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Economic News

Some Much Needed Perspective

Perhaps to the collective short-sightedness that has been one of the contributing factors to the current housing market shift, but not to those who see housing as a long-term, buy (and live in) and hold investment. … Let’s shift the perspective from one that tracks the housing market on a week-to-week and month-by-month basis and recognize that ” relatively” 6% is as close to free money as we’re likely to see.



30 Year Fixed Interest Rates - 1971 through 2008

Reality Check?

In reading the multitudinous stories about the Fannie/Freddie bailout/debacle/needed reform/callitwhatyouwill, one of the more stalwart voices in the economic world demonstrated the need for perspective. In Monday’s Wall Street Journal story titled Plan Skirts Housing’s Biggest Troubles, this sentence was striking and bewildering:

The most immediate change could come in the form of lower mortgage interest rates. They have remained relatively high — above 6% — for much of the past year amid credit-market troubles.

Really? 6% is relatively high? Perhaps to the collective short-sightedness that has been one of the contributing factors to the current housing market shift, but not to those who see housing as a long-term, buy (and live in) and hold investment.

Take a look at the above chart, share it with your colleagues and clients. Relative to the recent real estate market, 6.5% may be considered high, but relative to historical trends, six to eight percent is LOW. Let’s shift the perspective from one that tracks the housing market on a week-to-week and month-by-month basis and recognize that “relatively” 6% is as close to free money as we’re likely to see.

Dad, Husband, Charlottesville Realtor, real estate Blogger, occasional speaker - Inman Connects, NAR Conferences - based in Charlottesville, Virginia. A native Virginian, I graduated from VMI in 1998, am a third generation Realtor (since 2001) and have been "publishing" as a real estate blogger since January 2005. I've chosen to get involved in Realtor Associations on the local, state & national levels, having served on the NAR's RPR & MLS groups. Find me in Charlottesville, Crozet and Twitter.

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  1. Ken Brand

    September 11, 2008 at 11:47 am


  2. Bob

    September 11, 2008 at 12:12 pm

    I started in 1990. When rates dropped below 10%, my broker threw a party.

  3. Benn Rosales

    September 11, 2008 at 12:19 pm

    Bob, help me with more perspective here, what was the median price when 10% was a good day?

  4. ush

    September 11, 2008 at 12:20 pm

    The rates may be lower today, but the post does not take into account that cost of homes is much higher, while wages have not increased by the same rate.

    If we were to adjust the chart to take the rise in wages factor, one would have a clearer picture, and observe that the combination of rates and home prices make the home buying financing more similar than not, regardless of the rate.

    That is, in summary, the % of income remains similar, regardless of the interest rate.

    my 2 cents.

  5. Jim Duncan

    September 11, 2008 at 12:25 pm

    Bob – I’ve had clients who did the same. Imagine that – single digit interest rates!

    Ush – I’ll see what I can find.

  6. Thomas Johnson

    September 11, 2008 at 1:42 pm

    WSJ is referring to the spread between Treasuries and MBS. For some reason they seem to think that after the Chicoms and the Russians threatened Paulson into bailing them out, that the spread will narrow, all is well, no problem my communist friends, you can buy our mortgage backed bonds once more. With the Chinese economy slowing, they may have less appetite for our debt anyway, but I doubt they will give us those narrow spreads for a long time.

  7. Matthew Rathbun

    September 12, 2008 at 8:36 pm

    Sigh… Jim, I just don’t know anymore. I don’t think a truer thing has been said about all these projections than “shortsighted.”

    Everyone seems to being focused on what to do to fix it “right now.” My question is what processes are being put into place to stop this from happening in the future? We’ve had since the Great Depression to determine a way to stabilize rates and make the mortgage debt issue more sold – no one has been able to do it, so how are these analysis able to tell us anything?

    I almost think most of them will say anything to get published…

  8. Steve Simon

    September 16, 2008 at 6:33 am

    Regarding comment #7
    Mathew your comment is the key that most have missed (in the Government and the Media).
    Not the current problem, but how to avoid a repeat performance in the future.
    I have written (on my blog) for months, that they just keep running from one fresh wound to the next with a bandage; rather than changing the direction the industry was moving in…
    For two years plus FNMA and FHLMC were in trouble. There should have been money set aside for audit of the loans and docs that were producing these results!
    They would have seen much earlier than 2008 that there was significant “Pilot Error” in the banking and appraisal industries.
    Fllorida had hundreds of “Air Loans” (listening to the Chief Attorney from the State’s DBPR at a Licens Law Instructor’s Seminar), they told us in some case $300,000 had been loaned on properties that didn’t even exist! No house, no borrower, just a made up file, hence, “Air Loan”!
    125% LTV financing, seller downpayment gift to the buyer, it goes on and on…
    Just enforce the guidelines that were there, prosecute the fraud and out and out criminal scam and we would be better off in the future.
    I have twenty posts discussing the related topics of appraiser regulation and what should have been done on my site, but I see very little designed for long term improvement.
    They are dooming us to a repeat of this debacle if they don’t jail a lot of people and let a lot of folks lose what was a foolish investment. Trying to erase a mistake usually creates a bigger mess…

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?



NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<


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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.



young executives

job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.


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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.



gas tax


Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.


Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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