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Changing in Habits

February 13, 2012 – 6:16 pm

In Barron’s this weekend they noted a major shift in refinancing of mortgages. Over 50% of all refinancing in the fourth quarter of 2011 were paying down their mortgages. That figure before the housing crash never increased over 20%. That is in ‘never’ over all the prior years.

Of course much of it is because of the effort to get the lower mortgage rate and the need to put money into the mortgage because of the loss of value of the homes. The banks require at least a 20% equity value before they will issue a new mortgage.

Another more compelling reason is the ageing of the baby boomers and the fact you can only get a little over 3% on 30 year treasuries on your money compared to getting a 4% mortgage. Boomers are seeing better Value in their homes.

It a smart move by an aging population as they move toward retirement. Maybe they are fearing that social security may
be cut or maybe they realize they are not financially prepared for retirement. That certainly is true when the average 401K is well below 100,000 for those approaching retirement.

Still it is a good thing in the long run for those that will be forced to retire at some point. I just do not think that retirement is anywhere close for most baby boomers. They will we working into their 70’s because they have to.

Good Trading
Steve Peasley

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