Hi Everyone,

I just thought as we are approaching the July 4th holiday and looking forward to spending some time with our family and friends, we reflect on where we are headed and why.

I am sure we all know someone who is struggling in this economic downtrend. There is some good news for those we are able to take advantage of the Fed announcing the lowest interest rate in 50 years.

During these times focus and determination will help you through it. Today, I decided to share you with some articles that I recently read that will be able to help you, your family, and friends during this period. If you like the info, make sure to share it!

Here’s wishing you all a great July 4th!!
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Oil spill makes Gulf Coast homeowners jittery as oil from the BP spill reaches beachfront property, here’s what property owners can do to help protect their investment.

Crews work to stop the flow of oil at the site of the Deepwater Horizon disaster in the Gulf of Mexico near Venice, Louisiana. // © Win McNamee/Getty Images

On a sugary white beach, a group of vacationers crowd around a small black blob. “It’s a tar ball!” one exclaims.
I look closer. It’s not. It’s a sea squirt, a harmless creature that sometimes shows up on these shores.

But try telling that to anyone who visits a Gulf Coast beach these days — even here at Vanderbilt beach more than 900 miles from the Deep Horizon oil spill near the Southwest tip of Florida. Though the beaches were crowded during Memorial Day weekend, and local hoteliers reported few cancellations, the spill is the prime topic of conversation among residents and visitors alike — and that’s sure to create problems for people trying to sell or rent their coastal homes for months to come.

In early June, there were reports of an oil sheen on Florida’s Panhandle shoreline, but still no evidence that the slick has reached us here. Psychologically, however, the damage has already been done. Neighbors at the vacation condo I own a block from the Gulf say they’ve smelled strange odors wafting off the waves (I smell normal fresh, sea air). On popular, pristine Vanderbilt beach, I watch as a British-accented mother grabs her toddler’s arm as he tries to wade into the clear, aqua shallows. “I don’t want you swimming in that nasty oil,” she warns.

Her comment makes me anxious as I venture in, until signs of life dart past my leg — a silver school of guppies, pursued by a sand shark. I count the pelicans and ibises and try to remember if there were more or fewer of them than last year; I scan the waves looking for the familiar, plunging fins of dolphins. When I don’t see any, I pray that they haven’t migrated to the northern Gulf for the summer. I pray, too, that the latest efforts to snip and cap the endless spew of crude are successful.

Oil spill keeps visitors from Gulf Coast

No one really knows what the final toll will be to the coast’s tourist-based economy, any more than they can predict what will happen to the ecosystem, especially once the leak is fixed and the summer’s storms blow through. While the effects will undoubtedly be harmful, catastrophe is not a given. After all, the 1979 rupture of the Ixtoc I well off the coast of Mexico pumped some 425,000 gallons of oil a day into the Bay of Campeche for nearly a year, befouling Texas beaches some 500 miles north. Yet once the beaches were cleaned, both the environment and the tourist- and fishing-dependent coastal economies recovered.

So if you are trying to sell or rent out a place along the Gulf Coast, try not to panic or lose perspective. The next few months will be hard, and may even delay what looked to be a robust real-estate recovery (here in Naples, the overall median price increased 22% in April from a year earlier, while sales were up 46%).

BP has promised $70 million to Gulf Coast states to promote tourism. But neither blandishments from BP nor happy talk from chambers of commerce are likely to help you sell or rent out your home while all eyes are on the Spillcam. Until the mess is cleaned up, here’s how to cope:

• Address fears preemptively and honestly on your property’s website, and don’t try to gloss them over. Say “We realize you may be concerned about the oil spill; we are, too.” Then link to local news stories, blogs and beach webcams to show conditions less dire than those shown on national media, which focus on hardest-hit areas.
• Visit your property, talk to your neighbors and take date-stamped pictures of the beaches nearest your property. Upload your findings as often as possible.
• In your advertising, focus on non-beach attractions, like live theaters, water parks, zoos, and golf courses.
• If you’re a landlord, keep track of deals and incentives that nearby resorts, hotels and property managers are offering and match them.
• Remember that bad news brings out bargain hunters, so be prepared to negotiate. But don’t let them take advantage of you by going below the discounts that other sellers or landlords are giving.
• Document any losses that you incur. If you’re a landlord, keep track of cancelled reservations; if you’re selling, get an appraisal or broker’s price opinion now to serve as a baseline should property values fall. You’ll need evidence if you pursue compensation from the government or BP.

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How Far Underwater Do Borrowers Sink Before Walking Away? – By Nick Timiraos

At what point do borrowers who owe more than their homes are worth decide to stop paying the mortgage?

A new study from economists at the Federal Reserve Board aims to answer that question. The research found that the median borrower who “strategically” defaults doesn’t walk away from the mortgage until the amount owed exceeds the value of the home by 62%.

The study is bad news for the mortgage industry in that it backs up the idea that a growing share of borrowers are walking away from loans. Concerns are mounting among lenders and investors that some borrowers who owe far more than their homes are worth are now choosing not to pay mortgages that they can afford.

But the silver lining here is that it suggests a rather high threshold for borrowers to walk away.

“The fact that many borrowers continue paying a substantial premium over market rents to keep their homes challenges traditional models of hyper-informed borrowers” choosing to simply walk away, the authors write. The results suggest “that borrowers face high default and transaction costs” that make strategic defaults less widespread than they might otherwise be.

The study examined borrowers in Arizona, California, Florida and Nevada who bought homes in 2006 with no money down. Nearly 80% of those borrowers had defaulted by September 2009. The authors then separated out defaults caused by job loss and other income shocks from those that had been spurred simply by negative equity.

Nearly 80% of all defaults in the sample resulted from the traditional combination of income shocks and negative equity. But for borrowers that had a loan-to-value ratio of 150%, half of all defaults were strategic defaults, driven purely by negative equity.

Most defaults are typically driven by a combination of income shock and negative equity, or what’s known as the “double-trigger” hypothesis. While borrowers who lose their jobs but have equity in their homes can sell and avoid default, those without any equity are left with fewer options.

“Borrowers do not ruthlessly exercise the default option at relatively low levels of negative equity, broadly consistent with the ‘double-trigger’ hypothesis,” the authors write. “But by the time equity falls below -50%, [half] of defaults appear to be strategic.”

(Read about a separate study released on Monday that finds that around one in five mortgage defaults could be considered “strategic.”)

Empirical evidence suggests that more borrowers may be walking away from their primary residences, but this is a much bigger problem in housing markets that saw stunning home-price gains followed by a free fall. Look to the desert suburbs of Phoenix and Las Vegas, the southwestern coast of Florida, and the far-flung exurbs of California’s San Joaquin Valley and Inland Empire.

The Fed study finds, as have others before, that borrowers are more likely to walk away from homes in states where lenders can’t sue them for a deficiency judgment. The median borrower in a state where lenders have recourse to borrowers’ assets, such as Florida or Nevada, defaults when he or she is 20 to 30 percentage points further underwater than the same borrower in a non-recourse state, such as Arizona or California.

Borrowers with higher credit scores also find it more costly to default. The median borrower with a credit score between 620 and 680 walks away when their loan-to-value ratio hits 151%, while the median borrowers with a credit score above 720 walks away with a loan-to-value ratio of 168%.

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Mortgage Rates Set New Record at 4.69%, So Why Is Demand Weak? -By Nick Timiraos

Average rates on 30-year fixed-rate mortgages reached their lowest levels in more than 50 years this week. On Thursday, rates tracked by HSH.com hit 4.69%, down from 4.75% on Wednesday and an average 4.85% last week.

Freddie Mac also said on Thursday that rates this week had fallen to an average 4.69%, which is the lowest level recorded since it began its survey in 1971. Brokers were quoting rates as low as 4.25% on 30-year loans on Thursday for well-qualified borrowers.

HSH.com says you’d have to go back to at least the 1950s to find comparable rates—and those may not be perfect comparisons given how different the mortgage market was back then.

Rates have fallen over the past month, first as the European debt crisis sparked a flight to safety that helped drive down rates for American borrowers. Over the past week, renewed concerns about the health of the U.S. economy have also put pressure on rates. Rates on 30-year fixed-rate jumbos are down to 5.65%, a seven-year low, while banks offered “hybrid” jumbo adjustable-rate loans with a five-year fixed rate of 4.49%, according to HSH.

But if rates are so low, why isn’t demand for new loans picking up?

For one, most borrowers who could refinance probably did so last year, when rates fell below 5% in March, August, and December as the Federal Reserve purchased mortgage-backed securities to push down rates. Few expected rates to fall even further when the Fed ended its purchases at the end of this past March.

Many borrowers with an incentive to refinance can’t qualify with today’s tougher lending standards or don’t think it’s worth paying the closing costs on a new loan.

Credit Suisse estimates that around 61% of all borrowers with a 30-year fixed rate mortgage could lower their mortgage rate by 0.75 percentage point at current rates. But analysts estimate that only 38% of those borrowers could actually qualify at current standards.

More borrowers can’t qualify because they don’t have enough equity in their homes, their credit scores have taken a hit, or they’ve seen their income reduced. Mortgage application activity is down 0.5% over a four-week moving average tracked by the Mortgage Bankers Association. Weak demand for refinancing suggests that banks have exhausted the pool of homeowners who can refinance at today’s rates given the current tight lending standards.

Low rates typically spur waves of refinancing, but low rates aren’t enough to spur home purchases independent of other factors, such as a healthy economy that fuels job growth and household formation.  That can lead to some of the dissonant headlines of the present, where home sales plunge even as mortgage rates reach generational lows.

Applications for new purchase loans have fallen in five of the past six weeks, according to the MBA, and loan applications are down 37% from one year ago to lows last recorded in February 1997.

Moreover, the Heard column today examines how, when adjusted for inflation, rates aren’t as low as they seem:

Assume June’s year-on-year consumer-price inflation runs at the same rate as May’s 2%. Subtract that from the mortgage rate, and you get 2.69%. Since Freddie’s data started in 1971, there have been plenty of times when adjusted rates were lower. In fact, in the 1970s they often went negative, with inflation running higher than the mortgage rate.

With inflation set to head lower short term, rock-bottom mortgages aren’t quite as unmissable as they seem. Throw in signs that housing is weakening again, and indebted Americans thinking about a new mortgage might just pass on this bargain.