Friday, October 29, 2004
Watch the debt
Here's a good article:
Posted on Fri, Oct. 29, 2004
More Americans deeper in debt
By BEN WHITE - The Washington Post
WASHINGTON - Thinking about borrowing against your 401(k) account to finally buy the iPod you've been lusting after, or that snazzy new cell phone with built-in camera and Web access?
Well, before taking the plunge, you may want to pause a moment and consider your total debt level. If you are anything like the typical consumer, the numbers may look pretty scary.
According to data from the Federal Reserve, U.S. households had $9.7 trillion in mortgage and consumer credit debt at the end of June.
Sound like a lot? It is.
The figure represented more than 80 percent of the nation's gross domestic product through the end of the second quarter and more than 100 percent of total disposable household income of about $8.6 trillion. It is also about 21 times the burden shouldered by U.S. households in 1970.
In short, Americans are swimming in debt and getting in deeper by the minute. Personal bankruptcies are running at record highs.
Meanwhile, the personal savings rate is below 1 percent and flirting with a record low. Taken together, these numbers trouble many economists who worry that Americans, especially at lower income levels, do not have nearly enough set aside for emergencies or to prepare for retirement.
Of course, in many cases, rising household debt has been easily outpaced by the dramatic run-up in home values. Meanwhile, historically low interest rates have allowed millions of Americans to treat their homes as cash machines, refinancing mortgages while taking out equity to pay for home improvements or general spending.
Sung Won Sohn, chief economist at Wells Fargo, notes that about 70 percent of current household debt comes from mortgages, most of which are fixed at attractive interest rates.
But Sohn and many others worry about what could happen if the real estate market, as some fear, has in fact taken over from technology stocks as the investment bubble of the moment. If home prices drop, as they already have in some affluent areas such as Orange County, it could both wipe out large amounts of wealth and cut into available household cash. With incomes continuing to rise slowly, such an event could force households to dramatically cut back spending, which could in turn derail the consumer-dependent economy.
Sohn, however, said he believes the prospect of a nationwide real estate crisis is unlikely.
Instead, he said the drop would probably be limited to affluent areas on both coasts.
Another worry cited by economists is the growth in popularity of adjustable-rate mortgages and interest-only mortgages. Both offer the lure of lower monthly payments, at least at first. But, especially in the case of interest-only mortgages, the payments can spike dramatically after a few years.
Interest-only mortgages, previously marketed only to the affluent who used them for tax or investment purposes, are now being made widely available, especially to lower-income buyers looking for small monthly payments. The loans allow home buyers to pay no principal for several years, with monthly costs spiking when the principal kicks in. Many of these loans also have adjustable rates, which can add to the financial sting as rates rise.
Meanwhile, a Consumer Federation of America (CFA) study this summer found that adjustable-rate mortgages are disproportionately popular among lower-income and minority home buyers, many of whom may find themselves unable to meet payments as rates rise.
''A family which can barely afford the initial monthly payments represents a ticking time bomb,'' CFA Executive Director Stephen Brobeck said when the report was released.
The question is, How many other ticking time bombs are out there?
Posted on Fri, Oct. 29, 2004
More Americans deeper in debt
By BEN WHITE - The Washington Post
WASHINGTON - Thinking about borrowing against your 401(k) account to finally buy the iPod you've been lusting after, or that snazzy new cell phone with built-in camera and Web access?
Well, before taking the plunge, you may want to pause a moment and consider your total debt level. If you are anything like the typical consumer, the numbers may look pretty scary.
According to data from the Federal Reserve, U.S. households had $9.7 trillion in mortgage and consumer credit debt at the end of June.
Sound like a lot? It is.
The figure represented more than 80 percent of the nation's gross domestic product through the end of the second quarter and more than 100 percent of total disposable household income of about $8.6 trillion. It is also about 21 times the burden shouldered by U.S. households in 1970.
In short, Americans are swimming in debt and getting in deeper by the minute. Personal bankruptcies are running at record highs.
Meanwhile, the personal savings rate is below 1 percent and flirting with a record low. Taken together, these numbers trouble many economists who worry that Americans, especially at lower income levels, do not have nearly enough set aside for emergencies or to prepare for retirement.
Of course, in many cases, rising household debt has been easily outpaced by the dramatic run-up in home values. Meanwhile, historically low interest rates have allowed millions of Americans to treat their homes as cash machines, refinancing mortgages while taking out equity to pay for home improvements or general spending.
Sung Won Sohn, chief economist at Wells Fargo, notes that about 70 percent of current household debt comes from mortgages, most of which are fixed at attractive interest rates.
But Sohn and many others worry about what could happen if the real estate market, as some fear, has in fact taken over from technology stocks as the investment bubble of the moment. If home prices drop, as they already have in some affluent areas such as Orange County, it could both wipe out large amounts of wealth and cut into available household cash. With incomes continuing to rise slowly, such an event could force households to dramatically cut back spending, which could in turn derail the consumer-dependent economy.
Sohn, however, said he believes the prospect of a nationwide real estate crisis is unlikely.
Instead, he said the drop would probably be limited to affluent areas on both coasts.
Another worry cited by economists is the growth in popularity of adjustable-rate mortgages and interest-only mortgages. Both offer the lure of lower monthly payments, at least at first. But, especially in the case of interest-only mortgages, the payments can spike dramatically after a few years.
Interest-only mortgages, previously marketed only to the affluent who used them for tax or investment purposes, are now being made widely available, especially to lower-income buyers looking for small monthly payments. The loans allow home buyers to pay no principal for several years, with monthly costs spiking when the principal kicks in. Many of these loans also have adjustable rates, which can add to the financial sting as rates rise.
Meanwhile, a Consumer Federation of America (CFA) study this summer found that adjustable-rate mortgages are disproportionately popular among lower-income and minority home buyers, many of whom may find themselves unable to meet payments as rates rise.
''A family which can barely afford the initial monthly payments represents a ticking time bomb,'' CFA Executive Director Stephen Brobeck said when the report was released.
The question is, How many other ticking time bombs are out there?
Tuesday, October 19, 2004
A house sells every 3 to 4 days because of Smarter Agent.
Just looking over the records. Smarter Agent now initiates a house sale almost every 3 days!
As we push to open our Florida and California markets, next year at this time I am sure we will be initiaing a house sale every single day!
As we push to open our Florida and California markets, next year at this time I am sure we will be initiaing a house sale every single day!
Should I use more than 1 agent to find a home?
Here's what Blanche Evans of Realty Times newsletter says:
"Unless your agents belong to different MLS organizations, which cover different areas you are planning to choose between, it isn't fair" ...
Her best line, which is true is: "You can't keep it secret from agents that you've hired two people to do the job of one. Sooner or later, the cat will be out of the bag. They'll find out about each other and how much help do you think you'll get after that?
She adds "Using two agents can actually work against you. Let's say the agents agree to continue to compete for you. They may do so, but it's not likely they'll work any harder. If anything they will put you on the back burner. If a house comes up for sale before it goes into the MLS and your agent learns about it, do you think she'll tell you, or another buyer who is more loyal?"
I agree with Blanche, but here's my take. If you are not savvy enough to interview and pick the best agent, and fire them if the relationships not working...you are probably going to outsmart yourself and end up paying more for a house. Savvy pros get the job done. Any agent that works for you when you are using multiple agents is pretty stupid and will say or do anything just to get you in ah ouse so they make a commission.
I know this, which is why Smarter Agent interviews and lets only top agents represent our clients...so you get to use the best of the best, and we make money because you tell all your firends about us.
"Unless your agents belong to different MLS organizations, which cover different areas you are planning to choose between, it isn't fair" ...
Her best line, which is true is: "You can't keep it secret from agents that you've hired two people to do the job of one. Sooner or later, the cat will be out of the bag. They'll find out about each other and how much help do you think you'll get after that?
She adds "Using two agents can actually work against you. Let's say the agents agree to continue to compete for you. They may do so, but it's not likely they'll work any harder. If anything they will put you on the back burner. If a house comes up for sale before it goes into the MLS and your agent learns about it, do you think she'll tell you, or another buyer who is more loyal?"
I agree with Blanche, but here's my take. If you are not savvy enough to interview and pick the best agent, and fire them if the relationships not working...you are probably going to outsmart yourself and end up paying more for a house. Savvy pros get the job done. Any agent that works for you when you are using multiple agents is pretty stupid and will say or do anything just to get you in ah ouse so they make a commission.
I know this, which is why Smarter Agent interviews and lets only top agents represent our clients...so you get to use the best of the best, and we make money because you tell all your firends about us.
