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According to foreclosure-tracking service RealtyTrac, the foreclosure rate is falling nationwide. 

Versus August, foreclosures fell by 12 percent in September 2008 as more than half of the states showed month-over-month improvement. 

Most interesting in the data is that several states that led the foreclosure boom in 2007 now appear to be leading the charge out of it.

For example:

• In Arizona, foreclosures are down 9.43 percent
• In California, foreclosures are down 31.64 percent
• In Colorado, foreclosures are down 6.22 percent
• In Illinois, foreclosures are down 5.14 percent
• In Michigan, foreclosures are down 22.43 percent

But despite September’s promising data, the press is choosing to report that foreclosures are up 71 percent over the same period last year.  The data is accurate, but not necessarily relevant. 

When home buyers and sellers engage real estate markets, they rarely think in annual terms.  For them, it’s about buying or selling this month, or next month, or the month after that.  When someone is “in” the market, their mentality is “right now”.

In other words, annual data is more befitting of an economist, while month-to-month data is more befitting of you.  Of course foreclosures are up 71 percent since last year — a lot has happened since then.  But on a monthly basis, signals point to improvement.

September’s foreclosure data may be a signal of market recovery, or it may just be a blip.  Time will tell, really.  Either way, RealtyTrac’s foreclosure data reinforces what most real estate professionals already know and that’s that markets all over the country are showing signs of life.

Statistics are what you make of them, but sometimes, they can provide good perspective.

For example, from its peak in 2005 to its trough in late-2007, the number of “used” homes sold nationwide plunged.

• In 2005: Roughly 7 million homes sold annually
• In 2007: Roughly 5 million homes sold annually

Through all of 2008, though, Existing Home Sales volume has been essentially flat.  Some months up, some months down, but always hovering near the 5 million unit mark.

The data from September is no different. 

For the 13th consecutive month, the number of home resales nationwide straddled the 5 million benchmark, clocking in at 5.18 million units.  This tells us that everyday Americans are still buying and selling real estate at a fairly steady clip — despite what the news keeps telling us.

Versus August, September sales volume grew by 5.5 percent.

Now, couple this two other data points and we can see that the housing market is showing multiple signs of strength:

1. The national home supply is now down to 9.9 months
2. The number of homes under contract is up 7.4 percent

Again, though, statistics are what you make of them.  Just as there are positive signals about real estate, there are negative ones, too.  The credit markets are one example of that.   

But, either way, with a full year of stable sales volume behind us and stories of recovery in beat-up markets like California, we can’t ignore the idea that housing may be done trolling its bottom.

It takes willing buyers and willing sellers to turnaround a market.  It appears that housing may have both.

(Image courtesy: The Wall Street Journal Online)

Image by Getty Images via Daylife

I admitted earlier that I had totally jumped on the Phillies Bandwagon during the playoff season of Major League Baseball.
You may remember that when I was 14 years old, the 1964 Phillies had thrown away a 6 1/2 game lead in the race for the pennant by losing 10 games in a row, destroying their chances to get to the World Series, and making me a Sixers fan instead of a baseball fan.
In 1980, I just wasn’t over it, and while I was glad that the Phillies had won a World Series, I just wasn’t a fan. This year was different for me.

Maybe it was because my son is a real baseball fan.

Maybe it was because I saw the Phillies play in Dodger Stadium, and come back from near defeat to an outstanding win.

Maybe it was because I went to game 5 of this World Series, and experience the anticipation of the fans and felt the disappointment when the game was called due to weather, and the thrill when the game resumed.

I’m just not sure. I’ve been to the NBA finals with the Sixers when they played the Lakers in 2001. That was incredibly exciting. I went to the Super Bowl in Jacksonville when the Philadelphia Eagles played the New England Patriots, and that was very exciting. And I went to the World Series where the Phillies broke a 25 year losing streak for the city of Philadelphia, and won a world championship. It was like the other experiences except that the let down at the end when we weren’t the winners was missing this time. This time strangers hugeed and gave each other “high fives” and the crowd was wonderful. Happy and wanting the world to share their happiness. But I don;t think that’s why I changed my mind about becoming a fan again.

I think it was the team. There was no showboating, there was only talk about the fans, and the city, and the team, Young men who knew that they had brought a cool drink of water to a city parched by disappontment. It was the patience and perseverance I saw when they played a game with grace under pressure after what I consider an inappropriate decision by the Commissioner of Major League Baseball.

Don’t think that I don’t know that there are more disappointments ahead – after all this is Philadelphia – but I think these players, with their love of the game, the city and their team have finally brought me back – I’m  a Phillies fan once again. And it sort of feels good to be back.

The Federal Open Market Committee adjourns from its scheduled 2-day meeting today at 2:15 P.M. ET and the markets are eagerly awaiting the central bank’s press release.

In it, Fed Chairman Ben Bernanke is expected to address the U.S. economy, the future of credit, and the new Fed Funds Rate.

It’s this last point to which mortgage rate shoppers should pay attention — when the Fed Funds Rate falls, mortgage rates tend to rise.

The inverse relationship between mortgage rates and the Fed Funds Rate is based on the idea that cuts to the Fed Funds Rate are designed to add gas to U.S. economic engine.

In theory, over time, Fed Funds Rate cuts work to improve Corporate America’s balance sheets, thereby rewarding shareholders.  Therefore, when the Fed Funds Rate falls, or is expected to fall, investors often rush to buy stocks before their prices get bid up.  Part of that process, of course, includes selling the “safe” parts of their portfolio which are usually loaded with mortgage-backed bonds.

If you were looking for a reason why mortgage rates tanked Tuesday while the Dow Jones added 11%, now you have it.

The Fed Funds Rate stands at 1.500% and markets are split about how far the FOMC will cut it this afternoon:

• A “pause” is expected by 2 percent of traders
• A 0.250% rate cut is expected by 5 percent of traders
• A 0.500% rate cut is expected by 45 percent of traders
• A 0.750% rate cut is expected by 40 percent of traders
• A 1.000% rate cut is expected by 8 percent of traders

Without a consensus opinion among traders, no matter what the Fed does today, a lot of investors will be forced to rebalance their portfolios to account for their “bad bets”.  This will add to market volatility for sure.

Mortgage rates are calm this morning.  The calm likely won’t last.  If you are floating your mortgage rate and want to avoid additional risk, consider locking your rate prior to the FOMC press release. 

In the widest definition possible, amortization (pronounced: am-ohr-tih-ZAY-shun) is the scheduled process by which a loan’s principal balance pays down to $0.

The opposite of an amortizing loan is an interest only loan for which there is no scheduled principal repayment schedule.

With respect to mortgages, amortization is what determines how much of a monthly payment goes to principal, and how much goes to interest.    Amortization schedules are the same for all fixed rate, non-interest only home loans including 15- and 30-year fixed rate mortgages, as well as all non-interest only ARMs.

Monthly principal and interest payments on a mortgage are based on the mathematical formula above, where:

• P = principal
• A = payment
• r = monthly interest rate
• n = number of payments

Now, if you’ve ever paid on an amortizing home loan, you don’t need to use the formula to know that mortgage amortization schedules are dramatically front-loaded with interest. 

In other words, in the early years of loan, the interest due on a mortgage is relatively high versus the principal due.  And, if you’ve ever heard someone say, “You don’t pay down much of a loan in the first few years,” now you know — mathematically — why that is. 

This interest-heavy mortgage repayment schedule helps banks to collect as much loan interest as possible up-front, offsetting potential loan losses.

But, just because the bank sets an amortization schedule doesn’t mean that a homeowner can’t change it.  In any given month, a borrower can prepay extra principal to the lender, thereby changing the formula and accelerated the loan payoff date. 

There are calculators online that do the prepayment math for you, but before making extra payments, talk with your loan officer or financial advisor first.  Prepaying your mortgage could trigger a stiff penalty from your lender, or put your liquid assets at risk.  Prepayment is not a bad plan, but it may be a bad plan for some.

(Image courtesy: Mortgage News Daily)

Photo courtesy of Creativecommons.org

Every town has a few memorable places to grab a bite to eat, a place you can take your family, watch a game, down your favorite cheesesteak. Northeast Philadelphia is no exception. Here are a few places to check out for some good cooking:

Nick’s Roast Beef-2212 Cottman Ave.

Nick’s is famous for their amazing roast beef sandwiches. They cook it so that it’s practically melting in your mouth. Their menu offers a variety of other choices with great cheese steaks, sandwiches and fries. The atmosphere is perfect for a family or a group looking to watch a sport’s game one of their many flat screen TVs.

Tiffany’s Diner-910 E Roosevelt Blvd.

Tiffany’s gives you the best food for your money. The servers are friendly, the managers are welcoming and the diner is open 24 hours a day.  You can order breakfast morning noon and night and they have one of the largest dessert selections I’ve ever seen.  The restaurant was recently redone with bigger booths and a larger dining room. Their menu offers a large selection of food from burgers to Greek food.

Big Al’s Italiano-8212 Roosevelt Blvd.

Craving a little bit of Italian? Look no further than your front door or a quick drive down the Boulevard. Big Al’s makes homemade Italian food that is great to taste and reasonably priced. They offer a large selection of specialty pizza’s, pastas, hoagies and side items. They’ll deliver anywhere in the North East in a short amount of time.

As the stock market dips then jumps then dips again, it’s important to remember that markets are unpredictable and nobody knows what will happen tomorrow.

Unfortunately, that doesn’t stop the analysts from trying.

An obvious example comes from May of this year.   As the price of oil crossed $120 per barrel on its way to an all-time high of $147, a Goldman Sachs analyst was quoted as saying that $200 oil was “likely”. 

It seemed like a logical conclusion at the time.

Today, though, just five months after the prediction, the analyst’s “likely” scenario looks downright laughable.  Oil is off by more than 40 percent since that day.  And there’s hundreds of examples just like this, all around us. 

Every day, economic experts and analysts are on television, telling us what’s going to happen in the future:

• They tell us when housing prices will reach a bottom
• They tell us when stock markets will rebound for good
• They tell us what the economy will do over the next 12 months

But none of them operate with the proverbial crystal ball — it’s all on “gut”.

Another example is from today’s CNNMoney.com.  In the wake of the government’s banking response, a mortgage analyst predicts 7 percent interest rates over the next six months  This would represent a 1.5 percent from the recent lows.

The rate prediction may be accurate, or it may not.  We won’t know for another six months.  But what we know today, though, is that mortgage rates are all over the place — just like the stock market.  One day up, another day down.  And nobody knows what they’ll do tomorrow.

Predicting the future has always been an inexact science but that won’t stop the experts from trying.  And the experts are wrong as often as anybody else.

Private Mortgage Insurance (PMI) is a mortgage lender’s insurance policy against highly-leveraged homeowners.  It’s typically required when homeowner equity is less than 20 percent at the time of closing.

With PMI defaults up 40 percent over last year, though, private mortgage insurers are taking big losses.

They’re also taking outsized steps to prevent additional claims going forward and that is bad news for low-equity homeowners and home buyers.

The first PMI change new, higher insurance rates.

Like home insurers that adjust premiums after a worse-than-expected storm season, PMI insurers are raising mortgage insurance rates for all homeowners, regardless of credit history.  The higher premiums are meant to offset the higher losses.

And, the second change is that some PMI firms are discontinuing coverage for “high-risk” transaction types.  This includes purchases of non-owner occupied properties, and cash out refinances above 85 percent loan-to-value.

Both changes, however, point to similar conclusion about home loans: Home equity is increasingly important for today’s homeowner.

PMI rates are higher than they were six months ago and the rising default rates makes it likely that rates will rise again soon.  As PMI rates increase, so does the cost of homeownership for people whose lenders require it.

Image by wallyg via Flickr

I’m a home town sports fan. I follow the Philadelphia, Eagles and the Sixers regularly. I suffer with them through all of the almost wons and the agonizing seasons because that’s what Philadelphia sports fans do. But I have to admit I’m not much of a baseball fan.  When I was a kid, I loved the Phillies. My Mom was a huge baseball fan, and she loved Robin Roberts and the Whiz Kids, and I loved my mom so I loved them too. (I’m actually still kind of fond of Robin Roberts – great pitcher AND a neat name). But in 1964, with a 6 1/2 game lead for the championship, the Phillies proceeded to loose 10 straight games, which went down as one of the worst “chokes” in Major League Baseball, and tore my young heart out. So I stopped following baseball for the most part.

This year, the Phillies got me back, but I have to admit that I’m hopping on the bandwagon. I’m not going to pretend to be one of the true faithful that have struggled over the past few years as they almost made it, but I am a happy guy. One of baseball’s oldest franchises is fighting it out with one of baseball’s newest, and they’re earning their name of the “Fightin’ Phillies”. An underdog going into the 1st game, without home field advantage, the Phillies won the first game in the series last night. I’ve been a fan in Phillie too long to get too excited, but I’m back for this ride – hope its a good one!

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Buyers are returning to the housing market.

Each month, The National Association of REALTORS^® tracks homes under contract to sell, but whose closing has not yet happened.  It calls them “pending sales” and publishes a monthly report to quantify them. 

The Pending Home Sales report is important because it’s meant to predict future home sales activity.  History shows that 80 percent of homes under contract will “close” within 60 days, and most of the rest will close within 120 days. 

If Pending Home Sales are up, it’s believed, actual home sales will be up, too.

In August, Pending Home Sales jumped 7 percent from the month prior, returning to levels not seen in over a year.

The report’s strength suggests that buyers are returning to the housing market, continuing the trend that started in March.  This is tremendously good news for sellers because more buyers on the hunt means more demand for homes which, in turn, leads sale prices higher. 

The Pending Homes Sales report is not a perfect predictor, however.  For one, it’s not measuring an actual sale — just the expectation of one.  In addition, it only accounts for “used” homes, ignoring new construction. 

But that aside, the strong uptick in August tells us that home buyers are re-engaging at a quickening pace and finding that “now” is a good time to buy real estate.  When buyer demand rises, the real estate market as a whole isn’t usually that far behind.

(Image courtesy: The Wall Street Journal Online)