Updates from January, 2012

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  • 2012 Is the Year of the Political Economy

    8:58 am on January 19, 2012 | Comments:0
    Tags: , , , , , , international economy, recession, ,   Filed under: Agent information, Buyer Info, Consumer news and advice, economy, Federal Goverment, Interest Rates, mortgage, Seller Info, Stock Market, The Economy, The Housing Market

    Fiscal policy issues and political economic uncertainty will take center stage in determining the degree of consumer and business activity—key drivers of economic growth—during 2012, according to Fannie Mae’s (FNMA/OTC) Economics & Mortgage Market Analysis Group. The forthcoming presidential election, potential expiration of tax provisions for businesses and households, and the ongoing healthcare debate are among the uncertainties expected to keep the economy moving at a moderate pace with growth of 2.3 percent expected for the year. Moreover, contagion effects from the sovereign debt crisis in the euro zone, which appears to be slipping into recession, are expected to remain as a primary risk to growth in 2012.

    (More …)

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  • Comparing Real Estate To Other Investments

    2:24 pm on January 5, 2012 | Comments:0
    Tags: , , ,   Filed under: Buyer Info, Consumer news and advice, investment, Stock Market

    by The KCM Crew on January 4, 2012

    We recently posted Real Estate: Today’s Golden Opportunity comparing the current housing market to the market for gold about a decade ago. Some commented on the fact that you can’t compare gold to real estate as an investment as gold is a very liquid asset and it would take more time and effort to sell a house. We were not trying to make the case for real estate vs. gold as an investment in our blog. We were just showing that all investments go through cycles and that the best time to buy any investment may be when everyone is saying not to.

    However, since the subject of comparing real estate to other investments has come up, let’s take a closer look. There are two major advantages to investing in a home of your own rather than another option:

    You Can’t Live in Your IRA

    When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially.  There are two challenges with this conclusion:

    1. Today, in the vast majority of the country, renting is actually more expensive than owning a home.
    2. History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

    Today, study after study shows that owning a home is no more expensive than renting a home. However, even if this wasn’t the case, history shows that owning a home creates greater wealth.

    Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study last year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

    “[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

    There Are Tremendous Tax Advantages to Investing in a Home

    There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:

    Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

    “You may qualify to exclude from your income all or part of any gain from the sale of your main home. 

    Maximum Exclusion

    You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

    • You meet the ownership test.
    • You meet the use test.
    • During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

    If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.

    You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

    Ownership and Use Tests

    During the 5 year period ending on the date of the sale, you must have:

    • Owned the home for at least 2 years, and
    • Lived in the home as your main home for at least 2 years

    Certain exceptions exist in which you may qualify for the exclusion without satisfying the tests listed.”

    Bottom Line

    Every investment has pros and cons. That is why there is such an assortment of great opportunities. Real Estate has been, is and always will be one of those opportunities.



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  • Mortgage Rates Reach Record Lows as Stock Market Losses Mount

    9:11 am on August 11, 2011 | Comments:0
    Tags: , , , , ,   Filed under: Buyer Info, Consumer news and advice, Credit, economy, FHA, Interest Rates, mortgage, Statistics, Stock Market, The Economy, Wall Street

    RISMEDIA, August 11, 2011—Mortgage rates continued to move lower as investor concerns over the health of the U.S. economy increased, reports mortgage rate research website, ForTheBestRate.com. Interest rates advertised on the site have dropped to near their lowest point of 2011 for most products, with the 15 year fixed reaching historical record lows. On August 4, 15 year mortgage rates as low as 3.250% were posted (APR: 3.387%, Lender: Gateway Bank Mortgage).

    Mortgage pricing has edged lower while US and global stock markets are seeing losses, including a drop in the Dow of more than 500 points on Thursday, August 4, the largest single day loss since December of 2008.

    The downward trend of mortgage rates was confirmed in the weekly survey from Freddie Mac, a government sponsored enterprise that purchases residential mortgage loans in the secondary market. The data released August 4 showed a decrease in the average 30 year fixed rate pricing to 4.39% (0.8% points) from 4.55% (0.8% points) from the previous week. 15 year fixed rates fell to a new historical low, an average of 3.54% (0.7% points), after averaging 3.66% (0.7% points) the week before.

    5 year adjustable rate loans also moved lower to an average of 3.18% (0.6 points), down from 3.25% (0.6% points) the week of July 28.

    “While we’d love to see more positive economic news coming from other sectors, right now there is a huge opportunity for homeowners,” comments Shaun Hamman of American Financial Resources, a National mortgage lender offering a range of products including home improvement loans and debt consolidation mortgages. “Buying a home or refinancing a higher rate mortgage at these incredibly low rates can allow one to make a significant positive impact on their long term net worth,” he adds.

    For more information, visit http://www.ForTheBestRate.com.


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  • Austerity, Wall Street-Style

    1:44 pm on December 14, 2010 | Comments:0
    Tags: , , Wall Strret   Filed under: Agent information, Stock Market, Wall Street

    Booking Yachts Is Out, Carpooling on Private Jets Is In as Boffo Pay Ticks Lower

    The Wall Street Journal

    December 13, 2010


    In Christmases past, the top bankers on Wall Street would often load their families onto a private jet and head to the beaches of St. Barts or slopes of Aspen for the holidays.

    This holiday season, many Wall Streeters are flying commercial, according to jet brokers. Those who are still flying private are jet-pooling with strangers to cut costs. Some are even skipping the catered in-flight meals, which can cost $1,000 or more for four people.

    “They’re telling me, ‘We’ll just bring our own lunch,’ ” said Ricky Sitomer, chief executive of Blue Star Jets, a private-jet charter company. “They still want to travel in luxury, but they want the best value they can get.”

    Austerity is a relative concept on Wall Street, where year-end bonuses are measured in “bucks” (millions) and flying private nal shopping spree in favor of more restrained indulgence. Brown-bag lunches aboard the Gulfstream are just the start.

    Yet this year, amid the largest decline in bonuses since the onset of the financial crisis, the Street’s big spenders are reining in their seasonal shopping spree in favor of more restrained indulgence. Brown-bag lunches aboard the Gulfstream are just the start.

    December is usually a time when bankers crowd the showrooms and aisles shopping for their next big bonus toys. But jewelers, sports-car dealers and yacht brokers say bankers this Christmas are hard to find.

    “We haven’t seen them come in yet,” says Jeff Drajin, looking out over a largely empty showroom at Manhattan Motorcars. Mr. Drajin, who sells Lamborghinis, Bentleys and Lotuses, says that in the good old days of 2007 and even 2009, December would see bankers start pouring in. “This year is different. It’s a little quiet.”

    While pay may increase slightly in the broader financial-services world—including retail banks, hedge funds and private-equity firms—bonuses at the core Wall Street firms are likely to take a double-digit hit, analysts and pay consultants say. On Monday, New York Stock Exchange member firms that conduct business with the public reported third-quarter after-tax profits of $4.7 billion, down from $8.7 billion in the third-quarter of 2009.

    Wall Street bonuses are likely to be down 22% to 28% this year, according to Options Group, an executive-search and consulting firm. The drop follows last year’s much-criticized surge in banker pay and highlights growing uncertainty on Wall Street ahead of regulatory scrutiny and weak financial markets.

    Bankers at Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc., Bank of America Corp.’s Merrill Lynch and J.P. Morgan Chase & Co. say they are being told bonus pools are likely to be down between 10% to 25%. Some divisions, like proprietary trading, could be down as much as 50%, bankers said.

    Exact bonus amounts won’t be known for another month or two, since most banks pay out bonuses early in the new year. Yet senior bankers who have seen bonus-pool estimates say many employees are likely to be disappointed.

    One Citi banker said colleagues who have been coming out of compensation meetings in the past two weeks “look like they’ve been hit by a truck.”

    Bankers will get less cash this year in part because of new pay structures. Regulators and shareholders have pushed banks to link pay to long-term performance rather than short-term trading gains. As a result, some bankers, accustomed to getting as much as 50% of their bonus in cash, may get only 20% this year, with the rest usually paid out in deferred stock, according to Wall Street compensation consultants.

    Not that Wall Street is exactly hurting. Total pay for the top three dozen publicly held securities and investment-services firms is expected to top $140 billion, according to a Wall Street Journal study. Goldman Sachs set aside $13 billion for compensation and bonuses in the first nine months. That is down about 20% from last year but works out to more than $367,000 per employee.

    “Let’s be honest, 2010 is still going to be a pretty darn good year,” said Michael Karp, chief executive of Options Group. “But people have been humbled. I don’t think we’ll see them resume their exuberant habits or the wild crazy parties.”


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