1. Homeowners Insurance
If you can afford to, consider raising your deductible to $500 or $1,000. You can also reduce your premium by reducing coverage on the "household contents" portion of your insurance policy. This part of your homeowner's policy covers your personal belongings rather than the structure itself.
Most insurance companies offer discounts if you buy your homeowners and automobile policies from them. You can also reduce your premium by installing smoke alarms, deadbolt locks and home security systems that are monitored 24 hours a day.
Potential Savings: By raising your deductibles, combining policies and installing home security devices, you can save as much as 25 percent every month on premiums, according to the Insurance Information Institute.
2. Auto Insurance
Start by shopping around and requesting multiple quotes. (You might also want to get quotes for homeowners insurance at the same time, since having multiple lines with one company usually results in reduced costs.) Make sure the coverage you seek from competitors matches the coverage you have (or want) so that the comparisons are apples-to-apples.
Auto polices can vary by several hundred dollars, depending on the insurance company and your driving record. Blemishes like speeding tickets and chargeable accidents will cost you more.
Be sure to advise your insurance agent of your car's safety features. Such things as air bags, anti-lock brakes, daytime running lights and anti-theft devices can shave dollars off your premium.
Be sure not to skimp on liability insurance, though. A March 2008 report by AAA concluded that the average cost of a crash-related injury was $68,170, factoring in medical costs, property damage and rehabilitation, etc.
"If you're in a nasty accident you could lose everything," says Gary Foreman, publisher of Stretcher.com. "That is not the place to start saving."
You can also save money by raising your auto insurance deductible, but make sure that you can afford the increased deductible if you're in an accident. If you own an older vehicle that is fully paid for, you may want to drop comprehensive coverage altogether and opt for general liability coverage only.
Potential Savings: Increasing your deductible from $200 to $500 could cut costs on your collision and comprehensive coverage by 15 percent to 30 percent. Opting for a $1,000 deductible could save you 40 percent or more, according to the Insurance Information Institute.
3. Groceries
The U.S. Department of Labor's Bureau of Labor Statistics says Americans spend nearly 14 percent of the household budget on food. Gary Foreman, publisher of Stretcher.com, believes it's closer to 20 percent, and of that amount, 25 percent is wasted.
"That's because it either: 1) Gets bought and goes bad before they cook it; or 2) They cook it and it goes into the refrigerator -- with every intention of turning it into tomorrow night's leftovers -- but it ends up becoming a science project," he says.
The Goal: Reduce wasted food by 25 percent. You'll see your grocery dollar go a lot further. Cutting coupons can make a dramatic difference.
"Layer the savings, don't settle for just one kind of savings at the grocery store," says Ellie Kay, author of "How to Save Money Every Day."
She advises shoppers to learn to compound savings by monitoring store sales and using double coupons, cash-off-your-next-shopping-trip vouchers, store coupons and more.
It's a good idea to keep track of the prices of frequently bought items in a notebook, suggests Gary Foreman, publisher of Stretcher.com. "So when you see a sale price, you can truly judge if it's a good deal and stock up on it."
Shopping Tip: Make a simple meal plan for the entire week before you go shopping to keep you from buying things that look enticing but don't get eaten.
Cooking Tip: Microwaves can be a busy family's best friend. Prepare a dinner plate or two using leftovers; date and freeze them. Display a list of meals on the front of the freezer. When something gets eaten, cross it off the list. When a new meal is ready for the freezer, add it to the list in chronological order so older food gets eaten first.
Potential Savings: Ellie Kay says the average family of four can save up to $3,900 per year by following these tips.
4. Communications
Premium cable channels and cell phone plans with thousands of minutes and options like texting and Web access go right to the top of the "want" list rather than the "need" list.
The average monthly price for expanded basic programming is $42.76, according to the National Cable & Telecommunications Association. Add a couple of premium channels, a sports package or two and your monthly bill can easily top $100 per month.
"Nobody should be in the position that they are going to lose their home or can't make credit card payments on time because they absolutely have to have HBO2," says Gary Foreman, publisher of Stretcher.com.
Consider if you really need extra cell phone options or an infrequently used landline. The average monthly cost for bundled cell phone service (including voice, Web access and texting options) is between $99 and $149, plus taxes and surcharges.
Potential Savings: $100 or more per month.
5. Clothing
Families with young children tend to spend more on clothing because kids seem to grow into the next size overnight, and they tend to be a little rougher on their wardrobe. The solution? Shop the clearance racks often.
"I purchased six pairs of jeans for my kids this way, with original prices at $60 and sales prices at $20 for a total savings of $240," says Ellie Kay, author of "How to Save Money Every Day."
Another solution is to buy used clothing at consignment or thrift shops, but make sure it's in good condition.
Financial adviser Susan Zimmerman of Mindful Asset Planning in Apple Valley, Minn., says she saved a bundle by waiting until her children were older before they got the latest gear.
"I didn't buy toddler and preschool clothes at a store at all," she says. "I got them at garage sales and things like that."
Potential Savings: Hundreds of dollars, depending on how many children you have and how often you need to buy clothing.
6. Utility Bills
The typical American family spends more than $1,600 a year on home utility bills, according to the U.S. Department of Energy. The price of home heating oil alone rose 49.2 percent between August 2007 and August 2008, according to the U.S. Bureau of Labor Statistics.
Much of that energy is wasted through cracks in windows and doors and through open chimney flues.
Close the damper on your fireplace if you have one. Leaks through the damper can increase your heating bills by 8 percent or more.
In colder climates, small improvements such as caulking and using plastic films around window frames will stem the amount of heat that's wasted.
"Start with obvious things like weather stripping the house to reduce air conditioning and heating costs," says Gary Foreman, publisher of Stretcher.com. "Any time you can create an air pocket that way, you will save on your heating bill."
Set your thermostat back when you're not home and while you're sleeping. Lower the temperature on your water heater to 120 degrees Fahrenheit. An added benefit is that you'll prevent unnecessary scalding injuries.
Potential Savings: You can save up to 10 percent on your heating and cooling costs. A dwelling that incorporates a "whole-house energy efficiency plan" by using proper insulation, compact fluorescent light bulbs and energy-efficient appliances can cut energy costs by up to 25 percent, according to the U.S. Department of Energy.
7. Entertainment
Just because you're in "savings combat mode" doesn't mean you have to wait until 49-cent-burger-night to treat the gang to dinner and a movie. One way to curb expenses: Invest in region-specific entertainment coupon books at such sites as Entertainment.com.
The books sell for between $25 and $45 each and pay for themselves in short order. The discount coupons offer deals for eating at local restaurants, but an added benefit is you can also save on movie theaters, theme parks and other local stores.
Potential Savings: The coupon book for the Fort Lauderdale, Fla., area claims more than $18,200 in savings if you use every coupon. Of course, you don't want to use every coupon or your entertainment expenses will be through the roof! But even if you were to use just 10 percent of the coupons, you'd save about $1,820.
Wednesday, January 14, 2009
Tuesday, January 13, 2009
Washington Report: Obama Stimulus Plan
With both President-elect Obama and the new Congress in Washington last week, work on the forthcoming $775 billion economic stimulus plan moved into high gear.
But don't necessarily look to the stimulus plan alone for costly new incentives for home building or real estate sales. There are actually two packages out there -- the new stimulus plus the $350 billion in unspent funds from last Fall's congressional bailout legislation.
The 2009 economic stimulus may well contain some direct assistance to spur the housing market. Senate budget committee chairman Kent Conrad of North Dakota said last week that "it's hard for me to see a stimulus plan (passing Congress) that doesn't have a significant housing component."
But Obama himself suggested that the primary focuses of the economic stimulus would probably be elsewhere -- payroll tax cuts for workers, infrastructure projects and alternative energy development and some form of tax relief for businesses.
Asked about housing relief specifically in an interview on CNBC, Obama said, "I think the most important thing when it comes to declining home values, is number one, preventing further foreclosures that erode home values across the board."
Meanwhile, there were indications on Capitol Hill that foreclosure relief may well be funneled from the unused $350 billion left over from the original $700 billion authorized in the so-called "TARP" bailout fund. The initial $350 billion was used by the Treasury primarily to prop up banks, but congressional Democrats are demand that it now be used to help keep home owners out of foreclosure.
Aides to Obama said one likely housing-related target in the stimulus plan is an extensive "energy retrofit" program for houses and office buildings, including federal facilities. Obama has endorsed "weatherizing" -- improving the energy efficiency - of one million homes a year. That could take the form of additional tax credits or financial incentives, and would create employment -- another key goal.
Last week a bipartisan group of senators gave further impetus to the real estate retrofit idea, calling for a boost in the current $2,000 federal tax credit for energy efficient homes to $5,000.
Wrangling over what gets includes in the stimulus is likely to continue until the Inauguration January 20th, and a final stimulus plan isn't likely to be passed until sometime in February.
In the meantime, housing and real estate lobbies looking for tax credits and mortgage subsidies increasingly understand that there are two money pots in play - not just one. From whichever pot it comes, home building and real estate are likely to end up with a sizable chunk of the action.
But don't necessarily look to the stimulus plan alone for costly new incentives for home building or real estate sales. There are actually two packages out there -- the new stimulus plus the $350 billion in unspent funds from last Fall's congressional bailout legislation.
The 2009 economic stimulus may well contain some direct assistance to spur the housing market. Senate budget committee chairman Kent Conrad of North Dakota said last week that "it's hard for me to see a stimulus plan (passing Congress) that doesn't have a significant housing component."
But Obama himself suggested that the primary focuses of the economic stimulus would probably be elsewhere -- payroll tax cuts for workers, infrastructure projects and alternative energy development and some form of tax relief for businesses.
Asked about housing relief specifically in an interview on CNBC, Obama said, "I think the most important thing when it comes to declining home values, is number one, preventing further foreclosures that erode home values across the board."
Meanwhile, there were indications on Capitol Hill that foreclosure relief may well be funneled from the unused $350 billion left over from the original $700 billion authorized in the so-called "TARP" bailout fund. The initial $350 billion was used by the Treasury primarily to prop up banks, but congressional Democrats are demand that it now be used to help keep home owners out of foreclosure.
Aides to Obama said one likely housing-related target in the stimulus plan is an extensive "energy retrofit" program for houses and office buildings, including federal facilities. Obama has endorsed "weatherizing" -- improving the energy efficiency - of one million homes a year. That could take the form of additional tax credits or financial incentives, and would create employment -- another key goal.
Last week a bipartisan group of senators gave further impetus to the real estate retrofit idea, calling for a boost in the current $2,000 federal tax credit for energy efficient homes to $5,000.
Wrangling over what gets includes in the stimulus is likely to continue until the Inauguration January 20th, and a final stimulus plan isn't likely to be passed until sometime in February.
In the meantime, housing and real estate lobbies looking for tax credits and mortgage subsidies increasingly understand that there are two money pots in play - not just one. From whichever pot it comes, home building and real estate are likely to end up with a sizable chunk of the action.
Monday, January 12, 2009
House Bill Aims to Stabilize Housing, Addresses Foreclosures and Stimulus
A bill that embraces the need for righting the housing market—the first big step toward economic recovery—was introduced Friday in the U.S. House of Representatives.
H.R. 384, The TARP Reform and Accountability Act, was offered by Rep. Barney Frank (D-Mass.), chair of the House Financial Services Committee. The bill would require the Treasury Department to develop a program, outside the Troubled Asset Relief Program, to stimulate demand for home purchases and lower property inventories, by making affordable mortgages available for qualified buyers through interest rate buydowns, a priority of the National Association of Realtors®.
The measure would amend the TARP provisions of the Emergency Economic Stabilization Act of 2008 to make significant steps to reduce foreclosures, strengthen accountability and close loopholes. Treasury could consider the impact of areas with the highest inventories of foreclosed properties.
NAR President Charles McMillan was heartened by the legislation that would move the housing market forward. “The bill proposed by Chairman Frank is an important first step toward launching a real estate recovery. Housing has always led this country out of economic downturns, and this bill recognizes that the key to bolstering the overall economy is creating stability in the real estate markets. With foreclosure relief, improving the Hope for Homeowners Plan, and expanding TARP to support commercial real estate loans and commercial mortgage-backed securities, this legislation will help create housing stability.”
“By directing the Treasury Department to increase the availability of affordable mortgages rates for qualified home buyers and to offer reduced rate loans designed to stimulate demand for home purchases and clear inventory of properties, Chairman Frank has responded to the most critical issues facing potential homeowners," McMillan said.
Foreclosure relief, using the second half of the $700 billion previously authorized by Congress, would be conditioned on stipulation that $50 billion be used for foreclosure mitigation and calls for a plan to be put into action by March 15. That would allow the Treasury to begin committing the remaining TARP funds for the plan no later than April 1.
The plan would require that foreclosure assistance must apply only to owner-occupied residences. Further, the bill would provide liability protection for loan servicers who engage in loan modifications. Such servicers would have to report regularly to the Treasury.
In addition, the Treasury would be authorized to provide support for commercial real estate loans and commercial mortgage-backed securities, an NAR priority.
NAR has been urging the incoming Obama administration, as well as Congress, to address critical housing needs. “This legislation is a great beginning, but more needs to be done. We must continue to bring potential homebuyers into the market by ensuring low mortgage interest rates, making the higher 2008 conforming loan limits permanent, and applying the $7,500 tax credit to all homebuyers and making it non-repayable,” McMillan said.
H.R. 384, The TARP Reform and Accountability Act, was offered by Rep. Barney Frank (D-Mass.), chair of the House Financial Services Committee. The bill would require the Treasury Department to develop a program, outside the Troubled Asset Relief Program, to stimulate demand for home purchases and lower property inventories, by making affordable mortgages available for qualified buyers through interest rate buydowns, a priority of the National Association of Realtors®.
The measure would amend the TARP provisions of the Emergency Economic Stabilization Act of 2008 to make significant steps to reduce foreclosures, strengthen accountability and close loopholes. Treasury could consider the impact of areas with the highest inventories of foreclosed properties.
NAR President Charles McMillan was heartened by the legislation that would move the housing market forward. “The bill proposed by Chairman Frank is an important first step toward launching a real estate recovery. Housing has always led this country out of economic downturns, and this bill recognizes that the key to bolstering the overall economy is creating stability in the real estate markets. With foreclosure relief, improving the Hope for Homeowners Plan, and expanding TARP to support commercial real estate loans and commercial mortgage-backed securities, this legislation will help create housing stability.”
“By directing the Treasury Department to increase the availability of affordable mortgages rates for qualified home buyers and to offer reduced rate loans designed to stimulate demand for home purchases and clear inventory of properties, Chairman Frank has responded to the most critical issues facing potential homeowners," McMillan said.
Foreclosure relief, using the second half of the $700 billion previously authorized by Congress, would be conditioned on stipulation that $50 billion be used for foreclosure mitigation and calls for a plan to be put into action by March 15. That would allow the Treasury to begin committing the remaining TARP funds for the plan no later than April 1.
The plan would require that foreclosure assistance must apply only to owner-occupied residences. Further, the bill would provide liability protection for loan servicers who engage in loan modifications. Such servicers would have to report regularly to the Treasury.
In addition, the Treasury would be authorized to provide support for commercial real estate loans and commercial mortgage-backed securities, an NAR priority.
NAR has been urging the incoming Obama administration, as well as Congress, to address critical housing needs. “This legislation is a great beginning, but more needs to be done. We must continue to bring potential homebuyers into the market by ensuring low mortgage interest rates, making the higher 2008 conforming loan limits permanent, and applying the $7,500 tax credit to all homebuyers and making it non-repayable,” McMillan said.
Friday, January 9, 2009
Mortgage help gains momentum
Hundreds of billions will be spent to spur the economy. The elephant in the room - foreclosure prevention - hasn't gotten much notice. That is changing.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: January 9, 2009: 8:08 AM ET
NEW YORK (CNNMoney.com) -- There are many ways to spend $800 billion to revive the economy. In recent days, President-elect Barack Obama has ticked off many of them: invest in infrastructure projects, help states pay for Medicaid, cut taxes on the middle class, expand use of renewable energy.
But what about helping those at risk of foreclosure, and by extension the housing market as a whole?
Lawmakers in Washington are demanding that more be done, and they are aiming their sights both at the $700 billion financial rescue package known as TARP and the massive economic stimulus bill Obama is pushing as vehicles for new housing measures.
Already, Treasury Secretary nominee Timothy Geithner is working on plans to revamp the way TARP is used to make foreclosure prevention a bigger priority, two transition aides told CNN. Congress has made it known that it likely won't release any more TARP funds until some of the money is earmarked for housing.
For his part, Obama has been shy on details but has said that within a month or two he would unveil "a sweeping effort to address the foreclosure crisis so that we can keep responsible families in their homes."
Meanwhile, Senate Budget Chairman Kent Conrad, D-N.D., on Wednesday said it would be a mistake to pass a stimulus bill without also tackling the housing crisis.
"The housing market is 16% of the economy," Conrad said. "To think that we are going to have a package of economic recovery that does not address housing adequately I think would miss the boat."
What's on the table
Use TARP for homeowners: House Financial Services Chairman Barney Frank, D-Mass., is writing a bill that would impose conditions on the use of any more TARP money. He sent a memo to colleagues this week calling for "substantial efforts" to be made to reduce foreclosures, a spokesman for Frank's office said in an e-mail.
One of his suggestions: mandate that some TARP money be used to support a version of a plan proposed by FDIC Chairwoman Sheila Bair. The FDIC has estimated the cost of that program at roughly $25 billion, although other estimates run higher.
Bair's plan would systematically modify loans and provide a government guarantee to protect investors in the event a homeowner re-defaults after the loan has been modified.
Reform bankruptcy law: On Thursday, Senate Banking Chairman Christopher Dodd, D-Conn., and Sen. Richard Durbin, D-Ill., said that Citigroup (C, Fortune 500) has agreed to support a proposal that the lending industry has strongly opposed that would allow bankruptcy judges to write down the primary mortgages of homeowners filing for bankruptcy.
The bank's support of the proposal is based on the condition that the change only apply to existing mortgages and that homeowners filing for bankruptcy notify their lenders 10 days before to give them a chance to modify the mortgage.
Other lenders and housing industry interests -- including the powerful National Association of Home Builders -- have also started to lower their resistance to so-called bankruptcy cramdowns.
The long-held argument against cramdowns is that they would cause rates to rise because mortgage securities investors would demand a higher interest rate to compensate for the risk that a judge could rewrite mortgage contracts on terms disadvantageous to the investor.
Offer bigger tax break to home buyers: NAHB has been pushing for all home buyers to get a temporary tax credit for buying a primary residence worth up to 10% of the purchase price. A tax credit is a dollar-for-dollar reduction of one's tax liability.
Currently, only first-time buyers may get a temporary tax credit worth up to $7,500 for a limited period of time. But that credit functions more as an interest-free loan from Uncle Sam because the home buyer has to repay it over time.
Neither Dodd nor Senate Finance member Charles Schumer, D-N.Y., speaking to the press on Thursday, endorsed the idea of an actual tax credit. Dodd said a tax credit would not help prevent foreclosures but could spur economic growth.
And Schumer said there was "broad support" among members of the Senate Finance Committee to make tax policy changes to support housing, particularly existing homes as opposed to newly constructed ones.
Push interest rates down: The National Association of Realtors, among others, has pushed for the Treasury Department to take a more active role in driving mortgage rates down by buying securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac.
A plan already in place at the Federal Reserve has already had the effect of lowering rates on the 30-year fixed to record lows. The Fed is buying up to $500 billion in mortgage-backed securities backed by Fannie and Freddie, a move that bolstered confidence in the mortgage giants' ability to continue to buy and back loans in the secondary market.
Another idea that has been floated recently is to have Uncle Sam use money to buy down points on home buyers' mortgages to lower interest rates.
CNN's Jessica Yellin contributed to this report.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: January 9, 2009: 8:08 AM ET
NEW YORK (CNNMoney.com) -- There are many ways to spend $800 billion to revive the economy. In recent days, President-elect Barack Obama has ticked off many of them: invest in infrastructure projects, help states pay for Medicaid, cut taxes on the middle class, expand use of renewable energy.
But what about helping those at risk of foreclosure, and by extension the housing market as a whole?
Lawmakers in Washington are demanding that more be done, and they are aiming their sights both at the $700 billion financial rescue package known as TARP and the massive economic stimulus bill Obama is pushing as vehicles for new housing measures.
Already, Treasury Secretary nominee Timothy Geithner is working on plans to revamp the way TARP is used to make foreclosure prevention a bigger priority, two transition aides told CNN. Congress has made it known that it likely won't release any more TARP funds until some of the money is earmarked for housing.
For his part, Obama has been shy on details but has said that within a month or two he would unveil "a sweeping effort to address the foreclosure crisis so that we can keep responsible families in their homes."
Meanwhile, Senate Budget Chairman Kent Conrad, D-N.D., on Wednesday said it would be a mistake to pass a stimulus bill without also tackling the housing crisis.
"The housing market is 16% of the economy," Conrad said. "To think that we are going to have a package of economic recovery that does not address housing adequately I think would miss the boat."
What's on the table
Use TARP for homeowners: House Financial Services Chairman Barney Frank, D-Mass., is writing a bill that would impose conditions on the use of any more TARP money. He sent a memo to colleagues this week calling for "substantial efforts" to be made to reduce foreclosures, a spokesman for Frank's office said in an e-mail.
One of his suggestions: mandate that some TARP money be used to support a version of a plan proposed by FDIC Chairwoman Sheila Bair. The FDIC has estimated the cost of that program at roughly $25 billion, although other estimates run higher.
Bair's plan would systematically modify loans and provide a government guarantee to protect investors in the event a homeowner re-defaults after the loan has been modified.
Reform bankruptcy law: On Thursday, Senate Banking Chairman Christopher Dodd, D-Conn., and Sen. Richard Durbin, D-Ill., said that Citigroup (C, Fortune 500) has agreed to support a proposal that the lending industry has strongly opposed that would allow bankruptcy judges to write down the primary mortgages of homeowners filing for bankruptcy.
The bank's support of the proposal is based on the condition that the change only apply to existing mortgages and that homeowners filing for bankruptcy notify their lenders 10 days before to give them a chance to modify the mortgage.
Other lenders and housing industry interests -- including the powerful National Association of Home Builders -- have also started to lower their resistance to so-called bankruptcy cramdowns.
The long-held argument against cramdowns is that they would cause rates to rise because mortgage securities investors would demand a higher interest rate to compensate for the risk that a judge could rewrite mortgage contracts on terms disadvantageous to the investor.
Offer bigger tax break to home buyers: NAHB has been pushing for all home buyers to get a temporary tax credit for buying a primary residence worth up to 10% of the purchase price. A tax credit is a dollar-for-dollar reduction of one's tax liability.
Currently, only first-time buyers may get a temporary tax credit worth up to $7,500 for a limited period of time. But that credit functions more as an interest-free loan from Uncle Sam because the home buyer has to repay it over time.
Neither Dodd nor Senate Finance member Charles Schumer, D-N.Y., speaking to the press on Thursday, endorsed the idea of an actual tax credit. Dodd said a tax credit would not help prevent foreclosures but could spur economic growth.
And Schumer said there was "broad support" among members of the Senate Finance Committee to make tax policy changes to support housing, particularly existing homes as opposed to newly constructed ones.
Push interest rates down: The National Association of Realtors, among others, has pushed for the Treasury Department to take a more active role in driving mortgage rates down by buying securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac.
A plan already in place at the Federal Reserve has already had the effect of lowering rates on the 30-year fixed to record lows. The Fed is buying up to $500 billion in mortgage-backed securities backed by Fannie and Freddie, a move that bolstered confidence in the mortgage giants' ability to continue to buy and back loans in the secondary market.
Another idea that has been floated recently is to have Uncle Sam use money to buy down points on home buyers' mortgages to lower interest rates.
CNN's Jessica Yellin contributed to this report.
Thursday, January 8, 2009
Cheap Ways to Boost Your Homes Value
by Kelli B. Grant
These days, most homeowners are facing a scary reality: a rapid decline in their home's value.
According to the National Association of Realtors, median existing home prices are down 7.1% from last July -- and aren't expected to recover until well into 2009.
One way to buck the trend and boost the value of your home is to make some basic renovations. There's no need to embark on big-ticket projects — you probably won't recoup all of the costs anyway. Instead, seek out some inexpensive projects that will not only brighten up the place, but put a little extra cash in your pocket should you decide to sell your home. Here are five worth considering:
1) Paint
Cost: $60 for two gallons of Benjamin Moore interior paint — enough to paint the walls and ceiling of a 12-by-15 room.
A little paint or varnish can go a long way toward improving your home's value. One fresh coat (along with a little sanding and caulking) wipes out the scuffs, chips, cracks and other damage that clearly convey wear and tear. Make your first priority the front door, where everyone from visitors to potential buyers lingers. "You're standing on the front porch and you have a good 15, 20 seconds just to look," says David Lupberger, home improvement expert with ServiceMagic.com, a Golden, Colo.-based contractor marketplace. Inside, don't forget to freshen up the baseboards, doors and ceilings after you tackle the walls.
Just remember to stick to neutral colors if you're thinking of selling sometime soon, advises Lupberger. Buyers might not share your appreciation for the eye-popping combo of Fireball Orange and Traffic Light Green in the living room.
2) Basic Maintenance
Cost: $250 for a home inspection, including walk-through and report of suggested fixes.
"You have to be careful with remodeling because you can spend money in the wrong place and not get it all back," says Lyle Martin, co-founder of Assist-2-Sell, a Reno, Nev.-based real estate brokerage. A common mistake: making aesthetic upgrades while ignoring basic maintenance. New bathroom tiles mean nothing if the plumbing is faulty or the underlying wall has dry rot.
If you don't address these problems before putting your home on the market, it'll cost you. Buyers traditionally negotiate a $2 discount for every $1 in damage that turns up in a home inspection, according to home inspection service HouseMaster.
Aim to complete a few small maintenance projects each year, like fixing that creaky floorboard or replacing a cracked light switch plate, advises Martin. Not sure where to start? Hire a home inspector to point out which areas would be problematic were your home on the market.
3) Energy-Efficiency Upgrades
Cost: $500 to replace your old clothes washer with an Energy-Star certified Frigidaire washer (including a $50 utility-provided rebate and an estimated $50 in energy savings the first year).
Energy-efficiency projects such as installing Energy-Star windows or swapping for a high-efficiency boiler are one of the few upgrades that hold their value in a down market. Not only will such improvements cut your energy bills, but they'll also be more attractive to buyers who are hunting for more earth-friendly homes. "Homeowners can show buyers their utility bills as documentation of the effects of those energy-efficiency improvements," says Rozanne Weissman, a spokeswoman for the Alliance to Save Energy. "With energy prices so high, it makes a big difference."
Look for incentives and rebates through your utility providers and state and local governments. And don't forget about federal tax credits. Both the House and Senate have given tentative approval to a two-year extension of the energy-efficiency tax credits from the Energy Policy Act of 2005, which offered a credit of up to $500 for select projects completed in 2006 and 2007. Look to the Tax Incentives Assistance Project to refresh your memory on what criteria projects must meet to qualify.
4) Install New Fixtures
Cost: $86 for an American Standard faucet, 10 drawer pulls and 10 knobs.
Giving a room a more modern look requires little more than a screwdriver and some new fixtures. "New hardware can completely freshen a house," says Amy Matthews, host of DIY Network's "Sweat Equity." "Things that are outdated are things that buyers would turn their noses up at." As far as fixes go, it's dirt cheap. New drawer handles or knobs can be had for as little as $2 each. There are also plenty of options out there for personalizing your space. Home Depot lists almost 900 kitchen and bathroom faucets priced below $50. You might also try swapping out ceiling-mount light fixtures or doorknobs.
5) Landscaping
Cost: $200 for five each of dogwood, forsythia and red-flowering butterfly shrubs, plus $100 for enough mulch to cover 200 square feet of planting beds.
"A good first impression is crucial," says Jennifer Michaels, senior vice president for FSBO.com, a for-sale-by-owner listing site. Your carefully groomed landscaping — or, in contrast, weed-overgrown jungle — is one of the first things a potential buyer notices. But enhancing curb appeal is also something every seller does. You'll score more points with a yard that was obviously fixed up long before you listed your property.
Savings can be had as well, as long as you plant wisely. Drought-resistant shrubs require less water, while perennials won't require repeat plant purchases in coming years. Leafy deciduous trees shade your home from the hot summer sun, and allow maximum heat transfer inside during cold winters.
These days, most homeowners are facing a scary reality: a rapid decline in their home's value.
According to the National Association of Realtors, median existing home prices are down 7.1% from last July -- and aren't expected to recover until well into 2009.
One way to buck the trend and boost the value of your home is to make some basic renovations. There's no need to embark on big-ticket projects — you probably won't recoup all of the costs anyway. Instead, seek out some inexpensive projects that will not only brighten up the place, but put a little extra cash in your pocket should you decide to sell your home. Here are five worth considering:
1) Paint
Cost: $60 for two gallons of Benjamin Moore interior paint — enough to paint the walls and ceiling of a 12-by-15 room.
A little paint or varnish can go a long way toward improving your home's value. One fresh coat (along with a little sanding and caulking) wipes out the scuffs, chips, cracks and other damage that clearly convey wear and tear. Make your first priority the front door, where everyone from visitors to potential buyers lingers. "You're standing on the front porch and you have a good 15, 20 seconds just to look," says David Lupberger, home improvement expert with ServiceMagic.com, a Golden, Colo.-based contractor marketplace. Inside, don't forget to freshen up the baseboards, doors and ceilings after you tackle the walls.
Just remember to stick to neutral colors if you're thinking of selling sometime soon, advises Lupberger. Buyers might not share your appreciation for the eye-popping combo of Fireball Orange and Traffic Light Green in the living room.
2) Basic Maintenance
Cost: $250 for a home inspection, including walk-through and report of suggested fixes.
"You have to be careful with remodeling because you can spend money in the wrong place and not get it all back," says Lyle Martin, co-founder of Assist-2-Sell, a Reno, Nev.-based real estate brokerage. A common mistake: making aesthetic upgrades while ignoring basic maintenance. New bathroom tiles mean nothing if the plumbing is faulty or the underlying wall has dry rot.
If you don't address these problems before putting your home on the market, it'll cost you. Buyers traditionally negotiate a $2 discount for every $1 in damage that turns up in a home inspection, according to home inspection service HouseMaster.
Aim to complete a few small maintenance projects each year, like fixing that creaky floorboard or replacing a cracked light switch plate, advises Martin. Not sure where to start? Hire a home inspector to point out which areas would be problematic were your home on the market.
3) Energy-Efficiency Upgrades
Cost: $500 to replace your old clothes washer with an Energy-Star certified Frigidaire washer (including a $50 utility-provided rebate and an estimated $50 in energy savings the first year).
Energy-efficiency projects such as installing Energy-Star windows or swapping for a high-efficiency boiler are one of the few upgrades that hold their value in a down market. Not only will such improvements cut your energy bills, but they'll also be more attractive to buyers who are hunting for more earth-friendly homes. "Homeowners can show buyers their utility bills as documentation of the effects of those energy-efficiency improvements," says Rozanne Weissman, a spokeswoman for the Alliance to Save Energy. "With energy prices so high, it makes a big difference."
Look for incentives and rebates through your utility providers and state and local governments. And don't forget about federal tax credits. Both the House and Senate have given tentative approval to a two-year extension of the energy-efficiency tax credits from the Energy Policy Act of 2005, which offered a credit of up to $500 for select projects completed in 2006 and 2007. Look to the Tax Incentives Assistance Project to refresh your memory on what criteria projects must meet to qualify.
4) Install New Fixtures
Cost: $86 for an American Standard faucet, 10 drawer pulls and 10 knobs.
Giving a room a more modern look requires little more than a screwdriver and some new fixtures. "New hardware can completely freshen a house," says Amy Matthews, host of DIY Network's "Sweat Equity." "Things that are outdated are things that buyers would turn their noses up at." As far as fixes go, it's dirt cheap. New drawer handles or knobs can be had for as little as $2 each. There are also plenty of options out there for personalizing your space. Home Depot lists almost 900 kitchen and bathroom faucets priced below $50. You might also try swapping out ceiling-mount light fixtures or doorknobs.
5) Landscaping
Cost: $200 for five each of dogwood, forsythia and red-flowering butterfly shrubs, plus $100 for enough mulch to cover 200 square feet of planting beds.
"A good first impression is crucial," says Jennifer Michaels, senior vice president for FSBO.com, a for-sale-by-owner listing site. Your carefully groomed landscaping — or, in contrast, weed-overgrown jungle — is one of the first things a potential buyer notices. But enhancing curb appeal is also something every seller does. You'll score more points with a yard that was obviously fixed up long before you listed your property.
Savings can be had as well, as long as you plant wisely. Drought-resistant shrubs require less water, while perennials won't require repeat plant purchases in coming years. Leafy deciduous trees shade your home from the hot summer sun, and allow maximum heat transfer inside during cold winters.
Wednesday, January 7, 2009
Mortgage rates hit fresh 37-year low
Borrowing costs continue to fall, but that's failed to boost home buying.
NEW YORK (CNNMoney.com) -- Rates on mortgage loans are the lowest in the 37-year history of the Freddie Mac Primary Mortgage Market Survey, according to a weekly report released Wednesday.
The average 30-year, fixed-rate loan issued to borrowers declined to 5.1%, with 0.7 up-front points, for the week ending December 31, according to the survey.
The rate dropped from an average of 5.14% last week, which was the previous 37-year low. Freddie Mac (FRE, Fortune 500) began surveying lenders back in 1971. The 30-year fixed was at 6.06% a year ago.
The average for a 15-year, fixed rate loan was just 4.83%, its lowest level since March 25, 2004, when it hit 4.70 percent.
"Since the end of October of this year, these rates have declined by about 1-1/3 percentage points, or payment savings of approximately $173 a month for a $200,000 loan," said Freddie's chief economist, Frank Nothaft in a statement. "As a result, the number of refinance applications for conventional mortgages jumped over 500 percent between the weeks ending on October 31st and December 26th."
Housing won't budge
Unfortunately, the low interest rates have not spurred much of an increase in the number of new loans made to home buyers. According to the Mortgage Bankers Association, nearly 83% of all mortgage applications recorded last week were to refinance existing loans rather than to buy a home, indicating that low interest rates have so far failed to free up the frozen housing market.
Action from the Federal Reserve is also putting downward pressure on rates, according to Keith Gumbinger, of HSH Associates, a publisher of mortgage information that releases its own market survey.
The Fed announced in November that it will buy as much as $500 billion worth of mortgage backed securities (MBS) from Freddie Mac and Fannie Mae (FNM, Fortune 500) over the first six months of 2009. On Tuesday, it said it would start buying the securities next week.
"Just the fact that they said they'd do that put downward pressure on rates," said Gumbinger.
Lawrence Yun, chief economist for the National Association of Realtors, predicts the Fed action will help 30-year mortgages hold steady at around 5% or less over the next few months.
"The Fed is providing an additional buyer for the MBS, increasing demand for them and lowering rates," he said.
That should eventually boost the housing market, which has been crippled lately. Existing home sales fell 8.6% month-over-month to an annualized rate of just 4.49 million units in November.
The full impact of the low rates may not be felt for a while, however. "When rates fall, people respond, but the increase in sales usually follows by three to five months," said Yun.
That would coincide with the normally brisk spring selling season and, along with home prices that are the most affordable they've been in several years, could rejuvenate markets starting around March.
"Lower rates and falling house prices are making home ownership more affordable," said Nothaft. "House prices fell 18% over the 12-month period ending in October, according to the S&P/Case-Shiller 20-city composite index."
Despite these positive factors, Yun is still not totally optimistic about the boost they can provide housing markets.
"It's hard to dictate the confidence of consumers," he said.
Freddie Mac's is the longest running, and one of the most closely watched, mortgage market surveys around. The company surveys 125 lenders around the nation, asking them what the average rates are for their best customers who are putting 20% down on conforming loans, which generally have a cap of $417,000 in most markets or $625,00 in high-cost areas. To top of page
NEW YORK (CNNMoney.com) -- Rates on mortgage loans are the lowest in the 37-year history of the Freddie Mac Primary Mortgage Market Survey, according to a weekly report released Wednesday.
The average 30-year, fixed-rate loan issued to borrowers declined to 5.1%, with 0.7 up-front points, for the week ending December 31, according to the survey.
The rate dropped from an average of 5.14% last week, which was the previous 37-year low. Freddie Mac (FRE, Fortune 500) began surveying lenders back in 1971. The 30-year fixed was at 6.06% a year ago.
The average for a 15-year, fixed rate loan was just 4.83%, its lowest level since March 25, 2004, when it hit 4.70 percent.
"Since the end of October of this year, these rates have declined by about 1-1/3 percentage points, or payment savings of approximately $173 a month for a $200,000 loan," said Freddie's chief economist, Frank Nothaft in a statement. "As a result, the number of refinance applications for conventional mortgages jumped over 500 percent between the weeks ending on October 31st and December 26th."
Housing won't budge
Unfortunately, the low interest rates have not spurred much of an increase in the number of new loans made to home buyers. According to the Mortgage Bankers Association, nearly 83% of all mortgage applications recorded last week were to refinance existing loans rather than to buy a home, indicating that low interest rates have so far failed to free up the frozen housing market.
Action from the Federal Reserve is also putting downward pressure on rates, according to Keith Gumbinger, of HSH Associates, a publisher of mortgage information that releases its own market survey.
The Fed announced in November that it will buy as much as $500 billion worth of mortgage backed securities (MBS) from Freddie Mac and Fannie Mae (FNM, Fortune 500) over the first six months of 2009. On Tuesday, it said it would start buying the securities next week.
"Just the fact that they said they'd do that put downward pressure on rates," said Gumbinger.
Lawrence Yun, chief economist for the National Association of Realtors, predicts the Fed action will help 30-year mortgages hold steady at around 5% or less over the next few months.
"The Fed is providing an additional buyer for the MBS, increasing demand for them and lowering rates," he said.
That should eventually boost the housing market, which has been crippled lately. Existing home sales fell 8.6% month-over-month to an annualized rate of just 4.49 million units in November.
The full impact of the low rates may not be felt for a while, however. "When rates fall, people respond, but the increase in sales usually follows by three to five months," said Yun.
That would coincide with the normally brisk spring selling season and, along with home prices that are the most affordable they've been in several years, could rejuvenate markets starting around March.
"Lower rates and falling house prices are making home ownership more affordable," said Nothaft. "House prices fell 18% over the 12-month period ending in October, according to the S&P/Case-Shiller 20-city composite index."
Despite these positive factors, Yun is still not totally optimistic about the boost they can provide housing markets.
"It's hard to dictate the confidence of consumers," he said.
Freddie Mac's is the longest running, and one of the most closely watched, mortgage market surveys around. The company surveys 125 lenders around the nation, asking them what the average rates are for their best customers who are putting 20% down on conforming loans, which generally have a cap of $417,000 in most markets or $625,00 in high-cost areas. To top of page
Monday, January 5, 2009
10 Commandments for Frugal Living
ByJeffrey Strain, Special to TheStreet.com
Frugality often gets a bad rap. Many people misunderstand frugality and assume that it's nothing more than being "cheap" when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited.
For those who are just beginning to embrace frugality as a part of their lifestyle, here are 10 frugal commandments to live by.
Thou shalt not buy things you don't need. To get the most from the money that you have, it's essential to have a basic understanding of the difference between wants and needs. Chances are that a lot of things that you assume are needs are only wants you have disguised as needs in order to justify purchasing them.
Basic needs are food (including water), shelter and clothing plus the essentials needed to work so that you can provide those basics. That means that the TV (and virtually every other gadget in your house) is a want and not a need. Having the willpower to buy only those things that you really need (being frugal doesn't mean being stingy, but it does mean that any wants you do have are specifically saved and budgeted for as opposed to impulse purchases) is essential to getting the most out of frugality.
Simply put, if you don't need it, don't buy it, no matter how good the price.
Thou shalt only buy when you have the money. One of the basic premises of frugality is having the money to pay for the things that you buy. By budgeting and saving for those things that you want and paying for them with cash rather than using credit, you ensure you aren't paying far more than you should be for the products and services that you buy.
Thou shalt purchase by value, not price. One of the biggest misconceptions about being frugal is that those who are frugal only purchase things that are cheap or the very lowest price. The truth is that those who are frugal always try to buy the best value taking into account other factors such as the life expectancy and additional upkeep costs that come into play beyond retail price. This often means looking at the long term cost of an item rather than just the initial purchase price.
Thou shalt be patient. Those who embrace frugality rarely have the latest and greatest gadgets that have just hit the market. Instead, those who are frugal wait for the early adopters to embrace the technology until the point at which the price falls to a reasonable level as the gadget makes its way to the masses.
Those who are frugal are usually a generation or two behind on the latest gadgets, but they still perform the functions that need to be done and they get them for a fraction of the price.
Thou shalt buy used. A basic tenet of frugality is to get the best value from what you purchase, and this often means purchasing products used. Those who are frugal are more than happy to let someone else pay full retail price and absorb the premium pricing for products that are depreciating assets (think of the difference in price between a brand new car and a two-year-old vehicle, as an example).
Used products are often a fraction of the price of the new models and in many instances perform the needed task just as well.
Thou shalt look for alternatives before buying. If you need something, automatically going out and buying it is not an approach that a true frugal person would take. Instead, before spending any hard-earned money on something that may only be used a few times, consider alternatives.
Is it possible to borrow it from a friend, a neighbor or a place such as the library? Would renting it be less expensive in the long run? Do you have something else already on hand that can be used to perform the same task? Buying is only one of many options when it comes to getting things you may need.
Thou shalt ignore the Joneses. Part of living a frugal life is understanding that life isn't a competition over who has the most stuff. It's important to concentrate on your and your family's needs, and not what others are spending their money on. Just because your neighbors bought it doesn't mean that you need to go out and buy something on par or better.
Thou shalt not pay full retail price. When you are going to make a purchase, you should never pay full retail price for it. There are a number of ways to avoid paying full retail such as using coupons, finding discounts, waiting for sales and negotiating a lower price. With a bit of preparation and forethought, there is never a reason to pay full retail price for anything you purchase.
Thou shalt not waste. One thing that those who are frugal hate is waste. While this obviously includes the waste of money, it also goes beyond money to such areas a wasted resources and wasted time. Efficiency is a frugal person's friend, and those who are frugal tend to follow the green mantra of reduce, repurpose, reuse and recycle for the things that they do possess.
Thou shalt do things yourself. When something needs to be done, the first choice to perform the task should be yourself rather than hiring someone else to do it. Frugal people tend to be do-it-yourself experts and do not pay others to do things that they can easily do by themselves. When they don't know how to do something, they research it to see if it is something that they can do with the proper instructions or something sufficiently complicated that it's best to let an expert handle.
While it may take some practice at first, getting these 10 frugal commandments down will make your savings account look a lot healthier come 2010.
Frugality often gets a bad rap. Many people misunderstand frugality and assume that it's nothing more than being "cheap" when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited.
For those who are just beginning to embrace frugality as a part of their lifestyle, here are 10 frugal commandments to live by.
Thou shalt not buy things you don't need. To get the most from the money that you have, it's essential to have a basic understanding of the difference between wants and needs. Chances are that a lot of things that you assume are needs are only wants you have disguised as needs in order to justify purchasing them.
Basic needs are food (including water), shelter and clothing plus the essentials needed to work so that you can provide those basics. That means that the TV (and virtually every other gadget in your house) is a want and not a need. Having the willpower to buy only those things that you really need (being frugal doesn't mean being stingy, but it does mean that any wants you do have are specifically saved and budgeted for as opposed to impulse purchases) is essential to getting the most out of frugality.
Simply put, if you don't need it, don't buy it, no matter how good the price.
Thou shalt only buy when you have the money. One of the basic premises of frugality is having the money to pay for the things that you buy. By budgeting and saving for those things that you want and paying for them with cash rather than using credit, you ensure you aren't paying far more than you should be for the products and services that you buy.
Thou shalt purchase by value, not price. One of the biggest misconceptions about being frugal is that those who are frugal only purchase things that are cheap or the very lowest price. The truth is that those who are frugal always try to buy the best value taking into account other factors such as the life expectancy and additional upkeep costs that come into play beyond retail price. This often means looking at the long term cost of an item rather than just the initial purchase price.
Thou shalt be patient. Those who embrace frugality rarely have the latest and greatest gadgets that have just hit the market. Instead, those who are frugal wait for the early adopters to embrace the technology until the point at which the price falls to a reasonable level as the gadget makes its way to the masses.
Those who are frugal are usually a generation or two behind on the latest gadgets, but they still perform the functions that need to be done and they get them for a fraction of the price.
Thou shalt buy used. A basic tenet of frugality is to get the best value from what you purchase, and this often means purchasing products used. Those who are frugal are more than happy to let someone else pay full retail price and absorb the premium pricing for products that are depreciating assets (think of the difference in price between a brand new car and a two-year-old vehicle, as an example).
Used products are often a fraction of the price of the new models and in many instances perform the needed task just as well.
Thou shalt look for alternatives before buying. If you need something, automatically going out and buying it is not an approach that a true frugal person would take. Instead, before spending any hard-earned money on something that may only be used a few times, consider alternatives.
Is it possible to borrow it from a friend, a neighbor or a place such as the library? Would renting it be less expensive in the long run? Do you have something else already on hand that can be used to perform the same task? Buying is only one of many options when it comes to getting things you may need.
Thou shalt ignore the Joneses. Part of living a frugal life is understanding that life isn't a competition over who has the most stuff. It's important to concentrate on your and your family's needs, and not what others are spending their money on. Just because your neighbors bought it doesn't mean that you need to go out and buy something on par or better.
Thou shalt not pay full retail price. When you are going to make a purchase, you should never pay full retail price for it. There are a number of ways to avoid paying full retail such as using coupons, finding discounts, waiting for sales and negotiating a lower price. With a bit of preparation and forethought, there is never a reason to pay full retail price for anything you purchase.
Thou shalt not waste. One thing that those who are frugal hate is waste. While this obviously includes the waste of money, it also goes beyond money to such areas a wasted resources and wasted time. Efficiency is a frugal person's friend, and those who are frugal tend to follow the green mantra of reduce, repurpose, reuse and recycle for the things that they do possess.
Thou shalt do things yourself. When something needs to be done, the first choice to perform the task should be yourself rather than hiring someone else to do it. Frugal people tend to be do-it-yourself experts and do not pay others to do things that they can easily do by themselves. When they don't know how to do something, they research it to see if it is something that they can do with the proper instructions or something sufficiently complicated that it's best to let an expert handle.
While it may take some practice at first, getting these 10 frugal commandments down will make your savings account look a lot healthier come 2010.
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