The Numbers, Please…
Well, let’s check out some numbers, shall we?
The yield on the ten-year treasury hit the highest mark since June, 2019: 2.139%. it was as low as 0.535% in March of 2020. I’m not sure why the highest rate in the last three years makes news, but it does. 40 years would be something; 3 years doesn’t move the needle much for me.
Just to be clear, that 2.139% is the interest you are willing to receive by investing your cash in the US Government for 10 years. It’s a super-safe investment, also known as the risk-free rate, but you are locked in for ten years.
In a completely related story, home mortgage rates are also at a three-year high, with bankrate.com having 4.57% as the national average for a 30 year rate, with the best rate quoted as 3.99% with a 1% fee.
The lowest rate ever for a 30 year mortgage was 2.65% in January, 2021.
The highest rate for a 30 year mortgage was 18.5% in October of 1981.
That was also the highest rate for the 10-year treasury: 15.84% in September, 1981
Why the focus on the 10 year treasury? The 30 year mortgage closely tracks the 10-year treasury. So if you are in the market for a home loan, keep an eye on it. Which leads me to the next section.
How do rates impact your purchasing power for a home?
Let’s compare rates in 1981 to today and throw in the lowest rate back in January, 2021.
Given: $70,000 annual income and a down payment of $50,000, what can you afford to buy (generally speaking)?
18.5% gets you a $156,000 home with a $106,100 loan.
3.99% gets you a $332,600 home with a $282,600 loan.
2.65% gets you a $356,300 home with a $306,300 loan.
What’s interesting is that the drop in rates over the last 40 years have doubled the purchasing power. No wonder supply can’t keep up with demand.
Similarly, if rates rise, home prices will ultimately drop. Just when that is, is anyone’s guess.
Or, you can double everything if you get a partner that also makes $70,000 to go in with you. Which is how most homes are bought.
Speaking of rates, the Fed raised the Fed Funds Rate by 0.25% to a range of 0.25% to 0.5%, from 0% to 0.25%.
This wasn’t news; what was news is that most of the fed officials thought rates would be between 1.75% to 2% by year end.
That makes for at least six more ¼% rate increases by year end; this was higher than most analysts had expected.
That means your prime rate loan will be at least 5% by year end. Plus the spread the bank puts on your loan.
So what was in that spending package the Senate passed 68-31 to keep the country funded and paying its obligations?
2,727 pages for starters. The funny thing is that anyone at a meeting gets annoyed if a PowerPoint goes over 10 pages. Also, does any one person read the whole thing, or do you assign different sections to different people?
Total was $1,500,000,000,000. Or $1.5 trillion if your eyes get crossed trying to count the 0’s.
$10,600,000,000 for Ukraine and $3,000,000,000 for our European Command operations support.
$782,000,000,000 in defense spending, an increase of $42 billion (the zeroes are just a waste of ink but I included those as a reality check).
$26.7 billion for 13 Navy ships
$8.5 billion for 85 F-35 jets – those things are awesome!
$2.3 billion for 14 KC-46 air refueling tankers. That does NOT include the jet fuel, which may cost more than the plane.
$9.7 billion for some 5000 earmark projects.
An earmark project is a project favored by an individual lawmaker.
This had been banned since 2011. Evidently not anymore.
Alabama did quite well with $192 million for Senator Richard Shelby to fund Mobile harbor, Mobile airport and the U. of South Alabama in, you guessed it, Mobile.
The smallest I saw was a couple of $20,000 allocations for a workforce development program in Denver and a hospital in Chicago
Lindsey Graham got $17,997,000 for a South Carolina hospital.
Other misc. items (if you can count billions as miscellaneous)
$1.5 billion for climate diplomacy and $100 million for environmental justice. How is that measured anyway?
Tidbits
You know those compliance “tests” and “certifications” you take for sexual harassment, workplace issues etc? Those are the ones one of your employees does for you, or you attempt to test out using the “multiple guess” theory of test taking, or someone provides “coaching” so you can get on with more important things. Well, the California DMV is going to do that very system for the written portion of the drivers test. This is promoted as a way to keep lines and waiting time down at the DMV. Nice; what could go wrong? It will be interesting to see if there is a correlating rise in the downloads of Form SR-1.
Walmart sets a goal of hiring 50,000 by the end of April. They are positioning themselves as a place where you can have a career. And they still can’t find enough workers.
The total amount California has spent on the homeless problem over the last three years, per the Associated Press, is $13 billion. There are an estimated 161,548 homeless folks in California, per endhomelessness.org. That is $80,471.44 per person. And that’s just the last three years. Just sayin’.
In a completely unrelated story, here is a link you can use to write to prominent but uninterested elected officials: https://findyourrep.legislature.ca.gov/. Please tell them you care about what they do and that you vote!
The Ides of March have come and gone. Next up, April Fools!
