MARCH 2015

In This Issue
The "Starbucks effect": Higher Home Prices
by CNN Money


Living near a Starbucks has its benefits for homeowners, whether you're a coffee drinker or not.


The value of homes within a quarter-mile of a Starbucks rise faster than those that aren't, according to real estate research group Zillow (Z).


With tens of thousands of Starbucks locations in the U.S., that's good news for a lot of homeowners.


Between 1997 and 2013, home closer to the coffee shop increased in value by 96%, compared to 65% for all U.S. homes.


The biggest "Starbucks effect" was in Boston, where nearby home values went up 171% in the same time period. That's 45 percentage points more than all homes in the city.


Starbucks is usually a harbinger of good times for a locality. A new Starbucks gives a sense to developers that the neighborhood is on the rise, wrote Zillow CEO Spencer Rascoff and chief economist Stan Humphries in their new book "Zillow Talk."


But dig a little deeper and it's kind of a chicken and egg situation -- it's not like Starbucks (SBUX) can take credit for changing a community. The coffee chain is very good at finding locations that are up-and-coming, the authors said.


Homes near Dunkin' Donuts (DNKN) also appreciate faster than the nation's housing as a whole, but not as fast as those next to a Starbucks, according to Zillow's analysis.


Freddie Mac: 2015 best year for home sales in 8 years
by HousingWire


This goes for new home construction


The majority of homes sold in 2015 will be sold between now and June as the housing markets begins the start of the spring homebuying season. According to Freddie Mac's March 2015 Economic & Housing Market Outlook, 40% of all home sales for the year will happen over the next four months.  


"This month kicks off the spring homebuying season. These next few months will essentially tell us whether or not 2015 will be a good or bad year for housing markets," said Len Kiefer, deputy chief economist with Freddie Mac.


"Overall, we're feeling good about housing and we expect this year to be the best year for home sales and new home construction since 2007 when we saw total home sales about 5.8 million for the year," said Kiefer.

Here are the reasons Freddie Mac is optimistic:


High affordability

About 80 percent of metro markets in the U.S. are affordable, based on data through the 4th quarter of 2014 on the three primary drivers of affordability: house prices, interest rates and income.

Improving labor markets    

Over the twelve months ending in February 2015 the U.S. economy added nearly 3.3 million jobs, the fastest pace since 2000. And with labor markets tightening we might be starting to see wages and incomes rise.


One key demographic segment-millennials aged 25 to 34-have started to see their job prospects improve recently.

Rising rents

Many current residents are debating if the benefits to moving are finally strong enough to purchase a home. And looking at recent study findings, many feel that it could make financial sense to buy today.

Expanded Credit Availability

Freddie said it believes there will be financing available to capture the people exiting the rental market. Broader access to credit will be driven by a confluence of factors, not just the new Freddie Mac Home Possible Advantage initiative. 



6 Painless Ways to Pay Off Your Mortgage Years Earlier
by Daily Finance

Chances are your home mortgage is the largest debt you'll ever have. How would you like to pay it off and run your mortgage contract through the shredder a lot faster than the 30 years most homeowners sign up for? Let's consider some ways to painlessly pay off your home loan sooner. You can choose to do it a little faster or a lot. In some cases, you'll scarcely notice the added expense.

1. Make Biweekly Mortgage Payments

Since there are 12 months in a year, homeowners make 12 monthly mortgage payments. But if you make half-sized payments every two weeks (biweekly), you'll make 26 half payments, the equivalent of 13 full payments, essentially making 13 monthly payments every year rather than the usual 12.
To go this route, call your lender and ask the best way to do it. Some lenders will set you up with biweekly payments. Or you might simply prefer to send in the extra payments by mail or electronically. Whenever you make any extra payment, however, be sure to designate it "apply to principal." Otherwise, the lender may treat the extra as a prepayment of your next regular monthly payment.

Use a calculator like this one from the Mortgage Professor to see your savings. Example: According to this calculator, if you have a 30-year fixed rate mortgage at 3.8 percent, making biweekly payments would save $20,573 in interest over the life of the loan and pay off your mortgage four years earlier. That's a big bang for not many extra bucks.

One thing to avoid: "mortgage acceleration" products and plans. Paying down your mortgage is an easy thing to do, and you shouldn't have to pay anything to do it. No expertise or pipeline to a higher authority is required. When you see ads and pitches for mortgage "acceleration" plans, programs and products, run the other direction.
2. Pour Every Bit of Extra Cash Into Your Mortgage

Dedicate every bonus, raise and windfall, birthday, holiday and graduation gift you receive toward paying down debt. Obviously, the highest interest debt takes priority, but if you have an adequate emergency savings fund and your mortgage is your only debt, when extra money falls into your hands, don't even ask yourself what you'll do with it: Add it to your mortgage payment, designating it as additional principal.

It's possible you'll find better uses for extra cash than paying down your mortgage. For example, if your mortgage rate is 3.8 percent, but you can earn 5 percent on your money elsewhere, you're obviously going to be better off earning the 5 percent.
3. Round Up Your Payments

The monthly payment on a $200,000 mortgage at 3.8-percent fixed over 30 years is about $932 a month. Get into the habit of rounding up that amount to $1,000. Or even $1,030, or $1,050. Do it on a regular basis, and you'll shave years off your mortgage while feeling little pain.

4. Make One Extra Payment a Year

Give yourself a holiday gift by making an extra payment at the end of the year -- or any time. Or, if you'd rather, add an amount equal to one-twelfth of your mortgage payment to each month's payment. For instance, with the $932 monthly payments in the example above, one-twelfth is $78. Add that to your normal payment, for a total payment of $1,010, and you'll shave 30 payments off a 30-year mortgage, paying it off in 26 years instead of 30.

5. Refinance Into a Shorter Loan

Nearly 90 percent of Americans who financed their homes in 2013 chose a 30-year fixed rate mortgage, according to Freddie Mac. One reason to do so: Monthly payments are lower on longer-term loans.

Only 8 percent chose 15-year loans in 2013. But those borrowers stood to save a lot of money over the long haul. You can, too, with a shorter duration mortgage. Follow these three steps to find out what you would save:
  • Find current mortgage rates. A good general source is the Freddie Mac weekly mortgage market survey, updated every Thursday, but you can also look at real-life rates available in your area by visiting the Money Talks News mortgage search page.
  • Decide if you want a fixed or adjustable rate mortgage. ARMs are typically cheaper but riskier. Here's how to decide if an ARM is right for you.
  • See what you could save. Use HSH's amortizing mortgage calculator (choose "show the full table") to compare the costs and benefits of various options.
Here's an example: If you pay 3.8 percent on a 30-year fixed rate home loan of $200,000, your payment (principal and interest) will be $932 a month. After 30 years, you'll have repaid the $200,000 plus $135,489 in interest, money that could have gone to a college education for your kids or helped you retire earlier.

Reducing the term, or duration, of the loan usually saves money in two ways: You pay less total interest, and you often get a lower rate. When I researched this story, the average 30-year fixed mortgage rate was 3.8 percent. The average 15-year, fixed rate mortgage had an average interest rate of just 3.07 percent. The monthly payments on a $200,000 loan would be $1,388, which is $457 higher than the 30-year version. But you'd be done in half the time, paying only $49,823 in interest, instead of $135,489. That means you'd keep nearly $86,000 in your pocket rather than putting it in a lender's.

If you want to shorten your mortgage's term but 10 or 15 years feels too tight, the payments on a 20-year loan might be more comfortable.

6. Refinance and Just Pretend It's a Shorter Loan

If locking into a shorter mortgage with higher monthly payments feels scary (what if you hit a rough patch and need the money?), you can get much the same effect by refinancing - if rates are low enough to justify it -- into a cheaper 30-year mortgage but paying it off on a 15-year (or 10-year or 20-year) schedule.

You won't enjoy any lower rates offered for shorter-term loans, but you'll save heaps of money on interest. To stick with our sample mortgage, the new payment on your $200,000 (3.8 percent, 30-year fixed-rate) mortgage is $932. Go ahead and pretend you're on a shorter schedule. Your monthly payment would be:
  • $1,190 to pay it off in 20 years.
  • $1,459 to pay it off in 15 years.
  • $2,006 to pay it off in 10 years.
Do the math yourself using the HSH, or any number of other free calculators. This option requires willpower, because you must choose a higher payment than you are required to make each month. But it gives you the flexibility of falling back to your smaller required payment if you need extra cash.

Is Refinancing Cost-Effective?

The last two options involve refinancing your home. Before considering them, decide if refinancing is a good move for you. Whether refinancing is worth it depends on the associated costs and how long you'll stay in the home. To be a good deal, you'll need to stay long enough to more than recoup your costs. Refinancing is loaded with costs, including, but not limited to:
  • A lender's origination fee.
  • A title search fee and title insurance.
  • Taxes.
  • A settlement professional's fees.
  • The cost of pulling your credit report.
  • An appraisal fee.
  • State or county tax and/or transfer fees.
You can pay for these costs out of pocket at the time you refinance. Many lenders encourage borrowers to have the fees added ("rolled in") to their loan balance. But if you do, your monthly payment will grow and you'll pay additional interest.

Estimate Your Costs to Refinance

On average, homebuyers paid an average of $2,539 in closing costs for a $200,000 mortgage in 2014, according to Bankrate's annual survey. The cost of refinancing is similar. Here's rule of thumb: Expect to pay 2 percent to 5 percent of the loan amount to refinance, says Zillow.

Estimate your own costs using MyFICO's refinance calculator. Also, you can shop around by telling several mortgage lenders how much you want to borrow and asking for their estimates of fees. Again, the Money Talks News mortgage search tool is a good place to start. Don't give lenders consent to pull your credit until you're ready to actually apply for a loan.

How Social Media Convinces You to Spend More



When I ran a Facebook ad recently for a nonprofit where I volunteer, I was surprised how specific you could get in targeting potential customers. If I wanted to advertise the event I was promoting to women between the ages of 24 and 26 in my city who were unmarried and educated, who watched Girls, owned a dog and liked designer purses - I could do that.


Being able to target ads to a specific market can help a seller reach the people who want or need their products and services. Unfortunately, that means buyers may also be encouraged to spend more than they should if they're not mindful.


There are many ways that we spend money or time that we didn't before social media - ad targeting is just one of the potential spending traps we can fall into. We may also feel pressure to keep up with the social media images of our peers. Add to that the aspirational nature of sites like Pinterest, and it's safe to say that one can encounter many budget-breaking temptations by spending time on social media.

Your Inspiration Station

Pinterest might be the perfect place to score a killer recipe for Pumpkin Cream Cheese Muffins or instructions for how to DIY a fabric headboard, but it is also the biggest tempter when it comes to making us spend. According to RichRelevance, an e-commerce consultant, Pinterest shoppers will spend an average of $170 per session whereas Facebook shoppers only spend $95 per session and Twitter shoppers spend just $70 per session.


So while some people use the site to find fun DIY projects that are cheap or repurpose other items, they might not necessarily be coming out ahead, either. The downside comes if they choose to spend money on projects they hadn't budgeted for. So the key to keeping your inspiration - and aspirations - in check is to make a little room in your monthly budget for your projects... and then stick to it.


Keeping Up With the Joneses


Perhaps the most insidious ways social media influences our spending is through social pressure or suggestion. Did your friend just tweet, Instagram, Pin or share their delicious meal from that new brunch place? Now you're craving those waffles and you have to go! Sure, a meal out here or there may not set you back too much. But what if your friends are sharing pictures of their new house, their kitchen renovation, or their new car - and you start to feel a nagging sense that you need those things, too? Things that break your budget, or aren't even an item in your budget to begin with?


In the social media world, you aren't just tempted to try to keep up with your neighbors or co-workers, but also the friends from high school you don't see anymore, and the girl or guy you once met at a party. By expanding our networks, we expand our temptations... and maybe our sense of competition.

Viral Marketing

Another social medium luring us into the spend-more trap is viral content. Lately, I'm seeing more of my friends sharing funny article lists that are actually subtle ads for various products and how-to articles written by brands. Content marketing, a marketing strategy that uses videos and articles to reach consumers, has been growing as companies look for new ways to target potential shoppers and get them to share content online.

These subtle ads may persuade us to buy things we might not need or to spend more on a brand that we have a good association with. For example, I might decide to spend a few more dollars to buy a name product rather than a generic brand because I liked their viral video. This might not seem like a big deal given that it's just a few dollars. But it can add up, especially if it's something that involves a larger financial decision. For example, say you're in the market to buy a car and a particularly charming viral video persuaded you to make a more expensive choice.

What You Can Do

If you're trying to cut back on your spending, or just don't want those pesky laser-targeted ads, consider opting out from 'online behavioral' and 'interest-based' advertisements by registering your IP address with the Digital Advertising Alliance. It won't make the advertisements go away, but it will make them less tailored to you. And while there are some ways to block ads on social networking sites, it's ultimately better to be aware of the larger issue: There will always be ads, as will the temptation to spend beyond your means.

It's during these times that you need to remember to ask yourself:

  • Is this a want or a need?
  • Do I have it in my budget to spend on this?
  • Can I plan for this expense by creating a savings goal?
  • Is there a better way to spend this money (say, paying down your credit card debt)?

Staying conscious of your financial goals can help you overcome the urge to one-up your friends and followers. In fact, if you need a different kind of motivation, consider joining other social media groups focused on saving and paying down debt. Also start checking your credit regularly to see how much your debt is costing you. You can get a free credit report summary updated monthly on, so you can keep an eye on a major factor of your financial health.