2012 July

Planning Ahead For The Federal Reserve’s Next Move

Fed Funds Rate v 30-Year Fixed Rate In Washington, D.C. today, the Federal Open Market Committee (FOMC) begins a 2-day meeting, its fifth of 8 scheduled meetings this year.

Mortgage rates are expected to change upon the FOMC’s adjournment. Rate shoppers and home buyers of Chicago would do well to be alert.

The Federal Open Market Committee is a rotating 12-person subcommittee within the Federal Reserve. It’s the group which makes U.S. monetary policy.

“Making monetary policy” has many meanings but the action for which the FOMC is most well-known is its setting of the Fed Funds Funds. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other overnight.

Since late-2008, the Fed Funds Rate has been near zero percent.

The Fed Funds Rate and Freddie Mac’s 30-year fixed rate mortgage rate move along different paths. Sometimes, the two converge. Other times, they diverge. They’ve been separated by as much as 529 basis points in the past 12 years, and they’ve have been as near to each other as 52 basis points.

Clearly, there’s no correlation between the Fed’s Fed Funds Rate and the common 30-year mortgage. However, with its words, the Federal Reserve can influence the direction in which mortgage rates move — on occasion, by a lot.

We’ll be witness to this Wednesday.

When the FOMC adjourns, it is expected to announce no change in the Fed Funds Rate. Yet, based on the verbiage of the post-meeting statement, mortgage rates will rise or fall accordingly. If the Fed notes that the economy is sagging and that new stimulus is planned, mortgage rates are expected to drop throughout Minnesota. This is because new, Fed-led stimulus would be a boon for mortgage markets which would, in turn, drive mortgage rates down.

Conversely, if the Fed acknowledges growth in the U.S. economy and/or little need for new stimulus, mortgage rates are expected to rise.

Either way, expect rates to change — we just can’t know in what direction. The FOMC adjourns at 2:15 PM Wednesday.

How to Tell if Someone Is Lying to You

Woman Spying With Binoculars When someone is not being honest with you, there are often clues that they are lying. If you become adept at spotting these subtle changes in body language and tone, you will be able to develop your own lie detector and know when something is trying to keep you in the dark about something.

Here are some red flags that might indicate someone is lying:

They appear uncomfortable looking you in the eye. However, if they are aware that lack of eye contact indicates lying they might try harder to look you in the eye and it will also appear unnatural.
Their stories are inconsistent and either have too much detail or not enough detail.
The person acts unusually defensive and refuses answering questions.
Try to change the subject. If they have been lying, they will become more relaxed and happy that you aren’t talking about that topic anymore. If they are telling the truth, they will act confused as to why you changed the subject so quickly.
Nervous behaviors such as tapping their foot, biting their lip, or fidgeting can indicate that someone is lying.
If you ask someone a question and they look to their right, it is more likely that they are creating an answer in their mind. If they automatically look to their left, they are remembering something that actually happened.
A guilty person is usually uncomfortable with awkward silences and pauses, and will try to talk more than usually to fill up the silence and convince you.
When people are nervous, their saliva glands stop producing saliva and so their mouths become dry. If you notice the person licking their lips a lot, it cause be a sign that they are nervous about a lie they just told.

These are just a few telltale signs that someone is lying. They might not display all of these traits, but if they display several of them it can help you determine whether or not they are telling you the honest truth.

Image: FreeDigitalPhotos.net

How To Beat The Bacteria In Your Kitchen

Within Minneapolis homes, the kitchen is often the most “used” room in the house. It’s a meeting place for meals, for conversation, and for family. Unfortunately, that makes it a meeting place for bacteria, as well.

Along with bathrooms, kitchens are the most bacteria-heavy rooms in a home. Kitchens require a good, daily cleaning. This 4-minute interview on NBC’s The Today Show shows you how to do it.

Using ordinary household cleansers and some elbow grease, you’ll learn :

Why sponges should be out of your kitchen and why loofahs should be in
How to catch and trap fruit flies that spread germs and disease
How to clean and disinfect porous cutting boards

You’ll also get tips on removing stubborn stains from the bottom side of a frying pan.

The video is loaded with good advice and is worth a watch if only to learn a single sanitizing tip.

For example, did you know that you shouldn’t soak wooden bowls or boards in water because the water causes the wood to separate, leaving it “open” to kitchen-borne bacteria? Or that, because of new soap-types, today’s dishwashers should be regularly disinfected?

Keep your kitchen free from bacteria is a constant battle but, using the tips from the video above, you’ll give yourself a fighting chance.

Keep Your Cool in New Orleans This Summer

New Orleans Louisiana - The Big Easy The fabled city of New Orleans has a thriving culture which is completely unique to anywhere else in the USA.

It is famous for delicious down-home southern cooking, spicy Creole flavors, Spanish and French influences, a groovy jazz scene, friendly hospitality and of course for being one of the best places in the country to have a party.

The city of New Orleans is one of the most popular tourist destinations in the USA and with so many great concerts and festivals hosted here every year the saying goes that locals are always preparing for a party, celebrating one, or recovering from one.

If you plan a trip to “The Big Easy” this summer get ready to eat, drink and be merry.

However, if you are visiting from further north and you are not used to the hot and muggy temperatures of the south you might be quite overwhelmed when you arrive.

New Orleans can be extremely hot and muggy in the summertime with highs in the low 90s.

This can make sightseeing and enjoying New Orleans a sweaty and exhausting activity. Here are some tips for beating the heat during your visit to New Orleans this summer:

Start your day as early and get in as much sightseeing as possible before the temperature starts to heat up. The mid to late afternoon will be the warmest part of the day.
During the heat of the day, plan to retreat to an indoor attraction which will be air conditioned. For example, if you are interested in art you will love the New Orleans Museum of Art.
Another great indoor attraction which will keep you cool is the Audubon Aquarium of the Americas which is located right on the riverfront of the Mississippi.
Make sure that you drink lots of water to keep yourself hydrated in the heat. Also, wear sunscreen to protect your skin and loose fitting, lightweight clothing to keep you cool.
One of the best New Orleans experiences it taking a cruise down the Mississippi on the Steamboat Natchez. The afternoon cruise can be a bit too warm in the summer, so opt for the dinnertime cruise instead when it will be cooler. The cruise has a live jazz band and you also get to hear a commentary about the sights you see as you float down the river.
If you want to take your kids for a swim to cool off during your visit to New Orleans, there is a great family-friendly Water Park known as the Cool Zoo, complete with water spouts, an alligator slide and much more.
Why not sit in the shade at one of the green and leafy parks in the city, such as Louis Armstrong Park, to listen to some live jazz music?
Cool down with a nice cold refreshing drink at one of the many pubs on Bourbon Street, an exciting avenue dedicated completely to restaurants, bars and nightclubs creating the ultimate nightlife scene.

These are just a few of the ways that you can stay cool in New Orleans this summer while enjoying this hot destination!

Mississippi Steam Boat

Pending Home Sales Index Falls Just Short Of 100

Pending Home Sales Index June 2012

Home sales appear headed for a mid-summer breather.

One month after posting a multi-year high, the Pending Home Sales Index retreated to 99.3 in June — a strong reading in its own right.

A “pending home sale” is a home that is under contract to sell, but not yet sold. June’s value of 99.3 marks the 14th consecutive month during which the index showed year-to-year gains.

Last year in June, the index read 90.7.

For home buyers in Chicago and nationwide, the 14-month winning streak is one worth noting — specifically because the Pending Home Sales Index is different from the other housing market data that tends to make headlines.

Unlike the FHFA’s Home Price Index, for example; or the monthly New Home Sales data which both report on how housing performed in the past, the National Association of REALTORS®’ Pending Home Sales Index looks at how housing will perform in the future.

With high correlation, the Pending Home Sales Index predicts how Existing Home Sales will perform two months hence. This is because 80% of homes under contract convert to “closed sales” within 60 days of going into contract, and many of the rest convert within Months 3 and 4.

In addition, June’s near-100 reading is significant.

The Pending Home Sales Index is normalized to 100, a value which corresponds to the average home contract activity in 2001, the index’s first year of existence. 2001 was an historically-strong year for the housing market which means that June’s market action was also strong.

For today’s home buyers, the Pending Home Sales Index implies that the current market is somewhat “soft” as compared to May, a scenario which lends itself to buyer-friendly negotiations. Plus, with mortgage rates at all-time lows, home affordability has never been higher.

It’s an opportune time to buy a home. By next month, the market may look different.

New Home Sales Slow After Fast Start To 2012

New Home Supply 2010-2012

The number of newly-built homes sold slipped 8 percent in June from the month prior, says the U.S. Census Bureau in its latest New Home Sales report. The June data shows 350,000 homes sold nationwide on a seasonally-adjusted, annualized basis.

The home sale tally fell short of Wall Street expectations but the Census Bureau revised higher its previously-released results for March, April and May by a collective 33,000 units. This left the June New Home Sales report as the weakest of the last five months, yet still stronger than the 21 months preceding February.

In other words, despite retreating from May, the June New Home Sales data was still quite strong. As compared to June of last year, sales of newly-built homes are higher by 15% and the national inventory of new homes for sale is down to 144,000 units.

This marks a 13 percent inventory reduction in just twelve months.

At the current sales pace nationwide, the complete stock of new homes would “sell out” in 4.9 months, a noteworthy data point because analysts believe that a 6.0-month supply of homes marks a market in balance. Home supplies of below 6.0 months suggest a “seller’s market” where sellers have pricing power and excess leverage in negotiations.

Home supplies have been south of 6.0 months since October 2011. This is the same month that marked a shift with other housing data points, too, including Existing Home Sales and the Home Price Index.

Since October 2011, the average new home sale price is higher by 6% nationwide, a trend that should continue in Chicago through the end of 2012 and into 2013 — especially with mortgage rates at new all-time lows and home affordability at all-time highs. As more buyers enter the market amid limited supply, prices are expected to rise.

If you’re a home buyer in search of new construction, therefore, the best new home “deals” you may find may be the ones you find today.

Oh Yeah? How to Come Up With Snappy Comebacks

Frustrated Woman Needs Good Comeback Line Have you ever been in a situation where someone makes a rude comment at your expense, making you look foolish and causing everyone in the vicinity to laugh at you?

In those situations, are you able to fling a comeback in their direction to defend your dignity or are you left awkwardly speechless?

Coming up with quick-witted comebacks is not as easy as some people make it look, so here are some tips to help you be better armed in your next battle of wits:

Stay Calm

When you are insulted or someone makes a joke about you, do you automatically become very hurt or offended?

This strong emotion is actually what is stopping you from responding, because you are so distracted by how strongly you are feeling.

Also, showing that you are hurt or upset will only give your opponent more fuel to insult you with.

Staying calm will make you look like you have the upper hand in the argument, and it will usually infuriate the other party.

The more they frantically try to get you riled up, the more you can dismiss them calmly, making them look foolish.

Think of a verbal argument like a game of tennis and don’t let the ball of words hit you.

Calmly step out of the way and lob it back over the net towards your opponent, instead.

Take Apart Their Argument

If your opponent has said something that is absolutely ridiculous, rather than focusing on how offensive it was you can use logic to pick it apart and show how it makes no sense.

A great way to do this is by rephrasing a summary of the logical conclusions of their argument by starting with, “So you’re saying that…”

Then you can outline the reasons why this position definitely doesn’t make any sense, using clear logic.

If you are able to bring up some great points, the other person will lose a lot of their credibility.

Don’t Take Yourself Too Seriously

If your opponent has called you a name or accused you of something, you can surprise and confuse them by admitting that they are right.

Then exaggerate their accusation to the point where it is obvious to everyone involved how stupid it is.

For example, if you express a criticism of your university and someone accuses you of being anti-education you can say, “Yes of course, I hate all educational institutions and I think that humans should never learn anything new again. Do you want to come to my book burning this weekend?”

Everyone listening will realize how silly and extreme the accusation was and will realize that your viewpoints are much more reasonable than your opponent is trying to make them out to be.

These are just a few ways that you can respond quick-wittedly and come out on top next time someone throws a verbal attack your way.

Home Values Rise 0.8% In May 2012

Home Price Index from peak The housing market’s bottom is 9 months behind us. Home values continue to climb nationwide.

According to the Federal Home Finance Agency’s Home Price Index, home values rose 0.8% in May on a monthly, seasonally-adjusted basis. May’s reading marks the sixth time in seven months that home values rose.

Values are now higher by 4 percent since the market’s October 2011 bottom.

As a Minneapolis home buyer or seller, though, it’s important to understand what the Home Price Index measures. Or, more specifically, what the Home Price Index doesn’t measure.

Although widely-cited, the HPI remains widely-flawed, too. It should not be your sole source for real estate data.

As one example of how the Home Price Index is flawed, consider that the HPI only tracks the values of homes with an associated Fannie Mae- or Freddie Mac-backed mortgages. Homes with mortgages insured by the FHA are excluded, as are homes paid for with cash.

5 years ago, this wasn’t a big deal; the FHA insured just 4 percent of the housing market and cash sales were relatively small. Today, though, the FHA is estimated to insure more than 30% of new purchases and cash sales topped 17 percent in May 2012.

That’s a sizable subset of the U.S. housing market.

A second flaw in the Home Price Index is that it tracks home resales only and ignores new home sales. New home sales represent roughly 10% of the today’s housing market, so that’s a second sizable subset excluded from the HPI.

And, lastly, we can’t forget that the Home Price Index is on a 60-day publishing delay.

It’s nearly August, yet we’re only now receiving home valuation data from May. A lot can change in the housing market in 60 days, and it often does. The HPI is not reporting on today’s market conditions, in other words — it’s reporting on conditions as they existed two months ago. Information like that is of little use to today’s buyers and sellers.

For local, up-to-the-minute housing market data, skip the national data. Talk with a local real estate agent instead.

Since peaking in April 2007, the FHFA’s Home Price Index is off 16.0 percent.

Mortgage Rates Down 1 Percent In One Year

Freddie Mac Mortgage Rates

Another week, another new low for mortgage rates.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the 30-year fixed rate mortgage rate fell 3 basis points to 3.53% last week nationwide. The 3.53% mortgage rate is available to mortgage applicants who are willing to pay 0.7 discount points, on average, plus a full set of closing costs.

One year ago, the 30-year fixed rate mortgage rate was 4.52%. Today, it’s nearly one percent lower. For every $100,000 borrowed at today’s rates as compared to July 2011, a mortgage applicant will save $57 per $100,000 borrowed, or $684 per year.

Over 30 years of a loan, those savings add up.

30-year fixed rate mortgage rates have now dropped through 5 consecutive weeks, and in 11 of the last 12 weeks, a streak dating back to late-April. Depending where you live, however, you may not get access to 3.53% mortgage rates. As Freddie Mac’s survey reveals, mortgage rates vary by region.

Last week, mortgage rates by region were listed as follows :

Northeast Region : 3.56% with 0.7 discount points
West Region : 3.49% with 0.7 discount points
Southeast Region : 3.58% with 0.7 discount points
North Central Region : 3.52% with 0.7 discount points
Southwest Region : 3.56% with 0.7 discount points

Homeowners and home buyers in California, Oregon and Washington, therefore, received the lowest rates in the country, on average. Owners and buyers in Florida and Georgia, by contrast, received the highest rates.

This week, though, mortgage rates are lower everywhere.

With Spain at risk for a sovereign default and China warning of slow growth, mortgage rates began the week by falling yet again. If you’re eligible to refinance, therefore, the timing may be right to lock a mortgage rate. Similarly, if you’re an active home buyer in Chicago , today’s low rates will bolster your maximum purchasing power.

Talk to your loan officer about capitalizing on the lowest rates of all-time. Rates throughout Illinois may not rise beginning next week, but when they do rise, they’ll likely rise quickly.

Money Compass: How To Set Financial Priorities

Your Compass To Financial Planning Success Being conscious about your finances and setting goals for your money can help you achieve your dreams at any stage in life.

Here are some helpful tips to remember when you are making plans for your money and setting your financial priorities:

Identify Your Goals

Remember that you can do anything you want with your money, but you can’t do everything you want.

You will never have the unlimited resources to achieve all of your goals, so focus on which goals are most important to you and concentrate your efforts on those.

To accomplish these most important goals you will need to put some of the other less important ones towards the back burner.

What is Important to You?

When you are thinking about how you will manage your money, consider the things which are important in your life.

You will likely want to have an emergency fund to bail yourself out if the unexpected occurs. You also might want to free yourself of debt, or contribute to your child’s education fund.

Rank these goals in order of importance to decide which you should focus on primarily.

Talk to Your Family Members

When you are making a financial plan, it is important to involve all of your family members in the decisions.

The way that you manage your money will have an impact on everyone in the family unit including your spouse and your kids.

Make sure that you are involving everyone in the goal setting process and that they are getting their say.

Use Compound Interest To Take Advantage of Time

When you put your savings away in an interest earning account, the younger you are the better.

Over the years your nest egg will grow, thanks to the power of compound interest which will have you earning interest on your interest!

So no matter how old you are, start now because the earlier you start saving, the more money you will have!

Re-examine Your Financial Strategy

Your financial priorities will change throughout your life as you go through different stages, such as buying your first house, having a small child, sending your kids to school and moving towards retirement.

Every few years or so, it is important to sit down with your partner to make a new budget which will reflect your current stage in life.

With these planning tips, you will be able to budget your money and achieve your financial goals all throughout your life.