Coffee Break Blog!

The Beat Goes On . . .and on . . .and on

Effective April 1, 2008, sales and use tax in the majority of King County will increase from 8.9% to 9.0%. (The following Non-RTA areas are exceptions and will have rates of 8.6%: Black Diamond, Carnation, Covington, Duvall, Enumclaw, Maple Valley, North Bend, Skykomish, Snoqualmie.) The additional one-tenth of one percent will be used for chemical dependency or mental health treatment services.

Why do we as a society keep bailing out those who insist on making poor choices for their lives?  Granted, some people are unfortunate enough to be plagued by a mental illness.  However, studies show there are a lot of folks who choose to participate in extra curricular activities that often times lead to their current state of affairs. To quote Dr. Phil, when you choose the behavior, you choose the consequences.

Still a "Best Place?"

Back in 1989 a three-bedroom home in Seattle sold for around $130,000 and Boeing dominated our economy.  Starbucks had a few dozen stores, and Microsoft was really ramping up.

Now those corporate giants, along with the rise of Amazon.com, have made Seattle a "the place to be" when it comes to corporate climbers. Eventhough the corporate-headquarters moved to Chicago for Boeing, the main plant is still in the Puget Sound area and has been busier than ever. The influx of the well educated and well heeled has turned Seattle into a cultural mecca. The downside of all this upside: Seattle is far more expensive. Housing prices have more than tripled. And it still rains. A lot.

Get the house you want!

When my husband and I bought our first house we were both working in Bellevue and we loved the area but we couldn't find what we wanted in our price range so we ended up north in Mill Creek. We were able to get everything we wanted in a house and in our price range where if we stayed in Bellevue we would have to give some things up, like a garage!

Fast forward 6 years and we are still in the same house. I now work close to home but my husband does the long commute from Mill Creek to Bellevue 5 days a week. That's about 20 miles a day, mostly freeway driving. He drives a small SUV and figures he is getting 20 miles a gallon. With the price of gas about $3.50 a gallon he is spending about $7.00 a day in gas just to go to work. Multiply that by 5 days a week and that's $35.00 a week, $140 a month, $1680 a year. That's a lot of money, especially when you have twins! But it's not enough to make me wish we would have bought a house in Bellevue so we could save money in gas.

My advice, not that you're asking, is get the house you want. I am much happier in our Mill Creek home and all our house has to offer and I will gladly pay more money in gas back and forth to work to have that. But that's just me, maybe you think differently. Whatever your opinion just think it through when considering a house. Our buyers agent Brandon Bogart is a great resource, he's lived in the Seattle area his entire life!

It's Snowing in Seattle!

It's the end of March and it's snowing in Seattle. How strange is that? I guess we have snow in the forecast through the weekend. My poor flowers!

I came across this video on YouTube this morning. Whatever your political opinions are I thought this was funny and a great way to start a friday!

Easter Pics

With Easter being early we have little hope of having good weather in Seattle. Katie in her pretty dress hunted for eggs inside while Angi's boys roughed it outside. Easter is a fun holiday and has the best candy of all the holidays.

 

Leftovers Anyone?

I hope you had a great Easter weekend. We had family from Oregon in town and of the 24 hours they were at our house I was in the kitchen 90% of that time. Seemed like I was always making a meal, cleaning the kitchen, unloading the dishwasher, or clearing a meal. It was great fun though! Our fridge is full and I refuse to cook until all the leftovers are gone!

We had 3 three year olds at our house for Easter and they had a blast! We colored Easter eggs, made cut out cookies, and of course hunted for eggs in the rain! It was so much fun!

It's times like these when advantages and disadvantages of my house really show. We have a tri level and the lower level is a playroom for the kids. LOVE THAT! It's so great to have an area for the kids to play and not bother the adults while we are trying to visit. Plus it keeps the house picked up because all toys stay in the playroom! What I dislike is my small kitchen. It's fine when it's just me but when family in town you can't get more than 3 people helping in the kitchen. I will definitely keep these things in mind the next time we buy a house!

Happy Good Friday!

Hope everyone has a great Easter, a wonderful time with family and/or friends, and enjoys their Good Friday!

Buy a diamond? Get a refund!

A big part of what we do at The McFarland Group is save our clients money.  If you've purchased a diamond lately you may be entitled to a partial refund!  Check out this article, posted at http://articles.moneycentral.msn.com/SmartSpending/ConsumerActionGuide/BuyADiamondGetARefund.aspx

By Marilyn Lewis

How would you like a little refund on that diamond nose stud you bought in your wilder days? Or the diamond engagement ring you purchased for your sweetie when you settled down?

If you bought a piece of diamond jewelry -- or jewelry with a diamond in it -- between Jan. 1, 1994, and March 31, 2006, you may be eligible for a refund as part of a recent settlement of a class-action lawsuit alleging that De Beers, the big South African diamond company, had cornered the market for diamonds for decades, keeping prices artificially high.

In settling, De Beers is shelling out $295 million to put the trouble behind it -- $135 million of which is earmarked for consumers rather than wholesalers.

"While we don't accept the allegations, we do believe that settling this suit is in the best interests of our clients, our shareholders and consumers," De Beers says in a statement on its Web site.

How refunds are calculated

Your share, if any, will be small. Everyone has to split the pot, so the size of each refund depends on how many other consumers file claims, and for how much. There could be hundreds of thousands -- even a million -- consumer claims, says Joseph J. Tabacco Jr., the managing partner at Berman DeValerio Pease Tabacco Burt & Pucillo in San Francisco. He's one of the lawyers behind the lawsuit.

Theoretically, a $10,000 diamond ring is eligible for a $4,500 refund. But realistically, lots of competing claims will dilute that payout considerably. There's no way of knowing yet how big a refund the $10,000 purchase could bring, says Tabacco.

Here's how refund eligibility is figured:

	Purchase price	Maximum claim
Mixed-stones jewelry	Less than $200	6% of the retail price
Mixed-stones jewelry	$200 or more	14.5% of the retail price
Diamonds-only jewelry	Less than $200	10.5% of the retail price
Diamonds-only jewelry	$200 to $999	27.5% of the retail price
Diamonds-only jewelry	$1,000 to $5,499	32% of the retail price
Diamonds-only jewelry	$5,500 to $9,999	38.5% of the retail price
Diamonds-only jewelry	$10,000 or more	45% of the retail price
Loose diamonds	Any and all	59% of the retail price

How to make a claim

Even if the payout is diluted, who doesn't like a bit of cash back? You have until May 19 to make your move. Here's how to do it:

• Go online to the settlement site to file a claim online. Or download a .pdf claim form to mail it to the address on the form, postmarked no later than May 19. Or phone 1-800-760-5431 to get a form mailed to you.

• Contact the claims administrator if you have questions or need more help: 1-800-760-5431 or administrator@diamondsclassaction.com.

What Are They Doing?

What are they doing anyway?  They did it once again - no surprise.  The "Fed" cut interest rates again in an attempt to kick start the economy.  One task of the Fed is to monitor and control to some extent, the overall economy.  It's not to provide low interest rates to the housing market.

One of the ways the fed can stimulate the economy is by cutting the "Fed Rate" which is the rate banks borrow money. By cutting rates, money is cheaper for banks who can borrow and lend out more money, not necessarily for home-loans but for business loans.  If there is more money available housing usually will benefit as well.

Some downsides of a rate cut:

• the potential loss of value to the dollar.
• Inflation
• and higher mortgage rates.

A few upsides:

• Commercial banks that are in business of checking and savings type of banking.
• Home equity loans that are typically have a 10 year life.
• Auto Loans
• credit cards.
• Business loans

The benefits are intended for the economy in general and not necessarily to the housing market. The housing market can initially suffer by dealing with higher interest rates due to the effect on bonds.  We'll be watching this closely . . . so should you!

The difference between a 30 and 40 year mortgage....

This is a great article by Broderick Perkins and was posted on Realty Times on March 13, 2008. Enjoy!

Forty year mortgages can reduce your monthly mortgage payment, but is that enough to offset the extra cost of tacking 10 more years onto the conventional 30-year mortgage?

The question is probably too simplistic, says Dan Green, a mortgage planning specialist at Mobium Mortgage in Chicago.

He says loan products like the 40-year mortgage are deemed risky because they are viewed in a vacuum, without considering the needs of the individual borrower or without comparing their benefits with other mortgages.

"It's not the loan that is risky, it's the behavior of the person paying the loan," is the advice he offers in his treatise on home loans longer than 30 years.

The draw of a 40-year mortgage is its relatively lower payment -- compared to a 30-year loan -- due to stretching out the amortization schedule over a longer period of time.

That could be attractive to those in high-cost housing areas, those who can't qualify for a 30-year mortgage payment or for those who want to qualify for a larger home. Longer term loans are also beneficial for people who don't plan on moving for a long time.

But here's the rub, not only will you pay more over the life of the loan for a 40-year mortgage, the higher interest rate on a 40-year mortgage bites into some of the expected monthly savings.

According to LendingTree.com the rate on a 40 year mortgage could be 0.25 percent to 0.375 percent higher than the rate on a 30.

So let's do the math on a $250,000 mortgage, at 6 percent for a 30 year mortgage and 6.25 percent for the 40, using Nolo.com's "How much will my fixed rate mortgage payment be?" calculator.

The interest and principal payment on the 30-year loan would be $1,498.88 with a total of $539,593.37 paid over the life of the loan.

For the 40-year mortgage, the payment would be, $1,419.35 with a total of $681,285.85 paid over the life of the loan.

That's less than $100 savings each month in exchange for more than $140,000 in extra cost over the life of the loan.

Also consider the fact that the principal is not paid down on a 40 as fast as it is on a 30, toss in a market with flat or falling home values and homeowners with a 40 year mortgage could really feel a pinch instead of relief.

Or so the theory goes.

"These arguments are all based on a single tenet -- that paying down a principal balance is a good thing. That's not always true," says Green.

Green says the more a homeowner invests in the home, the smaller the return because the cash-in investment isn't generating the return. It's the home's value that grows -- market permitting.

The 40-year mortgage behaves somewhat like a no- or low-down mortgage in terms of using more leverage and leverage is the tool investors use to play the game, for good reason.

You get the same level of market-based equity growth with a 30-year, 40-year or even 15-year mortgage. With a 40-year mortgage it's just that you get that equity growth at a smaller monthly cost. Greater leverage.

Most people move or refinance within five to seven years and the low monthly payment could work from them in the right market. Given home equity growth historically shows up during a 10 year housing cycle, but not for the entire cycle, timing is important.

The 40-year mortgage can be a good fit if for those at an early stage in their career. It can allow them buy a home they might not otherwise be able to afford. Later during the next equity-growth cycle they can sell and buy anew sell or refinance with the next appropriate financing tool.

A 40-year mortgage can also be advantageous for high-income earners whose mortgage interest payments may be their only large income tax deduction. And it can be used by vacation rental owners to reduce carrying costs.

Other mortgages can perform the same high-leverage trick, provided you can qualify for them, provided they are a risk-fit for your financial status and planning and provided the market cooperates.

The key, says Green, is running all the numbers, both the cost-comparisons of mortgages along with your financial goals, planned tenure in the home and lifestyle.

"New loan products like the 40-year mortgage are not dangerous to everyone. They are only dangerous to homeowners who operate without a financial plan," says Green.