National News, but still good news!

Rising Home Prices, Increasing Equity Spark Move-up Sales

By Maria Patterson

This week’s breaking news regarding the significant jump in April home prices – posting record monthly growth and the fastest year-over-year growth in seven years – is just the latest in a series of statistics confirming that the real estate market is primed for the return of home sellers, who are now financially able and emotionally confident to list their current home in order to move up to their next.
The April home-price increase data from S&P/Case-Shiller comes on the tail of a report from CoreLogic earlier this month heralding the return of positive equity for 850,000 more residential properties in the first quarter of 2013, another sign that move-up buyers will become an increasingly prevalent market segment in the months ahead. According to CoreLogic, the national aggregate value of negative equity decreased more than $50 billion to $580 billion at the end of the first quarter from 631 billion at the end of the fourth quarter of 2012.
“It is hard to know market by market exactly how extensive the return to positive equity is, but from published data it looks like the movement is spread across the country,” says RE/MAX, LLC Chairman of the Board and Co-founder Dave Liniger. “In 2012, 1.7 million homeowners who were previously underwater achieved positive equity and about half that number achieved positive equity in the first quarter of 2013. For every home price increase of 5 percent another 1.2 million will reach positive equity. It appears to be a widespread phenomenon and one that will benefit this inventory-starved market.”

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Property Values Take Flight: Home Prices Soar by over 20 Percent

“While the combination of rapidly rising home prices in some areas, tight inventory nation-wide and the prospect of rising interest rates certainly warrant close scrutiny, a housing bubble in the immediate future is unlikely, says Kiplinger’s Associate Editor, Gillian White. “Areas such as Phoenix and Las Vegas are seeing price spikes of over 20 percent but home values in those same areas remain more than 40 percent below their peak values and interest rates remain low in comparison with historic averages.”
“When rates do begin to rise, the climb is likely to veer more towards slow and steady rather than rapid and steep. More homeowners will make their way out of underwater mortgages, increasing inventory. And gradually rising rates will cool housing demand, providing a better market equilibrium. If the economy continues to expand, as anticipated, it will give the housing market time to work out some of the concerning patterns that have taken root and likely prevent bubbles in most markets.”

An Easy Way to Cut 4 Years Off Your Mortgage

By Tom Reddin

(MCT)—We are now officially in the peak spring home buying-season. I was asked the other day for advice on what should be at the top of the list for homeowners after they move into their new home.
That was an easy question to answer. My No. 1 piece of advice for recent homebuyers is to switch from the traditional monthly mortgage payments to either weekly or bi-weekly payments.
Why? Because it’s the least painful, simplest way I know to shave approximately four years off the life of a traditional 30-year fixed rate mortgage. Here’s what you need to do.
First, contact your mortgage lender to set up automatic withdrawals from your bank account for your mortgage payments. While you could theoretically achieve the same result by mailing in your payments, the vast majority of people won’t have the discipline to stick to this alternate payment schedule if it’s not set up as an automatic withdrawal.
Next, ask your lender to establish a payment every two weeks. Take your monthly mortgage payment and divide it by two to come up with your payment amount. For example, if your mortgage payment is $1,000 a month, your payment should be $500 every two weeks. You could also establish weekly payments instead, which would be $250 a week instead of a $1,000 monthly payment.
This simple change in your payment schedule will cut approximately four years off of a traditional 30-year fixed rate mortgage. Check with your mortgage lender for an exact calculation of the reduction in years based on your individual circumstances.
Sounds painless and too good to be true, doesn’t it? Here’s how it works. If you make payments every two weeks, you’re making 26 payments a year. Since each payment is half of your normal monthly payment, take the 26 payments and divide by two to arrive at the monthly payments you are making each year. Twenty-six divided by two results in 13 monthly payments that you’ve made each year instead of the 12 monthly payments that you would normally make under a traditional payment schedule. The same mathematical result occurs if you establish a weekly payment schedule at one-fourth the amount of your normal monthly mortgage payment.
So, you end up paying an extra monthly payment on your mortgage each year, which has an impact on the compounding effect of the interest on your mortgage. Most homeowners would be hard-pressed to come up with an additional mortgage payment at the end of each year, so this is a great way to accomplish some forced savings in a manner that most people don’t even feel.
And this is not just for new homebuyers. Many existing homeowners are asking themselves, “Should I refinance?” If you decide to refinance your mortgage to today’s low interest rates, make sure to consider this option when you set up your new mortgage.
Finally, consider this scenario: You might have a child in college during those last four years of your mortgage. The absence of your mortgage payments might be the solution to paying tuition for those four years of college.
Tom Reddin, former president of LendingTree, writes for the Charlotte Observer about mortgages and home ownership. A version of this column previously appeared on his blog, MortgageRates.us. He runs Red Dog Ventures, a venture capital and advisory firm for early-stage digital companies.