Protect Your Savings From Inflation

Not all savings methods are created equal. In fact, some can actually cause you to lose money. Money Editor Stacy Johnson explains in this short (1:31) video…

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Housing Upgrades That Don't Pay

Before you dive into a major renovation project to give a house your special signature, consider how long you're likely to stay in the house.

A lot of people get into trouble by going into a home they're only going to be in for a relatively short period of time, and they start doing renovations and additions that are sort of on their fantasy list, but they're not going to be there long enough to really enjoy.

Here are four reasons to proceed with caution, particularly if you want to maximize your chances of a profitable resale later on.

1. High maintenance - If your upgrade requires too much upkeep, buyers may view it as more of a nuisance than an asset. A prime example is an in-ground swimming pool, which can cost a small fortune to install, secure, heat and clean.

2. Overdressed - Luxurious amenities can be a good selling point, but only if they blend in with rather than outshine what the neighbors have. Having the nicest home in the neighborhood can be a bad thing when it's time to sell. A prime example would be upgrading the kitchen in an entry leval home to reflect remodeling from high-end home magazines.

3. Too Personal - Making a "Cookie-Cutter House" in the image of your own exquisite taste. Any time you deviate, no matter what the improvement is, from what is a fairly traditional, single-family house, you run the risk of improving in a fashion that will not lend itself to additional dollars at re-sale time.

4. Unpopular - If no one else on the block has a room like the one you're adding, or all the other houses boast the very feature you're getting rid of, watch out. For example, although converting your garage into an office, bedroom or playroom can be a less expensive way to add square footage and create more living space, it can have drawbacks. Potential homebuyers might miss the sheltered parking more than they welcome the additional room, especially if other homes in the neighborhood have garages.

This final tip for whatever type of home renovation you may be considering: Before you do anything in a house, live in it for a while. Prioritize what needs to be done, then go back a year later and see how much your list has changed.

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Home Buying Techniques

Buying a home is an exciting and important life event. Being a first time home buyer means that you will have many decisions to make — and just as many questions that need answering.

Buying your first home is a huge step. These helpful home buying tips may reduce confusion about mortgage payments and the cost of buying a house:

• Get preapproved - Buyers should always get preapproved before they begin house hunting. Buyers should get a written preapproval from a reputable mortgage lender before they start shopping for a home.
• Calculate your mortgage payments - Buyer's mortgage payments might be the same or less than rent payments. The (principal and interest) monthly payment on a $200,000, 30-year, fixed rate mortgage with an interest rate of six percent (6.25%) is $1,231 — less than what some people pay for rent (taxes, insurance and any other fees, including closing costs, are extra).
• Share closing costs - Buyers may ask sellers to pay for closing costs. As part of the negotiating process when buying a house, the buyer may ask the seller to pay for a percentage of the non-recurring closing costs, sometimes saving thousands of dollars for the buyer.

Also ask yourself, "Is it cheaper to rent than to own?"

Here's a useful way to calculate and compare: Take the price of the type of home you want in your market. Now see how much it would cost annually to rent a similar property in the same area. For example, if you can purchase a home for $540,000 but can rent a similar one for $36,000 a year, your so-called price-to-rent ratio would be 15.

In general, buying starts to look attractive when the P/R ratio is around 15 or lower. (The current national average is 12.5.) As your market's P/R ratio falls, more sellers are likely to come into the market. So demand could pick up and help stabilize home prices.

Of course, 15 is just a ball park. While P/R ratios in many markets have come down lately, they're still high relative to their long-term average.

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Jobless Claims Highest in 6 Years

According to a recent Labor Department report, the nation's jobs market sent a fresh cry of distress as the number of newly laid-off people unexpectedly hit the highest level in more than six years. The AP's Ed Donohugh reports in this short video (runs :57)…

Do you think this latest jobs report truly reflects our nations' economy, or is this latest report just evidence that more people are looking for government help? We'd love to hear your opinion. Sound off by using the comment link below. Your identity is always protected when posting at our site. Your email address will never be published here.

Housing Bill Offers Breaks for Taxpayers

The federal housing and foreclosure relief legislation just signed into law by President Bush contains a little-noticed—but potentially far-reaching—change in real-estate tax policy.

It permits millions of homeowners who don't itemize on their federal tax filings to claim a deduction for at least part of their local and state property taxes. Though the House version set the maximum write-off at $350 a year for single taxpayers and $700 for married joint filers, the Senate's $500 and $1,000 prevailed.

The new legislation effectively adds another tax preference for people who own houses while offering nothing to those who rent. The idea, say supporters, is to provide greater tax fairness for a huge category of owners — often seniors and lower-to moderate-income households — who opt for the standard deduction but pay local and state property taxes.

Critics say the plan is just another example of the government's inequitable approach to housing policy — overemphasizing the financial benefits of homeownership versus renting.

What do you think? Does this new legislation discriminate against those who cannot afford to own a home? Is this fair legislation? We'd love to hear your opinion. Use the comment link below to sound off on this topic.