Mortgage, loan and property. What is a mortgage?

A mortgage is putting a property as a guarantee to a lender as a security for a mortgage loan.

While a mortgage in itself is not a liability or a dept, it is evidence of a debt. It is a transfer of an interest in property, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the property when the terms of the mortgage have been satisfied or concluded.

In other words, the mortgage is a guarantee for the loan that the lender makes to the borrower. In all but a very few states, a mortgage creates a lien on the title to the mortgaged property.

Saturday, May 31, 2008

U.S. housing surprises everyone in April

Sales of new homes rose by 3.3% in April compared to March the U.S., reaching an annual rat of 526,000 units, announced Tuesday the Department of Commerce.

Analysts were expecting 520,000 sales.

The numbers for March, however, were revised down to 509,000 sales, which is the lowest level since April 1991, instead of 526,000 initially announced.

In only one year, decreased sales of new homes has reached 42.2%.

This report was published four days after the home resale one. Home resales fell by 1% in April.

On the new housing market side, the median price rose by 1.5% in April (over one year) to reach $246,100.

Compared with March, prices rose by 9.1%.

The number of new homes for sale fell by 2.4% in April to reach 456,000, which represents the equivalent of a stock of 10.6 months of homes to sell at the pace April sales (against 11.1 the previous month).

The increase in sales in March is due in part by a jump of 41.7% of activity in the north-east, and by increases of 8.3% in the west and 5.8% in Central (Midwest). However a decrease of 2.4% was registered in the south.

Finally, the Case-Shiller index measuring property prices in the 20 largest U.S. cities went down 14.4% in the first quarter of this year compared to the same period in 2007. In the 10 major urban areas of the country, the decline has reached 15.3%.

Friday, May 30, 2008

Housing Index indicates Home crisis will last "an awful long time"

According to Joel Naroff, president of Naroff Economic Advisors and chief economist with Commerce Bank, the latest S&P/Case Shiller Index showing a 14 percent yearly dive in home prices is an indication that the housing downturn will run "an awful long time." The housing slump is therefore far from over.

Joel Naroff says it's an extremely large decline - the biggest he's ever seen. He predicts the home crisis will last through this year and maybe through the first half of next year.

He also says that the increase in foreclosures is putting a downward pressure on prices. He finally says that buyers are beginning to think there's still a long way to go before the real bottom is hit, so they will be holding back on making offers on homes.

U.S. consumers slow down their spending pace

"Consumers still spend, but just enough to follow the price increases and nothing more," said independent economist Joel Naroff.

The household consumption expenditure slowed in April, rising by 0.2% compared to March. Their incomes also rose by 0.2%, indicated Friday the Department of Commerce. These increases are in line with analysts' expectations.

For March, the increase in expenditure was left unchanged at 0.4% but the revenue was revised upwards to 0.4%. The disposable income after taxes increased by 0.2%, which is the lowest increase since April 2007. It was also the first time since that date that wages decreased.

"Consumers still spend, but just enough to follow the price increases and nothing more," said independent economist Joel Naroff. "Maybe the rebate checks will boost the figures for May and June, but it is difficult to say to what extent," he added.

Inflation has also went down, the price index linked to the consumption expenditure (PCE) rising by 0.2% in April against 0.3% in March. The index measured excluding food and energy, which is the one preferred by the central bank, increased by 0.1% (after +0.2%), an increase in line with analysts' expectations.

For both indices, it is lowest increase since February.

On a yearly basis, inflation reached 3.2% for the overall index in April and 2.1% for the index base (as in March for both indices).

Adjusted for inflation, the figures show that disposable income has stagnated in April like is has in March. Actual expenditures also remained stable (after +0.1% the previous month), households buying fewer goods (-0.2%) but more services (+0.1%). The savings rate increased to 0.7% of disposable income, like in the two previous months.

Tuesday, May 27, 2008

Still No Joy In British Home Prices

According to the slump in property prices that began nearly a year ago in Britain is showing no signs of slowing down, a gloomy survey showed on Monday.

The Hometrack’s House Price Survey showed a uniform downturn in the British housing market in May, with prices dropping 0.5% from April and 1.9% from the previous year.

A decrease in interest rates by the Bank of England would help the housing market by easing payments for holders of adjustable mortgages and for new buyers, but at the risk of a greater inflation level.

The current deteriorating sentiment heightens the risk that house prices could plunge sharply over the next couple of years.

While new housing data in Britain seems dire, only those homeowners who made their purchases around the market's peak last summer are expected to face the dire condition of owing more on their homes than they paid for them.