Question of the week: Is it true President Trump may change the mortgage market?

Answer: Yes.

In December the WR&MU covered some changes in the industry for 2025, not mentioned was a major change that will impact the mortgage, and therefore the real estate market, if enacted.

Some background.

As part of the legislative responses to the Great Recession that started with the meltdown of the mortgage and real estate markets starting in 2007, President George W. Bush signed The Housing and Economic Recovery Act of 2008. The Act established the Federal Housing Finance Agency (FHFA), which in turn announced it was taking over the Federal Nation Mortgage Association (FNMA—Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC—Freddie Mac), combined known as Government Sponsored Entities (GSEs).

This move was made as both GSEs had become illiquid as investors stopped purchasing their mortgage-backed securities (MBS) in the secondary market, thus freezing the industry. By establishing conservatorships by which the FHFA would direct the running of the two GSEs to regain solvency, re-establish trust in the MBS market, and enable the mortgage, and therefore real estate, market to recover.

As part of the agreement, the U.S. Treasury invested over $200 billion in the GSEs and extended credit to them so they would be solvent and operating. At the time they had over $5.1 trillion in debt and MBS. Essentially the United States government was backing the MBS issued by Fannie and Freddie; in other words, creating a guarantee for investors in their mortgage securities that they would be repaid if borrowers defaulted.

In short, the MBS issued by Fannie and Freddie had the backing of the U.S. government, just like the debt issued by the Treasury Department. Historically, because they are backed by the U.S. government, Treasury bills and bonds are considered the safest investment in the world. Ergo, with the same backing, MBS from Fannie and Freddie became equally, or very close to equally, as safe.

The original intention was that eventually the GSEs would exit their conservatorships and become independent entities traded as public companies, rolling back to their status pre-2008 and the establishment of the FHFA.

Sixteen years later, the GSEs have more than repaid the loans and bailouts from the Treasury, they are still operating under the FHFA. For several years, into the end of the Obama Administration, many have been calling for the conservatorships to end.

With Trump coming into office, it appears that a primary issue for his administration is to separate the GSEs from the government. While it may not happen this year, the consensus is that the separation will occur during this administration.

When, not if, separation occurs, it will have an impact on the mortgage industry. First, with MBS issued by Fannie and Freddie no longer backed by the federal government, how more return will investors require than if they invest in Treasury bills and bonds? The higher the risk the higher the return, how much higher is the risk for mortgages made to homeowners and investors in domestic real estate?

Accordingly, the expectation is that mortgage rates will increase due to the termination of the FHFA conservatorships. Note that investors anticipate events, so when it becomes very certain that the termination will occur investors will start behaving accordingly putting upward pressure on rates before the actual split.

As part of its conservatorship, the FHFA has imposed guarantee fees (g-fees) on the GSEs. Since Fannie and Freddie guarantee the payment of principal and interest for those purchasing their MBS, there is a fee that is charged per loan to cover the guarantees. These fees cover losses and administrative fees, as well as a return on capital, i.e. profit.

Over the years, the FHFA has increased g-fees, and added more g-fees that lenders must pay to Fannie and Freddie, which of course are added to costs for borrowers. While borrowers generally do not pay the g-fees directly, they are paid in terms of higher rates to absorb the fees.

One benefit to borrowers, and the mortgage markets, should be the elimination of g-fees when the GSEs separate from FHFA. The average base g-fees mandated by FHFA for single-family mortgages is currently 61 basis points (0.61%) which amounts to approximately three-eights (0.375%) to one-half (0.50%) of one percent to the mortgage rate.

Absent any reaction to investors with the elimination of guaranteed payments, the elimination of g-fees would result in a reduction in interest rates.

Several years ago the FHFA mandated that lenders increase the fees charged for second home and investment property loans, what is not known is if the GSEs will lower, or eliminate, these higher fees when they become independent entities; my guess is they will not.

Because they no longer have a backstop against losses, another unknown for post-breakup is underwriting criteria. Will the GSEs tighten their criteria or approval? Loosen some criteria that was required by FHFA? Or leave their guidelines essentially the same? One factor in this decision could be the feedback they get from major buyers of their MBS and their expectations for return vis-à-vis risk due to any changes.

One more impact that an end to FHFA’s conservatorships may have is the cost of mortgage insurance. For the past decade plus the cost of private mortgage insurance (PMI) has been historically cheap, due in part to the federal backing of MBS. While foreclosures have been historically low. Since peaking in 2010 they have been declining almost every quarter since. This certainly has had an impact on the cost of PMI, as has tighter underwriting guidelines as a result of the GSE conservatorships, with FHFA mandating the tightening, and rising property values.

Depending on changes that the GSEs make once they are independent of their fees to lenders, and underwriting guidelines, mortgage insurance costs may (should in my opinion) increase for borrowers.

While it is fairly certain that the Trump Administration will extricate Fannie Mae and Freddie Mac from their conservatorships and being subject to FHFA directives, less certain is the total impact this will have on home loan borrowers and the mortgage and real estate markets. My presumption is that rates will be higher, and guidelines a bit tighter for conventional mortgages.

Schedule an appointment to discuss your options if you are considering purchasing a new home or property or refinancing an existing one and want to know the mortgage options available to you. 

Have a question? Ask me!

As expected, the Federal Reserve’s Federal Open Market Committee (FOMC), which determines policy for the Fed’s interest rate moves, did not lower its benchmark interest rate at its meeting this week. Furthermore, Fed Chair Jerome Powell stated that the Fed is not in a hurry to cut the rate in the near future—meaning a cut in March is off the table. As this was expected, the non-move had no impact on rates.

Hot December despite cold fronts. A big jump in personal spending in December helped push 4^th quarter economic growth to a 2.3% rise in GDP, following a 3.1% increase in the 3^rd quarter. For the year GDP grew at 2.8%, the third year in a row the economy grew at 2.5% or higher. A 4.2% increase in personal spending in the quarter, the highest since the first quarter of 2023, was the primary factor for the GDP increase as consumer spending is 65-70% of our economy. Personal spending was up 0.7% in December, following a strong 0.6% increase in November, as consumers outspent their incomes which showed a 0.4% increase for the month.

Incomes did outpace inflation in December, as the Personal Consumption Expenditure index rose 0.3% in December, the most since April, a 2.6% pace year after year. The PCE is the Fed’s preferred inflation index for determining rate moves, and the core index (energy and food stripped for data) is its preferred part of the PCE; the core index had a rather benign 0.2% increase for the month and a 2.8% for the year. Inflation continues to be resistant to the Fed’s 2% target, the 2.1% rate in September is the closest the economy has come to the target. The one-half percent increase since September is not positive for interest rates. Looking ahead, the Fed is forecasting inflation to be 2.5% in 2025.

Looking ahead, it is my belief that the Fed lowering rates this year is becoming less likely given the economic data over the past several months. Instead, we may need to consider the Fed increasing rates as continued consumer spending, strong economic growth, a firm labor market, are not conducive to lower inflation.

Rates for Friday January 31, 2025: I was in New York on personal family business last Friday and unable to get out the WR&MU, but rates had dropped from the prior Friday. Despite the economic news this week, rates are flat from last Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.6275%      Flat        

30-year high-balance conforming        6.875%        Flat      

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Leslie and I are back to being empty nesters. Our oldest and her boyfriend went back to Boston after spending Christmas week with us. The youngest, who flew in the week before Christmas, left today to go back to Brooklyn. Her prolonged stay was a result of her having finished her classes, and her senior year, in December.

It will take a bit to get used to the change in energy, meal schedules, and pop culture education.

If you per chance know of any openings for a bright, witty, smart, young woman looking for a job in New York City referrals are very appreciated!

Question of the week:  What are some impacts that the Southern California Wildfires will have on housing in the region?

Answer:  Taken singularly either the Palisades or Eaton fires would be historic in scope of damage to natural habitats and structures lost.

The Palisades fire as of this morning has burned over 20,000 acres, for perspective the city of San Francisco is approximately 30,000 acres. The Eaton fire covers 14,000 acres, or almost the size of Manhattan Island in New York City.

Almost 180,000 people have put under mandatory evacuation orders so far. This is the equivalent of evacuating the entire city of Ontario (California not Canada).

The fires in the Southland have destroyed more than 10,000 structures. Most of the structures are homes and apartments, displacing tens of thousands of people.

The current damage estimate is over twenty-five billion dollars, with estimated economic impact exceeding $50 billion.

The impact of these fires will be felt throughout the region for a long time.

One impact that immediately comes to mind is property insurance. As is well known, the insurance situation in California has been untenable for many years (essentially since voters decided to have an elected insurance commissioner). Major carriers have pulled back, or out of, coverage in the state, forcing many property owners to get coverage under the California FAIR Plan or ‘non-admitted” carriers who are not backed by California Insurance Guarantee Association (CIGA), which acts like the FDIC does for bank accounts but for insurance policies backing up to $500,000 in claims should an insurer declares bankruptcy or depletes its reserves.

With tens of billions of potential claims being paid due to the wildfires, and not counting any claims from future events this year, what will be the response to insurance companies in a market already inadequately covered due to past claims in high risk areas and inability to have increase premiums sufficient to the risk and costs approved by the commissioner’s office.

Anticipate more non-renewals and fewer new policies issued in the state, further burdening the California Fair Plan. In March the California Department of Insurance warned that a major disaster could make the FAIR Plan insolvent. If the FAIR Plan has insufficient funds to cover claims other insurers must step in to cover the gap based on their share of the market. Very important to note, insurers can pass the costs onto their customers.

Per the Wall Street Journal, the estimated coverage by the FAIR Plan in Pacific Palisades is $5.9 billion; per the article the Fair Plan has approximately $700 million cash on hand to pay claims.

Look for your insurance premiums to increase.

With thousands of families, perhaps tens of thousands, being displaced there will be a significant increase in demand for housing, rental and homeownership. Combined with the elimination of thousands of homes and apartment units reducing supply, the region will likely see an increase in rents and home prices.

Higher costs for home improvements and remodels. Wood, glass, drywall, cement, flooring, plumbing, electrical, counters, cabinets, roofing material, appliances, garage doors, look around your home and office and imagine one thousand structures needing all the same material in then next few years. Demand for home building supplies during Covid as home remodels surged straining supply lines and pushing costs higher and delivery times longer. Expect the same to occur starting later in the year and to continue for quite a while.

If you are considering a remodel, you may want to get your plans into city or county planning offices before the flood of plans being submitted for fire damaged properties. As well, even if plans are not approved, consideration may be given to purchasing appliances, sinks, etc that are part of your plans and put in storage. The storage costs may be lower in the end than higher costs for those items if you wait.

Finally, the airborne smoke and ash from the fires are considerably more toxic than from traditional forest fires. Forest fires have organic matter in their airborne detritus. Due to the amount of metal, plastic, rubber, etc that has been burned with all the buildings and structures, the airborne smoke and particulates are toxic and can, will, cause long-term respiratory issues for many.  

There are two impacts that I am hopeful will result from the catastrophic fires we are experiencing.

First, that governing agencies will engage in forestry management, including, but not limited to, systematic and consistent controlled burns and the removal of underbrush, dead wood and other fire enhancers throughout wilderness and forested areas.  

Second, that the funds from Proposition 1, passed by voters in 2014, will go beyond allocation and become funding for their purpose of building water capture and storage systems throughout the state. Approximately $6.4 billion was available for spending but less than one-third has so far been spent. Keep in mind the allocation of funds from a decade ago will likely not go nearly as far as intended due to increase costs over the past decade while projects sat waiting for approvals, permits and other bureaucratic “necessities.”

Schedule an appointment to discuss your options if you are considering purchasing a new home or property or refinancing an existing one and want to know the mortgage options available to you. 

Have a question? Ask me!

Extremely strong finish. This may be too light of an emphasis on the data released today by the Department of Labor for December’s job market. Expectations from Wall Street were that the economy would add 155,000 jobs last month. That was off by more than 100% as 256,000 jobs were added. As well, the unemployment rate was expected to remain the same, at 4.2%, but dropped to 4.1%; despite 243,000 new job seekers in the market. The news was extremely not mortgage rate friendly.

The entirety of the report had one small glimmer that could be seen as rate friendly, the average wage increased 0.3% for the month, slightly lower than November’s 0.4% wage increase. December’s data concluded a year in which 2.2 million jobs were added in 2024, two times the estimates made for the year at the end of 2023. For the 75% of job creation occurred in three sectors: healthcare, leisure and hospitality, and government.

Reactions were fast and big to the data as stocks dropped in prices and bond rates climbed as investors see the strong job market as pushing the Federal Reserve off any cut to its benchmark rate later this month, and increasingly unlikely to cut at it following meeting in March.

Rates for Friday January 10, 2025: Rates have been climbing since the start of the year, higher the first Friday of the month/year than the last Friday of 2024, and higher again today. Rates are at their highest since the first week of July, and up 1.25% since they hit their most recent low at the end of September.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.875%        Up 0.125%        

30-year high-balance conforming        7.00%          Up 0.125%      

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Southern California is immense, Los Angeles County is larger than the combined area of Delaware and Rhode Island. Population wise, the County would rank 11^th most populated state, between Michigan and New Jersey.

Despite the size, it seems everyone I have spoken to in the last few days has family and/or friends who have been evacuated from, or lost, their homes due to the fires.

In this space of the WR&MU over the years I have included a link to the donation page for disaster relief for the American Red Cross for disasters in other parts of our nation. Today I include the link hoping you will donate some amount, not donation is too small, to enable the Red Cross to assist our families, friends, neighbors, fellow Southern Californians, with food, water, shelter and comfort.  

Thank you for clicking here to make your donation.

Have a great week,

Dennis

Question of the week:  What are some changes in the industry for 2025?

Answer: Perhaps the most significant change is an annual event, the change in the maximum loan limits for conventional and FHA mortgages. The Federal Housing Finance Authority (FHFA) sets the maximum conforming (Fannie Mae and Freddie Mac loan limits based on the House Price Index which tracks the average increase in home values nationally. Adjusted for incomes and inflation, the HPI usually increases from year to year, but there have been some years in the past when it declined, and as a result so do the maximum loan limits. While Fannie and Freddie are under the direction of the FAHA, FHA is under the Department of Housing and Urban development but uses the FHFA limits.

In the past, pre-2008 Great Recession and housing market melt-down, FHA set their own loan limits—generally lower than the conforming limits. Besides the conforming loan limit, FHFA also sets the ”high-balance” limit for homes in high-cost areas; originally for Alaska and Hawaii, the high-balance limit also applies to high-cost counties such as Los Angeles and Orange. Prior to the Great Recession and restructuring of home financing with the Dodd-Frank Act, there was no separate high-balance limits for counties and loans above the conforming limit had to use “jumbo” or non-traditional mortgage products.

For 2025 the loan limits have increased a bit over 5.2% to $806.500 for conforming and $1,209,750 for high-cost areas (high-balance loan limit is 150% of the conforming loan limit).

Today to qualify for a $806,500 loan with a payment of $5098 you will need income of approximately $14,500 per month with a rate of 6.5%; last year for the same loan amount, because it was “high-balance” limit, the rate was 7.125%, the payment $5434 and qualifying income of approximately $15,525, about 7% more than needed this year due to higher loan limit. Note the rate is based upon parameters below, 20% down and 740 FICO score, a higher credit score, or lower loan-to-value will result in a lower rate and payment.

Insurance is changing for 2025. After seeing major changes in home coverage policies, from none available to higher premiums, 2025 should show more friendly changes. Farmers Insurance recently announced they see the state’s insurance market improving and as a result is increasing the number of homeowners insurance policies they will issue in the state and expand coverage to condos and other types of housing.

This is good news as chances are other insurers should follow Farmers, thus expanding more affordable insurance options for homebuyers. That said, State Farm is still the biggest insurer in the state and no news has come from them regarding their plans for 2025.

For the “non-admitted” insurance market (from insurers no licensed by the state but allowed to write policies to cover risks admitted carriers will not cover) more competition has entered the market which has softened some premium options for those forced into this higher-priced market.

Condo sales as a whole will continue to be challenging in 2025, mainly due to insurance coverage. Fannie Mae, Freddie Mac and FHA have been reducing the number of approved condominium homeowners’ associations where they will lend, primarily because of what they determine to be inadequate insurance coverage. Due to the significantly higher costs to replace and rebuild damaged properties, many HOAs insurance policies have not kept up with the higher costs. As a result, they have been dropped off eligible condo lists due to the risk posed to lenders, and ultimately Fannie, Freddie and FHA, should there be a major event and property loss.

For condo sellers, and listing agents, it is highly recommended before putting units on the market to determine if the complex is on or off eligibility lists for lenders. If they are off the list determine why and if the reason is correctable; is it a need to re-apply with updated information, or are there other factors that may require significant action by the HOA to regain eligibility.

For condo buyers it is highly advisable when you make your offer to have your lender check to see if the unit is eligible for the type of financing you are using. If not, determine why and is it something that can be corrected during escrow—such as updating HOA information for the lender.

Finally, 2025 will be the first full year with the new broker compensation regulations that went into effect earlier in 2024. Will sellers be willing to include compensation for the buyer’s agent in their sales price? Will buyer(s) need to compensate their agent out of their own pocket? Will more, or fewer, agents be willing to sign one-time-show contracts with buyers? Will more or fewer homebuyers, and sellers, contract for reduced services from agents to assist with transactions?

The market is still sorting many of these issues out, and with continued slow sales there has not been a significant number of transactions to establish market “norms” between agents and clients it may take a while for there to be an established set, or sets, of what is expected in terms of service, compensation, and who pays who what.

With rates continuing to be at, or above 5.5% for most of 2025 we should see a slow down in the increase in home prices for the year—note “slow down in the increase” not “decline.”

Schedule an appointment to discuss your options if you are considering purchasing a new home or property or refinancing an existing one and want to know the mortgage options available to you. 

Have a question? Ask me!

A bit hotter than expected. That sums up inflation data this week. November’s Consumer Price Index increased at the highest rate in seven months, up 0.3%. While what was expected from Wall Street forecasters, that it was the highest since the Spring brought some concern. Year over year inflation increased from 2.6% in October to 2.7% in November. For the fourth month in a row the “core” (volatile food and energy costs stripped from index) rose 0.3%, with the core rate unchanged at 3.3%. A big part of the increase was vehicle prices, likely due to increased demand from those needing to replace cars and trucks that were lost during October’s hurricanes. One positive note for November is that housing price increases cooled off for the month. Not as good was a 0.4% jump in medical costs for the second month in a row.

Pundits opined (pundited?) that expectations for the Fed should not change based on the inflation data—it will lower its benchmark rate next week. However, the markets did not seem in sync with the pundits. Fixed rates markets dropped throughout the week (lower prices mean higher rates) with no news other than inflation data that should be market moving. One reason could be that while the expectation is that the Fed will lower rates next week, rate cuts in 2025 are less certain. Will the Fed stick to a plan of two to three cuts? Or will there be a long pause to see how inflation and job markets moving.

Rates for Friday December 13, 2024: Rates have their biggest week-to-week increase since last October when they hit their highs for the current cycle (7.875%). Up 0.375% for the week, rates are at their highest since July. Long-term rates have been drifting down, and this could be a short-term spike, but as we close out the year volatility is my expectation.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.50%          Up 0.375%        

30-year high-balance conforming        6.875%        Up 0.375%        

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

When is too soon? When is it too soon, and when have you waited too long to get a Christmas tree? Go too soon and it starts to dry out before New Year’s. Wait too long and your choice of trees has been reduced dramatically and you risk your choices being somewhat Charlie Brownish.

This is the internal debate as to get a tree over the weekend, or wait until sometime next week.

Have a great week,

Dennis

Question of the week:  What’s happening in the housing market?

Answer: October saw the biggest increase in month-to-month home sales in California in the past 40-months, up 4.7% from September and up 9.5% from last year. With the increase in sales came an increase in the statewide median home price ($888,740) by 2.4% from September and 5-8% higher than a year ago.

More locally, LA and Orange County also saw large increases in sales, but drops in median prices from September.

In Los Angeles County home sales were up a whopping 23.1% from September and 10.9% for the year. The $956,200 median sales price was down 0.4% from the prior month, but up 7.0% from 2023; the monthly decline was the fourth drop from month-to-month this year.

Further south, in Orange County, sales surged 12.3% from September and were 14.8% higher than 2023. The $1.35 million median sales price was 3.4% lower for the month, but up 5.9% year-to-year; it was the second month in a row for a decline in the median price and the third decline in the past four months. Orange County’s median price hit a high in June of $1.45 million.

The jump in sales in October is directly attributed to the drop-in interest rates in September—buyers locking in rates in September when entering purchase contracts and closing in October.

Some statistics nationally for home buyers sees a significant change in who is buying homes.

First time buyers are at a record low of 24% of the market. Single women consist are 20% of first time buyers (FTB), more than twice the number of single men.

Another all-time low was seen in the home buyers with kids under the age of 18, only 25% of the market.

Traditionally the median FTB are in their late 20’s. With the increase in prices and rates, the median age from 2023 to 2024 has risen to 38 years old. That is ten years of wealth creation in homeownership being missed by those in their 20’s who traditionally would be entering the housing market.

Showing the lack of move-up buyers in the market, the average of a home seller has been 63 years old, up more than 10 years from prior markets cycles.

Regarding wealth creation, American homeowners have $35 trillion in equity, that is almost 28% higher than our national GDP in 2023, and twice the equity in homes prior to the 2008 crash. The average amount of equity nationwide is $315,000, up from pre-Covid equity of $186,000.

Move-up buyers have been noticeably absent from the market, a major factor in rising prices, and equity growth. The data does not support an significant increase in move-up buyers as 70% of homeowners with a mortgage have a rate under 4.5%, 25% under 3%. Hard to decide to sell you home and see your mortgage rate go up, possibly double.

Note that 40% of home owners own their homes free and clear.

The housing market responded as expected to rates dropping in September when they hit their lowest rates in two years.

As commented on in prior editions of the WR&MU, the economic and political environment do not portend a significant drop in rates in the near, or medium, future absent a significant event domestically or globally. The question to be answered is when will interest rates, prices, and potential buyers’ incomes and funds available for purchase, converge so that home sales increase.

With unsold inventory at 3.1 months and median days on the market at 25 days, both up 25% from a year ago, we could see a softening of the market in the early part of 2025 that could move more homes—depending on rates and if prices do soften, how much.

Schedule an appointment to discuss your options if you are considering purchasing a new home or property or refinancing an existing one and want to know the mortgage options available to you. 

Have a question? Ask me!

Rates for Friday November 22, 2024: Not a lot of rate impacting economic new this week. As result fixed rate markets (bonds, mortgages) moved a bit sideways this week. The result is conforming rates are down this Friday following last week’s spike.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.50%          Down 0.125%        

30-year high-balance conforming        6.875%        Flat      

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Off and on through the past several years I have written in a journal, The Gratitude Journal. It is described as the 5-minute journal for “more happiness, positivity, affirmation..” And when engaged in the thought and reflection in the morning and evening it does fulfill those promises.

As we approach Thanksgiving, I have re-surfaced my journal after taking a too long of a break and realize, again, I have much for which to be thankful and grateful. It is my hope has you gather for Thanksgiving with family, friends, whomever, you too have an abundance of people, circumstances and surroundings to fill you with thanks and gratitude.

Happy Thanksgiving,

Dennis

Question of the week:   Can we save on taxes by making some home improvements?

Answer: Yes!

Two years ago the WR&MU question was, “Should we get solar panels?” In the answer federal tax credits were covered, at the time of the writing the credit was expiring in 2024, however Congress extended the credit to 2032.

In addition to a tax credit for solar panels, the federal tax code also has an Energy Efficient Home Improvement Credit. This credit allows credits of 30% up to $3200, through 2032, for qualified energy-efficient improvements to your home.

Claims are allowed for various energy efficient improvements, including but not limited to exterior doors, windows and skylights, heat pumps, and water heaters. There are limits as to the maximum credit allowed per unit and overall for each type of improvement, for instance the limit is $200 per door with a total of $500.

As well, for those meeting established efficiency standards, the Energy Star rating, appliances are also eligible for credits. Refrigerators, dishwashers, washing machines, dryers, water heaters and HVAC systems are all eligible if they meet the criteria.

Keep in mind a tax credit is a direct reduction of taxes owed for the year claimed, not a reduction of taxable income. For instance, if your total tax liability for the year is $20,000 and you have $3200 in energy efficient improvements and $5000 for solar installation, your tax liability is reduced to $11,800. 

As opposed to a tax deduction, where the total of $8200 lowers your taxable income by that amount.

Did you do any home improvements or remodeling in 2024? Make sure you save those receipts, and if any Energy Star appliances were purchased have the labels and manufacturer certifications.

Note, per the IRS website, for Energy Efficient Home Improvements after 2024 for each item (door, window, etc) the item must have been produced by a qualified manufacturer and you report the PIN for the item on your return.

Final note, we mentioned three different programs, each with their own regulations for eligibility: solar, Energy Efficient Home Improvements, and energy efficient home appliances. Check with your CPA or tax preparer for eligibility of your expenditures and amount available for possible federal tax credits.

Schedule an appointment to discuss your options if you are considering purchasing a new home or property or refinancing an existing one and want to know the mortgage options available to you. 

Have a question? Ask me!

The result was fully expected, after the meeting of the Federal Open Market Committee of the Federal Reserve announced it was lowering its benchmark rate by 0.25%. In a news conference after the announcement Chairman Jerome Powell stated that the effects of high prices are still being felt and it will take time for wages to outpace inflation enough for people to feel better about their financial condition.

Other comments from his presser: Our national debt is on an unsustainable path. The Fed’s monetary policy remains “tight,” meaning it anticipates more rate cuts. While on the right path, lower, one report on inflation was higher than expected; regarding rate cut in December, “By December…one more employment report, two more inflation reports and lots of other data, and we’ll make a decision.” Which could foretell a pause in cutting its benchmark rate.

Rates for Friday November 8, 2024: With the Fed rate cut fully priced into the mortgage rate market for several weeks, the only impact on rates was the election; which produced the standard volatility pre- and post-election. Rates dipped yesterday and today as investors sort out the implications of the results for the President, Senate and House of Representatives, with many investors buying on the large drop in mortgage prices (higher rates) of the past several weeks. As a result, conforming rates drop from last Friday for the first time since mid-September.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                             6.375%        Down 0.125%        

30-year high-balance conforming        6.875%        Up 0.125%      

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

At the 11^th hour of the 11^th day of the 11^th month in 1918 fighting stopped between Germany and the Allied Forces after an armistice was signed in Compiègne, France. While the Treaty of Versailles that formally ended the war would not be signed until six months later, the armistice effectively ended the “war to end all wars.” 

In 1919, President Woodrow Wilson declared that November 11^th would be Armistice Day. On the first Armistice Day besides the parades and speeches to celebrate, there was a brief suspension of business at 11 a.m. In 1938, Congress made Armistice Day a federal holiday.

In 1954, after World War II and the Korean War, acquiescing to Veterans service organizations who had been lobbying for quite some time, Congress amended the 1938 Act, exchanging “Armistice” for “Veterans.”  November 11^th became a day to honor all veterans of all wars.

I feel it is fitting that our national election day is held days before Veterans Day, honoring those who have served to preserve our liberties, freedom and democracy regardless of who has been elected to serve in our Executive or Legislative branches of government.

Deep gratitude and appreciation for all our veterans who have served our nation, and their families who have endured through their time served, not just on our holiday on Monday, but every day.