Making money
The housing market “is still racing on
strong legs,” said Shawn Tully in For-
tune. Last year, prices for single-family
homes “spiked 9.4 percent—their best
performance in over a decade”—thanks
to low mortgage rates and historically
limited inventory. This confluence of
factors could keep prices “roaring in
2021,” particularly in neighborhoods
surrounding “gateway cities such as San
Francisco, Los Angeles, and New York,”
where the “dearth of new construction
that has endured since the catastrophe of
2008 and 2009” has left builders scram-
bling to meet demand from “affluent Millennials seeking home
offices and backyards.” What’s being offered is “selling at the
fastest pace in years”: Nearly half (47 percent) of all listings are
selling in 60 days or less. And despite the run-up in prices, low
rates have made mortgages cheaper to carry. Before the housing
crisis of 2007, typical payments for a new house were almost
40 percent above their historical average. Now, even with the re-
cent rise, the cost of a new home is still 3 or 4 percent below the
traditional affordable line, based on average family income.Rates are beginning to climb back up, said Orla McCaffrey in
The Wall Street Journal, concerning analysts ahead of the spring
buying season, which accounts for more than 40 percent of the
year’s home sales. The average 30-year fixed-rate mortgage rate
hit 2.81 percent last week—still amazingly low by historicalstandards, but the highest it has been
since November. Mortgage rates are
“closely tied to 10-year Treasury-note
yields,” which have also been rising
quickly. The housing market is hot now,
“but there are growing concerns about
how much longer this strength can last,”
said Paul La Monica in CNN.com.
Though Home Depot and Lowe’s both
reported better-than-expected results,
“rising interest rates could eventually be
a problem,” and Home Depot has been
careful not to promise investors equally
good results for 2021.For those who already own a home and are nearing retirement,
there’s a lot of pressure to pay off your mortgage, said Katy
McLaughlin in The Wall Street Journal. The 2008 financial
crisis made advisers “wary of retirees carrying mortgages, espe-
cially when they must expose themselves to stock-market risk
to meet income goals.” Yet the stock market has been so strong
that “paying off a low-cost loan” can feel like leaving money
on the table. What to do? It’s helpful to “run scenarios for how
a lump-sum amount to pay off your mortgage could perform
in various portfolios.” Be sure to model worst-case scenarios.
Still, it’s “fairly easy to put together a low-risk portfolio that
can outdo the savings most clients would get from paying off a
loan.” The harder calculation is determining how much more
secure you’d feel if you were able to retire debt-free.Housing: Prices spike despite pandemic
BUSINESS 33
AP
Low rates mean homes remain affordable.A $28 billion power bill
Texans were promised that a deregulated
electricity market would make power more
affordable. Instead, it has cost residential
customers $28 billion more than they would
have paid at rates charged by the state’s tradi-
tional utilities, said Tom McGinty and Scott
Patterson in The Wall Street Journal. The de-
regulated system has come under fire after se-
vere weather left millions without power last
month. Supporters of deregulation—a push
led by Enron in the 1990s— promised more
innovation and better service than monopoly
utilities offered, because customers could
“shop around for the best deals.” Initially,
“dozens of competitors emerged,” but a wave
of mergers has left just two, Vistra and NRG
Energy, providing three- quarters of the retail
electricity sold in Texas. From 2004 to 2019,
“rates of retail providers averaged 13 percent
higher than the nationwide rate.”Zillow may want to buy your house
“For certain homes, Zillow’s ‘Zestimate’ will
now represent an initial cash offer from the
company to buy the property,” said Clare
Duffy in CNN.com. The Zestimate cash of-
fers will be available in only 23 markets to
start. But they are part of Zillow’s ongoingnational transformation from “a hub for on-
line real estate data” to “a one-stop shop for
home searching, buying, and selling.” Zillow
has long contended that the pricing algorithm
behind its value-estimate tool, or Zestimate, is
“reliable,” and it’s used that data to buy and
sell homes for several years. The early results
haven’t translated into instant success—the
buying and selling business lost $320 million
last year on revenue of $1.7 billion—but Zil-
low says growth is the focus.Bad news about your home office
After a year of working from home, a lot of
people are wondering whether they qualify for
a home office tax deduction, said Justin Jaffe
in CNET.com. This tax break lets you claim
“the space in your home that’s dedicated to
working as a business expense.” The rules,
however, are “dramatically different for cor-
porate employees and self-employed workers.”
Tax changes in 2017 suspended eligibility
for home office write-offs for any employee
who receives a W-2 from an employer “even
if you’re working from home.” If you are a
business owner or independent contractor, you
are still eligible. But be aware that the IRS uses
tactics such as “checking to see if this is a new
deduction” to find potential issues.What the experts say
When last month’s
devastating winter
storm hit Texas,
Convoy of Hope
(convoyofhope
.org) sent 63 truck-
loads of relief sup-
plies to the state.
The trucks deliv-
ered 94,500 cases
of water—more
than 2 million
bottles—to Texans whose water was shut
off. The organization works internation-
ally, responding to disasters, equipping
farmers with seeds and tools, and feed-
ing children. Convoy of Hope has pro-
vided food to more than 300,000 children
in 18 countries, and given water filtration
systems to communities that lacked clean
water. One program, Convoy: Women,
focuses on women’s economic empower-
ment. So far it has trained 19,400 women
in 10 countries; many of them are now
able to support their families after start-
ing their own businesses.Charity of the week
Each charity we feature has earned a
four-star overall rating from Charity
Navigator, which rates not-for-profit
organizations on the strength of their
finances, their governance practices,
and the transparency of their operations.
Four stars is the group’s highest rating.