Archives For Todd Burkhalter

Is there a better option than home ownership? Granted owning your home is aligned with the American dream. However, through the recent economy and turmoil in the real estate markets the question has become more common to ask should I Rent or Buy my home? Our guest post takes a look at that very question in Randy Brunson’s post Buying vs. Renting Revisited.

About Our Guest

This week we have a Guest Post from Atlanta based Financial Planner,Randy Brunson. Randy studied at The University of Tennessee – Chattanooga and has spent the majority of his thirty year career advising his clients on building their personal wealth. In addition to Founding Centurion Advisory Group Randy is a husband to Teresa and they have two grown children and two grandchildren.

In case you haven’t purchased a home recently, here’s some (very funny) advice on how to work with real estate agents :



For people of a certain age, who remember taking out a home mortgage at 15%, 16% or even near the top at 18%, the astonishingly low rates that banks are charging today are a little hard to believe. This chart, taken
from statistics collected by the Federal Home Loan Mortgage Corporation for 15-year and 30-year fixed-rate mortgages, tells the story: rates have been historically low for years, and they have been trending lower ever since the bottom fell out of the real estate market.

This has created a strange but not unusual market situation: people who remember the housing market collapse are nervous about buying right at the time when they can buy more house for less money than ever before in their lifetime, and finance at rates we may never see again. Our instincts tell us to buy when the markets are booming and prices are high, and to stay on the sidelines when the markets are offering us bargains.

The economic case for purchasing a home vs. renting has always been a bit sketchy. The real estate site Trulia has calculated that the breakeven between the two comes when you can buy for 15 times your yearly
rental costs. By that formula, if you’re paying $20,000 a year in rent, you might think twice about purchasing a comparable home that costs more than $300,000. But that formula has some embedded assumptions about mortgage rates. If you were to buy that $300,000 house and finance it at 18.45%–the average
national mortgage rate back in October, 1981–then your $4,631 monthly payments would amount to $55,572 a year–more than two and a half times the rental rate you’re paying now. This might not be the ideal tradeoff. But at 3.55%–the average national rate in July–the payments are $1,355 a month, or $16,260. At
those rates, even if you factor in maintenance and property taxes, buying might actually cost less per month than renting.

Trulia identifies some markets where prices are historically high and historically low. The average two-bedroom condominium or townhouse in the New York City area currently costs about 32 times as much to buy as to rent. In Seattle, you can expect to buy at about 24 times the rental cost; San Francisco and Portland, OR now cost 22 times as much. Meanwhile, Miami homes are going for about eight times annual rents, while Phoenix (10 times) and Las Vegas (11) seem to be relative bargains.

In general, you should avoid committing too much of your cash flow to the place you live; annual housing costs should be less than a third of your gross annual income. And you probably shouldn’t count on your
home appreciating in value immediately. A recent report by Fitch Investors Services says that in many markets, housing prices won’t have completely bottomed out until late next year. This is not a market for flipping homes. But with the combination of low rates and distressed prices, it may be the best time to buy that many of us have seen in a long, long time.

Content courtesy of Bob Veres and Randy Brunson


Weekly Update – September 24, 2012

During the past three months, the stock market has turned in one of its strongest performances in U.S. history. Since early June, the Dow Jones Industrial Average has gained 12%. If this rate of increase continued, it would offer close to a 50% annualized gain.[i] But of course, such expectations are entirely unrealistic. While we are grateful for market gains when we can notch them, we must acknowledge that healthy markets move up and down.

In keeping with this behavior, markets closed slightly down last week as investors weighed promises by the Fed and other central banks against signs of economic hurdles and political challenges ahead. The S&P closed 0.38% lower, the Dow lost 0.1%, and the Nasdaq trimmed 0.13%.[ii]


Federal Reserve officials made the rounds last week, giving speeches and expressing support for the Chairman’s efforts to stimulate the economy. Some comments lead analysts to believe that the Fed will act on its strong mandate and take further action if necessary; however, most believe it will leave policies unchanged until the end of the year. While investors cheered the recent aggressive Fed actions, some believe the move indicates the U.S. recovery is still uncertain at best.[iii]


As we near the end of the third quarter, we will begin to see the first corporate earnings reports. Profit warnings from companies in the S&P 500 are outpacing positive pre-announcements by the largest margin in 11 years, indicating that businesses are still feeling the economic crunch.[iv] Because companies have been cutting earnings estimates for months already, there is a possibility that weak earnings  could trigger a decline in stock prices. Even so, equities could heat up in the first week of October due to market-moving events like the release of unemployment data, the presidential debate, and the Eurozone finance meeting.

As the elections near, politicians are ramping up the rhetoric, but still failing to deal with the fiscal cliff, a huge issue in the minds of analysts and investors. Although we wish that legislators would get their priorities straight and do their jobs, it is unlikely that any major resolution will be reached until after the elections. Should you have any questions about how the fiscal cliff or any other issue could affect your personal financial picture, please contact us. We are always happy to provide guidance.




Monday: Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Consumer Confidence

Wednesday: New Home Sales, EIA Petroleum Status Report

Thursday: Durable Goods Orders, GDP, Jobless Claims, Pending Home Sales Index

Friday: Personal Income and Outlays, Chicago PMI, Consumer Sentiment

Data as of 9/21/2012


Since 1/1/2012




Standard & Poor’s 500
























10-year Treasury Note (Yield Only)






Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.


Homebuilders see strong third quarter. In a further sign that the housing sector may have turned the corner, U.S. homebuilder KB Homes, reported strong third quarter earnings. The company reports that it is experiencing rising orders for new homes as inventory drops and housing prices rise.[v]

Jobless claims rise in 26 states. Unemployment rates rose in 26 states in August, according to a Labor Department report, although most states still showed lower rates than a year ago. 42 states and the District of Columbia had lower rates last month than in August 2011.[vi]

Oil prices near $93 per barrel. Oil prices rose higher Friday as traders weighed slowing economic growth and reduced demand for oil against potential supply disruptions in the Middle East. Higher energy prices as we head into the winter months could hit consumer spending hard.[vii]

Concern grows about China’s hard landing. A raft of negative economic reports is raising concerns that China’s economy will not recover. A one-two punch of softening domestic and foreign demand is threatening the giant’s economic stability. A recent report shows that manufacturing grew only slightly in September and that foreign direct investment fell in August for the third month in a row.[viii]


“Leadership is a potent combination of strategy and character. But if you must be without one, be without the strategy.” – Norman Schwarzkopf


Weekly Update – September 17, 2012

Markets experienced a sharp rally last week as the Federal Reserve unleashed its long-expected quantitative easing. The major indices closed higher with The S&P gaining 1.94%, the Dow gaining 2.15%, and the Nasdaq picking up 1.52%.


Under the pressure of the previous week’s disappointing jobs report, the Fed finally let the genie out of the bottle. The report showed that the economy had added just 96,000 jobs in August, a number much lower than economists expected.[i] This was enough to get the Fed to finally launch long-awaited additional quantitative easing. Under QE3, the Fed has made an open-ended commitment to buy mortgage-backed securities to the tune of $40 billion per month. The move is designed to lower long-term interest rates and spur more lending to businesses and consumers. The Fed said it also will “closely monitor” the economy and continue these purchases and possibly expand them until it sees substantial improvement in the outlook for the labor market.[ii] This open-ended commitment means that QE3 will last as long as the Fed wants it to and we cannot be sure when it will end.


The Fed’s recent action sends a signal to businesses and investors that it fully intends to use its powers in a major (and unusual) way to spur economic growth. That is a powerful statement to make in a time of economic uncertainty. QE3 is designed to convince businesses to invest in the future by assuring them that the Fed stands ready to do whatever is necessary.


On the negative side, our concern is that QE3 will simply add to the already enormous national deficit without dealing with the underlying causes of our current economic weakness. We are also skeptical that the Fed’s actions will convince banks to lend aggressively; rates are already at historic lows, but businesses and homeowners are still having trouble borrowing from gun-shy lenders. In short, QE3 is not a magic bullet that will solve our economic issues. In fact, it may actually add to our problems when the Fed is forced to unload all the bonds it has purchased – not just the QE3 bonds, but the $2 trillion in Treasury bonds it bought during QE1 and QE2 as well. Selling all that debt will drive up interest rates and may stall the recovery just when it has finally taken off.


So, what can we expect next? It’s clear that markets are jubilant about finally seeing what the Fed had in store. However, once investors get over their reaction high, if the economic numbers don’t show improvement, markets will likely retreat. Although we hope that businesses respond positively to the Fed’s move by increasing hiring and capital investment, we really want to see Congress pull itself together enough to address the fiscal cliff and tighten its purse-strings. If you have any questions about how QE3 or any economic issue will affect your portfolio, please feel free to call or e-mail us. We are delighted to be of service.



Monday: Empire State Mfg. Survey

Tuesday: Treasury International Capital, Housing Market Index

Wednesday: Housing Starts, Existing Home Sales, EIA Petroleum Status Report

Thursday: Jobless Claims, Philadelphia Fed Survey