Paul Murphy

From the Boston Herald:

Bay State home sales figures for August - released exclusively to the Herald - plummeted more than 20 percent, declining for the second consecutive month as potential buyers were scarce despite record low mortgage interest rates, according to the MLS Property Information Network.

The good news for sellers: prices increased.

Last month, 3,145 single-family homes were sold in Massachusetts, compared to 3,947 in August of last year - a 20 percent drop. Condos did not fare any better as sales dropped to 1,345 last month from 1,749 for the same month a year ago, a 23 percent dive. MLS provided the data to the Herald in advance of the Massachusetts Association of Realtors and the Warren Group data slated to be released on Sept. 28

"Why aren't buyers buying in a buyers' market?" asked Robert Shortsleeve, regional vice president at Coldwell Banker Residential Brokerage New England.

One reason could be cost. While year-over-year sales volume is down, prices are rising. The median price for a single-family home in Massachusetts increased to $330,000 last month, up from $315,000 last August - a 4.8 percent hike.

Condos saw a similar surge. The median price for a condo swelled to $306,500, up from $280,000 one year ago, a 9 percent rise.

Despite the increase, Shortsleeve said buyers anticipate low prices given the state of the economy.

"Buyers expect Filene's Basement pricing, so they're waiting," he said. "They think that if a home is listed for two weeks, the price will drop by 5 percent and drop another (5 percent) in six weeks."

Still, Shortsleeve is not surprised that some buyers are sitting on the sidelines. He said lots of inventory is overpriced.

"If a home's real value is $500,000 based on comparable sales, but it's listed for $579,000, that's not a viable piece of inventory," he said. "The reason is not because sellers are delusional, it's because they can't afford to sell if they owe more than the home is worth."

WASHINGTON - Sales of new homes jumped last month, but it was the second-weakest month on record. The lackluster economy has made potential buyers skittish about shopping for homes

New home sales rose nearly 24 percent in June from a month earlier to a seasonally adjusted annual sales pace of 330,000, the Commerce Department said yesterday. May's number was revised downward to a rate of 267,000, the slowest pace on records dating back to 1963. Sales for April and March were also revised downward.

High unemployment, slow job growth, and tight credit have kept people from buying homes.

The industry received a boost this spring when the government offered tax credits to home buyers.

But since they expired in April, the number of people looking to buy has dropped, even with the lowest mortgage rates in decades available.

"There's no question that this is a weak number, but it seems to be more stable,'' said Stuart Hoffman, chief economist at PNC Financial Services Group. "The bottom line to all of this is that we need more jobs.''

Sales are down 72 percent from their peak annual rate of 1.39 million in July 2005. More than 600,000 new homes were sold annually from 1983 through 2007. After the housing bubble popped, sales plunged to 375,000 last year.

New home sales made up about 7 percent of the housing market last year. That's down from about 15 percent before the bust.

Weak sales mean fewer jobs in the construction industry, which normally powers economic recoveries. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries.

Builders have sharply scaled back construction in the face of the housing market bust. The number of new homes up for sale in June fell 1.4 percent from a month earlier to 210,000, the lowest level in nearly 42 years.

Due to the sluggish sales pace, it would take eight months to exhaust that supply. That's above a healthy level of about six months.

The median sales price in June was $213,400. That was down 0.6 percent from a year earlier and down 1.4 percent from May.

New home sales rose by 46 percent in the Northeast, 33 percent in the South, and 21 percent in the Midwest. The West posted a decline of nearly 7 percent.

"One month doesn't make a trend and the roadblocks to a healthy housing market are high, the most important one being the still-high jobless rate,'' wrote BMO Capital Markets economist Jennifer Lee in a note to clients. "But with borrowing costs at record lows, prices also remaining low, those with jobs who can afford a home may be enticed.''

The stock market might be behaving badly, but that's not a reason to leave stocks out of your long-term financial planning right now. In fact, with the market near recent lows, you may be more interested in considering one of the most common financial conundrums for homeowners: Is it better to use your excess cash each month to pay off your mortgage faster or to invest?

If this question piques your interest, congratulations for having excess cash. Not many families in the United States are as lucky as you, particularly with so many currently unemployed. Assume you have this surplus even after saving for retirement and other long-term goals and you are comfortable with your emergency fund. There are advantages to using this additional cash flow to accelerate your mortgage payments, but in some circumstances, investing the money would be a better choice.

Check with your lender to ensure you won't be penalized for paying more than the bank expects. If there is no extra fee, doubling your monthly payment from the beginning of your mortgage could reduce the total interest you pay to the lender by tens of thousands of dollars. Eliminating that interest is similar to receiving a guaranteed return equal to your mortgage interest rate.

It's not uncommon to compare this interest rate, currently averaging around 5 percent, with the average long-term return for the stock market, about 8 percent. One method for deciding whether to prepay your mortgage depends on which interest rate is higher; if your mortgage rate is lower than the expected stock market return, you should invest as much as possible and take the slow route to paying off your mortgage.

This doesn't take risk into account, however. While prepaying your mortgage is a guaranteed increase in your net worth, there are no such guarantees when investing in the stock market. Building equity in your house, which you can accomplish faster by accelerating your mortgage payments, is a relatively safe storage of your wealth when compared to a stock market index fund or a small selection of stocks.

In addition to this risk, the stock market is volatile. Your mortgage interest rate won't change year after year unless you refinance; your stock market investment may lose value for several years and take the rest of the decade to recover. Worse, the stock market may decline in the final years as you begin to need those funds to replace your income and never recover.

Also consider your expected retirement date. If you follow a typical career path, you will likely have less income to spend in retirement. By eliminating your mortgage quicker, you pay your mortgage down when you can better afford the payments, releasing yourself from anxiety, stress, and house payments when your income shrinks in retirement.

Other factors contribute to this decision. If you don't plan on staying in your current house and expect to sell within a few years, there may be no need to speed up your mortgage payments. If you decide to invest your excess cash because of the anticipated financial benefits, you must commit to investing. I've heard from many readers who choose not to send the bank their extra money each month with the intent to invest, but other expenses inevitably arise. Whether it's lack of discipline or necessity, the misdirected cash prevents these families from seeing the benefit of a stock market that generally, over the long term, increases at a rate higher than most mortgages.

Whether to pay your mortgage off early or to use your excess cash to invest is a personal decision. While the numbers may help you decide, you can't make the choice without considering your needs beyond having the highest net worth possible at the end of the day and your ability to stick to the plan.

URGENT MESSAGE FOR ALL TRAVELERS AGENTS!

The National Flood Insurance Program's (NFIP) authorization expired at Midnight on May 31, 2010

**During this lapse, no credit cards, E-Checks or ACH Transactions (agency sweep) will be accepted.**

The following is based on guidance that FEMA published on rules of the NFIP during the lapse:

Flood New Business

• If Travelers received a new business application with proper payment prior to midnight 5/31/10, the policy will be processed and issued in accordance with standard NFIP effective date rules.
  
• If Travelers received an application prior to midnight 5/31/10, but did not receive proper payment until after midnight on 5/31/10, the new business will not be issued until the NFIP is reauthorized. The effective date of the policy will depend on whether or not Congress reauthorizes the NFIP retroactively.
  
• If a new business application is submitted and payment received after 5/31/10, Travelers is not able to issue the new business policy during the lapse period. The effective date of the policy will depend on whether or not Congress reauthorizes the NFIP retroactively.
  
• For loans that closed prior to midnight on 5/31/10, if the flood application date is on or before the closing and the payment check is from the escrow account (lender's check), title company or settlement attorney, the policy will be issued even if the application and money are received after 5/31/10. Standard NFIP receipt date rules apply.
  
• If Congress fails to reauthorize the NFIP, or if congressional action is not taken within a reasonable amount of time, any premiums being held for any new business application that we are unable to process as outlined above will be returned and no policy or coverage will have gone into effect.

Flood Renewals or Added Coverage Endorsements

• If Travelers received a renewal instruction or added coverage endorsement with proper payment prior to midnight 5/31/10, the renewal policy or change will be processed and issued with standard NFIP effective date rules.
  
• If Travelers received an added coverage endorsements prior to midnight 5/31/10, but the money was received by Travelers after midnight on 5/31/10, the added coverage endorsement will not be processed until after the NFIP is reauthorized. The effective date will depend on whether or not the legislation is retroactive.
  
• Travelers cannot mail renewal offers after midnight on 5/31/2010. Travelers is not allowed to process any increase in coverage if the request and payment are received by Travelers after midnight 5/31/2010.
  
• If Travelers issued the renewal offer prior to midnight on 5/31/2010 and the premium is received by Travelers within the 30-day grace period, the renewal policy can be issued even if the premium is received after 5/31/2010.
  
• If an Underpayment Notice was issued prior to midnight on 5/31/10 and the premium is received by Travelers within 30 days of the date of the Underpayment Notice, the added coverage endorsement can be issued even if the premium is received after 5/31/2010.
  
• If Congress fails to reauthorize the NFIP, or if congressional action is not taken within a reasonable amount of time, any premium we are unable to apply based on the rules stated above will be returned. Coverage will be determined based upon the rules of the NFIP.

FEMA HAS RECOMMENDED THAT WE HOLD ANY PREMIUM RECEIVED AFTER MIDNIGHT ON MAY 31, 2010 FOR NEW POLICIES, RENEWAL POLICIES, OR ADDED COVERAGE ENDORSEMENTS AS WE AWAIT CONGRESSIONAL ACTION. IF CONGRESS PROVIDES RETROACTIVE REAUTHORIZATION TO THE NFIP, POLICIES/ADDED CHANGE ENDORSEMENTS WILL BE AFFORDED THE EARLIEST EFFECTIVE DATE BASED UPON TRAVELERS RECEIPT OF THE TRANSACTION AND PREMIUM.

For Example: If you submit a new policy today and the reauthorization is made retroactive, we will use today's date as the beginning of the waiting period using standard NFIP effective date rules. If you wait to submit something until the reauthorization is approved, that future submission date will be used in calculating the waiting period.

Flood Claims

• Claims on properties where there are policies in force will be processed and paid as usual during this lapse.
  
• Unless Congress provides retroactive authorization of the NFIP, claims CANNOT be HONORED under a new policy, renewal policy or an added coverage endorsement transaction, if those transactions were not able to be processed and issued as outlined above. WYO Companies may investigate claims under a reservation of rights or non-waiver agreement, up to the point of payment. WYO Companies would continue to investigate the claim but would reserve the right not to pay the claim if Congress does not reauthorize the NFIP.

Travelers Flood Team appreciates your business and we are hopeful that this communication is helpful. If you have any questions regarding a specific policy or the lapse in general, please call the Travelers Flood Customer Service Team at 1-800-356-6670 Option #4.

Important notice regarding Travelers Personal Insurance Property Eligibility - Homeowners and Homesaver/Dwelling Fire Eligibility

Our current Homeowners and Homesaver/Dwelling Fire Eligibility Guidelines show the following as ineligible:

In addition, in some coastal areas of East Coast and Gulf Coast states, excess flood insurance coverage above the limits provided by FEMA is also required.

There is no change to the above eligibility requirements for Homeowners and Homesaver/Dwelling Fire business. We cannot accept business in these areas where a flood policy is not in force. Accordingly, new or increased Homeowners and Homesaver/Dwelling Fire coverage requests on homes located in these areas are ineligible and cannot be bound without an inforce flood policy.

Questions regarding Homeowners and Homesaver/Dwelling Fire Eligibility should be directed to 1-877-878-2468 (ASO Agents) OR 1-877-872-8737 (CCC Agents).

A dwelling subject to flood or wavewash (all Flood Zones V and A) unless the risk is covered by a Flood Policy up to the Coverage A and C limit, or the FEMA maximums of $250,000 Coverage A and $100,000 Coverage C, whichever is less.

In a recent New York Times article series about the difference between male and female drivers across the globe, the verdict seems to be in. Women drivers get the prize for being safer drivers overall, on the road. But this doesn't come as a big surprise to most people in the insurance industry..

When insurance companies compare the number of accidents and claims reported by men vs. women, the results show that men report a much higher number of accidents than women, regardless of education or income level.

Why are men involved in so many more accidents? The Times article series reports that men are more likely to ignore traffic signals, to honk their horns, to rudely gesture at other drivers, and to be involved in tragic accidents. (Ouch fellas!)

But, we hate to put all men in the same boat. Although men may be charged slightly more for auto insurance, there are a lot of ways to help decrease the costs. Drivers who complete a Driver Safety or Defensive Driver class, for example, may be eligible to save up to 15% on their bi-annual premium. Also, simply practicing safe driving can help reduce rates as most insurance companies will reward good drivers each year they remain accident and claim free.

Paul T. Murphy Insurance Agency
16 Lebanon St, Malden MA 02148
781-321-9700
781-324-4253 (fax)
www.paulmurphyinsurance.com