August 2006

2006

In this Issue:

Have Mortgage Rates Finally Peaked? Handling the Extreme Heat Making Sure You're Covered

Have Mortgage Rates Finally Peaked?

Mortgage rates retreated from a two-year high last week, brought down by signs that the economy is cooling, according to Freddie Mac.

The average rate on 30-year fixed-rate loans fell to 6.72 percent for the week ending July 27 from 6.80 percent the week before. A year ago, the 30-year mortgage rate averaged 5.77 percent.

Mortgage rates drifted lower last week on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile.

Meanwhile, recently released new homes sales for June fell to a lower than expected rate. That drop can be traced directly to higher mortgage rates, which are also helping to slow the growth of house prices in 2006.

Freddie Mac said the 15-year rate slipped to an average of 6.34 percent from 6.41 percent the previous week. A year ago, the 15-year rate averaged 5.34 percent.

Five-year adjustable-rate mortgages edged lower to 6.35 percent last week. The five-year ARM averaged 5.27 percent a year ago.

The average one-year adjustable-rate mortgage also fell, slipping to 5.78 percent from 5.80 percent. At this time last year, the loan averaged 4.46 percent.

For homeowners using adjustable rate mortgages, a rise in interest rates can mean ballooning payments. The Mortgage Bankers Association estimates that some $330 billion worth of ARMs will adjust in 2006 and $1 trillion worth will reset by the end of 2007.

Handling the Extreme Heat

We covered this topic a couple of times in the past when the summer heat became extreme, and with extreme heat that has been gripping much of the nation in recent weeks, and all the deaths that have occurred already this summer from heat exhaustion and heat strokes, we felt this topic warranted a reminder.

Increase Your Intake of Non-Alcoholic, Non-Carbonated, Caffeine Free Beverages Such as Water and Juice.
Wear Clothing That is Light in Color and Loose Fitting.
Avoid The Outdoors During Extreme Heat. Stay Out of the Sun.
Stay in an Air-Conditioned Environment if Possible. Shopping Malls Offer Relief if Your Home is not Air-Conditioned.
Check On The Elderly. They are Especially Susceptible to Heat Related Illness.
Eliminate Strenuous Activity Such as Running, Biking and Lawn Care Work When it Heats Up.
Eat Less Foods That Increase Metabolic Activity/Heat. Proteins are an Example. Increased Metabolic Heat Increases Water Loss.

HEAT RELATED ILLNESSES AND THEIR SYMPTOMS

SUNBURN - Redness and pain in the skin. In severe cases there is also swelling, blisters, fever, and headaches.

HEAT CRAMPS - Heavy sweating and painful spasms usually in the leg or abdomen muscles.

HEAT EXHAUSTION - The person becomes weak and is sweating heavily. The skin is cold, pale and clammy. The pulse becomes thready. Fainting and vomiting accompanies heat exhaustion.

HEATSTROKE/SUNSTROKE - High body temperature (106 degrees or higher) along with hot dry skin and a rapid and strong pulse. Unconsciousness is possible.

THE HEAT INDEX

This is the opposite of "wind chill". The Heat Index combines the effects of heat and humidity. Warm temperatures feel even warmer when it is humid.

HEAT INDEX VALUES AND THEIR EFFECTS…ESPECIALLY FOR PEOPLE AT HIGHER RISK…

The Heat Index Chart

80 to 90 degrees - Fatigue possible with prolonged exposure and/or physical activity.

90 to 105 degrees - Sunstroke, heat cramps, and heat exhaustion possible with prolonged exposure and or physical activity.

105 to 130 degrees - Sunstroke, heat cramps or heat exhaustion likely, and heatstroke possible with prolonged exposure and/or physical activity.

130 degrees and higher - Heatstroke/sunstroke highly likely with continued exposure.

Making Sure You're Covered

Getting the enough insurance coverage for your home is the only way to protect your most valuable asset. As we swing in to the month of August, we move closer and closer to the height of hurricane season, and a reminder that NOW is the time to make sure you're covered, NOT after a storm hits, or even forms.

Most homeowner insurance companies cease writing coverage on property once a tropical storm has been officially named, so now is the time to make sure you are not caught short when the next name is attached to a weather system.

A lot of people have what is called "cash value insurance." That means if you have a loss, you may not get the money you need to fix your house or buy new furniture.

This policy means your insurer is going to give you something less than what you paid to buy the content in the first place because they take depreciation into account. Depreciation is the amount of money they say makes up for the wear and tear.

If you want the full value of what it would cost to replace your items, you'll need replacement cost insurance. It's priced at about 10 percent more.

Nearly 2/3rds of all homes are insured for less than their value. Don't get caught shorthanded. With construction and material costs up about 8-10% since last year, you'll want to factor in these rising inflation costs. Make sure your insurance policy has an inflation guard. This way the value of your home will be adjusted to account for these rising prices. And if you've made any improvements to your home, be sure to tell your insurance company. Whenever you add value to your home, you'll want your insurance to reflect that.

If you live in an older home or in an area that has an older infrastructure or your community is prone to disasters, you may want to consider insurance that will cover the cost of rebuilding your home to meet building code upgrades and construction regulations.

If you live in a flood zone, getting flood insurance is a no-brainer. For the rest of us, it's still a good idea since homeowners are 26 times more likely to get hit with a flood rather than a fire.

If your home is damaged to the point where you can't live there for a while, your insurance should pay for your hotel room and meals. If you live in an area that has seen widespread devastation, like New Orleans, it could take quite a few months or even years before you can return to your house.

You want to get all the details about this living expenses provision. Some policies may cover expenses only for six months. Other policies will cover expenses up to about 20% of the insurance on your house. In most cases, you can increase this coverage for an additional premium.

And above all, don't wait for disaster to strike to find out what kind of coverage (and for how much) you have. DO IT NOW. Call your insurance agent if you're unsure about how to interpret something in your policy.