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I’d like to say that I’m over the Housing bust, but I’m not.
I am still angry. Angry at the homebuyers who overbought and then were foreclosed on, the banks that gave out loans to anyone who could fog a mirror, and the government regulators who sat idly by.
You see, it's personal for me.
My home's value is still suffering, but here is the thing, when it comes to your money, you have to set emotion aside and be clear headed.
It’s hard to do that these days with the reports coming out of the housing market. Standard & Poor’s/Case-Shiller housing index jumped 9.3% in February– the most in seven years. With numbers like that, it’s hard not to get excited. But here’s what you need to know, if you plan to buy a home this year.
1. All signs point to a bubble. The government isn’t warning of a housing bubble because the housing numbers they survey when it comes to inflation aren’t home prices but apartment rents, called “Owner’s Equivalent Rent.” What’s worse, the government figures this number using estimates from homeowners. Not exactly scientific. So, if you can’t rely on government numbers, take a look at what’s going on in some of the hardest hit markets during the recession. For example, Las Vegas prices were up 31% year over year in April as inventory contracted. The story is the same in many markets. Less inventory, higher prices.
2. Be prepared for stiff competition. If you’re shopping for a home, you may find yourself competing with professional investors or flippers or all cash offers. This reduces your negotiating leverage.
3. Get the money ahead of time. If you are getting a loan to buy, do the paperwork first. If you have a commitment from your lender in hand ahead of time, your negotiating position will become much stronger.
4. Don’t get caught in a bidding war. Yes, they are happening in many markets across the country. For most of us, a bidding war is a recipe for disaster. Bidders end up overpaying and regretting it for a long time.
5. It’s local. This is the oldest saw in real estate because it’s true! While Las Vegas is showing every sign of a bubble housing market, other markets are not. Survey the local metrics to find out the state of play in the market you want to buy. What are comps? Do similar homes command the same price as the one you fell in love with? What is the going price per square foot? What’s the state of the local economy? Is employment expanding or contracting?
Inevitably, people are always asking me where the market is going next. Believe me, if I could answer that question, I wouldn’t be working for a living. I would be trading my own account from my private hammock on my own private island.
What I can do is tell you about the trends I see developing and how they may or may not represent opportunity or risk. That’s why I am writing today.
One of the smartest financial advisors I know, Ric Edelman, is sounding the alarm on municipal bonds. The reasons are simple. Bankruptcies at a handful of municipalities in California are shaking the very foundations of the sleepy muni bond industry.
In the largest ever municipal bond bankruptcy in Stockton, Ca., officials are making payments on employee retirement plans to Calpers, while they default on payments to bondholders. This is unheard of – it's as astonishing as if the sun rose in the west and set in the east. If local governments can put muni bond holders at the back of the line when it comes to payments, well, then the investment has just moved out the risk curve. Bondholders have traditionally been fully repaid their principle during major bankruptcies. Game of craps, anybody?
Edelman talked about these risks on The Willis Report last week after attending a roundtable with a Securities and Exchange Commission Official and bond money managers who discussed their worries that higher rates will hit individual bond investors hard. The muni bond market is dominated by retail investors who hold 7.4% of the $3.7 trillion market.
A couple of years ago, a Wall Street analyst was vilified for saying the muni bond market would encounter headwinds. Today, numerous market players are saying there could be troubles ahead. This time we all should listen.
I love to travel, but I hate the ever-escalating prices. Worse yet, the fees!
Fortunately, there are ways to save money this summer if you’ve decided not to “staycation” this year. If you’re flying, schedule your time off when others are working. According to Rick Seaney of FareCompare.com, cheaper times to travel are early spring and late summer. Also, pick a weekday to fly. Most people want to fly on Saturday or Sunday and fares reflect that demand. If you fly into and out of major airports – the big cities with the most competition among carriers – you are more likely to bring down the price.
My husband and I are planning a trip to Europe in late summer. We purchased tickets six weeks ago and have watched as fares have risen since then. I feel lucky, but the reality is that the fares could just as easily come down later this summer as the airlines try to fill empty seats. It’s always a crapshoot when to book your summer vacation, but one way to game the system is to use websites like Kayak.com that will give you advice on whether they believe, based on their data, fares will go up in the next week.
If you are flying domestically, the good news is this: Travelocity reports that prices are down for Memorial Day weekend. The average price of a domestic ticket is $341, down $6 from last year.
Not everybody will fly to their summer vacation destination. Some of us will drive. One app that can help you with that is 'Waze,' which gives you free GPS navigation turn by turn – plus, it tells you where you’ll encounter traffic backups and even speeding traps! It relies on community participation, so you may find the bigger cities have the most robust reporting of traffic issues.
Getting away is essential and getting a good price on your days away is not that hard
If you thought your home was expensive, wait until you hear how much owning a simple car is costing you.
According to a new report from AAA, the cost of owning a car is up roughly 2% from 2012.
That breaks down to an increase of more than a cent for every 15,000 miles to nearly 61 cents a mile... or more than $9,000 a year.
This covers everything from maintenance, gas, insurance and depreciation.
The report shows maintenance costs had the biggest jump, more than 11%, to five cents a mile on average.
Insurance costs are also skyrocketing. They are up nearly 3%, or $28, to more than $1,000 a year and that's only if you have a good driving record.
Gas prices are actually on the decline, and an increase in fuel efficiency is helping to keep fuel costs from rising year after year.
In fact, the price for an average gallon of gas today is $3.52, and just a year ago it was $3.91.
Depreciation costs ticked up just slightly.
Another health-care story caught my eye in the Wall Street Journal: possible insider trading of health-care stocks as the result of a policy shift in Washington.
Here's what happened: On Monday, the White House announced they were no longer going to cut Medicare advantage by 2%. They're actually going to raise investments in the program by 3%.
That announcement sent health insurance stocks soaring: Aetna up 2.5%, UnitedHealth 3%, and Humana a whopping 8.5% spike.
But now, the paper is looking into the possibility traders were tipped off by a private message alerting them the change was coming.
The paper says the message came from a Washington investment-research firm called height securities about 20 minutes before the markets closed.
Volumes for those companies skyrocketed, even though the official announcement from the White House would come about 15 minutes after the market closed.
And today a GAO report was released calling on the SEC to crack down on market-moving information being leaked from Capitol Hill.
They absolutely should. Insider trading is a contagion in this country and one that makes for an uneven playing field for small investors. Once again, the big guys get critical trading information while small investors are left in the cold.
Everyone should get the same information at the same time... is that too much to ask?!?
As we await the Final Four action this weekend, I’m sure most of us have seen or heard of that gruesome injury suffered last weekend.
Louisville’s Kevin Ware fractured his leg so badly, a bone protruded six inches and CBS refused to replay it. There is some good news, earlier today, Ware was released from the hospital and is headed back to campus. The other silver lining to this tear-inducing tragedy?
According to reports, Kevin's family will not have to pay a dime out of pocket for his medical bills.
Every student athlete must have health insurance because the NCAA requires it. If their parents don't have coverage, most universities will buy insurance. Even if the athlete’s parents are covered, some schools will serve as co-providers.
In Ware's case: Louisville will pay for the whole thing. If the bills were too astronomical, the NCAA also has supplemental insurance for up to $90,000 dollars. If the player is totally disabled, the benefits could reach $20 million.
This story makes me think the government offers great health insurance. Heck even the NCAA steps up for its players.
What about the rest of us? Why are we being forced to settle for Obamacare?
This is an example of how to handle health care, and I'm glad the Ware family doesn't have to deal with any more pain than they've already endured.
You may want to bank offshore when you see what's happening to banks in this country. The Great Recession has kicked off a huge wave of bank closures as interest rates remained low and more customers turned to online banking.
According to SNL Financial, nearly 2,300 bank branches were shut last year alone, and the firm expects another 13,000 to disappear over the coming decade.
This is the result of more and more Americans turning to their computers instead of their neighborhood teller to do their banking. 53% compared to 14%. That's leading to major cost cutting measures at these banks.
Associated Bank in Wisconsin says for every branch it closes, the company saves $300,000. That's a lot of money considering one third of the nation's bank branches are unprofitable.
While smaller communities and suburbs are the ones hardest hit by these closures, it's not just the small regional banks shutting their doors.
Bank of America, the nation's second biggest bank, closed nearly 200 branches as part of its plan to shut 12% of its brick-and-mortars over the next few years.
PNC bank closed just 54 last year, but plans to shut 200 more in 2013.
Look... you may miss the days when in order to take money out of your account you headed to the local bank and gossiped with your neighbors. But, this is the new reality, just as it is for the post office.
People are banking online as much as they're sending messages that way.
While many economists are pointing to a housing recovery, Uncle Sam seems to think the market still needs his help.
Another government program is being rolled out to lower monthly mortgage payments for struggling homeowners.
Here's what makes this program different from the countless others already out there, those with mortgages backed by Fannie and Freddie will no longer have to provide documents proving financial hardship!
Under the streamlined program, borrowers will get their payments reduced by changing interest rates, extending the length of the loan and principal forbearance.
It's not free money. Homeowners will have to go through a trial period where they have to pay at least three payments.
The Obama administration has been pressuring Fannie and Freddie and the Federal Housing Agency to do more to help homeowners, saying, “Right now, there's a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today's rates. Democrats and Republicans have supported it before. What are we waiting for? Take a vote, and send me that bill. Right now, overlapping regulations keep responsible young families from buying their first home. What's holding us back? Let's streamline the process, and help our economy grow.”
But, Acting Director Ed DeMarco says it's simple. Forgiving these delinquent loans would be too costly, especially for taxpayers.
He's right: Fannie and Freddie are paying mortgage servicers to process each modification. They will, in turn, absorb the losses, and their money is really our money.
The two companies still owe taxpayers more than $135 billion from the bailout. These programs are just more incentives for homeowners not to pay what they owe, and this administration keeps helping those that are not helping themselves.
This is not making the economy better. It's just making more people dependent on the government, and once you get a handout - the only thing that accomplishes is the desire for more.
I guess we need to say a little prayer for her.
Singer Dionne Warwick recently filed for bankruptcy and has joined an impressive list of celebrities-Mike Tyson, Elton John, Willie Nelson, and Toni Braxton- who've done just that.
The main reason for Warick's problems is that she owes more than $10 million in back taxes... $10 million!
In the filing, Warwick said she earns nearly $21,000 a month in income, but spends $20,990 on expenses! Talk about not living within her means.
However, the lack of funds is not the reason Whitney's cousin hasn't, and probably won't, pay the IRS what she owes.
According to one bankruptcy attorney she may not have to pay anything, because her tax obligations reach so far back they would most likely be dischargeable.
Warwick stated she owes $7 million to the IRS for the 90s and more than $3 million in business taxes to the state of California.
So let me get this straight. She doesn't have to pay what she owes, because she took too long to report it? The message I'm getting here is, if you don't want to pay taxes, or at least the penalties and the interest, just don't. If you wait long enough you don't have to!
Especially if you call Hollywood home.
Monday, May 13th, 2013
Alan HaftFinancial Advisor & "You Can Never Be Too Rich!" Author
Alessandro AcquistiDirector of the CMU Center for Behavioral Decision Research
Tuesday, May 14th, 2013
Bob Rice"The Alternative Answer" Author
Dr. Kathryn SmerlingClinical Psychologist
Wednesday, May 15th, 2013
Scott MartinCEO, Accent Asset Management
Gerri DetweilerDirector of Consumer Education for Credit.com
Thursday, May 16th, 2013
Rob MorganFulcrum Securities Chief Investment Strategist
Rep. Tim GriffinR-AR
Friday, May 17th, 2013
Lis WiehlFox News Legal Analyst
Michael ReaganReagan Group Founder