Homeownership Builds Wealth

Home. Just the word usually conjures up mental images, smells, sounds in our minds eye. Home is where the heart is. Home is where we make memories. Owning a home… that’s the American Dream.

While it may be the American Dream, don’t overlook the benefits that come with home-sweet-home. Let’s take a peek…

1. Real Estate is a great long term investment. Real Estate – just like interest rates – move in cycles. It is important to keep in mind it is a long term investment and a hedge against inflation. Home appreciation has averaged 6% in the 50 year period from 1977 to 2007. And since the bubble burst in 2007, the past 50 years from 1979 to 2009 the average is 4.51%. What does the math look like on this? If you bought a home today for $300,000…the same home appreciating at 4.51% for 30 years would be worth – $1,126,825!

2. Home prices are currently at a discount. It’s like getting the price roll back at Walmart. Homes are more affordable now than at any other point in time since 1970 according to the National Association of Realtors’ housing affordability index.

3. Rates are the lowest in the history of mortgage ratesdid you hear that? Mortgage terms affect your monthly payments. Check out this historical chart.

4. There is plenty of inventory. In most places it is taking many months to sell a home, creating loads of inventory…both new homes and existing homes. This gives you more choices than before.

5. It’s typically cheaper than renting. Renting deprives you of the tax benefits, which in can help in many households. Mortgage interest is fully deductible on your tax return in most cases. In addition, real estate taxes for both a first home and a vacation/2nd home are fully deductible.

6. Homeownership builds wealth in two ways – through the forced savings of paying down a mortgage and thru appreciation – (the rise in the home value over time). But don’t take my word for it – According to VIP Forum, Federal Reserve Board – the average net worth of homeowners vs renters is much greater. Its Survey of Consumer Finances consistently documents the gap between the wealth of homeowners versus renters. Take a look:

Great long term investment. Prices are at a discount. Rates are the lowest in my lifetime. Plenty of choices in inventory. Tax benefits. Build wealth. Seems like a no-brainer to me.

Where Are Rates Headed?

Interest rates have been dancing around a ceiling of resistance for about 5 days now. This ceiling marks the high water mark for mortgage back security pricing…translation – lowest rates in my entire life. These rates were last seen in the late 50’s.

I’m not sure that anyone expected rates to remain low – and more especially move even lower – after the Fed ended their MBS purchase program. But a few unexpected events around the world impacted us, thus impacting (positively) home loan rates.

Taking a look at the market and where rates currently dance, folks might be wondering if they will continue to improve. It is important to keep in mind that our present environment is a gift – with a big bow attached.

Here are a few things that would likely prevent rates from continuing to move lower:

  • Sovereign debt in Europe
  • Moody & Fitch warning of a possible down grade of the U.S. Triple A rating
  • Inflation, not present now, but could be a big threat once it begins to manifest
  • Fed, when they remove the “extended period” language
  • Fed – when they begin to sell their MBS

Any one of these would trigger a sell-off in the bond market putting pressure on bond pricing. Those “dancing” bonds will be falling fast and rates will rise.

The Fed meets next week. It will be interesting to hear what they have to say. In the meantime remember the proverb, “the best time to plant a tree is 20 years ago, the second best time is now.”

Be…Do…Have,

Elizabeth

Just One Big Thing…

Whenever I go to the beach, it doesn’t seem to matter if I step onto the sand gingerly, or with the full force of unbridled enthusiasm…I will get just as much sand on me either way. And I am covered…more than halfway up my calves. As I begin to attempt to dust myself off, somehow I manage to be more covered in it. I don’t have an aversion to sand being all over my legs. I guess it is just a natural behavior to dust myself off.

Not too long ago, I reached out to my friend and highly sought speaker, Jason Womack. Jason travels like there is no tomorrow. He is always jetting off to some cool place. He speaks overseas as well as around the US. On top of his heavy travel schedule, he is constantly writing his blog, on social networking sites, and producing valuable content for his business relationships. I just don’t know how he keeps up. It truly is amazing. So I asked.

Jason shared this tip with me (and I tried it yesterday). He said each day in the morning he sets his mind on the one big thing in his big list that he really wants to accomplish. The one thing that will make a difference. The one thing that will move him one step closer to where he is headed. I would imagine that any typical day for Jason would be full of busyness. He says that at the end of the day, he checks in with himself to see how he did. He asks himself the question of “what big thing did I accomplish today that will get me further down my path.” Like all of us, he is human…so some days he doesn’t stack up as well as he would like. But he says that it really does help him stay tuned in.

Yesterday I tried it. But I had 3 big things. Three things that really were important and I didn’t want to procrastinate or delay. I committed to myself that I would not be derailed by emails, interruptions, and other mundane busy work. It took me about four hours, but I did what I committed to do. And my attitude during the afternoon was in the clouds. I felt so good about what I had tackled and completed, that I accomplished even more.

Just like on the beach, when the sand jumps all over you…don’t get overwhelmed. Dust it off. Most of the stuff on your list could be just “stuff”. Some of it, if ignored, may become irrelevant in just a few days. Some of it can wait. And some of it – the big things – get them done now! You’ll be amazed at how great it feels.

Remember this…one grain of sand at a time.

Be…Do…Have,

Elizabeth

Unintended Consequences?

Just a few days ago, President Obama signed the Financial Reform bill into law.  There is considerable uncertainty among businesses as to how this will impact them.

Financial Reform

It is likely that as legal counsel for companies begin to dissect the 2,300 page document, there will be differences of opinion of what the language means.

While there might be some good elements buried somewhere in this legislation, it is difficult to see just yet.  However, unintended consequences are popping up.  Here are just a few…

Rating agencies won’t allow their ratings to be printed on the offering documents which caused the asset backed debt market to shut down Wednesday afternoon.  In order for deals to happen, it is an important legal measure to have the ratings printed on the offerings.

Wednesday night, Ford Motors pulled a financing deal because they could not get a printed rated on their offering.

Some good elements?  Well, it seems that there is some relief for unemployed homeowners tucked inside this bill!  That should make us smile.  HUD hasn’t released the details on how the $1 billion emergency homeowners’ relief fund will work, however the legislation states the program will start Oct 1.

As the details unfold, I’ll keep you posted!

Spicing It Up

The new Old Spice commercial caught my attention the other day.  I thought it was a great diversion from the ordinary…and especially all the negative news.

I just spent a week away at the beach (will share stories on that later).  During those unplugged days, I discovered fun again.  And so to spice things up a bit and have a little fun…Spice It Up

Enjoy!

Elizabeth

The Link Between Payroll Taxes and Jobs Creation

What if the government kept their hand out of your pocket and kept payroll taxes where they are, or better yet…reduce them. The result could give a much needed, nice shot in the arm to the economy. Say what? How’s that?

Let’s break it down. By reducing payroll taxes, small and medium businesses have more free cash to expand. One form of expansion often is in hiring additional workers. Let’s say the “XYZ” company hires more workers…now the government receives more in tax receipts from the “XYZ” company. The government receives more, and the “XYZ” company is able to produce more with the added workers. In addition, all the employees of the “XYZ” company benefit and keep more of their hard earned cash.

Now that the workers of “XYZ” company have more income, what might they do with it? They may save some….and spend some. By spending in their communities, consumers help support local businesses. Now these local businesses have more coming in, thus are collecting more state sales taxes, which helps our states and municipalities. In addition, they are making more revenue by the increased sales and can produce more goods, hire more people and also contribute to the growth.

Sounds simple enough. Not only does this benefit the economy but could have a positive impact on existing Jobs and Jobs creation.  Maybe our government will see the light.

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