THE BASIS POINT

Where Are 50% of Ski Homes Bought With Cash? Can You Spot A Scam? (FDIC QUIZ).

Can You Spot A Scam? Take This FDIC Quiz
We all love con artists in the movies, but if you’re scammed in real life it’s anything but entertaining. Yet it happens every day. So you should take the FDIC’s Can You Spot A Scam Quiz to make sure you know how to avoid losing your money to a grifter. And while visiting the FDIC site, you realize they do quite a bit more than just close down illiquid banks. Here’s another good consumer link with mortgage payment tips.

50% of Park City Homes Bought With Cash
According to the National Association of Realtors, currently 29% of real estate around the nation is paid for with cash—no loan. But in some places it is higher: 50% of Park City, Utah buyers paid cash in September: 35% for single-family homes, over 50% of condominiums, and nearly 80% of land sales were paid for with cash in the 3rd quarter. But wait a minute–what about leverage? Instead of tying up $500k of cash in that condo, use $100k in cash, get a $400k loan, and use $400k cash to invest in stocks, growing your company, etc.

Tuesday Market Recap
What happened yesterday with rates? In the last week or so mortgage prices have had a nice rally/improvement, and traders say that “they ran out of steam” compared to Treasury prices. Origination and MBS selling by money managers increased throughout the day, with traders seeing a large amount of selling in the higher, existing coupon areas (5% and above). Ongoing fears regarding EU banks, particularly Spain and Portugal, fueled the flight to safety again. But then we had much stronger-than-expected Chicago PMI and Consumer Confidence numbers.

The S&P/Case-Shiller Home Price Indexes showed broad-based declines in home prices in the 3rd Quarter of 2010, with the National Home Price Index declining 1.5% from a year earlier. The Case-Shiller index of 10 major metropolitan areas dipped 0.5% from August, while the 20-city index decreased 0.7%. Adjusted for seasonal factors, the declines were 0.7% and 0.8%, respectively.

We saw some intra-day price weakening Tuesday, so even though MBS prices ended the day roughly unchanged, the fact that they started off so strongly and then went south resulted in the changes. TradeWeb reported activity at 119% of the 30-day average, up from 59% on Monday. And the 10-year Treasury note ended the day at 2.80%.