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Wednesday, September 18, 2013

The housing market

The real estate market is slowed by unemployment, wage stagnation and banking regulations
Federal Reserve MBS purchases help the real estate market
By Brian Davis

A few years ago when the recession began and the housing market began to plummet, people were afraid it would be the end of the world.  While many people have lost their homes to foreclosures, there is certainly more optimism today; after several long hard years, the housing market has begun to recover significantly.

As recently as last year, some people still had no faith in the real estate sector, but the latest reports on the economy of the United States have shown that there has been an increase in private domestic demand and growth of the economy. 

Reasons for recovery

The Federal Reserve has begun to purchase mortgage backed assets rather than Treasury notes, and this has essentially been one of the most important factors driving the recovery of the real estate sector.  The increase in mortgage refinancing as a result of lower mortgage rates has also encouraged many homeowners to take this course of action.  This has helped by allowing for more home purchases and increased private consumption.  Real estate investment has become more lucrative for investors recently because of the lower return on assets such as long-term bonds.  Because of mortgage financing programs which have been instituted recently, such as HARP and HAMP, people have been able to refinance their homes and increase their assets. 

Why is the progress slow?

While the housing market seems to be getting better, this is not the case all across the board.  With the unemployment rates at 7.3% in the US, the economy is still struggling to stabilize itself.  People who are not employed have no expendable income and therefore cannot buy goods and services and often cannot afford to pay their rent.  Because of this first proverbial domino falling, the landlords and homeowners who cannot collect rent in turn cannot afford to pay their mortgages resulting in loan defaults, evictions, and foreclosures. 

While the progress and recovery is occurring, there are still some hindrances including the unemployment rate and people’s fear of losing their homes or other valuable assets.  Many people who are employed have also cut back on spending in an effort to save money for the future when they need it.  While this is good for the individuals, the economy relies on the spending of consumers for its recovery.  Since people are not spending as much, the recovery process has slowed.  Still, home supply and home improvement stores such as Lowe’s and the Home Depot have boasted an increase in their sales, indicating increased activity in the housing sector.

While the housing market and the American economy in general is on the road to recovery, it will take years and plenty of hard work for a full recovery (measurable by 5-6% unemployment) to be achieved.  The fact of the matter is that regardless of all the strife and hardship of the American people and the fluctuations in the housing market, the health of the real estate sector is on the rise.  Continued low interest rates will help, as will faster homebuilding rates.  While the U.S. looks to scale down Fannie Mae and Freddie Mac, government sponsored entities which support the sale of mortgages, it will need to be done slowly to prevent another credit crunch.

About the author: Brian Davis is the Vice President of ezLandlordForms, a leading provider of important documents like residential leases and more.

* Image license: Woodsy; RGBStock royalty free

Tuesday, September 17, 2013

What's the real story behind the US economy, and how does it effect real estate?

2013 saw substantial rises in real estate values across the nation
Higher mortgage interest rates have a dampening effect on real estate sales
By Jeffry Evans

In a surprising turn of events, the Commerce Department revealed that the economy grew at a 2.5 percent annual rate from April through June, which is much faster than they were previously projecting. The good news also continues. Some economists are expecting the growth to stay at an annual rate of 2.5 percent for the second half of the year as well, which is excellent for aiding in an economic turn around; while other economists are saying those projections may be a little optimistic. So what exactly do these numbers mean for us and our economy and our real estate market today?

Why the higher economic growth rate?

There are several factors why the economy grew so much in the first quarter of 2013. For one, American companies exported more goods and the number of imports declined. The use of American products helps our economy greatly. Also, the growth is due to overall steady job gains and federal spending cuts, along with improvements in the trade deficit which helped offset the low government spending.

Where is the real estate market now?

One thing is for certain, the real estate market is starting to grow again as well. We've seen housing and business investments remain strong in the second quarter as well. Housing construction grew at an annual rate of 12.9 percent, which makes it the fourth consecutive quarter of double digit growth. Those are the kinds of numbers we want to see when examining the health of local real estate markets and the overall growth and health of our economy. However, some economists are slightly less optimistic about continuing the same growth into the next quarter, and they may just be right.

But are the numbers accurate?

In another report from Reuters, US consumer barely rose at all during the last quarter, and that's a big deal on how Americans feel about the health of the economy. As the Federal Reserve is considering cutting back on it's massive bond-buying program, this should be a major factor in their decision. Consumer spending accounts for more than two-thirds of US economic activity, could struggle even more to gain momentum if interest rates keep rising. The Commerce Department said that consumer spending only rose by 0.1 percent, much lower than economists had been projecting.

What could this mean for real estate in the future?

While some economists are extremely optimistic for the economic growth for the second half of the year, others are cautioning that higher interest rates may slow our growth instead. Paul Ashworth, chief US economist at Capital Economics, hinted that the strong growth we've seen in the second quarter should give the Federal government “more confidence that the recovery is gathering steam as the fiscal drag begins to fade.” This means that rates could go even higher if the Federal Reserve decides to reduce it's $85 billion a month in bond purchases later this month. In the past, these bond purchases have kept long-term borrowing rates low, in hopes of jump starting our economy. Higher interest rates could mean less people borrowing, which will certainly have an effect on our current expansion numbers.

About the author: Jeffry Evans brings you the top resources to get your real estate license. If you're looking to become a real estate agent check out my site http://www.realestatelicense.org/ to see the requirements and resources your state has.

Monday, September 16, 2013

Homes and home loans for millennials

Home ownership is a lower priority for Generation Y
The American Dream differs for Gen-Y
By Gina Pogol 

Generation Y’s American Dream is beginning to shake up housing markets nationwide. Yes, young adults between 18 and 35 want to own their homes, even after the recession. However, the whole 3-car-garage-gourmet-kitchen-big-fenced-yard thing just doesn’t appeal to them.

This new breed of first time homebuyers is so into living digital that more than half of those surveyed by Better Homes and Gardens believe a home's gee-whiz technology is more important than its curb appeal.

Generation try: Millennials unfazed by fixer-uppers

Three quarters of this next generation of homebuyers want customized and purposeful nests, not the open floor plans and big spaces favored by Baby Boomers. Nearly half eschew developer’s offerings in favor of custom homes. One in three are not afraid of fixer-uppers and most don’t mind doing at least some of the work themselves.

"These Millennials are getting into their first homes and they are very price conscious and according to the survey, when they buy a home they expect to put some sweat equity into it," said Craig Pyle, business development manager at Vivint, a home automation systems company experiencing a 54 percent increase in demand.

Green is good

The kids see little reason for formal dining rooms or double ovens but like tricked out home theatres. The most sought-after upgrades, however, are more practical and environmentally friendly -- an energy efficient washer and dryer (57%), security system (48%), and smart thermostat (44%). In fact, 84 percent of the younger Americans surveyed believe that uber-modern digital technology is flat-out essential to have in their homes.

"The thirst for more and more technology grows every day, but the wiring of a home is not as important, as long as the neighborhood has access to the Internet," says Robert Aldana, a Silicon Valley real estate agent. 

Home loans for millennials

Given their penchant for fixing and upgrading, Millennial homebuyers may find themselves best served by the FHA mortgage program. In addition to a low 3.5 percent down payment requirement and flexible underwriting, FHA offers 203(b) loans to buy houses and 203(k) loans to build or renovate the homes many Millennial buyers want. Even better, those who wish to make those desirable green home improvements can add an Energy Efficient Mortgage (EEM) to their FHA financing package.

Buying a fixer-upper with an FHA Mortgage

Here’s how the FHA 203(k) program works for Gen-Y buyers who want to fix up a home.
  • Find a lender approved to do 203(k) loans.
  • Apply for a home loan and get a pre-approval letter.
  • Find a property. The offer should contain language indicating that a 203(k) loan is required.
  • Find a contractor to write an estimate of work needed and materials required.
  • The lender will order at least one appraisal to get an “after renovation” value.
  • When the loan closes, the seller is paid and the remaining money is held in escrow for the contractor. The lender (or its agent) releases escrowed funds as work is completed.
If the only improvements to be financed are energy-related, the standard FHA 203(b) home loans method with an EEM can be used. To qualify for EEM financing, the energy efficient improvements must be cost effective. That means the total cost of the improvements must be less than the total value of the energy saved over the useful life of the upgrade.

Cost effectiveness is determined by an approved energy consultant using a Home Energy Rating System (HERS). The cost of the energy rating report and inspections may be financed as part of the cost effective energy package.

Millennials can install their energy improvements after their home loan closes. The lender deposits the money in an escrow account, and the funds are released to the borrower after an inspection verifies that the improvements are in and the energy savings will be accomplished.

Millennials have their own unique requirements in the homes they choose and the loans they use. Real estate in the US will never be the same.

About the author: Gina Pogol spent over a decade in mortgage lending, originating, processing and underwriting home loans. She has written about mortgage and finance issues for a number of publishers since 2006. Currently a senior marketing manager with Lending Tree, Gina advocates for consumers and loves answering their mortgage and personal finance questions. For more information: https://www.lendingtree.com/home-loan-overview

* Image license: Bruce Fingerhood; CC BY 2.0

Sunday, September 15, 2013

How to find oil in the Arctic

Oil comapnies are increasingly seeking out oil exploration opportunities in the Arctic
Oil drilling in the Arctic poses operational and logistical challenges
 By Sienna Hawkins

The Arctic is a region located at the very northernmost of our planet and comprises of the Arctic Ocean as well as parts of Canada, Russia, Denmark, Norway, Alaska, Sweden, Finland and Iceland. It is a vast area consisting of ice covered ocean and surrounded by treeless forests. The Arctic is a unique area on our world and one of the most inhospitable places on earth.

The Arctic is a huge expanse and the exploration for oil is much more challenging than any other environment on earth. However, due to advances in modern technology, the high price of oil and the drastic effects of global warming, it has now become of huge interest to the petroleum industry.
Nineteen geological basins make up the Arctic region and some of these have already experienced oil and gas exploration. In the Alaska North Slope, oil was first produced from Predhow Bay in 1968 and yet only half of the other basins such as the Beaufort Sea and West Barents Sea have yet to be explored.

It is estimated that the Arctic holds 13% of the world’s undiscovered oil and around 30% of undiscovered natural gas. All this amounts to a staggering 400 billion barrels of oil – equivalent to ten times the entire total of oil and gas produced in the North Sea to date. Accessing and developing the Arctic may be essential for securing our world energy needs for the future but the project will also mean a fine balance between economic, environmental and social issues.

Wood Mackenzie recently carried out a study on the Arctic and its potential for oil and came to the conclusion that the remaining reserves here would most likely comprise of 75% natural gas and 25% oil. The study highlighted four basins which were likely to be the focus for the oil, petroleum and gas industries in upcoming years. These were the Kronprins Christian Basin thought to have large reserves, the Greenland basin and the Laptev and Baffin Bay basins.

How companies operate in the Arctic

The Arctic is a unique place on earth and as such requires thought and care with every project. The sheer remoteness and harsh weather conditions means that a range of advanced technologies is required in order to develop resources safely.

The Arctic is not just a unique environment it is also the home of many indigenous people who rely on this expanse of land and sea for their livelihood. Oil companies need to build strong relationships with the local communities and remain sensitive to their concerns and conscious about environmental impact.

Oil companies must draw upon their extensive experience and state of the art technology to ensure that they have the required expertise to operate safely, responsibly and with sensitivity in these extreme conditions.

If you are interested in oil exploration in the arctic then the Shell website offers further details about their ongoing work and challenges. Find out how specialist equipment, oil seals and oil extraction machinery are making oil exploration safer.

About the author: Sienna Hawkins has worked in the Oil & Gas industry for several decades and prides herself on knowing the process from top to bottom, from geology to chemical compatibility.

* Image license: US-PDGov