Study Looks At Renter Finances

The most effective way to increase the number of renters who can afford a house is to subsidize the down payment, a Census study says.

Reducing the amount of required down payment and lowering mortgage interest rates had less impact on the ability to buy a house, the report said.

The Census Bureau looked at the affordability of modestly priced houses, which it defined as homes that were less expensive than 75 percent of the houses in the area. These ranged from around $84,000 for homes bought by individuals to $136,000 for homes bought by families.

In analyzing the various reasons people are unable to afford a private home, researcher Howard Savage determined that a down payment subsidy of $2,500 would increase the number of renters who qualify to buy by 2 percentage points by reducing the amount of money needed up front.

A subsidy of $5,000 boosted those qualifying by 11 percentage points, $7,500 raised it by 18 points and $10,000 by 22 points.

“Surprisingly,” Savage said, “decreases in the mortgage interest rate of less than 3 percentage points … had no significant impact on the number of renters who would have qualified for a mortgage.”

Reducing interest by 3 points, the report said, increased the share of renters who could qualify by only 1 percentage point.

Lowering the down payment from 5 percent to 2.5 percent increased the number who could qualify by 1 percentage point also. It lowered the initial payment needed, but increased the amount of income needed to qualify because the amount saved in down payment had to be added to the long-term cost of the home mortgage.

Credit Union group offers Y2K tips

The Washington Credit Union League has some advice for consumers concerned about disruptions that could be caused by the so-called Y2K bug, which could incapacitate computers that cannot differentiate between the years 1900 and 2000.

First, the league notes all Washington credit unions and 99 percent nationwide are ready for the changeover, according to the President’s Council on Y2K Conversion. All but a handful of banks are also in compliance.

But take these precautions:

Keep accurate and timely financial records.

Read inserts included in your monthly statements and check Web sites for updates.

With Jan. 1 falling on a weekend, long lines at automated teller machines can be expected. If there are problems, they will be fixed quickly.

Don’t keep excess cash. Your credit cards will work.

Beware of Y2K-related scams. Don’t disclose your Social Security number or mother’s maiden name.

Trader sees `buying opportunity’

Prudential Securities Inc.’s Ralph Acampora expects a “buying opportunity” in U.S. stocks akin to the bargains offered in October 1998, a Prudential official said.

Acampora, Prudential’s director of technical research, said he expects a “huge year ahead,” according to the Prudential official. Acampora spoke to Prudential salesmen during a conference call Thursday. Acampora himself wasn’t available for comment.

The Dow Jones industrial average plunged close to 500 points for the week.

Stocks tumbled in September and October 1998 as investors fled risky investments of all sorts. Yet as Federal Reserve policy-makers cut interest rates, the Standard & Poor’s 500 Index soared 33 percent in three months.

Acampora, who studies “technical” indicators such as volume and price trends, recommends large technology shares and some drug shares, but wasn’t specific.

Idaho issues cease and desist order

The Idaho Department of Finance has issued a cease and desist order against a British Columbia corporation, Blackpool Investments Inc., and its only director, Parkash Kotalwi.

The company was allegedly selling “National Savings Premium Bonds” using tax-free prizes of as much as $2 million as inducements.

Although the government of Great Britain does issue such bonds, Blackpool and Kotalwi are not authorized to sell them.

The order requires the company and Kotalwi to cease sales until they are registered in Idaho and to refund money collected from Idaho investors.

Best total return stocks picked

Do you want to invest in proven favorites?

“Here are our analysts’ favorite stocks among issues with the best five-year `total return’ (gain plus income) results,” says S&P Outlook, Sept. 15.

“In order, America Online Inc., Dell Computer Corp., Cisco Systems Inc., Microsoft Corp., Clear Channel Communications Inc., Intel Corp., International Business Machines Corp., Staples Inc., Pfizer Inc., Warner Lambert Co., Bristol-Myers Squibb Co., American Express Co. and Home Depot Inc.”

Price, fundamentals not linked

Here’s a surprise: “There’s no consistent link between fundamentals and stock prices,” says David Dreman, money manager, in Forbes, Oct. 4. “Investors overvalue prospects of stocks with good fundamentals and undervalue prospects of weak stocks.

“If there ever was a time to heed this lesson, it’s now. Even if blue-chips like Cisco Systems Inc. and Clear Channel Communications Inc. show sharp earnings growth, their prices could revert to their `mean,’ meaning they would underperform. And even if unloved issues like Borders Group Inc. and Tenet Healthcare Corp. don’t turn into big earnings growers, they could outperform as they revert toward their `mean’ going the other way.”