Economic Growth Helps Take Press

Steve Kent's August 2006 Newsletter

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Economic Growth Helps Take Pressure Off Rates

In Freddie Mac's Primary Mortgage Market Survey the 30-year fixed-rate mortgage (FRM) averaged 6.72 percent, with an average 0.3 point, for the week ending July 27, 2006.
"Mortgage rates drifted lower on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile," said Frank Nothaft, Freddie Mac vice president. "Meanwhile, recently released new

Mortgage Rates

Source: Realty Times

U.S. averages as of July 27, 2006:

30 yr. fixed:   6.72%
15 yr. fixed:   6.34%
1 yr. adj:        5.78%

homes sales for June fell to a lower than expected rate. That drop can be traced directly to higher mortgage rates, which are also helping to slow the growth of house prices in 2006."

Sales Expected To Stabilize In The Months Ahead

Home sales are projected to ease modestly but should stay within a relatively narrow range over the balance of the year, according to the National Association of Realtors.
David Lereah, NAR's chief economist, said the market is showing signs of stabilizing. "The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels," he said. "At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don't look for any big shifts one way or the other."

College Students And Homeowners Insurance

    Homeowners insurance policies often cover far more than a home and its contents. If you have a child entering college he or she may well have personal property protection under your household policy.
     Policy coverages differ, but in many cases homeowners automatically have personal property protection equal to 50 percent of the property's total value -- and some policies go as high as 70 or 75%. A college student living in a dorm is often considered a "resident" within your household for insurance purposes. In the event of theft, a portion of your personal property coverage can apply to the student.
     For details, speak with your insurance agent.

To Buy Or Not To Buy

    Renting can cost more than seven times annually than owning, according to a newly revised consumer education brochure from the National Association of Realtors®. The brochure, "Why rent when you can buy?" challenges certain assumptions about renting versus buying.
     "Housing is a good investment, and owning a home makes sense for a lot of current renters, but many would-be homeowners are reluctant to take those first steps," said 2006 NAR President Thomas M. Stevens. "Given their experience with homebuyer concerns and insight into local markets, Realtors® can counsel consumers to begin their journey toward homeownership."
     The Federal Reserve Board estimates that homeowners have a net worth nearly 36 times more than that of renters. Over the past 10 years, the cost of rental housing in the United States has increased an average of 3% per year; average rents are projected to rise 4.1% this year alone. With a 3% annual increase, a current rental payment of $1,000 per month would increase every year and amount to $137,567 after 10 years, with no wealth accumulation. In contrast, a $210,000 home purchased today with a down- payment of $10,000 and a 30-yr. fixed rate mortgage at 6.5% would cost a steady $1,100 per month and yield a net worth of $138,521 after 10 years, assuming an historic 4.5% annual appreciation rate.

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