Tuesday, March 26, 2013

Home Prices Continue Climb ... If You Haven't Done So Yet, The Time to Refinance Is Now

Home prices rose again last month, and the housing recovery looks real and lasting as well. That's good news for the U.S. economy in lots of ways.

And while I don't certainly want to be a pest, I do encourage anybody who owns a home and has a mortgage to investigate refinancing possibilities for that loan. Why not reduce the monthly payments by $150 or more just by replacing your existing loan with another lower interest rate borrowing? Maybe even consider a shorter maturity as well.

And if you apply for a fifteen year or so new loan, the monthly payment probably won't increase but the time to pay off the loan will become much quicker than the schedule you're on now.

Besides, interest rates are pretty much at rock bottom and look likely to be substantially higher a year from now than today's level. That's because the economy is improving. But that's more than enough preaching from me, so now let's look at today's good news on home pricing.

Home Prices Post Biggest Rise Since 2006 has the details:

"U.S. home prices rose in January from a year earlier, registering the biggest increase since the summer of 2006, according to Standard & Poor's Case-Shiller home-price indexes.

On a year-on-year basis, the 20-city index improved 8.1% . . . .

"This marks the highest increase since the housing bubble burst," said David Blitzer, chairman of S&P's index committee.

The 10-city index grew 7.3% year over year. . . .

Low mortgage rates, a reduction in foreclosures and a shrinking inventory of homes on the market—along with an improving economy—have been supporting a gradual housing-market recovery.

Still, the two indexes remained about 30% below their June/July 2006 peaks through January....

Separately, the number of new homes listed for sale in the U.S. rose last month, a sign that builders are boosting construction to meet increasing demand.

At the end of February, there were 152,000 homes listed for sale, adjusted for seasonal factors, which is the most since November 2011, the Commerce Department said. Sales of new homes, meanwhile, fell 4.6% in February after surging the prior month.

The data showed 411,000 homes were sold last month, nearly matching expectations. Economists surveyed by Dow Jones Newswires forecast an annualized sales rate would fall to 415,000 in February.

Many economists believe housing will be one of the main economic drivers this year as prices rise, more homes are sold and builders break ground on new projects.

In a survey published last week, home builders said they were seeing stronger demand from potential buyers. Still, they said they were discouraged by a lack of land available, rising costs for building materials and tightened credit conditions that can make it difficult for potential home buyers to secure a mortgage.

Tuesday's data showed the median price for a new home sold in February was $246,800, up 2.9% from a year ago.

Despite the upward trend, home sales remain well below historical levels. New-home sales peaked in July 2005, when they hit an annualized pace of nearly 1.4 million, and declined to a low of 273,000 in February 2011."

Summing Up

Housing has been in the dumpster for a long time and still has a very long way to go to reach previous peaks in terms of both sales and prices.

That said, interest rates are probably about as low as they'll get, so if you haven't refinanced yet, now's the time.

Either keep the monthly payment the same and pay off the loan earlier with a shorter maturity loan or keep the maturity and reduce the monthly payment.

Either way it makes sense to do.

That's my take.

Thanks. Bob.

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