Top Things to Watch for in 2014

Economy, Interest Rates, and Housing

  1. Experienced lenders will have a huge advantage. New lending rules and strict compliance requirements will be too overwhelming for some. Dodd-Frank rules are still only 50 percent implemented and smaller lenders may not be able to afford legal staff or counsel necessary to monitor compliance.
  2. Expect inflation in 2014 to wind up no higher than 1.5 percent, possibly lower. From import prices to producer prices, from the CPI to the Federal Reserve’s favorite measure of inflation, core Personal Consumption Expenditures, are all running well below the Fed’s target of 2 percent.
  3. Interest rates will be stable into early 2015, although exceptionally low mortgage rates are a thing of the past. Auto loans and other short term rates will barely be affected by tapering of Fed purchases.
  4. The unemployment rate should be at or near 6.5 percent by the end of 2014. Jobs begin 2014 where they were in early 2013, averaging 190,000 per month. Most economic headwinds are behind us, and we could see increases to 220,000 per month.
  5. New home sales up, existing homes stay flat. The flood of distressed sales pushed existing home sales up at the expense of new homes, but distressed sales as a percentage of all home sales will decline. Existing home sales should stand pat at 5 to 5.25 million while new home sales rise by about 20 to 25 percent – to about 525,000.
  6. House prices could see a 5 to 6 percent boost. Look for slowing median house price increases and more rapidly rising average house prices, courtesy of increasing income disparities between the rich and everyone else. Inventory bottomed in 2013, but a 5 percent increase should increase supply, enabling more first-time buyers and move-up buyers to find a home.
  7. The economy could finally break out of its low growth funk. An election year means politically motivated saber rattling over the budget will be kept to a minimum. The most recent budget deal will help increase GDP due to the short-run increase in government spending, and decrease economic uncertainty. Overall, expect a one-point rise in GDP to 3.1 percent in 2014.

The Reverse Mortgage – 62 & over – Is it a Wise Option?

As the Reverse Mortgage ads heat up (conventional mortgage rates moved up and refinances became scarcer) due to a new strategy by the big lending house hounds, to attract business, I wanted to address a few things regarding this very important mortgage product.  The Reverse Mortgage in general is a fantastic product, for the right people.  If you call up the local TV ad sales person who has a script in hand, they will not know anything about retirement, tax or financial implications, or the art of mortgage planning integrated with your personal financial goals and retirement plan.  “If you are 62, you should have this product” goes the script. And then the numerous benefits are rolled off the tongue much like the Storage Wars auction on TV, which I happen to enjoy on occasion…… Yup!

The Reverse is not necessarily a last resort loan as many believe, just to keep the client in the home, but rather it is a financial tool that can assist a person in not drawing down their 401K, IRA’s, or savings; the retirement assets of course, subject to taxation whether it is voluntary distributions or RMD’s (required minimum distributions).

The challenge with this product is that the required HUD counseling (over the phone for 1 hour) is pretty much a FAQ session where the counselor simply lays out the options and answers a few questions. Other than that, the “salesman” (referred to as a Reverse Mortgage Specialist, and there are even certifications bantered out to impress you during the “sales pitch”) will try and convince you how easy and non-qualifying this product is, along with the stream of tempting uses of the equity in your home towards vacations, toys, better life style, and possibly a pitch for your favorite charity tossed in for good emotional measure.

house-of-moneyHowever, it is critical to understand ALL the components of this product and whether it is a wise decision to obtain it or not.  Maybe it would be great for a client, but just not now, maybe a year from now…..Only by working with a professional mortgage planner can a family really weigh the pros and cons of this type of loan product.  Often my questions relate to “how other family members, if involved, feel about the reverse; are they able to attend a meeting to discuss the product and it’s options; what are the type and amount of current assets, liquid and non-liquid of the client; what are the plans for living in the current property (you must occupy the residence though there is no stipulation on how much you can travel, or vacation, etc.)  Does the client understand they are “still owners and on title” of the property, and still responsible for property taxes, insurance, HOA if applicable and maintenance; are they aware that at this time there is no deficiency or liability if in the unlikely event the loan exceeds the value of the property when client moves out or departs.  Are there any repairs or modifications to the home that need to be done at some point for the convenience of the client, such as handrails, or wheelchair access, etc.?  The Reverse with adequate equity often can distribute monthly income just like social security, (for virtually any purpose) except it is NOT taxable, and there are NEVER any monthly loan payments while living in the property….. We have only scratched the surface here and as rules continue to change (at end of year several changes occurring and more qualification likely) the Reverse Mortgage will be getting more difficult to obtain.

In conclusion, if you or anyone you know has an interest in the Reverse Mortgage product, please contact me for a free interview and analysis of the situation so we can be sure you make the best and wisest decisions.

OC Register Reports Orange County has Quickest Home Sales

From the Orange County Register Business Section:

May-OC_quickest-homesales

Home prices up 10.2% annually in February per CoreLogic

CoreLogic reported that home prices rose by 10.2% annually in the month ended in February. It was the largest annual gain since March of 2006 and was the 12th consecutive monthly increase in home prices nationally.

Appreciation-Feb-2012-Feb-2