The Middle East Heats Up 28 Feb 2011
It All Heats Up
First Tunisia. Then Egypt. The protests have spread over North Africa and the Middle East. But the markets, especially oil, did not get really spooked until the action in Libya intensified. What is the difference? Libya is an oil exporting nation. Not only have the protests in Libya affected oil supplies, the markets are now thinking about what happens if a country like Saudi Arabia is next. There is a big difference between the less than two million barrels per day that Libya produces versus the more than eight million that Saudi Arabia produces. Right now the Saudis represent a potential escape valve that can minimize short-term disruptions. After easing back over the past few weeks, oil prices shot back over $90 per barrel during President’s Day and topped $100 per barrel by mid-week.
Some analysts are predicting that $4.00 per gallon gasoline could be seen this year. Last week we spoke of two obstacles for the economic recovery to overcome. One is real estate. Another is shrinking government stimulus. High gas prices are also a potential barrier to economic growth. Right now consumer confidence is at a three year high. Nothing can cause consumers to cut back more quickly than having to pay $4.00 at the pump. Are we saying that this is going to happen? Absolutely not, but this is the reason that events overseas are dominating the headlines. Bringing democracy to other countries is a good thing, but economic disruptions can cause hardships in the short-run. If there has been any benefit to the run-up in oil prices, it is the fact that rates have eased back down for the moment. Earlier when oil prices spiked, rates were going up as well because the causal factor was strong economic news. Lower rates are the one thing that can help cushion the pain of higher gas prices.
Data from Moody’s Analytics shows that U.S. home affordability returned to pre-bubble levels in a growing number of markets over the last year as price depreciation set the stage for a housing rebound. Of the 74 markets tracked, affordability at the end of the third quarter had either returned to or surpassed the average reached between 1989 and 2003 in 47 of those markets. At the same time, however, price drops left more borrowers owing more on their loan than the property is worth. Source: WSJOnline.com
Home sales should continue to climb this year because of the strengthening economy and the high affordability of property, according to one private insurer. PMI Mortgage Insurance Co. expects existing home sales to rise 8.3% to 5.31 million units in 2011 with new home sales increasing 29% to 415,000 units. If rates are rising due to a recovery in the overall economy, then the consequent jobs growth ’should more than offset’ the higher rates and boost home sales, according to PMI. But if rates are climbing because of higher inflation or a declining value of the U.S. dollar, jobs growth won’t come and home sales will decline this year. ‘At this point, it is more likely that home loan rates are rising because of strong economic growth than for other reasons — or at least mostly for growth reasons,’ PMI said. Source: HousingWire.com
For-sale-by-owners are rare nowadays. In fact, the number of FSBOs dropped to record lows over the past year. Unrepresented sellers make up just 11 percent of the market, down from 13 percent in 2009, according to the 2010 National Association of Realtors® Profile of Home Buyers and Sellers. With today’s more complex transactions–such as with short sales and foreclosures and frequent changes in lending–more sellers are finding comfort in the help of real estate professionals to guide them through the process. FSBOs once were lured to try to sell themselves because they thought they could save on commission fees, but now sellers are realizing that if they don’t use an agent, it’ll likely cost them more in the long run, experts say. ‘Selling by owner does not guarantee the seller will put 5 [percent] to 6 percent more in his or her pocket in trade for doing all the work and taking on potentially costly liabilities,” Margaret Woda, associate broker with Long & Foster in Crofton, Md., told The Washington Times. “On the contrary, prospective FSBO buyers have their eyes on that 5 percent to 6 percent as well. It’s more likely the buyer will win this negotiation in a buyer’s market with a huge price reduction–probably even larger than the saved commission.’ Some FSBO sellers also often make the mistake of listing their home at a higher price than the market warrants. But even if they do find a buyer for that price, unless it’s a cash purchase, the home has to be appraised and many deals can then fall apart. Source: TheWashingtonTimes.com
Home warranties can be attractive to home owners or buyers who are looking at purchasing a property. These service contracts can cover all of a home’s major systems, such as the furnace or air conditioner, and will cover needed repairs if the appliance breaks or is damaged. Some sellers are offering a home warranty to try to lure buyers. But not all home warranties are the same. Experts say you should carefully weigh costs, policy allowances, and customer feedback before making a decision so that you ensure you’re getting the best deal. Home warranties cost about $250 to $500 a year. Here are some more tips from experts in shopping for a home warranty:
• Find customer reviews. Web sites, such as homewarrentyreviews.com, provide reviews of home warranty companies. You also might check how each company is rated with your local Better Business Bureau.
• Check for extra fees. Will you have to pay a fee for service calls?
• Check the coverage allowance. Are there any exclusions to coverage? Will the allowance cover the entire cost of a broken appliance or just some of it? For example, if you have older appliances and mechanicals, will the policy cover the full cost of replacing it or just the depreciated value? If the policy only covers the depreciated value when a 20-year-old furnace dies, for example, the reimbursement may not be enough to buy a new one. Also, verify what appliances are all included in the coverage. Some companies will allow you to add coverage for swimming pools, while others won’t. Source: ChicagoTribune.com
