30-Year Rates Just Shy of 5 Percent

Freddie Mac reports slightly higher mortgage rates this week, with the average interest on a 30-year fixed loan topping off at 4.99 percent from the previous week's 4.96 percent and from 4.85 percent a year ago.

Here’s a look at how other rates fared:
• 15-year fixed loans bumped up to 4.34 percent from 4.33 percent a week earlier but remained down from 4.58 percent a year ago.
• Five-year adjustable-rate mortgages averaged 4.14 percent, climbing from 4.09 percent a week earlier but declining from 4.98 percent a year earlier.
• One-year ARMs were 4.20 percent versus 4.12 percent and 4.85 percent, respectively.

Source: Wall Street Journal, Nathan Becker (03/26/10)

“Current market conditions have created a perfect storm of sorts that has made it an ideal time to purchase for first-time and trade-up buyers alike,” said James M. Weichert, president and founder of Weichert, Realtors. “Those who have the means and the desire to buy now but don’t, aren’t likely to see such a great opportunity again anytime soon.”

Specifically, Weichert offered three reasons why those who aren’t under contract to purchase a new home by April 30, 2010 might regret it.

1. They won’t receive a sizeable amount of money from Uncle Sam.

For the past two years, the federal government has offered a home buyer tax credit to help stimulate the economy. But that financial incentive is set to expire soon. First-time buyers who aren’t under contract to purchase a home by April 30, 2010 will leave the $8,000 that is available to them through the tax credit on the table. Meanwhile, repeat buyers will miss out on the opportunity to collect up to $6,500 from the government.

2. They might not lock-in on the historically-low interest rates.

Thanks to measures taken by the Federal Reserve including the purchasing of mortgage-backed securities, interest rates have remained historically-low for several years. With the economy beginning to show signs of recovery, it is widely believed that the government will soon put an end to these stimulus efforts.

If that happens, many economists believe we will begin to see a sharp increase in interest rates which could result in a much higher monthly payment for those who wait. For example, an interest rate increase of 1% on a 30-year fixed mortgage of $300,000 could cost a buyer $188 more a month or $67,000 more over the span of the entire loan.

3. They might miss out on record home price affordability.

Home price affordability is at its most optimal level in decades. As a result, those who wait to buy will likely pay more for the home they purchase than what that same home would cost right now. In fact, home prices have already begun to rise slightly in some markets. Instead of getting a better bargain, waiting to buy a home might net buyers a higher purchase price, less appreciation and less house for their buck.

“There is no time to waste for anyone who wants to take advantage of this great buying opportunity. Particularly for those who have a home to sell first,” added Weichert. “If you are prone to saying ‘what if’ and wondering what could have been, you will thank yourself down the road for buying now.”

Happy Talk

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

The “dismal science” of economics typically focuses on “bad” news. We clearly face many significant challenges…no argument here. However, there are also many favorable developments taking place within the U.S. economy. This is our semi-annual update of “Happy Talk.”  This Tea Leaf focuses ONLY on the “good” news…

• The Great Recession is over! The consensus of forecasting economists expects U.S. economic growth this year near 3.0% (after inflation), the strongest in five years

• The U.S. accounted for nearly one-third of the $1.1 trillion spent globally on research & development in the latest data available

• Total U.S. workplace fatalities declined to their lowest point on record last year

• The strongest U.S. job gains in four years are likely to be reported in coming months

• Donations to charities were near the all-time high in 2008, with more than $307 billion donated by individuals, foundations, and corporations. As a percentage of GDP, Americans gave twice as much as the next most charitable nation…England

• Energy-efficient appliances, cars, buildings, and other technologies that already exist could lower U.S. energy usage 30% by 2030

• Smoke-free laws in restaurants, bars, the workplace, etc. reduced the rate of heart attacks by an average of 17% after one year in those communities where the bans had been adopted

• The Dow average has rebounded 66% since its low in early March 2009, with even larger gains by other measures

• The income of women worldwide is expected to rise by $5.1 trillion by 2013 to $15.3 trillion, an increase of one-half

• During the early 1960s, the five-year survival rate from cancer for Americans was one in three. Today it is two in three…continuing to climb…and the highest in the world

• Roughly 80% of companies that suspended or reduced their 401(k) matches during the past 2-3 years plan to reinstate them this year

• The divorce rate dropped by one-third between 1981 and 2008, and is at its lowest level since 1970

• U.S. exports to China have risen roughly 24% per year since 2001, making China the fastest growing market for U.S. goods

• Conventional thirty-year fixed-rate mortgages have averaged just slightly below 5.00% in recent weeks, near the lowest levels on record

• Violent crime declined 4.4% during 2009’s first half, versus the year before.  Violent crime overall is down nearly 60% since 1993, with violence by teens down 71%.  School violence has declined by half from a decade ago

• The number of American volunteers rose 2.0% to 61.8 million in 2008. Among young adults, the number of volunteers rose 5.7%

• Air pollution declined 25% over the past 30 years even as the population and the economy grew.  Water quality also continues to improve.  More progress will occur in coming years as companies see rising value in “going green”

• The global economy has returned to modest growth after suffering its first recession since just after WWII 

• Cigarette smoking by teenagers is at the lowest point since measurement began in 1975

• Women now make up a record 46% of global MBA candidates. More than 70% of students surveyed name the U.S. as the top MBA study destination

• Men’s contribution to housework has doubled over the past 40 years, while their time spent on child care has tripled

• Productivity of U.S. workers rose an average of 2.8% annually during the past 10 years, the largest gains in 40 years. Rising productivity is a long-term key to higher standards of living

• The number of people who have quit smoking (46 million) now exceeds the number who still smoke (45 million).  Less than 21% of adults smoke today, versus nearly half in the early 1950s

• Traffic deaths per 100 million miles traveled during 2009’s first half were the lowest on record

• The Consumer Price Index (CPI) is up a modest 2.1% during the most recent 12-month period

• The number of people using public transportation hit a 52-year high during 2008

• Alcohol-related traffic fatalities in the most recently reported year dropped by more than half versus 20 years ago

• Average U.S. life expectancy has reached 78 years (men 75, women 80), the highest ever.  This compares to 76 years in 1995, 68 years in 1950, and 47 in 1900

• For every dollar of U.S. economic output generated today, we burn less than half as much oil as 30 years ago

• Children’s deaths from unintentional injury have dropped by almost 40% since 1987. Bicycle deaths fell 60%, while firearms-related deaths fell 72%

• Roughly 30% of trash was recycled or composted in the latest year, versus 16% in 1990

• A record 50.5 million foreigners visited the U.S. during 2008

• The number of miners killed on the job in the U.S. fell to 34 during 2009, the lowest since recordkeeping began nearly a century ago

• Seat belt usage by Americans was at 82% in 2007, versus 49% in 1990 and 14% in 1983

• A recent poll of more than 12,000 global business figures conducted by the World Economic Forum ranked the U.S. as the world’s most competitive economy

• A record 29% of men have earned a bachelor’s degree or higher, versus 26% of women, also a record. This compares to a combined 7.7% in 1960.  A record 84.6% of adults over age 25 now have at least a high school diploma, versus 24.5% in 1940

• The upward “mobility” of the typical American remains the greatest in the world. Why? The U.S. economy “rewards” the combination of hard work and educational achievement more than ever before…and more than any other country in the world

• Substantiated cases of childhood sexual abuse have fallen 49% since 1990.  Physical abuse of children is down by 43%

• More than three million girls participated in high school sports last year, part of a record 7.3 million total participants

• The number of abortions performed in this country has declined by one-third since 1990 and is now at a record low

• Women earned nearly 60% of all bachelor’s degrees awarded in recent years, versus 43% in 1970 and 24% in 1950. Women earned a similar share of master’s degrees

• U.S. teen pregnancy and birth rates plummeted to all-time lows in recent years, before a slight rise. The reasons? More widespread use of birth control, more work opportunities, and more girls who “just say no”

• Flexible work schedules are now the norm for 43% of workers, up from 29% in 1992 and 13% in 1985. This allows greater flexibility for more people, especially those with children

• The number of police officers who died in the line of duty during 2009 was the lowest in 50 years

• The U.S. role of dominance in the global economy during the past decade was as clear-cut as at any time since the 1950s

Fannie Expects Slow Recovery to Begin By Year End

Housing activity is projected to rebound later this year, but at a slower pace than previously anticipated, according to Fannie Mae’s March 2010 Economic Outlook. The report finds that the recent drop in new- and existing-home sales should be temporary, with sales beginning to improve in the second quarter and trending up through the end of the year. The report forecasts that the overall economy will grow by 3 percent in 2010, although concerns over job and income prospects continue to weigh down consumer confidence.

Home Price Reductions Fall to All-Time Low

About one in five residential property listings (19 percent) on the market as of March 1 had at least one price reduction, down from 21 percent at the beginning of February, according to Trulia’s March 2010 Price Reduction Report.

It is the first time price reduction levels fell below 20 percent since Trulia began tracking this statistic in April 2009, and it is a new all-time low. Price reductions have declined steadily from a peak of 26 percent in November 2009 to the current rate of 19 percent. The average home price reduction was 11 percent off the original asking price during the month, unchanged from the previous month. Overall, home prices were slashed to $21.6 billion in February.

Home Owners Fight Property Tax Increases

Taxpayers in high property-tax states all over the country are fighting back, including packing up and moving to states where the property tax burdens are lower.

They find it particularly galling that tax bills continue to rise as home values decline, a common phenomenon. A recent survey by the National League of Cities reported that 25 percent of municipalities raised property taxes in 2009 to replace declining revenues.

In New Jersey and New York, voters threw incumbents they viewed as tax-and-spend officials out of office. In Michigan, there have been so many tax appeals that the tax court has 24,000 pending cases.

Some observers like Ted Lanzaro, a certified public accountant who handles taxes for clients in Connecticut, predict that people are running out of savings and some are simply going to stop paying taxes.

Source: The Wall Street Journal, M.P. McQueen (03/06/2010)

Buyers Who Wait May Lose a Lot

Potential home buyers who delay have a lot to lose.

First-time home buyer and move-up tax credits worth $8,000 and $6,500, respectively, expire April 30. Buyers who qualify get a dollar-for-dollar reduction in taxes or a cash payment if they don’t pay enough taxes to cover the credit.

Other factors that should spur buyers:

Low mortgage rates. If the Federal Reserve stops buying mortgage-backed securities at the end of March, 30-year rates will almost certainly rise to more than 6 percent.

Rising prices. About 30 percent of markets are already experiencing price increases. Prices are falling in 12 percent of markets, says Fiserv (but that only helps if you want to live there).

Source: Money Magazine, Beth Braverman (03/02/2010)

Buyers Should Consider Prepaying Mortgage

Should home buyers with sufficient cash pay down their mortgages or put the extra money in investments or savings?

Financial experts say the choice depends on the home buyer's employment prospects, current savings, and investable assets.

If life looks a little uncertain, they advise putting the money in a safe place, like a savings account. But for people with more stable financial situations, paying down the mortgage can be a great investment, often providing a better return than a savings account.

Source: Washington Post, Ilyce R. Glink and Samuel J. Tamkin (02/27/2010

Municipality of Anchorage elections will be held on April 6th.  Two Girdwood Board of Supervisors seats are up for re-election.  I am running for re-election to Seat 'C'.  This is a three year term.  I was appointed to this seat by Mayor Begich in the fall of 2007 after being recommended by the Girdwood Board of Supervisors. I was subsequently re-elected in the spring of 2008 to the remaining two years of the three year term.

After a little more than two years on the Board, I have learned that it takes at least a year, and possibly longer, to really understand how the Board functions.  In addition, it takes some time to learn about the issues affecting our community.  Being a member of the Board is a committment.  It can take time and it can be a thankless volunteer position, but our community cannot function without individuals dedicated to Girdwood.

I gave running for re-election great thought and consideration.  I would appreciate your vote on April 6th and hope you'll support me as a volunteer dealing with the issues that affect our community.  I am available to answer any questions you may have as to where I stand on issues affecting Girdwood; please feel free to reach me by phone at 907/223-9799 or by e-mail at Bryan@BryanEpley.com .

Fed: Interest Rates to Remain Low

Investors breathed a sigh of relief Wednesday when Federal Reserve Chair Ben Bernanke told Congress that interest rates are likely to remain low for an extended period. The economy, he said, "still requires support for recovery."

Investors see these low rates as a boon to a recovery of employment and business.

Bernanke’s announcement also took the edge off the news Wednesday that housing sales hit a new low in January.

"Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there," said Jim McDonald, chief investment strategist at Northern Trust in Chicago.

Source: Associated Press, Tim Paradis (02/24/2010)