Avoid Paying Taxes!

I know, it sounds too good to be true, right? While you can't get out of paying that property tax bill you recently received, you may not have to pay taxes on the increase in value of your home when you sell it. Certain requirements must be met, but the bottom line is that an individual can take a $250,000 gain on a home sale, and pay NO tax on that gain. There is a good article on the Motley Fool's web site which gives some of the basics. Click here to read it, and talk to you tax professional for more information.

Buying a House Is Easy!

One of the reasons I read the Motley Fool website (www.fool.com) is that it combines some humor with financial advice. I recently revisited an article posted there last spring about buying a home, which makes some basic, but important points about what you should do when preparing to buy a home.

• Make a budget
• Calculate costs of ownership
• Meet with me to review your credit
• Research neighborhoods
• Learn the floor layout at the closest Home Depot or Lowe's!

Read the whole article here.

Mortgage Knowledge is Power!

Of all the things I bring to my relationship with clients, the one they most often mention is that I give them the knowledge and information they need to empower them to make a sound financial decision. I don't make decisions for my clients, rather I provide the best mortgage options available, and help them make an educated decision. I am not a fan of treating a home like a piggy bank, and am much more likely to discuss planning to be debt free than strategizing how to tap equity in a home. Even so, there are many scenarios where refinancing a current mortgage makes sense.

There are some good ideas in this recent article on RealtyTimes.com. Two which I thought were noteworthy:

• Take advantage of the great rates available on fixed rate mortgages to prevent monthly payments from going up when todays crop of adjustable rates hits the first rate adjustment; and
• Use equity in a home to make a significant down payment on an investment property (I suggest 20% to get the best financing on the investment property).

Call me today to find out what your interest rate will be if you decide to get out of your ARM!

Peter Kazaks * 414.807.7277 * Peter@MortgageMKE.com

Vote Today!

This morning I voted. As a homeowner, small business owner, and tax payer, I have the right and moreover the responsibility to vote. I urge you to do the same!

Please take advantage of the opportunity to make your voice heard in our government.

"Feels Like the First Time"

The first thing I do with all of my new clients is go over their credit report line by line, ensuring that they are aware of everything that shows up, and discussing how to protect or earn a great credit score. I had an initial meeting yesterday with a married couple who are in the process of selling their first house and shopping for a larger home to accommodate their growing family. While this couple had been through the financing process before, they had never seen their credit report, let alone had someone explain it to them. After we had discussed the good (and a little bit of bad) which makes up their credit profile, the husband turned to the wife and said, "this feels like the first time I have applied for a mortgage." Was this cheesy? No. The fact of the matter is that many mortgage originators work hard to get potential clients in front of them and "close the deal" as fast as possible. This is not the approach I take--a home is the largest financial decision you will make, and as such, I take it very seriously. It is not unusual for a new client to tell me they did not know much about credit before their meeting, and this particular client hammered the point home in an entertaining way.

If you or someone you know can benefit from advice given by a True Mortgage Professional, someone who is an expert on credit as well as mortgage products, please urge them to talk to me by calling 414.807.7277 or sending an e-mail to: Peter@MortgageMKE.com

Bonds worsened yesterday in response to information in the Minutes from the Federal Reserve’s last meeting. These minutes reflect discussions among decision makers at the meeting where, for only the second time in two years, short term interest rates stayed the same rather than going up.

Some comments in the minutes show that the Fed may raise rates again, talking about continued economic strength in the new year, and whether or not the recently lower energy prices (see my recent post below on this topic) would return to their previously high levels.

WHAT DOES THIS MEAN TO YOU? Rates ticked up a bit today based on the news, and uncertainty about inflation and the strength of our economy will be present for the immediate future. If you are not already working with me or one of my colleagues at KLM, is your mortgage broker watching this stuff?

Good News About Energy Prices!

While the weather is predicted to be 5.9 percent colder this winter compared to last year (booooo!) it is still expected to be 2.1 percent warmer than normal (yay!). Still, the cost of heating your home should be lower than last year, because natural gas prices have gone down. I know, I know, you want solid numbers, right? On average, those of you who have a natural gas furnace can expect to spend about $119 (13 percent) less this winter to keep your home warm.

Source: the Energy Information Administration

Breaking News!

KLM Mortgage combats cavities this Halloween season! Local area dentists not happy!
KLM Mortgage Group is officially banning candy this Halloween season. Bring your kids in to the KLM office during the week of October 23rd – 27th for a candy-free and sugar-free trick or treat bag.

100 available ● First come, first serve.

Join Us In Our Efforts

Do you know what it feels like to be outside on a frigid, cold, Wisconsin winter day, fingers and ears frozen because you can’t afford a hat or gloves? Probably not! Did you know that thousands of children in the greater Milwaukee area experience this every year?

Do your part to keep a child warm this winter. The KLM Mortgage family has kicked off the 1st Annual "KLM - Keeping Kids Warm in the Winter." For every hat or pair of mittens or gloves donated, KLM will add 3 more.

Drop off (or mail) all kids and womans gloves, mittens and hats now through October 27th , at our office: 7119 W. North Avenue, Wauwatosa, Wisconsin 53213. We will be distributing all donations the first week of November to local area shelters including: Battered Women Shelter, Salvation Army, La Causa and the Milwaukee Rescue Mission.

How good will it feel to help keep a child warm this winter?

Are The Rate Tides Turning?

Rates have continued to decline this week! I have called a number of my clients whose current rate warrants a low cost refinance to take advantage of the lower rates currently available on 30 year fixed mortgages. Call me today for information on how YOU can save money every month!

What is going on in the mortgage market? Inflation seems to be in check, and on Friday St. Louis Federal Reserve Bank President William Poole made the follwing statement: "If inflation pressures are easing, even if only gradually, and there is a genuine prospect that inflation will return to the comfort zone, then I see no reason to accelerate the decline in inflation by maintaining a restrictive policy in the face of declining employment."

What does that mean in plain ENGLISH? The long series of rate hikes which ended in August is certainly over, and if conditions are right, we may see rate reductions in the not so distant future. There is a jobs report coming out this friday, which provides an important measure of how strong the economy is and will impact policy decisions by the Fed in the coming month.

Keep an eye here, and be ready to take advantage of my low or no cost refinance offer if your current mortgage is not the best available!

What's News In The Economy?

This week's manufacturing data shows that the long series of Fed hikes has slowed the economy even more than anticipated. While this means that the desired result is here, there is some concern that the action which has been taken was more than needed. The bottom line is that the economic data released this week tells us that further rate hikes are very unlikely. This means that interest rates for second mortgages and home equity lines of credit are going to stay stable at least through the end of 2006, which is good news for consumers.

Mortgage rates are currently at or near their best rates of the last six months. Combine that with the talk of the current "buyers market" environment, and now may be the time to take action if you have been considering a home purchase.

As always, I am available to help at 414.807.7277.

Testimonial

To whom it may concern:

I am writing this letter as an endorsement for Peter Kazaks. As a first time homebuyer, I felt Peter did an exceptional job educating me on how to buy a home. When I first met with Peter, he sat me down and explained to me about my finances. He also pointed out what price range I should consider to look in to; if I still wanted to live the lifestyle I am use to. Once I found my house and was ready to put a purchase order in, Peter explained all of the language into owning that house. He told me not only what a mortage means, but also what escrow means. Peter also explained all of the different mortgage rates and showed me which one he felt was the most beneficial. I didn’t expect Peter to work with my realtor as close as he did. He made sure I felt comfortable with my offer and ensured me that my realtor was also working for my best interest. Once it came to closing, Peter called me the night before to make sure he could answer any concerns I might have before going into the meeting. Thus, that morning I did not have and unexpected surprises and felt very relaxed with the closing. Overall, my experience with Peter was fantastic and I look forward to Peter helping me with my next purchase.

Sincerely,
Barbara W
Wauwatosa, WI

Happy Labor Day!

I hope you are enjoying the Labor Day holiday with friends or family. Do you know what Labor Day celebrates? From the Department of Labor's web site:

Labor Day, the first Monday in September, is a creation of the labor movement and is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.

No Money Down?

Home ownership is available to renters who don't even know it! Did you know that in 2005, 43% of all first time home buyers made their purchase with no money down? A study by the National Association of Realtors provides that statistic.

There are fantastic mortgage products available for buyers with no money down--including the recently released First Time Home Buyer program available only in Wisconsin which features a LOW fixed rate for 30 years and NO Private Mortgage Insurance. If you are a first time home buyer, call me today at 414.453.7620 to find out if you qualify!

Good News For Mortgage Rates

This morning’s economic headlines brought some good news of lower inflation, and Bonds are enjoying a nice pop higher as a result. The Fed is also likely breathing a sigh of relief as their recent decision to pause has some confirmation. What does this mean for you? Mortgage rates aren't jumping any more (for the moment) and have even gone down a touch. We anticipate this to continue for the immediate future.

Call me with any questions!

THE TECHNICAL STUFF:
Yesterday the Fed decided to take a pause in raising short-term interest rates leaving the Fed Funds Rate at 5.25%. What does this mean? The Fed thinks inflation is probably back in check.

What is interesting is that the vote to pause wasn't unanimous. Richmond Fed President Jeffrey M. Lacker had voted for another 25bp rate hike. Because the hike wasn't unanimous, the mortgage market is jittery because we don't know if the Fed is taking a temporary break from raising rates or if rates will rise again in the fourth quarter.

Here's the relevant language in the Fed's latest statement: “…[I]nflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.” This meands that the Fed will closely monitor economic reports for the next few months, and this will determine whether we see another rate hike in the near term.

WHAT DOES THIS MEAN FOR MORTGAGES?
We have been seeing a move towards lower mortgage rates, and I believe this will continue. In spite of today's news about a foiled terrorist plot, the bond market is pretty stable today. While a turn for the worse is certainly possible, I am optimistic for better rates in the next few weeks.

As always, feel free to call me with any questions about mortgages!

Peter

More Insight Into Credit Scoring

There is a great column on realtytimes.com which offers insight into credit scores and highlights the difference between the score you can buy online and what you will see when I review your credit in our first meeting. I welcome the opportunity to review your credit report with you, call me today to set up a meeting! I can be reached at 414.453.7620.

"Not messing with a good thing is sound advice for consumers. Why? Because trying to improve your score could actually result in a lower score, not a higher one. Some steps to a higher number are counterintuitive, such as opening a new account and closing out an old one, a step that you could really mess up your score. "

Read the whole article HERE.

Lunch On Us This Friday!

We will be hosting another Lunch On Us at KLM this Friday, August 4. Feel free to stop by our office for lunch and conversation from 11:30 to 1:30. I hope to see you here!

Peter

Testimonial

I would like to offer my accolades to Peter Kazaks for excellent customer service throughout the entire process of my new home purchase.

As a first-time buyer, I knew nothing about the home closing routine. Peter demonstrated patience and understanding from beginning to end. He assured me that no question was a stupid one, and Peter was thorough in explaining processes and procedures. For many, legal and economic issues as it relates to the home-closing process can be confusing, and Peter conveyed this information in a manner that was easy to comprehend.

In sum, Peter was confident in his skills, he instilled confidence in me as a buyer, and he made the closing process seamless and comfortable. Peter clearly has a mastery of both the mortgage industry and people skills, and I would gladly recommend him to anyone seeking a mortgage lender.

Thank you,

Lindsey Kriete

The Economy In Brief: Strong Bond Market is Good for Mortgage Rates

Bonds have enjoyed a nice recovery over the past two days and are modestly higher so far today. Friendly commentary from Fed Chairman Ben Bernanke has been the primary driver of the recent rally. Mr. Bernanke sparked the rally on Wednesday when he told Congress the economy seems to be moderating and inflation remains contained, and continued with similar comments in yesterday's testimony.
Further backing up Bernanke was yesterday afternoon’s weak Philly Fed Manufacturing Index, supplying further evidence the economy is indeed slowing down. In fact, as a result of the weakness shown in the latest economic data...combined with Big Ben's comments over the past few days...the Fed Funds Futures are now predicting only a 33% chance for another 25bp rate hike at the August 8 Fed meeting – down from about a 90% chance just a couple of days ago.
Bonds are also getting a boost on safe-haven buying due to the escalating fighting between Israel and Hezbollah. In recent months, traders haven't purchased Bonds on a flight to quality, but the continuing conflict between Israel and Hezbollah is bringing concerns that countries like Iran and Syria may get involved, which would further escalate the conflict and possibly interrupt oil supply. For the time being, oil prices are off their recent highs, which has helped to soften inflationary pressure and support Bonds at current levels.

Millionares In The Making

Financial awareness is crucial to building an adequate nest egg. While most blog readers are probably thinking about not only a home but their financial future, I have posted in the past about the negative savings rate in the U.S. That being said, we can all use some inspiration from time to time to keep us on track and making responsible financial choices. One source of inspiration I keep an eye on is the "Millionares In The Making" feature on CNN.com. I suggest regularly checking the site linked HERE and also bookmarked on the right side of this blog so you can read what others have done to ensure their long term financial stability. Make no mistake about it--real estate is a consistent theme with the people featured as Millionaires In The Making!

5 Ways to Kill Your Credit

I talk about responsible use of credit in my home buying seminars, I counsel clients about it in one on one meetings. A solid credit profile can save you hundreds of dollars every month when it comes to financing a home. Is it really worth saving $5 to open that new retail credit account? Probably not...

CNN.com has posted one of the better articles I've seen on "what not to do" when it comes to credit. I suggest you take a few minutes to read it by clicking here.

Action in the Market

The bond market is not doing well today due to events of the last few days. From today's MMG:

A few big headlines are bringing the action back in a hurry after the long holiday weekend. First, North Korea test fired six missiles over the Independence Day Holiday, one of which was long-range and capable of reaching Hawaii or Alaska. Japan and other surrounding countries, as well as the US, are protesting the actions of North Korea, and are threatening economic sanctions against the rogue nation. Normally this type of geopolitical news would create a “flight to quality” and help Bond prices improve, as they are viewed as a safe haven, but another headline has forced Bond prices lower this morning.
A payroll survey released by the world’s largest paycheck processor, Automatic Data Processing, Inc. (ADP), showed an increase of 368,000 new jobs, the largest monthly increase in employment since the ADP Index was created five years ago. While their numbers are not always accurate, this sure provides some evidence that Friday’s Jobs Report may come in much hotter than expected. The current expectation has been for about 160,000 new jobs created during June, and remember that last month’s Job Report showed a fairly wimpy number of 75,000 new job creations during May. We had expected a stronger number last month, so seeing a hot number this month – along with a potential upward revision of last month’s number – wouldn’t come as a surprise, especially given the ADP findings this morning.

Lunch Is On Us!

You are invited! Picking up right where we left off last fall, the first of our monthly summer "Lunch On Us" get togethers is coming up on Friday, July 7. Join us at our offices for fun, food, and friendship! We'll be grilling out, so bring your appetite!

Friday July 7, 2006
11:00 a.m. to 1:30 p.m.

KLM Mortgage Offices:
7119 West North Avenue
Wauwatosa, WI 53213
(click here to see a map)

This Week's Mortgage Market Guide

From this weeks installment of the MMG:

With Bond prices moving lower for thirteen straight days, home loan rates have been climbing higher.

For last week, there wasn't much economic news of note, so what gives? It appears the market is weighing heavy in advance of next week's big plate of economic news, which includes the highly anticipated Fed meeting on Thursday, June 29th. Inflation still appears to be a concern, so it's a lock that the Fed will increase rates by another .25%, and they may go further yet. And when the Fed hikes the Fed Funds Rate, it impacts many other lending rates, such as for Home Equity lines, credit cards, car loans, business loans...they've all been moving higher over the past two years of hikes, and it looks like the hits will keep on coming. It may be time to consider restructuring your outstanding debt, so please call me for ideas and strategies that may make sense as rates continue to climb.

A New Business: Bayshore Realty

Through my involvement in the Apartment Association of Southeastern Wisconsin I have gotten to know Nancy Haislmaier, Graig Goldman, and Maggie Haughton of Landlord Liquidators. Recently they left the realty firm they were affiliated with and have established a new company, Bayshore Realty. Congratulations to the team, I am sure the change will allow them to provide the same excellent service with even better value.

From the Bayshore Realty website:

"We are an experienced team of brokers and agents ready to help you achieve your real estate goals. Our services include both investment and residential real estate. In keeping with our commitment to you we offer variable commisions and an 'ala cart' menu of services. Our staff includes both buyer and seller specialists that are in tune with your needs."

Testimonial

Dear Peter:
Thank you for your professionalism and for answering all our questions in a timely manner. The re-finance was a great experience. I have, and will continue to recommend you to my friends and family who need a mortgage.
Brian and Nicole Hudson

Success!

The First Annual KLM Fore! Kids Golf Outing was a success! We had beautiful weather, and 80 golfers took to the links to benefit Children's Hospital of Wisconsin. Thanks to all who played and donated items to the silent aution and raffle. I look forward to doing it again next year!


Pictured above:
Joe Doyle, First Franklin
Me
Justin Dumke, Financial Resource Services, LLC
David Sengstock, Poulos, Sengstock, Budny & Ludwig

Peter

One Week Until Tee Time!

The KLM Fore! Kids golf outing is a week from today! We still have space available, please contact me at peter@klmmortgagegroup.com or 414.453.7620 if you would like to join in the fun for a great cause.

Peter

Making an Insurance Claim?

Insurance companies are working together to maintain an extensive database of information pertaining to your home.

"You probably know that it’s not a good idea to make too many claims on your homeowners insurance policy because your insurer could drop you."

Read all about it here.

A Personal Note...

Success! After racing in a few sprint distance triathlons last year, I have been training for my first Olympic distance triathlon. Last weekend I traveled to central California to race in the Wildflower triathlon. The distances are 1.5 k-swim, 40 k-bike, 10 k-run. I beat my goal time of three hours on this very hilly course by just over two minutes. Training and racing in this event was very rewarding, and I plan on returning next year.

Do You Know Someone on Medicare?

KEY DATE FOR MEDICARE - The deadline for the 43 million eligible American seniors to sign up for Medicare’s prescription drug coverage without penalty for calendar year 2006 is 2 weeks from today (5/15/06). Enrolling after that date for 2006 coverage will cost +1% more each month or an individual can wait until the next open enrollment period which begins on 11/15/06 for 2007 coverage. The 5/15/06 deadline is the end of an initial 6-month enrollment period that began on 11/15/05 (source: Medicare).

Who Is Buying A Home?

"Last year, 21 percent of all U.S. homes were purchased by unmarried women, up from 10 percent in 1985, according to the National Association of Realtors."

Interesting article on the fact that single women make up an increasing percentage of all home buyers. I have seen this in my business and have had great fun helping single women buy their first home, divorced women buying by themselves for the first time. While the experience may seem frightening at first, my clients have told me that after they have made the decision to buy and moved forward, the whole process can be empowering.

Read the whole article here.

Golf and Economic Updates

KLM is sponsoring a Charity Golf Outing for Children’s Hospital on June 8, 2006 at the Silver Spring Country Club. Join us for golf, lunch & dinner. Be one of our Captains or a Sponsor. The KIDS and KLM will thank you. Bob Reitman is attending!

Last week the Fed raised the Fed Funds Rate by another .25% as expected. Fed Chief Ben Bernanke did indicate there were still some inflationary concerns. The financial markets despise uncertainty and this caused home loan rates to increase by .125%.

This Friday’s Jobs Report will likely determine the course of directions for Bonds and Home Loan Rates. Good economic news tends to be good for stocks, but inflationary pressures threaten to continue to pull money away from Bonds, causing pricing to worsen and home loan rates to rise.

Testimonial

Dear Peter:
Your professionalism and knowledge of the industry surpassed all of my expectations. It is clear that you truly care about your clients, and make certain that all of their needs are met in a timely, efficient manner. I will highly recommend your services to anyone seeking assistance in the home buying process.
Mya Newman

What is an Escrow Account?

I recently met with one of my clients who is a first time home buyer. She has an accepted offer on a very nice house, and is excited to be moving in to a house she can call a home. We reviewed the Good Faith Estimate for her mortgage and had a lengthy discussion about what escrow is and why she would have an escrow account, so I thought it would be a useful post for this blog!

So what is it? An escrow account is a savings account for real estate taxes and homeowners insurance. Borrowers who have an escrow account associated with their mortgage pay a set amount each month in addition to the principle and interest on their mortgage, and this money is put into a savings—or escrow—account. The amount put into escrow each month is about 1/12 of the anticipated annual real estate taxes and homeowners insurance premium. For example, if a homeowner must pay $1200 in annual real estate taxes and $120 for homeowners insurance each year, the monthly escrow payment would be $130, or $120 towards taxes and $10 towards insurance. In December of each year, a check is mailed either to the borrower or directly to the municipality, and the real estate taxes are paid. On each anniversary of the purchase of the home, the lender will send a check to the insurance company, and insurance will be paid in full for the next twelve months. By having an escrow account, both the borrower and the lender know that the taxes and insurance will be paid, in full and on time!

Is escrow required? Sort of. Most lenders require escrow, though if you would rather save your own taxes, escrow can be waived for a fee, typically ¼% of the loan amount.

For more information on escrow or other mortgage questions, feel free to call or e-mail me at 414.807.7277 or pkazaks@hotmail.com

New Responsibilities

As of yesterday, I am now a member of the board of the Apartment Association of Southeastern Wisconsin. I look forward to contributing to this great organization, which helps our area's landlords provide quality housing at reasonable prices.

If you are a landlord or are considering investing in residential real estate, I suggest you check out this organization. I have been a member for a year and a half, and have learned a great deal from the speakers at our monthly meetings, and from the connections I have make through the organization.

Check out the website here.

Funny

There is no doubt that the various parties I interact with in the course of a purchase transaction each have a different view the house being bought/sold/appraised/mortgaged. Find an illustrated guide here.

(tongue planted firmly in cheek...)

Spruce Up Your Home for Under $25!

With spring on the way, I spent part of the weekend doing some "spring cleaning." Feels good to have a fresh house as we look forward to enjoying warmer weather. Many homeowners would like to spruce up their home this time of year. Need some ideas to do so without breaking the bank? Check out this article!

Testimonial

I work hard on behalf of all of my clients, and I just love receiving these!

Dear Peter,
I would be remiss if I didn’t take the time to write this letter as a demonstration of my appreciation for all your efforts. Having owned rental properties for the last 8 yrs I have met and dealt with many financial providers as it relates to home and rental loans. Your professionalism and responsiveness is impressive and I have not experienced such an informative process from beginning to end with any other financial provider. Simply put thank you Peter for your efforts that lead to a smooth and successful loan process.
-Troy H.

Mortgage Deduction is Safe

Here's the headline from CNN.com:

Bush: We won't kill the mortgage deduction
President says he wouldn't support removing the mortgage deduction from income tax law.

Read the article here.

Real Estate Taxes are Due!

If you haven't paid your real estate taxes yet, most municipalities require at least a partial payment by today, January 31! If you haven't done so already, make the trip down to city hall and write them a check or sign over your escrow check! The day I pay my taxes is one of mixed emotions--I'm handing over a significant amount of money, but I'm happy because it is tax deductible, and moreover, home ownership is key on the road to wealth!

Appreciation Tidbit

DOUBLE-DIGIT INCREASE - The average sales price of an existing home in the USA has increased +34% over the last 3 years (2003-05), an increase of +10.1% per year (source: National Association of Realtors)

How Are Your ARMs?

In the last five years, many home buyers took advantage of the low interest rates available to borrowers who opt for an Adjustable Rate Mortgage, or ARM. While the advantage of a lower interest rate is appealing, many home owners are now seeing the drawback of an ARM when they receive notice that the loan has reached the end of the initial period under which the intreest rate was locked in, and their interest rate --and payment-- are going up. I am now hearing from homeowners who need help dealing with the increased payment.

Be Proactive!

Long term mortgage rates are still very good--the low 6% range for qualified borrowers. If you have an ARM, now may be a good time to consider refinancing into a fixed rate mortgage. While I do not expect we will see fixed rate mortgages top 7% this year, I do expect that rates will head to the high 6% range by the end of the year.

Call me today at 414.453.7620 to learn more about your options!

So You Want To Be A Landlord...

I met with a client yesterday who is considering purchasing his first rental property. He is retired, and has very little left to pay on the mortgage on his own home, and is beginning the process of researching whether or not investing in real estate is right for him, and if so, what type of property. We discussed mortgages for the property, and also what it takes to be a landlord. I suggested that he attend the next meeting of the Apartment Association of Southeastern Wisconsin, which I am a member of, as it is an organization which provides good information on how to stay on top of the best rental practices. I also suggested that he do some reading on what it takes to be a successful landlord, and talk to a realtor who specializes in rental property in this area.

As is discussed in this Motley Fool article, there are many aspects of landlording to consider. I have enjoyed and prospered from my rental properties, but it is not for everyone. Owning rentals is a business, and should be treated as such. If you are interested in investing in real estate, call me at 414.807.7277 to set up a time to discuss it over a cup of coffee.

This Week in the Economy (Friday the 13th Wrap Up!)

The Treasury auction held yesterday showed that foreign demand for US bonds is still strong. This is good news, as a significant amount of foreing money is invested in US bonds, and this helps keep the lending industry healthy.

The last two big economic reports for the week were released this morning, and the bond market is relatively quiet. Stocks are back below the 11,000 marker, and appear to be tickling support around 10,950. If stocks fall decisively below this level, Bonds will benefit. But if stocks continue to run at the 11,000 level or higher, it could pull money away from Bonds and hurt pricing.

Below is a discussion of today's economic reports for those of you who are interested.

The Producer Price Index (PPI) which indicates inflation at the wholesale level jumped 0.9% in December, but when excluding volatile food and energy costs, the Core PPI rose a mild 0.1%. For all of 2005, the PPI grew by 5.4% - the largest calendar year increase since 1990…but was likely due to high energy costs experienced throughout the year. More importantly, the Core rate rose by just 1.7% in 2005. This indicates that overall inflation appears to be in control…good news for Bonds and home loan rates.

Retail Sales were slightly below consensus estimates at 0.7% in December. Economists were estimating an increase in sales of 1.0%, but sales for October and November were revised higher, so it was basically a wash. Year-over-year, Retail Sales for December were up 6.3% from December 2004 – a good sign of a strengthening economy.

Dow is Looking Strong

Yesterday was the 20th time the Dow has ever broken 11,000, the last time being June 2001. The highest level the Dow has ever attained was 11,722 on January 14, 2000. The longest time the Dow has ever held its ground above 11K was August of 2000, when it held for 24 days. In October of 2002, the Dow hit a low of 7,286.

What does this mean for mortgages? While the Dow is down so far today (I write this at 10:56 a.m. CST), it is still above 10,940, a level which for months has been a "ceiling," pushing down whenever the dow approached it. Now that the Dow has broken through this ceiling, it may become a level of "support." If 10,940 does become a level of support, this will draw money away from bonds and into stocks. The end result will be less money available for mortgages, and in turn, higher interest rates.

I don't see any drastic moves coming in the near future, but this is definately a trend that I will be watching in order to make sure my clients are getting the best rates available.

Testimonial

It's always great to hear from a client after we have closed on a home. Here is a testimonial from a recent client:

Peter has a passion for real estate and financing, and I could tell he truly enjoyed assisting my wife and I in financing the home we wanted. Peter took the care to thoroughly educate us on our financial options, and he was creative in structuring a financing plan that saved us the most money under our circumstances. We were very happy with the work of Peter and KLM Mortgage Group. – Michael B.

Milwaukee in the Wall Street Journal

"Milwaukee, an industrial city known for making gritty icons such as Harley-Davidson motorcycles and Miller beer, as well as small engines and mining equipment, is working on a classic American comeback after decades-long shakeout of its manufacturing sector." Read the story here.

The Outlook for 2006

Employment
In 2005, about 2 million new jobs were created, and unemployment hovered around 5%. Because the outlook for the economy continues to be strong, expect new job creation, and low unemployment to continue through 2006. As profits have been strong for American business in the past year, highly skilled employees have seen companies offering good money to attract and retain talent. Expect this to continue as well. At the same time, technology has created an environment which is ripe with opportunity for those who have the entrepreneurial spirit.

Easy Come, Easier Go?
While consumer spending bolsters the economy, it doesn’t help personal savings… As a nation, we are currently spending more than we earn. In 2006, expect that the continued rise in the cost of oil will further decrease the rate at which we save, as consumers continue their driving habits in spite of the increased expense. Remember that even if the potential for gas prices stabilizing in the high two dollar range sounds expensive, we are still paying quite a bit less than in most other countries.

Inflation
While inflation has been pretty much non-existent the last few years, it reappeared in 2005. Inflation pulled money out of the bond market in the latter half of the year, causing interest rates to rise moderately. The measured series of Fed rate hikes kept inflation in check, and expect more of the same in 2006.

Alan Greenspan Exits Stage Left
After 18 ½ years, Alan Greenspan’s last meeting as the Fed Chair will be January 31. The market is expecting one last ¼ point rise to the fed funds rate at this meeting, and when the new Chair Ben Bernanke takes over at the March meeting, he will likely show that he means business with another ¼ point hike. While these rate hikes do not impact fixed rate mortgages much, they do have a direct impact on ARM’s and Home Equity Lines of Credit (HELOC’s). I expect we will see consumers driven toward fixed rate second mortgages, decreasing the prevalence of HELOC’s.

What Housing Bubble?
2006 is the fifth year that the media has been talking about a housing bubble. While some areas may see prices cool, employment is strong and mortgage rates are still low. Appreciation may slow, but a widespread bubble is not in the cards, particularly here in the midwest where appreciation has been rapid, but not outrageous. Remember that a good realtor can provide you with lots of information on the current housing market in your area.

The Bottom Line: Mortgage Rates
Rates will rise in 2006, but not by much. Foreign demand for our bonds continues to be strong, and as our population ages, their assets will flow from stocks into bonds in order to preserve wealth. This continued flow of money into the bond market will prevent mortgage rates from going up too quickly. Expect 30 year fixed rates to spend most of the year in the mid six percent range.

The First Week of 2006!

The last few weeks, Mortgage Bonds have been drifting sideways, meaning not much change has taken place during the holidays for home loan rates. This is typical during the holiday season, when trading is light and the economic calendar is not busy. Traders will be back to the pits in full force the first week of the New Year, and we have a busy fat economic calendar, punctuated by Friday’s Jobs Report, which can set the trend for home loan rates for days and weeks to come. If the report comes in showing blockbuster numbers and higher than expected job growth, home loan rates will worsen…where a weak number would help home loan rates to improve.

In The Last Week of 2005...

The big financial event last week was the appearance of an “Inverted Yield Curve”, when the shorter term 2-Year Treasury Note Yield moved higher than the longer term 10-Year Treasury Note Yield. Why care? Only because historically, this has tended to be a recessionary signal, implying that investors do not trust the long term strength of the economy…so while it had the markets a bit rattled initially, a closer inspection shows little cause for concern.
Bottom line, things are different this time because the Fed moves have pushed the 2-Year Note Yield higher, while contained inflation and foreign demand for longer term bonds have helped reduce the 10-year Note Yield. The economy is and will continue to be strong and a recession does not appear to be in the cards for 2006.