower than January 2014’s 1.88 million unit-supply. To Yun’s point, unsold inventory is at a 4.7-month supply at the current sales pace – up from 4.4 months in December. 

January’s median price for existing homes of all types grew to $199,600, a 6.2 percent increase over January 2014, marking the 35th consecutive month of year-over-year price gains.

“The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand,” Yun noted. “The big test for housing will be the impact on affordability once rates rise.” 

New Home Sales 

New home sales for January saw similar performance. Transactions of new single-family homes fell 0.2 percent from the previous month to a rate of 481,000, according to estimates released last week by the Census Bureau and the Department of Housing and Urban Development. While down on a monthly basis, January’s sales were 5.3 percent higher than January 2014’s estimated rate of 457,000.

Looking at price, the median sales price of new houses sold in January came in at $294,300, and the average sales price was $348,300. Looking at supply, the estimate of new homes for sale at the end of January totaled 218,000, representing a supply of 5.4 months at January’s sales pace.

Once again, real estate analysts were saying that a true housing recovery depends on other economic factors.

“We are still taking sort of a meandering, bumpy path toward recovery,” IHS Global Insight U.S. Economist Stephanie Karol told the New York Times. “We expect housing will improve later this year due to the improvement in the labor market and credit conditions.” 

Initial Jobless Claims 

Looking at one of those other market factors, employment, first-time jobless claims filed by the newly unemployed saw their biggest jump since December 2013 last week; that’s after falling by a similar amount the week before. Initial jobless claims for the week ending Feb. 21 shot up to 313,000, an increase of 31,000 claims from the previous week's revised level of 282,000, the Employment and Training Administration reported last week. 

The four-week moving average, which is considered a more reliable measure of jobless activity also saw a stiff increase, growing to 294,500, a gain of 11,500 from the preceding week’s revised average of 283,000. 

This week we can expect: Monday — January personal incomes and spending from the Bureau of Economic Analysis; January construction spending from the Census Bureau. Tuesday — February car and truck sales from the auto manufacturers. Thursday — Initial jobless claims for last week from the Employment and Training Administration; January factory orders from the Census Bureau. Friday — Consumer credit for January from the Federal Reserve; January trade balance from the Census Bureau; February unemployment, payrolls, hourly earnings and average workweek from the Bureau of Labor Statistics.




3 Tips to Staging the Inside of Your Home Like a Pro

Are you considering putting your house up for sale, but not sure where to start? Afraid it will take too long to sell, or that you won’t get the price you want? Think about “staging” your home, or in other words, setting the scene for immediate buyer interest in your property. To be really effective, you need to look at both the outside and the inside of your home. Here are 3 tips to get you started with the inside of your home: 1. De-clutter. This is one of the most important things you can do. It might be easier to think of de-cluttering like this – you’re moving anyway, so why not start packing now? Pack up everything you don’t need and store the boxes out of sight in the garage (or consider temporarily renting a small storage locker). 2. Organize your closets - put similar colors together, pants together, skirts together, shirts together etc. Why? Because it will make the closets look bigger. (Really.) An organized closet appears bigger, and you want your closets to look as spacious as possible. 3. Make your home look like a model. You want to de-personalize as much as possible so potential buyers can imagine themselves and their own belongings occupying the space in your house. That means minimizing – putting away everything you don’t need or use. Clear off kitchen counters as much as possible – stash all those appliances you don’t use, and put miscellaneous small clutter in a few attractive baskets or boxes And the biggest tip of all? Imagine yourself as a potential buyer looking at your property for the very first time. What impressions are you getting? Would YOU buy your house? What would you like to see changed before you put an offer on your house? And don’t worry about spending several thousand dollars to get your house ready to sell – you’ll get it all back when your house sells. Proper staging helps you sell your house in a shorter time and at the price you want.  

Brandon Farber

Brandon Farber

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