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Gathering storm overseas taking mortgage rates down | Inman News

16 Oct

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Oct 10, 2014

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Euro in peril image via Shutterstock.Euro in peril image via Shutterstock.

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The financial world is back on a familiar precipice: A giant global-regional economy is on a cusp, all waiting to see if its government will intervene. This time it ain’t us — it’s Europe, again — the shock waves for the moment beneficial to the U.S.

Mortgages are on their 2014 lows, near 4 percent, taken down by the U.S. 10-year T-note now 2.31 percent, itself taken down by a new low on the German 10-year, 0.845 percent. One more inch down and long-term U.S. rates can fall another quarter-point quickly. Not a prediction, but a middling probability.

Euro in peril image via Shutterstock.
Euro in peril image via Shutterstock.

The immediate push toward this edge has been a new European recession, this time including Germany. Euro foolishness has been clear for several years, poor-productivity nations bolted to the uber-productive German hive and its Deutsche-gelt standard.

The others so love having German money in their wallets that they’ll tolerate 50 percent youth unemployment and German demands to adopt German behavior.

In return, Germany has done everything possible to ruin the experiment: It runs a trade surplus more than 6 percent of GDP (double the treaty maximum), and has this year balanced its budget.

Lou Barnes explains how eurozone troubles can affect U.S. mortgage rates.

We have to raise the cost of money from zero, and we’re probably late to do it.”

Each time Europe has reached a breaking point, the European Central Bank has intervened by jawbone. First a run on non-German banks, then the moon shot of non-German sovereign yields — each time the ECB has threatened to bury anyone trading against it. But the Germans have not allowed the ECB to do anything, especially a Fed-like QE operation.

Each of the prior ECB jawbones has produced global financial relaxation, just like each QE here — rates up, stocks up. This time the ECB’s problem is not a run, it is the fundamental cracking of the European economy.

The Germans in epic rigidity have failed to see that a net-export surplus to others in the same currency will wreck their ability to buy. Germany has allowed the ECB’s rapid devaluation of the euro, a benefit to German exports to non-euro buyers, but within the euro zone a euro is a euro. And so it has come to pass: Germany’s GDP is going negative, its exports failing.

Back to the interest-rate brink: If Germany allows the European Central Bank to take dramatic action or adopts equally dramatic deficit spending, then global markets will quiet, rates back up. Most likely Europe will announce timid measures that will buy time but not stop deflation, and we’ll be back in this soup in months or a year.

Here in the U.S., the world’s best economy, we can enjoy black humor. The events above have put the U.S. Fed in a state of cognitive dissonance. We have to raise the cost of money from zero, and we’re probably late to do it.

Every time we talk about doing something mean, like going all the way to 1 percent in a year or two, the stock market faints. Every time we say we may hold off, stocks take off again. Can’t have the stock market trading on us.

The unemployment rate has fallen faster and farther than ever occurred to us. Only a little more than a year ago we said 6.5 percent would trigger action. New claims for unemployment insurance have reached a 40-year low. Must mean overheating and wages and inflation are nearby. Right?

Housing is soggy at best. Credit card debt is falling. Car sales are propped by subprime loans that are really instant-cancel leases. Wages are not growing at all.

The gap between U.S. performance and the outside world has never been greater — not since World War II. Not after the war, in it. Prices of imported goods fell a half-percent just last month. Commodity prices have tanked. U.S. inflation is going down, not up.

Sensible Fed speakers now sound nuts. Five years ago, the cost of money at zero, the Fed began to reassure markets by saying it would stay there “a considerable period.” Fed Vice Chair Stanley Fischer this week defined the period as “two months to one year” — shorter than anyone in the markets ever believed, and contradicting the whole “considerable” concept.

New York Fed President William Dudley has been the most lucid in the last month, hinting repeatedly that the Fed would be slower to hike than its mid-2015 estimates, but this week said that frame was reasonable.

Watch Europe for now, not this sit-and-shake Fed. If Europe does not save itself, our Fed can be right back in deflation-fighting.

Lou Barnes is a mortgage broker based in Boulder, Colorado. He can be reached at lbarnes@pmglending.com.

 

 

Gathering storm overseas taking mortgage rates down | Inman News.

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10 rental markets where landlords make a killing

14 Oct

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Stocks aren’t the only asset class with impressive returns. With the help of low homeownership rates and strong mobility demand, the rental market remains attractive for investors, especially in areas of the country experiencing double-digit returns.

According to a new report from RealtyTrac, a leading source for comprehensive housing data, rental property in the United States posted an average annual return of 9.06% in the third quarter. That is down slightly from 9.65% in the same year-ago quarter, but still represents a significant return for landlords.

MORE: Top 10 housing markets in America for homebuyers

Furthermore, median home prices rose more than 7% on average from a year earlier. The report analyzed median sales prices for residential properties and average fair market rents for three bedroom properties.

“The single family rental market is still strong, with returns averaging 9% in the 586 counties analyzed,” said Daren Blomquist, vice president at RealtyTrac, in a press statement. “Even so, the market is softening, with those same 586 counties averaging a nearly 10% return a year ago. In the high-risk, high-yield markets, where unemployment and vacancy rates are higher than national averages, the average return was a whopping 19%, actually up from a year ago thanks to a strong increase in rental rates.”

MORE: 5 signs Americans are flat-out broke

Let’s take a look at the top 10 rental markets where landlords are making a killing, using annual gross rental yields from RealtyTrac.

10. Hernando County, Florida

• Annual gross rental yield: 17.29%

• Vacancy Rate: 5.1%

9. Pasco County, Florida

• Annual gross rental yield: 17.30%

• Vacancy Rate: 8.9%

8. Columbia County, Florida

• Annual gross rental yield: 18.42%

• Vacancy Rate: 11.3%

7. Wayne County, Michigan

• Annual gross rental yield: 19.88%

• Vacancy Rate: 8.9%

6. Spalding County, Georgia

• Annual gross rental yield: 20.35%

• Vacancy Rate: 12.3%

5. Putnam County, Florida

• Annual gross rental yield: 22.63%

• Vacancy Rate: 6.3%

4. Howard County, Indiana

• Annual gross rental yield: 24%

• Vacancy Rate: 6.6%

3. Duplin County, North Carolina

• Annual gross rental yield: 24.4%

• Vacancy Rate: 8.8%

2. Clayton County, Georgia

• Annual gross rental yield: 26.88%

• Vacancy Rate: 16.9%

1. Edgecombe County, North Carolina

• Annual gross rental yield: 41.57%

• Vacancy Rate: 11.1%

 

Eric McWhinnie, Cheat Sheet 8:30 a.m. EDT October 12, 2014

 

10 rental markets where landlords make a killing.

Your student loan is killing the housing market

14 Oct

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Millennials already have to deal with hefty debt from college, an iffy job market, and growing up in an era where MTV no longer plays music videos, but now they’re being blamed for holding back the real estate boom. Home builder adviser John Burns Consulting published details from a study earlier this month concluding that student loan payments will cost the housing industry 414,000 transactions this year that would have totaled $83 billion in sales.

Ouch. The ivory tower is crumbling at the foundation.

It’s been widely assumed that mounting student debt is eating away at this otherwise buoyant housing market recovery. John Burns Consulting’s study — boiled down to a free one-pager for those that aren’t paying customers that got the more thorough report — attempts to quantify the impact.

How did the adviser arrive at $83 billion? Well, we start with the 5.9 million households under the age of 40 that are paying at least $250 in student loan debt, nearly triple the 2.2 million leveraged college grads in the same predicament back in 2005. We then get to the assumption that $250 earmarked for student loan debt every month reduces the buying power of a potential home buyer by $44,000. That’s bad, and it’s naturally worse depending on how much more than $250 a month some of these indebted students have taken on to pay back. That’s less money they can commit to a mortgage. John Burns Consulting offers up that most households paying at least $750 a month in student loan have priced themselves out of the housing market entirely.

It gets worse

The study only looked at folks between the ages of 20-40. That’s a pretty sizable lot, especially since 35% of all households in that age bracket have at least $250 a month in student debt. However, even John Burns Consulting concedes that there’s “a big chunk of households over age 40 who have student debt” as well. It’s not likely to be as bad, naturally, but it’s all incremental at this point.

This report also happens to come at a time when the housing industry is starting to flinch after a couple of years of boom and bounce. Right now everything seems great. New home sales data released this past week showed the industry’s highest monthly growth rate in more than six years. However, the near-term outlook is starting to get hazy.

Shares of KB Home (KBH) shed more than 5% of its value on Wednesday after reporting uninspiring quarterly results. Revenue and earnings fell short of expectations, and the same can be said about its number of closings and order growth. Earlier this month it was luxury bellwether Toll Brothers (TOL) setting an uneasy tone after posting a year-over-year decline in the number of contracts it signed during the period and an uptick in the cancellation rate for existing home orders.

It gets better

The student debt crisis is real, and the skyrocketing costs of obtaining a post-secondary education naturally open up the debate of its necessity. However, it’s also important to remember that university grads are earning far more than those that don’t attend college.

The median of annual earnings for young adults in 2012 was $46,900 for those with a bachelor’s degree, $30,000 for those with just a high school degree or credential and $22,900 for those who did not complete high school. Those going on to grad school for advanced degrees — and that’s where student loans can really start to pile up — are at $59,600 a year.

In other words, most college grads, and especially grad school graduates, are typically better off than those that didn’t pursue higher education, even with the student loan albatross around their white-collared necks. The housing industry would be better off if colleges were cheaper or if student debt levels were lower, but the same can be said about purchasing power in general. At the end of the day, debt-saddled or not, the housing industry needs its college graduates.

Rick Munarriz, The Motley Fool 9:33 a.m. EDT October 5, 2014

 

Your student loan is killing the housing market.

Selling a Home? How to Kick Up Curb Appeal – YouTube

16 Sep

 

 

Affluent Towns Map – Business Insider

15 Sep

Affluent Towns Map – Business Insider.

most-affluent-places-map

 

 

David Radney Keller Williams