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| | Provided to you Exclusively by Phil Jensen |
| For the Month of July 2010 --- Vol. 5, Issue 7 | |
| | | | | | Things aren't always what they seem! All too often, people look at the tip of the iceberg - such as the headline of a story. Unfortunately, doing so can mean that you miss some important points. The articles below help you go behind the headlines to understand what's going on, what you may be missing, and how it can negatively impact you if you aren't paying attention. As always, please forward this newsletter to friends, family members and coworkers who may find the information helpful. And if you have any questions or need any help at this time, just call or email to discuss your unique situation. | |
| | Fed Actions Speak Louder Than Words? |
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According to the popular saying "actions speak louder than words." But the words from various Fed members on the actions they feel need to be taken are getting pretty loud. So...what could all this potential action mean for home loan rates? There has been growing debate among Fed members about when to begin raising the Fed Funds Rate. What is the Fed Funds Rate? It's the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans. A higher Fed Funds Rate tends to slow economic activity, as it means the cost of borrowing to finance a purchase will be higher, while a lower rate helps to stimulate activity, a ripple effect that expands into all sectors of the economy. As you can see in the chart above, the Fed Funds Rate is currently at a range of 0.0-0.25%, and it has been this low for over a year to help stimulate our economy and move us from recession to recovery. Why is all this important? If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a "double dip" recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result...and inflation concerns were a big reason for all the Fed chatter last week. Remember, inflation is the archenemy of Bonds and home loan rates. With mounting debt in the US and concerns that US debt will overtake GDP by 2012 - as well as the problems in Europe - there are many factors the Fed needs to consider before taking action. For instance, recently Fed Chairman Ben Bernanke said that the Unemployment Rate is likely to remain high for a while and he noted that the Fed "can't wait until unemployment is where we'd like it to be" before tightening credit, or inflation could too easily get out of control. That said, recent unemployment reports indicate that our economic recovery is still fragile at the moment. This means the Fed won't want to act too quickly, either. The Fed just met on June 22-23rd and decided to keep the Fed Funds Rate at 0.25%, and also reiterated in its Policy Statement that economic conditions warrant keeping the Fed Funds Rate low for an "extended period." But more and more Fed members are expressing concerns about the current very accommodative monetary policy in place. The next Fed Meeting isn't scheduled to take place until August 10, 2010. Although home loan rates are not tied to the Fed Funds Rate, I'll be watching this situation very carefully as it continues to unfold. Overall, Bonds and home loan rates have benefitted lately from the situation in Europe and other economic factors. But the situation could reverse quickly - especially in today's volatile environment. If you or anyone you know would like to take advantage of the exceptional opportunity that exists in the home loan marketplace at this point in history, please don't hesitate to call or email. Or forward this newsletter on to anyone you think may benefit as well! | |
| | Billions of Dollars are Missing. Is Some of it Yours? |
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| | | | | | Would you be surprised to learn that Billions and Billons of dollars are missing...just waiting to be found by the rightful owners? What happens to this money...and how can you get it back if it's yours? Here's the scoop. Why Is the Money Lost? When individuals move and forget to change their address, companies or banking institutions cannot contact them. So any property left behind is turned over to the state as "unclaimed property." The state then acts as a custodian of the property until the rightful owner claims it. Where Does the Money Come From? The most common types of unclaimed property include bank accounts and safe deposit box contents; stocks, mutual funds, bonds, and dividends; un-cashed checks and wages; insurance policies, CDs, trust funds; utility deposits and refunds; and escrow accounts on home loans. Is Some of This Money Yours? To determine if you have any unclaimed property with the state, jump on the web and visit www.unclaimed.org. Click on the state that you live in, and you will be directed to the appropriate website. You will either be able to perform a quick immediate search online, or a few states give you the information on how to just contact them directly to inquire. If you have lived in several states, do a quick search for each, since the funds will be held in the state they originated. But Be Careful... Be cautious of solicitations by mail or email that require you to pay a fee to obtain information about unclaimed property. You may end up paying a fee and receiving no information about unclaimed property, just the contact information for the state. Any unclaimed property information can be obtained free of charge by visiting the above listed website. What about money in Canada, or Federal money such as IRS returns, Savings Bonds, or Federally insured Credit Union accounts? While you're on www.unclaimed.org, just hit "links" at the top of the page to search these resources as well. By taking a minute to do a quick search, you may find out you're a bit richer than you think. Pass this article on to your friends, family members, or colleagues...but be sure to remind them to include you in their celebration if they find their missing stash of cash! | |
| | Q&A: Rate versus Price Reduction? |
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| | | | | | QUESTION: Should you focus more on your rate or getting a price reduction? ANSWER: Since the Fed's Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could well cost you more money in the long run. Let's look at an example to see why. Say a homebuyer wants to buy a home that costs $300,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $10,000. If, in the meantime however, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and locking in the 5.25% interest rate. In other words, the buyer would save $10,000 only to end up paying $35,000 more. Now these prices and rates are just for the sake of example. But the point is that home prices are already very affordable...and rates are still at historic lows for now. So in the end, waiting for a home price to reduce may end up costing you much more than you expect if rates rise. | |
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