Tuesday News Snippets

Dotcoms strike back!

Shares in most regular retailers have slumped over the past six months, for obvious reasons. Expect more bricks and mortar stores to close as overstretched consumers retrench. But when it comes to online retailers, the story changes.

Amazon stock, which tanked initially, has doubled since November. Hype over the Kindle electronic book reader has helped. Online jeweler Blue Nile has also bounced. And look at Netflix – its stock just hit a record high, surging over $40 for the first time. The Internet-based movie rental company is one of the big winners of the recession so far, as consumers stay home and order in movies. And it makes sense: A Netflix subscription, typically about $14 a month, is much cheaper than cable.

Historians note that many of the stocks which did best during the Great Depression were actually so-called "growth" companies, because they were the ones conquering the future. When a hurricane sweeps through a forest it knocks down a lot of the older, weaker trees. The younger ones survive and prosper. And so it may be in the economy.
=====================
Bankrate.com

Mortgage deduction savings exaggerated
Monday March 30, 6:00 am ET

Dear Dr. Don,

I still owe $100,000 on my house at an interest rate of 5.88 percent. I would like to pay off the mortgage, but people keep insisting that I shouldn't because I'll lose the mortgage interest deduction.

Yours is a classic question in personal finance. Are taxes the tail that wags the dog or are they just one of many variables to consider when deciding on a financial course of action? I lean toward the latter. You want to consider the tax impact of your financial decisions but not to the exclusion of all else.

The mortgage interest deduction does reduce taxes paid, at least to the extent your deductions exceed the standard deduction. But there's still the after-tax cost of your debt to consider.

The rule of thumb in deciding whether you should prepay your mortgage is to compare the effective cost of your mortgage debt with what you expect to earn on an after-tax basis on your investment.

Martha, I thought the timing on this article from bankrate.com (an independent source) was interesting after our talk last night.
==================

Foreclosures spike - so do mortgage-help plans.

In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders.About 134,000 of the workouts completed were mortgage modifications, which typically lower the interest rate on loans, lengthen mortgage terms or reduce principal owed to make loans more affordable.

But in spite of these efforts, the number of foreclosures started in February rose to 243,000 from 217,000 in January. About 87,000 homes were repossessed by banks during February, a 28% jump from the 68,000 foreclosures completed in January. Since the mortgage meltdown hit in July 2007, 1,395,044 homes have been lost.

The Obama administration's foreclosure prevention initiative could send mortgage modification numbers higher in the coming months, but it will take time. We won't see a spike right away. [Under the program] It takes 90 days to complete a modification. Over the next three months we'll start to see some pull-through.
===================

Opposition stalls mortgage "cram-down" legislation.

A proposal supported by President Barack Obama to allow bankruptcy judges to alter the terms of mortgages for struggling homeowners has been stalled by opposition from moderate senators and the financial-services industry.

Congress will head into a two-week break on April 6, and Senate negotiators say they do not have the 60 votes needed to get the legislation through the chamber. The banking industry says cram-downs would boost mortgage rates, clog bankruptcy courts and raise risks for lenders.
====================

Sales of second homes fell 22% in 2008

Second home sales comprised 30% of the housing market, down from a peak of 40% in 2005, when financing was easier and before the nation fell into recession.
Just 9% of sales last year were for vacation homes, down from 12% in 2007. Proportionally, investment properties held steady at 21%.
===================

The American Dream Is Up for Rent

More residents in the outermost fringes of suburbs are renting, creating rental economies in regions built on the promise of home ownership.

More than three million homes have either been lost to foreclosure or a foreclosure-related sale between 2006 and 2008,