CLARK: Knowledge & Vigilance Save Dollars

The U.S. economy is showing strength — new single-family home sales rebounded in July and consumer confidence increased the highest in seven months. It was reported last week that were only slight increases in home prices nationwide making it more affordable for first-time buyers.

New-home sales increased about 5% in July. This segment of the real estate market accounts for more than 8% of the market and were up nearly 26% compared to this time last year. (Source: Commerce Department)

Another report revealed the consumer index surged having the highest reading since the first of this year. This is attributed to the improvement of the job market. This index increased from 91 to 101.5 in July. These reports were prior to the volatility of the stock market last week.

A strengthening labor market, declining gas prices and an improving real estate market are contributing to consumer confidence. Some analysts believe that the U.S. economy can hold up despite the turmoil in the global economy.

The Federal Reserve this month will determine if the state of the economy warrants an interest rate increase. If the Fed does raise the rate, mortgage interest rates will still remain low. Buyers on the fence in buying a home today, may choose to commit and will save money by doing so. Last weekend the vice chairman of the Fed, Stanley Fischer stated that “the economic conditions in the U.S. are approaching the standards the Fed has said would be necessary for it to raise rates.”

The Standard & Poor’s/Case Shiller composite index of 20 metropolitan areas in June slightly increased 5% year-over-year compared to 4.9% in May.

The largest appreciation in homes was realized in Denver where prices increased slightly over 10% followed by San Francisco where home prices increased 9.5% and Dallas where home prices increased 8.2%. Improving appreciation is key for the housing market as it will motivate homeowners to list their homes while drawing potential buyers to return to the market.

Home buyers who cannot put down 20% of a home’s purchase price, typically, have to have private mortgage insurance (PMI). PMI is intended to insure the lender should a borrower cease mortgage payments before accruing equity in the home. A borrower, however, who pays down a mortgage or loan that crosses the 20% equity level no longer is considered a risk and the PMI requirement should discontinue.

Lenders must end PMI at a certain time pursuant to the Homeowners Protection Act of 1998. This Act specified the termination or expiration date as when the principal balance of the mortgage reaches 78% of the original value of the home. According to the Consumer Financial Protection Bureau in a recent bulletin, some companies fail to timely terminate PMI. This agency reminded mortgage servicers of required automatic insurance termination is required even if the home’s current value is less than its sales price. Mortgage servicers may not require borrowers to get a home appraisal before PMI termination.

Mary Ann Clark is a realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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