Gold Prices: Greed or a Warning?
As we search the world for clues with regard to the state of the economy, there is one indicator that consistently stands out. However, it is difficult to determine what this indicator means. Throughout this period of economic recovery from the recession, gold prices have been strong and gold continues to hit historic highs. Now for the hard part -- what does that mean about the economy? There are three possible explanations. First, there is a risk of impending inflation as gold is often used by investors as a hedge against inflation. If we accept this explanation, then all the talk about deflation is absolute nonsense. If you look at commodity prices in general, there is little, if any evidence of deflation. Ask the consumer if they feel that prices are going down right now. Even as the Federal Reserve Board in its most recent statement mentioned the low level of inflation, they did not focus upon the risk of deflation.
Second, we can theorize that the high price of gold is telling us that the fiscal crisis is still here and could get worse. Gold is also a safety standard in portfolios much like U.S. Treasuries. Is the continued strength of gold a sign of worse things to come? It is not out of the question and a poor economic outlook could be accompanied by inflation in a phenomenon which is called "stagflation."
Finally, gold may be strong because investors aren't seeing returns anywhere else. Real estate and stocks have both been weak in the past five years. Bonds have been strong, but investors know that this run of bonds ends with any pick-up in inflation and/or economic growth. Investors are looking for returns and gold has provided the returns. So is gold a harbinger or just a place to make a buck right now? Arguments could be made for both sides-or in this case three different, but not incompatible sides.
|
The Personal Comfort of Owning
The seemingly endless run of bad hous ing news is discouraging some potential home buyers from considering a purchase. But the truth is that the advantages of homeownership have very little to do with investment gains. The best things about owning a home have a lot more to do with personal comfort and satisfaction. Here are five of them:
1. Be your own landlord. The bank can only kick you out if you don't pay; a landlord can be much less dependable, deciding to sell the property or choosing to live there themselves.
2. Paying the principal is forced savings. Yes, it's possible that home prices will fall further. It is also possible that your 401(k) will lose value. But over the long haul, both are likely to enjoy modest gains in value.
3. Inflation protection. Fixed-rate home loans never rise, and eventually you pay them off. With rates at record lows, people who buy now are locking in real bargains.
4. Good schools. Family-sized rentals are harder to come by in areas with excellent public schools.
5. Spacious properties in pleasant neighborhoods. Sizable homes in attractive communities are almost always owned - not rented.
Source: The New York Times
|
FHA Changes the Rules and Costs
The most popular government mortgage program, FHA, has been busy changing the rules to make sure the program stays strong. Two major changes were released recently and are effective October 4.
The minimum credit scores and downpayment requirements for FHA-insured loans, will be:
- Borrowers with a credit score at or above 580 are eligible for maximum financing (3.0% down).
- Borrowers with a credit score between 500 and 579 will require a 10% down payment.
- Borrowers with a minimum credit score of less than 500 are not eligible for FHA-insured financing.
In addition, FHA is modifying the charges for it's mortgage insurance. The up-front premium is being lowered to 1.00%, which can still be financed in the loan amount. The monthly premium will range from .85% for a 5.0% or more down payment to .90% for less than 5.0% down on 20 and 30-year loans. For 15-year loans, there is no monthly premium for 10% or larger down payment and .25% for less than 10% down.
Source: FHA |
| About Cornerstone Financial Mortgage
Cornerstone employs a team of experienced professionals who are committed to providing the highest level of service while fulfilling the varied needs of our customers. We build our business on satisfied customers - home buyers, homeowners, realtors and builders. Cornerstone strives to create value for all our partners - value for our customers, investors, shareholders, employees and the communities where we do business.
|
|
|
