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Net Worth Up Rising home prices around the country helped increase the average wealth of African-American households by an impressive 37 percent from 2001-2004, according to the recently published Survey of Consumer Finances conducted every three years by the Federal Reserve. Average wealth for all minority families increased 24 percent during the same period. Despite the gains, the wealth of minorities continues to lag behind the wealth of whites in this country.
The survey also suggests that growing credit card debt is an equal opportunity cancer eating away the wealth of many American households. More and more money is borrowed and less money is saved. Reducing or eliminating credit card debt should be a priority for families who want to move beyond mere financial survival.
The Growing Burden of Credit/ Interest Rates Are Up/ Housing Market Slows
According to the same survey, 46.2% of all families now carry a credit card balance. This is up from 44.4% in 2001. Households are also carrying higher balances; the mean balance is now $5,100 ($4,400 in 2001) and the median balance is $2,200 ($2,000 in 2001). The median income is currently $43,200 and the typical family's credit card balance is now almost 5% of their annual income.
"These households have probably gone through budget shock -- as their balances have risen, the interest rates have also increased every few months and the minimum payment percentage has just increased," says Bill Hardekopf, CEO of LowCards.com. "The average APR is now above 13%, so carrying that balance is getting very expensive. The average household is paying over $700 per year in interest for credit cards."
Why is this information in a real estate column? Because high credit card balances often prevent prospective borrowers from getting mortgages for purchases and refinances. One solution is for homeowners to consolidate high interest credit card debt into mortgage payments with lower interest rates.
The national average commitment rate on a 30-year fixed-rate mortgage reached 6.37 percent the week ending March 9, 2006, the highest level since Sept. 5, 2003 when it was 6.44 percent, according to Freddie Mac, the stockholder-owned corporation that connects the residential mortgage market to Wall Street dealers and investors.
The national average commitment rate for the 15-year fixed-rate mortgage also increased to 6.00 percent. The 15-year rate has not been this high since July 5, 2002, when it averaged 6.03 percent. The national average commitment rate, along with fees and points charged by lenders, reflect the cost of obtaining a mortgage.
The average rate on a five-year adjustable-rate mortgage (ARM) also edged up to 6.03 percent. Meanwhile, the average rate on a one-year ARM reached the highest level in five years, hitting 5.45 percent. The one-year ARM has not been higher since Sept. 21, 2001 when it averaged 5.58 percent.
"Financial markets are beginning to think that the Fed will hike rates three more times this year putting upward pressure on mortgage rates,” says Frank Nothaft, Freddie Mac vice president and chief economist.
"Although the signs are mixed, the housing industry is now beginning to shift into slower gear and higher mortgage rates will only strengthen that change,” Nothaft concludes. However, we see no signs of a bursting bubble, but rather a return to a more normal pace of activity."
Marci Kenon is a Los Angeles-based loan specialist with Clarion Mortgage Capital. To apply for a loan anywhere in the U.S. or for info about residential and commercial loan programs, visit: www.clarionmortgageusa.com . You can contact her at marcikenon@msn.com or via telephone: 323-418-8690, for a FREE consultation.