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Source: Housing Wire

Consumers’ assessment of their current conditions remained at a 16-year high even as their confidence in the future edged higher, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch.

The Consumer Confidence Index increased to 121.1 in July up from 117.3 in June. The Present Situation Index increased from 143.9 last month to 147.8 in July and the Expectations Index increased to 103.3, up from 99.6 last month.

In 1985, the index was set to 100, representing the index’s benchmark. This value is adjusted monthly based on results of a household survey of consumers’ opinions on current conditions and future economic expectations. Opinions on current conditions make up 40 percent of the index, while expectations of future conditions make up 60 percent.

Consumers’ assessment of their current conditions improved in July as those saying business conditions are good increased from 30.6 percent to 33.3 percent. Those who said business conditions are bad remained unchanged at 13.5 percent. Consumers also held a more favorable view of the labor market, as those saying jobs are plentiful increased from 32 percent to 34.1 percent while those saying jobs are hard to get decreased from 18.4 percent to 18 percent.

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By Jacob Passy

Generation X home owners with mortgage between the ages of 35 and 50 on average have a loan-to-value ratio of 70%.
The recession is continuing affect one aspect of Generation X’s financial health — and it could be putting their retirements at risk.

Generation X home owners with mortgage between the ages of 35 and 50 on average have a loan-to-value ratio (LTV) of 70%, according to a report released this week by real-estate website Zillow. Comparatively, the average LTV among all home owners is 62%. The loan-to-value ratio measures how much a borrower still owes relative to the value of the property. Having a lower LTV means that a home owner has a lower amount left to pay on the mortgage — comparatively, home owners with high LTVs are at a greater risk defaulting on their loans. Making mortgage payments or providing a larger down payment will lower the LTV for a homeowner, and home owners with lower LTVs can qualify for a lower mortgage rate.

Meanwhile, despite being slower to become home owners in the first place, millennials appear to be building home equity at a faster clip than members of the preceding generation. Based on Zillow’s data, millennial homeowners on average have an LTV of 76% — and in cities such as Chicago and Detroit they actually have more equity in their properties than members of Generation X. Generation Xers in some parts of the country, including Seattle and the San Francisco Bay area, have amassed particularly high amounts of home equity, largely because of the dramatic increase in home values in recent years. In the report, Zillow defined home equity as the amount a home owner could sell their property for less what they owe on it.

What marriage-phobic millennials mean for the wedding-ring industry
Nevertheless, Generation X home owners’ struggle to grow their housing-based wealth is a reflection of how the housing bust hit them harder than other groups. Because many of these homeowners bought at the peak of the pre-recession housing bubble, they were especially burned when home prices plummeted. “They were really scarred during the housing bust,” said Svenja Gudell, Zillow’s chief economist. “Many were almost immediately underwater.”

And that doesn’t even account for the scores of Generation X home owners who sold properties at rock-bottom prices to cut their losses or, worse yet, those that went through foreclosure. Millennials, on the other hand have managed to reap the benefits of the housing bust. “They bought during the recovery, so they’ve built an incredible amount of equity very fast,” Gudell said.

Homeownership is commonly viewed as a means of growing wealth, and home equity is typically one of the largest assets in a home owner’s portfolio. Meanwhile, mortgages are seen as one of the main reasons why a growing number of Americans are going into retirement with debt. And having a mortgage when retired can be problematic for some, since it can be harder to make monthly payments on a fixed-income, particularly if unexpected expenses arise.

As a result, experts suggest that Americans should begin rethinking how they approach homeownership as part of their financial plan. “A house may appreciate in value as an asset but it doesn’t provide a stream of income on a monthly basis,” said B. Brandon Mackie, a certified financial planner and associate with Hennsler Financial, a Georgia-based registered investment adviser. “A ‘paid-off’ house, especially in retirement, does not add money to your bank account every month, which means…it’s not helping you with monthly bills or unforeseen expenses.”

The good news is that home owners appear to be taking a more conservative approach to ensure that a decrease in home prices would not have as devastating an effect on wealth as it did during the housing bust.

Buying a home that’s within budget is now the most important factor for prospective home owners, ahead of other attributes such as neighborhood safety or proximity to good schools, according to another report from Zillow. And home buyers are more likely to make a more significant down payment than during the bubble years (in part because of post-crisis regulations), Gudell said. “That’s a healthier decision than a very small down payment,” she said.

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Real estate is hot, all right. Home prices are soaring, a real estate mogul occupies the White House, and here’s the latest evidence: Americans say housing is their best bet to make some money.

In fact, for the third consecutive year real estate is the favorite way to invest money not needed for at least a decade, according to a Bankrate national survey. No-risk cash investments are a close second — also for the third straight year — while stocks are relatively unloved, in third place.

The results should have you asking yourself: Do I have the right idea about how to build wealth? Because while a home and a bank account may feel like safe bets, especially among millennials, they do carry risks. You could be leaving money on the table.

Reasons we love real estate

There’s a strong appeal to owning property.

“If you have a long time horizon, you will win in real estate,” says Abhi Golhar, a 32-year-old Atlanta-based real estate investor who owns and rents out single-family homes.

Real estate is top investment choice

After bottoming out at the end of 2011 following the worst housing collapse in generations, home prices have gone gangbusters recently, climbing back above their record pre-crisis levels. Prices jumped 6.6 percent during the 12 months that ended in May, according to CoreLogic.

Toss in persistently low interest rates, tax goodies that come with owning a mortgage, and the psychological payoff from planting your roots, and maybe it’s no wonder real estate remains popular.

Reasons we ought to re-think that

Still, “it’s a rather poor investment,” says RBC Wealth Management financial advisor Darla Kashian. “It’s highly illiquid, and markets aren’t always rational.”

One study by professors at the London Business School found that housing returned only 1.3 percent per year after inflation from 1900 to 2011, while stocks tended to perform more than four times better.

Homes are costly to maintain and can be difficult to sell in both good markets and bad. During a downturn, there can be so few available buyers that your ability to ask for a higher price is diminished.

And what about stocks?

Stocks, meanwhile, continue to lag as an investment choice, even trailing cash.

Which is weird.

The current bull market turned 8 years old in March, making it the second longest-lasting winning streak for stocks since the end of World War II.

“If you look at historical averages comparing stocks and cash, it’s not close,” says Matt Becker, a fee-only financial planner and the founder of Mom and Dad Money.

Over the past 10 years, even including the financial crisis, stocks have returned an average of 8.6 percent per year, far above the earnings for money-market accounts and other cash investments.

Cash is a bad 10-year investment

Putting your money into very safe investments can actually cost you money, if you consider inflation. You do need some cash in a liquid account available at a moment’s notice in case of an emergency, but it shouldn’t be your top investment pick.

Young vs. old

The millennial money mind turns out to be a bit more complicated than conventional wisdom might have you believe.

“Contrary to the notion that millennials don’t want to buy homes, their preference for real estate as a long-term investment is exceeded only by their counterparts in Gen X,” says Greg McBride, CFA, Bankrate chief financial analyst.

Young adults split their vote evenly between real estate and cash (at 30 percent for each), with stocks trailing far behind (at 13 percent, behind gold). Compare that to baby boomers, who choose stocks second after real estate, with cash third.

Favorite investment? Millennials love cash

Millennials have years to earn and invest, so why would they seem more eager to play it safe than people who are in or near retirement? Here’s one possible reason: their relative lack of overall wealth compared to their parents and grandparents.

With fewer dollars to play with, millennials are less likely to want to take on risk, even if that means settling for weaker returns.

Americans’ financial security still solid

Regardless of how they would invest, Americans remain confident about their personal finances.

Bankrate’s Financial Security Index — based on survey questions about how people feel about their debt, savings, net worth, job security and overall financial situation — has hit its third-highest level since the poll’s inception in December 2010, despite dropping slightly from the record high seen in June.

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Source: CNBC

Sales and prices are moving so quickly that appraisals are not keeping up. If the appraisal doesn’t match the contract price, the buyer doesn’t get the mortgage, and the deal dies.
The national median price of a home sold in June hit $263,800, a record, according to the National Association of Realtors. In addition, the average number of days a listing took to go under contract fell to just 28, down from 34 a year ago.

“Anytime prices move up fast, the actual appraisal process, because they’re looking back in history, not forward into the future, they are lagging behind,” said Lawrence Yun, chief economist at the Realtors group. “From the buyer’s perspective, it’s a tough situation where they want to rely on the value of the home, on the appraisal, yet they know that if they decide to back away there are other buyers waiting to pounce.”

Lenders are now far more careful with appraisals than they were during the last housing boom. In turn, appraisers are being very cautious with the current price run-up.

That history gives today’s cash buyers, many of whom are investors flipping homes for a quick profit, a major advantage over mortgage-dependent buyers. Once again, they’re pushing prices higher artificially, but this time they are doing it without the banks.

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Homeowners can make a lot of mistakes during that first year in homeownership, especially when eagerness can sometimes lead to ignorance. HouseLogic recently featured several of the most common and costly missteps homeowners most often make in their first year, including:

1. Always going with the lowest bid.

Homeowners may be smart about gathering multiple bids when, say, that HVAC system needs repairs. But they may be tempted to always go with the lowest price. HouseLogic recommends ensuring that all bids include the same project scope. At times, one bid may be less expensive but may not include all of the actual cost or details of the project, or the contractor may lack the experience to do a good job.

2. Submitting small insurance claims.

Owners shouldn’t be in a rush to submit an insurance claim every single time something goes wrong. Filing a claim or two, particularly over a short time, can prompt an increase to your premium. Amy Bach, executive director of United Policyholders, says it’s better to pay out of pocket than to submit claims that are less than your deductible. “You want the cleanest record possible,” Bach says. “You want to be seen as the lowest risk. It’s like a driving record—the more tickets you have, the more your insurance.”

3. Failing to consider the ROI of home remodeling improvements.

Homeowners shouldn’t believe that just because they see the value in an upgrade, they will get an added market value for it when they go to sell. Owners can over-upgrade their home. “It’s easy to build yourself out of your neighborhood” and invest more than you can make at resale, says Linda Sowell, a real estate professional in Memphis, Tenn. Homeowners should check with a real estate professional or appraiser before they start a project to learn whether the improvement will help boost their property value.

4. Tossing receipts and paperwork.

Homeowners need to be good record-keepers. HouseLogic recommends keeping home improvement receipts, contracts, and manuals in a three-ring binder with clear plastic sleeves. Or they can photograph documents and and store them on a computer or in the cloud.

5. Ignoring seemingly minor items on an inspection report.

An inspection report can make a great first to-do list once moving in, HouseLogic says. Seemingly minor issues, like loose gutters or uninsulated pipes, may eventually cause bigger damage if not repaired soon. New owners should consult a contractor and make an informed decision about what needs to be fixed right away and what can wait.

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Source: Yahoo Finance

Is now the right time to refinance? If you’re a homeowner, it’s a question you’re bound to ask yourself at some point during the life of your mortgage.The short answer is … It depends on your specific situation and goals.

There are a few reasons to refinance your mortgage– maybe interest rates have dropped since you took out your initial loan and you want to take advantage of the lower rate, or you want to shorten your loan’s term.

For instance, if you have an adjustable-rate mortgage you might want to switch to a fixed-rate loan in order to lock in the lower interest rate.The good news is that mortgage rates are still near historic lows.
The national average for a 30-year fixed mortgage is currently about 4%, according to Bankrate.com.

But before you decide to take the plunge, you’ll want to ask yourself a few questions. First, do you own at least 20 percent of your home? Many banks won’t even consider refinancing until you do.

Ask yourself how long you have left on your loan and how long you plan to stay in your home.

If you have five years or more left on your mortgage and plan to live in your home for at least another three years, it may pay to spend the money and refinance now.

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If you bought a house with a down payment of less than 20 percent, your lender required you to buy mortgage insurance. The same goes if you refinanced with less than 20 percent equity.

Private mortgage insurance is expensive, and you can remove it after you have met some conditions.

How to get rid of PMI

To remove PMI, or private mortgage insurance, you must have at least 20 percent equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80 percent of the home’s original appraised value. When the balance drops to 78 percent, the mortgage servicer is required to eliminate PMI.

Although you can cancel private mortgage insurance, you cannot cancel Federal Housing Administration insurance. You can get rid of FHA insurance by refinancing into a non-FHA-insured loan.

Canceling PMI sooner

Here are steps you can take to cancel mortgage insurance sooner or strengthen your negotiating position:

Refinance: If your home value has increased enough, the new lender won’t require mortgage insurance.
Get a new appraisal: Some lenders will consider a new appraisal instead of the original sales price or appraised value when deciding whether you meet the 20 percent equity threshold. An appraisal generally costs $450 to $600. Before spending the money on an appraisal, ask the lender if this tactic will work in the specific case of your loan.
Prepay on your loan: Even $50 a month can mean a dramatic drop in your loan balance over time.
Remodel: Add a room or a pool to increase your home’s market value. Then ask the lender to recalculate your loan-to-value ratio using the new value figure.
Refinancing to get out of PMI

When mortgage rates are low, as they are now, refinancing can allow you not only to get rid of PMI, but to reduce your monthly interest payments. It’s a double-whammy of savings.

The refinancing tactic works if your home has gained substantial value since the last time you got a mortgage. For example, if you bought your house four years ago with a 10 percent down payment, and the home’s value has gone up 15 percent over that time, you now owe less than 80 percent of what the home is worth. Under these circumstances, you can refinance into a new loan without having to pay for PMI.

Many loans have a “seasoning requirement” that requires you to wait at least two years before you can refinance to get rid of PMI. So if your loan is less than 2 years old, you can ask for a PMI-canceling refi, but you’re not guaranteed to get approval.

What mortgage insurance is for

Mortgage insurance reimburses the lender if you default on your home loan. You, the borrower, pay the premiums. When sold by a company, it’s known as private mortgage insurance, or PMI. The Federal Housing Administration, a government agency, sells mortgage insurance, too.

Know your rights

By law, your lender must tell you at closing how many years and months it will take you to pay down your loan sufficiently to cancel mortgage insurance.

Mortgage servicers must give borrowers an annual statement that shows whom to call for information about canceling mortgage insurance.

Getting down to 80% or 78%

To calculate whether your loan balance has fallen to 80 percent or 78 percent of original value, divide the current loan balance (the amount you still owe) by the original appraised value (most likely, that’s the same as the purchase price).

Formula: Current loan balance / Original appraised value

Example: Dale owes $171,600 on a house that cost $220,000 several years ago.

$171,600 / $220,000 = 0.78.

That equals 78 percent, so it’s time for Dale’s mortgage insurance to be canceled.

For a fuller explanation of the above formula, read this article about figuring the loan-to-value ratio to remove PMI.

Other requirements to cancel PMI

According to the Consumer Financial Protection Bureau, you have to meet certain requirements to remove PMI:

You must request PMI cancellation in writing.
You have to be current on your payments and have a good payment history.
You might have to prove that you don’t have any other liens on the home (for example, a home equity loan or home equity line of credit).
You might have to get an appraisal to demonstrate that your loan balance isn’t more than 80 percent of the home’s current value.
Higher-risk properties

Lenders can impose stricter rules for high-risk borrowers. You may fall into this high-risk category if you have missed mortgage payments, so make sure your payments are up to date before asking your lender to drop mortgage insurance. Lenders may require a higher equity percentage if the property has been converted to rental use.

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