The Numbers Are Not Always What They Seem….

things-arent-always-what-they-seemNumbers can be misleading. For example, the stock market has been up over 10% thus far this year. That is great news for those who bought stocks last year. As a matter of fact, stocks are up a huge 125% from the lows hit during the financial crisis four years ago. That is a great rate of return for those who purchased stocks at that time. On the other hand, if you purchased stocks at the peak five and one-half years ago, the returns would have been close to nothing. Let’s add one more level of analysis. If you purchased stocks twenty years ago, the Dow is up more than 400%. We can say the same thing about housing prices. Last year, median home prices rose to almost $180,000 — up 10% in the past year.

On the other hand, the median home price was almost $220,000 in 2005. Twenty years ago? The median home price was hovering just over $100,000. Obviously, which stock you purchased or which home you purchased will have a big factor in your rate of gain. Different stock sectors and different geographic locations have performed very differently over time. Here we are only taking into account time. Timing any market should be left to professionals and even they are often wrong. Those who are looking to time their purchase of real estate or stocks to get in at the right moment are much more likely to be wrong. The right moment was twenty years ago. Today is likely to be the right moment twenty years from now. The key is a long-term mentality and then you can take the day-to-day or year-to-year out of the equation. Numbers are not always what they seem to be when you look at the small picture. The employment numbers released this week can have an important affect upon what will happen Friday and next week. But not twenty years from now.
The Markets. Rates were up slightly in the past week. Freddie Mac announced that for the week ending March 28, 30-year fixed rates rose from 3.54% to 3.57%. The average for 15-year loans rose to 2.76%. Adjustable rates were mixed but stable, with the average for one-year adjustables down slightly to 2.62% and five-year adjustables rising to 2.68%. A year ago 30-year fixed rates were at 3.99%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Low and relatively steady rates on home loans are invigorating the housing market. For instance, existing home sales over January and February experienced the strongest two-month pace since November 2009, while new home sales were the strongest since August and September 2008. This strong demand helped push the S&P/Case-Shiller® 20-city home price index (seasonally adjusted) in January to its highest reading since December 2008. Moreover, the number of consumers expecting to purchase a home over the next six months rose to 5.6 percent in March, the second highest share since data was first collected in February 1964, according to The Conference Board.” Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Current Indices For Adjustable Rate Mortgages
Updated March 29, 2013

  Daily   Value Monthly   Value
  March   28 February
6-month   Treasury Security 0.11%  0.12%
1-year   Treasury Security 0.14%  0.16%
3-year   Treasury Security 0.36%  0.40%
5-year   Treasury Security 0.77%  0.85%
10-year   Treasury Security 1.87% 1.98%
12-month   LIBOR    0.764%   (Feb)
12-month   MTA    0.178%   (Feb)
11th   District Cost of Funds    0.962%   (Jan)
Prime   Rate    3.25%

Get ready for the healthiest spring home-buying season since 2007, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for March. The mortgage giant is forecasting low rates and increasing housing prices to continue, as well as gradually improving consumer confidence that will likely boost home sales this spring. Sales are expected to rise 8 to 10 percent in 2013 compared to 2012 numbers, Freddie economists report. Freddie Mac also expects housing starts to rise to 950,000 units this year compared to 780,000 in 2012. “History shows us not all economic recoveries are created equal, and consumer confidence mirrors this fact,” says Frank Nothaft, Freddie Mac’s chief economist. “With the spring home-buying season upon us, the recent highs in the stock market are a welcome signal of better times ahead. But it will be the gradually declining unemployment rate and steadily improving housing market that will deliver broad-based economic benefits for Americans and, in turn, support the overall recovery.” Source: Freddie Mac

Does homeownership really encourage civic engagement? A study in Urban Affairs Review tackles the question. Looking at data collected from a group low- and mid-income homeowners and renters over four years, researchers from the University of North Carolina at Chapel Hill find that owning a home can indeed inspire someone to get involved with the community—so long as the ownership is sustained. The study assumes civic engagement stems from three overarching factors: Financial self-interest, more general self-interests (such as neighborhood amenities and social ties), and rates of mobility. Of these, it appears that mobility—how often one moves or stays put—is the strongest. From the report– This research also points to the importance of considering mobility when examining causes of civic engagement, particularly instrumental civic engagement. Our findings indicate that homeowners and renters are affected differently by residential mobility. For homeowners, moving may prompt them to become more involved in neighborhood groups as a way to establish ties with others and integrate in a new community. Renters who move, however, are less likely to turn to civic participation as a way to build new social network ties. Meanwhile, new homeowners were no more or less inclined to join a neighborhood group than a renter in the time before they bought a house. After purchasing, however, their likelihood to participate increased fourfold. And homeowners who return to renting are “no more or less likely to be involved in neighborhood groups than people who have never been homeowners.” This isn’t the case if an owner simply moves to a different house, in which case participation rates remained relatively constant. Policy-wise, the study concludes that measures aimed at increasing homeownership rates in low-income neighborhoods can help precipitate a robust civic life, which in turn may bring about a better overall quality of life. However, beyond simply increasing access to homeownership, these policies would have to ensure it can be sustained. Source: Greater Greater Washington

It is tax time. These instructions are directly from the IRS regarding allowable deductions of mortgage insurance paid in 2012. You can treat amounts you paid during 2012 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006.

  • Qualified mortgage      insurance.      Qualified mortgage insurance is mortgage insurance provided by the      Department of Veterans Affairs, the Federal Housing Administration, the      Rural Housing Service or private mortgage insurance. Mortgage insurance      provided by the Department of Veterans Affairs is commonly known as a      funding fee. If provided by the Rural Housing Service, it is commonly      known as a guarantee fee. The funding fee and guarantee fee can either be      included in the amount of the loan or paid in full at the time of closing.      These fees can be deducted fully in 2012 if the mortgage insurance      contract was issued in 2012. Contact the mortgage insurance issuer to      determine the deductible amount if it is not reported in box 4 of Form      1098.
  • Special rules for      prepaid mortgage insurance. Generally, if you paid premiums for qualified mortgage      insurance that are properly allocable to periods after the close of the      tax year, such premiums are treated as paid in the period to which they      are allocated. You must allocate the premiums over the shorter of the      stated term of the loan or 84 months, beginning with the month the      insurance was obtained. No deduction is allowed for the unamortized      balance if the home loan is satisfied before its term. This paragraph does      not apply to qualified insurance provided by the Department of Veterans      Affairs or the Rural Housing Service.

Limit on deduction. If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Form 1098. The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. See Form 1098, Mortgage Interest Statement.   Source: The IRS

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