Just one week after reports of Existing Home Sales and New Home Sales plunging, the housing market is signaling that auturm may fare better than did summer.

The number of homes under contract to sell rose 5 percent in July.

The data comes from the July Pending Home Sales Index, as published by the National Association of Realtors®. By definition, a “pending home sales” is a home that is sold, but not yet closed.

Historically, 80% of such homes close within 60 days which makes the Pending Home Sales Index an excellent, forward-looking indicator for the real estate market.

Indeed, the nationwide drop in home sales this summer was foreshadowed by the Pending Home Sales report.  The index dropped 30 percent in May. Then, two months later in July, it was shown that Existing Home Sales volume dropped 29 percent.

That’s a strong correlation.

Now, to be fair, the July Pending Home Sales Index is still relatively low; the second-lowest on record and well below last year’s numbers. But, the tick higher last month shows how housing may be stronger than than what the headlines report.

It appears that buyers in Colchester took advantage of rising inventory, cheap financing, and stagnant prices, and pushed the market forward. We should expect similarly promising numbers when September’s Existing Home Sales data is released.

There’s plenty of reasons to want to change a showerhead in your head. Perhaps you’re trying to fix a leak in the faucet; or, remodeling your bathroom; or, trying to conserve water via a low-flow showerhead. 

Whatever the reason, changing a showerhead can be a basic do-it-yourself project. The tools aren’t complicated and the job is a quick one.

In this 2-minute video from AOL, you’ll learn:

• What tools you’ll need to change the showerhead
• How to remove your old showerhead
• How to firmly attach your new showerhead to prevent leaks

If you get stuck, or just want to outsource, call a professional handyman to finish the job. Changing a showerhead should take less than a hour to complete.

On the first Friday of each month, the Bureau of Labor Statistics releases Non-Farm Payrolls data for the month prior. 

The data is more commonly called “the jobs report” and it’s a major factor in setting mortgage rates for residents of Vermont and homeowners everywhere. Especially today, considering the economy.

This is because, although it’s believed that the recession of 2009 is over, there’s emerging talk of new recession starting.

Support for the argument is mixed:

1. Job growth has been slow, but planned layoffs touch a 10-year low
2. Consumer confidence is down, but beating expectations
3. Consumer spending is weak, but not declining

In other words, the economy could go in either direction in the latter half of 2010 and the jobs market may be the key. More working Americans means more paychecks earned, more taxes paid, and more money spent; plus, the confidence to purchase a “big ticket” items such as a home.

Jobs growth can provide tremendous support for housing, too.

Today, though, jobs growth was “fair”. According to the government, 54,000 jobs were lost in August, but that reflects the departure of 114,000 Census workers.  The private sector (i.e. non-government jobs), by contrast, added 67,000. 

In addition, net new jobs was revised higher for June and July by a total of 123,000.  That’s a good-sized number, too.

Right now, Wall Street is reacting with enthusiasm, bidding up stocks at the expense of bonds — including mortgage-backed bonds.  This is causing mortgage rates to rise.  Rates should be higher by about 1/8 percent this morning.

Home affordability took a slight hit this week after the Federal Reserve’s release of its August 10 meeting minutes.

The “Fed Minutes” is a lengthy, detailed recap of a Federal Open Market Committee meeting, not unlike the minutes published after a corporate conference, or condo association gathering. The Federal Reserve publishes its meeting minutes 3 weeks after a FOMC get-together.

The minutes are lengthy, too.

At 6,181 words, August’s Fed Minutes is thick with data about the economy, its current threats, and its deeper strengths. The minutes also recount the conversations that, ultimately, shape our nation’s monetary policy.

It’s for this reason that mortgage rates are rising. Wall Street didn’t see much from the Fed that warranted otherwise.

Among the Fed’s observations from its minutes:

• On the economy : The recession was deeper than previously believed
• On jobs : Private employment is expanding slowly
• On housing : The market was “quite soft” in June

Now, none of this was considered “news”, per se. If anything, investors were expecting for harsher words from the Fed; a bleaker outlook for the economy. And, because they didn’t get it, monies moved to stocks and mortgage bonds lost.

That caused mortgage rates to rise.

The Fed meets 8 times annually. Its next meeting is scheduled for September 21, 2010.  Until then, mortgage rates should remain low and home affordability should remain high. There will be ups-and-downs from day-to-day, but overall, the market is favorable.

According to the Standard & Poors Case-Shiller Index, home values rose 5 percent in June versus the month prior, and 4 percent from a year earlier.  It’s the 16th consecutive month in which Case-Shiller reported an increase in home values and the third straight month of outstanding results.

That said, homeowners and home buyers in Colchester would do well to temper Case-Shiller enthusiasm. The June figures are issued on 60-day delay and, over the last 60 days, housing data has been lackluster at best.

• Existing Home Sales are down 27 percent
• New Home Sales are down 12 percent
• Homebuilder confidence is down

Stories like these highlight a key weakness of the Case-Shiller Index — it’s out of date as soon as it’s published. Because of this, the Case-Shiller Index relevance to everyday Americans is muted. People don’t buy homes in the “60 days ago” real estate market, after all.

June is ancient real estate history.

However, the Case-Shiller Index does have its place. As the most widely-followed, private-sector housing tracker, the index is used to help make policy decisions and to shape Wall Street’s expectations of the economy. This means that a strong Case-Shiller reading can cause mortgage rates to rise, and a weak Case-Shiller reading can cause rates to fall.

Tuesday, mortgage rates fell.

Mortgage rates are low right now but pinning them down this week could be a challenge. As Labor Day Weekend nears and Wall Streeters take their head-start on the holiday, trading volume will fall, which will cause mortgage rates in Vermont to get jumpy.

As mortgage rates change, so does the long-term cost of owning a home. Every 1/8 percent adjustment changes a household budget.

Meanwhile, the relationship between “vacation days” and mortgage rate volatility is an interesting one; based more in scarcity than market fundamentals.

Rates tend to get volatile near holidays because of two inter-related facts:

1. Conforming mortgage rates are based on the price of mortgage-backed bonds
2. Mortgage-backed bonds can’t trade without a buyer and a seller at a specific price

So, as the week progresses and more traders leave for their respective “extended” 3-day weekends, there’s fewer buyers and sellers left on Wall Street to connect for a trade.  As a result, mortgage bond prices move across larger gaps than on a “normal” day which, in turn, translates into faster, larger changes in rates.

This phenomenon can be exaggerated during periods of economic uncertainty — like what we’re in now — and, furthermore, there’s a bevy of important data set for release this week including the FOMC Minutes, inflation data, and August jobs figures.

In other words, rates would have been volatile without the vacation week. The presence of Labor Day just piles on.

Mortgage rates may rise this week, or they may fall.  Either way, if you have a chance to lock something favorable and within your budget, consider doing it.  Rates are at all-time lows and likely won’t last.

Each week we will leave from the RE/MAX North Professionals Colchester office at 2:00 PM* and visit the latest listings in Colchester. Along the way you will also have the opportunity to learn about Colchester Vermont history, Lake Champlain, neighborhoods, parks, shopping, places of worship, lake access, marinas, fishing… and maybe even some good town gossip!

Please contact us if you would like to reserve a seat as space is limited. We look forward to having you join us on our Tuesday Tours.

*subject to change

There are two basic retirement systems:  defined benefit plans and defined contribution plans (often called a pension).  More recently we have read about defined benefit pension plans  This type of plan  is designed to pay a retiree who has met the employer’s minimum employment obligations a guaranteed income for the remainder of his/her life and sometimes the life of one’s spouse.  Money to support this type of retirement program comes from the employer and usually the employee.  The “required” annual contribution to this type of pension fund is centered on actuarial (anticipate life span) tables based on the age of the covered employees.  The contributions are invested, usually in the stock market to (1) earn dividends and (2) appreciate in value to cover the anticipated monthly payment due upon a person’s retirement. The “glitch” occurs when employers “under fund” their pension fund on the hope the stock market will “create” the difference due by appreciation and/or dividends.  Under current economic conditions, the decline in the stock market has lowered the anticipated income of these funds leaving many employers without sufficient money to pay future retirees.

The other basic retirement system is called a “defined contribution” plan.  Under this type of program, an employer pays into an individual’s “retirement account” a set sum of money – usually a percent of salary.  Some programs also require the employee to contribute to his/her retirement account.  Once a payment is made by the employer its responsibility ends to the employer.  It is now the employee’s job “to manage” his/her pension fund.  During the current downturn in the economy and “collapse” of the stock market, employees with this type of retirement fund on average lost about 30% of its value – thus reducing an employee’s retirement “nest egg”.

With the exception of the police, the Town has a defined contribution plan for each of its employees, with contributions made by both the employee and the Town.  The plan is currently managed by the International County/Municipal Management Association.  The police belong to the Vermont Municipal Employees Retirement System’s defined benefit program.  Both the officers and the Town contribute to this plan with officers contributing 50% more than the Town into this State program.  Based on performance of the stock market and the actuarial tables for the covered membership, both the municipal and individual rates can be changed by the State Treasurer. Again, with the Town’s annual payment into this pension fund, there is no “unfunded” liability to the Town.

The residents and taxpayers of Colchester Vermont can take pride in the oversight and guidance provided by the Town Select Board in the finances of the Town.  Each year, the Town appoints a licensed public accountant to perform an annual financial audit of all funds of the town.  The contracted auditor provides his findings two weeks prior to attending a Select Board meeting to report his findings and answer questions posed by the Select Board and public in attendance.  The report includes statements about all the outstanding and potential liabilities encumbering the Town.

As Colchester taxpayers I think you should be proud of your local government being “ahead of the game”. We also need to remember that we are responsible for those liabilities incurred by the State and Federal Governments retirement funds.  To help you understand the significance of what should be your pride in Colchester two articles are worth reading.  They are the New York Times article in the Business Section of the Saturday, August 7, 2010 edition entitled “Battle Looms Over Huge Cost of Public Pensions” and David Coates article in the Vermont Tiger entitled “The Bills Are Coming Due:  Dangerous Trends Require Action”.

As painful as it may be, it’s time for governments and citizens to address these unfunded liabilities which affect all of us individually but more importantly threaten our collective well being as Americans and Vermonters.

With Labor Day looming, the autumn and winter months aren’t far behind. It’s a good time to reflect on your home’s heating and cooling costs, and take steps to lower your energy bills. Finding air leaks may be a perfect first project.

According to the U.S. Department of Energy, up to 30 percent can be cut from a home’s energy costs just by reducing drafts. For example, a 1/16-inch gap unsealed gap around a window is equivalent to leaving the window 3 inches open. 

That’s a lot of wasted Colchester air.

The good news is that air leaks are rather simple to identify, and simple to fix. The key is to know where to look. And, to make the job easier, the government offers a complete DIY Guide To Sealing and Insulating a home.

Some of the key tips include:

• Focus on the attic and basement, where most air is lost
• Locate problem areas on a chimney
• Check recessed lights which allow air flow between conditioned and unconditioned air

The government’s website also provides a 13-page PDF with detailed images, instructions, and recommendation to help you with the work.

However, if the job is beyond your skill set, be sure to call a qualified contractor. Sealing your home from air leaks will reduce your monthly energy bill and the money spent to pay a professional will be just a fraction of what you’ll save over time.

(Image courtesy: US Department of Energy)