Floods Are Not Covered

Most people know this, or at least SHOULD, but for some reason, always think, "Oh, we're not in a flood zone, so we're in no danger of flooding.. why buy flood insurance?"

Floods, aren't covered under homeowners insurance policies — something many Katrina victims learned to their chagrin.  The National Flood Insurance Program, run by the Federal Emergency Management Agency, offers coverage.  If you live in an area that's prone to either floods or hurricanes, you need both wind and flood coverage.

It seems that not a week goes by any more that we don't hear news about floods from heavy rains in areas that have never flooded before, or at least not in a very long time. 

So don't be negligent or niave in thinking "flooding will never happen to us.. we're not in a flood zone."  Neither were millions of Americans who have sustained some sort of flood related damage to their homes recently, and had no coverage for the damage.

If you're the victim of a landslide, however, you're pretty much on your own.  That kind of earth movement usually isn't covered, so it pays to get a geologist's report before buying any home near a cliff or on a hill.

Have you experienced flood or water damage that was not included on your homeowner insurance policy?  We'd love to hear from you.  Leave us your comment below.

Housing Costs Consuming More of Paychecks

Housing costs ate up more of the monthly paycheck for millions of Americans in 2006 than the year before, despite signs of a slowdown in the housing market, according to figures made public recently by the Census Bureau.

The housing data describe the buildup of economic pressures before the recent wave of foreclosures, as lenders allowed home-buyers to borrow more money relative to their earnings and consumers borrowed or refinanced as if the market would never fall.  At the same time, incomes did not keep up with housing prices.

Nationally, half of renters and more than one third of mortgage holders spent at least 30 percent of their gross income on housing costs, the level many government agencies consider the limit of affordability.

The new data also show changes in the composition of households.  Homeownership continued to rise, while the percentage of households that could be described as nuclear families — two parents with children under 18 — continued its decline, to 22 percent last year, from 24 percent in 2000.  More families spoke a language other than English in their homes in 2006, when compared with the previous year, most often Spanish.

Fourteen percent of mortgage-holders spent at least half their income on housing in 2006, up from 13 percent last year, while among renters there was little change. In both years, 25 percent of renters spent half their income on housing.

The rising housing burden cuts into the money people have available for other expenses and therefore causes more anticipated rises in foreclosure ratess in coming months.

Retiring in Myrtle Beach With a Mortgage

It's an increasingly common dilemma.  You want to retire — but you haven't yet retired your mortgage.

According to the Federal Reserve, among households headed by someone age 65 to 74, over 32% had a mortgage on their primary residence in 2004, up from less than 19% in 1992.

Going into retirement and still carrying a mortgage?  Here's how to do it:

• If you have a heap of savings and a modest mortgage, go for the loan payoff.  You might consider trading down to a smaller home or, work part time until you're rid of the mortgage.
• If you have cash sitting in, say, a money-market fund held in a regular taxable account, also consider using these savings to reduce your loan balance.  Sure, your mortgage may be costing you just 6% and the interest might be tax-deductible. But your money-market fund is likely yielding only 5% — and you have to pay tax on that income.

If your mortgage is so large that paying it off will seriously crimp your retirement, you might as well get the mortgage payment down as low as possible.

Better still, trade down.  After forking over a 5% or 6% real-estate commission and paying off your current mortgage, in most cases, you could put down cash on your new home, leaving you with a smaller mortgage.  If you financed that over 30 years at 6.5%, your monthly payment would be lower.

You might even refinance later in retirement, further shrinking your monthly payment by again extending the loan over 30 years.  Even in today's tight credit environment, you shouldn't have a problem qualifying for a new loan, as long as you have a reasonable amount of retirement income.

Double-Digit Home Price Drops Not Out of the Question

Over the next few years, more than three-quarters of the nation's housing markets will suffer some decline in home prices.  Many will experience double-digit hits in a forecast that has worsened considerably in recent months.

According to an analysis conducted by Moody's Economy.com, declines will exceed 10 percent in 86 of the 379 largest housing markets.  And 290 of the cities will experience price drops of 1 percent or more.

The survey attempted to identify the high and low points of housing prices in each of the markets, some of which started declining from their peak in the third quarter of 2005.  All are median prices for single-family houses.

Nationally, Moody's is projecting an average price decline of 7.7 percent.  That's a jump from the 6.6 percent total price drop that the company was forecasting in June and more than twice that of last October's forecast of a 3.6 percent price decrease.

So if you're thinking of buying a home, does this mean it's smarter to wait until prices drop further?

Our opinion is, NO!  An increase of only 1 percent in the mortgage rate can more than offset any savings you might realize by waiting.  In the case of "gambling on interest rates".. waiting for home prices to drop could end up costing you more than you'd save.

The Real Cost of Relocating

There's good reason that relocating ranks alongside divorce as one of life's most stressful events: It's expensive. Even if you're moving for a higher-paying position, your spouse may have to quit a job and look for a new one, which could pummel your household income.

You might be forced to sell into a frighteningly declining real estate market.  With mortgage rates on the rise, monthly payments for your new place are likely to be higher.  Then there are all the expenses of settling in, from buying furniture to putting in an updated kitchen.

It's more important than ever to run all the numbers before you agree to move to a new city.  If you'd be selling in a weak real estate market, your new salary had better be pretty darn sweet - or your new employer needs to be willing to help you out.

Remember that relocating is sort of like buying a plane ticket to Paris:  The price varies depending on when you go.  May through September is peak season, so if you can depart earlier or later, many movers will charge you 5 percent to 10 percent less.  The same is true if you're willing to move in the middle of the month rather than at the beginning or end, when most moves are scheduled.

There is a long list of things you need to consider before relocating to a new city, and we'd be happy to furnish you with a thorough list of things you need to think about before relocating.  Just drop us a line, we'll be glad to assist you.