2024

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If you spent your teenage years waiting anxiously for one of your siblings to get out of the shower, the idea of selling your spacious, multi-bathroom home and moving into a smaller house or condo may feel like a reversal of fortune.

Yet for many retirees, downsizing makes financial and practical sense. Younger baby boomers — those currently ranging in age from 57 to 66 — made up 17% of recent home buyers, while older boomers — ages 67 to 75 — accounted for 12%, according to a 2022 report from the National Association of Realtors Research Group. Boomers’ primary reasons for buying a home were to be closer to friends and family, as well as a desire to move into a smaller home, the report said. Both younger and older boomers were more likely than others to purchase a home in a small town, and younger boomers were the most likely to buy in a rural area.

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For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.  

Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips. 

With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”

Challenges for downsizers 

For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com. 

Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers. 

Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.” 

Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement. 

However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.

Other costs and considerations 

If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect. 

Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.

Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says 

Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older. 

If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.

At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”

Time is on your side 

Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership 

The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year. 

In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)

Aging in place

Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home. 

To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.

There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.

Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.

Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely. 

Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Source: kiplinger.com

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The Free Application for Federal Student Aid (FAFSA) for the 2024-25 academic year is preparing to soft launch, following a three-month delay and its most significant redesign since the 1980s.

The Education Department said on its main FAFSA webpage Dec. 27 that the new form will be available to students and families “periodically” while it tests functionality and site performance during planned pauses for maintenance. It urged students and families to continue checking FAFSA.gov for updates.

Anyone who plans to attend college next year should submit the new FAFSA as soon as possible. The sooner you apply, the more money available to you.

The form unlocks federal, state and school-based financial aid, including federal student loans, need-based grants, work-study and even some scholarships. Some of this aid draws from a limited pool and is first come, first served.

How the FAFSA Soft Launch Will Work

The Department said It will save the information of anyone who submits the form during the soft launch, and will not require resubmission when the form is formally launched. Those who submit the FAFSA should receive a confirmation email with preliminary financial aid eligibility information.

The Department said it will provide FAFSA eligibility information to schools and states in late January. Until that time, schools will not be able to answer questions about aid eligibility or status.

In late January, it said, students and families will be able to check the status of their FAFSA form on StudentAid.gov.

What you can do right now

You’ll need an FSA ID to submit the form. Each person who submits financial information for the new FAFSA is called a “contributor.” This could include the student, the student’s spouse, one or both biological or adoptive parents or the parent’s spouse. Each contributor needs a unique username and password — an FSA ID — to log in and complete their portion of the form.

Request your FSA ID on studentaid.gov and plan for a three-day turnaround time to receive it. Students won’t be able to submit the FAFSA until every contributor has their FSA ID.

What’s new with the new FAFSA

The fresh FAFSA formula could impact students’ financial aid packages. An additional 610,000 students from low-income backgrounds are expected to qualify for the Pell Grant, which gives students up to $7,395 that doesn’t need to be repaid.

The new formula, however, eliminates the so-called “sibling discount,” so parents no longer get a break for having multiple children in college at the same time.

If you’re a current college student and need help completing the 2024-25 FAFSA, reach out to your college’s financial aid office. If you’re a prospective college student, contact your high school college counselor or the financial aid offices of the schools to which you’re applying.

Source: nerdwallet.com

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What is an FHA loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA loans are often a good fit for first-time home buyers or people with little savings or credit challenges.

You could still qualify for an FHA loan even if you don’t meet the requirements for a conventional mortgage or if you had a bankruptcy.

The federal government doesn’t issue FHA loans, but it does insure them. That insurance protects lenders in case of default, which is why FHA lenders are willing to offer favorable terms to borrowers who might not qualify for a conventional home loan.

FHA loans are issued by private, FHA-approved lenders, including many banks, credit unions and nonbanks (a type of lender).

An FHA home loan can be used to buy or refinance numerous types of homes, including:

Specific types of FHA loans can also be used to finance new construction or renovate an existing home. However, all properties — existing or new construction — must undergo an FHA appraisal. If the property meets government standards, then you can use an FHA loan to buy (or refinance) it.

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FHA vs. conventional loans

In general, it’s easier to qualify for an FHA loan than for a conventional loan, which is a mortgage that isn’t insured or guaranteed by the federal government.

Here are some key differences between FHA and conventional loans:

  • Credit score and history: FHA loans allow for lower credit scores than conventional loans. If you’ve had credit problems (including bankruptcy), you might find it easier to qualify for an FHA loan.

  • Mortgage insurance: Unlike conventional loans, all FHA loans require mortgage insurance. (However, the amount you pay varies based on the size of your down payment.) With a conventional loan, mortgage insurance generally isn’t required if you make a 20% down payment or once you reach 20% equity in your home.

  • Gift funds for down payments: FHA rules are more flexible regarding monetary gifts from family, employers or charitable organizations you can apply to your down payment.

  • FHA appraisal: To qualify for an FHA loan, the property must undergo an appraisal to make sure it meets government standards for health and safety. An FHA appraisal is different and separate from a home inspection. Conventional loans don’t require this.

  • Closing costs: FHA loans may involve closing costs that aren’t required by conventional loans.

FHA loan requirements

The FHA sets minimum requirements for borrowers seeking an FHA loan. However, each FHA-approved lender can determine its own underwriting standards, so long as those requirements are in line with the minimums set by the FHA. For instance, one lender may require a minimum credit score of 600 and another a minimum of 620.

Lenders each set their own interest rates and fees, too. To make sure you get the best FHA mortgage rate and loan terms, shop more than one FHA-approved lender and compare offers.

In general, here are the basic requirements to expect when applying for an FHA loan.

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Credit score for FHA loans

According to the FHA, the minimum credit score for an FHA loan is 500. If your score falls between 500 and 579, you can qualify for an FHA loan, but you’ll need to make a down payment of at least 10%.

If your credit score is 580 or higher, you can qualify for a down payment as low as 3.5%.

Again, these are FHA guidelines; individual lenders can and often do opt to require a higher minimum credit score.

🤓Nerdy Tip

If your credit score doesn’t measure up, you may want to work on building your credit before you begin home shopping. When you’re ready, find a lender that specializes in FHA loans. These lenders might be more experienced at working with credit-challenged borrowers.

Debt-to-income ratio

Your debt-to-income ratio, or DTI, is a measure of your monthly debt payments in relation to your pretax income. That includes your rent or mortgage costs in addition to things like auto or student loans and credit card balances. In general, lenders view a lower DTI as more favorable when issuing loans.

DTI requirements for FHA loans differ based on your credit score and other compensating factors, such as how much cash you have in the bank. If you have a credit score from 500 to 579, the FHA generally requires a DTI of less than 43%.

It’s still possible to get an FHA loan with a DTI that’s higher than 50%, but you’ll have to meet compensating factors, and your options will be limited.

Down payments and gift funds

The minimum down payment required for an FHA loan is 3.5% if you have a credit score of 580 or higher. If you have a credit score from 500 to 579, you’ll have to put down at least 10% of the purchase price.

The good news? It doesn’t all have to come from savings. You can use gift money for your FHA down payment, so long as the donor provides a letter with their contact information, their relationship to you, the amount of the gift and a statement that no repayment is expected.

🤓Nerdy Tip

Look into state and local down payment assistance programs for first-time home buyers, usually defined as someone who has not owned a home within the past three years. You may be able to find low- or no-interest loans, or even grants, to help you pull together the cash.

FHA appraisal

The property you’re trying to buy with an FHA loan has to undergo an appraisal from an FHA-approved professional and meet FHA minimum property requirements.

The FHA appraisal is separate and different from a home inspection. The goal is to be sure the home is a good investment — in other words, worth what you’re paying for it — and ensure it meets basic safety and livability standards.

For an FHA 203(k) renovation loan, the property may undergo two appraisals: an “as is” appraisal that assesses its current state and an “after improved” appraisal estimating the value once the work is completed.

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Mortgage insurance

FHA mortgage insurance is built into every loan. When you first get an FHA mortgage, you’ll make an upfront mortgage insurance payment, which can be rolled into the total amount of the loan. Then, you make monthly mortgage insurance payments thereafter. The length of your monthly payments varies based on the size of your down payment.

  • If your down payment is less than 10%: You will pay FHA mortgage insurance for the life of the loan.

  • If your down payment is 10% or more: You will pay FHA mortgage insurance for 11 years.

With a conventional loan, you can cancel private mortgage insurance once you reach 20% equity in your home. FHA mortgage insurance can’t be canceled in the same way.

🤓Nerdy Tip

Once you have enough home equity, you could choose to refinance your FHA loan into a conventional loan. This would remove the FHA mortgage insurance requirement, but you’d have to meet new qualifications and pay additional closing costs and fees.

Types of FHA loans

The FHA offers a variety of loan options, from standard purchase loans to products designed to meet highly specific needs. A full list of all FHA loan products and eligibility requirements is available at HUD.gov. Here are some common options:

Home purchase: Basic Home Mortgage 203(b)

The Basic Home Mortgage 203(b) is the standard single-family home loan backed by the FHA. Only primary residences — not vacation or second homes — qualify for FHA-insured loans.

FHA refinance loans

You may want to refinance your FHA loan to lower your interest rate, shorten your mortgage term or get cash flow for a costly project, such as a home renovation. Options include:

  • FHA streamline refinance: This can save you time and paperwork because it doesn’t require a new appraisal.

  • FHA cash-out refinance: This loan replaces your current mortgage with a new, larger loan. The difference is paid to you in cash.

  • FHA 203(k) refinance: This loan lets you roll the cost of repairs or renovations into the total amount of your mortgage. Upgrades must meet FHA eligibility requirements.

FHA renovation loans

  • FHA 203(k) rehabilitation mortgages: This option helps borrowers finance fixer-uppers by rolling purchase and renovation costs into one loan. The standard 203(k) loan lets borrowers finance improvements over $5,000. The FHA limited 203(k) loan lets borrowers finance improvements up to $35,000.

  • Title 1 Property Improvement Loans: These loans are also available to finance home repairs and improvements. Homeowners can obtain this loan without refinancing their existing mortgage, and the funds can be used to supplement a 203(k) loan. However, you can borrow only up to $25,000 for a single-family home.

Other specialty FHA loans

  • Energy-efficient mortgages: An energy-efficient mortgage can be used to finance home improvements to help a home save energy. To qualify for this financing, the home must undergo an energy assessment from a qualified professional.

  • Construction-to-permanent loans: This loan type helps borrowers finance the purchase of a home that’s still being built by paying the contractor in installments. When the home is finished, the loan converts to a permanent mortgage. Qualifying for these types of loans can be more difficult and time-consuming than a traditional purchase mortgage.

  • Manufactured homes: This includes the type sometimes called a mobile home. Manufactured homes can be bought with FHA financing, so long as everything meets HUD requirements. For example, HUD mandates that a manufactured home is at least 400 square feet, and it must be designed to use as a dwelling attached to a permanent foundation.

FHA loan limits

No matter what type of FHA loan you’re seeking, there will be limits on the mortgage amount. These limits vary by county. FHA loan limits in 2024 range from $498,257 to $1,149,825.

  • Low-cost county limit: The upper limit for FHA loans on single-family homes in low-cost counties is $498,257. An example is Lucas County, Ohio, where Toledo is located.

  • High-cost county limit: The upper limit for FHA loans in the highest-cost counties is $1,149,825, which would include mortgages in San Francisco County, California, for example.

Some counties have housing prices that fall somewhere in between, so the FHA loan limits are in the middle, too. An example is Denver County, Colorado, where the 2024 FHA loan limit is $816,500. You can visit HUD’s website to look up the FHA loan limit in any county.

How to apply for an FHA loan

Applying for an FHA loan will require personal and financial documents, including but not limited to:

  • A valid Social Security number.

  • Bank statements for, at a minimum, the past 30 days. You’ll also need to provide documentation for deposits made during that time, such as pay stubs.

Your lender may be able to automatically retrieve some required documentation, like credit reports, tax returns and employment records. Special circumstances — such as if you’re a student or you don’t have a credit score — may require additional paperwork.

Pros and cons of FHA loans

An FHA loan might be your best option for homebuying if you have credit challenges. Still, it’s important to understand the trade-offs.

Benefits of FHA loans

  • Lower minimum credit score requirements than conventional loans.

  • Down payments as low as 3.5%.

  • Debt-to-income ratios as high as 50% allowed (in some cases, may be higher if you meet compensating factors).

Disadvantages of FHA loans

  • FHA mortgage insurance lasts the full term of the loan with a down payment of less than 10%.

  • Property must undergo a separate appraisal and meet strict health and safety standards, which some sellers will consider an added hurdle.

  • No jumbo loans: The loan amount cannot exceed the conforming limit for the area.

Though the FHA sets standard requirements, FHA-approved lenders’ requirements may be different.

FHA interest rates and fees also vary by lender, so it’s important to comparison shop. Getting a mortgage preapproval from more than one lender can help you compare the total cost of the loan.

Ways to get the best FHA mortgage rates

When you’re shopping for an FHA loan, it’s smart to make sure your financials are in as good a shape as possible. This means pulling your credit reports from the three main credit reporting agencies — Experian, Equifax and TransUnion — and addressing any errors you might find. If possible, you might also pay down any larger balances, which has the added benefit of improving your debt-to-income ratio. While FHA loans might have more lenient requirements than some other loan types, having a better credit score and DTI will likely net you a better rate.

FHA loans are notable for requiring low down payments, but if you’re able to make one that’s higher than the minimum, you’ll look like a safer candidate to lenders. This is also likely to get you lower rate offers.

Once you feel confident about your application, compare mortgage rates between at least three FHA lenders. Even small differences in the rate you pay could save you — or cost you — thousands of dollars over the term of a home loan. And while you’re comparing lenders, look into first-time home buyer programs offered by your state’s housing authority. Many of these nonprofit agencies offer down payment and closing cost assistance in the form of grants.

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Source: nerdwallet.com

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In the world of retail and fashion, home was 2023’s biggest loser.

Apparel firms faced some stress too, but the category managed to avoid the bankruptcy boom that hammered the home sector. In the U.S., the year saw the bankruptcy filings of women’s lifestyle brand Soft Surroundings in September and the April Chapter 11 petition by David’s Bridal, marking its second brush with bankruptcy following its November 2018 filing. Footwear firm Rockport Co. filed on June 14 for its second tour of bankruptcy proceedings, while Shoe City’s parent company ESCO Ltd. filed earlier in the year. Overseas, there was also the Scotch and Soda bankruptcy in March in the Netherlands, followed one month later by the Dutch filing of fashion brand Sandwich.

And just this month, mall operator Pennsylvania Real Estate Investment Trust, better known as PREIT, found itself in bankruptcy proceedings for the second time in three years. The mall REIT expects to exit bankruptcy early next year, after which it will find itself under the ownership of its lenders.

Other retail bankruptcies include Party City, long a fixture on credit ratings watch lists, which filed in January. The party favor firm exited bankruptcy in October, but its bankruptcy also saw the closure of 35 big-box locations. And Christmas Tree Shops, once owned by Bed Bath & Beyond, ended up in bankruptcy court when its parent Handil Holdings filed for Chapter 11 protection in May. The company closed down operations in August, and shuttered 72 doors in the process.

But it’s been the troubled home furnishings category that has endured the most distress this year. That comes as little surprise, particularly after the home furnishings boom during COVID when people were sheltering in place. The return to offices, even in hybrid work environments, curtailed additional spending for refurbishing home workspaces. And the home sector was further hit by rising supply chain costs post-COVID, much of which was due to higher expenses connected to moving big pieces of furniture, both in imports and in shipments to customers.

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Even credit experts foresaw trouble ahead in home. The home furnishings category carried the highest default risk across retail since 2021, according to data from S&P Global Market Intelligence.

And the firing salvo from Wells Fargo’s emergency motion on Dec. 30, 2022, that pushed United Furniture Industries (UFI) into an involuntary Chapter 7 after its shutdown one month earlier set the stage for the upheaval to come in 2023. UFI eventually filed a Chapter 11 petition on Jan. 6.

Home was also the big category loser due to the the mega filings of Bed, Bath & Beyond and Tuesday Morning, with the latter contributing to what seemed to be a trend in second filings, the so-called Chapter 22. Z Gallerie was the rare exception across retail sectors that landed in bankruptcy court for the third time on Oct. 16. It’s first filing was back in 2009.

There’s another reason why the home sector’s bankruptcies stood out this year. By the end of the first quarter of 2023, there were already nearly 2,000 announced store closures. That tally included 300 CVS doors and 545 Foot Locker Inc. stores by 2026, including 420 Foot Locker branded sites and 125 Champs Sports locations.

Moving to the end of 2023, total store closings are edging closer to 2,900 locations. The store closures in the home sector contributed a total of 1,228 closed retail doors in 2023. That’s over one-third of the total stores closed this year, with Bed Bath & Beyond contributing 896 to the home sector’s total.

Below is a summary of the top bankruptcies in the home sector in 2023.

Serta Simmons

Mattress maker Serta Simmons Bedding, owned by private equity firm Advent International, filed a Chapter 11 petition on Jan. 23. The filing included the company’s bed-in-a-box brand Tuft & Needle. The company owned more than $62 million to its top 10 unsecured creditors.

Serta Simmons said on June 29 that it completed its restructuring and had emerged from bankruptcy proceedings. “The Serta and Beautyrest brands in our portfolio have a deep heritage in innovation and have played meaningful roles in the lives of consumers for generations,” the company’s CEO Shelley Huff said. “With our financial restructuring behind us, we are taking steps to drive growth by getting back to our innovation roots, reinvesting in our iconic brands, and nailing the fundamentals of our business with a focus on commercial and supply chain excellence.”

During the bankruptcy process, the company reduced its funded debt to $315 million from $1.9 billion at the time of its filing. The $1.6 billion debt reduction lowered the company’s annual cash interest expense by more than $100 million.

Tuesday Morning

Tuesday Morning found itself bankrupt for the second time in three years. It filed for Chapter 11 bankruptcy protection on Feb. 14, citing “exceedingly burdensome debt.” The off-price home retailer has since liquidated operations.

Tuesday Morning’s first petition was in May 2020, which saw it close 213 of its 700 stores. The retailer emerged from bankruptcy in January 2021 with 487 locations in operation. At the time of the second filing, the retailer said it planned to shutter 265 doors. This past May, the 49-year-old retailer decided to shut down operations and join the retail graveyard.

Bed Bath & Beyond

The long-awaited Bed Bath & Beyond bankruptcy finally occurred on April 23, eight months after speculation about its finances had suggested that a collapse was forthcoming.

One month before the bankruptcy, Bed Bath & Beyond closed 416 stores in the U.S., including some Buybuy Baby doors and it shut down its 45-store Harmon’s Beauty business. It also closed its Canadian stores, resulting in a loss of 1,400 retail jobs. When it shut down operations in June, the retail sector lost another 360 Bed Bath & Beyond stores and 120 Buybuy Baby locations.

The Bed Bath & Beyond intellectual property (IP) assets were sold to Overstock.com, best known for its liquidator origins selling excess or closeout inventory, for $21.5 million. Overstock in August rebranded itself as Bed Bath & Beyond. And the Buybuy Baby IP assets were sold to one of its suppliers, Dream on Me Industries Inc., for $15.5 million. Dream on Me subsequently acquired 11 of the Buybuy Baby store leases for $1.17 million, and reopened those locations on Nov. 18. The Harmon IP asset was acquired by investor Jonah Raskas for a reported $300,000. His initial plans are to open five Harmon locations, a CNBC story said.

The home goods chain had been struggling for years, but things started going downhill in a big way after it  dismissed chief executive Mark Tritton and its merchandising leader in the wake of a first-quarter flop in 2022 when it burned through nearly $500 million in Q1 alone. It also spent $589 million on share buybacks instead of investing in turnaround strategies.

Its other problem was Tritton’s turnaround plan, which saw the retailer triple the number of private brands to lift opening price points and bring in more value products for a customer base that was on the hunt for deals on national brands. More bad news followed the troubled chain when its former chief financial officer, Gustavo Arnal, committed suicide in September 2022 after being named in a lawsuit alleging securities violations that included investor Ryan Cohen and his firm RC Ventures as defendants. Arnal has since been removed as a named defendant.

Altmeyer Home Stores

The 81-year-old family-owned regional home chain Altmeyer Home Stores filed for Chapter 7 liquidation in July.

The company operated 11 stores. It was headed by a fourth-generation Altmeyer at the time it filed its Chapter 11 petition.

The company sold primarily soft home linens in bedding, rugs, window treatments and kitchen accessories. But like many in the home sector, it also faced sourcing problems and a slew of online competitors.

Mitchell Gold + Bob Williams

August saw one of the biggest surprises of the year with the abrupt shutdown of upscale home lifestyle retailer Mitchell Gold + Bob Williams after its lender pulled the plug on financing, resulting in the closure of about 35 retail stores and outlets. The company filed its Chapter 11 petition in September, and went into liquidation mode after failing to find a buyer. In November, Surya, a Cartersville, Ga.-based home furnishings firm that specializes in rugs, textiles, lighting, furniture and decor, stepped up to acquire the Mitchell Gold + Bob Williams assets, including its IP and manufacturing facilities.

Surya, which brought on co-founder Mitchell Gold as an advisor, plans to restore the home lifestyle brand to its former glory. It plans to begin shipping the brand’s product line in the first quarter of 2024.

August also saw the closure of furniture firm Klaussner, better known as Klaussner Home Furnishings. And Solid Comfort, a Fargo, N.D.-based maker of casegoods for firms such as Marriott and Hilton in the hospitality industry, also shut down.

Z Gallerie

Upscale home decor retailer Z Gallerie landed back in bankruptcy court for the third time following a Chapter 11 filing by its parent company DirectBuy Home Improvement Inc. in October.

Z Gallerie was sold to DirectBuy, as affiliate of CSC Generation Holdings, during its second tour of bankruptcy proceedings in 2019. Its first petition was filed in 2009. The retailer started out as a picture framing and poster shop in 1979. During its heyday, it operated about 60 locations. At the time the business shut down for good, there were only 21 stores left in operation.

Source: sourcingjournal.com

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Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population

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Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population

By:
Rob Chrisman

Thu, Dec 28 2023, 10:54 AM

If someone reports their company for tax evasion in the U.S., he or she will receive 30 percent of the amount collected. Have you ever loaned someone money and had them not pay you back? Here’s one thing that you can do to them (IRS’ 1099-C). While we’re on the general topic, despite strong retirement savings, Fidelity Investments’ Q3 2023 analysis reveals a surge in hardship withdrawals and 401(k) loans, addressing short-term financial challenges. By the numbers: 3 percent took hardship withdrawals (up from 1.8 percent in 2022). 8 percent tapped into 401(k) loans (compared to 2.4 percent last year). The silver lining? Retirement balances are on the rise, and savings rates remain steadfast. For those planning retirement, consider suggesting reverse mortgages as a game-changer. They offer an alternative, allowing access to funds without swiftly depleting hard-earned savings. If you haven’t set up reverse division at your shop, well, 10,000 people a day turn 62. Today’s podcast can be found here, and this week’s is sponsored by Gallus Insights. Mortgage KPIs, automated at your fingertips. Gallus allows you to go from data to actionable insights. If you can use Google, you can use Gallus. Hear an Interview with attorney Brian Levy on the NAR lawsuits and the implications for housing finance moving forward.

Broker and Lender Software, Products, and Programs

Are you a compliance nerd? A group of mortgage industry veterans has launched a software company for loan servicing that is getting a lot of attention. Keep your eyes and ears open for MESH software (Mortgage Enterprise Servicing Hub), which is their brand name for a series of software products aimed at loan servicers. The first product runs hundreds of compliance rules on loan portfolios daily, so servicers have a daily review of all loans against everything the CFPB, Agencies and States can throw at them. Look up “MESH Auditor”.

It’s time to start planning for the year ahead! Join the Computershare Loan Services (CLS) team from January 22 – 24 in The Big Easy for MBA’s Independent Mortgage Bankers Conference. With CLS’ originations fulfillment, co-issue MSR acquisition, subservicing, and mortgage cooperative, IMBs can streamline their operations, minimize expenses, and maximize profits. Contact the CLS team today to schedule a meeting in New Orleans.

Ring in the new year with a kinder outlook by joining us for the highly anticipated “Kind Mindset” event presented by Kind Lending. Taking place on January 16th, 2024, at The Buckhead Club in Atlanta, GA, this immersive event is designed to empower attendees with valuable insights on growth, success, and mindset. With an impressive lineup of speakers, including Kind Lending’s CEO/Founder, Glenn Stearns, and special guest Captain Charlie Plumb, 6-year Prisoner of War and former Fighter Pilot, this event promises to be a transformative and inspirational experience. Get ready to cultivate a “Kind Mindset” and embark on a journey of transformation and success. Register today.

Aging, Down Payments, and Housing Demographics

Do you think getting old is hard? The U.S. Census Bureau released a report showing that about 4 million U.S. households with an adult age 65 or older had difficulty living in or using some features of their home. About 50 million, or 40 percent, of U.S. homes had what were considered to be the most basic, aging-ready features: a step-free entryway into the home and a bedroom and full bathroom on the first floor. About 4 million or 11 percent of older households reported difficulty living in or using their home. The share increased to nearly 25 percent among households with a resident age 85 or older. Over half (about 57 percent) of older households reported their home met their accessibility needs very well, but only 6 percent of older households had plans to renovate their home in the near future to improve accessibility.

In general, Zillow expects home prices to remain roughly flat in 2024, with only a 0.2% increase in its housing market index. Existing home sales are expected to fall further to 3.74 million. Zillow does mention that this forecast does not take into account the latest forecast from the Fed, and the expectation for big rate cuts in 2024.

Falling mortgage rates have put some spring in the step of the homebuilders, according to the latest NAHB / Wells Fargo Housing Market Index. As one would expect, with mortgage rates down roughly 50 basis points over the past month or two, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look. With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory and lower inflation. But builders have lagged production for so many years…

Non-builder loan officers find the builder world a tough nut to crack. Many, if not most, big builders are dealing with the mortgage rate issue by subsidizing buy-downs. Builders generally build free upgrades into their models, and these funds are being used to buy down the rate. The builder gets full price for the house, loses a few points on the mortgage, which might have instead gone to upgraded countertops or something else.

Even if one can get approved for a loan, buying can still be prohibitively expensive. Receiving help from family and friends for that crucial down payment can be a major turning point for many consumers. In fact, nearly 2 in 5 homeowners (39 percent) have received down payment assistance, according to LendingTree’s Mortgage Down Payment Help Survey, of nearly 2,000 U.S. consumers. 78 percent of Gen Z homeowners reported some financial support for a down payment, mostly from their parents. 54 percent of millennials have received down payment help, followed by 33 percent of Gen Xers.

Almost a third (31 percent) of Americans think putting down 20 percent for a down payment is obligatory. However, 59 percent of current homeowners say their down payments were less than 20 percent of the home’s purchase price, and just 29 percent put down 20 percent or more. One in 10 Americans never took out a mortgage, while 15 percent had a mortgage but have since paid it off. Baby boomers are the most likely to have paid off their mortgages, at 29 percent.

As anyone shopping for a home can tell you, it’s slim pickings out there. For many years we have been seeing the biggest squeeze in the starter home category. It appears that for years part of the problem is a lack of confidence to move up to the next category. People in starter homes are staying put, which is keeping homes off the market.

Capital Markets

It was another slow news day yesterday without any meaningful economic data or news to move sentiment. However, investors are laden with optimism as a soft-landing for the economy comes into view and seem to be throwing caution to the wind with over 150 basis points of Fed Funds easing fully priced in for next year. In accordance with that, benchmark bonds rallied to fresh highs yesterday after the U.S. Treasury sold $58 billion in 5-year notes to excellent demand. The strong auction exposed some short positioning, and it invited additional late buying. That followed Tuesday’s $57 billion 2-year Treasury auction that attracted a record number of indirect buyers to snap up high yields before the Fed’s anticipated rate cuts, which are fully priced in to begin at the March meeting in just over 80 days. Yields on benchmark treasuries have dropped to levels not seen since the summer.

Today has a fuller calendar than the past two sessions in regard to economic news. We are under way with initial jobless claims (+12k to 218k, a little higher than expected), continuing claims, advanced economic indicators for November (goods trade balance, retail inventories, and wholesale inventories), none of which moved rates. Later today brings the NAR’s Pending Home Sales Index for November, Freddie Mac’s Primary Mortgage Market Survey, and another large amount of supply from the Treasury, headlined by $40 billion 7-year notes. We begin the day with Agency MBS prices worse a few ticks (32nds), the 10-year yielding 3.81 after closing yesterday at 3.79 percent, and the 2-year is down to 4.25.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

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Mortgage rates dropped below 7% for the first time since August, hitting 6.95% this week, Freddie Mac reported Thursday. It’s a holiday gift for home buyers who were sidelined in recent months by higher borrowing costs.

The latest rate drop brings the monthly mortgage payment for a $400,000 home to $2,118. That’s $183 less per month compared to earlier this fall when rates surged to 7.79%, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. Economists predict rates to fall even further heading into the new year.

Adding to the optimism, the Federal Reserve decided Wednesday to leave its benchmark interest rate unchanged and said three rate cuts are likely in 2024. The potential for rate cuts in the new year offers hope that pressure on other interest rates, including long-term mortgage rates, will ease. NAR forecasts mortgage rates to average 6.3% in 2024.

As rates come down, “the momentum is moving in the right direction for stronger sales activity in 2024,” Lautz says. “Will it be a traditional spring real estate market, or will it start to heat up in the winter months as rates decline? Let’s also hope the lower mortgage interest rates translate into stronger homebuilder activity, as inventory will be needed as buyers move from the sidelines.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 14:

  • 30-year fixed-rate mortgages: averaged 6.95%, falling from last week’s 7.03% average. A year ago, 30-year rates averaged 6.31%.
  • 15-year fixed-rate mortgages: averaged 6.38%, increasing from last week’s 6.29% average. Last year at this time, 15-year rates averaged 5.54%.

Source: nar.realtor

Apache is functioning normally

After nearly two years of trudging through a frozen housing market, the consensus among mortgage professionals is that the worst of it is over.

The Federal Reserve recently signaled plans to slash interest rates three times in 2024, shifting toward the next phase in its monetary policymaking.

“It finally seems like we are turning a corner and that’s good news after two years of the Fed’s negative perspective that we’ve heard,” Max Slyusarchuk, CEO of A&D Mortgage, said in an interview.

The spread between the 30-year fixed-rate mortgage and the 10-year Treasury yield has narrowed after sitting at over 300 basis points, compared to the historic norm of 150 bps. 

But how much will the decline in mortgage rates and a narrowing of the spreads breathe life into the dour origination landscape?

“At the end of the day if mortgage rates come down, I don’t just think that’s gonna solve the inventory problem right away,” said Ben Cohen, managing director at Guaranteed Rate.

“There’s still going to be a lag. So my concern is that rates are going to come down but inventory is not going to just all of a sudden be plentiful and now we’re in a situation where home prices get driven up because there is still low inventory. You have all these buyers that have been waiting for rates to come back and now they’re back and all this becomes really competitive again.”

Mortgage professionals say 2024 will be a ‘recovery year’ as markets slowly return to normal. But a combination of factors – high home prices, lack of inventory, elevated rates — temper expectations for even a moderately strong year. 

HousingWire interviewed a dozen loan officers and mortgage executives about their strategies for 2024, which mortgage products they expect to be in demand, and the magic rate needed to get sellers and buyers back in the market.

Strategies for 2024

I’m heavily focused on recruiting, improving technology and marketing, empowering the loan officers — by giving them the same technology and marketing support. Whatever I have for me, I will do it for them as well. This way I can help them grow their business. 

We will use AI to help with customer service. AI can understand the loan status, a loan profile and AI can respond to the consumer. If they want to know what’s going on with rates, their loan, AI can give them an answer. 

The second project I’m working on is having a mobile app where the the client can download the app and use it to take care of their transaction. We are going to shift to using a mobile app so we don’t have to use phone calls, emails and text messages anymore.

— Thuan Nguyen, CEO of Loan Factory, Inc.

A lot of what you hear is very cliche-ish. You have to make more calls, got to call on more people — all that is true.

But I think it’s more complex than that.

A successful loan officer in this market needs a very capable qualified assistant. I think they need to have all systems firing, meaning they’ve got to do the traditional stuff where you’re doing broker open houses, you’re going to open houses, you are doing coffee clutches and breakfasts and all that. 

Simultaneous to that, I think you got to be heavily engaged in what I call the ‘virtual war’ and that means you’re driving your social media and you’re in your your subscribing to systems that drive alerts to your database’s activity. And then you have to have a process in a system to manage those alerts and have outreach to those alerts to where you’re capitalizing on them in a quick time. 

— John Palmiotto, chief production officer at The Money Store

What people who don’t understand marketing have done is unintentional marketing. They’re just doing what they see everybody else doing and what we’re finding is those who are succeeding today and are going to thrive in 2024 have a lot of intention in their social media. 

It’s not social media, it’s social networking. Networking has always been a key component to drive growth and fostering true community with your referral partners and your sphere of influence. So you have to be intentional, you have to be very strategic – understanding the audience that you’re going after and leveraging it as a social networking platform. 

— Shane Kidwell, CEO of Dwell Mortgage

We’re now having to put in work every day without necessarily reaping the immediate reward. Staying disciplined to putting in the effort every single day at the absolute highest level even though we’re not going to see the immediate reward.

We’re laying the constant groundwork word doing the agent training. We’re doing it to where some of that is not reaping us rewards here. It’s that type of mindset that we have to have, because luck is hard work meeting opportunity.

— Matt Weaver, VP of mortgage sales at CrossCountry Mortgage

I recently got licensed in the state of Ohio because that’s where I’m from. I have a lot of connections in Ohio. I’m comfortable with lending there because I know I’m very familiar with the area. I think a lot of my friends and family members and circle of influence up there are going to be refinancing in the next six, 12, 18 months and I want to be licensed and ready to go when that time comes so that I can help them. 

— Justin McCrone, loan officer at Atlantic Coast Financial Services

Origination goals

I would be happy with doing $65 million to $75 million next year. I left and joined Revolution in 2023 for a couple months with no origination, I’m probably gonna hover around $50 million this year, whereas I did $100 million in 2022 at Guaranteed Rate. 

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

The Mortgage Bankers Association (MBA) has a report on where they think the business is going, you have Fannie Mae on where they think the business is going. We look at all that and then we look at the size of the sales team, who we’ve recruited, what we think how much business will pick up.

I think the first quarter is going to be tough. And I think it’ll pick up once you get past the first quarter spring market and on. So we’re planning for a 20% increase.

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

I think I’m doing marginally better than this year. We’re now looking at a declining rate environment versus the rising rate environment.  So that will allow people to be more optimistic. I would imagine we’ll be about 10 to 15% better next year than this year. 

— Robby Oakes, managing director at CIMG Residential Mortgage

Given the rate cycle over the past two years and the record level of available home equity that consumers are sitting on, the second mortgage market is a huge opportunity for originators to serve the cash-out and debt consolidation needs of their clients without touching their low rate first mortgage, make much needed origination income and keep the client close so they can service them again in the next cycle. Home equity is really a no-brainer today. 

Non-QM is also a huge opportunity for originators to serve the needs of their clients and make much needed origination income. Originators will be battling it out again next year for purchase and refinance volume again that fall into the standard agency, government, jumbo buckets. The rate and term and cash-out refinance market will rely on rates decreasing, but even if they move to 6% next year, the industry will struggle with refinances.

— Paul Saurbier, SVP of strategy at Spring EQ

There’s a big push for home affordability. So there’s a lot of programs out there for first-time homebuyers based on where they’re actually buying their home and what their income is. There’s incentives for those people to get into the home a little bit cheaper than who’s already been a homeowner and can’t take advantage of those programs. 

So to me, it’s still a big first-time buyer market in 2024. I’m not saying there are people that are existing but the people that are existing homeowners are only going to move if they absolutely have to move.

–Ben Cohen, managing director at Guaranteed Rate

I think for sure the non-QMs – the more flexible guideline programs are going to continue to be big, especially for people who are investors or self-employed aging populations.

Obviously for people with good credit, good income, solid assets, the 30-year fixed conventional mortgages is the most amazing program that exists for consumers because you don’t have any risk if rates go up and if rates go down you get to refinance and get a lower rate.

I don’t know if it’s national, but 30% of deals right [in my market in California] now are all-cash and so competing against all-cash is still going to be a concern for folks. So that means our job is not only to get them educated on their loan options, but also to make sure we are solid so we get fully underwritten files, making sure we do a lot of work on the front-end so we’re not missing out on deals.

— Brady Thomas, branch manager at American Pacific Mortgage

Home equity products will continue to be attractive options for homeowners looking for specific needs. Based on the goals of the homeowner, Adjustable Rate Mortgages (ARMs) may offer some flexibility. As rates start to tick down throughout 2024, traditional refinances will begin to make more financial sense, as well.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Magic rate?

I would say 5.5%. But the issue is home prices are too high. In order to have the market return to normal, they have to come down a lot more. If rates and prices both come down, it’s easier. But this time, the price might not come down so we have to rely on the rates.

— Thuan Nguyen – CEO of Loan Factory, Inc.

When we get rates in the 5%, I think it’s gonna be fun to be in this business again because people will be willing to leave their 3% interest rate. I think we are going to see (traditional) refinancing transactions really start to kick in in the second half of 2024, 2025.

— Larry Steinway, senior vice president of mortgage lending and branch manager of Revolution Mortgage

I think if we get rates to come down into the 5% range, that’s going to help quite a bit. If people got rates of 7% and 7.5% and they can get a rate at 5%, that’s a refi boom for all of those buyers.

I think rates in the 5%-range or low 6% levels will bring buyers back to the market, but I don’t think we would get a ton of sellers until we have rates in the 4% or low 5%. Somebody who might want to move because they need an extra bedroom or want a bigger backyard won’t move if rates are still at 6% and they’re going from a rate of 3%. But they might do it if they’re getting 4.5%. 

— Brady Thomas, branch manager at American Pacific Mortgage

Business was really busy when they were in the low 6% range and the high 5% levels. If you look back earlier in the year when we had the banking crisis hit, business picked up a lot then and that’s about where rates were – in the high 5%, low 6%. I think somewhere in there, you would see a pretty good pickup. 

— Jon Overfelt, director of sales and principal at American Security Mortgage Corp.

The question people should be asking is at what rate threshold will sellers come back into the market. Given the average mortgage rate is 3.7%, and considering the pent-up deferred sales pressure is growing each day, our view is that somewhere around 5.5% will be a key threshold to attract sellers in a way that brings supply-demand parity into closer balance.

— Jack Macdowell, chief investment officer at Palisades Group

The number will be different based on the goal of the customer. If customers are looking for home improvement, debt consolidation or other spending goals, Home equity products can be positive at current rates. As rates work back towards 6%, I think you will begin to see more refinance options open up.

— Michael Merritt, SVP of customer care and default mortgage servicing at BOK Financial

Our definition of a magic number indicates the rate at which more than half of the buyers are willing to buy. We have an analytical department that analyzes the purchasing power of the U.S. in the past 40 years and they are saying it’s 6.25%. At 6.25%, a majority of people would say, ‘I’m OK to buy.’ That’s when supply and demand will equalize and your property is not going to drop or rise in value.

— Max Slyusarchuk, CEO of A&D Mortgage

Source: housingwire.com

Apache is functioning normally

You made it! The sun is setting on 2023 and dawning on 2024. Among other personal reviews, the changing of years is the perfect time to refocus on your finances. Let’s spend a few minutes discussing:

  • Conducting a year-end financial review
  • Setting goals for next year

Conducting a Year-End Financial Review

We want our year-end financial review to do two important things:

  1. Provide clear, actionable data on our previous year’s finances.
  2. But without requiring days’ worth of time to conduct.

So we’re going to focus the review in 7 major areas:

  • Spending (including Unexpected Expenses)
  • Income
  • Saving
  • Net Worth
  • Investing, Allocation, Etc.
  • Insurance and Estate Planning
  • Progress on Previous Goals

Spending

Spending is the most time-consuming part of the review. But you can’t skimp here! A poor understanding of household spending is one of the deadliest sins of personal finance. It’s all too easy to assume your spending is under control when it’s not. That poor assumption is the difference between financial health and financial decay.

So – what exactly should you be measuring?

  • Total dollars spent. Personally, I like measuring monthly.
  • Categories you spent on. Think groceries or housing or debt repayment. If you’re curious, I shared my personal budget categories here. You should be able to identify if you spent $4000 on groceries…or $8000!
  • Unexpected expenses. How do you handle unexpected expenses and/or items not covered by your basic monthly budget? This answer is highly correlated to financial success/failure. Ask yourself:
    • Did your emergency fund do its job this year? Is it in a healthy place right now?
    • Did you stick to your budget? Or did you allow the allure of “shiny objects” to pull your purse strings in a regrettable way?

Income

What was your household income for the year? How did it change from last year? And how do you expect it to change in the year ahead? Most importantly, how does your income compare to your spending? aka how’s your cashflow?

Saving

How much did you contribute to (or withdraw from) your savings accounts this year? The same for your Roth IRA, your 401(k), or any other savings/long-term investing accounts.

Note: this should only focus on your contributions, not whether the investments in your accounts went up or down.

Net Worth

Update your net worth, tracking all of your assets and debts. How did your net worth change over the year? Personally, this is something Kelly and I have started doing monthly. It gives us a high-level understanding of our household’s financial health.

Net worth does include whether your investment accounts have gone up or down. After all, investing is one of the reasons we’re all here on The Best Interest! 🙂

But I urge you to not let investments/Net Worth fool you during a year-end review! For example, most of us would have seen our net worth decrease in 2022, as it was a bad investing year. The opposite is true in 2023 – the S&P 500 is up 25% year-to-date!

If we measure on Net Worth alone, the poor investment returns in 2022 could “wash away” our other good financial habits. Similarly, the great investment returns in 2023 could “sweep under the rug” our bad habits.

Investing: Allocation, Performance Etc.

The year-end review is a great time to look at all of your investing accounts. 401(k), IRAs, taxable accounts, etc.

First, review your allocation and rebalance as necessary.

“Allocation” is the percentage of stocks, bonds, alternatives, etc. that comprise your portfolio. As different assets perform differently throughout the year, our portfolio allocations drift from their “target allocation.” The act of “rebalancing” is the process of making trades in your accounts to return to that pre-defined “target allocation.”

You should also review your performance.

Are your accounts up? Or down? By how much? The main reason for tracking performance is to understand if your accounts are on-pace with the underlying “benchmarks.”

For example, let’s take a retiree with a 50% stock, 50% bond portfolio. We can look at some basic indicies and see that so far this year:

  • The S&P 500 (stocks) is up 25%
  • The bond AGG index is up 2.5%

So, roughly speaking, I’d expect this retiree’s portfolio to be up ~13-14%. If their performance is drastically different than ~13-14% (up or down!), I’d want to understand why. Some reasonable reasons could be:

  • Their stocks investments are more value-heavy (the Dow Jones is only up ~13% this year) or growth-heavy (the NASDAQ is up ~46% this year)
  • They own individual stocks instead of owning indexes.
  • They own individual bonds, not funds.

At the end of the day, this is an exercise in asking, “Does my investment performance match my expectations? If not, why not?”

Insurance, Estate Planning, Etc.

Death isn’t a fun subject. I won’t need to beat it to dea…hmmm..

Nevertheless, you should check annually to make sure:

Progress on Previous Goals

It’s time to check in on last year’s goals. Did you accomplish what you’d hoped in 2023?

If not, why not? The curiosity to ask “why” is the best way to grow.

Setting Goals for 2024 (and Beyond)

Now it’s time to look ahead. What are some of the smartest financial goals you can set for yourself?

Saving

Savings goals take many forms. As your finances improve, your savings goals will evolve.

Perhaps the most basic is saving for an emergency fund. You should have money set aside in your bank account simply to act as a safety net should life get hard.

Retirement saving is another common set of goals. For example, my “basic” retirement savings goals are ensuring I get my employer match on my 401(k), and then maxing out my Roth IRA contributions for the year.

And then there’s “saving for an X” goals. A new house, your first car, a trip to Thailand. When you hope to have large outlays of money, it makes sense to create a savings goal for yourself. Some people call these “sinking funds.”

Reduce/Control Spending

As I wrote earlier, “A poor understanding of household spending is one of the deadliest sins of personal finance.” Controling your spending is a wonderful goal. But it’s easier said than done.

To be successful here, you must measure. You need data. You’ve got to understand how much you’re spending today and set a realistic, measureable goal for reduction.

How to do that “measuring?” I love the budgeting app YNAB. I’m also a fan of simple spreadsheets, if that’s more your style. If you’re looking for something to do today, I’d start by downloading your past 3-6 months of credit card statements and/or bank account statements. What do your transactions look like? How much are you spending? And where?

Increase Income

What can you do to increase your income this year?

Personally, I’m not a fan of recommendations like “find a new side hustle” or “get a second job.” The point isn’t to work ourselves to the bone in pursuit of money.

Instead, I’d focus on questions like, “How can I be more efficient?” or “How can I secure a raise at work?” or, especially in the modern economy, “Will a job/career change lead me to higher income?”

Even a minor pay bump, when magnified by decades, makes a huge difference.

Pay Off Debt

Debt reduction is another common goal, but I recommend caution here. Make sure you separate the math of debt reduction from the psychology of it.

The math says that interest rates matter. Low interest debt (~5% or lower) isn’t that bad, and doesn’t need to be paid off quickly. High interest debts (~8% or more) should be highly-prioritized. Credit cards, for example, with 20%+ interest rates are a five-alarm fire for your finances. The mid-level debts (6-7%) are a coin flip.

But the psychology of debt payoff is highly personal. Some people can’t stand debt, and having a 2% car loan keeps them awake at night. If this is you, I encourage you to priorize your sleep and pay down that low-interest debt! But just know that, mathematically, it’s not optimal.

It’s ok. Personal finance is a mix of numbers and psychology. We’re not automatons, and sometimes our brains trump what the numbers tell us.

The numbers: currently, risk-free savings accounts are paying 4.5% – 5%. Why use $1000 to pay off a 2% loan when you could instead earn 5% interest?

Invest More…

Investing is the flywheel of wealth creation. Put your army of dollars to work creating more dollars. Annual investing goals make sense. Most of my work is focused on investing. I won’t go too deep here. But I’m 100% behind investing early and often.

Put Together a Financial Plan

A financial plan is a bridge between your comprehensive financial ecosystem and your personal values and desired outcomes. The process of financial planning makes you realize, “It’s more than money. It’s about your life.”

A good financial plan is more than that bridge, though. Using another transportation metpahor, a financial plan is a lighthouse in the financial fog. It provides vital direction and (in rough terms) distance to where you need to go.

Considering the number of people who think, “I have no idea where my finances are…” …I’d say putting together a financial plan is a wonderful goal for 2024.

Go Get Your Goals!

Happy New Year! I hope you had a great 2023 and kickoff 2024 with verve.

I’d love to hear from you if finances are part of your 2024 goals! Drop a Comment or shoot me an email: [email protected].

Thank you for reading! If you enjoyed this article, join 7500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

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Source: bestinterest.blog

Apache is functioning normally

From 9 a.m. ET on December 22, 2023, to 5 p.m. ET on Thursday, February 15, 2024, fans have the opportunity to enter for a chance to win the 2024 HGTV Dream Home.

HGTV and FoodNetwork fans have the chance to win the 2024 HGTV Dream Home giveaway in Anastasia Island, Florida. The prize package, valued at over $2.2 Million, includes keys to the home, all furnishings, an all-new Mercedes-Benz E Class Sedan, and $100,000. Eligible fans can enter for a chance to win daily at HGTV.com/DreamHome and FoodNetwork.com/HGTVDreamHome, where they will also find full details of the official rules and additional home features.

The three-bedroom, four-bathroom home sits at approximately 3,300 square feet with views of the Matanzas River and the St. Augustine Lighthouse. The home combines classic coastal elegance with modern touches and layers of natural textures drenched in soothing blue and white hues. Upon entry, guests will instantly be taken away by the beautiful views of the waterfront. The front door leads to the great room with an open concept, including a living room with sleek sofas and a fireplace, a dining room with a beach-inspired distressed table, and a bright blue cabinet-filled kitchen. The laundry room and well-organized mudroom sit between the kitchen and an attached two-car garage. The main bedroom looks up to airy skylights and offers a private retreat from the rest of the home with a walk-in closet and main bathroom.

The house is perfect for entertaining, with two guest suites and a loft that provides a cosy space with a wet bar and a mini fridge. The spacious backyard is a dreamy getaway with an outdoor kitchen and high-top bar, two fire features, a pool, and multiple outdoor entertaining spaces, including a screened-in porch with lounge and dining and a pergola with conversation seating.

Architect Michael Stauffer designed the home, and local builder Glenn Layton Homes brought it to life. The interior design was done by Brian Patrick Flynn.

2024 HGTV Dream Home features overview:

  • 3-bed, 4-bath home with 3,300 sq ft
  • Views of Matanzas River and St. Augustine Lighthouse
  • Classic coastal elegance meets modern touches
  • The front door opens to a great room with an open-plan concept
  • Main bedroom with walk-in closet and main bathroom
  • 2 guest suites and loft with wet bar and mini fridge
  • Spacious backyard with outdoor kitchen, high-top bar, fire features, pool, and multiple entertaining spaces

The HGTV Dream Home inspires millions of HGTV fans who enter for a chance to win every year. With this year’s home, we are showcasing Anastasia Island, which offers something for everyone from historical sites to year-round outdoor adventures.

Loren Ruch, Head of Content, HGTV

Anastasia Island is located off the northeast Atlantic coast of Florida, just east of St. Augustine, considered the oldest city in America. The 14-mile island is connected to the city of St. Augustine by the Bridge of Lions, giving access to everything from the charming cobblestone streets and powder sand beaches to historical sites and a wide range of activities. With a rich architectural history, Anastasia Island sits atop layers of local coquina stone formed from seashells used to build the Castillo de San Marcos, a national monument and the oldest fort in the United States. Visitors can explore the St. Augustine Lighthouse, Anastasia State Park, Matanzas Inlet, St. Augustine Amphitheatre and many other local attractions. With endless water sports, scenic boat rides, campsites and majestic views, this seaside escape is the perfect dreamy getaway to call home.

Sponsors of the 2024 HGTV Dream Home include Belgard®, Cabinets To Go, Delta Faucet, James Hardie Building Products Inc., LL Flooring, Mercedes-Benz USA, The Sherwin-Williams Company, SimpliSafe Home Security, Sleep Number®, Trex Company LLC, VELUX® No Leak Skylights, Viva®, Wayfair® and KitchenAid, and Maytag by Whirlpool Corporation.

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Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.

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Source: realtybiznews.com

Apache is functioning normally

[Editor’s Note: This is the introduction to our 275th Weekly Transmission, originally delivered direct to the inbox of the GEM Crystal on December 22nd, 2023. Below, myself and others from the GEM Diamond community look back on year with high interest rates, tighter VC wallets, lawsuits, and increased short term rental legislation. Many links included are to members-only articles, so won’t be accessible without an account already setup. You can read the full full article on our Crystal Platform.]

What a year, what a year. It’s all about the interest rates.

The 2023 macro was challenging, at best. It was a damn hard year all the way around. ❇️Reali ended in flames ❇️, as did Veev. WeWork lost its mojo, again. Opendoor’s missionary force stepped away. Those that survived are here to stay…for now. There’s no doubt 2024 will usher in another year of sleep-deprived founders.

Here’s a snapshot of the most notable industry dynamics that played out:

Mounting Lawsuits: There are $1.8 billion reasons that the Sitzer/Burnett trial in the U.S. District Court in Missouri has dominated the year’s news cycle. And, many more when you factor in the growing selection of follow-on lawsuits. Re-read that Sam Westelman essay thoroughly. Big changes are afoot, both for individual practitioners and MLSs—all of which will impact technology innovation and adoption.

AI-izing Everything: We don’t need to beat this drum since it’s beyond obvious, but you can’t go a day without hearing about the impacts of AI. That said, it’s still focused on the low-hanging fruit—largely still being used for data efficiencies, automating processes, and of course creating content.

Drying Up VC Funding: Fundraising was hard. Really hard. I heard that sentiment over and over from founders far and wide. BISNOW reports proptech funding was down 42%. Finding a VC actually putting money to work makes me think, “Where’s Waldo?” As Fast Company says, 2023 was a bloodbath for venture capital. Sure, AI is bucking the trend, but I’m not optimistic that will hold as AI becomes table stakes, like social media. “Overall IPO proceeds in 2023 lag[ged] 2022’s,” and the existing public stocks experienced steep declines since their pandemic highs—that needs to change to turnaround VC fuel. We’ll continue monitoring the public side via our Quarterly Earnings Radar and weekly ❇️Proptech Index updates❇️.

Mainstreaming ESG: With New York’s Local Law 97 requiring buildings over 25,000 square feet “to meet new energy efficiency and greenhouse gas emissions limits as of 2024” (with even stricter limits coming by 2030), and Washington approving legislation that makes it “cumbersome and expensive for [residential] builders to meet energy efficiency targets without installing heat pumps,” sustainability has moved front and center. This is only the beginning of governmental mandates that will further drive adoption of sustainability technologies previously seen as optional.

Boiling Over of CRE: The office sector is even worse than everyone says. Vacancies are up, transactions are down. With the cycle on commercial longer, fatigue in the market is real, and with tenants fighting to lower or abandon rents, the adoption challenges startups have always experienced are more of a reality than ever before.

Regulating Short-term Rentals: New York’s Local Law 18 took effect in September, which we touched on ❇️earlier this year❇️. The overlap of long/short-term rentals and Airbnb and all of that mushy gray area where new living arrangements are popping up for people. All of which bodes well for ❇️those facilitating home sharing, swaps, and exchanges❇️.

And, with that, let’s get to it…

Image created by: Dall-E-3
Prompt: “I’m writing a post about the real estate market titled Looking back at 2023, but am looking for a graphic for the top of the article. please make one and include either 2023 or 23”

How did we fare? Let’s take the time to reflect on, and score, the predictions and trends published a year ago.

Without further ado …

Read the full article for free

 

Source: geekestateblog.com