Personal Economics 101

Why Some Rate Quotes Are So Different And Why "Points" Are On The Rise It was yet another tough week for the mortgage market with rates rising to their highest levels since 2009, but how high have they actually risen? Energy up nearly 50% YTD as crude oil climbs to $110 per barrel WTI crude futures ( CL1:COM ) jumped 4.9% for the week to $109.77/bbl, July Brent futures ( CO1:COM ) also added 4.9% to $112.39/bbl, and gasoline futures ( UGA ) in New York settled at a record high $3.76/gal, three weeks before the start of the U.S. summer driving season. Losing the People? Then Change the Rules Court-packing—the attempt to enlarge the size of the Supreme Court for short-term political purposes—used to be a dirty word in the history of American jurisprudence. The Disinformation Governance Machine Right out of 1984. Homeland Security Secretary Alejandro Mayorkas announced on April 27 the creation of the “Disinformation Governance Board.” The Nation's Top Scientists Lied Scott ...

By Gary Halbert Between the Lines U.S. home prices soared by 18.4% in October alone over year-ago levels. That was actually slightly below the annual increase of 19.1% in September. Home prices are on fire, and no one knows how this unprecedented bull market will end. Here you can see what US home prices have done over the last 50+ years. The price rise has been spectacular, with no end in sight. Since the last low in 2010, median home prices have more than doubled from near $200,000 to above $400,000 today. The median home sale price in the US was $404,700 at the end of the 3Q. It is considerably higher in certain popular zip codes. Those would include Phoenix, Tampa and Miami just to name a few. Minneapolis and Chicago posted the smallest increases over the past year but still increased by 11.5%. The housing market has been strong thanks to rock-bottom mortgage rates, a limited supply of homes on the market and pent-up demand from consumers locked in last year by the pandemic. Many A...

The following was written by Kelly Evans, CNBC . We've been talking about the reversal in liquidity that's popped some bubbles in stocks and crypto over the past few months (growth in M2 has dropped from 27% in February to 18% year-on-year as of April), but one place that's still rip-roaring is the housing market. In fact, home prices are accelerating, as the Case-Shiller release showed yesterday. Year-on-year gains rose to 13.3% in March, from 12% in February. Still, that's a composite of 20 big cities. You might expect the broader FHFA national index to show more modest gains, but nope. That index showed prices up nearly 14% in March! I asked the CEO of Realogy about this the other day--are we back to the bad old days of the early '00s housing bubble? No, he said. This one isn't driven by psychology (hey, buy a house, make a ton of money! Home prices never go down!) so much as real, consumer demand. All the millennials are buying houses all at once. Now that ...

From Morningstar Equity Research :  Investors had every reason to be hesitant in entering the third quarter of 2020, but economic conditions have proved more favorable than widely expected. In particular, housing markets proved exceptionally robust. Existing-home sales surged toward the end of the summer, giving builders confidence and supporting 11% growth in new-home starts during the third quarter.  We expect the momentum to continue through the fourth quarter and into 2021, but some dynamics will change. Affluent buyers have driven the surge in housing in 2020. Sales growth in housing categories from $500,000-$1 million-plus accounts for over half of incremental purchase volumes in the third quarter. For most buyers, those prices remain out of reach.  As more companies have approved indefinite remote-work policies, we suspect wealthier renters could be heading for the suburbs. However, we don't see this as a sustainable source of housing demand in the long run.  ...

 The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in November unexpectedly improved to another record high, jumping to 90, versus forecasts calling for it to match October's 85 level. A level north of 50 depicts positive conditions. The index notched a record high for the third month in a row and the NAHB noted that this reflects that housing is a bright spot for the economy. "However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front," the NAHB added. Housing starts for October rose 4.9% month-over-month (m/m) to an annual pace of 1,530,000 units, above the Bloomberg forecast of 1,460,000 units, and compared to September's upwardly-revised pace of 1,459,000 units. However, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future c...

Don’t over-leverage the property. Borrowing money to purchase and improve a property is a good strategy. Just don’t overdo it. Two things happen when you over leverage a property. You may not have adequate financial reserves to take care of any unexpected problems that come along. Also, it costs money to borrow money. It will eat into your profit. Today’s low-interest rates are tempting but do the math first. If the interest rate is likely to go up later (balloon payment or adjustable mortgage), run the numbers for the worst-case scenario before committing to the loan. Be conservative in your cost estimates and schedule. It almost always costs more and takes longer than you think it will to make repairs or remodel a house. Especially if you don’t have a lot of experience with real estate or a particular type of deal. Be conservative when estimating costs and schedules and then add another 20% to both. The bright spot here is that when you come in under budget and ahead of schedule, th...

Right now, people are feeling like there is a lot of pressure to buy a home. After all, mortgage rates have been insanely low. So, for many who have been saving up to buy their first home, now feels like a good time. But, while the nationwide real estate market is booming, you probably aren’t looking for an average home just anywhere. And local markets can see vastly different stories playing out that you don’t hear about when you’re taking a look at the real estate market as a whole. So, how can you look at specific data that applies to your specific situation and still make an informed decision? While there are benefits to buying, let's look at some top reasons not to buy a house. First, the original article where this material came from stated that you shouldn't buy if you're nearing retirement. I couldn't disagree more. If the other criteria, such as income, debt, etc., are in line, buying can be a good choice, as it tends to lock in your housing costs. This has be...

 We all know that home prices are ridiculous in California. After decades of restrictive housing regulations, demand outpaced supply, driving up prices.  Here's what $1.7 million will buy you in San Francisco. (2,173 square feet) 1812 Webster Street, San Francisco Here's what $1.7 million will buy you near Austin, TX (6,495 square feet) 412 Indigo Lane, Georgetown

I have put together a series of resources and videos on Homeowners Associations. I focus on Texas, but these laws and procedures are common in many states. I've tried to be "neutral" and not just focus on the negatives of HOAs, as there are some benefits to these organizations. Most of the videos simply deal with your rights as a homeowner.  Many states have a state agency that regulates or monitors HOAs. However. Texas does not.  Here are some other resources that might be useful: Texas HOA Laws and Resources Can you dissolve an HOA in Texas? Texas State Law Library: Property Owners Associations Texas Property Code: Restrictive Covenants Texas HOA Law: 2019 Legislative Update Texas Property Codes Texas Residential Property Owners Protection Act Test HOA Litigation in Texas (4:00) He mentions Right of Redemption in reference to foreclosure: The right of redemption, in the law of real property, is the right of a debtor whose real property has been foreclosed upon and sold ...

Initial claims for unemployment insurance totaled 4.43 million for the week ending April 18, marking the fifth consecutive week of massive, record-shattering layoffs, and dwarfing the previous high of 695,000 in October 1982. However, on a positive note, the latest tally is the third week of declines in the number of initial claims since the 6.87 million claims during the week of March 27. During the Great Recession in 2008-09, total job losses were 8.8 million over 25 months versus the current 5-week total of 26.5 million initial claims. The unprecedented flood in claims is the leading edge of a tsunami of negative economic statistics that reflect the impact of the COVID-19 outbreak and the drastic policy reactions implemented to contain the spread. Sales of new single-family homes tumbled 15.4 percent in March to a 627,000 seasonally adjusted annual rate. Sales are now down 9.5 percent from a year ago. Sales fell in all four regions tallied: sales plunged 41.5 percent in the North...

You may be wondering if there are tax deductions when selling a home. And the answer is: You bet! Sure, you may remember 2018's new tax code—aka the Tax Cuts and Jobs Act—changed some rules for homeowners. But rest assured that if you sold your home last year (or are planning to in the future), your tax deductions when you file with the IRS can still amount to sizable savings. 1. Selling Costs These deductions are allowed as long as they are directly tied to the sale of the home, and you lived in the home for at least two out of the five years preceding the sale. Another caveat: The home must be a principal residence and not an investment property. Just remember that you can’t deduct these costs in the same way as, say, mortgage interest. Instead, you subtract them from the sales price of your home, which in turn positively affects your capital gains tax (more on that below). 2. Home Improvement and Repairs If you renovated a few rooms to make your home more marketab...

Phil Town always (or mostly) has good financial advice. His money traps to avoid this year (or actually any year): 1. Don't buy a flashy new car. If you need a car, find a quality used car. 2. An expensive house you can't afford. 3. Streaming services. Don't over do it. Watch the small stuff. Stick to a budget. 4. Investing too much money in a 401(k).

With the new tax laws passed in 2017, 2018 and 2019, the standard deductions are now $12,200 for an individual and $24,400 for a married couple. You might now have enough in homeowner deductions, which need to be over those limits to be of benefit, but you should know the rules regardless. For some homeowners, itemizing simply may not be worth it. So when would itemizing work in your favor? As one example, if you're a married couple who paid $20,000 in mortgage interest and $6,000 in state and local taxes, you would exceed the standard deduction and be able to reduce your taxable income by an additional $2,000 by itemizing. Mortgage Interest Homeowners with a mortgage that went into effect before Dec. 15, 2017, can deduct interest on loans up to $1 million. However, for acquisition debt incurred after Dec. 15, 2017, homeowners can only deduct the interest on the first $750,000. Property Taxes This deduction is capped at $10,000 for those married filing jointly no mat...

I received an "urgent" notice in the mail this week. It was addressed to those of us who have VA mortgages. With rates as low as 2.75%, no cash up front, no processing fees, among other promises, I thought, maybe I should investigate. My current mortgage rate is 3.75%. I could lower my monthly payment nearly $200, based on their information, if it was true. Turns out the facts speak differently. First thing I did was go to Bank Rate and Barron's magazine to check the national average for 30-year fixed mortgages, As of this writing, it was 3.685%. This made the "rates as low as" offer suspicious. I then reached out to a trusted source, my mortgage broker, Mary Kennedy at PrimeLending , for my current VA mortgage. Here's what she said: "Throw all those away!!! You are good at 3.75 %!! Those advertisements have you paying lots of fees and points and they add it all onto your loan amount but they make it sound so good!! I don’t think it will ever b...

In my lifetime, I have bought six houses, and sold five. I currently live in the sixth, which was new construction, which was an adventure unlike purchasing an existing home, But the principles of buying a home are the same, whether you are purchasing a new home, or an existing home. 1. Understand why you want to buy a house Purchasing a home is a major decision that shouldn’t be taken lightly. It’s important to define your personal and financial goals before proceeding. Think about factors such as whether you’re craving more stability, whether it makes sense financially and whether you’re prepared for the responsibility of maintaining a home. You should explore some resources on Renting vs. Buying before you make the decision. I posted a article with a couple of good videos on this subject, and bankrate.com as an informative article here .  2. Dig Into Your Credit Reports and Credit Scores Your credit score and history are the first things all lenders will look...

Gross Domestic Product Consumer spending was stronger than previously estimated in the second quarter, rising at an annual 4.7 percent inflation-adjusted pace. This pace is a reminder that the strong labor market is underpinning the consumer and helping to offset weakness in global growth and the resulting weakness in domestic manufacturing. Overall GDP was shaved by 1 tenth in the second estimate for the second quarter though still managed a respectable 2.0 percent showing. The key for the second quarter was consumer spending and so far in the third quarter strength here appears to be solid once again and may well offset uneven readings for other components, whether business investment or residential investment which are two areas where recent indications have been up and down. Jobless Claims Unemployment claims did edge higher in the latest data but remain favorable, indicating strong demand for labor and pointing to another solid showing for the monthly employment report. New...

The housing trend is visibly fading at the half-way point, opening the year on a solid rise before flattening out and slowing in May and June. This is true of existing home sales which were reported yesterday and is especially true with today's report on new home sales which came in at a lower-than-expected 646,000 annual rate. The 3-month average is at 636,000 which compares unfavorably against a 673,000 peak in April. The median price firmed in June to $310,400 but is no better than dead flat versus June last year. Supply edged higher to 338,000 new homes on the market and on a sales basis is at an ample 6.3 months. Sales jumped in the West, edged higher in the South, and slipped in the South and Northeast. Market fundamentals should be pointing to better results for new home sales: there's plenty of homes on the market, prices are soft, employment is strong, and mortgage rates have come down sharply. Yet today's report is consistent with anecdotal reports that foreign bu...

GUESS IT DEPENDS ON YOUR SOURCE OF INFORMATION I wrote back in September of last year that I thought that the housing market was showing signs of weakness. This is important because it is a large part of our overall economic outlook. But there are currently differing opinions, depending on the source. From the American Institute of Economic Research on May 23: Housing Outlook Remains Weak Sales of new single-family homes fell 6.9 percent in April to a seasonally adjusted annual rate of 673,000, down from a multiyear high of 723,000 in March. Sales fell in three of the four regions, with only the Northeast - the smallest region by volume - posting a gain. Total inventory of new single-family homes for sale fell 0.9 percent to 332,000 in April, pushing the month's supply to 5.9 months, up from 5.6 months in March. Slowing sales and rising inventory are coinciding with slowing permit issuance. Overall, despite weakness in housing, the economy continues to be supported by a tight lab...

No one is predicting a crash in the housing market yet, but there are signs of a slow-down. Mostly due to raising mortgage rates and a change in the tax law, in my opinion. Realtor.com has a analysis via the link below. Then there are the smaller cities, like Austin, TX, and Nashville, TN, that burst onto the national scene just a few years ago—poster children for the supercharged housing recovery. Home prices rose to meteoric heights as builders raced to put up new abodes and transplants from even higher-priced metros flooded the cities. At the same time, their populations shot up 18.5% and 10.6% respectively from April 1, 2010, to July 1, 2017, according to U.S. Census data. And then, despite all the hype, list prices did the unthinkable—they began to fall. Austin is a particular eye-opener: List prices dipped about 3%, to a median of $362,000 in August compared with the previous year, according to our realtor.com analysis. The year before that they dipped 2%. And while median sale...