Category Archives: Financial Advice

Heating Fuels Price Comparison

As winter approaches home owners naturally think about what the costs will be to heat their homes. This is also on buyers minds as they look at prospective homes – the number one question realtors get asked when a home is heated with fuel oil is “is there gas on the street?” Hard numbers on heating fuel prices are readily available but a detailed comparison is harder to come by. As the MA Properties Online team takes a ‘data driven approach’ to real estate this newsletter will do the comparison for you.

Heating Fuels

Homes in Massachusetts are heated with a number of fuels so we’ll focus on the main ones: natural gas, fuel oil, electricity, propane and wood pellets. The latest pricing data is available on the Energy and Environmental Affairs section of the mass.gov website. For electricity and natural gas costs we used the latest prices for NSTAR (electricity) and National Grid (natural gas).

Here are the prices for November 2014:

Fuel Type Fuel Price Fuel Unit Notes
Natural Gas $1.03 Therm Supply + delivery charges
Wood Pellets $318.5 Ton Average for premium and super premium pellets
Fuel Oil $3.33 Gallon  
Propane $3.13 Gallon  
Electricity 17.8 cents KWh Generation + delivery charges

Cost Comparison

The costs comparison converts all costs to $/BTU and factors in an efficiency rating for various heating appliances. The calculations to do this came from the US Energy Information Administration (EIA). As you look at this data remember that your fuel prices may differ from the prices listed above (perhaps because you pre-ordered fuel oil) and the efficiency of your heat appliance may be different (in general, more modern appliances will have a higher efficiency). The EIA estimates that the average usage in MA is 109 million BTU (this is for a 2,076 sqft single family home – so your usage may differ if your home is significantly larger or smaller than this).

Fuel Type Fuel Price Fuel Unit Heating Appliance Type Approx. Efficiency Fuel Cost / Million BTU Average Fuel Costs MA
Natural Gas $1.03 Therm Furnace or Boiler 82% $12.54 $1,366.59
      Room Heater (Vented) 65% $15.82 $1,724.01
      Room Heater (Unvented) 100% $10.28 $1,120.60
Wood Pellets $318.5 Ton Room Heater 78% $24.75 $2,697.47
Fuel Oil $3.33 Gallon Furnace or Boiler 78% $30.78 $3,355.29
Propane $3.13 Gallon Furnace or Boiler 78% $43.94 $4,789.02
Electricity $17.8 cents KWh Furnace or Boiler 98% $53.23 $5,802.45
      Baseboard/Room Heater 100% $52.17 $5,686.40

If we show this graphically (using the furnace/boiler data) we see the clear advantage of natural gas over all the other fuel types.

More details of this can be found in the Newsletter Heating Fuels Price Comparison.

A wealth of information for over 40 towns (and a lot more information on buying/selling) can be found on our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us.

Quantitative Easing – what it all means

I saw the following explanation of what Quantitative Easing (QE) is in USA Today and thought it was worth sharing …

If you’ve bought a home or gotten a job over the past five years, the Fed’s [Federal Reserve] quantitative easing program may have touched your life.

Normally the Fed regulates the economy by raising or lowering short-term interest rates. If the economy is growing too fast it nudges its key Fed funds rate up. If it [the economy] is slowing, it lowers it.

In 2008, the Fed had already pushed interest rates to zero. To stimulate the economy it began quantitative easing – buying long-term Treasury and mortgage-backed securities. Doing so, the Fed reasoned, would push long-term interest rates down. (In the upside-down bond world lower supply means lower yields and vice-versa). Those lower yields would push down mortgage interest rates and let homeowners refinance, putting money in their pockets. It would also push up stocks, making people feel richer.

Now that QE is being tapered off what are the implication for mortgage interest rates and the housing market in general?

Analysts predict that mortgage interest rates are predicted to rise over the next 12 months.

Price appreciation – though appreciation is still there, the amount of the appreciation is decelerating, meaning that we were up, over 12 percent year over year and now we’re just over ten percent. Analysts think this is going to continue, meaning that prices are going to get more and more like they were last year as we move forward. We’re not going to see that double – digit appreciation as a nation, and we could probably go down – we probably will go down to small single digit numbers.

A wealth of information for over 40 towns (and a lot more information on buying/selling) can be found on our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us.

Benefits of Buying vs. Renting

Are you wondering whether you should buy or continue renting? Given where we are now with interest rates and where they are headed (see recent blog post Mortgage Rate Projections, if you were sitting on the fence about whether now is the right time to buy, then you should consider that it is cheaper to buy than to rent in all of the 100 largest metro markets.

One reason is the increase we’ve seen in rents:

Its not just the rising cost to rent – there are benefits to home ownership:

Mortgage Tax Deduction Benefits

  • Mortgage deduction: The tax code allows homeowners to deduct the mortgage interest from their tax obligations. For many people this is a huge deduction, since interest payments can be the largest component of your mortgage payment in the early years of owning a home.
  • Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller. And because origination fees of 1 percent or more are common, the savings are considerable.
  • Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes.

Capital Gains Exclusion

If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. Now, it may sound ridiculous that your house could be worth more than when you purchased it after these past several years of falling house prices. However, if you purchased your home anytime prior to 2003, chances are it has appreciated in value.

Average home prices have now exceeded their pre-crash prices.

Conclusion

First Time home buyers should get off the fence, and quickly!

For more information on over 40 other towns (and a lot more information on buying/selling) can be found on our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us.

Mortgage Rate Projections

Prior to 2008 when the financial markets began collapsing interest rates hovered around 5.75 and 6%. The red line constitutes the actual moment that the financial worlds collapsed. From that point the government began implementing all sorts of stimulus packages to attempt to bring back the housing market, and this resulted in driving interest rates down. And they drove them all the way down until the market started to come back in early 2012. Since the market has come back in 2012, we are seeing interest rates starting to again increase.

Mortgage rate predictions for Q1 2015 by four of the major analysts have mortgage interest rates up by ¾ to 1% within the next year.

These rate should be seen in context though. The following graph shows the Freddie Mac mortgage rate from the past 20 years. As this shows the current and projected mortgage rates are still low. But, buyers should not delay their home search – the sooner you can find the home for you and lock in a rate the sooner you are protected from the inevitable rate rise.

For more information on over 40 other towns (and a lot more information on buying/selling) can be found on our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us.

First Time Homebuyer and Mortgage Rates

According to the 2013 NAR profile of First Time Homebuyer, these are the sources of their down-payment. The cash buyers are out there but they are generally not first time home buyers. 95% of first time homebuyers still take out a mortgage, so what is happening with mortgage interest rates is critical to these folks. Most analysts predict that by Q4 2014 interest rates will be up by ¾ or 1% point higher than they are currently.

If you are a first time homebuyer or you’ve done it before but are just unclear of the process when buying a home the MA Properties Online team have prepared FREE comprehensive Buyer’s and Seller’s Guides that provide a wealth of information about the home buying and selling process. Each guide takes you through each step of the process providing details on what you can expect as you move through the process to owning or selling your home. A page where you can request your FREE copies can be found on our website Free buying and selling guide

For more information on over 40 other towns (and a lot more information on buying/selling) can be found on our website www.mapropertiesonline.com (or if you’re on your smartphone – mobile.mapropertiesonline.com) and if you have any questions do not hesitate to contact us.