Rates for home loans tumbled, as investors snatched up safe assets in the wake of a Federal Reserve policy announcement that took markets by surprise.
The 30-year fixed-rate mortgage averaged 4.06% in the March 28 week, mortgage guarantor Freddie Mac said Thursday. That was a 14-month low, and 22-basis point slide was the biggest weekly decline since June 2009. The popular product has managed a weekly gain only twice during 2019.
The 15-year adjustable-rate mortgage averaged 3.57%, down from 3.71%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.75%, down nine basis points.
Fixed-rate mortgages take their cue from the yield on the 10-year U.S. Treasury note
Lower borrowing costs are obviously good for would-be homebuyers. But rates aren’t the housing market’s only headwind. There’s still very little inventory of homes in the areas where people want to live, in the price ranges they can afford. And mortgage lending remains tighter than before the housing crisis, even as Americans have accumulated more student debt and lower down payments.
The housing industry is, slowly, adapting. One example: home builders are increasingly constructing houses for rent, rather than for purchase by owner-occupants. The data in the chart above comes from economists at the National Association of Home Builders, who have tracked the trend across several decades.
Even with the increase, the share of single-family homes constructed for rentals purposes is only 5%, well below the share of all rental units that happen to be single-family homes. NAHB Chief Economist Rob Dietz pointed out in a research post on the topic that “as homes age, they are more likely to be rented.”
The median age of existing homes is now 37, NAHB calculated last summer. That suggests the supply of homes that could be converted to rentals remains elevated, although they’re more likely to require remodeling to keep them energy-efficient and habitable.
That’s probably not the thing that’s breaking the bank for you.
When Matt Kelly and his wife Cheri faced debts of roughly $65,000 in 2005, they decided something must be done. So they cut food costs from about $500 to $300 a month, and pared down entertainment and extras from their budget. But the big thing that tipped the scales in their financial favor: Slashing their housing costs, the Portland, Ore.-residents tell MarketWatch.
The Kellys, who lived in Colorado at the time, moved from a three-story condo to an 850-sq.ft pad. That cut their monthly housing costs from $1,300 to $685, allowing them to save more than $7,300 a year. (Had they just cut a $4-a-day latte habit, their annual savings would have been less than $1,500.) By 2007, the Kellys were debt free, and to this day, they save roughly 25% of their income, Kelly says.
“Cutting housing costs is a huge help in allowing us to live the life we want,” Kelly says.
New research from TD Ameritrade — which looks at people who save 20% or more of their incomes, called “super savers” — shows that they may be onto something: The single biggest difference between what super savers spent less on, as compared to the rest of us, was housing. Super savers spent just 14% of their incomes on housing, while regular folks dropped 23%.
One reason super savers may scrimp on housing? “They may see expensive mortgage payments as a liability. Our data shows that they value freedom to do what they want as well as financial security and peace of mind,” explains Dara Luber, senior manager of retirement at TD Ameritrade.
In some ways, it may be easier to cut housing costs than make smaller conscious choices all day to cut out the things you love, like those lattes. After all, you move once, and your monthly mortgage or rent payments are slashed every month following.
Meanwhile, making choices frequently can lead to something called decision fatigue, which research shows can impact our ability to make the “right” choices as the day goes on.
And because housing is the biggest part of most Americans’ budgets, it’s extra important to save on it. Indeed, the average American household spends a total of roughly $60,000 per year; nearly $20,000 of that spending is on housing, government data shows.
Of course, it’s often easier said than done. Households often pay more for housing so they also get into a good school district or because an area is safer. And, it’s also possible that many of the savers interviewed in the TD Ameritrade study had lower housing costs because they put more down on their home when they bought.
And though you may think you need that space, it’s likely you don’t. As Kelly puts it: “I thought we would miss the larger space, but we didn’t. In fact, we felt more connected as a family. We have more conversations and more spontaneous interactions.”
In the world of full-size pickup trucks, Fiat Chrysler’s Ram 1500 has long been a distant third in sales behind General Motor’s Chevy Silverado and Ford’s F-150. We think the redesigned model is the company’s best chance yet at catching up.
It offers staggering capability, serious technology and incredible on-road manners that impressed us during a weeklong test. It’s not just the best Ram ever, the Ram 1500 is the best truck you can buy today.
To anyone who doesn’t understand the pickup truck craze, we prescribe a few minutes in a Ram for you to figure it out.
Scoff all you want at the $66,370 sticker price of our Ram 1500 Laramie tester, but consider the following. It offers more rear legroom than a $90,000 Mercedes S-Class executive sedan, more cargo and passenger space than the $72,530 BMW X5 luxury family SUV we tested, more power than a $74,160 BMW sports sedan and more towing capacity than a $98,230 Lincoln Navigator.
And it’s not just features and specs; the Ram feels entirely like a luxury product. There’s a well-trimmed interior with a massive, Tesla-style portrait touch screen. There are massive heated and cooled seats that are comfortable for long hauls. There’s effortless power around town and precious little cabin noise on the freeway.
Plus, we love the way the Ram rides. While other trucks and full-size SUVs tend to have some business in the ride at high speeds, the Ram is never unsettled. We also like the way it handles; though it makes no attempts to be sporty or otherwise exciting, it doesn’t lumber about with the sloppiness of, say, a Toyota Tundra.
Ram also sweats the small stuff with tons of thoughtful details throughout the truck. The locking boxes on the side of the bed are watertight and can be drained, in case you need some impromptu coolers. The center console is reconfigurable with sliding cup holder trays.
Peek under the lids, and you’ll see helpful conversion charts and formula references useful to any contractors who happen to buy a Ram. Below, there’s a cute depiction of the Ram truck lineage driving through the center console.
Convenience wise, we counted two 110-volt power outlets, four USB-C ports, five USB-A ports and a wireless charging pad. Add in the standard 12-volt plugs, and you’re set to power a small hospital should the need arise.
Finally, the 5.7-liter engine is a workhorse. It’s not loud or obtrusive, but it delivers 380 horsepower and over 400 lbs per foot of torque. Spec a Ram right, and you’ll be able to tow a best-in-class 12,750 pounds.
While the portrait style touch screen looks cool, it’s not nearly as seamless as Fiat Chrysler’s smaller displays. The software isn’t quite there, as certain menus are confusing and tapping on an information area doesn’t always lead to where you’d expect.
Luckily, you can save money by not ordering the larger infotainment display. You might need it, as you’ll be spending a lot on gas. Ram trucks with the 5.7-liter engine are rated for 15 miles per gallon in the city and 21 mpg on the highway when equipped with four-wheel drive.
It’s a decent figure for the class, but it’s still a thirsty machine. If you don’t plan to tow, there’s a mild-hybrid V-6 “eTorque” engine that costs less and delivers 19 mpg in the city and 24 mpg on the highway.
The beauty of these trucks is that you can get them however you like them. Regular cab, extended cab, crew cab, long bed, short bed, wide bed, with Ram boxes, V-6, V-8 without eTorque, V-8 with eTorque, four-wheel drive or two-wheel drive. That’s before you get to options and trims.
Because of this, we can’t recommend one specification that will be the best all-around truck for all scenarios. Instead, we’re going to option a truck as though we are a truck buyer looking to maximize luxury per dollar while using the bed for occasional hauling. If you need maximum payload or towing capacity, you can consult Ram’s Towing & Payload Capacity Guide.
We’d start with a V-6, four-wheel drive Laramie Crew Cab with the shorter bed option. Add $1,695 for the Level 1 equipment group, which adds blind-spot monitoring, remote tailgate release, front and rear park sensors and a reclining rear seat with split folding.
We’d highly recommend choosing the $1,695 Advanced Safety Group to get adaptive cruise control, lane-keep assist, forward collision warning and an extremely useful 360-degree camera. To make moving stuff in the bed easier, we’d spend $845 on the Bed Utility Group to get a bedliner, cargo tie points and a cargo divider. Budget $100 or $200 if you don’t want a bright red truck.
Finally, add $1,495 for the beautiful panoramic sunroof. All together, our Ram sits at $48,220.
We can’t get over how much value the Ram offers buyers. As equipped, the Ram does a great impression of a luxury car. It’s got adaptive cruise control, 360-degree cameras, heated and cooled seats and a gargantuan cabin. It rides exceptionally well and provides all the convenience features one would expect of a top-trim minivan, like 12 cupholders and nine total USB ports.
The luxury of the Ram alone justifies the price. But it doesn’t stop there; you get up to a 6.4-foot bed, class-leading towing, never-ending list of available configurations and clever cargo solutions to make the bed more usable.
We aren’t sure if the Ram we configured is the right truck for all readers. But if you do need a full-size truck, we’re pretty confident in saying that the right truck for most readers has a Ram badge.
A vexing problem for travelers is finding a place to stash their suitcases when they arrive in a city too early to check into a hotel or Airbnb, or when they’ve checked out of their rooms and have adventures planned before heading to the airport.
Toting baggage to restaurants, museums or a meeting with a potential client is one option. But a growing number of start-ups promise apps that match travelers seeking short-term bag storage with coffee shops, restaurants, gift shops and other businesses that have secure storage space to spare.
These luggage storage networks, such as Vertoe, LuggageHero, Stasher, Nannybag, Knock Knock City and others, allow users to open an app, locate a vetted nearby drop-off spot, reserve a space and pay for the service online. Once dropped off, security ties are usually attached to bags to prevent tampering. Insurance is included in the fee and, after pick-up, users are invited to rate the experience online.
Storage fees vary and are charged by either the hour or the day. Both Knock Knock City and LuggageHero charge $1 per hour or $10 per day with a one-time handling fee of $2 per bag. Nannybag charges $6 per bag for the first day and $4 per bag for each additional day. Stasher’s fees are $6 per day per item and Vertoe’s fees start at $5.95 per day, per item (overnight storage counts as two days) and varies by location.
The services are still young and in the active learning and growth mode.
LuggageHero, which Jannik Lawaetz founded in 2016, currently has more than 300 storage locations in six cities (New York, London, Copenhagen, Lisbon, Madrid and Barcelona) and plans to expand to 39 cities by January 2020.
“The biggest challenges so far have been language,” said Lawaetz. The company started by working only with locations in English-speaking countries, but now is working where Spanish and Portuguese are spoken.
Knock Knock City, also founded in 2016, has dealt with some challenges as well.
“We started in New York City and Brooklyn with people offering bag storage in their apartments on Craigslist, like Airbnb for luggage,” said Selin Sonmez, co-founder of Knock Knock City, “But we found the business hours posted for some people’s homes weren’t reliable or always accurate and others required users to walk up flights of stairs with their suitcases.”
Knock Knock City now also operates in San Francisco, Boston, Washington, D.C., Seattle, Philadelphia, Chicago and Miami and only works with partners on a ground floor that have strict business hours. Sonmez said any location with an average star rating below 3.5 (out of 5) is removed.
Like the other luggage-storage app services, the list of Knock Knock City partner sites is eclectic. Customers can store their bags at bike shops, clothing stores, restaurants, a massage therapist’s office, an eyebrow bar, at hotels and in hostels.
In addition to helping businesses put unused or underutilized space to income-producing use, “we’re helping local economies by getting travelers to explore neighborhoods and getting foot traffic in the doors,” said Sonmez.
That’s the pitch that convinced Atlas Workbase, a co-working space by Seattle’s Space Needle, to sign up as a Knock Knock City site.
“There are a lot of Airbnb rentals in this area and a lot of tourists, so it solves a real need,” said Kim Burmester, Atlas Workbase vice president of sales and marketing. “But our real goal is to get traffic in here as our key target audience is the traveling professional.”
Vertoe, with luggage storage sites in 19 U.S. cities, has partnered with gift shops at transit nodes, hotels, cafes and dry cleaners. It will soon add some co-working spaces to its network as well.
“When we look for look for spaces, it is very important to us that our partners actually make money,” said Vertoe co-founder and chief marketing officer Neha Kesarwani. “We add the locations thoughtfully with that goal in mind. If it’s a marketplace, it needs to be a healthy one.”
Nannybag, which operates in 24 countries and 250 cities, reports some hotel partners that have signed up as luggage “nannies” are finding it more profitable to set aside some guests rooms for luggage storage instead of renting the rooms to guests.
Stasher, with more than 1,000 StashPoints in more than 160 cities across four continents, has partnered with everything from a flower shop to an art gallery for storage. But it finds that a third of its luggage storage sites are now hotels.
“They generally offer better customer service as they normally already deal with this kind of request, and have very convenient opening hours as well,” said Stasher marketing manager Elsa Corcione via email.
Stasher is also available in the Hotels.com concierge app and, like other luggage storage apps, is working with online travel companies to offer luggage storage as an add-on service.
As convenient as storing a suitcase at a coffee shop for a few hours may be, travelers who don’t want to deal with any baggage hassles have other options. Travelers can send luggage (and golf bags, ski and snowboard gear or bicycles) ahead with door-to-door shipping services such as Luggage Free or with services such as Lugless (part of the Luggage Forward family) that offer both drop-off and door-to-door luggage shipping services. Pricing depends on destination, weight and how soon you want your bag to arrive.
Or, business travelers may want to consider another option. For an introductory fee of $9.95 per month for storage, and $99 per standard round-trip U.S. shipment, travelers can skip worrying about making arrangements for toting around a suitcase altogether. Dufl sends customers a suitcase to be filled with clothes or accessories and then picks up the suitcase and stores the items in a “virtual closet.”
Customers can request that the suitcase, filled with any of the stored items, be waiting for them at a hotel and then, after their trip, return the suitcase and the clothes back to Dufl for dry cleaning and storage until the next trip comes around.
For the last two years, Scott Gottlieb missed a lot of time with his wife and three daughters — back-to-school nights, school plays and parent-teacher conferences.
He loved his job running the Food and Drug Administration, but hated leaving his wife Allyson, nine-year-old twins and five-year-old in Connecticut every Sunday to head to Washington, DC. Leaving work on Fridays was also hard. Allyson would tease him about how he wouldn’t want to leave D.C. at the end of the week, but didn’t want to leave his home in Westport, Connecticut on Sundays either.
Gottlieb said he was used to traveling for work every week when President Donald Trump tapped him to be his FDA commissioner in March 2017.
The commute didn’t bother him so much until late last year when he was on a call with a U.S. senator and his other line kept ringing. It was his wife; she was hit by a car while walking in a strip mall parking lot and slightly fractured her knee. He flew home that day, but there was no quick way to get to her between the flight and hour-long drive home from the airport.
“It put a bigger weight on me in terms of feeling disconnected and far away and not being there,” said Gottlieb in an interview. “There was a fear that, God forbid, if something happened and I need to be home quickly, I just couldn’t.”
Although he originally planned to stay at the agency through August, the accident helped put his priorities in order, he said. At the top of the list: spending the summer at home with his family.
That’s essentially what he told his staff when he resigned March 5; he wanted to spend more time with his family.
Usually, when an official of Gottlieb’s stature resigns in Washington or Wall Street, “spending more time with my family” is rarely the real reason. And his unexpected departure, just two months after denying plans to step down, fanned speculation that he was at odds with the Trump administration and forced out like so many other top officials over the last two years.
Not true, Gottlieb said in an interview at the agency’s Silver Spring, Maryland headquarters where his office bookcase is filled with family photos. Befitting for the nation’s top food regulator, who is also a medical doctor, the White House candy dish on his desk is covered with plastic wrap to guard against germs.
The 46-year-old still has a full career in front of him. He’s worked at the FDA multiple times, invested in health-care companies as a venture capitalist and written about health policy at the conservative think tank, the American Enterprise Institute. He denied knowing what he’s going to do next.
In his nearly two years at the helm of the FDA, Gottlieb advanced sweeping initiatives like making cigarettes minimally or non-addictive and approving generic drugs faster. He published roughly 175 commissioner statements and gave countless media interviews, helping raise the FDA’s stature and influence.
Just two weeks before Allyson’s accident, Gottlieb announced the FDA would seek to limit the sales of fruity flavored e-cigarettes. That is part of the biggest and controversial issues of his tenure: curbing epidemic levels of teen vaping.
He’ll step down before the policy is finalized or implemented. It’s one of a number of initiatives he advanced that he leaves unfinished. He says he would have liked the tobacco policies to be further along, though he’s “confident” they will get out.
Ned Sharpless, currently director of the National Cancer Institute, is filling in as acting FDA commissioner after Gottlieb’s last day, which is Friday.
Right now, the only future plans Gottlieb said he’s sure of: going to Disney World for spring break. (He let his daughters pick the vacation.)
“That last week is going to be hard. The first week after I announced, it was difficult,” Gottlieb said. “I was very emotional because in some respects, I’m walking away from the best job I’ll ever have. That’s hard to do.”
The night before Gottlieb announced his resignation, he called his old boss and friend, former FDA commissioner Mark McClellan.
“He said, ‘just make sure you’re ready to do this because there’s nothing like this. You’ll never have another job like this again,'” Gottlieb recalls him saying. “And I know that. I know enough to know that.”
He also called as many of his FDA colleagues as he could before announcing his resignation. When the Washington Post’s story broke, Gottlieb was sitting with two of his senior advisers in his office at the Health and Human Services Department headquarters. Their phones immediately started ringing.
Gottlieb said his predecessor Robert Califf warned him that it’s going to feel weird when his phone stops ringing the day after he leaves.
As for what comes next, Gottlieb said he has no idea.
“It’s the first time in my life I don’t know what I’m doing next,” he said. “I’m a doctor so I always had my next job planned out, but this is truly the first time I’m leaving a job and I do not have a job.”
The one job he said he’s looking forward to? Being a dad again.
These parents are going to great lengths to ensure their kids are happy campers.
It’s the most stressful time of the year for parents struggling to get their kids into summer camps, many of which are already at capacity.
Camp counselors say they’ve seen parents act their most desperate during registration periods. Christopher Tucci, 30, a sports camp counselor who has coached at elite camps in New Jersey, Los Angeles and Colorado in recent years, says he’s had parents try to bribe him into getting their kids a spot on the roster.
‘Last year, someone forged a reduced lunch form, we took them out of the camp.’
“I’ve had everything from parents bribing me with money or free services if they own a local business, to parents finding out who is signed up already, and trying to convince those parents to take their kids out, in order to free space so they can sign up,” Tucci says: “I had a parent in line offer the parent in front of them $100 to change places on the line.”
Tucci says he’s never taken a bribe, but he’s been offered hundreds of dollars from parents. “I knew them well enough that it was a very playful tone of ‘come on, you know we can’t,’ or if I didn’t know them at all I’d turn them away from business in general,” he says.
The average cost of a week-long day camp is $314, according to the most recent statistics from the American Camp Association (ACA) with many of the camps hosted by nonprofit and city organizations, branches of the YMCA and the Boys and Girls Club. Sleep-away camp on average costs $768 per week, and $1,500 weekly, the ACA noted, but experts say prices can be far more expensive than that.
Niche camps that specialize in things like STEM, robotics and computer science can cost up to $1,000 a week. Although 93% of accredited camps offer financial assistance, spots fill up so fast parents who need it are often out of luck if they are minutes late to sign up.
‘I had a parent in line, offer the parent in front of them $100 to change places on the line.’
Case in point: Registration for the Recreation Summer Camp in Summit, N.J. opened on Jan. 2 and the camp now has more than 50 people on its wait list. It has 175 spots for a six-week daily program for $305, and had 12 spots open for a reduced cost of $205 available on a first come, first served basis.
The camp even sent out “save the date” emails to parents as early as December 2018, Maria Hughes, an office assistant at the camp, confirmed. “The sign up went live at 8:30 a.m. and filled in two hours,” she says.
Competition gets especially stiff when it comes to applying for subsidized slots, she adds. To get the reduced rate of $205, a parent must show their child’s reduced school lunch form to prove they qualify for financial assistance.
Some desperate parents will do anything to cheat the system, she says, but camp employees are on the look-out for anything that looks suspicious. “Last year, someone forged a reduced lunch form, we took them out of the camp,” Hughes recalls.
So why do parents to such lengths to get their kids into a summer camp, which is supposed to be fun?
Robert Feldman, a social psychologist and professor of psychological and brain sciences at the University of Massachusetts Amherst, says the obsession with getting a kid into an elite camp gives parents automatic bragging rights, allowing parents to take credit for their children’s’ achievements.
Feldman explains the behavior is reminiscent of the college admissions fraud scandal that rocked the nation earlier this month. Giving your child every social and cultural advantage starts earlier and earlier, especially when there’s so much competition to get into the right school and, eventually, college.
‘Some parents will do virtually anything to allow their kids to get into the right camp.’
“Parents feel that it’s their responsibility to help their children maximize their success and some parents will do virtually anything to allow their kids to get into the right camp,” Feldman says.
“There’s an element of fear,” he adds. “It’s this feeling that if your son or daughter is not in ‘the right place’ they’ll somehow be disadvantaged for the rest of their lives, but in reality they’re going to be just fine. It’s easy for parents to lose site of that.”
Some parents go to great lengths to get their kids into camp the hard way, without cheating the system. “You need to set your alarm to sign up,” Liz Tenety, a mother of four from Summit, N.J., told MarketWatch of scheduling her kids’ summer plans six months in advance. “There’s incredibly high demand within our town to get access to these more affordable, high-quality summer camps.”
Tenety, 33, says subsidized spots at Recreation Summer Camp in Summit, N.J. in her town filled within a day.
When Tenety could not get a subsidized rate for both of her boys, she decided to sign them up for camp at the local YMCA for around $300 a week per kid. She’ll have to shell out another $600 a week for the cost of a babysitter to watch her youngest daughter.
Parents with deep pockets who want their kids to have a more specialized summer-camp experience can pay a starting fee of $400 an hour to consult with Jill Tipograph, a New York City-based educational consultant. Her company, Everything Summer, helps families decide on the best summer program for their kids by interviewing them about their hobbies and interests.
Camp consultants learn if kids are introverted or extroverted, and suggest camps based on these traits.
“We talk about personal interests and get them to share with us the kind of extracurricular activities they do,” says Tipograph. “We ask leading questions like, ‘Do you play an instrument? Do you sing?’ To get a sense if it’s an actual passion. We ask them about the kinds of things they like to do that make them happy.”
Tipograph learns about the kinds of classrooms settings kids are in, if they are introverted or extroverted, and suggest camps based on their age group, hobbies and behavioral traits. She will ultimately give parents a suggested list of camps that would be a right fit for their child, though she does not ultimately sign the kids up for camp herself. “We won’t just be a conduit to get them into a camp, it has to be a good fit,” Tipograph says.
“I turn away clients,” she says. “When parents come to us wanting us to do things that are not within our morals and integrity, or the way we work, we nicely explain, ‘The answer is no,” she explains. She’s had to refuse the services of some parents for trying to pay her to skip the line and try to snag their kids a spot in a sought-after summer camp.
Other moms, like Melissa Wachman, 37, who lives on Manhattan’s Upper East Side, have already missed the boat for early summer-camp sign-ups, so she’s considering enrolling her child in day-camp sessions instead.
She uses the app KidsPass, a ClassPass-type monthly subscription system where parents can sign up for $19 to browse available classes for kids like pottery, music lessons, crafts or chocolate-making and sign them up like you would book a Yoga class.
“It’s very stressful,” Wachman says. “Basically, as soon as the KidsPass calendar is available, you need to be on there booking right away,” she says, adding that she’s forked over $80 for just one class for her kid in the past.
Tenety, the co-founder of the blog Motherly, says the burden of booking summer camps for kids often falls on moms, and the cost of expensive camps can cancel out what they make at their own jobs leading some to decide to stop working and stay home with their kids instead to cut costs.
“It’s not helping the overall economy for women and even the wage gap,” says Tenety. “Some moms end up saying, ‘It’s going to cost me more money for my kids to go to camp than I make at work.’”
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When it comes to getting the timing right for listing a home for sale, April 1 is no joke.
The first week of April is set to be the best moment to put a home on the market this year, according to a recent analysis from Realtor.com. Homes listed between March 31 and April 6 are projected to get 14% more views and 5% less competition.
‘Putting a home on the market in early April positions sellers to attract buyers seeking to close and move before the beginning of school year.’
As a result, Realtor.com estimates that these homes will sell on average six days faster and fetch 6% higher prices on average, which equates to a gain for the seller of $17,000 for the typical listing. The high demand these homes should encounter also means sellers who put their home on the market then are 1% less likely to have to drop the price.
“June is often considered the peak of home buying season, but our analysis found the first week of April is best for sellers looking to maximize list price, and also reduce the risk of price cuts and competition from other sellers,” said Danielle Hale, chief economist for Realtor.com. “Given the time it takes from listing to close, putting a home on the market in early April positions sellers to attract buyers seeking to close and move before the beginning of school year.”
Realtor.com based its analysis on data from the last three years, looking at trends in median listing prices, views per property on Realtor.com, the amount of time properties were on the market and the number of listings.
Making the week ahead all the sweeter is the recent downturn in mortgage rates. The 30-year fixed-rate mortgage averaged 4.06% this week, dropping 22 basis points to a 14-month low for the biggest weekly decline in mortgage rates in nearly a decade. So far this year, the average rate for these loans has only increased twice.
Realtor.com’s report suggested that these low rates could attract home buyers looking to score the rare deal in today’s pricey real-estate market. (Realtor.com is operated by News Corp
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
Nevertheless, as the adage goes: All real estate is local. And depending on where a seller lives, they may want to hold off on listing their home — or get a move on. In particular, sellers in warmer climates may want to hold off until later in the year.
Some Sun Belt cities see their peak listing week in the summer. The best time to list a home in Miami, for instance, is the week of Aug. 4. And sellers in Riverside, Calif., may want to hold off on advertising their properties until June.
Corporate executives and directors are trading on inside information about potential audit findings in the window between year-end earnings announcements and when companies file annual reports and audit opinions with the Securities and Exchange Commission, according to new research.
Companies didn’t use to announce fourth-quarter earnings until the auditors’ work was done and the annual report with its opinion was issued. Since 2004, however, after new audit requirements were mandated by the Sarbanes-Oxley Act as a result of the failure of Enron and the dissolution of its audit firm Arthur Andersen, audits are taking longer to finish.
As a result, recent studies say nearly 70% of companies now announce unaudited fourth quarter and year-end earnings well before the completion of the audit, on average at least 15 days later.
Most publicly traded companies receive a clean audit opinion on their financial reports, but not all. Auditors occasionally add additional language to the report to highlight material internal control weaknesses, going concern issues, and restatements of prior financial statements for errors or material misstatements.
The new working paper, “Audit Process, Private Information, and Insider Trading,” by accounting professors Salman Arif and Joseph Schroeder of the Kelley School of Business at Indiana University and John Kepler and Daniel Taylor of The Wharton School at the University of Pennsylvania, provides evidence that corporate insiders in some companies exploit the window between the earnings announcement and the 10-K filing for personal gain by trading based on material private information about any audit findings. The working paper has not yet been peer reviewed.
The researchers say that any increase in the information content of the audit report, such as a seemingly innocuous explanatory paragraph, increases the value of insiders’ information advantage and potentially increases the incentive to trade during the gap between the earnings release and the publication of the auditors’ annual report.
Taylor, Arif, Schroeder and Kepler conclude that advanced knowledge of audit findings provides corporate insiders with a “temporary information advantage.” The simple solution, they told MarketWatch, is to align the announcement of earnings with the filing of the 10-K and audit report. They recommend in the paper that companies could also further limit trading for key personnel involved with the audit and that companies could consider extending trading blackout windows until the 10-K and auditor’s opinion is issued.
Beginning with the 2019 annual reporting season, requirements for auditors to say more about critical audit matters, or CAMs, will be phased into the audit report. “Any increase in the information content of the audit report will increase the incentive to engage in opportunistic insider trading,” Taylor told MarketWatch.
Schroeder added, “This is an important thing for regulators and company counsels to monitor as we implement the new CAM disclosures.”
Corporate executives and board members will know well in advance of the filing of the annual report if the auditor has raised issues with the financials or the internal controls and whether that information will show up in the annual report. That’s because a typical large public company audit is now a year-long effort, beginning with scoping and scheduling the work effort and then performing interim audit procedures at the end of each quarter.
When the audit report is almost ready, the lead auditor briefs the audit committee of the board. The company subsequently files its 10-K that includes the audit report and any findings to the SEC and the public.
It is illegal for corporate insiders to trade while in possession of material non-public information. Companies monitor compliance with the insider trading law based on company-specific policies that establish restricted trading windows. Earlier research based on actual insider trading policies at 260 companies found that the average length of trading restrictions is 48 days, or 46 days before and 1 day after an information event such as the fourth-quarter and year-end earnings announcement.
There is no formal requirement for companies to file insider trading policies with the SEC.
The earlier researchers also found that about 24% of all insider trades still occur within these restricted trade windows, which vary by company and where enforcement varies by company.
Restricted trading windows alone are not effective at reducing insider trading, according to the earlier research co-authored by Taylor of Wharton with Alan D. Jagolinzer of the University of Cambridge Judge Business School and David F. Larcker of the Stanford University Graduate School of Business.
The effectiveness of restricted trade windows in deterring insider trading depends, instead, on whether individual transactions require corporate legal officer approval.