Market Monitor 8.7.09

Weichert Financial Services Market Monitor I ssu e 10, V olu me 30 / A u gu st 7, 2009 Paying Off Your Mortgage in Half the Time The Week Ahead -> The “Keys” By: Tim McLaughlin - FOMC Rate Announcement and Inflation Data are Key We have all heard about the PITI formula: principal, interest, taxes and insurance. These four items make up Date Economic Release Prediction Last the monthly payment that homeowners send in to their servicer each month. The first piece, principal repayment is 8/11 Nonfarm Productivity 5.3% 1.6% the gradual reduction in the loan balance over the term of the loan. And interest can be thought of as the rent you 8/11 Unit Labor Cost -2.3% 3.0% pay for borrowing the money you used to buy your house. And because home loans are calculated with a simple 8/11 Wholesale Inventories -1.0% -0.8% interest calculation, the amount of interest charged 8/11 IBD/TIPP Eco Optimism - 46.3 declines each month as the principal balance of the loan is paid down. Taxes are paid to the county or municipality 8/12 BB Global Confidence - 39.13 collecting them and lenders require that we maintain insurance coverage on the house to protect them (and us) 8/12 MBA Mortgage Applications - 4.4% against loss due to fire or other casualty. 8/12 Trade Balance -$28.5B -$26.0B Of these four elements, the interest we spend over the 8/12 Monthly Budget Statement -$161.5B - life of the loan is typically the greatest expenditure, so when a borrower has an opportunity to significantly reduce 8/12 FOMC Rate Decision 0.25% 0.25% that expense, its worth considering. Given current market conditions, that opportunity may be at hand. 8/13 Import Price Index (MoM) -0.3% 3.2% For the first time in a long time, the differential between 8/13 Import Price Index (YoY) -19.0% -17.4% 30 and 15 yr mortgage terms has become quite significant, 8/13 Advance Retail Sales 0.4% 0.6% rewarding the shorter term borrower with a rate in the mid to high 4% range (with points). In contrast, the typical 8/13 less Autos 0.1% 0.3% borrower who chooses a similar loan with a 30 yr term will pay a rate in the low to mid 5% range with similar points. 8/13 less Autos and Gas - -0.2% True, both these rates are excellent when compared 8/13 Initial Jobless Claims - 550k with predominant rates over the past 30 some years. But any time you have the opportunity to lock down a home 8/13 Continuing Claims - 6310k loan rate of 15 years at any rate under 5.50 percent; it’s a 8/14 CPI (MoM) 0.0% 0.7% true bargain, particularly in a culture that has moved from “spender” based, to “saver/wealth generation” based. As 8/14 ex Food/Energy 0.2% 0.2% an example, on a $275,000, 15 year mortgage at 4.75%, the average monthly P&I is $2,139.04. On a like 30 year 8/14 CPI (YoY) -2.0% -1.4% mortgage at 5.5% (approx .75% higher in rate), the P&I is $1,561.42, $577.62 lower a month. HOWEVER, if you can 8/14 ex Food/Energy 1.6% 1.7% swing the extra $577 in this example, the upside is you pay 8/14 CPI Core Index SA - 219.34 off your mortgage 15 years earlier, AND your total life of loan interest is $110K vs. $287K on a 30 year, over $177K 8/14 CPI NSA - 215.69 saved in interest payments. 8/14 Industrial Production 0.1% -0.4% Does this equation work for you? Does $177K in saved interest sound appealing, whether you are purchasing or 8/14 Capacity Utilization 68.5% 68.0% refinancing? Have questions and want to explore further? Your Weichert Financial Gold Services Manager can help. 8/14 U of Michigan Confidence 68.5 66.0 We can address your questions quickly and easily! Weichert Gold Services. Real Estate, Mortgage, Insurance, Title, Home Connections. We Do It All For You. At the date of this printing all information is deemed reliable but not guaranteed. This publication is a service to our clients and friends. It is designed only to give general information on the topics actually covered. It is not intended to replace tax, legal or financial advice, for which you are encouraged to seek a competent professional advisor. Weichert Financial Services Executive Offices: 225 Littleton Road, Morris Plains, NJ 07950. 1-800-829-CASH. An Affiliate of Weichert, Realtors®. Licensed Mortgage Banker with State Department of Banking: NJ, NY, CT, and PA. Licensed Lender: DE, MD, VA, DC, AK, TX, and WV. An Equal Housing Lender.

Market Monitor 8.7.09

by Weichert Real Estate Agent on Aug 11, 2009

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Market Monitor 8.7.09 — Document Transcript