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Mike Larson, Money and Markets columnist and editor of the Safe Money Report, is out this afternoon. Mark Najarian, the managing editor of Money and Markets, is filling in. Mike’s regular afternoon column will return on Monday …
Happy New Year! And welcome to the first Afternoon Edition for 2015.
The first subject to tackle: The housing industry, and whether it’s better to buy or rent. House prices are continuing to rise, albeit at a slower rate than in recent years as the crash days of the Great Recession drift further back in our memory. But will 2015 be the year we get back to the glory days of the housing sector, when prices surge even before you sign the final paperwork to buy your new home?
Some experts are saying home prices might post solid gains in 2015, based on lower interest rates (but with the threat that they could eventually rise) and helped along by the increase in rental prices and new policies by Fannie Mae and Freddie Mac that will offer low-down payment loans.
A report by Zillow, a real estate company that certainly has a vested interest in the matter, says that U.S. renters paid $441 billion in rent in 2014, up 4.9 percent or $20.6 billion from the previous year — coming to $26 more a month for the average renter. In markets such as San Francisco, the rate was up 14 percent (or about $163 a month more), in New York it was up 10 percent, while renters in Denver paid 11 percent more than the previous year.
This comes after another survey by Zillow that said renting was now half as affordable as buying in the U.S.
“In the third quarter of 2014, U.S. renters could expect to spend about 30 percent of their incomes on rent, while those buying homes could expect to spend just 15 percent of their monthly incomes on their mortgage,” Zillow said.
It added that before the real estate bubble burst, in the years 1985-2000, renting was usually more affordable than buying, even in the least-affordable areas, such as San Francisco, Los Angeles and Boston.
|How does the housing market shape up for 2015? Time to buy, or remain a renter?|
That’s changed, however. “Over the past 14 years, rents have grown at twice the pace of income due to weak income growth, burgeoning rental demand and insufficient growth in the supply of rental housing,” Zillow Chief Economist Stan Humphries said. “This has created real opportunities for rental housing owners and investors, but has also been a bitter pill to swallow for tenants, particularly those on an entry-level salary and those would-be buyers struggling to save for a down payment on a home of their own.”
In another report, CNN Money listed the housing market trends expected by industry experts for 2015 that could lead to the revival of the first-time buyer:
Looser lending standards.
More homes to choose from (with builders ramping up production of smaller homes).
More affordable houses as supply increases.
The anticipation of future rate rises.
|“A survey says that renting was now half as affordable as buying in the U.S.”|
How about you? Are you trying to decide between renting and buying? Are increasing rental prices pushing you in one direction? Or are the uncertainties in today’s economy keeping you from making that big purchase? Is this the time to buy property as an investment? This is a sector that relies heavily on consumer sentiment, so your views are important.
Money and Markets readers generally are not first-time buyers, but we do have some. What are your thoughts on the housing market in your geographic area? And what advice do you experienced homeowners have for those potential first-time buyers? Click here to add your view.
|Our Readers Respond|
On New Year’s Eve, we gave our readers the last word on a variety of subjects. And they had plenty to say! And there were a lot of competing views. For example:
On Obamacare, Reader Ken said: “The Affordable Health Care Act raised my Medicare premiums and my family’s health insurance costs, while simultaneously seeing a number of physicians dropping from Medicare participation and my insurance carriers’ plans.”
But Reader Joan said: “I’ve seen my monthly premiums drop from almost $700 to less than $300. So far, I am a satisfied Obamacare customer.”
So it seems that the cost/benefit of the Act depends on the particular circumstances each individual finds himself in. On the whole, though, it appears that the majority of responses from Money and Markets readers expressed opposition, and sometimes anger, toward the program.
On Russia, many expressed worries about what Vladimir Putin might do next if pushed into a corner.
Reader Robert: “We need to keep a strong watch on Putin. If the recession is deep and prolonged, he could lash out like a caged animal. Remember this guy was a KGB operative in the former East Germany.”
And from Reader Mel: “I think Putin is a very dangerous man and could be the next Joseph Stalin. Putin’s current actions mirror Stalin’s late in WWII, where Russia raped and pillaged the countries adjacent to Russia. Stalin had a World Domination view and intended to be the dictator of the world; but strong leaders in the U.S. and England prevented his vision. With weak leaders in the U.S. and England currently, Russia could make a play for world domination again.”
Still, it has to be said, many responses to Money and Markets throughout the Russia/Ukraine crisis have supported Putin’s actions. This year definitely will be a crucial one in Russia’s relations with the West and in its attempts to avoid economic disaster in the face of Western sanctions and falling oil prices.
As for those falling oil prices, Reader Arnold expressed appreciation for the lower costs, but said basically that enough is enough: “It’s nice to have cheaper gas prices but the benefits are, and will be, more than offset by the negative impact on the overall economy for many of our provinces and country as a whole. As consumers and citizens, we would all be better off if oil prices would level off at around $75 ppb and not get too crazy with this BOOM or BUST mentality.”
Those are good points, Arnold. I too appreciated lower prices at the pump but don’t want to see the lower oil prices disrupt new U.S. production or the drive to developing more fuel-efficient transportation methods. Meanwhile, as for the share prices of energy stocks, it seems that oil companies can figure out how to make money no matter what the price of oil is, so I don’t worry too much about that.
You can join in the conversation on these matters or any others by clicking here.
|Other Developments of the Day|
Disputes about silly film comedies aside, North Korean leader Kim Jong Un said in his New Year’s speech that he is ready for more talks or even a summit with his counterparts from South Korea. The South welcomed the statement and urged the North to make a fuller commitment toward normalization of relations. Great-sounding words from the North but, as we all know, the sentiment could change in a minute and tomorrow we could be talking again about a war of words.
The dollar soared after the head of the European Central Bank, Mario Draghi, said in a newspaper interview that interest rates in the euro zone are set to stay lower for a longer period of time. That sent the euro inching ever closer down to the $1.20 level. The euro is at its lowest level since 2010. Other comments were interpreted as indicating that the ECB was moving closer to a program to buy sovereign debt to help stimulate the sluggish economy on the Continent.
In 2000, the U.S. National Intelligence Council published a study looking at what the world would be like in 2015. Here’s a link to the report. It talks of financial volatility, cyber attacks, trouble with North Korea and Russia and tensions in the Middle East. It also sees a Palestinian state, Iraq with nuclear weapons … too much to list here, but it makes for interesting reading.
Remember, other readers are interested in your views on all this. Click here to comment.
Best wishes for the New Year,