Understanding Home Equity and Economic News

IN THIS ISSUE...

	"LIFE IS A MIXED BLESSING, WHICH WE VAINLY TRY TO UNMIX." - Author and journalist Mignon McLaughlin. The labor market and the economy saw their own mixed blessings last month in the form of mixed news reports. But unlike Mignon McLaughlin's quote above about life, these mixed reports can actually be untangled. The articles below help break down some of the important stories you need to understand: Mixed News – Mixed news leads to more QE3 questions and uncertainty. Here's what you need to know! What to Watch – This report offers insight into multiple aspects of the housing market. Home Inventory – Don't overlook this crucial part of homeownership, especially since it's easier than ever! Q&A: Home Equity? – Discover how you accumulate equity in your home...and what you need to understand about that equity. Beginning in October, look for your issue of MMG Monthly on the second Friday of the month. In the meantime, enjoy the articles below. And, if you have any questions or would like to discuss your unique situation, call or email today. Please forward this newsletter to friends, family members and coworkers who may find this information helpful.

Mixed News Leads to QE3 Questions

	Several reports last month delivered good news for our economy. Earlier last month, the Retail Sales number came in much higher than expectations, Building Permits jumped to their highest level in four years, and Consumer Sentiment also improved.  In addition, inflation at the consumer level was tame. This is typically a good sign for Bonds, as inflation hurts the value of fixed investments like Bonds. So tame inflation is also good for home loan rates, since they are tied to Mortgage Bonds.  But not all of the news has been positive for the US economy. For example, Durable Orders were reported much better than expectations; however, the details of that report showed that general business spending declined, stoking fears of a slowing US economy. Moreover, Atlanta Fed President Lockhart said last month that the strength of the US recovery remains disappointing. Similarly, the Fed Meeting Minutes that were released last month stated that the housing market remains depressed, while economic activity has somewhat decelerated. Overall, the Minutes revealed that the Fed is moving closer towards some form of Quantitative Easing (or QE3) at the next meeting on September 12. But it's not a sure bet. In fact, St. Louis Fed Bank President James Bullard said in an interview at the end of last month that he feels that there is only a 30% chance of some type of easing at the meeting, given the fact that recent economic data has improved, which somewhat differs from the sentiments in the Minutes.  Remember that QE3 would likely push Stock prices higher initially. That would mean that traders and investors would shift cash out of Bond and into Stocks, which would hurt home loan rates in the process. I will continue to monitor the economic reports and the Fed closely over the coming weeks, as these stories continue to develop. The bottom line is that now continues to be a great time to purchase or refinance a home, as home loan rates continue to remain near historic lows. Let me know if I can answer any questions at all for you or someone you know.

What to Watch: Existing Home Sales...and Home Prices

	The health of the housing market continues to be an important topic when looking at the economic outlook. Unfortunately, it can sometimes be tough to discern which housing report you should watch and why.  The reality is that the reports are each beneficial for looking at different aspects of the housing market. But if you're looking at the overall trend in sales, the Existing Home Sales report can be important to watch. After all, existing (or pre-owned) houses account for roughly 84% of all houses sold. So this month, we focus on the Existing Home Sales report and the multiple indicators that it provides. What's in the report? The Existing Home Sales report measures the selling rate of pre-owned single-family homes. In addition, it includes a geographical breakdown, a measure of prices, and house inventory that indicates the number of months it would take to deplete the existing supply of pre-owned houses at the current sales pace.  What happened last month? In the report released last month, Existing Home sales rose slightly over the previous month, and year-over-year sales were reported up 10.4%. Perhaps just as important as the sales trend is the new data on home prices. As you can see in the chart for this article, the median home price rose 9.4% compared to the same time last year. That could be a sign that we've hit the bottom of the market and that prices in some areas are starting to move back up. Where does the data come from? The information is collected by the National Association of Realtors from 650 Realtor associations.  When is the next release? The next Existing Home Sales report is scheduled for release on September 19, 2012. If you have any questions about the housing market or other economic reports, please call or email me. I'm always happy to explain what's going on and how it impacts the rate you can get based on your unique situation.

Home Inventory Made Easy

	Here's a great idea you can pass on to your friends and family members--whether they've owned a home for decades or are just settling into homeownership. Imagine the nightmare of having a home damaged or destroyed. Then, to make matters worse, imagine trying to remember all of the home's contents for insurance and replacement purposes. Many thousands of Americans find themselves in that situation every year.  Now's the time to make sure that doesn't happen! Here's how... Homeowners can create a home inventory list with ease thanks to FREE access to the Insurance Information Institute's "Know Your Stuff" software, which is available at www.knowyourstuff.org. The software is user friendly...available as an app...and even provides free secure storage online so users can be sure their inventory is accessible in the event that their home is damaged. After a quick setup, users can create a name for each room in their home--kitchen, living room, family room, master bedroom--and begin adding items. A drop down list is even available with the most common household items as well as the specific information required by insurance companies, in case a claim needs to be filed. Want to add a picture or a receipt for a large ticket item? No problem, just upload the image.  Once the home inventory is completed, it's a good idea to have your homeowner's insurance agent review the list to make sure the home has sufficient coverage.

Q&A: Home Equity?

	QUESTION: How do homes accumulate equity...and what does that equity have to do with a broader financial plan? ANSWER: Home equity accumulates in four ways: (1) the money committed in the original down payment; (2) any appreciation in the local housing market over time; (3) physical improvements or renovations; and, of course, (4) principal payments on the mortgage itself. While seemingly desirable on its face, this accumulation of wealth in the home has a few consequences that you should keep in mind. First, the cash in your home is "buried." Not only is it unavailable in the event of a family emergency, it is vulnerable to loss due to periodic downturns in housing values, fire, or natural disasters such as hurricanes (insurance, where available, may not cover the full market value of your home). Perhaps more critical, cash trapped in property is earning zero interest, year after year.

	The material contained in this newsletter has been prepared by an independent third-party provider. The material provided is for informational and educational purposes only and should not be construed as investment, financial, real estate and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.  As your Trusted Advisor, I always want to make sure you are clear on all details of the home financing process. If you or someone you know are interested in purchasing or refinancing a home, give me a call today! Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated. Mortgage Success Source, LLC does not grant to the recipient or distributor a license to any content, features or materials in this email. You may not distribute, download, or save a copy of any of the content except as otherwise provided in our Terms and Conditions of Membership, for any purpose.