The Pontiac Silverdome, which cost $55.7 million dollars to build, sold a few days ago for $583,000.
Yes, five hundred eighty three thousand dollars.
This is a stadium, one that was the home for a National Football League team, a National Basketball Association Team, even a Super Bowl.
And now, it’s been sold for less than some homes in my small little town of Kane’ohe. For less than the equity my mother has in her home, even.
Granted, it will take a lot of money to just do upkeep, but it seems like it might be a great deal for the buyers.
I’ll be thinking about the Silverdome as I look for homes that cost, oh, only a little more than half its price.
One of the best features of the economic stimulus packages that have been going around since the economy got flushed down the toilet has been the homebuyer tax credit of up to $8,000 for first time homebuyers, which is set to expire at the end of the month.
Fortunately, there is bipartisan support for extending this credit.
This is a huge break for those looking to buy a home, but it comes with the usual gotchas (besides the credit actually getting extended, which the lawmakers are working on right now): the buyer has to have a down payment saved up and decent credit to get a loan–which really, is the way it was always supposed to be–and find a lender willing to lend you the money.
That said, if you meet those requirements, you may have a few more months to make this into a fantastic time to buy a home.
The overall effects of interest rates on the economy can be summed up pretty quickly–low interest rates encourage borrowing and help those who owe money; that encourages spending and therefore economic growth. On the other hand, high interest rates benefit those who like to save, as they’ll get better return on their money, and discourages spending, therefore discouraging economic growth. That said, on a micro level, who actually benefits from low interest rates?
The people who benefit most from low interest rates are those who owe money or are looking to borrow money. For instance, with the incredibly low interest rates on 30 year fixed mortgages available earlier this year, I refinances the mortgage on the house from the very decent 5.85% obtained a few years back to 4.25%, shaving hundreds of dollars off of the monthly payment. Also, if I wanted to borrow money to say, start a business, I could likely get a much better rate than I would have a couple of years back.
On the other hand, the very low interest rate climate hurts savers. My online savings accounts that were paying rates in excess of four percent are just over one percent now–and I’m afraid to check what the regular passbook savings account that my mother uses at the local brick and mortar bank is paying (not long ago it was paying a quarter of a percent when the online accounts were still above three percent). Folks who are looking for certificates of deposit as safe places to park money are having difficulty finding interest rates at three percent for almost any term (Bankrate says it’s possible to get 3.06% on a five year CD).
Remember that in recent years inflation has been about three percent per year, which makes it pretty clear that locking in a paying rate for a long period of time is a real risk if inflation shows up again with a vengeance; on the other hand, it’s a great time to refinance debt or buy a house if you can come up with a nice down and really can afford it over the long run. In any case, we all benefit from low interest rates if we owe money (or are looking to borrow), but all hurt by them if we’re saving somewhere.
We talked about Real Estate Investment Trusts not long ago, and we talked about Exchange Traded Funds awhile back. Now combine the two and we get one of my very small holdings, the Vanguard REIT Index ETF (VNQ).
This is a tiny holding in my Roth IRA; when I say tiny, I mean .14% of my total portfolio. That’s right, not even close to a single percent. Like real estate, this fund hasn’t done all that well, but since it’s from Vanguard, I get the low costs I would expect, and the ETF pays a nice dividend of 9.13%.
As usual, in a tax advantaged account, I have no real tax concerns. Since it’s such a small part of my portfolio, I have no danger of overexposure. And while it hasn’t performed well recently, it will go as real estate goes–and eventually it will come back.
If you are interested in real estate investing without the headache of being a landlord, this is one ETF to really consider.
A real estate investment trust (REIT) is a tax designation for a corporation investing in real estate that reduces or eliminates taxes with a catch–REITs must distribute almost all of their income to their investors. These REITs often issue stocks, so it’s possible to buy into REITs–including indices of REITs–as an individual investor.
A few years ago, when real estate was red hot, so were were REITs. These days, like real estate, REITs are taking a beating; for instance, the Vanguard REIT Index (VGSIX) is down 8.72% year to date, trailing the essentially flat for the year S&P 500 index; however, it also pays a yield of 8.98%, which is considerable, meaning that there is still some nice benefit to owning a REIT–income.
While it hasn’t performed great as of late, real estate is an area worth diversifying in; instead of buying actual real estate, a REIT or REIT fund (or ETF) may offer the benefits of buying real estate at a lower initial cost and without the headaches of being a landlord. Consider a REIT for diversifying your investments if you would like some exposure to real estate.
