RE/MAX 440
David J Feinberg

David J Feinberg
4789 Route 309  Center Valley  PA 18034
Phone:  610-509-4358
Office:  610-791-4400
Fax:  610-791-9575

My Blog

Rent or Buy? How to Decide

June 22, 2012 1:52 am

Today is a tempting time to buy a home with interest rates and prices at their lowest levels in years. Deciding whether to buy or rent can be complicated, and potential homebuyers have a lot to consider. As part of National Homeownership Month, the American Bankers Association (ABA) offers these key questions to help real estate consumers make wise financial choices when considering buying a home.
  1. How much can you afford to put down? Can you afford the monthly payment? A mortgage down payment of 5 - 20 percent of the selling price is typical, but can vary depending on the situation. The size of the down payment will impact the monthly cost. Assess your financial health, determine how large of a down payment you can afford and consider if you can then afford the monthly cost.
  2. What other debt do you have? Consider all of your current and expected financial obligations and ensure you are able to make all the payments. Aim to keep total rent or mortgage payments plus other credit obligations less than 35 - 40 percent of your monthly income. If you can't keep payments below that, you may be better off renting for a while or searching for a more affordable home.
  3. What is my credit score? Can I qualify for a good interest rate? A high credit score indicates strong creditworthiness, which qualifies you for better interest rates on a mortgage. Maxing out your credit lines and paying bills late will lower your credit score, and the impact of a credit score on interest rates can be significant. For instance, a borrower with a score of 760 could pay nearly 2 percentage points less in interest than someone with a score of 620. That equates to over $3,000 less in mortgage payments each year. If your credit score is low, you may want to delay buying a home and take steps to raise your score.
  4. How much will taxes, monthly maintenance or other fees cost? Owning a home means you will have to pay real estate taxes and other costs like insurance and maintenance. However, owning a home can bring tax savings at the end of the year. Remember to factor in these costs and incentives. Renters have neither these costs nor tax advantages.
  5. How many years will I stay here? Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your house where renters do not. Yet, renters have greater flexibility to move as they don't have to worry about finding new tenants.
Source: aba.com

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Most Awkward Money Moment? Credit Card Declined

June 21, 2012 1:50 am

Whether it's splitting a dinner bill or turning down a co-worker for a donation for his child's school, awkward money moments abound in today’s world. According to a recent survey conducted by Harris Interactive for CouponCabin.com, having a credit card declined tops the list of worst money-related situations.

While getting a credit card declined is the most awkward money moment for 40 percent of U.S. adults, a variety of other sticky money situations made the list:
  • Feeling pressured to donate to a charity on behalf of a co-worker, family member or friend – 34 percent
  • Saying no to giving money to a panhandler or beggar – 30 percent
  • Feeling pressured to chip in on a group gift at work, like for a baby shower or wedding shower – 26 percent
  • Sharing salary/wage amounts with co-workers – 25 percent
  • Splitting a dinner bill or check with a large group of people – 17 percent
  • Figuring out a gift to get a partner for special occasions, like a first anniversary or a first birthday together – 13 percent
"It's inevitable that some financial situations can be tinged with tension, but honesty is always the best policy," says Jackie Warrick, president and chief savings officer at CouponCabin.com. "Respect your budget and trust your gut to make the right decision. Don't feel pressured to spend money on something or share something you'd rather not, and expect others to do the same."

Staying open is key to defusing awkward money moments, but they're likely to still happen in some social situations. When asked to describe their specific most awkward money moments, U.S. adults from a random sample reported the following:
  • Knowing someone owes me money, but not being sure how to go about reminding him or her
  • Reaching a tollbooth and realizing you don’t have cash to pay the toll
  • Attempting to pay for a company dinner and having credit card declined
  • Splitting a dinner bill when after only having salad and water, while the other party had filet mignon, a large appetizer and wine
Source: CouponCabin.com

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Getting Smart About Your Debt

June 21, 2012 1:50 am

Americans' recent push to eliminate their debt is placing many families at risk. The most recent Federal Reserve Bank of New York Quarterly Report on Household Debt and Credit shows that Americans reduced their debt by approximately $100 billion since the fourth quarter of 2011. However, according to Certified Financial Planner Board of Standards, Inc. Consumer Advocate Eleanor Blayney, CFP®, Americans who reduce debt without setting up a plan to manage it, risk their long-term financial security.

"We tend to think about debt far too simplistically. Witness the movement in this country from the notion that borrowing is a good growth strategy to the conviction that all debt is bad," says Blayney. "Consumers need to take a more sophisticated approach to debt, one that allows for investment while maintaining a reasonable amount of risk that won't jeopardize a family's financial well-being. Smart debt management can help Americans as they seek to rebuild their net worth," says Blayney.

Creating a debt management plan is one of the 12 steps in CFP Board's year-long "12 for '12 Approach to Financial Confidence." Blayney recommends consumers consider five key points when deciding to take on debt:

  • The duration of assets and liabilities: Consumers should be hesitant to take out short-term loans to finance long-term assets. For example, financing a long-term asset such as a home with short-term loans from credit cards is an ill-advised decision. When payment comes due at the end of the month for your credit card, you won't be able to use the value from your home to pay the bill. By the same token, borrowing long-term for a short-term asset can spell trouble as well. Taking a 10-year loan for a used car that won't make it until next year leaves you with debt years after the car you purchased is already in the junkyard.  
  • Your liquidity: Sometimes it is not possible to perfectly match the duration of our assets and liabilities. In this case, take your liquidity into account when deciding to take on debt. For example, you might decide to refinance your mortgage at a lower rate, without increasing the outstanding balance. However, to take advantage of this strategy, you may need liquidity in the form of cash to pay the refinancing's upfront costs and points.
  • Interest rate risk: What happens to your debt when interest rates rise? If you borrowed money at a variable interest rate, such as a margin loan, the cost of the loan will track the increased level of interest rates. If, at the same time, increased interest rates negatively impact your asset holdings, you may experience a classic margin squeeze. It's important to assess the amount of interest rate risk exposure that is in your balance sheet. A CFP® professional can help you make this determination.
  • Financial priorities: You may be determined to get those credit card balances eliminated as soon as possible. However, it may be wiser to direct your extra cash first toward 401(k) contributions in order to get an employer match, or to set up an emergency fund, so you have some protection should unexpected expenses arise. It is a question of balancing your short- and longer-term priorities in a way that makes most sense for your individual circumstances.
  • Ratio of discretionary to non-discretionary expense: Most debt has to be serviced every month, thus becoming a recurring fixed, non-discretionary expense. The larger these expenses, as compared to other expenses that you have more control over in terms of their amount and when they are paid, the less planning room you have to react to changing circumstances. This is particularly important to retirees who may be living off of their investment portfolios. When the market takes a steep drop, the best strategy is to avoid taking money from investments. But if you have a large debt burden, this may not be possible. Taking this risk into account, it may be advisable to eliminate debt, even when interest rates on loans seem extremely favorable.

Source: Certified Financial Planner Board of Standards, Inc.

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Government Refinance Applications More Than Double in Latest MBA Survey

June 21, 2012 1:50 am

Mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 15, 2012.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased more than 1 percent compared with the previous week. The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index fell 9 percent from one week earlier. The unadjusted Purchase Index decreased more than 9 percent compared with the previous week and was 2 percent lower than the same week one year ago.

The refinance share of mortgage activity increased to 81 percent of total applications from 79 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4 percent of total applications.

During the month of May, the investor share of applications for home purchase was at 6 percent, unchanged from the previous month, even though regions including East South Central and South Atlantic increased by 0.5 percent.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.87 percent, matching the lowest rate in the history of the survey, from 3.88 percent, with points increasing to 0.49 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.06 percent, the lowest rate in the history of the survey, from 4.12 percent, with points decreasing to 0.38 from 0.41 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.72 percent from 3.71 percent, with points decreasing to 0.47 from 0.59 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.25 percent from 3.23 percent, with points decreasing to 0.45 from 0.48 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 2.75 percent, the lowest rate in the history of the survey, from 2.78 percent, with points decreasing to 0.33 from 0.49 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

Source: Mortgage Bankers Association

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Save Money, Protect Your Home This Summer

June 20, 2012 1:50 am

After an abnormally warm winter and spring, many homeowners have already begun sweating the inevitable increase in their electricity usage that arrives along with warm summer weather. In addition to the longer days and more frequent thunderstorms most regions experience every summer, the Farmer's Almanac is predicting record high temperatures across the country in 2012.

The combination of those factors can wreak havoc on a home during summer months. Power Home Remodeling Group offers the following tips for protecting your home and wallet by saving energy this summer.
  • Cut down your AC usage by turning the thermostat up during the daytime hours when no one is home, or consider installing a programmable thermostat.
  • Replace air conditioner filters every month to increase your unit's efficiency and productivity.
  • Use ceiling fans to circulate cool air but remember to turn them off when leaving the room.
  • Plant trees or shrubs to shade AC units, but make sure they don't block the airflow.
  • Run dishwashers and clothes dryers at night to reduce heat production in the home during the hottest hours of the day.
  • Install door sweeps on the bottoms of all doors leading outside so that they lightly graze the existing threshold and keep hot air outside, and cool air in.
  • Place electronic equipment like televisions and computers away from thermostats where the heat they produce could cause the AC to run overtime. Likewise, position the thermostat away from direct sunlight which can cause it to read a higher than actual temperature.
  • Keep shades and blinds closed during the day to block out the sunlight and keep the house cool.
  • Close any AC intake vents that are low to the floor and open those that are high on the wall to ensure warmer air is cycled back into the home through the AC system.
  • On the hottest days of the summer, switch the fan mode on your thermostat from "auto" to "on" to continuously cycle the air and make the temperature on all floors feel consistent.
  • Seek out drafts around kitchen and bath vents, doors, windows and outlet covers with the help of a stick of incense. Light the stick and wave it slowly in front of those areas to see where the smoke is drawn out. Repair any leaks by sealing with caulk or weather stripping and replacing trim.
  • Avoid using the oven on very hot days. Instead, cook using an outdoor grill or microwave.
  • Investing in new doors and energy efficient windows can protect window treatments, floors and furniture from fading due to sun damage.
  • Swap old lightbulbs out for energy efficient, compact fluorescent bulbs that emit a brighter light and last longer.
  • Secure loose shingles, replace damaged sections of the roof and gutters and clear gutter blockages to prevent ultimate gaps and holes that can lead to leaks and the escape of cool air.
  • If replacing a roof, consider using pale-gray shingles as they will attract less heat than darker shingles.
In addition to these tips, energy and savings-conscious homeowners can conduct a home energy assessment through a do-it-yourself energy review or by hiring a licensed company. By seeking out air leaks and inspecting insulation, lighting and heating/cooling systems, homeowners can easily target the energy-sucking culprits around their homes and determine solutions.

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Forecast: Modest Gain in Pace of Wage Growth

June 20, 2012 1:50 am

The pace of wage growth in the private sector is likely to continue to accelerate modestly in the coming months, according to the revised second quarter Wage Trend Indicator™ (WTI) recently released by Bloomberg BNA, a leading publisher of specialized news and information.

The index rose to 98.69 from 98.42 in the first quarter.

Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the Department of Labor's employment cost index (ECI). A sustained increase in the WTI forecasts greater pressure to raise private sector wages, while a sustained decline is predictive of a deceleration in the rate of wage increases.

Barring a shock to the U.S. economy, experts at Bloomberg BNA expect annual wage gains in the private sector to reach 2.0 percent or more, compared with a 1.9 percent year-over-year increase in the first quarter, as measured by the ECI. The WTI does not forecast the magnitude of wage growth, only the direction.

Reflecting recent economic conditions, five of the WTI's seven components made positive contributions to the revised second quarter reading, while two factors were negative.

Of the WTI's seven components, the five positive contributors to the revised second quarter reading were forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; job losers as a share of the labor force and average hourly earnings of production and nonsupervisory workers, both reported by DOL; and the share of employers planning to hire production and service workers in the coming months and the proportion of employers reporting difficulty in filling professional and technical jobs, both tracked by Bloomberg BNA's quarterly employment outlook survey. The negative factors were industrial production, measured by the Federal Reserve Board, and the unemployment rate, reported by DOL.

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Improving Housing Data Drives Consumer Spending

June 20, 2012 1:50 am

In May, the Deloitte Consumer Spending Index (Index) posted its first three-month increase since September 2010. The Index tracks consumer cash flow as an indicator of future consumer spending.

"The Index's increase is due to an ongoing slowdown in declining new home prices, plus a small uptick in real wages as falling energy prices give consumers some relief," explains Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "If these two components continue in this direction, consumer spending and sentiment may gain ground. However, the outcome of the stalling job market and economic crises overseas will determine whether it can be sustained."

Deloitte's analysis of factors influencing consumer spending indicate:
  • Housing prices are currently stable and in many markets are turning up. Should prices remain steady, demand may return. Pending sales of existing homes were down 5.1 percent in April from March, possibly because the unseasonably warm winter improved sales.
  • In recent weeks, oil prices fell more than $20 a barrel and gasoline prices will follow, giving consumers more purchasing power.
  • Three consecutive monthly employment reports were disappointing. Jobless claims are trending up and layoff announcements are up sharply as well. If the labor market continues to deteriorate, the recent improvement in the Index will quickly reverse.
  • After posting significant gains early in the year, auto sales have weakened — even in comparison to a period when sales depressed by lack of supply from Japan. Sales in May fell sharply from April. At 13.78 million units on an annualized basis, sales in May were well below the peak sales rate of 15 million units achieved in February, and it is likely that the May numbers — due out in mid-June — will also be weak.
The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — rose to 2.96 from an upwardly revised reading of 2.42 the previous month.
"Though confidence is still fragile, the consumer's mood may improve as they begin to see their housing concerns recede and gas prices fall," says Alison Paul, vice chairman, Deloitte LLP and Retail & Distribution sector leader.

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Personal Financial Situation Key Factor in 2012 Presidential Vote

June 19, 2012 1:50 am

Nearly 6 in 10 Americans (59 percent) report that their personal financial situation is either the single most important factor (12 percent) or one of several important factors (47 percent) in deciding which presidential candidate they will vote for in November, according to new research released today by Bankrate.com.

Americans are evenly divided with respect to which candidate they think will be best for their personal financial situation. Twenty-one percent support President Barack Obama, and an equal 21 percent support Republican challenger Mitt Romney. Fifty percent don't think it will make much difference either way, and 8 percent either don't know or refused to answer.

Franklin Roosevelt (in 1940) was the last sitting president to win re-election with unemployment above 7.2 percent. The latest figure reported by the U.S. Bureau of Labor Statistics (June 1, 2012) was 8.2 percent, down from a peak of 10 percent in October 2009.

"How Americans feel about the U.S. economy and their own finances will be central to the election on Nov. 6," reports Claes Bell of Bankrate.com. "While unemployment will probably be above that 7.2 percent historical benchmark when the election takes place, the key question will be whether Americans are comfortable with the progress that has been made since the economy took a turn for the worse.

Close to 3 million jobs have been recovered since October 2009, and Bankrate.com's Financial Security Index hit an 18-month high last month, but some recent indicators have been less positive.”
The new survey was conducted by Princeton Survey Research Associates International (PSRAI).

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Census Bureau Estimates Changes in Household Net Worth

June 19, 2012 1:50 am

U.S. median household net worth declined 35 percent between 2005 and 2010, from $102,844 to $66,740 (in 2010 constant dollars), according to a set of detailed tables released recently by the U.S. Census Bureau. However, excluding home equity, median household net worth increased by 8 percent between 2009 and 2010, from $13,859 to $15,000.

The Net Worth and Asset Ownership research show household net worth - the value of assets minus debts - by a variety of demographic characteristics in 2005, 2009 and 2010. The statistics come from the Survey of Income and Program Participation.

"The overall decline in net worth reflects drops in housing values and stock market indices," explains Census Bureau economist Alfred Gottschalck.

In absolute terms, median net worth decreased for all age groups over the period, but more so for older households than for younger ones. For householders 65 and older, it decreased from $195,890 to $170,128; for those under 35, the decrease was from $8,528 to $5,402. In percentage terms, however, the story was much different: a 37 percent decline for younger householders, compared with a 13 percent decline for older ones.

All educational groups also experienced declines. For example, those with a high school diploma saw their median net worth fall 39 percent and those with a bachelor's degree experienced a 32 percent decline.

Other highlights include:
  • More education is associated with higher net worth. In 2010, those with a graduate or professional degree had a median net worth of $245,763, while the median net worth of those with a high school diploma only was $42,223. Those with a bachelor's degree had a median net worth of $142,518.
  • In 2000, those with a bachelor's degree had a median net worth value almost twice as large as those with a high school diploma only; by 2010, this number had risen to almost three and one-half times as large. The same pattern can be seen when examining the graduate or professional degree to high school diploma ratio; this ratio has increased from 3.5 to 5.8 over the same period.
  • Householders age 35 to 44 had the largest percent decline in median net worth from 2005 to 2010 of any age group: 59 percent.

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Harvard: Home Sales Finally Poised to Improve

June 19, 2012 1:50 am

Harvard University’s Joint Center for Housing Studies released its annual State of the Nation’s Housing report for 2012 and, according to NAR’s Speaking of Real Estate blog by Robert Freedman, it very closely tracks comments made by NAR Chief Economist Lawrence Yun earlier this week at a CRE conference on what’s holding back the housing recovery.

According to Freedman, the Harvard report points to increasingly strong market fundamentals and says home sales really could see serious improvement this year.

The main weakness is tepid job growth, which Yun also mentioned. The overhang of distressed properties is also a continuing problem.

Other issues include the unusually slow pace at which young people–the Echo Boomers—are leaving their parents’ homes and forming their own households. That’s a big missing link in home sales growth, and it’s certainly related to the weak job picture. Unless young people feel confident about getting a good job, they’re going to remain hesitant to start a new household.

The big beneficiary of the last several years has been the multifamily housing sector, which Freedman describes as “booming.” As the report puts it, “the number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the postwar era.” More rental growth is expected.

It’s in part because of this rental growth that homeownership is poised to improve. The Harvard report underscores how much more affordable mortgage payments have become relative to rental rates. At some point, renters are going to realize they’re losing money each month they continue to rent.

Another interesting point made by the report is the critical role older homeowners have played in preventing the U.S. homeownership rate from falling more than it has over these last few years. The rate today stands at about 66 percent, which is about 2 percent lower than it was a few years ago. Households 65 and older are the only age cohort that has continued to increase its share of ownership; all of the others, including the important middle-aged move-up cohort, have declined.

Source: Robert Freedman, Speaking of Real Estate Blog, the National Association of REALTORS®

Published with permission from RISMedia.


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