Buy vs. Rent: An Update

Buy vs. Rent: An Update – Below is an updated list of rent ratios — the price of a typical home divided by the annual cost of renting that home — for 55 metropolitan areas across the country. We last covered this subject about eight months ago, and you’ll notice that most ratios have not changed much since then. A good rule of thumb is that you should often buy when the ratio is below 15 and rent when the ratio is above 20. If it’s between 15 and 20, lean toward renting — unless you find a home you really like and expect to stay there for many years. It’s pretty amazing when you think about it. The country has suffered through a terrible crash in home prices, yet buying a house remains an iffy proposition in many markets. The data comes from Mark Zandi of Moody’s Analytics and covers the second quarter of this year. Home prices haven’t changed very much since then, so I would expect ratios in most places to be quite close to the numbers you see here.
Government liabilities rose $2 trillion in FY 2010: Treasury – The U.S. government fell deeper into the red in fiscal 2010 with net liabilities swelling more than $2 trillion as commitments on government debt and federal benefits rose, a U.S. Treasury report showed on Tuesday. The Financial Report of the United States, which applies corporate-style accrual accounting methods to Washington, showed the government’s liabilities exceeded assets by $13.473 trillion. That compared with a $11.456 trillion gap a year earlier Unlike the normal measurement of government intake of receipts against cash outlays, accrual accounting measures costs such as interest on the debt and federal benefits payable when they are incurred, not when funds are actually disbursed.
Bond Sale Pulled as Rate Bets Send Yield to Four-Month High: Russia Credit – Russia scrapped a sale of ruble bonds for the second time this month as the prospect of rising interest rates sent yields to the highest in at least four months and threatened plans to double borrowing next year. The Finance Ministry yesterday canceled its last sale of so-called OFZs for 2010, an auction initially scheduled for Dec. 1 and delayed until today, citing “unfavorable market conditions” in a statement on its web site. The government pulled a sale of OFZs due 2016 last week after yields reached 7.78 percent, the highest since the debt began trading Aug. 5, prices on Bloomberg show
Employers Seek To Avoid Higher State Taxes On Jobless Benefits – As U.S. employers brace for higher state unemployment insurance taxes next year, business groups are urging Congress to delay interest penalties on $42 billion states have borrowed to continue paying jobless benefits during the recession.
Thirty states and the Virgin Islands have exhausted their unemployment insurance trust fund reserves and are using U.S. treasury funds to maintain benefit checks for millions of workers who lost jobs through no fault of their own.
So far, only Maryland, New Hampshire, South Dakota and Tennessee have paid back their loans in full, according to the National Conference of State Legislatures. California, with an unemployment rate of 12.4 percent, leads all borrowers with more than $9.1 billion owed. Hard-hit Michigan is a distant second and owes more than $3.8 billion. 
A provision of the stimulus bill waived interest on the loans for the past two years, but that respite expires on Dec. 31 and interest begins accruing on the outstanding loans in 2011.

Municipal Bond Sales Hit Record In 2010 — States and local municipalities sold more debt in 2010 than any prior year, boosted in large part by sales of taxable Build America Bonds before the program expires at the end of this month. Sales of municipal bonds rose to $424.8 billion this year, topping the prior record of $424.2 billion set in 2007, Thomson Reuters said Tuesday. Nearly a third of the sales — $116.3 billion — were BABs, a federally-subsidized form of taxable muni bonds that issuers have liked. In 2009, municipal bond sales totaled $406.8 billion

$305 On Gas This Month – Bah! Humbug!  – Holiday shoppers will need to bump up their budget for one purchase this year, and they can’t even put it under the tree: gasoline. The price of fuel is up 13.6% from last December and 76% higher from December 2008, according to a new study from the Oil Price Information Service. Nationwide, drivers spent $305 on gasoline in December.
 Who’s hardest hit? People in Montana. Montana households are estimated to spend over $449 on gas in December, representing a 12.74% slice of their overall household budget. It’s common that people in rural states spend a higher percent of their salary on gas, as incomes tend to be lower. They also often have further to drive for work, and tend to buy larger vehicles

Greece’s Debt Ratings Put On Watch by Fitch for Possible Downgrade to Junk – Greece may have its credit rating cut to non-investment grade by Fitch Ratings within six weeks after a review of the nation’s “fiscal sustainability.”  The assessment will focus on government measures to lower the budget deficit, the economic outlook and the “political will and capacity of the Greek state” to push through austerity measures, the company said in a statement today. Greece is rated BBB- at Fitch, its lowest investment-grade rating.  Greece, the first euro-area nation to seek international aid this year, already has non-investment grade ratings at Moody’s Investors Service and Standard & Poor’s.

EU’s Rehn Vows To Contain Debt "Forest Fire" (Reuters) – The European Union’s top economic official said the bloc needs to keep its options open about the possibility of issuing a common euro zone bond to fight its debt crisis, an idea that Germany publicly opposes. Olli Rehn, the EU’s economic and monetary affairs commissioner, told Reuters Insider Television in an interview on Tuesday that the European debt crisis was akin to a "forest fire," and said the EU was determined to contain the fire. "We will do whatever it takes to safeguard the financial stability in Europe," said Rehn, who was in Beijing for annual EU-China trade talks. "I’m certain that economic recovery in Europe is solid and sustainable. We will contain the financial turbulence so that it will not erode the foundation of the recovery." On the chance of the EU expanding the size of its fund used to bail out euro zone countries, the European Financial Stability Facility (EFSF), Rehn hinted discussions were still ongoing.

Mayors Issue Annual Report on Hunger, Homelessness in 27 Major Cities – The issues of hunger and homelessness still remain major challenges in U.S. cities according to a U.S. Conference of Mayors (USCM) report on the status of Hunger and Homelessness in 27 cities in America (listed below) that was released today by the U.S. Conference of Mayors on a news conference call.  “Each year, the U.S. Conference of Mayors’ report helps us understand the state of homelessness in our communities, as well as how communities are responding” “While there is currently an historic effort to restore America’s economy, the effects of hunger and homelessness are clearly evident in America’s cities and urban centers. This is why mayors have been so proactive in supporting and encouraging local food programs and why federal programs like the Supplemental Nutrition Assistance Program (food stamps) are so critical,” said Asheville, NC Mayor Terry Bellamy who chairs the USCM Hunger and Homelessness Task Force and participated in the press conference call. “The ‘food stamp’ program is an integral safety net for hungry families in our cities. Mayors want to ensure that the recent cuts made to the food stamp program are restored; and we support the Administration’s efforts in this regard. With respect to addressing homelessness, collaboration is essential.

Maryland Considering Cuts To Education Funding – Gov. Martin O’Malley is considering a 5 percent across-the-board cut in state aid for public education.

State Budget Secretary T. Eloise Foster has proposed the cut, which the governor’s office says would save more than $200 million. Maryland is facing a $1.3 billion budget shortfall in the upcoming fiscal year. 

The possible 5 percent cut was revealed in a letter from Foster to Prince George’s County Schools Superintendent William Hite, who has asked the state for an additional $139 million in funding. Foster notes that Prince George’s receives more education funding than any other jurisdiction in Maryland.


Colorado’s Assessed Property Values Projected To Drop For The First Time Since The Late 1980S – Assessed property values in Colorado are expected to fall for the first time since the late 1980s. The latest forecast from legislative economists projects that overall assessed property values will drop 5.3 percent this year. Assessed values are expected to dip another 6.9 percent next year. The report blames a drop in oil and gas prices, the economic downturn and the slow real estate market. The 1980s decline was blamed on the oil bust and the savings-and-loan collapse. Property taxes help fund school districts and The Denver Post reports that the latest decline will cost the state. According to the forecast, lawmakers, already facing a budget shortfall of up to $1 billion, will have to come up with another $140 million to subsidize schools.

Hay Springs Schools will move to 4-day week – The Hay Springs school board voted unanimously last week to move to a four-day school week for the 2011-12 academic year. Superintendent Steve Pummel said the switch will save the district money and should have attendance and academic benefits as well. State aid to education will fall drastically over the next two years as stimulus funds run out, and districts across the state are preparing for 10-20 percent in cuts. Hay Springs has already taken steps to reduce its approximately $3 million a year budget. The district closed a rural school last year, sold an empty theater building the school used for limited storage, sold extra busses and went from two offices to one and from three libraries to one.


Miami-Dade Mayor Faces Recall After Property Tax Raised to Balance Budget – Carlos Alvarez, mayor of Miami-Dade County, Florida’s largest municipal borrower, faces a recall election after opponents gathered sufficient signatures to trigger a new election, the court clerk said.  The drive to recall Alvarez came after the county raised the property-tax rate to balance its fiscal 2011 budget. The county commission must call an election in 45 to 90 days under the county charter, Miami-Dade joins Omaha, Nebraska and Chattanooga, Tennessee in mayoral recall attempts after proposed levy increases.  The increase in the property-tax rate follows a 22 percent slump in the county’s taxable-property values from 2007 to 2010, according to documents provided by the property appraisers’ office. The county closed budget gaps of $1 billion in the past four years as revenue declined, Alvarez said.

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