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Looking at the average U.S. household, 82 percent have at least one Internet-connected TV device. For some, that means a large Smart TV that’s perfect for streaming movies and playing video games. Others may take it a little smaller, but there’s nothing better than the big screen.

Whether secured on the wall with a TV mount, or atop a TV stand, this device is valuable because it provides hours of entertainment. You’d hate to have to spend hundreds of dollars replacing it if the screen cracks during a move. That’s why it’s important to take extra care, up to the point of deciding to hire professional movers, when it’s time to relocate your TV securely to a new home.

Preparing your TV for a move

Your television may look sturdy, but it’s actually one of the most fragile items in your home. There are rules on how to pack a television for moving, but the process starts with detaching your TV from its current location.

Begin with all the cords. Unplug everything from the TV, securing longer cables with a bungee cord or twist tie. Keep all power cords related to the TV together and in their own plastic bag, which you need to label “for the television.” It’s also not a bad idea to create a single box of all your electronic accessories, for easier unpacking.

Remove the batteries from your remote control, as well as add the controller to the bag with the power cord.

Next, you need to separate the flat-screen TV from the wall mount if you’ve got it hanging. Take off all of the mounting hardware before you move it. If you have the legs or a stand installed at the base of the flat-screen TV, you’ll need to remove those pieces, as well. Make sure to bag and label all parts.

Dust left on a TV screen can actually scratch it, so make sure at this point you wipe the entire TV, including the television screen, with a microfiber cloth to eliminate lingering particles.

Keep your TV standing upright as much as possible during this process, although, if you do have to lay it flat, it’s OK as long as you don’t box it up that way.

How to pack a television for moving

The ideal way to pack a TV for moving is within the original TV box, using the original packaging materials that came with the device. This is already set up for you to properly pack your TV, so whenever you buy new electronic devices, if possible, store the box somewhere safe, just in case.

An original TV box often includes both the protective sleeve for the flat screen and foam pieces to go at each corner that is the exact shape you need.

Even if you just have the original box and not the packing material, this is still the best bet, but it’s not your only option.

Using a TV box

Missing an original TV box doesn’t mean you’ll struggle to get your flat screen safely packed. Most moving companies and box stores offer a specialty box just for your television. These typically start at $20 and go up in price, but they’re the exact right shape for a large TV. They also often come with special packing supplies like foam corner cushions and a screen protector. Some are even adjustable for different-sized TVs to ensure a perfect fit without empty space to jiggle your device.

What’s even better, these boxes make it easy to get your TV inside while still in an upright position. Often, you just have to slide your television right into the box and seal it with packing tape.

One thing to note if using these types of boxes to pack a flat screen is that only one TV fits into each box. If you have multiple televisions, you’ll have to get more than one moving box.

Packing a flat-screen TV

Regardless of whether you’re using the original box, there’s a right way and a wrong way to pack it up and get it to your new home. Flat-screen TVs always belong in the upright position when getting boxed up and moved out. This is because a flat-screen TV is weight balanced when vertical. When you put the TV flat, you upset that balance, and as the television jiggles during the move (which it inevitably will do even if it’s just a little), you’re increasing the risk of the screen cracking or developing issues that could lead to picture distortion the next time you turn it on.

Even if you keep your TV upright as you box it and get it to your car or a moving truck, how you secure it is also important. Never lay the box flat, but instead place it vertically between two other sturdy items to hold it in place. Heavy objects like a couch are more secure during a move, so can protect your TV. A mattress is another good object to place a television against. It’s already padded enough to protect your device. Other pieces of furniture, like a dresser, can work as one side of your television sandwich, as well.

This strategy will work great in a moving truck, but for your car, anything soft and secure filling up the extra space around a TV in the box will keep it protected. Other boxes or even blankets will do the trick.

Can you lay a TV flat when moving?

The official answer to this question is no. Flat-screen TVs, which most are, shouldn’t lay flat. However, if you need to lay your TV down while you’re disassembling it, say while taking off the legs or the stand, that’s OK.

To do this safely, lay out a towel or blanket on a flat surface first. You want the TV to lay on soft padding for protection. Place the TV on the now soft surface, screen-side down. A screwdriver will most likely take care of all the disassembly.

Once done, return the TV to a vertical position, and place it between two sturdy objects to shield it from any bumps until you’re ready to box it up.

Bubble wrap is your friend

Even with no separate box for your TV, it’s possible to keep it safe. Preparing a TV for moving box-free means treating it more like a piece of furniture. Moving blankets make great protective packaging, but save it for the final layer of the wrapping.

To start, you could seal up the whole TV in plastic wrap. This sticky stuff provides an added layer of coverage against scratches and dings. You can put foam pieces on the corners, as well.

If you’re worried about the screen specifically, bubble wrap is a great packing material to secure your TV. However, if you’re taping it on, make sure packing tape never touches the screen itself.

For a pro tip, put a layer of tape around your TV so the sticky side faces out. Then, apply bubble wrap to the tape. Easy peasy.

Keeping your TV safe no matter how you move it

Even if you’re using a moving company that will pack up your larger items themselves, there are a few more things to know about moving a TV the right way.

  • Avoid leaving electronics in humid areas. Don’t leave a TV outside in the summer or anywhere you think humidity could build up. If it’s unavoidable, put some silica gel packets around your TV before packing it.
  • As you’re cleaning out drawers, keep an eye out for user manuals. If you find the one for your TV, toss it into the bag with the cords. It could come in handy when setting up your television in your new home.
  • If you’re worried about forgetting how to put everything back together, take a photo with all the cords plugged in before you disassemble and wrap the TV. This will provide a great reference.

The goal should always be to get that flat-screen TV to the moving truck as protected as possible. This really is one item you don’t want to have to replace before you’re ready.

Readying your TV for moving

Taking all the proper precautions when packing up that flat-screen TV is the only way to ensure it arrives at your new home in tip-top condition. Then, it’s just a matter of finding the perfect place to install it, setting up your favorite streaming services, popping some popcorn and enjoying your first movie in your new place. The rest of the unpacking can wait, right?

Source: rent.com

Apache is functioning normally

Progress on the office makeover continues albeit slowly!. Things are finally falling into place though so we thought it was time for another progress update.

One piece we had to say goodbye to was my lovely desk. Now, I’m not actually ditching this prized possession. The beautiful petrified wood piece is sticking around, it’s just physically leaving the office. There are no ways around the fact that a single desk is just not big enough for four people to sit at and work efficiently. What we need is something communal, spacious and designed to help us all get down to business!

get your shop on: 1 // 2 // 3

Truthfully, we’ve already picked one of these beauties and it’s soon to be revealed with the rest of the office woot!, but all three of these tables are great options if you’re looking for the same modern, communal work space, or if you’re just looking to spread out your personal work station.

So we figured we could play a game because we love games!. Which desk do you think made the cut? Is it the mid-century style Parker table? The durable and sleek Strut table? Or the smooth Aqua Virgo table?!

You’ll have to stay tuned to find out!

image 1 via Line Klein // 2 via // 3 via Genbyg Design // 4 via ATWTP

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Source: apartment34.com

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While many may have familiar-sounding job titles, some have ventured off the beaten path and pursued unique careers. Despite the unconventional work, there are a plethora of lucrative job opportunities available. In this article, we’re exploring some weird, high-paying jobs worth considering.

1. Bereavement Coordinator

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A bereavement coordinator is tasked with assisting families who have terminally ill or recently passed loved ones. Their responsibilities include overseeing administrative tasks, scheduling appointments, managing funeral arrangements, and supervising staff and volunteers to alleviate the burden on grieving families.

Offering Words of Wisdom

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Additionally, a bereavement coordinator may also arrange counsel for those who are struggling with grief. This role often involves working in hospitals, nursing homes, or hospice settings and can be considered a type of counseling service. National Average Salary is $47,660

2. Online Dating Ghostwriter

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An online dating ghostwriter is a professional who writes online dating profiles on behalf of clients. This individual is responsible for creating an engaging and attractive online dating profile that accurately reflects their client’s personality and interests. The ghostwriter must have strong writing skills and be able to craft a compelling narrative that highlights the client’s best qualities.

Matchmaker, Matchmaker

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They may also assist with messaging and communication with potential matches. The goal of an online dating ghostwriter is to help their clients stand out in a crowded online dating market and increase their chances of finding a compatible match. The national average salary is $54,204 per annum.

3. Art Therapists

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Art therapy is a unique profession that blends the principles of therapy with the creative process of art. Art therapists utilize various forms of artistic expression to aid patients in their healing journey. By reducing stress levels and enhancing self-esteem, art therapy can help improve overall mental health. This therapy is particularly useful when individuals have difficulty expressing themselves verbally.

Wisdom and Creativity

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Becoming an art therapist requires a background in psychology or counseling and specialized training in art. Art therapists have the flexibility to work in a variety of settings, including schools, communities, and private practices. Companies can even hire them to help employees manage stress and improve their mental well-being. The National average salary is $58,139.

4. Flavorist

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As a Flavorist, your primary responsibility would involve developing both natural and artificial flavors. To accomplish this task, you must possess a wealth of knowledge regarding essential oils, botanical extracts, flavor aromas, and essences in order to replicate natural flavors accurately.

Education… and Good Taste

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Additionally, you would be tasked with inventing new and captivating flavors that appeal to consumers. This highly specialized profession necessitates a Ph.D. in chemistry or biochemistry, along with extensive apprenticeship experience with flavor companies. The National average salary is $60,640.

5. Color Designer

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The role of a color expert involves utilizing color psychology, trends, statistics, and theory to recommend optimal color schemes for various settings, including homes, company buildings, brand logos, and more. As a color expert, you would be responsible for creating layouts and designs for a variety of purposes, such as branding, interior design, and architecture.

Think Outside the Box

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A college degree is not typically required for this position, although specialized training is necessary. Additionally, possessing a creative and innovative mindset can be beneficial when pursuing a career as a color expert. The National average salary is $61,554 per annum.

6. Veterinary Acupuncturist 

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Veterinary acupuncture is a form of alternative medicine that involves using techniques similar to those used in human acupuncture to treat animals. As a veterinary acupuncturist, your primary objective would be to provide non-surgical and non-pharmaceutical treatments to animals using methods such as needle insertion, massages, blood-moving approaches, frequency approaches, and polarity devices.

A Big Heart

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In order to pursue a career in this field, you would need to acquire the necessary training and certification in acupuncture. Furthermore, genuine love and compassion for animals would be crucial to succeed in this role. The National average salary is  $69,167 per annum.

7. Equine-Assisted Therapy

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An equine therapist is a profession that merges horseback riding with therapy to help both children and adults. This therapy involves using horses to provide patients with physical and emotional benefits. To pursue this career, you would need to be a certified therapist with extensive knowledge of various disabilities, as well as experience working with horses.

Ready to Ride

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Hippotherapy has proven to be an effective method to improve recreational activities, socialization, and interactions with other patients. As a hippotherapist, you would be a valuable member of a team of experts responsible for designing customized plans and objectives for each patient. National average salary is $74,434 per year.

8. Toy Designer 

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A toy designer is a professional who creates toys that are not only fun but also safe for children to play with. This role may also be referred to as a product designer or toymaker, and it requires a keen artistic and imaginative sense. Toy designers must have a good understanding of materials to create toys that do not pose any safety risks to children. They should also have the ability to design toys that are sturdy and easy to maintain.

Are You a Tinkerer?

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In addition, a love for gadgets and proficiency in mechanical skills are highly desirable traits. To pursue a career as a toy designer, you would need to earn a degree in the arts, such as a design degree. Furthermore, proficiency in CAD and engineering skills would be necessary to succeed in this field. The national average salary is $74,913 per year.

9. Podiatrist 

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A podiatrist is a healthcare provider who specializes in the examination, diagnosis, and treatment of conditions affecting the feet, ankles, and lower legs. They are also qualified to perform surgeries on these body parts.

Take Good Care of Feet

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Podiatrists possess the expertise to detect and manage abnormalities in the feet, prevent and correct deformities, and alleviate foot pain and infections. To pursue a career as a podiatrist, you would need to obtain a degree from an accredited podiatric medical college. The National average salary is $90,795 per year.

The job market is full of unique, unconventional job opportunities that can offer excellent salaries. Pursuing a career in one of these jobs may lead to a rewarding career path with significant income potential. So, if you’re looking for an exciting and well-paying job, don’t be afraid to explore some of these unique professions!

Image Credit: Shutterstock – Denis Makarenko

Who is one actress you can never stand watching, no matter their role?  After polling the internet, these were the top-voted actresses that people couldn’t stand watching.

10 Actresses People Despise Watching Regardless of Their Role

These 7 Celebrities are Genuinely Good People

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We’ve all heard the famous adage that “no publicity is bad publicity,” and while it tends to be accurate, there are certainly exceptions. But what about those few stars who stay out of the limelight and get along without a hint of trouble? 

These 7 Celebrities are Genuinely Good People

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Have you ever known someone and thought you liked them—until you learned about their hobbies? Then you get to know them and then you’re like, “Wow, red flag.” Well, you’re not alone.

These 10 Activities Are an Immediate Red Flag

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Some celebrities definitely seem to enjoy the limelight and keep working to stay in the public eye. While others quickly move out of the spotlight. Many of these actors and actresses stepped out of the spotlight to live a more private life without constant media pressures.

10 Celebrities That Made the Big Times Then Disappeared Off The Face of the Earth

Image Credit: Troma Entertainment

We’ve all been there – sitting through a movie that we can’t help but cringe at, but somehow it still manages to hold a special place in our hearts.

These 10 Terrible Movies Are Still People’s Favorites



About the Author



Dan Williams



Source: financequickfix.com

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For many people, a financial advisor is a key ally in helping you reach your financial goals. While most savvy people under 30 should be able to handle their finances on their own, many opt to hire a financial advisor to get access to personalized advice from a financial expert.

If you live in San Francisco and want help from a local financial advisor, you’ve come to the right place. The best financial advisors in San Francisco are standing by to help you create a financial plan, choose the best investment portfolio, and put you on track to reach your most important financial priorities. Keep reading for a list of the best financial advisors in San Francisco.

What’s Ahead:

Overview of the best financial advisors in San Francisco

BOS

  • Contact: 415-781-8535 or [email protected].
  • Services offered: Financial planning, trust & estate planning, wealth management.
  • Assets required: $3 million in investable assets
  • Typical fees: The fee is quoted as an annual percentage fee, and is billed quarterly by taking the value of your assets at the end of each calendar quarter and applying one-fourth of that annual percentage fee.

Bingham Osborn & Scarborough Wealth Management, better known as BOS, is an investment and financial advising company for individuals with at least $3 million in investable assets.

The fee-only firm advises clients with a holistic approach that looks at all aspects of the client’s finances. BOS works to build long-term investment portfolios using a data-driven approach that incorporates taxes and other factors. 

Burgess Financial Planning

  • Contact: 415-525-1041 or [email protected].
  • Services offered: Financial planning and investing advice.
  • Assets required: $3 million in investable assets.
  • Typical fees: $480 fee for an initial planning meeting.

A smaller shop, Burgess Financial Planning is a boutique firm with just one planner. Sean Burgess is a CFP and Registered Investment Advisor. He is a fiduciary (that means he always puts your best interests first) and doesn’t have any minimum required level of assets to get started.

Burgess charges a $480 fee for an initial planning meeting. If you decide to work with Burgess Financial Planning long-term, investment fees are charged based on assets under management. This firm earns an impressive 4.5-star rating with 35 reviews on Yelp.

Citrine Capital

  • Contact: 415-494-8262.
  • Services offered: Wealth management, financial planning, asset protection, risk management.
  • Assets required: None listed.
  • Typical fees: Starting at $7,000 per year.

Founded in 2014, Citrine Capital is a fee-only wealth management firm with a focus on the Bay Area’s high-tech community. Entrepreneurs, business owners, and startup employees will likely feel at home with this firm.

Citrine Capital works to organize client finances in a way that helps them reach financial goals, mitigate taxes, and manage wealth for long-term needs. Fees start at $7,000 per year for clients with a net worth below $1 million.

Financial Connections

  • Contact: 415-924-1091 or [email protected].
  • Services offered: Financial planning, investment management, retirement planning, socially responsible investing.
  • Assets required: None listed.
  • Typical fees: $290.00 per hour for financial planning.

Located across the Golden Gate Bridge in Corte Madera, Financial Connections offers financial management, investment management, and other services to Bay Area clients. The fee-only firm doesn’t take any commissions or compensation from large investment fund providers.

The firm’s team acts as fiduciaries project-based financial planning. For those with long-term and unique needs, you can sign up for a concierge service to plan for specific needs. Its investment management product comes with either customized portfolios or robo advisor-style modeled portfolios.

Hall Capital Partners

  • Contact: 415-288-0544 or [email protected].
  • Services offered: Investment management, risk management.
  • Assets required: $500 million.
  • Typical fees: $300,000 to $400,000 annual minimum fee.

Founded by Kathryn Hall in 1994, Hall Capital Partners is a large financial planning firm with more than $30 billion in client assets under management. It exclusively works with high-net-worth clients, many of whom hold eight-figure and nine-figure portfolios.

If you have that kind of wealth, the $300,000 to $400,000 annual minimum fee isn’t a huge deal. But for most of us peons with merely tens or hundreds of thousands, or even assets in the low millions, Hall Capital Partners probably isn’t going to work for you. If you just made it big time from your company’s IPO, however, it could be worth giving Hall Capital Partners a call.

Morling Financial Advisors

  • Contact: 800-607-5800.
  • Services offered: Financial planning, investment management.
  • Assets required: None listed.
  • Typical fees: Start at $300 per month.

Morling Financial Advisors is an investment manager and financial planner founded in 1999. Suitable to high-tech Silicon Valley, Morling Financial Advisors has its own app for clients to log in and view their account details.

Financial planning services start at $300 per month. Investment management services start at 1% for those with under $1 million in assets and go down to 0.60% for those with $10 million and up.

Paragon Financial Planning

  • Contact: 510-227-5354 or [email protected] or [email protected].
  • Services offered: Financial planning, investment management, retirement planning.
  • Assets required: None listed.
  • Typical fees: Depends on portfolio size.

If you are in Oakland or Alameda, the office of Paragon Financial Planning may be convenient for you. Paragon Financial Planning is a small office led by Samantha N. Dinh, a Certified Financial Planner.

She’s doing something right, as Paragon Financial Planning earns perfect five-star ratings after 34 reviews on Yelp. Dinh offers financial planning, investment management, and insurance services through her company.

Summary of the best financial advisors in San Francisco

Firm Services offered Primary clientele
BOS • Financial planning
• Trust & estate planning
• Wealth management		 High net worth individuals
Burgess Financial Planning • Financial planning
• Investing advice		 Those looking for no minimums and an affordable advisor
Citrine Capital • Wealth management
• Financial planning
• Asset protection
• Risk management.		 High tech professionals, entrepreneurs, business owners
Financial Connections •Financial planning
• Investment management
• Retirement planning
• Socially responsible investing		 Those with unique money needs
Hall Capital Partners • Investment management
• Risk management		 High net worth individuals
Morling Financial Advisors • Financial planning.
• Investment management		 Tech industry workers
Paragon Financial Planning • Financial planning
• Investment management
• Retirement planning		 Those looking for no minimums and an affordable advisor

How I came up with this list

This list of the best financial advisors in San Francisco is based on several sources.

They are fee-only planners

Financial advisors on this list don’t earn from shady commission deals. They are all fee-only planners where you know what you will pay upfront and can rest easy that there are no major financial conflicts of interest.

They are fiduciaries

Fiduciaries are legally required to put your interests first. It’s a good idea to only work with a financial or legal expert who acts in a fiduciary capacity.

They earn good customer reviews

Before adding a financial advisor, I checked out reviews on multiple sites including Google and Yelp, and public lists of awards given to San Francisco financial advisors.

They work with a wide range of clients

Top advisors from this list may be a good fit for people from all financial backgrounds, whether they have $1,000 to invest or $100,000,000. While every financial advisor on this list isn’t the right fit for every reader, there should be an advisor that meets the needs of most people looking to get started with a financial advisor.

Remember that not all people need a financial advisor. Resources like those available here at Money Under 30 could give you all you need to make good financial decisions without the added cost of a finance professional. Ultimately, it’s up to you and your comfort level with your finances to decide if you would benefit from the services of a San Francisco financial advisor.

What questions should you ask a financial advisor?

How can you help me with my finances?

A financial advisor is a licensed financial professional with the expertise to help you manage various parts of your finances. That can include creating a financial plan, managing your investments, or a fully hands-on advising experience where they handle most of your day-to-day finances. Some focus on taxes, some focus on specific types of business owners or employees, some work with anyone.

There are many types of financial advisors. The one thing they all have in common is a business built around helping you manage your money.

Why should I hire you instead of doing it myself?

A financial advisor is best for someone who isn’t confident that they are making the right financial decisions. Most people don’t get much financial education at school, if any. That means unless their parents taught them about money, they could be just making best guesses around major financial decisions like saving for retirement or buying a home.

If you want help creating a financial plan or having your plan double-checked by a professional, a financial advisor could be right for you.

Are you a fiduciary?

A fiduciary is a type of financial advisor that is obligated to put your interests first. That means they are not allowed to put your money into a fund that isn’t aligned with your long-term goals and needs.

Ideally, you should only ever work with a financial professional that acts in a fiduciary capacity.

What services do you offer?

Financial advisors can offer a range of services. Here are some of the most popular services you can find from a financial advisor.

  • Financial planning – Reviewing where your money is today and how it influences your future is important. With financial planning services, advisors help you chart out the right savings and investments to reach your goals.
  • Investments – If you don’t know the difference between a stock, bond, and ETF, this service could be very valuable to you. Some financial advisors help you set up your portfolio to manage yourself. Others will manage it for you long-term.
  • Taxes – Financial advisors may be able to help with tax planning and tax savings strategies. Not all advisors offer tax services, but it’s an extra perk and could allow you to manage all of your money needs in one place.
  • Consulting – As well-versed financial pros, some advisors also offer business consulting services with a focus on financial management.

What are the costs of hiring a financial advisor?

If you are hiring a financial advisor, it’s important to ask them how they get paid. That’s because financial advisors can charge fees in different ways. They could also make money in ways that give them an incentive to suggest investments that are not in your best interest.

Fee-only financial advisors are only paid by client fees. This is the best type of financial advisor to choose. I would argue that it’s the only financial advisor relationship that works toward the client’s best interests.

Fee-only advisors may charge monthly or annual fees, hourly fees, or fees based on the size of your portfolio. Rates and services can vary, so it could make sense to shop around before choosing a financial advisor.

Some financial advisors are paid commissions by insurance companies and investment firms for selling their products. This is a major conflict of interest. Under this scenario, advisors may be paid to funnel your money into mutual funds or other financial products that are not in your best interest. 

Summary

San Francisco and the Bay Area are home to some of the most successful companies in the world. But it’s also one of the most expensive places to live. A financial advisor can help you make the most of your money and keep it working to help you reach your financial goals.

By choosing a fiduciary financial advisor that works as a fee-only advisor, you should be in good hands. This list of the best financial advisors in San Francisco is a great place to get started.

Read more:

Source: moneyunder30.com

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When the subject of Individual Retirement Accounts (IRAs) comes up, the one question that seems to cross everyone’s mind is: Which investment vehicle is better, a Roth IRA or a traditional IRA?

The subtle differences between the two types of IRAs are the source of all the confusion, but the answer depends largely on whether you expect to be in a higher or lower tax bracket when you start to draw funds out in retirement — however, there is actually more to consider than just your tax bracket.

Four Important IRA Features to Consider

For most Get Rich Slowly readers, the four most important considerations are these:

  1. Contribution limits: For Roth IRAs and traditional IRAs, the contribution limits are identical. In 2015, you may contribute a maximum of $5,500 a year to your account. If you are 50 or older, you may contribute an additional $1,000.
  2. Income limits: Both Roth and Traditional IRAs have income limits. (You can get the details on the IRS website: Form 590 for Roth, and Form 590-A for traditional.)
  3. When contributions are taxed: Both types of IRA are tax-advantaged, but in different ways.
    • Traditional IRA — You are usually able to fund a traditional IRA with pre-tax dollars, so you pay taxes when you withdraw the money.
      (If you or your spouse has a retirement plan through an employer, the deductibility of your traditional IRA contributions may be subject to income limits.)
    • Roth IRA — The money you put into a Roth IRA has already been taxed and will grow tax-free; therefore, you are able to withdraw it tax-free.
  1. Annual distributions after age 70 ½: You must take yearly distributions from a traditional IRA (and pay taxes) when you are over 70 ½ years old. There is no such required minimum distribution with a Roth.
Comparing Features: Roth IRA vs. Traditional IRA
  Roth IRA Traditional IRA
2015 Contribution Limit – < 50 $5,500 $5,500
2015 Contribution Limit – > 50 $6,500 $6,500
2015 Income Limits IRS Roth IRA Info IRS Traditional IRA Info
Required Annual Distribution None Required at 70.5
When Contribution Is Taxed Before contribution At withdrawal

How to Choose Between a Roth IRA and a Traditional IRA Account

So if you qualify for both, which one is best? In general, the rule of thumb is:

  • Choose a Roth IRA if you suspect that your retirement tax rate will be equal to (or greater than) your current tax rate.
  • Choose a traditional IRA if you think your tax rate will decrease during retirement.

Of course, nobody knows what their future tax rate will be. As a general guideline, take an honest look at your lifestyle and your dreams for retirement. If you live a frugal lifestyle, your withdrawals from your IRA should be low enough so as not to put you in a high tax bracket. In that case, a traditional IRA might work best for you.

However, if you are starting early and you know you will have a substantial nest egg which you plan to use to travel the world in style, you can expect to be withdrawing a high enough amount to put you in a higher tax bracket then. If that is the case, a Roth IRA might make more sense for you.

Looking at it from the other side, if you are in a high-paying job now, a traditional IRA might be attractive because you save a significant amount of income tax from the deduction you take. If, however, you are in a low tax bracket at the present, a Roth IRA might make more sense, because you won’t get a significant tax saving from your deduction.

Getting More Specific

If you want more explicit information, you should search the web for an IRA retirement calculator. Be aware, though, that your assumptions about the future are just that — assumptions. Nobody knows what tax rates will be like in the future. If you make very little now, you can guess that your tax rate will probably be higher in retirement. If you make a lot, your tax rate could very well be lower. But what about the rest of us?

I asked Dylan Ross of Swan Financial Planning for his advice:

Because many people will have tax deferred savings from other sources anyway, it usually makes sense to go with the Roth when you have the choice.

Most people will not be withdrawing their entire IRA in a single tax year. It’s entirely possible that some years will have higher tax rates than present and some years will be lower. This is why I think it makes sense to try to have tax-free (Roth) and tax-deferred savings, so I can have options in the future. If I want to save some of my tax-free when I’m retired because tax rates are at a low and I suspect will eventually rise, I’ll pull from my traditional IRA. If tax rates are super high, I’ll tap the Roth.

I’m an advocate of diversifying the tax treatment of my retirement savings; but in the end, when you have a choice, putting it all in the Roth is usually the better move.

The Question Remains, and the Answer is Personal

Traditional and Roth IRAs are great tools to help the average American save for retirement. There are several subtle differences between the two accounts that affect everyone whether they are just starting out in their retirement planning career (and it is a career, the only one from which no one can ever be fired or laid off) or they happen to be near (or even in) retirement.

So which is better? It depends. Your circumstances determine which account makes the most sense. If the choice is not clear to you, you should probably consult a qualified professional such as an accountant or a certified financial planner. Most of the time I route people to one of my previous articles if they want to get a better handle on the subject:

If you are more interested in 401(k)s than IRAs, the same train of thought applies. (And because you are dealing with an uncertain future, a train of thought is the closest you can hope to get to a firm scenario.)

Source: getrichslowly.org

Apache is functioning normally

We think we know what will make us happy, but we don’t. Many of us believe that money will make us happy, but it won’t. Except for the very poor, money cannot buy happiness. Instead of dreaming of vast wealth, we should dream of close friends and healthy bodies and meaningful work.

The Psychology of Happiness

Several years ago, James Montier, a “global equity strategist”, took a break from investing in order to publish a brief overview of existing research into the psychology of happiness [PDF]. Montier learned that happiness comprises three components:

  • About 50% of individual happiness comes from a genetic set point. That is, we’re each predisposed to a certain level of happiness. Some of us are just naturally more inclined to be cheery than others.
  • About 10% of our happiness is due to our circumstances. Our age, race, gender, personal history, and, yes, wealth, only make up about one-tenth of our happiness.
  • The remaining 40% of an individual’s happiness seems to be derived from intentional activity, from “discrete actions or practices that people can choose to do”.

If we have no control over our genetic “happy point,” and if we have little control over our circumstances, then it makes sense to focus on those things that we can do to make ourselves happy. According to Montier’s paper, these activities include sex, exercise, sleep, and close relationships.

What does not bring happiness? Money, and the pursuit of happiness for its own sake. “A vast array of individuals seriously over-rate the importance of money in making themselves, and others, happy,” Montier writes. “Study after study from psychology shows that money doesn’t equal happiness.”

The Happiness Paradox

Writing in The Washington Post last June, Shankar Vedantam described recent research into this subject. If the United States is generally wealthier than it was thirty or forty years ago, then why aren’t people happier? Economist Richard Easterlin of the University of Southern California believes that part of the problem is the hedonic treadmill: once we reach a certain level of wealth, we want more. We’re never satisfied. From Vedantam’s article:

Easterlin attributes the phenomenon of happiness levels not keeping pace with economic gains to the fact that people’s desires and expectations change along with their material fortunes. Where an American in 1970 may have once dreamed about owning a house, he or she might now dream of owning two. Where people once dreamed of buying a new car, they now dream of buying a luxury model.

“People are wedded to the idea that more money will bring them more happiness,” Easterlin said. “When they think of the effects of more money, they are failing to factor in the fact that when they get more money they are going to want even more money. When they get more money, they are going to want a bigger house. They never have enough money, but what they do is sacrifice their family life and health to get more money.”

The irony is that health and the quality of personal relationships are among the most potent predictors of whether people report they are happy — and they are often the two things people sacrifice in their pursuit of greater wealth.

Why aren’t rich people happier? Perhaps it’s because many of them are workaholics, because they’re more focused on money than on the things that would bring them joy. A brief companion piece to The Washington Post story notes that researchers have found that “being wealthy is often a powerful predictor that people spend less time doing pleasurable things, and more time doing compulsory things and feeling stressed.”

In general, rich people aren’t much happier than those of us in the middle class. Yes, money can buy happiness if it elevates you from poverty, but beyond that the benefits are minimal. So why do so many people believe that money will make things better?

Stumbling on Happiness

In 2006, Harvard psychology professor Daniel Gilbert published Stumbling on Happiness, a book about our inability to predict what will really make us happy. Here is is a 22-minute video of a presentation Gilbert made at TED 2004, in which he compresses his ideas into bite-sized chunks.

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Gilbert says that because humans can plan for the future, we naturally want to structure our lives in such a way that we are happy, both now and later. But how do we know what will make us happy? We don’t. In fact, we’re surprisingly bad at predicting what will bring us joy. Gilbert asks:

Which future would you prefer? One in which you win the lottery? Or one in which you become paraplegic? Which would make you happier? […] A year after losing their legs, and a year after winning the lotto, lottery winners and paraplegics are equally happy with their lives.

The problem is impact bias, the tendency to overestimate the “hedonic impact” of future events. Put another way, the things that we think will make us happy usually don’t make us as happy as we think they will. Winning the lottery isn’t a panacea. Having an affair with your hot new co-worker won’t be as thrilling as you imagine. And losing a leg isn’t the end of the world.

It turns out that humans are able to synthesize happiness. Many people look outside themselves for fulfillment; they expect to find it in things, or in relationships, or in large bank accounts. But true happiness comes from within. True happiness comes when we learn to be content with what we have.

13 Steps to a Better Life

What does all this mean to you? If money won’t bring you happiness, what will? How can you stop making yourself miserable and start learning to love life? According to my research, these are the thirteen actions most likely to encourage happiness:

  1. Don’t compare yourself to others. Financially, physically, and socially, comparing yourself to others is a trap. You will always have friends who have more money than you do, who can run faster than you can, who are more successful in their careers. Focus on your own life, on your own goals.
  2. Foster close relationships. People with five or more close friends are more apt to describe themselves as happy than those with fewer.
  3. Have sex. Sex, especially with someone you love, is consistently ranked as a top source of happiness. A long-term loving partnership goes hand-in-hand with this.
  4. Get regular exercise. There’s a strong tie between physical health and happiness. Anyone who has experienced a prolonged injury or illness knows just how emotionally devastating it can be. Eat right, exercise, and take care of our body. (And read Get Fit Slowly!)
  5. Obtain adequate sleep. Good sleep is an essential component of good health. When you’re not well-rested, your body and your mind do not operate at peak capacity. Your mood suffers. (Read more in my brief guide to better sleep.)
  6. Set and pursue goals. I believe that the road to wealth is paved with goals. More than that, the road to happiness is paved with goals. Continued self-improvement makes life more fulfilling.
  7. Find meaningful work. There are some who argue a job is just a job. I believe that fulfilling work is more than that — it’s a vocation. It can take decades to find the work you were meant to do. But when you find it, it can bring added meaning to your life.
  8. Join a group. Those who are members of a group, like a church congregation, experience greater happiness. But the group doesn’t have to be religious. Join a book group. Meet others for a Saturday morning bike ride. Sit in at the knitting circle down at the yarn shop.
  9. Don’t dwell on the past. I know a guy who beats himself up over mistakes he’s made before. Rather than concentrate on the present (or, better yet, on the future), he lets the past eat away at his happiness. Focus on the now.
  10. Embrace routine. Research shows that although we believe we want variety and choice, we’re actually happier with limited options. It’s not that we want no choice at all, just that we don’t want to be overwhelmed. Routines help limit choices. They’re comfortable and familiar and, used judiciously, they can make us happy.
  11. Practice moderation. Too much of a good thing is a bad thing. It’s okay to indulge yourself on occasion — just don’t let it get out of control. Addictions and compulsions can ruin lives.
  12. Be grateful. It’s no accident that so many self-help books encourage readers to practice gratitude. When we regularly take time to be thankful for the things we have, we appreciate them more. We’re less likely to take them for granted, and less likely to become jealous of others.
  13. Help others. Over and over again, studies have shown that altruism is one of the best ways to boost your happiness. Sure, volunteering at the local homeless shelter helps, but so too does just being nice in daily life.

Remember: True wealth is not about money. True wealth is about relationships, about good health, and about continued self-improvement.

Related >> Is it More Important to be Rich or to be Happy?

Source: getrichslowly.org

Apache is functioning normally

A multiple listing service settled a lawsuit challenging Realtor commission rules for $3 million, a possible harbinger for several ongoing actions by home sellers alleging listing requirements are anticompetitive.

The case, Nosalek v. MLS Property Information Network, had class action status and was filed in the U.S. District Court for Massachusetts. Only the MLS agreed to a settlement, according to a June 30 legal filing. Other defendants in the case, both franchisors and brokerages, were not part of the agreement.

Sellers, along with the Department of Justice, are pushing for a major change to the real estate industry’s compensation structure that both its proponents and opponents agree will affect every party involved in home buying. 

“​​Life after all of this is gonna be quite different,” Dennis Norman, a real estate broker and owner of More, Realtors, said. “And I don’t know if NAR survives because we’re talking about massive, massive amounts of money.”

Rules by the National Association of Realtors and associated multiple listing services, which are databases real estate brokers use to list and search for properties, are at the crux of all three major lawsuits — Nosalek v. MLS PIN, Sitzer v. NAR and Moehrl v. NAR. All three cases cite the Sherman Antitrust Act.

The Nosalek plaintiffs didn’t sue NAR, although they did go after realty companies like Century 21, HomeServices of America and Keller Williams. Their initial complaint, filed in December 2020, cites MLS PIN rules on Realtor commissions that say listing brokers must include a fee for the buyer’s representation on each property. 

This is because of a coupled compensation structure: most home sellers pay for both the buy-side and sell-side broker fees. 

Sellers who don’t offer a fee on the MLS PIN can’t list their home on the service. The lawsuit says this complicates the selling process because buyer agents use the MLS to search for their clients and popular websites like Zillow also use it for their home listings.

Another complaint in the lawsuit says if sellers offer a lower-than-normal fee, buyer agents can see this on the MLS and will likely steer their clients away from the listing. 

As part of the settlement, MLS PIN agreed to change its rules on the topic, eliminating the compensation listing requirement. They will also require brokers to inform buyers that they can negotiate the buyer-broker fee and inform sellers that they can elect not to pay it. 

HomeServices of America and its affiliates recently filed for summary judgment on the case, arguing there’s no evidence the company conspired with the MLS PIN to inflate commissions. 

Both the Sitzer and Moehrl cases contain similar complaints, but are focusing on the NAR as well because of its strong influence on listing service rules: 97% of regional MLSs are affiliated with the NAR and follow its code of ethics, according to by T3 Sixty, a real estate consultant firm. 

If the Sitzer and Moehrl lawsuits compel NAR to uncouple with MLSs as some industry voices like Norman are expecting, on top of large damages, the organization and its local chapters would lose their major draw: member-only access.

“I think that’s almost the last bullet for the associations,” Norman said. “MLSs are gonna have their challenges too… but they still have what everybody wants and they’re good for the consumer.”

How Realtors get paid
Coupled commissions have been around for a long time. With this system, home sellers pay their listing broker 5% to 6% of the final sale price after closing. That commission is then divvied up evenly between sell-side and buy-side agents, who interact with the customers, and their broker agencies. The majority of each half goes to the agent.

For example, after selling a $300,000 house, a seller pays $15,000 in Realtor fees. Agents receive $6,000 each and their brokers $1,500 each for the sale. The buyer doesn’t pay any fees.

“The whole compensation system doesn’t make a lot of sense,” Steve Brobeck, a senior fellow at the Consumer Federation of America and a self-described public interest advocate, said.

Why are Realtors compensated this way? It evolved from the original system used in 1908 when the first iteration of NAR, the National Association of Real Estate Exchanges, was founded, according to a report by T3 Sixty. 

Back then, the industry relied on an exclusive representation system: sellers hired a single listing broker for a fee. Buying brokers were sub-agents of listing brokers, and both sides had a fiduciary duty to sellers. When property sold, listing agents gave their sub-agents a portion of the commission fee.

Eventually, the industry moved away from the subagency model to properly align fiduciary duties, but it didn’t move away from coupled compensations.

“It’s a weird system,” Ann Schnare, a former Freddie Mac executive who ran a study on the compensation structure, said. “Admittedly, it wouldn’t be the first to come to mind, but the fact is that’s what exists… changing it, I think, would be unnecessarily disruptive.”

The NAR has a similar outlook: it resists the lawsuits’ efforts to outlaw shared commissions because they say it’s optional and the rate is negotiable.

Critics of the system like Brobeck point to uniform commission rates despite this negotiability. Brobeck found that in 24 cities across the country, 88% or more of home sales had buy-side commission rates between 2.5% and 3% in a CFA report.

Source: Consumer Federation of America

“This rate uniformity is striking evidence of the lack of price competition in the residential real estate industry,” Brobeck said in the report.

Other antitrust lawsuits
Legal action over commission fees began in 2018, when a 10-year settlement between the DOJ and the NAR expired. Before crafting a new agreement, the DOJ and Federal Trade Commission held a joint workshop about competition in the real estate industry.

In 2020, the DOJ filed a new lawsuit against the NAR under the Sherman Antitrust Act and simultaneously settled with the association. The settlement required several changes to NAR’s code of ethics to provide “greater transparency to consumers about broker fees.”

The settlement banned buyer brokers from advertising their services as free unless they receive zero compensation from any source. It also prohibited these brokers from searching MLSs by filtering out properties with low commission fees and pushed for greater transparency on those sites.

Because of the settlement, many MLSs began to publicly post commission fees for each property. Redfin and Zillow followed suit. For the first time, homebuyers saw how much their agent would earn from each listing.

But then, the DOJ pulled out of the settlement in 2021 because it prevented them from investigating the association’s rules further. 

The Moehrl and Sitzer lawsuits popped up around the same time as the DOJ’s initial workshop.

On March 6, 2019, Christopher Moehrl sued Realtor companies “for conspiring to require home sellers to pay the broker representing the buyer of their homes, and to pay at an inflated amount, in violation of federal antitrust law.”

Then, in April 2019, Joshua Sitzer and Amy Winger, Scott and Rhonda Burnett and Ryan Hendrickson filed a similar lawsuit in Missouri.

Both plaintiffs sued the NAR along with large national broker franchisors: Realogy (now Anywhere Real Estate), HomeServices of America, RE/MAX Holdings, and Keller Williams Realty, as well as HomeServices affiliates BHH Affiliates, HSF Affiliates and The Long & Foster Companies.

Real Estate Exchange, a real estate brokerage, also filed an antitrust lawsuit in 2021 against the NAR, Zillow and Trulia. The lawsuit alleges that Zillow’s search features prevent “transparent access to home inventory.”

Will cash-constrained homebuyers suffer?
NAR argues in press releases about the lawsuits that the coupled compensation system fosters market competition because it frees up cash for buyers, allowing them to make a larger down payment.

A study funded by HomeServices of America, a defendant in all three suits, supports the claim. It declares that unless lending changes come in tandem with revisions to this commission structure, it would hurt “minorities, lower income households, and first-time home buyers” the most.

Consumer advocates argue that agent fees won’t hurt buyers because their cost is currently built into home prices. If sellers no longer pay both agent commissions, home prices will fall, and buyers will have the same net cost. 

Schnare, one of the study’s authors, said because most finance their home with a mortgage, that’s not true.

“If everything was cash, it wouldn’t make a difference,” Schnare said. “What seems like a small adjustment can make a big adjustment on what they can afford to pay and, you know, potentially hurt the lower end of the market, but with ripple effects upwards.”

Brobeck says this concern is exaggerated, and that lenders will adapt accordingly: “the only reason that argument has any force at all is because the industry supports buyers not being able to finance their commission on the mortgage.”

But Schnare’s study found it’s not that simple. 

In order to avoid hurting cash-constrained buyers, lenders would need to change underwriting standards, specifically the loan to value ratio, which represents the borrower’s equity position in the property. This is the most powerful measure of default, the study says, and including an “extraneous factor” like buyer agent fees in the ratio could decrease its predictive accuracy. Schnare says government-sponsored enterprises, the Federal Housing Administration and the Department of Veterans Affairs are unlikely to approve of this change. 

Even if they did, it would “require regulatory approval and coordination across multiple parties along the mortgage supply chain,” so Schnare expects it to be a lengthy, expensive process. In the meantime, first time homebuyers would struggle to pay broker fees out of pocket.

“We have what we have, we’re not starting from scratch,” she said. “That’s a big ask for something where the benefits are not entirely certain.”

But the CFA and REX both dismissed the study, citing its funding and accusing it of a faulty premise.

Either way, the industry might be forced to change — both the Sitzer and Moehrl lawsuits are going to trial and many expect the plaintiffs to win. The Sitzer trial is scheduled for Oct. 16, and the Moehrl trial will likely begin early 2024. 

“I would not be surprised if there was a settlement before them in both cases,” Brobeck said. “And then the question is, will this settlement really lead to effective price competition?”

Source: nationalmortgagenews.com

Apache is functioning normally

You know what the mortgage crisis needed more of? Adjustable-rate mortgages.

Yep, we needed more loans with variable interest rates to both avoid such a disastrous downturn and recovery more quickly.

Allow me to explain. James J. McAndrews, executive vice president and head of the Research and Statistics Group at the Federal Reserve Bank of New York, delivered the opening remarks during a panel about mortgage contract design last week.

ARMs May Not Require Any Work

  • While most probably think of ARMs as a lot of work and stress
  • They can actually adjust with the economy
  • So you don’t necessarily need to do anything
  • Assuming economic conditions are favorable and rates fall over time

His angle was an interesting one, strikingly contrarian to the common belief that a fixed-rate mortgage is the smartest and only choice to avoid another housing meltdown.

The basic premise is that ARMs naturally rise and fall with the economy, and thus any necessary interest rate adjustment can come with little action on behalf of the borrower or a government entity.

So had everyone had ARMs prior to the mortgage crisis, they wouldn’t have needed to refinance via HARP or get a loan modification through HAMP.

Instead, accommodative monetary policy would have pushed interest rates on ARMs lower automatically.

After all, look at the mortgage indexes tied to ARMs, such as LIBOR, that are a fraction of a percent. Coupled with the margin on an ARM, the fully indexed rate would be very low today.

In fact, borrowers who never refinanced their ARMs could be enjoying rates in the 2-3% range month after month, all because of macroeconomic trends and Fed policy.

These borrowers would also have saved money by avoiding a refinance, which McAndrews said could cost the average borrower about $2,000 plus one percent of the loan amount.

And their loans would still be on course to be paid off when originally taken out because the term would be unchanged.

In other words, many homeowners would be about halfway through their 30-year terms right now.

More importantly, many of these borrowers would be enjoying these low rates regardless of whether they had equity because there are no LTV constraints involved with a variable rate mortgage.

Conversely, without programs like HARP and the FHA streamline refinance, many borrowers would have been stuck with their higher-rate fixed mortgages because refinancing wouldn’t be an option.

Borrowers Stuck in Fixed Mortgages

  • Fixed mortgages generally seem like a no-brainer
  • No matter what the economic climate
  • A lot of borrowers got stuck with high-rate fixed mortgages
  • Thanks to negative equity, while ARM borrowers enjoyed lower rates

McAndrews went on to argue that fixed-rate features limited the benefits of accommodative monetary policy by the Fed because borrowers continued to pay their higher-rate mortgages.

This is evidenced in the following chart, which shows rates on outstanding mortgage loans for fixed mortgages vs. ARMs.

As you can see, the interest rates on ARMs declined much more rapidly and fell lower than the rates on fixed mortgages.

And this happened despite the fact that many ARMs are hybrids, where the first three or five years are fixed before becoming adjustable based on associated indexes.

So borrowers with fixed mortgages continued to overpay each month, despite action by the Fed.

This is important because research by the Fed has shown that these lower payments resulted in significant declines in these homeowners’ default probabilities. And there’s evidence that these borrowers increased their consumption.

In other words, the Fed could have saved all these borrowers lots of money and got the economy humming again a lot faster without the need for complex and pricey mortgage help programs like HARP and HAMP.

And $100 billion or so wouldn’t have needed to be spent on refinancing from 2008 through 2013, not that the mortgage industry is complaining.

The Reality of the Situation

  • While the basic premise makes sense
  • Assuming interest rates don’t rise a ton over a long period
  • ARMs can also get homeowners into a lot of trouble
  • Make sure you can afford payments no matter what happens in the future

It’s clear that McAndrews favors ARMs, or at least sees their grand potential. But in reality, a lot of homeowners got stuck with some really questionable ARMs at the height of the housing boom.

In fact, many of the loans weren’t even affordable at origination, and there was little evidence to predict they would be later on.

I don’t know if anyone expected the associated indexes to plummet as they have, resulting in rock bottom mortgage rates for the lucky borrowers who stuck with their ARMs.

My guess is that most expected interest rates to worsen, putting these borrowers in an impossible position, especially since many used stated income to qualify.

Going forward, you could make a stronger argument for ARMs, seeing that borrowers are actually qualified using full documentation nowadays.

But then you have to contend with the fact that fixed mortgages are near all-time lows, making them extremely attractive as well.

While it’s true that the central bank could have helped borrowers with ARMs in a faster and more direct manner, it might be better to question why they needed help to begin with.

If it weren’t for those shoddy ARMs that artificially increased affordability and allowed home prices to swell and swell to unreasonable levels, maybe I wouldn’t be writing this post.

Source: thetruthaboutmortgage.com

Apache is functioning normally

After hovering below 3% for a month, the average 30-year fixed mortgage rate popped back up six basis points to exactly 3% last week, according to Freddie Mac‘s PMMS.

Mortgage rates climbed north of 3% over the first few months of 2021, but crested at 3.2% in March before descending again. Despite such a favorable rate climate, there remains a shortage of homes for sale, pointed out Sam Khater, Freddie Mac’s chief economist.

“The lack of housing supply has been compounded by labor disruptions and expensive building materials that are driving up the cost of new housing, making it difficult for homebuyers to find homes to purchase,” Khater said.

Because mortgage rates held for so long in the sub-3% category, Fannie Mae‘s economic and strategic research group revised its expectations for 2021 and 2022 origination volume, noting that originations could have been higher if the market weren’t struggling with supply.

“We downgraded our expectation for 2021 purchase volumes by $43 billion from last month’s forecast to $1.8 trillion,” the ESR group said, “We expect refinance origination volume to be $2.2 trillion in 2021, a $125 billion upward revision from last month’s forecast, as incoming data continue to come in strong and interest rates have pulled back in recent weeks.”

The mortgage ecosystem is fractured – Here’s how to fix it

To improve the mortgage ecosystem, SitusAMC and ReadyPrice created a platform that connects originators with the secondary market.

Presented by: ReadyPrice

At current mortgage rates, the group estimated around 51% of all outstanding mortgage have at least a 50-basis point incentive to refinance, up from 42% in the previous months forecast. While millions of borrowers may have the opportunity, Joel Kan, the Mortgage Bankers Associations associate vice president of economic and industry forecasting, said the refi wave is still likely under volatility if mortgage rates continue to oscillate around current levels.

When mortgage rates failed to pick up in the last month, savvy homebuyers jumped back on them. But even with rates slipping to previous lows, borrowers are still battling it out in the bidding trenches on overheated home prices. April economic data for home sales showed year over year numbers are still above those in 2020, but beginning to dip sequentially

Source: housingwire.com

Apache is functioning normally

In December 2021, when the 30-year fixed mortgage rate still averaged 3.1%, a borrower could get $700,000 mortgage that required monthly payments of principal and interest of just $2,989.

Fast-forward to Wednesday, and a $700,000 mortgage taken out at the current average mortgage rate of 6.90% would equal a $4,610 per month payment, which is $583,000 more over 30 years than that mortgage issued at a 3.1% rate. When adding on insurance and taxes, that monthly payment could easily top $6,000. Not to mention, that calculation doesn’t account for the fact that U.S. home prices in June 2022 were 12% above December 2021 levels and 39% above June 2020 levels.

Mortgage planners like John Downs, a senior vice president at Vellum Mortgage, have the hard job of breaking this new reality to would-be homebuyers. However, unlike last year, Downs says most 2023 buyers aren’t surprised. The sticker shock, the loan officer says, is wearing off.

Just before speaking with Fortune, Downs wrapped up a call with a middle-class couple in the Washington D.C. area, who told him they were expecting a mortgage payment of around $7,000.

“The call I just had was a typical area household. One person makes $150,000, the other makes $120,000. So $270,000 total and they said a payment goal of $7,000. I’m still not used to hearing people say that out loud,” Downs says.

Even before these borrowers speak to Downs—who operates in the greater Baltimore and Washington D.C. markets—they’ve already concluded that these high mortgage payments will be “short-lived,” and they’ll simply refinance to a lower payment once mortgage rates, presumably, come down.

To better understand how homebuyers are reacting to deteriorated housing affordability (and scare inventory levels), Fortune interviewed Downs.

This conversation has been edited and condensed for clarity.

Fortune: Over the past year, mortgage rates have spiked from 3% to over 6%. How are buyers in your market reacting to those increased borrowing costs?

John Downs: I must say, the reaction today is quite different from last year. It’s almost as if we have lived through the “7 stages of grief.” We appear to have entered the “acceptance and hope” phase.

With all the reports pointing to home prices stabilizing, one might think that buyers are comfortable with these rates and corresponding mortgage payments. The reality is quite different. Many would-be homebuyers have been pushed out of the market due to affordability challenges through loan qualifications or personal budget restraints. Move-up buyers also find themselves in the same predicament.

As a result, my market (Baltimore-DC Metro Region) has 73% fewer available homes for sale than pre-pandemic, 57% fewer weekly contracts, and an 8% increase in properties being relisted. (Information per Altos Research) As a result, prices have remained relatively stable due to the balance of buyers outweighing sellers.

I’m seeing buyers today taking the payments in stride for various reasons. Their incomes have risen dramatically, upwards of 25-30% since 2020, and the income tax savings through the mortgage interest deduction is now a meaningful budget item to consider. Many also say, “I can always refinance when rates come down in the future,” which leads to a sense that this high payment will be short-lived.

When I say buyers are comfortable with these payments, I know there are also two to three times more buyers who run payments using online calculators who opt out of having conversations in the first place! To prove this, our pre-approval credit pulls (a measure of top-of-funnel buyer activity) are running about 50% lower than pre-pandemic.

Among the borrowers you’re working with, how high are monthly payments getting? And how do they react when you give them the number?

For the better part of the last decade, most of my clients would enter a pre-approval conversation with a mortgage payment limit of no more than $3,000 for a condo and $4,500 for single-family homes. It was rare to see numbers higher than that, even for my higher-income wage earners. Today, those numbers are $4,000 to $6,500 respectively.

To my earlier comment, active buyers today seem to expect it. It’s as if they are comfortable with this new normal. Surprisingly, the debt-to-income ratios of today (in my market) are very similar to where they were five years ago. Income is ultimately the great equalizer. Yes, the payments are dramatically higher today, but the buyers’ residual income (post-tax income minus debt) is still in a healthy range due to local wages.

Remember, we are still talking about a much smaller pool of buyers in the market today so this conversation is skewed towards those with more fortunate lifestyles.

Tell us a little bit more about what you saw in the second half of 2022 in your local housing market, and how that compares to the first half of 2023?

There are dramatic differences between those two periods. In the second half of 2022, there was nothing but fear. The stock market was under stress, inflation was running wild, and housing began to stall. Across the country, inventory began to rise, days-on-market pushed dramatically higher, and price decreases were rampant. The safest bet then was to do nothing, and that’s just what buyers did. The mindset was, “I will wait until prices fall and rates push lower before I buy.”

The start of 2023 sparked a reversal in many asset classes. The stock market found a footing and pushed higher, mortgage rates rebalanced, property sellers adjusted their prices, and employers began pushing out significant wage increases. As a result, housing stabilized, and in some areas, aggressive contracts with multiple offers, price escalations, and contingency waivers became the norm.

The strength in housing was not as universal as it was in 2021. There were very hot and cold segments, depending on location and price point. The affordable sector (<$750,000 in my market) and higher-end (>$1.25 million) seemed to perform very well with heightened competition. The mid-range segment is where we noticed some struggles. One common theme is that buyers at every price point seem much more sensitive to the property’s condition. When the housing payments are this elevated, it doesn’t take much for the buyers to walk away!

What do you make of the so-called “lock-in effect”— the idea that existing market churn will be constrained as folks refuse to give up those 2-handle and 3-handle mortgage rates?

I believe the “lock-in effect” is very real. My opinion is based on countless conversations I’ve had in the past 6-9 months with homeowners who want to move but can’t. Some cannot afford to buy their current home at today’s value and rate structure. Others just cannot stomach the significant jump in payment to justify the increase in home size or the preferred location.

I believe the reason we are seeing struggles in the mid-range home is that the traditional move-up buyer is stuck. In my market, that would be the person who sells the $700,000 home to purchase at $1 million. They currently have a PITI housing payment of $2,750; the new payment would be $6,000 rolling their equity as a down payment. That jump is too much for most, especially those with a median income. That payment would have been $4,500 a couple of years ago, which was much more manageable.

Based on what you’re seeing now, do you have any predictions on what the second half of 2023 might look like? And any thoughts on the spring of 2024?

Despite high rates, the desire to buy a home is still high for many. Given the lag effects of Fed tightening (raising interest rates) coupled with an overall improvement in inflation, one can assume mortgage rates have topped out and will continue to improve from here. Think of playing with a yo-yo on a down escalator, up-and-down movement but generally pushing lower. As rates improve, affordability and confidence will shift, bringing out more buyers and sellers.

I believe this will be supportive for home values and give buyers more choice as inventory increases. Keep in mind, most sellers become buyers, so the net impact on inventory will be negligible. Knowing that some sellers will keep their current home as a rental, one could argue that inventory will worsen. At least buyers will have more house options each week, a stark difference from today.

When discussing strength in housing, thinking through local dynamics is crucial. The DC Metro area has a diverse, stable job market which I do not see reversing if an economic slowdown occurs. We didn’t have a tremendous push towards short-term rentals as many other areas and the “work-from-home” (WFH) environment had most people stay within commuting distance to the cities.

One thing I expect is an unwinding of WFH in 2024. In fact, I’m already experiencing that. Many clients are being called back to the office, either through employer demands or fear they will be exposed to corporate downsizing efforts. As a result, I expect underperforming assets (D.C. condos and single-family rentals in transitional areas of the city) to catch a bid while single-family rentals in the commuting neighborhoods plateau from their record-setting appreciation over the past few years.

Housing market affordability (or better put the lack thereof) is at levels unseen since the peak of the housing bubble. Do you have any advice on how would-be buyers can ease that burden?

This may be the most complex question because everyone is at a different place in life. For the better part of the last 20 years, my consultation calls were 20 to 30 minutes long, and we could formulate a great plan. Today, that pushes over an hour and usually requires a detailed follow-up call. If I had to sum up all my conversations, I would say it comes down to forecasting life and patience.

Forecasting is a process where you map out life over the next two to three years—discussing job stability, income projections, saving and investment patterns, debts rolling off (or being added), kids, schools, tuition, etc. From there, talking about local market dynamics such as housing supply, population growth, and interest rate cycles and projections. This helps formulate a solid budget to use for a home purchase.

Patience can mean several things. For some, it means renting for a period of time to save more money or ride out periods of uncertainty. For others, it could be looking for the right sale price mix and seller concessions for rate buy-downs, closing costs, etc. Sometimes it means being patient with your desired location. Maybe you just can’t have that specific house in that specific area for a few years and settling for the next best location is good enough for now. Housing used to be a stepping stone for many but the low-rate environment of the past few years allowed everyone to get what they wanted right away. We seem to have lost the art of having patience in life.

This story was originally featured on Fortune.com

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Source: finance.yahoo.com