Risk free rate – Freedominst http://freedominst.org/ Mon, 16 May 2022 20:27:11 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 http://freedominst.org/wp-content/uploads/2021/03/cropped-favicon-32x32.png Risk free rate – Freedominst http://freedominst.org/ 32 32 Advantages and Disadvantages of Interest Only Mortgages http://freedominst.org/advantages-and-disadvantages-of-interest-only-mortgages/ Mon, 16 May 2022 19:13:39 +0000 http://freedominst.org/advantages-and-disadvantages-of-interest-only-mortgages/

Homebuyers who feel caught off guard by escalating financing costs might be tempted to explore unconventional home loans known as interest-only mortgages, which have much lower down payments compared to a standard mortgage.

But these loans have some major drawbacks that potential borrowers should also be aware of.

With an interest-only mortgage, you only pay interest on the loan initially, usually for the first five or 10 years. The advantage is that these upfront payments are cheaper since you are not required to make payments on the full amount borrowed, known as the principal.

After the initial interest-only period ends, you start paying principal and interest for the remainder of the term of the loan. Payment terms vary, but the interest rate is usually reset to the prevailing rate at that time, which may have increased. And with principal now included, those payments can cost you double or triple what you originally paid on the loan, according to the Federal Deposit Insurance Corporation.

If payments become too expensive, borrowers can try to negotiate a longer term or refinance the loan with a cheaper mortgage rate, if available. However, refinancing can still cost around 2-5% of the total loan, which could offset the savings from a reduced monthly premium.

Right now, interest-only mortgages are “getting more and more popular,” says Shmuel Shayowitz, president of Approved Funding, a mortgage company. He says that for some buyers, it “helps bridge the monthly payment gap.”

But again, as Shayowitz points out, there are downsides to these types of loans that every borrower should consider, even though they can temporarily save you a few hundred dollars a month.

The Disadvantages of Interest-Only Home Loans

First, these loans generally charge higher interest rates than conventional mortgages. The reduced monthly cost comes only from postponing the principal payment to a later date.

And because you’re paying a higher interest rate and making more interest payments overall, you’ll also pay more interest over time, compared to a conventional loan.

Additionally, there is a risk that mortgage rates will rise over time, as has been the case recently. This would make the monthly payments more expensive than originally expected after the end of the interest-only period. The burden of these additional costs could expose borrowers to the risk of loan default.

Rate increases are usually capped at around 2% after the initial interest-only period expires, but this can still be a significant expense.

Another risk is that if your home loses value, the subsequent sale of the property may not cover the full cost of the loan.

“Think about why you’re considering it,” Shayowitz says. A bad candidate for an interest-only loan would be someone looking to “cut a few dollars” off their monthly costs just to move into a home they might not otherwise qualify for.

A good candidate for this type of loan usually has a reliable source of income with enough cash to cover mortgage payments after the interest-only period expires. Mortgage rates could rise further, but the buyer would be willing to accept that risk, especially if they plan to sell the home in a few years. Choosing an interest-only mortgage would temporarily free up money for other expenses or investments.

“A lot of it comes down to putting pen to paper,” says Andy Darkins, certified financial planner at wealth management firm Vista Capital Partners. He advises potential buyers to “stress test” their short- and long-term cash flow before considering an interest-only loan.

“Look at different scenarios,” he says. “At the end of [interest-only] term, what happens if the payment doubles? What if it was somewhere between that and your initial payments? Ask yourself if you could actually afford the payments in each of these circumstances.”

For homeowners looking to minimize monthly costs, another option to consider is a conventional variable rate mortgage, which typically offers lower rates than fixed rate home loans. Again, terms vary, but generally the interest rate on an adjustable mortgage will be locked in for an initial term of five, seven, or 10 years, after which it resets annually or even monthly.

The advantage of an adjustable rate mortgage is that, unlike interest-only loans, you’ll actually start paying off the loan immediately, building up equity in the home that you can borrow later, if needed. And you wouldn’t be saddled with thousands of dollars in unnecessary interest charges either.

Adjustable rate mortgages, however, come with some risk, as mortgage rates could go up. That’s why homebuyers often stick with the cost certainty offered by fixed rate mortgages, even though the interest rate on this type of loan tends to be higher.

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Cuba sees signs of recovery and announces “bold” measures to control inflation http://freedominst.org/cuba-sees-signs-of-recovery-and-announces-bold-measures-to-control-inflation/ Sat, 14 May 2022 19:31:00 +0000 http://freedominst.org/cuba-sees-signs-of-recovery-and-announces-bold-measures-to-control-inflation/

Cranes dot the skyline as the construction of luxury hotels and the renovation of historic buildings are underway, in Havana, Cuba May 16, 2017. Picture taken May 16, 2017. REUTERS/Stringer

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HAVANA, May 14 (Reuters) – Cuba’s struggling economy has started to recover in some sectors after two years of pandemic-induced contraction, but soaring global food and fuel prices require action” audacious” to control inflation, said Economy Minister Alejandro Gil. Cuban lawmakers Saturday.

Gil said Cuba saw a 38% increase in exports in the first quarter, boosted by the rise in the price of nickel, one of the main mineral exports. He said inflation had also slowed despite the upward pressure on the price of imports.

“We’re starting to see a clear and gradual recovery,” Gil said.

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But the price Cuba paid for imported goods jumped nearly $700 million in the first quarter, outpacing the country’s modest export gains, a predicament Gil attributed to “imported inflation” driven by rapidly rising prices of commodities such as fuel, corn for livestock feed and wheat.

US sanctions and soaring food and fuel prices, in part due to Russia’s invasion of Ukraine, have jeopardized Cuba’s timid recovery and threaten to deepen shortages, already forcing citizens to queuing for food, medicine and other basics. {nL2N2W20F1}

Tourism, the main source of foreign exchange needed to pay for more expensive imports, has also lagged behind government targets, complicating the recovery.

Gil did not provide figures on overall gross domestic product or explain how the first quarter results helped meet the government’s target of 4% growth in 2022.

A major sticking point, Gil said, continues to be Cuba’s unofficial exchange rate, which has climbed to five times the government rate of 24 to 1 in recent months, dramatically reducing the average Cuban’s purchasing power. .

To combat this, Gil said Cuba would begin selling foreign currency at a rate between official rates and black market rates, but would limit such transactions to certain public and private companies in an effort to boost the production of commodities. in high demand.

The economy minister said the more favorable exchange rate would support “a production that will then be sold to the population in national currency.”

Gil said citizens looking to exchange pesos for dollars would not be able to participate in the new exchange program, but the cash-strapped government was working towards that goal.

“These are bold and innovative measures. There are no magic bullets…that can solve all problems at once,” Gil said.

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Reporting by Dave Sherwood and Nelson Acosta; Editing by Mark Porter

Our standards: The Thomson Reuters Trust Principles.

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House subcommittee reviews rating agency competition http://freedominst.org/house-subcommittee-reviews-rating-agency-competition/ Thu, 12 May 2022 19:32:44 +0000 http://freedominst.org/house-subcommittee-reviews-rating-agency-competition/

What do you want to know

  • A witness for S&P argued that some commentators on its new insurance rating proposal seem to assume, incorrectly, that the ratings are all about the same.
  • Representative Brad Sherman proposed creating a board that would choose the rating agencies that produce the top three ratings for a new corporate bond or asset-backed security.
  • Rating agency representatives said the Sherman bill would likely reduce rating agencies’ efforts to compete on the basis of rating quality.

The American Council of Life Insurers would prefer that S&P Global Ratings take a different approach if and when it updates its rules for rating insurer capital levels.

Mariana Gomez-Vock a senior vice-president of the ACLI, gave this assessment on Wednesday during a hearing on the bond rating sector hosted by the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.

Most of the witnesses focused on how S&P’s proposed updated capital adequacy rules may or may not affect the level of competition in the rating industry, and on federal rules and policies that help or hinder the level of competition in the rating industry.

Representative Bill Huizenga, R-Mich., turned the conversation to the proposal’s possible effects on life insurers by referring to reports that the proposal could hurt variable annuities and other long-term products.

“What is the management problem there?” asked Huizenga.

Gomez-Vock said the problem is that life insurers may end up having to meet two major capital adequacy standards: the risk-based capital ratio system of US state insurance regulators and a more close to the European Solvency II system.

The RBC ratio approach in the United States is based primarily on the amount of capital an insurer has, how the assets are invested, and the benefits promised to the insurer.

Solvency II is based on cash flow projections for in-force business, with the assumption that all invested assets will earn the same “risk-free” rate of return.

The Solvency II approach “tends to be hostile to long-term products,” Gomez-Vock said.

What this means

Rating agencies try to help life insurers show that they are likely to be able to deliver on the promises of their insurance policy and annuity contract, by providing facts and analysis to prove that ‘they are well managed and invest in sound investments.

Any major change in rating agency rules could affect the types of products life insurers can write and the cost of the products, although nothing has changed except the rating agency rules.

The S&P proposal

Traditionally, S&P competed primarily with Moody’s and Fitch Ratings in bond ratings, and with Moody’s, Fitch and AM Best in insurance ratings.

The list of Nationally Recognized Statistical Rating Organizations, or NRSROs, recognized by the SEC also includes Japan Credit Rating Agency, Kroll Bond Rating Agency, DBRS, Egan-Jones Ratings and HR Ratings of Mexico.

The National Association of Insurance Commissioners has another type of entity, a securities rating office, which assists state insurance regulators with day-to-day assessments of the credit quality of securities held by insurers. regulated by the state.

S&P sparked policymakers’ interest in ratings industry rules by proposing an update that sets strict rules for how its own raters would use security ratings from outside sources.

S&P suggested that if it hadn’t rated a security, it would start by taking a rating from another NRSR and reduce that rating by one level, or “notch”.

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US corporate debt falls to lowest prices since 2008. Could this be a canary in the coal mine? http://freedominst.org/us-corporate-debt-falls-to-lowest-prices-since-2008-could-this-be-a-canary-in-the-coal-mine/ Tue, 10 May 2022 20:35:00 +0000 http://freedominst.org/us-corporate-debt-falls-to-lowest-prices-since-2008-could-this-be-a-canary-in-the-coal-mine/ Stocks and crypto aren’t the only things hurting.

Billions of Fortune 500 corporate bonds deemed nearly default-proof have also been tagged in a garage sale for financial assets as the Federal Reserve scrambles to raise rates and to cool inflation to its highest level in four decades.

The dollar price of the US investment grade corporate bond index recently fell to $93.5 (see chart), the lowest level since the global financial crisis, according to data from BofA Global.

Investment-grade bond prices have fallen to lows since 2008

ICE data, BofA Global

The prices of a host of highly rated corporate bonds in the index fell even lower, in one of the worst periods in history for total returns.

Investment-grade U.S. corporate bonds were pegged at a total return of minus -13.9% this year through Monday, compared to -9.3% for high-yield bonds, a decline that made it the one of the worst performing fixed income sectors, according to Mizuho Securities.

“There are several high-quality bonds in the tech space, where long bonds maturing in 30 years are trading at 70 to 60 cents on the dollar,” Arvind Narayanan, co-head of investment-grade credit at The Vanguard Group, said over the phone.

“These are names that are AA, almost AAA-rated credits,” he said, noting the rare discounts on such bonds as global central banks pull pandemic support from markets.

“Companies and their debt have to fend for themselves,” Narayanan said. “This is a great opportunity for active investors to really drive value for customers.”

Tech-wreck, in debt

The past two decades have been known for falling interest rates, resulting in years in which investors flocked to the deep well of the US investment-grade corporate bond market for yield.

Strong demand meant that much of the debt in the corporate bond index rated as investments generally traded at a premium to “par”, or above the $100 price that many bonds get on issue.

“Only 15% of the days since 2020 has the average index price fallen below par,” BofA Global strategists wrote, in a weekly client note. “Currently, nearly a third (32%) of notional trades in the index are below $90 and 9% – below $80. Unsurprisingly, 92% of bonds priced below $80 have a duration of 10 years or more.

Amid rising interest rates, the stock prices of many of America’s biggest tech companies have fallen, including Apple Inc., AAPL,
+1.61%
Netflix Inc. NFLX,
+2.63%
Amazon.com AMZN,
+0.06%
and GoogleGOOG,
+1.33%
Parents Alphabet.

It has also caused a sea of ​​red for corporate bonds this year, particularly for debt maturing in a decade and beyond, according to data from Bondcliq. For example, Apple’s AA+ coupon bonds maturing in February 2051, rated AA+, were trading at around $74 on Tuesday.

The interest rate mess

When prices for much of the $10 trillion U.S. corporate bond market have fallen in the past, it can often be attributed to concerns about “credit issues,” such as rising defaults. companies.

Bankruptcies were clearly a concern when banks collapsed in 2008, but also initially in 2020, when much of the world adopted containment measures to slow the spread of COVID 19. However, many companies used cheap debt over the past two years to strengthen their balance sheets. and push funding needs further down the road.

“It’s an unusual situation,” said Nick Elfner, co-head of research at Breckinridge Capital Advisors, who said much of the decline in corporate bond prices over the past six months was due at rates.

Bonds are priced at a spread, or premium, above risk-free rates. The 10-year Treasury rate TMUBMUSD10Y,
2.993%
was close to 2.99% on Tuesday, down from a year low of around 1.63% on Jan. 3, 2022, according to Dow Jones Market Data. When bond yields go up, prices go down.

“In 2009, it was based on credit risk, downgrades and solvency risk in the banking industry,” Elfner said, over the phone. “Right now you’re kind of seeing the opposite, with faster upgrades than downgrades, companies with ample liquidity, and high interest coverage.”

But he also called the sharp rise in interest rates a “double-edged sword,” not only inflicting painful losses on bond investors in the short term, but also the possibility of higher returns later, as the yields increase.

The yield for the ICE BofA US Corporate Index was pegged at 4.4% to start the week, approaching the peak of 4.7% at the start of the pandemic in 2020.

As bonds sold off, some of the scum also came out of other more speculative parts of the markets, with bitcoin BTCUSD,
-0.33%
down 35.1% on the year to Tuesday and the tech-heavy Nasdaq COMP composite index,
+0.98%
by 21.5%, according to FactSet.

The big question going forward will be whether the Fed can get inflation under control without triggering a recession, which would raise credit concerns for many corporate debt investors.

Against this uncertain backdrop, Vanguard’s Narayanan said investors remained disciplined in how they deployed their capital. However, he also said it could mean garage sale prices are set to drop further.

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Here’s how to customize your mortgage rate for a better deal http://freedominst.org/heres-how-to-customize-your-mortgage-rate-for-a-better-deal/ Sun, 08 May 2022 03:51:02 +0000 http://freedominst.org/heres-how-to-customize-your-mortgage-rate-for-a-better-deal/ SAN FRANCISCO (KGO) — Mortgage interest rates are rising, but homebuyers can take some steps to lower their personal mortgage interest rates. Mortgage rates are not uniform. Homebuyers should compare rates from different financial institutions. When comparing rates, they look for the lender that offers the best discounts for their situation.

Anyone who has ever shopped for a house has, in all likelihood, also shopped for a mortgage. When shopping, news stories aren’t much help. The headlines scream, “Rates Hit 5.27%,” but the next headline states that rates have “fallen.”

Keep in mind that these titles are just a general guide to mortgage rates and have little to do with the rate you will pay. This makes it difficult to find a mortgage, especially for first-time home buyers like Charlie and Katie Henderson of Concord.

“It was crazy how, for example, the numbers fluctuate if you want to opt for a lower interest rate, but then you pay more fees.” Charlie said. “I didn’t even know how much those fees were…”

RELATED: Why is the interest rate you pay so much higher than the interest you earn?

Just like most mortgage buyers, homebuyers should go online and check out all those interest rates, monthly payments, and fees.

Solidify Mortgage Advisors Loan Officer Joseph Rivera tells buyers not to get bogged down in what they read in most media reports about current mortgage rates.

“Contrary to popular belief,” says Rivera, “every interest rate a homebuyer finds themselves at is pretty much tailor-made or tailored to their specific situation.”

When homebuyers read a mortgage rate online or hear one on TV, they should keep in mind that it is an average or median rate and is probably not what you will pay.

“The lender will assess what they consider to be the perceived risk; the higher the risk, the higher the interest rate,” says Rivera, “and the higher the cost will be to the borrower.”

Now that’s something you can work with. Here’s how to lower your mortgage interest rate.

A good credit score lowers your mortgage interest rate; the same goes for a lower loan amount. A large down payment can also lower your interest rate. Your “debt to income” ratio – how much you owe compared to how much you earn – plays a role in the interest rate you’ll be offered. Also, buying a single-family home versus a condo can lower your interest rate.

VIDEO: 30-year mortgages see highest rate in over a decade

Homebuyers can’t control what the Federal Reserve does or how the big banks act, but they do have some control. Every small change to your individual position can potentially lower your interest rate by 1/8th of a point…and an eighth of a point here and an eighth of a point there can be big savings.

“So it all depends,” Rivera says, “but generally your concept is correct. All of those things that you can do to reduce the risk to the lender will be rewarded in pricing.”

Really work, and you can cut your interest rate in half, maybe even a full percentage point. Over thirty years is real money. The important thing is to get together with a good loan officer and go over all those little adjustments.

Check out more stories and videos from Michael Finney and 7 On Your Side.

Do you have a question for Michael and the 7 On Your Side team? Fill out the form HERE!
The 7OYS Consumer Helpline is a free mediation service for consumers in the San Francisco Bay Area. We help individuals with substance-related problems; we cannot act on business-to-business cases or cases involving family law, criminal cases, landlord and tenant disputes, labor issues, or medical issues. Please see our FAQs here. As part of our support process, it is necessary that we contact the company/agency you are writing about. If you do not want us to contact them, please let us know immediately, as this will affect our ability to work on your case. Due to the high volume of emails we receive, please allow 3-5 business days for a response.

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Corner of Dalal Street: Nifty, Sensex closes the shortened week during the holidays with 4% discounts; what should investors do on monday? http://freedominst.org/corner-of-dalal-street-nifty-sensex-closes-the-shortened-week-during-the-holidays-with-4-discounts-what-should-investors-do-on-monday/ Fri, 06 May 2022 10:56:38 +0000 http://freedominst.org/corner-of-dalal-street-nifty-sensex-closes-the-shortened-week-during-the-holidays-with-4-discounts-what-should-investors-do-on-monday/

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Dime Community Bancshares, Inc. Announces Pricing of http://freedominst.org/dime-community-bancshares-inc-announces-pricing-of/ Tue, 03 May 2022 22:46:53 +0000 http://freedominst.org/dime-community-bancshares-inc-announces-pricing-of/

HAUPPAUGE, NY, May 03, 2022 (GLOBE NEWSWIRE) — Dime Community Bancshares, Inc. (NASDAQ: “DCOM”), (the “Company”), today announced the price of its $160 million offering of its 5.000% Fixed-Floating Rate Subordinated Notes due 2032 (the “Notes”). The notes will initially bear interest at 5.000% per annum, interest being payable semi-annually in arrears, from the date of issue, until May 15, 2027 excluded. Beginning May 15, 2027, the interest rate on the Notes will reset quarterly. at a variable rate per annum equal to a reference rate which should be the three-month SOFR (which is defined in the Notes) plus 218 basis points, with interest payable quarterly in arrears. The Company may redeem the Notes, in whole or in part, on or after May 15, 2027, at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest. The Notes will mature on May 15, 2032 if not redeemed earlier.

The Company expects to close the transaction, subject to customary conditions, on or about May 6, 2022. The Company intends to use the net proceeds of the offering for general corporate purposes, which include the repayment of the outstanding principal amount of the outstanding subordinated bonds of the Company. notes and subordinated debentures. The Notes are intended to qualify as Tier 2 capital for regulatory purposes.

Piper Sandler & Co. is acting as active bookrunner for the offering. Keefe, Bruyette, & Woods, Inc. and Raymond James Financial, Inc. are acting as passive bookrunners for the offering.

This press release does not constitute an offer to sell or a solicitation of an offer to buy securities of the Company. There will be no sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Any offer to sell or solicitation of an offer to buy securities of the Company will be made only pursuant to a prospectus supplement and a prospectus filed with the SEC. The Company has filed a registration statement (including a prospectus) (File No. 333-264390) and a preliminary prospectus supplement with the SEC for the offering to which this press release relates. Before making an investment decision, you should read the Prospectus and Preliminary Prospectus Supplement and other documents the Company has filed with the SEC for additional information about the Company and the Offering.

You can obtain these documents for free by visiting the SEC’s website at www.sec.gov. Alternatively, the Company or Piper Sandler & Co. will arrange to send you copies of the prospectus and the preliminary prospectus supplement upon request by contacting fsg-dcm@psc.com.

About the company

Dime Community Bancshares, Inc. is the holding company of Dime Community Bank, a New York State-licensed trust company with over $12.0 billion in assets and the largest deposit market share among banks Greater Long Island communities. (1).

(1) Overall deposit market share for Kings, Queens, Nassau and Suffolk counties for community banks with less than $20 billion in assets.

Forward-looking statements

This press release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements can be identified by the use of words such as “expect”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “likely”. , “could”, “outlook”, “plan”, “potential”, “predict”, “project”, “should”, “will”, “would” and similar terms and expressions, including references to assumptions.

Forward-looking statements are based on various assumptions and analyzes made by the Company in light of management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that it deems appropriate in the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company’s control) that could cause actual results to differ materially from future results. expressed or implied by these forward-looking statements. Accordingly, you should not place undue reliance on such statements. Factors that could affect our results include, but are not limited to, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control; there may be an increase in competitive pressure between financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins; changes in deposit flows, loan demand or real estate values ​​may adversely affect the Company’s business; unexpected or material increases in loan losses could adversely affect the Company’s financial condition or results of operations; changes in accounting principles, policies or guidelines may cause the financial condition of the Company to be perceived differently; changes in corporate and/or personal income tax laws could adversely affect the Company’s financial condition or results of operations; general economic conditions, national or local, in some or all of the areas in which the Company operates, or conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates; legislative or regulatory changes may have an adverse effect on the Company’s activities; technological changes may be more difficult or costly than the Company anticipates; there may be failures or breaches of information technology security systems; the success or completion of new business initiatives may be more difficult or costly than anticipated by the Company; and litigation or other matters before regulatory bodies, whether now existing or beginning in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates. Additionally, given its ongoing and dynamic nature, it is difficult to predict the effects that the COVID-19 pandemic will have on our business and results of operations. The pandemic and related local and national economic disruptions may, among other effects, lead to reduced demand for our products and services; increased levels of delinquent loans, problem assets and foreclosures; branch closures, work stoppages and unavailability of personnel; and increased cybersecurity risks as employees work remotely.

For a discussion of these and other risks that may cause actual results to differ from expectations, please refer to the sections titled “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K and the subsequent updates set forth in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Dime Community Bancshares, Inc.
Contact with Investor Relations:
Avinash Reddy
Senior Executive Vice President – Chief Financial Officer
Phone: 718-782-6200; Ext. 5909
Email: avinash.reddy@dime.com

]]> The housing market pandemic is creating extraordinary wealth http://freedominst.org/the-housing-market-pandemic-is-creating-extraordinary-wealth/ Sun, 01 May 2022 21:57:54 +0000 http://freedominst.org/the-housing-market-pandemic-is-creating-extraordinary-wealth/

Over the past two years, American homeowners have gained more than $6 trillion in real estate wealth. To be clear, this does not mean that homebuilders transferred $6 trillion in new homes to buyers, or that existing owners made $6 trillion in kitchen and bathroom upgrades.