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Money Monetary Theory or MMT is an alternative economic theory which says that governments that create and control their own currency should be able to do so without limits. More specifically, the heterodox theory argues that these governments shouldn’t fear incurring debt to further economic growth because they can not run out of money.

MMT emphasizes the creation of more money to meet a variety of economic needs, such as improving infrastructure, improving the quality of government-funded education, or expanding access to healthcare. While that may sound appealing, critics of the theory believe it could lead to an increase in inflation and skyrocketing national debt.

What Is MMT?

Modern Monetary Theory is an economic theory often associated with investment fund manager Warren Mosler, author of “The 7 Deadly Innocent Frauds of Economic Policy.” In the 2010 book, Mosler suggests governments that control their own currency can never run out of money or go bankrupt, since they can simply print more money.

Modern Monetary Theory challenges the idea that governments should pay for spending with taxes. Instead, the theory holds that taxes are a means of controlling inflation amid rising prices rather than funding the government’s spending initiatives. MMT can be seen as an extension of quantitative easing, in which a government’s central bank purchases long-term securities in order to boost the money supply.

Both seek to put more money into circulation, though Modern Monetary Theory doesn’t necessarily support the idea of resorting to negative interest rates to stimulate spending, which can occur with quantitative easing.
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Traditional Economics vs Modern Monetary Theory

In terms of its application, MMT economics is quite different from traditional economic theory. Specifically, it challenges the idea that printing more money to fund spending is inherently bad. Traditional economists view printing money as a less-than-ideal way to manage fiscal policy, since doing so can lead to rising inflation or a devaluation of currency.

Here’s a closer look at how traditional economic theories and modern economic theory compare.

Traditional Monetary Theory Explained: Key Concepts

•   When the economy is struggling, the government can give it a boost using monetary and fiscal stimulus, or quantitative easing.

•   Governments rely on interest rate policy to control inflation and the stability of currency values.

•   Interest rate policy can also be used to stimulate spending during recessionary environments by encouraging borrowing while rates are low.

•   Taxes and debt insurance are the two primary means by which governments fund their spending.

•   Unlimited government spending and debt can lead to economic destabilization.

Modern Monetary Theory Explained: Key Concepts

•   Governments that control their own currency effectively have access to unlimited spending, as they can always print more money.

•   A country that follows MMT cannot go bankrupt or become insolvent unless it’s by political choice.

•   Unlimited spending fuels economic growth and reduces unemployment.

•   Taxes can curb inflation but they’re not their primary source of government funding.

•   If a government incurs national debt, it can print more money to meet those obligations without fear of runaway inflation, deflation, or devaluing its currency.

In terms of inflation theory, MMT says the biggest risk is a government outspending its available supply of resources, such as raw materials or workers. But this scenario is rare, since it would require full employment or a shortage of supplies. If it did occur, MMT would dictate that the government could use taxation to manage inflation.

Modern Monetary Theory also states that governments don’t need to sell bonds to raise funds, since they can print their own money. Under this theory, the bond market becomes optional, rather than a requirement for maintaining government cash flows.

Modern Monetary Theory: Potential Benefits

While MMT is considered a radical theory in some circles, it has a simplistic appeal. If governments that control their currency can simply print more money as needed, then they have endless resources to promote economic growth. Deficits don’t disappear under this type of modern economic theory, rather they may grow.

From a taxpayer perspective, Modern Monetary Theory also has benefits, since it may mean fewer tax hikes to pay for government funding initiatives. Just like deficits, taxes wouldn’t disappear. But there’d be less fear of the government introducing new tax measures solely as a means of managing its own spending or debt.
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Modern Monetary Theory Flaws

While MMT has many vocal supporters, it’s also drawn plenty of critics, including Federal Reserve Chair Jerome Powell and Kenneth Rogoff, former Chief Economist and Director of Research at the International Monetary Fund. The consensus, for the most part, is that Modern Monetary Theory poses too great of a risk to national economies. Specifically, critics raise these arguments:

•   Unlimited spending is not a catch-all solution. While MMT gives governments leeway to print money as needed, doing so is not necessarily a foolproof solution for tackling problems like unemployment or rising inflation. Again, if there’s a scarcity of resources or full employment, governments still have to rely on taxation to bring inflation under control.

•   Unchecked debt is problematic. When an economy experiences a boom cycle, the national deficit may receive less attention. But it can become a very real financial problem governments have to deal with when the economy enters a recession and printing more money may not be a realistic solution.

•   Rising rates could trigger hyperinflation. If rising deficits are accompanied by rising interest rates, the scales could tip from inflation to hyperinflation. This means rapid, out-of-control price increases and steep declines in currency values. Both of those can contribute to an economic crisis or collapse.

Those who suggest MMT is problematic may point to countries like Venezuela and Zimbabwe as examples of how it can go wrong. Though neither country specifically subscribed to Modern Monetary Theory, both relied on the printing of currency to navigate economic troubles. In both cases, the end result was severe hyperinflation and financial crises.

The Takeaway

Money Monetary Theory (MMT) says that governments that create and control their own currency should be able to do so without limits. If applied to the U.S. economy, Modern Monetary Theory could potentially impact your investments in different ways. So it’s important to keep this theory in mind when building a portfolio.

For example, it’s important to consider how inflation might affect the value of your investments. If inflation rises or the government has to impose tax increases to fund spending, that could affect the profitability and spending of the companies you invest in. Investing in companies that are more inflation- or recession-proof may help to insulate your portfolio against those risks.

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The real question, though, is can you afford to live in this quaint state? In order to figure this out, it’s best to look at all the factors that contribute to your cost of living in Virginia. By comparing averages with what you can afford, you’ll be able to match up your budget to the perfect Virginia city.

Here’s what you should take into consideration when tallying up the cost of living:

Virginia housing prices

When it comes to the overall cost of living in Virginia, numbers tend to linger close to the national average. The same is not true when looking at housing prices. Where you live and how close to Washington, D.C., you are definitely impacts housing prices in Virginia, so pack a big budget if you’re planning on commuting into our country’s capital.

Alexandria

Just outside of Washington, D.C., if you’re coming to Virginia as a commuter, Alexandria is where you’ll want to live. At only seven miles or one subway ride away, it’s very easy to head to work without having to live right in D.C. However, this convenience comes at a price, and the small-city living you’ll find in Alexandria has housing prices that are 108.4 percent above the national average.

Rent and home prices also take quite a leap here. Even with moderate price increases over last year, a one-bedroom apartment’s average monthly rent is $2,014, and a two-bedroom’s is $2,490. One-beds rose in price by 5 percent over last year, and two-beds rose by 5 percent.

The median home price in Alexandria is $650,000, but the price is only up 6.6 percent from last year.

Arlington

The most expensive city on our list, Arlington is practically in Washington, D.C., so it has serious housing prices. They’re 132 percent above the national average. This means you’ve really got to pay for where you live in Virginia, especially when you can see D.C. from your house.

Both one-bedroom and two-bedroom apartments in Arlington saw a 17 percent increase in cost over last year, but what’s significant is what that takes rent to each month. Again, this is an expensive city, especially when we’re talking about rent. One-bedroom apartments have an average monthly rent of $2,527, but two-beds are a whopping $3,442 per month. Might be time to consider a roommate.

Homes are also expensive, though, with not as drastic of a price tag as renting an apartment. The median home in Arlington is $670,000, down 7.6 percent over last year.

Charlottesville

Combining hiking and canoeing with skiing and snowboarding, Charlottesville provides outdoor activities all year long. Sitting at the foot of the Blue Ridge Mountains, this scenic city offers a perfect location for just about everyone. It’s both a college town and a foodie city, a place full of culture, history and more. With all this going on, Charlottesville housing prices edge just above the national average at 2.9 percent over.

This also means that rent is going to cost you. Both one and two-bedroom apartments have seen price increases over the last year and come with a sizable monthly rent. One-bedroom apartments, up 16 percent over last year, have an average rent of $1,592 per month. Two-bedroom apartments, up 19 percent over last year, are costing an average of $1,767 per month.

Homes for sale are rising at a slower rate than those for rent, up only 10.1 percent over last year. The median sale price for homes in Charlottesville is $413,000.

Lynchburg

An outdoorsy location, just east of the Blue Ridge Mountains, Lynchburg is great city for hikers, skiers and those who like to partake in water activities. Situated in the center of the state, it’s a ways from Washington, D.C, meaning housing prices are more affordable at 24.7 percent below the national average.

Rent prices are quite affordable in Lynchburg, having only risen by 6 percent over last year on all accounts. A one-bedroom apartment is only an average of $875 per month, and a two-bedroom averages out at $965 per month.

Home prices are rising a bit faster, up 16.7 percent over last year. The median home price in Lynchburg is $228,000.

Richmond

The capital of Virginia, Richmond is a hub of higher education. Home to the University of Virginia, Virginia Commonwealth University and more, students flock to the area, but Richmond offers so much more. It’s also a favorite spot for millennials and its location on both sides of the James River makes it an attractive destination for outdoor enthusiasts. Home prices in Richmond are also on the more affordable side at 13.3 percent below the national average.

Seeing decent growth in the rental market, one-bedroom apartments have increased in price by 13 percent. Two-bedrooms are up 12 percent to an average monthly rent of $1,756 and one-bedrooms average out to $1,425 per month.

Home prices are up 22.6 percent over last year bringing the median sale price in Richmond to $352,000.

Virginia food prices

Another cost of living in Virginia is food. Known for Southern-style cuisine, must-try Virginia dishes may not have originated in the state, but they’re now part of the culture. You can get delicious barbecue, blue crab, oysters and Brunswick Stew here, but the state is best known for its country ham. For those Virginians who like to infuse their own home cooking with this Southern charm, the average grocery shopper spends between $233 and $267 per month.

Just like with housing, prices on food tend to go up the closer you get to Washington, D.C.

  • Lynchburg is 8.1 percent below the national average
  • Richmond is 7.5 percent below the national average
  • Charlottesville is 3.6 percent below the national average
  • Arlington is 10.6 percent above the national average
  • Alexandria is 11.4 percent above the national average

When it comes to individual grocery items, these differences in food pricing overall can mean a lot. You’ll pay almost a dollar more for a dozen eggs in Alexandria over Lynchburg, and almost two dollars more for potatoes. These small price differences can easily add up when building your weekly grocery list.

Going out to eat has the same issue, as well. It costs $59 for a three-course meal for two in Lynchburg, but you’ll pay 21 percent more or $75 in Charlottesville.

Virginia utility prices

Utilities are pretty much at the national average across Virginia. Although some are slightly under, and some a little above, it’s typically by just a tiny bit, which is good news for the overall cost of living in Virginia.

  • Alexandria and Arlington are both 2.3 percent below the national average
  • Charlottesville is 0.4 percent below the national average
  • Richmond is 3.5 percent above the national average
  • Lynchburg is 9.7 percent above the national average

When it comes specifically to energy costs, you’ll spend, on average, anywhere from $170 to $210 per month. If you want to save a little, Blacksburg has the lowest electric bill at $138.37 and the lowest utility prices at 13.2 percent below the national average.

Virginia transportation prices

Transportation prices include all the costs associated with getting around any given city. Throughout Virginia, that could mean owning a car, using public transportation or even getting around on foot or by bike.

Cities like Alexandria and Arlington have a relatively high walk and bike scores meaning you may not even need to own a car to comfortably navigate the city. Arlington tops the charts with an 81 for a walk score and 74 for a bike score, but Alexandria isn’t too far behind with a 62 walk score and 58 bike score.

Overall, when it comes to transportation prices:

  • Charlottesville is 12.8 percent below the national average
  • Lynchburg is 7.4 percent below the national average
  • Richmond is 6.8 percent below the national average
  • Arlington is 10 percent above the national average
  • Alexandria is 36.5 percent above the national average

Again, the closer you are to D.C., the higher the cost of living Virginia. This could be a result of parking prices if you drive around, or simply just the cost of being able to utilize public transportation to get around.

WMATA and DASH in Alexandria

Because of its proximity to Washington, D.C., Alexandria has services from two different public transportation systems. The WMATA operates the subway. Also called the Metro, there are four stations within Alexandria that provide access to both the yellow and blue lines. The time of day you ride determines the Metro price you’ll pay. For peak hours, a one-way fare is between $2.25 to $6.00. During off-peak hours you’ll pay between $2.00 to $3.85.

Local bus services in Alexandria motor through the city thanks to DASH. There are three color-coded routes. Red routes are frequent routes, with buses coming every 15 minutes or less. Blue routes run slower, but all week long, and green routes only run on weekdays. DASH is now free to ride throughout Alexandria. There’s also a free King Street Trolley you can take advantage of when in Old Town Alexandria.

ART in Arlington

Arlington’s bus system, ART, also connects to the Metro, among other modes of public transportation. It has 16 routes. Those with frequent service come every 20 minutes or less. The one-way fare on ART is $2. To transfer to the Metro, you’ll pay an additional 50 cents.

GRTC in Richmond

A long list of bus routes and a few express options make up the GRTC system. Covering Richmond and surrounding counties and cities, the GRTC has been in operation for over 150 years, only stopping service once, during the Civil War.

Today, the single-way fare on any local route is $1.50 and passes are available. You can get a seven-day pass for $17.50, or a 30-day pass for $60. Express and extended express routes, do cost more per way and vary in price.

Virginia healthcare prices

Throughout Virginia, healthcare is on the more costly side, with more cities above the national average than in most other costs of living categories. This total includes visits to your doctor, dentist and eye doctor. It includes urgent care stops, as well as any prescriptions you have to buy.

  • Lynchburg is 3.2 percent below the national average
  • Alexandria is 1.1 percent above the national average
  • Richmond is 2.7 percent above the national average
  • Charlottesville is 9 percent above the national average
  • Arlington is 14.4 percent above the national average

At these numbers, the average doctor’s visit in Virginia could cost as much as $162.50 in Arlington or as little as $136.80 in Lynchburg.

Virginia goods and services

For all those things that go onto your monthly budget that isn’t really necessary for survival, they fit into the cost of living in Virginia for goods and services categories. These are the items you need to have for you, but if you suddenly couldn’t afford them, you’d still get by.

Totaling all of these up, goods and services in our Virginia cities almost all cost more than what you pay on average across the county.

  • Lynchburg is 5.9 percent below the national average
  • Richmond is 2.1 percent above the national average
  • Charlottesville is 7.1 percent above the national average
  • Arlington is 11.3 percent above the national average
  • Alexandria is 18.4 percent above the national average

To understand how this can impact the prices of individual goods and services you like, here are average prices for just a few.

Alexandria almost holds onto the most expensive items for our whole chart. Arlington beats the city out only when it comes to dry cleaning bills. Similarly, Lynchburg isn’t always the cheapest city when it comes to individual goods and services. Seeing how the order continues to switch, it’s important to look at costs that relate to the goods and services you use when budgeting.

Childcare as a good/service

One of the priciest items within the goods and services category is childcare. Most first-time parents experience quite a shock when they have to start adding this into their monthly budget. Childcare isn’t cheap, but where you live can greatly impact the price.

The most expensive city when it comes to paying for a full-day, private preschool is Alexandria. Monthly costs are, on average, $1,833.33. Arlington and Charlottesville both also have monthly costs above $1,000, as well. The least expensive city is Richmond, at only $516.67 per month for preschool.

Taxes in Virginia

Virginia has four different income tax rate brackets based on income. You’ll either pay 2, 3, 5 or 5.75 percent.

When it comes to sales tax, the state rate is 5.3 percent. Localities can add on to this an additional amount, bringing the total up to no more than 7 percent. At the max, for every $1,000 you spend shopping, $70 goes right to taxes.

Arlington, Alexandria and Richmond all have the same sale tax rate of 6 percent. Charlottesville and Lynchburg opted to stay a little lower, sharing the same sales tax rate of 5.3 percent.

How much do I need to earn to live in Virginia?

When calculating how much you really need to make to live in a specific place, the cost of rent should always come into play first. Since experts suggest you put 30 percent of your annual income toward rent, you need to afford this expense first and foremost.

In Virginia, the average rent is $1,748, so you’d need to make a minimum of $69,920 to meet the 30 percent requirement.

The annual average wage in Virginia comes close to this at $62,330 but means you won’t always be able to get an ‘average’ apartment in every city. You may have to look at more affordable locations to find the perfect apartment.

To be certain you can afford to live in the Virginia town of your choice, plug your specific numbers into our rent calculator.

Living in Virginia

With a strong economy, so much professional potential, plenty of natural beauty and so much history, Virginia has a lot to offer potential residents. Whether you’re looking to live close to Washington, D.C., to commute, or think the laid-back, nature vibe on the other side of the state is more your speed, there’s something for everyone.

All you have to do is figure out whether the average cost of living in Virginia is something you can actually afford. Grab that calculator to start figuring things out.

The Cost of Living Index comes from coli.org.
The rent information included in this summary is based on a calculation of multifamily rental property inventory on Rent. as of June 2022.
Rent prices are for illustrative purposes only. This information does not constitute a pricing guarantee or financial advice related to the rental market.

Source: rent.com

Apache is functioning normally

A ban on residential building permits in parts of the Phoenix area is angering builders and agents, who feel it may curb the supply of affordable housing.

“Our main concern on the implication of the model that was released is housing affordability,” Spencer Kamps, the vice president of legislative affairs at the Home Builders Association of Central Arizona (HBACA), which serves homebuilders in Maricopa County, said. “Effectively, what we have created is growth boundaries.” 

In early June, the Arizona Department of Water Resources (ADWR) announced that it was denying any new certificates of Assured Water Supply (AWS) in the Phoenix Active Management Area (AMA), which encompasses all of Maricopa County and parts of Pinal County, for a total of 5,646 square miles and home to 4.6 million residents. In certain parts of the Phoenix AMA that do not have a designated water provider, builders and developers need a certificate of AWS to obtain a building permit. 

Arizona sees the ban as a precautionary measure to curb the effects of climate change, as it will limit the number of new residential properties built in the area. 

Maricopa County, which encompasses the cities of Phoenix and Scottsdale, uses 2.2 billion gallons of water per day and receives less than 11 inches of rain per year. More than half of the county’s water supply comes from groundwater. Much of the rest of the county’s water supply comes from the Colorado River, which is in the midst of a decade-long drought. More than 30% of the water used in Maricopa County each day — roughly 640 million gallons — is used for domestic purposes.

Rapid population growth is adding pressure on groundwater resources in the state. No metropolitan area in the country welcomed more new residents than Phoenix last year, at 76,000. 

The moratorium on residential permits was made after an analysis conducted in the first half of the year by the ADWR showed that over the next 100 years, 4%, or 4.86 million acre-feet of water of Phoenix AMA’s groundwater demand, would not be met.

“By proactively addressing opportunities for enhancing groundwater availability, we are demonstrating our dedication to long-term sustainability and securing Arizona’s water future,” Chris Camacho, president and CEO of the Greater Phoenix Economic Council, said in a statement.  

Arizona has long taken protective actions in the interest of water conservation. The state’s AMAs were put in place in 1980 via the Arizona Groundwater Management Act. The primary goal of the legislation and the AMAs was to ensure homeowners’ water needs were  being met, by forcing builders and developers to obtain permission from the state before drilling for water. 

Greg Vogel, the founder and CEO of Land Advisors, a Scottsdale-based land brokerage, had some stronger words about the analysis and the building ordinance.

“The original purpose of the Groundwater Management Act was really consumer protection,” Vogel said. “It needs updating and the analysis they did, I think is woefully inaccurate related to its accounting of the supply of groundwater. The analysis showed the entire region was 4% short over 100 years — no other state has anything like this ridiculous requirement.”

Questioning the rationale for the building restrictions, the HBACA said that Arizona was the only state that requires homebuilders to ensure a 100-year water supply in order to build.

Other states in the arid southwest impacted by drought, such as New Mexico, California and Colorado, have water supply requirements of 40 years, 25 years and 20 years, respectively.

The HBACA claims that the homebuilding industry is the only industry in the state required to meet 100 years of demand for ground water use.

Due to the restrictions these regulations have created, Kamps said the HBACA is concerned about the area’s housing supply and housing affordability moving forward.  

Under the new regulations, construction of new residential buildings can continue in areas that have a designated water provider since homebuilders and developers do not need an AWS certificate to obtain a building permit. The areas that are most impacted by this building ordinance are the town of Queen Creek, the city of Buckeye and other unincorporated areas of Maricopa County, Kamps said.

However, there is somewhat of a silver lining. There are 80,000 undeveloped lots that have certificates of AWS that the state has said can be developed as planned, which would help mitigate some of the county’s housing supply issues.

“We still have the potential for growth into those 80,000 units,” Kamps said.

“Within those designated providers there are limited opportunities to grow homes and therefore we think, potentially, over the long run the impact on affordability could be significant.”

Kamps added that he anticipates the prices of the 80,000 lots that already have AWS will also increase if developers chose to sell them, since there currently is a finite supply.

Phoenix, said Vogel, was already dealing with low housing inventory and increasing affordability issues.

On August 4, 2023, 5,259 single family homes were for sale in Maricopa County, down from 11,890 homes on August 9, 2019, according to data from Altos Research. During the same period, the median list price for a home in Maricopa County rose from $399,000 to $640,000, and the current Market Action Index score for the county is 51 — Altos considers anything above 30 to be a seller’s market.

“We have a deep shortage of housing,” Vogel said. “The AMA studies they’ve issues and the restrictions they have put in place do not help, but you can build commercial property and multifamily rental properties so long as it is not a subdivision in undesignated areas, for the moment, but there are bills being proposed to short-circuit that.”

While the building ordinance will certainly impact housing inventory, Elise Fay, a local eXp Realty agent, feels that, at least in the short term it won’t have a major impact on home prices.

“The homes they are looking to build in the restricted areas are on the outskirts of the city, so I just don’t see it having a big impact on housing prices,” Fay said. “The homes out there do tend to be more affordable though, so that is probably going to hurt some first time home buyers.”

Despite rising home costs and dwindling inventory, some local real estate agents who spoke with HousingWire said they weren’t overly concerned about the building ordinance.  

“No one is really talking about it,” Robert Shaw, the Arizona regional vice president of Hunt Real Estate ERA, said. “Since this is about building permits it will be years before it impacts the resale home market, which is the majority of homes agents deal with, so it hasn’t really been a big topic of discussion.”

Fay, a native New Yorker, to whom water shortages were a foreign concept before moving west, said she felt the building ordinance was a sign of the state’s commitment to the stewardship of water resources over the long term.

“Arizona has been innovative in their water management and [when] you realize that they have a 100-year water supply requirement for groundwater, you feel better,” she said.

Although the issuance of new building permits may be on hold for now and the excessive heat and drought situation in Phoenix, which has seen over a month straight of at least 110-degree weather, does not appear to be improving, the HBACA remains optimistic about the future of residential building in the metro area.

“When the governor announced it, she called it a pause and we were pleased to hear that because that told us that it wasn’t a permanent policy of the state,” Kamps said. He also noted that the governor has created a water council that is currently working on recommendations on how to fix the groundwater issues, which it will present to the governor in early 2024.”

Source: housingwire.com

Apache is functioning normally

Home mortgage rates have surged past 7%, hitting the highest level in more than 20 years and dealing another blow to Americans trying to break into the housing market.

The average rate on the popular 30-year fixed mortgage was 7.09% this week, up from 6.96% last week and the highest since 2002, according to data released Thursday from mortgage giant Freddie Mac.

One month ago rates were at 6.78% and for much of the year held in the low-to-mid-6% range.

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But borrowing costs have been on the rise lately. Inflation is a major driver of mortgage rates and amid continued economic growth investors increasingly think inflation will prove stickier than they hoped.

Those investment bets have a big effect for potential home buyers.

The difference between a 6.78% rate and a 7.09% rate adds an extra $133 to the monthly mortgage payment for an $800,000 house. Compared with where rates were in early February, today’s payment is $422 more for the same priced house.

The last time rates were higher than today was in 2002, but they briefly hit 7.08% — just under this week’s levels — in fall of last year.

At the time rates were exploding, more than doubling in a year as inflation soared and the Federal Reserve reversed easy money policies.

The rapid rise quickly sapped buyer borrowing power and caused home prices to fall. But today’s buyers face a different market — one where prices are rising.

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After rates fell into the 6% range this year, a fair number of first-time home buyers returned. But existing homeowners were less willing to list their homes and give up their sub 3% mortgages.

The result has been an extreme shortage of homes for sale that’s once again driving up prices.

In July, the average home price across the six-county Southern California region was $823,398, according to data from Zillow. That’s up 1.2% from the prior month, and the six straight month of increases.

What happens next with prices depends on a variety of factors, including the direction of the overall economy and mortgage rates.

If rates stay where they are today or climb higher, it could sap demand enough to stanch further price increases. But if higher rates keep even more homeowners from listing their homes, it might not make much of a difference.

Rick Palacios Jr., research director with John Burns Research and Consulting, said it typically takes a rapid rise in rates, rather than a slow climb, to significantly hit housing demand.

Unlike Freddie Mac, industry publication Mortgage News Daily provides a daily tracker of borrowing costs and put Thursday’s average rate at 7.37%.

“Our price forecast for Los Angeles is flattish, but that was assuming rates were going to cap out around 7%,” Palacios said. “We are now eclipsing that.”

Source: latimes.com

Apache is functioning normally

With 30-year mortgage rates now above 7%, a refinance likely isn’t in the cards for most homeowners.

In fact, the total number of refinance candidates has plummeted as interest rates have more than doubled.

Previously, around 18 million homeowners stood to benefit from a refinance. Today, it might be less than 100,000, per Black Knight.

Either way, it’s clear that refinancing has fallen out of fashion big time. The math just doesn’t make sense for most.

The question is what are your options other than refinancing, assuming you want a lower rate or cash out?

Why a Mortgage Refinance Doesn’t Make Sense Right Now

Yesterday, the Mortgage Bankers Association (MBA) reported that mortgage rates hit their highest levels since 2001, matching those seen briefly in October 2022.

They noted that refinance applications were off two percent from a week earlier and 35% from the same week a year ago.

If you look at the graph above, you can see why. The number of refinance candidates has fallen off a cliff.

Meanwhile, Freddie Mac said nearly two-thirds of all mortgages have an interest rate below 4%.

As such, refinancing the mortgage just doesn’t work for the majority of homeowners out there.

Simply put, trading in a fixed interest rate below 4% for a rate above 7% isn’t very logical, even if you really need cash.

In fact, during the first half of 2023, nearly nine out of 10 conventional loan refinance originations were cash out refinances.

Ultimately, if you’re looking for a lower rate via a refinance, you’re likely going to need to wait for rates to fall.

This explains why mortgage refinance volume has fallen to its lowest levels since the 1990s, as seen in the chart below.

Option 1: Open a HELOC

One popular refinance alternative is to take out a second mortgage, such as a home equity line of credit (HELOC).

The beauty of a second lien is that it doesn’t affect the terms of your first mortgage.

So if you’ve got a 30-year fixed locked in at 2-3% for the next 27 years or so, it won’t be disturbed.

You’ll continue to enjoy that low, low rate, even if you open a second mortgage behind it.

Another perk to a HELOC is that it’s a line of credit, meaning you have available credit like you would a credit card, without necessarily needing to borrow all of it.

This provides flexibility if you need/want cash, but doesn’t force you to borrow it all in one lump sum.

Closing costs are often low as well, depending on the provider, and the process tends to be a lot more streamlined than a traditional mortgage refinance.

Monthly payments are also typically interest-only during the draw period (when you pull out money) and only fully-amortized during the repayment period.

The major downside to a HELOC is that it’s tied to the prime rate, which has increased a whopping 5.25% since early 2022.

This means those who had a HELOC in March of 2022 saw their monthly payment rise tremendously, depending on the balance.

The potential good news is the Fed may be done hiking, which means the prime rate (which is tied to HELOCs) may also be done rising. And it could fall by next year.

So it’s possible, not definite, that HELOCs could get cheaper from 2024 onward.

Just pay attention to the margin, with combined with the prime rate is your HELOC interest rate.

Option 2: Open a Home Equity Loan

The other most common refinance alternative is the home equity loan, which like the HELOC is often a second mortgage (this assumes you already have a first mortgage).

It also allows you to tap into your home equity without resetting the clock on your first mortgage, or losing that low rate (if you’ve got one!).

The difference here is you get a lump sum amount when the loan funds, as opposed to a credit line.

Additionally, the interest rate on a home equity loan (HEL) is typically fixed, meaning you don’t have to worry about payments adjusting over time.

So it’s beneficial in terms of payment expectations, but those payments may be higher due to the lump sum you receive.

And you’ll likely find that HEL rates are higher than HELOC rates because you get a fixed interest rate.

Generally speaking, you pay a premium for a fixed rate versus an adjustable rate.

Also consider the origination costs, which may be higher if you’re pulling out a larger sum at closing.

It’s one thing if you know you need all the money, but if you just want a rainy day fund, a HELOC could be a better option depending on minimum draw amounts.

Be sure to compare the costs, rates, fees, and terms of both to determine which is best for your particular situation.

Lastly, note that some banks and lenders combine the features of these products, such as the ability to lock a variable interest rate, or make additional draws if you’ve paid back the original balance.

Put in the time to shop as rates and features can vary considerably compared to first mortgages, which are generally more straightforward aside from price.

Option 3: Pay Extra on Your First Mortgage

If you’ve been exploring a refinance to reduce your interest expense, e.g. a rate and term refinance, it likely won’t be a solution at the moment (as mentioned above).

Simply put, mortgage rates are markedly higher than they were just over a year ago.

Today, the 30-year fixed is averaging around 7%, more than double the 3% rates seen in early 2022.

This means most homeowners won’t be able to benefit from a refinance until rates fall significantly.

Of course, the more people who take out 7-8% mortgages today, the more opportunity there will be if and when they fall to say 5%, hopefully as soon as late 2024 if inflation gets under control.

In the meantime, there’s a solution and it doesn’t require taking out a loan, or even filling out an application.

All you have to do is pay extra each month, each year, or whenever you can. You can also set up a free biweekly mortgage payment system.

Whatever method you choose, each time you pay extra toward the principal balance of your mortgage, you reduce the interest expense.

So if you have a mortgage rate of 7% or higher, paying an extra $100 per month or more could lessen the blow.

You’d of course have to consider other options for your money, such as savings rates, investments, and other alternatives. And also your ability to devote more cash toward your home loan.

But this is a way to effectively reduce your mortgage rate without refinancing, which doesn’t pencil for most homeowners these days.

Just note that making extra mortgage payments does not lower future payments. So you’ll still owe the same amount each month unless you recast your loan.

But if and when rates do drop, you’d have a smaller outstanding balance thanks to those additional payments.

This could push you into a lower loan-to-value ratio (LTV) bucket, potentially making the refinance rate lower as well.

To sum things up, there are always refinance alternatives and strategies available, even if interest rates aren’t great.

And if history is any guide, there will come a time in the not-too-distant future when mortgage rates are favorable again.

Source: thetruthaboutmortgage.com

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If you don’t currently offer a tenant portal to your renters, the COVID-19 situation currently disrupting the world brings to light several reasons why you might reconsider. For the most part, landlords and property managers who already communicate and interact with tenants online are facing less business disruption than those who do not. In addition, landlords utilizing tenant portals are actively promoting the health and safety of their tenants, their employees and themselves.

Even when we aren’t facing a global pandemic, a tenant portal is becoming critical to success for any property management business. I’ve encountered countless situations where my tenant portal has helped me be a better landlord. 

Once while on vacation, I was notified that one of my tenants had submitted a maintenance request thanks to my own tenant portal. This one happened to be for a leaking sink, which always catches my attention because water damage can become expensive or dangerous very quickly. Using our tenant portal, my renter was able to upload a few photos of the issue, and I was able to determine that the leak needed immediate attention. I contacted my plumber and was able to get him out to the house quickly. All said and done, this entire process took less than an hour and I was able to get back to enjoying my vacation. 

Landlords who don’t currently use tenant portals often underestimate the convenience and affordability of providing this option for tenants. Many are concerned that tenants may be resistant to paying rent online, but one statistic shows that more than 80% of Americans prefer banking online. Funds can be available as soon as the next day, which is often much faster and more convenient than the time it takes for a check to arrive and clear. 

Tenant portals allow your renters to do things like:

  • Pay rent online – Gone are the days of collecting rent via check in the mail. Believe it or not, I actually know a fellow landlord who had to send out a notice to all of his tenants asking them to stop sending cash rental payments because his dog had eaten hundreds of dollars worth of rent one day. Renters can set up one-time or automatic recurring rent payments via bank transfer, or pay with a credit or debit card. The convenience of paying rent online and setting up automatic payments will help you reduce late payments (and reduce late fees for your renters.)
  • Track payment history – You and your renters can both easily access payment history including payment dates, payment amounts and any late fees or charges. This can help you avoid any disagreements or misunderstandings about payments and payment dates.
  • Place maintenance requests – If you provide a streamlined process for your tenants to submit maintenance requests or work orders, your tenants are more likely to be proactive in bringing potential issues to your attention. This can mean big savings for your business by preventing problems from going unreported and causing preventable damage to your property.
  • Communicate – If you manage multiple properties or a multi-family unit, you might not want to hand out your personal phone number to every tenant you rent to. Tenant portals provide a viable solution for tenants to reach out to you, and for you to communicate updates and notices to all of your tenants at one time.
  • Access important files – File sharing is one of my favorite features of using a tenant portal. Tenant portals provide the opportunity to quickly upload and share files with your renters – things like the lease agreement, move-out instructions, important contact information, or seasonal maintenance information. 

It’s no secret that technology is changing the rental industry, and choosing not to provide a tenant portal in this day and age may even hurt you in a competitive marketplace. Renters value technology and demand the ability to complete tasks online, and landlords need to comply to keep up with the competition. You need to be able to run your business from anywhere – and because rental payments are where you turn a profit on your investment, your renters need to be able to pay rent from anywhere.

Source: geekestateblog.com

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Have you found yourself contemplating flipping a house for the first time? Or you’ve flipped a house in the past, and something went terribly wrong. Now you want to know what other home renovators are and aren’t doing.

Whether you’re searching to flip a house in Ventura, CA, or a home in Las Vegas, NV, this Redfin article offers valuable tips to save time and money. From selecting the best location to choosing a reliable contractor and marketing your property, we’ve got you covered.

1. Do consider the location

Choosing a location is one of the most important factors when you flip a home. For starters, if you plan to actively participate in the renovation process, you’ll want to ensure the commute is close. However, to assemble the right team (contractors, painters, designers, etcetera), you’ll also want to be sure that anyone working on the home can access it readily and isn’t deterred by the distance.

Now, from the perspective of when you go to sell the property, location is equally important. Flipping a home in an area with active demand for your listing can make or break the deal. If you plan to keep the property as a rental, consider both short-term and long-term demand. Would it be best to be located near the city for visitors to access hot commodities quickly? Or is the home a retreat tucked away from the hustle and bustle of the world and instead amongst the quiet wilderness?

Rui Wang, is the VP of marketing for Ark7, an online platform for investing in fractional real estate. She recommends having a rental property near an urban center. This will boost occupancy rates and give easy access to travelers.

2. Do budget accordingly

Numbers are critical when it comes to flipping a house. Spend too much, and you’ll find yourself at a financial loss. On the other hand, spending less may find yourself struggling for occupancy or buyers.

Real estate finance gurus, BiggerPockets, discuss the importance of calculating after-repair value (ARV). What is the property going to be worth after repairs? To determine a property ARV, you must know its current value, the value of the renovations, and perform a comparable market analysis (CMA). A good rule of thumb to help you along the way is the 70% Rule, which states that you shouldn’t pay more than 70% of the ARV minus the repairs needed.

Konstantin Podyachev, CEO of Expo Home Buyers, recommends “setting aside a buffer of around 10-15% for unexpected expenses.” These expenses can arise throughout the renovation process; the last thing you want is to be financially strung out. In the best-case scenario, everything goes according to plan, and the 10-15% stays in your pocket.

3. Do consult with a real estate agent

Even before you purchase a home to renovate, you’ll want to consult a real estate agent. Agents are equipped with a vast knowledge of the area you desire to purchase and can guide you through the process. From learning about recently sold or leased homes comparable to your vision, it’s essential to understand what you’re up against.

Additionally, assembling a team of contractors, designers, appraisers, and inspectors can be challenging. Having a real estate agent as a guiding resource to connect with those individuals can be a step in the right direction.

4. Don’t assume your plan can’t be derailed

Try to assemble a foolproof plan when beginning the process of renovating a home; however, don’t expect it to stay that way. If you plan to reconfigure the layout by demolishing walls or ripping beneath the surface of the floors, you never know what may be discovered.

Termites, asbestos, mold, and other jarring, plan-wrecking things may be found beyond what the eye first sees. Before purchasing a property, perform due diligence and have an inspector review the house. They should look at everything from sewage pipes and water lines to foundation and structural integrity.

Bobbie Wasserman, Founder and CEO of Single Lady Estates, shares to bring in a specialist if concerns arise. “Their insights can provide you with a comprehensive understanding of the current state of the home’s critical (and expensive to repair) systems.”

5. Don’t cut corners, but don’t over rehab

The lowest contractor bid is constantly enticing. However, before deciding, be sure you’re asking to see a portfolio of anyone’s work (maybe even touring a current project). Another helpful tip is to read reviews or connect with someone they’ve worked with before to hear firsthand how well they executed their vision.

Will Rugeley, marketing manager for Good Vibes Homebuyers, shares that in 2020 their team bought a home for $15,000, sold it for $143,000, yet lost $8,500. This happened because they chose a contractor with the lowest bid before vetting them. Based on early estimates, Will and his team were significantly over budget as expenses continued to arise. He now advises “being wary of strangely high or low rehab estimates.”

6. Do consider the design

You’ve considered the location; now it’s time for the fun part, crafting the home’s design. First and foremost, decide if you’re going to design it yourself or if you’re going to hire a professional interior designer. 

Designing a home as a short-term rental (such as an Airbnb or VRBO) can be much different than how you’d create one for a long-term rental or to sell. For short-term rentals, Wang suggests molding each room into a “functional oasis, where guests are treated to both essential amenities and supreme comfort.”

When designing a long-term rental or selling property, the saying “less is more” may be helpful. Consider prospective buyers or renters touring your magnificently curated property; you’ll want them to picture their life in the home. That life may mean leaving room for accent walls or taking inspiration from what you’ve already designed and offering a higher price tag for added features.

7. Don’t forget about marketing

After pouring your heart and soul into designing the perfect property, the last thing you want to forget about is marketing. Your real estate agent will be the greatest asset for introducing your home to potential buyers or renters. 

The experts at Old Pueblo Stucco share the reminder of creating stunning curb appeal so that there is a “wow” factor at first glance. Hire a photographer or videographer to capture the best angles of everything that makes your home unique. Additionally, be sure you (or your agent) have written an attractive copy that will be front and center within the property description, highlighting all the best features.

Final thoughts on do’s and don’ts for flipping a house:

Flipping a home can seem extraordinarily overwhelming. Remembering integral parts can serve as your guiding light from start to finish. Learn from people along the way, consult experts, and continue diving into online resources available when you need clarification.

Beyond the challenges and the windy road that is “do this” or “don’t do that” lies an incredible experience of what is your piece of art coming to life.

Source: redfin.com

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Dan Och said the deal for Rithm Capital Corp. to buy Sculptor Capital Management “substantially undervalues” the hedge fund firm and “penalizes” all shareholders.

Senior management may have sought to influence potential buyers into an “outcome in their favor and to the potential detriment of the company’s shareholders,” Och and four founding partners wrote in a letter Wednesday to the firm’s special committee. 

The committee didn’t seriously entertain potential suitors whose offers focused more on shareholder value than management interests, they wrote in the letter, which was attached to a regulatory filing. Some bidders may have been excluded from the process, while others want to make a higher-value offer now but are barred from doing so by nondisclosure agreements, it said.

Dan Och, Sculptor founder, is objecting to the transaction with Rithm.

Photographer: Rick Maiman/Bloomberg

Och, who founded the firm formerly known as Och-Ziff, asked the committee to release all bidders from any restrictions.

Rithm agreed last month to buy Sculptor in a deal valued at about $639 million, which is expected to be completed in the fourth quarter. The company had been embroiled in litigation with Och over pay packages given to Sculptor Chief Executive Officer Jimmy Levin. The two resolved the legal dispute last year, and Sculptor formed a special committee to explore potential transactions.

The Och group previously expressed its concerns with the bidding process, according to the letter, which was also signed by Harold Kelly, Richard Lyon, James O’Connor and Zoltan Varga.

Under the terms of the deal, Sculptor’s Class A shareholders will receive $11.15 per share in cash, or they can choose to roll over their Sculptor stakes into partnership units in one or more Rithm subsidiaries.

Shares of Sculptor rose 0.9% to close at $11.03, extending their gain this year to 27%. The stock is still down about 60% over the past two years.

Rithm shares fell 1% to close at $9.74.

Sculptor and Rithm didn’t immediately reply to requests for comment.

“We have long sought a partner with the stable capital structure, culture and vision to help unlock the potential for our platform to deliver more and greater value to our fund investors,” Levin had said in a statement after the deal was announced.

The group of former Sculptor executives said they have been pushing Rithm for better terms, both before and after the transaction was announced, and that if there are no material changes “we will vigorously oppose this transaction.”

Source: nationalmortgagenews.com

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OK Rates… Explain Yourself!

By:
Matthew Graham

Wed, Aug 16 2023, 4:28 PM

OK Rates… Explain Yourself!

Today’s Fed Minutes were uneventful with a volume spike that didn’t even eclipse those seen after today’s 8:20am CME open or the 9:15am Industrial Production data.  That puts them in very forgettable company among potential market movers.  Nonetheless, bonds sold off moderately into the afternoon.  This has less to do with things that happened today and more to do with the general trend.  Inflation is moving into the ensemble cast while growth, issuance, and the yield curve are getting more lines.  

    • Housing Starts
      • 1.452m vs 1.448m f’cast, 1.434m prev
    • Building Permits
      • 1.442m vs 1.463m f’cast, 1.441m prev
    • Industrial Production
      • 1.0 vs 0.3 f’cast, -0.5 prev

10:12 AM

Weaker at 8:20am CME open, but stronger now.  10s down 1.6bps at 4.203 and MBS up 3 ticks (0.09).

11:49 AM

Giving up some ground now with MBS down 2 ticks (0.06) and 10yr yields up 1.4bps at 4.233.

01:35 PM

Weakest levels ahead of Fed Minutes.  10yr up 2.9bps at 4.248.  MBS down an eighth (.125).

02:17 PM

Slightly weaker after Fed Minutes, but not a huge move.  10yr up 3.5bps at 4.254.  MBS down 7 ticks (.22)

04:18 PM

More selling.  10yr up 5bps at 4.268 and MBS down just over a quarter point.

 Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.

Source: mortgagenewsdaily.com