3% Down Coming?

The Director of FHFA (Fannie and Freddie’s parent), Mel Watt announced that the FHFA will release details regarding the return of the 3% down-payment product sometime next month, but expect it to include conditions such as housing counseling, stronger credit scores, lower DTI ratios, and a higher interest rate.  Cross you fingers that it’s a usable program that really does offer a benefit to home buyers and not just another chest puffing initiative that doesnt really work for 99% of would-be homeowners.

In economic news, Existing Home Sales rose to 5.26M, the Consumer Price index fell flat to 0%, Jobless Claims dropped a couple thousand to 291K, and the Philadelphia Fed index doubled last month’s paltry 20.7 at 40.8

The Impact of One Economist

One of the Federal Reserve Bank economists yesterday made a statement that by the end of 2016, the probability of low inflation is double the probability of high inflation.  Where the Fed has switched their emphasis from employment to inflation this last month, this statement by the San Francisco Senior Economist has people talking.  And when we are talking about interest rates, it’s important to underline that inflation leads to higher interest rates.  Inversely, if inflation is nonexistent, interest rate stay low.

One of the measures of inflation is the Producer Price Index, which measures inflation at the wholesale level.  Today’s reading of the PPI only rose by 0.2%, or 1.5% year-over-year.  The Fed’s current target is 2.0-2.5%, so Mr. Senior Economist’s statement is timely.  More measures of inflation roll out almost every day; the monthly Consumer Price Index will be released tomorrow.

As an indicator of the impact that this economist might have on the financial world (or not), these photos are the only ones that Google could find for him (and the photo on the right might actually just be a woman who looked like him in high school).  His name is Vasco Curdia.

Want to live debt free?

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Renters For Life?

The amount of single young adults who are fully employed has increased from 25% in 1976 to 40% in 2013. But married young adults where both spouses worked full time declined from 25% in 1976 to 15% in 2013, and plenty of these youngsters (who don’t live with Mom and Dad) are paying some pretty hefty rents. Zillow reports rents have jumped 7% nationwide over the past year, as the average renter now spends 30% of their income on rent.  This large cohort of young adults are driving the overall homeownership rate down as they are less likely to own a home. The creation of household formations plays an important role in homeownership rates among young adults and is one of the main reasons the average age of first time home buyers is now 31 years old. That is one of the reasons why there are so many new gigantic apartment complexes being built right now…

Buy Low, Sell High

Stock prices are lower after the S&P (2039) and the Dow (17614) closed at record levels yesterday.  The S&P marked its 40th new closing high for the year (versus 45 in 2013) and is up 9.5% from that six-month low just a month ago.

Speaking of buying low; wholesalers are amassing larger inventories than have been deemed prudent by analysts.  So it you want to gamble a little, you might find last-minute deals this Christmas if Retail Sales don’t also beat expectations.

In the meantime, pricing of both Stocks and Bonds is down marginally.

Happy Veteran’s Day

Today is Veteran’s Day so banks and the bond market are closed, and there are no financial reports out either.  If I may, let me tell you one great thing about this country.

I experienced my first NASCAR race last weekend, though some of you will argue that I didn’t actually see a race since I went on Saturday and not Sunday.  I took my dad and my two oldest boys, pictured here–which was a great experience.  While I am not sure that I will be purchasing wired headsets to communicate with all of my racing buddies while we watch the same cars rumble past our eyes every 28 seconds for a two hour stretch, nor buying an RV to get us from town to town, I would probably go to this venue again.  I would go for one reason, and it’s also what I like best about parades:  the celebration of our nation’s real heroes.  When they asked all of the veterans to stand up just prior to the rest of us rising to sing the national anthem, I thought that my heart would burst open with pride and appreciation for the large minority of soldiers standing among the rest of us in the grandstand.  So from me to you soldiers, Happy Veteran’s Day.

Mid Term Election

Today is the mid-term election here in the United States of America.  So go vote, wisely. Speaking of living the American dream, CoreLogic reports home prices, including distressed sales, rose by 5.6% year-over-year in September.  That’s the slowest year-over-year appreciation rate since August 2012.  Last month’s reading is 0.28% less than August and well below the 11.8% recorded half a year ago in February.  Looking forward, CoreLogic expects a 5% rise from September 2014 to September 2015.  Don’t panic, historically speaking, a five percent appreciation rate is a nice healthy average. Oil prices have dropped significantly over the last two days, leaving a barrel of sweet crude at only $77 a barrel.  I think that I’ll fill up the car with gas on the way to the polls this afternoon. Thirty year FHA loans are at 3.25% while Conventional 30 years hangs at 4.0%. Fifteen year rates are still at 3.0% (APR will generally be higher, depending on the loan and down payment amounts, and amortization term–as closing costs and the presence of mortgage insurance affect each loan differently.)