Put into perspective, consumer spending is being canceled out by inflation, and the housing market could be bottoming out. Image: CC Mr. T in DC/Flickr

An increase in pending home sales in February was not enough to offset the big slide in contract signings reported in January. A February gain in consumer spending was also neutralized after being adjusted for inflation driven by rising food and energy prices. But the minutely positive data on pending home sales and consumer spending boosted stocks Monday, and some real estate experts think the housing market may have bottomed out.

Inflation and consumer spending

Consumer spending in February increased 0.7 percent compared to the month before, according to the Commerce Department. Consumer spending has risen eight months in a row, but February’s increase, adjusted for inflation, is just 0.3 percent, matching the increase reported in January. Rising food and energy prices pushed up inflation in February. After rising 0.3 percent in January, the Commerce Department said the personal consumption expenditures price index rose 0.4 percent, the fastest rate recorded since June 2009. The increase in the consumption expenditures price index effectively canceled out February’s 0.3 percent increase in personal income. Households have also been dipping into savings to cover rising food and energy prices. Savings dropped from $710.5 billion in January to $676.7 billion in February.

Pending home sales as an economic indicator

Pending home resales increased 2.1 percent in February after dropping 2.8 percent in January, according to the National Association of Realtors. Compared with February 2010, pending home sales fell 9.3 percent. Because they represent signed contracts, pending home sales are considered a leading economic indicator. The number affects existing home sales data a month or two later, when the contracts close. As for February, existing home sales — 95 percent of today’s housing market — dropped 9.6 percent from the month before. The median price for existing homes dropped 5.2 percent from February 2010, erasing all increases in home values since February 2002. New home sales plunged 17 percent in February to the lowest rate ever recorded. The median price for new homes dropped 8.9 percent from February 2010.

Has the housing market bottomed out?

Because home prices continue to fall, the National Association of Realtors expects existing home sales to eventually rise 5 to 10 percent overall in 2011. Very few people are buying despite the fact that housing has become so affordable it should be one of the most attractive investments in the U.S. According to Deutche Bank, it’s now cheaper to pay a mortgage and other major homeownership costs than to rent the same house in 28 out of 54 major markets. Optimistic real estate analysts are betting that this affordability will eventually entice potential homeowners into pulling the trigger. The re-emergence of homebuyers could start raising housing prices in many markets, which could get even more homebuyers off the fence.

Sources

Bloomberg

New York Times

Fortune

Fewer Americans believe homeownership and real estate are worthy investments. Photo Credit: Infrogmation/Wikimedia Commons/CC-BY

Americans are becoming less convinced that getting mortgage loans to buy real estate is a good idea. A recent survey found that the number of people who believe owning a home is a worthy investment has dwindled to the lowest level in years. Home sales have been sluggish to recover from the housing crash.

Fewer see homeownership as good investment

American real estate has been shaken to its core during the past few years. One of the side effects has been that fewer people believe homeownership is something to aspire to and that owning a home is not as good an investment as once thought, according to Reuters. Mortgage investment house Fannie Mae performs a quarterly survey on attitudes about home ownership, called the National Housing Quarterly Survey, which found that 64 percent of respondents believed that the tradition of going to a bank or loan company to get a loan and buy a house was a good investment. That marked a declined from early 2010, when 70 percent of respondents thought so. In 2003, the figure was 83 percent.

More people turning to rentals

As fewer are buying houses, more are going with paying landlords instant cash through renting. The percentage of vacant rental units declined over the fourth quarter of 2010 to 9.4 percent from 10.3 percent in the summer of 2010. That is the lowest percentage of available rental units since 2007. The same survey from Fannie Mae found that nearly 75 percent of respondents said they thought it would be harder to get a mortgage from a loan lender than to  rent.

Home sales fall

New home sales plunged over the month of January 2011, according to CNN. Some areas where prices are dropping are able to sell more inventory, but areas like Arizona and other places with highly inflated prices have difficulty liquidating housing inventory. However, after stops and starts over the fall, new home sales fell 11.2 percent over January 2011, marking an 18.2 percent reduction between January 2010 and January 2011. The housing market is down more than 80 percent overall from a peak point in 2005.

Sources

Reuters

CNN

People might think they own their homes, but the reality is that they don't at all. Image from Wikimedia Commons.

One of the greatest aspirations of most people chasing the “American Dream,” is to own a home. It’s a lovely idea, to be sure, but it’s not as simple as one might think. In fact, there is a lot to suggest that true home ownership is practically a myth.

Equity determines ownership

Measuring how much people “own” has to do with equity. A person who has full equity in a home or car completely owns that house or vehicle. However, until full equity has been reached, people only co-own homes, vehicles or anything else bought on credit with whatever entity they secured the financing from. The average American moves about nine times after age 19, according to the U.S. Census. If the average person can expect to live to 75, that leaves about 56 years of life after age 19. That means the average person changes residence about once every six years or so. One in six people move every year, according to the Census. Given that the average mortgage is a 30-year mortgage, six years is just not enough time to establish much equity. In reality, until a person establishes at least 51 percent equity, that “homeowner” is a minority shareholder.

Foreclosures and repossessions threaten the notion

Should anything go wrong, such as foreclosure or a repossession, the person who holds the deed does not own the home. The lender does. In fact, according to CNN, there were about 102,000 homes in September and almost 93,250 in October that people believed they owned, but found out otherwise. Granted, there has been a slowdown in foreclosure filings and repossessions and auctions, but that is more due to a federal freeze than anything else.

Bottom line

In reality, the typical American will never actually own his or her home, at least not outright. It can be done, of course, but it is difficult. If the home’s value ends up being higher upon sale than when bought, a small profit may be realized, but once agent fees and closing costs are taken into account, it really isn’t much.

Sources

U.S. Census

CNN

U.S. home ownership rates have fallen to the lowest level in a decade, and millions of Americans are expected to lose their homes in 2011. Image: CC TheTruthAbout/Flickr

U.S. home ownership levels have declined to the lowest level in more than a decade. The trend has accelerated in recent years because of high unemployment, a foreclosure crisis and falling home values. Millions of Americans have lost their homes in the last five years and millions more are expected to in the near future.

Home ownership declining steadily

Home ownership in the U.S. has declined steadily over the last five years according to a report from the U.S. Census Bureau. U.S. home ownership has dropped by 3 million households since 2005. In the third quarter this year the rate of home ownership was 66.9 percent — the lowest rate since 1999. The home ownership rate peaked in the first quarter of 2005 at 69.1 percent. The economic uncertainty of the past several years hit younger homeowners the most. In the third quarter 39.2 percent of people younger than 35 owned homes, a decline of 9 percent since 2005.

Housing market repercussions

As homeownership falls, the housing market follows. U.S. existing home sales in September dropped 19 percent from the year before. The current annual rate of 307,000 existing home sales is a historic low. The lack of sales continues to drive down home prices. The Census Bureau reports that 18.8 million homes are vacant. Housing starts in 2010 are at about a 600,000 a year annual rate, far below what is considered normal. A real estate analyst told CNN that fewer people are forming new households or renting. Families are doubling up and younger people are living with more roommates.

Home ownership and the foreclosure crisis

Nearly a million homes are expected to be foreclosed on in 2010. If the unemployment rate doesn’t go down, analysts have said foreclosure numbers will be even higher in 2011. A Morgan Stanley report said that about 3.1 million mortgage holders are seriously delinquent, and many are expected to lose their homes. An additional 4 million homeowners are falling behind, and half of those are expected to go into foreclosure. The total number of homes in danger of foreclosure is about 11 million.

Sources

CNN

Daily Finance

Consumer Affairs

(Photo from allaboutgeorge, Flickr.com)

Homeownership certainly has a number of benefits, from the tax advantages to the equity you’ll build in your property. However, the maintenance and upkeep that a traditional single family home requires isn’t for everyone. If you aren’t ready to spend weekends on yard work or home repairs, why not consider buying a condo?

The advantages of owning a condo

As a condo owner, your liability is limited to the interior of your unit – the structure of your building and all exterior spaces are owned communally by the home owners’ association (HOA). What this means for you is that the cost of major repairs – like a new roof or new siding – are shared by all the members of the association, instead of falling squarely on your shoulders. While you’ll still be required to pay for interior improvements and repairs, your overall costs will be much lower than with a standalone home.

But lower repair bills aren’t the only advantage to condo ownership. In addition, your complex may offer community facilities – like a pool, gym or clubhouse – onsite for you to use, free of charge. Your monthly bills may also be lower than single family homes, as shared condo walls cut down on heat and cooling expenses. Finally, condo complexes offer a sense of community you won’t find in your own home – if you’re ever feeling lonely, your neighbors and friends are just a wall away.

What you need to be aware of with condo ownership

Of course, there are some downsides to condo ownership. Let’s take a look at a few of them:

1. HOA Fees

Although you aren’t responsible for many traditional homeowner tasks, you aren’t off the hook altogether. Every month, you’ll be required to pay a home owner association fee which goes towards the maintenance of common areas, on top of your mortgage and tax payments. The size of the fee depends on the association and the level of service it provides, but in most cases, you can expect to pay between $100-400 per month to the HOA.

2. Rules and Covenants

When you buy a condo, you agree to abide by the rules and covenants set forth by the HOA. These may include such things as how you’re allowed to decorate your home, how much noise you can make and whether or not you can rent out your condo in the future. Breaking these rules can result in penalties or fines, and a strict HOA board can make your life miserable if you aren’t prepared to abide by them. Basically, if you need the freedom to choose your own paint scheme, think long and hard about buying a condo.

3. Future Resale Values

Traditionally, condos appreciate less in value than single family homes and often take longer on the market to sell. This isn’t always the case – condos in desirable neighborhoods can turn over quite quickly – but you should be prepared to wait a little longer than normal when it comes time to sell. If potential resale values are a concern for you, you’ll want to do your homework to determine whether a condo or a single family home makes more sense for you.

Image from creativechick.blog-city.com.

Contrary to what you may have heard, many people still dream of owning a home. For those who already own a home, benefits may prove to be even more worthwhile. The only way to really make the most of your equity is to take out home equity loans.

Now that you own your home, you should make use of it and open up that equity. With a home equity loan, you can consolidate debts, make major purchases or investments, and put the money toward home improvements — the money is yours, and you can do as you please.

Strategize to maximize profit

Well, actually, the money isn’t yours yet, but it becomes yours as soon as you sell your home. With all home loans, you have to think of every move you make as something for potential profit. You won’t see the rewards of your hard work and dedication until it’s time to sell, then it all comes back around to give you the biggest financial boost of your life.

With your first home, you probably saved up for years just to have enough to make a down payment, then you spent years — probably decades –  paying off the remaining balance through a mortgage. Ne doubt that home appreciated in value, and now you are in position to use the equity that you have built in the form of a home-equity loan.

Home-equity loans not for everyone

Recently the housing market has suffered a serious downturn, and home values are not quite what they were just two years ago. However, if you have been in your home for a significant period of time and have not taken out a home-equity loan in the past, it is likely you have enough equity to aid your financial situation in a significant way. That being said, not every homeowner should secure a home-equity loan.

You must have a plan and purpose for your home-equity loan before starting the application process. While home-equity loans can be very helpful, they can also cause undue strain on your finances.

Don’t become a statistic

Home-equity loans are not free money. You must repay your home-equity loan over time. Many people get into more trouble with home-equity loans than most realize. Your home becomes the collateral for your home-equity loan. Failure to make payments on time can result in a foreclosure. In today’s economy many homes are being lost because borrowers are not able or willing to make home-equity loan payments.

While home-equity has long been a type of savings account for homeowners, home values have depreciated to the point that homes are not considered the investment they once were. It is best to consider why you need or want your home-equity loan and consider the cost. Home equity loans are a great tool for homeowners if used properly. If not, sacrificing your home ownership may become a reality.