Posted by: Dexter and Pamela Montgomery | January 15, 2012

Home Ownership Costs Are Rising Despite Record Low Mortgage Interest Rates!

Did you know that earlier  this week 30- year mortgage rates hit a new historic low, averaging at  3.89 percent for fixed rates loans, according to weekly survey data released Thursday by Freddie Mac. Other news from Washington, will make it more expensive for new homeowners despite the low-interest rates.  During the end of the year fight between Congress and the President over the extension of the payroll tax cut, several mortgage financing benefits disappeared.  One of them, the ability of many home buyers and homeowners to write off the premiums they pay for mortgage insurance, could ratchet up the costs of homeownership this year.   This change in the law took place on January 1, along with the expiration of 58 other tax code benefits that Congress failed to renew, such as credits for home energy improvements, credits for energy-efficient houses and deductions for state and local sales tax payments.    The elimination of this tax deduction will hit many low-down payment conventional loans  originated since 2007, plus almost all new loans where the down payment is less than 20 percent.

For families with low to moderate income the ability to find an affordable place to rent is also becoming tougher.  As you probably know for the past three decades family income have grown at a much slower pace than the cost of owning or renting housing.  This situation means that  families with low and moderate incomes must spend an ever-growing portion of their family income on rent.  As the cost of construction of affordable housing has gone up, the incomes of low and moderate income families has stayed flat.  The third factor contributing to the shortage in supply of affordable housing:  the greatly reduced availability and size of public subsidies to cover the gap between what housing costs and what people can pay.   Because of changes since 1980 in our  public policy regarding subsidizing low and moderate housing, we can only expect the current situation in the United States to stay the same or to get worse in the foreseeable future.

What does this mean for the real estate investor? You must continue to evaluate each deal and determine which ones fit into your overall strategy and risk profile.  Knowing about the overall financial and housing markets  and changing government housing policies helps make you a SAVVY INVESTOR. To find out more about becoming a SAVVY INVESTOR go to


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