A number of interesting items has cross my mailbox in recent weeks. Take a look:
Home Values Continue To Rise
What slowdown in the real estate market? Last week, Freddie Mac, the second-largest secondary mortgage market lender, released its Conventional Mortgage Home Price Index, which showed that the price of houses nationwide increased just shy of 7 percent in the past 12 months that ended June 30.
The report, which tracks actual sales prices or appraised values of the same house over time, rather than lumping together the median prices of all homes, is considered to be quite accurate.
“It’s a good time to be a homeowner,” said Frank Nothaft, deputy chief economist at Freddie Mac.
Home prices in New England, which includes Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine, rose the fastest during the second quarter of 2000, at an annual rate of 11.1 percent. The East North Central States, which include Illinois, Indiana, Michigan, Ohio, and Wisconsin, saw the slowest rise in home price appreciation during the second quarter, a nice annual pace of 5.2 percent.
Financial advisors have used the purchase of real estate as a hedge against inflation, since real estate has historically risen in price just ahead of inflation. But with inflation running at well under 2 percent, the real price of property has been moving sharply ahead, with stock market-like gains.
At the very least, homes in the U.S. are currently appreciating at “better than double the rate of inflation,” Nothaft said.
What’s causing the rise in prices? It’s the old law of supply and demand. Steady economic growth, high levels of consumer confidence and low unemployment help renters take the first steps toward homeownership. That creates more demand for the homes available for sale. And prices rise.
30 Year Mortgage Rates Hit Lowest Levels This Year
Another factor contributing to the rise in home prices has been the historically low interest rates.
Each time interest rates rise 1 percentage point, about 400,000 wanna-be home buyers are knocked out of the running, according to David Lereah, Chief Economist of the National Association of Realtors, and author of a new book, The Rules for Growing Rich (Crown Business, 2000).
Over the past 30 years, mortgage interest rates have averaged nearly 10 percent. Anything less was considered a huge bonus. For most of the last decade, however, interest rates have ranged from 6.5 percent for a 30-year fixed rate mortgage to about 8.75 percent, with rates generally staying under 8 percent.
If the statistic holds true, low interest rates have permitted nearly a million extra families to purchase their first home each year. That demand has helped home prices continue to rise.
Need a New Lawn Mower?
Last Spring, the Wall Street Journal reported that the new “in” thing was to fire the gardener and pick up a new, ergonomically correct rake.
Of course, you should also have a spiffy new lawnmower to go along with the rake and other fancy accessories. And as long as you’re mowing more than a postage stamp, why not have a lawn tractor to which you can hitch a wagon.
Well, coming to a showroom next spring, is a brand new lawnmower that proposes to cut grass with a laser instead of a blade. According to the Associated Press, the grass will be so cleanly cut it won’t know it’s been cut. The pieces will be chopped up into bits so fine that it can instantly turn into mulch.
Of course, all this technology won’t come cheap. The price tag? $30,000.
Who’s going to buy a $30,000 lawn tractor? Probably the same folks who are shelling out $6,500 and up for a Front Gate barbeque grill.
Published: Aug 28, 2000