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Mortgage Rates Show Modest Decline

After rising at the start of April, both fixed-rate financing and adjustable-rate mortgage rates generally declined toward the end of the month.

If it's true that the recession is over and the economy is expanding, then somewhat higher rates may lie ahead. Why? Because as the economy grows more demand for capital to fund business expansion is likely. With more demand for loan money, interest rates are likely to rise.

Toward the end of April 30-year fixed rate loans were available at around 7 percent while 1-year adjustable-rate mortgages were in the 5.2 percent range. The gap between fixed-rate and adjustable-rate mortgages has increased substantially during the past year, a factor which makes ARMs more interesting for borrowers.

Existing Home Prices Rise

Across the country, home values are generally rising. According to the National Association of Realtors, the national median existing-home price was $153,000 in March, up 6.7 percent from March 2001 when the median price was $143,400.

Existing sale activity in March was the sixth strongest on record -- but even so, sales actually slowed when compared with results for January and February.

"We were truly at a break-neck pace for home sales in January and February, likely the result of unseasonably mild weather, so it comes as no surprise to see sales decline to a more sustainable pace," according to David Lereah, NAR's chief economist.

For the year, however, Lereah says we may see another record: "Even with sales easing off the big numbers at the beginning of the year, we expect existing-home sales to rise 0.3 percent this year to a total of 5.31 million, edging-out the record of 5.30 million in 2001," Lereah said.

Federal Reserve Chairman Alan Greenspan says the recession of '01 is over and "there can be little doubt that prospects have brightened." What that means for new and existing home sales won't be known for several months, but even a fall-off from a record year could still produce big sales and rising prices.

Checked Your Roof Lately?

Depending on the materials used, the local climate, and the quality of installation, a good roof can last anywhere from 15 years to a full century with little maintenance and no replacement. But while roofing materials may be a long-term investment, it still pays to check roofing each spring.

When you look at the roof from the ground do you see missing tiles, lumpy areas or depressions? If yes, all could be signs of damage and a hint of leaks to come. Also, check gutters to assure that water is being directed away from the house.

If your roof or gutters need inspection, repair or replacement, be certain to use a qualified contractor. Ask about licensing, bonding, and insurance -- and get answers in writing. Get consumer references and also check contractor performance with the Better Business Bureau.

11th District Rates Continue To Fall

Different mortgage formats work well for different borrowers. Some people prefer fixed-rate mortgages, others like adjustable-rate mortgages (ARMs), and some borrowers are open to both options.

ARMs tend to offer lower start rates and they routinely have more liberal qualification standards when compared with fixed-rate loans. The result is that borrowers who might not qualify for fixed-rate financing may be able to obtain an ARM. However, ARM interest rates and monthly payment costs can rise over time, a risk borrowers must consider.

Given such pros and cons, it's interesting to see that index levels for several ARM products are now remarkably low. For instance, the 11th District Cost of Funds Index reached 2.744 percent in February, the lowest level since records were first maintained in 1979 according to HSH Associates, a financial publisher. If you take the index and add a fixed "margin" -- say 2 percent -- you have a 4.744 interest level. For a $100,000 loan paid out over 30 years, the monthly cost for principal and interest at 4.744 percent would be just $521.29 -- at least until the index once-again goes up or down.

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