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
A new housing development built along a canal near the Mokelumne River is viewed on May 22, 2023, near Stockton, California.
George Rose | Getty Images
Lawrence Yun has as big a stake in the Federal Reserve’s moves as any economist: As the chief economist for the National Association of Realtors, his industry is a target of the Federal Reserve’s efforts to tame inflation with higher interest rates.
But the housing’s industry’s bigger problem right now may be the bond market, and specifically, spreads between treasuries and mortgage rates that suggests homebuyers’ economic challenges may not decline even as the Federal Reserve is nearing the end of its interest-rate hikes. There is a historically-wide difference between the 10-year treasury bond, a benchmark for pricing mortgages, and the actual price of an average 30-year loan. Usually around 1.75 percentage points, and as low as 1.3 in 2021, the so-called mortgage spread is hovering at more than 3 percentage points now. And that is propping up mortgage rates, keeping home owners from selling their homes and buying nicer ones, and hurting first-time buyers, Yun said.
“Buyers know 3.5% mortgages aren’t coming back,” Yun said. “So 5.5% would bring out buyers.”
Why mortgage spreads should move lower
Logically, mortgage spreads should move down sharply from here, thanks to the recent spate of good economic news, and bring relief to home buyers who have seen affordability deteriorate sharply since 2020.
Traditionally, spreads widen when markets fear a recession. They spiked before the financial crisis of 2008, for example. Collapsing spreads help revive housing activity after a recession arrives, or can prop up the housing market in a crisis, which happened in 2021 as the Covid pandemic threatened an economic crash. But as the Fed began raising interest rates in March 2022, mortgage rates rose even faster than bond yields.
The case for wide spreads this past year was two-fold. Partly, it was rooted in the idea that the 10-year treasury yield would rise as the Fed hiked more. Fear of a 2023 recession also contributed — evidenced by a sharp widening of spreads in March, after Silicon Valley Bank failed.
Now, both cases are evaporating. Last week’s inflation report showed consumer prices rose just less than 3% for the 12 months ending in June, down from more than 9% a year earlier. Low inflation should persist into the fall, because the government’s measure of housing inflation lags private market data that has been moving lower since last summer. The consumer price index is expected to only start to reflect the now year-old dip in rents and home prices in parts of the U.S. by year-end.
At the same time, the Atlanta Federal Reserve Bank’s tracking estimate of second-quarter economic growth now sits at 2.3% belying predictions of an early-2023 recession that were widespread.
The recent inflation news pushed the 10-year treasury lower, touching 3.76% after reaching 4.09% earlier in July. Mortgage rates also dropped, to 6.89% last Friday from a recent peak of 7.22%, according to Mortgage News Daily. But the spread between the two was little changed.
How much the big mortgage spread costs homeowners
If the spread between 10-year bonds and mortgages were to revert to normal, it would make a huge difference in monthly payments for home buyers.
On a $500,000 mortgage, for example, a 7% interest rate spits out a monthly payment of $3,327, plus taxes and insurance. That falls to $2,934 if rates go to 5.8%, which would represent a 2 percentage-point gap between treasuries and mortgage rates, and to $2,777 with mortgages at a spread of 1.5 percentage points — back within the range of the long-term average, 1.75 points.
The closing of spreads alone would save that borrower $6,600 a year in payments. A $500,000 loan would typically require about $150,000 in pretax annual income.
“People consider changing their cable company for $30 a month,” Yun said. “$600 a month is a big number.”
A narrowing of spreads last fall, which reversed in February and March, helped stabilize a falling real estate market, according to Logan Mohtashami, lead analyst for HousingWire in Irvine, Calif.
But bond market and housing experts are skeptical of whether the spreads will narrow, and mortgage rates fall, as fast as homebuyers might like.
The Fed is widely expected to raise the Fed funds rate at its meeting on July 25-26, with futures prices implying a 96.1% chance of a quarter-point increase, according to the CME Group Fedwatch Tool. That will support Treasury yields, at least in theory.
More than that, the Fed has stopped buying up mortgage securities as the bonds on its balance sheet mature. That depresses the price mortgages can command in secondary markets or from federally-backed loan buyers like Fannie Mae and Freddie Mac, and puts pressure on lenders to demand wider spreads from borrowers, said Rob Haworth, senior investment strategy director at U.S. Bank in Seattle.
Banks may also seek bigger spreads on loans made in the next few months because of the risk the mortgages will be repaid quickly when borrowers refinance next year as rates fall, he added.
“One might attribute it to quantitative tightening,” Haworth said. “The Fed is a seller.”
Indeed, the Fed has signaled that it doesn’t want mortgage rates to fall soon, according to Mohtashami, citing comments made by Minneapolis Federal Reserve Bank president Neel Kashkari who said in February that lower rates and a hotter market would “make our job harder” in controlling inflation.
“I assumed the spreads would stay high until the Fed cried Uncle and started cutting rates,” Mohtashami said. “If the banking crisis hadn’t happened in March, they would be lower.”
But markets have defied the Fed before, as recently as this week, when the 10-year Treasury yield dropped even as traders remain convinced the central bank will hike rates at least once more.
If the drop in inflation is sustained — a big if — and rising consumer confidence pushes any recession further into the future, markets are likely to reset interest rates with or without the central bank.
The Fed will raise rates at least once more, but the second rate increase many investors have expected may be delayed or canceled if inflation stays tame, said Doug Duncan, chief economist at Fannie Mae. That would let last week’s modest dip in mortgage rates continue, even though Fannie doesn’t expect the central bank to cut interest rates until at least early next year, he said.
How banks think about lending rates
Fannie Mae’s forecast calls for rates to be near current levels through 2023. But the Mortgage Bankers Association of America sees the 30-year rate dipping to 5.2 percent next year.
Banks’ reaction to changing spreads may be tricky to predict, Duncan said. On the one hand, banks would have to watch out for more prepayments if interest rates come back down, pressuring them to keep spreads wide, he said. But that might be overwhelmed by an increase in the value of mortgages that banks already own, as loans from the late 2010s and 2020 that pay lower rates regain value they lost as rates rose, he said. In that case, more banks would probably be more willing to let spreads fall, he added.
Mortgage rates could come down quicker than expected if banks respond to rising mortgage-bond values by relaxing spreads, Duncan said. When the Fed tried to talk markets into tightening credit in 2013, mortgage spreads actually became smaller, loosening mortgage credit, Haworth said.
“Unless rates go back to 3 percent, banks are still going to be better off, even if prepayments pick up,” Duncan said.
Most families need to stick to a budget when they travel. But tracking daily expenses, especially in a foreign currency, can be tricky. Here are some easy tips to make it easy to keep track of how much you’re spending.
Before you leave:
Create an email folder for your trip. Each time you make a booking, place the itinerary confirmation and receipt into the folder. You can use the folder to help you build your final itinerary before you leave, too.
Set a daily budget that includes lodging, food, transportation, and entertainment. During the trip you can track your spending against this goal.
Find out how much it costs to get money, and know which source is the cheapest. For example, what fees does your bank charge for using an international ATM and withdrawing foreign currency? What about your credit card? What is the exchange rate? If you expect to travel a lot, you might consider opening a Capitol One credit card with no international transaction fees.
On your trip:
Develop a rule-of-thumb for converting between currencies. You’ll do a better job of reining in your purchases if you know how much you are spending. Your rule-of-thumb doesn’t need to be exact. For example, at today’s rate of 1.57 US Dollars to the Euro, I would multiply any price I saw by two and then subtract 20%. (Meaning a 30 euro item is approximately $60-$12=$48.) This accounts for any transaction fees, and slightly overestimates the cost of each item so that there aren’t any nasty surprises when I return home.
As you get receipts, write on each what it was for.
Bring an envelope for receipts. If some expenses are deductible, reimbursable or shared, bring separate envelopes for each type of expense. At the end of each day, empty your receipts from your wallet into your envelope.
Keep the cash for the day separate from the rest of your cash. For example, you get $300 out of the ATM and you want that to last you 4 days, so that’s $75/day. Put $75 in an easy to access part of your wallet and you put the rest in a harder to reach spot. If you see yourself going into the hard-to-reach spot, you know you’re going over budget.
If you need a more detailed accounting that includes smaller cash transactions, or want more accountability, carry a small notebook. Record each transaction in the notebook (including snacks, bus rides, etc). Each evening, total your expenses and note where you wasted money and can do better the next day. This tip helped us cut our budget significantly by doing things like buying bottled water and snacks at local grocery stores to carry with us when we travel.
Not only will having a detailed accounting of how much you spent on your trip help you keep expenses down, it will help you do a better job of estimating expenses for your next trip before you leave home.
J.D.’s note: On our trip to Europe last summer, I did all of these things based on reader advice. They worked like a charm. I was able to adhere closely to my intended budget. This may sound like too much work, but it really alleviates a lot of hassle, making travel easy and care-free. Photo credit: Refracted Moments.
“We have a pipeline right now of companies that have signed letters of intent but not yet closed,” Graham said. “That is significant, the highest it’s been in years.
“…If the market stays as it is, there’s a lot more shakeout coming.”
Graham said it’s easy to track stock deals involving IMBs because there are so many public filings. It’s much harder to track asset sales, he added, because there are limited required public filings.
He said STRATMOR and many of its peers also advise clients not to announce asset deals because such publicity is not a benefit to either party to the transaction.
“Normally you’re trying to keep it out [of the public eye],” he explained. “It [publicity] helps the advisors, and it helps the [loan-officer] recruiters, but it doesn’t exactly help the buyer and seller trying to get settled in a transition of the assets of the company.”
Graham added that STRATMOR has good visibility into both stock and asset deals occurring in the market due to its research capabilities, but he does concede there is one exit strategy — a lender shutdown — that is pretty much a dark box as far as tracking the numbers.
Consequently, the shrinkage of the existing IMB industry may be even more severe than the M&A figures alone reveal.
“… We have absolutely been involved in shutdown engagements [this year],” Graham said. “In 2020, we had none of those,” adding that they are absolutely increasing in the industry, “but that’s very hard to track.”
“Shutdowns are not exactly my favorite part of our consulting practice,” Graham said. “But we help lenders with it, and usually they need help, because it’s a lot more complicated and there’s a lot more risks.”
Occasionally, he explained, there’s an extraneous external event that makes a lender “a dead man walking,” but most of the time a shutdown is being pursued because the lender’s leadership waited too long to seek a buyer.
“They could have marketed their company, and they could have done a reasonable M&A, and they could have had a more graceful exit and probably be paid a premium, but they waited too long,” Graham said. “…We have calls with lenders every single week in that category.”
Mounting pressures in mortgage
The pace of shutdowns and M&A deals continues to rev up, in part, because of several mounting industry pressures that are cranking up the heat on IMBs.
Chief among them, according to Brett Ludden, managing director and co-head of the financial services team at Sterling Point Advisors, are the rapid pace of loan-repurchase demands coming from the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac coupled with mounting pressure on struggling lenders to remain in compliance with GSE and warehouse covenants. Those covenants, or contracts, include requirements related to lender financials, such as minimum net worth or income requirements, that, if breached, can lead to cancellation of the agreements.
If an IMB is cut off by the GSEs for violating its net worth requirements, for example, it can still sell its loans at a haircut to loan aggregators, but such a covenant violation, Ludden and other experts say, also will trigger increased scrutiny from its warehouse lenders.
“A number of lenders right now are concerned with covenants,” Ludden said. “Fannie Mae has ratcheted up pressure, for example, with their move to monthly P&L [profit and loss] reviews with companies that are not performing, and they expect those companies to deliver on their forecasts on production and profitability month over month.
“…If I’m a warehouse-line provider, I’m going to say, ‘Hey, if they get cut off by Fannie, I’m going to assume that Fannie knows something that I don’t know, and we’re going to cut them off too. So, that’s going to be a challenge as well.”
In most cases, if a lender’s warehouse lines start to evaporate, it also loses the liquidity necessary to fund new loans.
“The ironic thing about it is that by cutting off these struggling companies, you create, to some extent, a self-fulfilling prophecy, which is by cutting them off, you’re going to make them worse off,” Ludden said.
He added that on the loan-repurchase front with respect to the GSEs, Sterling’s data shows that there has been “a material increase in the speed at which repurchase requests have occurred from the time of [loan] origination.” Repurchase requests are prompted after GSE quality-review teams uncover underwriting errors in mortgages purchased by the agencies.
“It could be the GSEs are trying to get their money back faster in their review process because they’re worried about these lenders going under,” Ludden said. “We still think the [repurchase-wave] peak occurred in the third or fourth quarter of last year, but we’re seeing that repurchases in the first, second and into the third quarter of 2023 are not that far off from the peak of late 2022.”
Ludden explained that every time a lender has to repurchase a loan from the GSEs, they face the prospect of either selling it at a loss in the “scratch and dent” market or holding onto it, if possible, with the hope that in the future “they can sell it at less of a loss.”
“If you have to repurchase even just four loans, you just paid out a million dollars of your cash,” he added. “That is a lot of money to smaller lenders, or medium-sized lenders.
“…To me, it’s the $500 million to $1 billion players [based on mortgage originations] that are really going to feel the brunt of the challenge here because they have $2.5 million net worth requirements, they’ve got material cash requirements, and they’ve been burning through their equity for the past 18 months — and it’s not going to let up.”
A “killer” 5-10 years ahead
Brian Hale, founder and CEO of Mortgage Advisory Partners, said the mortgage market has simply been down longer than most originators anticipated when rates first started spiking in the second quarter of last year in the wake of the Federal Reserve’s inflation-fighting campaign.
“My own view is the first couple of quarters of 2024 are still going to be less good than people thought they were going to be six months ago,” he said. “And so, the group of companies that could have sold, might have closed, decided to hold on thinking rates are going to come down eventually.
“First of all, no, they don’t. Secondly, I think they will [rates will improve], but not as fast as people want or need them to come back to improve the market … and so you still have an awful lot of lenders who aren’t making profit [in fact, up to three-quarters of the industry by some estimates].”
Hale added that at this time, “buyers have the upper hand.”
“I just think the entire calculus on when things get better, and how much they get better, has shifted to the right on the timeline,” he said. “So, what people are now talking about is mid-2024 or maybe 2025 will be a killer [renewed boom].”
Offering a note of optimism for lMBs now enduring the bleak landscape out there, Hale said when the market does rebound, it will be after the hard times have “rinsed out a lot of capacity, and so the rush will come back against a much skinnier industry, and things will feel great” for the survivors.
“I still believe that the next five or 10 years are going to be killers in the real estate, mortgage and homebuilder markets as far as the eye can see, once this inflation disaster gets behind us,” Hale said. “I think if you can be a survivor, you can do very well then.”
Ludden, however, sees survival as the key word in all of this and far from a given for many lenders. He said the margin erosion independent mortgage banks are experiencing now makes the game ahead about survival of the fittest.
“I’ve talked to multiple lenders that saw double-digit decreases in margins month over month throughout the second quarter,” he explained. “And talk about pain because you’re already struggling….
“You’re trying to do business, and somebody’s willing to give up some more margin, so they win the business, but that hurts the industry as a whole. It’s kind of a fight to the bottom.”
Ludden said his firm saw what he considers “a groundswell” of renewed interest in the second quarter of this year from mortgage lenders seeking some kind of exit from the business. He added that the “next roughly 12 months” is going to be the real test of who survives and who disappears from the market.
“If you’re breaking even right now, you’re not making money in the fourth quarter [of 2023], and you’re likely not making money in the first quarter [next year],” Ludden said. “The next time you’ll likely make money is going to be March of 2024, so that’s a long way to go, and if you get to August or September [next year] and you’re not in super shape, I’d say you’re in real trouble.”
This is a guest post from Cathy, who writes about family finances, cooking, and parenting at Chief Family Officer.
I love the philosophy of getting rich slowly by doing the fundamentals: spend less than you earn, pay off debt, and invest wisely. One way that I save money is with what I call The Drugstore Game.
The Drugstore Game involves combining manufacturer and store coupons, and taking advantage of a store’s best deals. When played at the highest level, the Drugstore Game requires only a couple of dollars out of pocket each week to keep you and your family stocked on necessities like toiletries, paper goods and even groceries.
Real-Life Examples
I recently bought an 8-pack of Bounty Basic paper towels, a Venus Embrace razor, and a tube of Aquafresh Extreme Clean toothpaste for $1.81 out of pocket at CVS. If I’d bought the same items at Target (where I used to shop), I would have paid at least $13, even after manufacturer coupons. That doesn’t take into account the $7.99 CVS store coupon I received that I can use on a future purchase.
At Walgreens recently, I bought ten tubes of Crest ProHealth toothpaste, three bottles of Cascade dishwashing gel, a box of two Mr. Clean Magic Erasers, two boxes of 3-oz. Dixie paper cups, two 20-ft boxes of aluminum foil, a small bottle of Dawn dishwashing liquid, a Venus Embrace razor, a tube of Blistex, an Oral B Cross Action toothbrush, four cans of Spaghetti O’s, three cans of Campbells condensed soup, one can of tomato paste, and one box of cereal. I paid only $16.54 for all of these items.
Interested in savings like these? Then read on…
Playing the Game
To play the Drugstore Game well, you’ll need the following fundamentals:
Have an understanding of how store coupons and manufacturer coupons work together. Most people are familiar with coupons that come with the Sunday newspaper. These are generally manufacturer coupons that can be used at any store that takes coupons. Manufacturer coupons can usually be combined with a store coupon. A store coupon is one put out by the store. For example, if you have a $1 off Pampers manufacturer coupon and a $1 off Pampers CVS coupon, you can use both coupons at CVS to get $2 off a package of diapers.
Have an understanding of the various store rewards programs. My personal favorite drugstore is CVS, which has the ExtraCareBucks (ECBs) program. ECBs are coupons that print at the end of a receipt after qualifying purchases. The coupons can then be used like cash on a future purchase. Each week, CVS sells items that are “free after ECBs,” meaning that if a toothbrush is on sale for $2.99, you’ll get a $2.99 ECB coupon at the end of your receipt. Walgreens has a somewhat similar program called Register Rewards, as well as the monthly Easy Saver rebate program. Riteaid has the Single Check Rebate program. For a summary of the CVS and Walgreens programs, check out the “Beginners Start Here” section at Money Saving Mom (over in the sidebar). Be Thrifty Like Us has a primer on the Drugstore Game that includes Riteaid.
Have an understanding of how coupons and rewards programs work together to save you money. This is the tricky part, but it is absolutely worth mastering. In the toothbrush example above, a Drugstore Game pro would never pay the full $2.99. Instead, she would probably have a $1.50 off manufacturer coupon. So she’ll pay $1.49 and receive $2.99 that she can use to buy more items. A typical scenario is the one I described in the introduction, where I paid only $1.81 out of pocket. I used a $7.98 ECB coupon to make the purchase, and received $7.99 in ECBs on my receipt. This process is called “rolling over,” and it is what allows Drugstore Game pros to spend less than $2 out of pocket each week while never running out of necessities.
Have good sources of information. You could sit at home poring over the weekly and monthly drugstore circulars, or you could simply sit down at your computer and visit the sites that do all the math for you. If you visit only one site for your Drugstore Game playbook, it should be Money Saving Mom, which lists all of the weekly and monthly drugstore deals, puts together sample scenarios for free or “money-making” deals, and has a robust community that supplies updates. There are many other sites that provide different scenarios, and I’ve found it helpful to read them and find scenarios that best match what my own needs (and coupons) are. These sites also link to available printable coupons in case you don’t have one from the newspaper. You can find a list of my favorite deal sources at CFO Reviews.
Have an understanding and acceptance of the necessity of buying non-necessities in order to maximize store rewards coupons. This can be a difficult concept if you are frugal and constantly ask yourself if you really need an item before you buy it. However, for maximum savings, it’s essential to overcome the tendency to exercise shopping restraint. Mommy Making Money has a good explanation of how buying things she doesn’t need helps her buy those things that she does. (She also describes what she does with those unnecessary items, since they do pile up!)
In my first two months of playing the Drugstore Game, I calculated that I saved over $50. And that’s despite many “mistakes” because I didn’t really understand how to roll over ECBs by buying non-necessities. Now that I have a much better grasp of this concept, I expect to save my family hundreds of dollars before the year is over.
Getting Started
If you want to start playing The Drugstore Game, figure out which drugstores are most convenient for you. Then check out BeCentsable for links to deals of the week for your particular store (click on the ‘Grocery Gathering’ tab, then on the store name.). If you don’t have the right coupons for that week’s deals, don’t worry! Just buy the Sunday newspaper and start with the next week’s deals. (Be sure to cut out all of the coupons, not just the ones for items that you’re interested in. You never know what will turn out to be a moneymaker!)
Also, when you head to the store, bring a calculator in case you have to re-work some of your deals due to some items being out of stock. And take the circulars with you (or pick them up in the store before you start walking around). The stores don’t always mark the shelves properly, and sometimes the only way to tell which item qualifies for a deal is to check the printed circular.
Good luck! May you become a Drugstore Game champion!
Well it’s mid-2015, and even though the housing market appears to be on fire, 63% of properties actually sold for below list price, this according to the May 2015 Realtors Confidence Index Survey.
This may seem rather surprising, given how hot real estate has been over the past few years.
Ask anyone who has purchased a home (or attempted to) and they’ll probably tell you they got into a bidding war, or were forced to include a cover letter with their offer.
Despite that common tale, most properties don’t actually sell above list. In fact, nearly two-thirds do not.
However, this number has trended down lately. A year ago, around 70% of properties sold at a discount. So clearly properties are selling more easily at higher prices.
The Realtors said properties that remain on the market for a longer period of time are more likely to sell at a discount.
Some 84% of properties that sold between 2012 and May 2015 after 12 months were sold at a discount, per the Realtors’ monthly survey.
Meanwhile, less than half of the properties that sold within a month went for below list price. And nearly a quarter (24%) sold for a premium.
Properties that sold after 12 months only sold at a premium a measly six percent of the time.
In other words, price your home right the first time to avoid a price cut and losing money on the sale. Price it really right and you might sell for a premium.
The Longer They Sit, the Harder They Fall
When considering selling a home
Know that time is of the essence, even if you’re in no rush
As homes fester on the market
They’re more likely to experience price cuts and eventually sell for less
As you can see from the chart above, the longer a listing stagnates, the lower the chance of it selling for list price or at a premium.
Surprisingly, 48% of properties listed for less than a month still went for below their asking price. So there’s always room to negotiate, even if the property was just listed.
And don’t worry about offending anyone – if you don’t offend them with your offer you offered too much, that according to a wise man…
Most Properties Sold for 4-11% Below List Price
It was most common to see a property sell 4-11% below list
With properties selling 0-3% below list the next most likely outcome
In other words, expect your home to sell for less than you listed it for
And don’t forget the closing costs and real estate agent commissions that are deducted from the sales price
In May 2015, it was most common for a property to sell for between 4-11% off list price.
A discount between 0-3% was the second most common outcome, followed by no discount or premium.
Very few properties sold at 20% or more off, and even fewer sold for 11% or more than list.
So it’s important to have realistic expectations when it comes time to sell your home.
In short, you should expect a price cut, and thus list it accordingly. Don’t list it at your absolute bottom dollar price if you know you’ll have trouble accepting a lower offer.
And don’t forget the many closing costs associated with a home sale, along with the hefty commissions that must be paid out to real estate agents involved with the transaction.
If you’re looking to sell for more, consider the fact that staging a property could help it sell for one to five percent more, this according to the Realtors.
Zestimates Can Help with Pricing
While it might sound somewhat counterintuitive
Pricing your property below market value
Could help it sell a lot faster and at a higher price
Whereas an overpriced home might sit on the market longer and eventually require a price cut
In a related article, the Zillow Research team threw out some pointers to help home sellers list their properties at the right price.
They said despite an improving housing market, it’s wise not to “overheat your listing price.”
Zillow found that properties priced more than 12% above their Zestimate are nearly half as likely to sell within 60 days.
And apparently the “sweet spot,” where homes sell the fastest, is between the Zestimate and six percent above it.
The company also discovered that smaller homes sell the fastest (those under 1,100 square feet) and that the optimal number of photos per listing is 16 to 21.
Your home may take longer to sell if you don’t provide enough photos. And as we know, that could result in a price cut. So take good photos and plenty of them.
Read more: Should I continue renting or buy a home instead?
It’s no secret that mental health is an incredibly important part of overall well-being. From anxiety to depression and beyond, our emotions, moods, and behaviors are impacted by how we take care of ourselves. But with all the demands on your time, it can seem daunting and overwhelming to give yourself the attention needed for good mental health—right? Wrong! There are some simple steps you can take each day that will help keep your brain in tip-top shape!
1. Work Out
Photo Credit: Shutterstock.
One user shared, “Working out. Made all the difference.”
Another user replied, “I swear by this. Worst bout of depression in 2021 until I started exercising. Even now when I have a sh*tty day, an hour of exercise makes all the difference. It’s like the sweat washes away all the negative toxins from your body or something.”
One Redditor added, “This. I can’t stress it enough. I would work out 24/7 if I could as it just blocks out all my thoughts and lets me focus on the gains.”
Another commenter said, “That’s it. For me it’s really the feeling of being in control and actively working on feeling better. It also does something to your biochemistry that is extremely beneficial but if you just look at factors that lead to depression, losing control or feeling like other people determine your fate is quite at the top of the list. I feel like I’m turning that around somewhat by working out.”
2. Delete Social Media
Photo Credit: Shutterstock.
One user commented, “Not having any social media accounts.”
Another Redditor asked, “Does Reddit not count?”
The OP answered, “I also deactivated all social media except for Reddit and Twitter (which I will soon deactivate too) I feel these two platforms are different in the sense that they don’t lead the users to constantly compare themselves or expose you to falsehoods of what a ‘perfect’ life others have. This wasn’t personally the reason I deactivated, for me it was a useless time suck that I just wanted to eliminate.”
3. Keep a Gratitude Journal
Photo Credit: Shutterstock.
“Journal of gratitude. Writing in it every night before bed. Keeps me focused on positives,” one user replied.
One user added, “I moved to Japan. I originally visited temples and shrines because I like the environment and collecting the official seal from each. Somewhere along the way it turned into an exercise of gratitude. At each place, I think about how the aspect of the place is there for (Love, knowledge, travel, etc) has been good for me and give thanks. It gets really niche sometimes (Last month I went to a shrine about teeth!) but what that means is that there’s so much I realized I can be thankful for.”
Another user concluded, “I love this idea.”
4. Practice Sobriety
Photo Credit: Shutterstock.
One Redditor added, “Sobriety. More than any other single change. Second biggest? Taking one or two meds that could help with the symptoms I couldn’t resolve myself.”
“Same. Got my 2 month chip today. It’s still new but yeah,” another user replied.
One user commented, “Congrats! keep it up! It just gets better.”
Another user added, “I can’t begin to tell you how much of a difference this has made for me. I am coming up on 9 months sober on July 5th. My psychiaTRIST kept asking me to quit the alcohol but I kept drinking for years. Now that I am feeling the benefits I am just blown away. I’ve already decreased my psych meds once and I feel like I am ready for another decrease.”
5. Get Professional Help
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“Seeing someone about it,” one user commented.
Another Redditor replied, “Seeing a private therapist about it and starting ADHD medication the past 6 months has helped so much more than 5 years of various medication and therapy in the public psychiatry did it was truly wild the difference it made being properly medicated with something that actually worked for me (compared to all the antidepressants, antipsychotics and anxiety medications i’ve been on) along with a therapist who genuinely was willing to help me, rather than one who just wanted me out of the psychiatric system as soon as possible.”
One also confirmed, “Counseling really helps.”
6. Take Medications
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One user commented, “My medication. Thank you Lithium and Seroquel for controlling my type two bipolar which enables me to participate in my life in a meaningful way. It has also made it possible for me to deal with unresolved issues and now I only need the meds listed above. Been almost twenty years now and not a hint of mania or depression.”
Another user replied, “How is your memory with seroquel? I’ve only been on a very low dose for 3 weeks but my memory is horrible all of a sudden. I’m also sleeping a lot.”
Another user shared, “It can take up to six weeks for it to reach therapeutic levels. The sleepiness will abate. I don’t recall specific memory issues when I started but I was also dealing with the memory issues of the depression I was slowly coming out of. Talk to your pharmacist about the side effects. They will know what you should be concerned about and what will pass.
“Getting the right meds at the right dose requires patience but it is so worth it. Hang in there. Being able to meaningfully participate in your own life once you get this sorted is a blessing I can’t describe. I am grateful every day for my meds.”
7. Make New Friends
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One Redditor shared, “Leave all my old friends behind and look for new ones to forget my old struggles. I know it’s bad but I don’t care. I love my two only friends and they are enough for me.”
Another user affirmed, “It’s not bad at all; sometimes you must leave people in the past.”
8. Positive Existentialism
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One user stated, “Optimistic nihilism. One day I realized I’m not actually going to be here forever, and the things I do now aren’t going to matter in the long run. Did something embarrassing? So what, they’ll forget about it eventually. Made a mistake at work? Dude the bosses make way more money anyway, why should I care if I already gave it my all? I’ve learned that I can be a good person and still not give a shit, that the only opinion that matters is mine, and if someone wants to stomp all over that I don’t need them in my life. Edit: it’s officially called absurdism/existentialism! I recommend looking it up.”
One user responded, “I call this ‘zooming out’. I do it periodically. I think it’s healthy to recognize that each of us is 1 in 8 billion living people, probably 100 billion ever. That only spans a few thousand years. The world has been around billions of years before us, and will last billions of years after we’re gone. Our tiny planet is one of billions (trillions?) of planets that have existed or will exist. We are so small.”
Another user added, “Yes! So many people are miserable because they want to look good for everyone else, but what’s the point when in a year, a month, even a week from now no one will remember what you said or did. Most people are too absorbed in their own insecurities to focus on yours, and the ones that make it a point to focus on yours aren’t worth it. In the end, you’ll be gone and no one will remember you, even celebrities will be distant memories one day.”
9. Delete Toxic Messages
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“Deleting my ex-wife’s emails without reading them,” one user commented.
Another user replied, “Boss move. Well done!”
10. Leave Unhealthy Relationships
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One commenter posted, “Being single again. Two weeks after being dumped, I was still feeling less emotional distress than what I did on a regular basis while in that relationship.”
11. Plant a Flower
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“Moving into a house with a garden after years in a flat, sitting out in nature is so relaxing, being able to enjoy the fruits of my labour by seeing the flowers and plants grow that I planted is so rewarding, especially when you see bees enjoying the flowers. I have honestly gone from around a 2-5 in mood up to a 9-10, even on the most difficult days, the garden is my sanctuary, I didn’t think it could make such a difference, but it does,” one Redditor added.
Another user added, “That’s happy! Nature makes such a huge difference in well being. Being outside pretty much immediately improves/regulates my mood.”
12. Go Outside Near Water
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Another user shared, “Going to the beach.”
One added specifically, “Newport Beach, Crystal Cove Beach. . . California.”
“Little Corona,” another commenter responded.
One user suggested, “Rio Del Mar, Capitola, Santa Cruz CA.”
13. Meditate
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“Meditation,” one user posted.
Another Redditor confirmed, “Yes meditation has done wonders. For me guided meditation. There are tons of free ones on YouTube. It can take a few times but it does help big time.”
One commenter asked, “Please suggest a good yt video if you can. If you don’t know of a good video, can you please take the pain of writing it? I will be so grateful…”
Another user said, “Look into Dr Joe Dispenza.”
14. Get a Dog
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One user shared, “Getting a dog.”
Another user replied, “Ooff, so much agreement here. A dog gives you routine, which is key when your life is disrupted by big events.”
“Honestly, I’ve noticed my anxiety always gets a lot worse when I have no routine. Even little things like going to the gym/walking everyday, getting up at a certain time, etc helps me,” one commenter added.
Another Redditor responded, “I was going to write the same. My furry little friend has made a huge difference.”
15. Don’t Watch the News
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One user suggested, “I stopped watching the news about 7 years ago. I cannot describe how blissful ignorance is.”
Another replied, “Fr tho.”
16. CBD
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One user posted, “Unironically, smoking a bunch of weed. That’s not saying it’s a healthy way to go about it, but when I’m baked, I want to be as comfortable as possible. To get that, I actually had to clean my living space and do basic hygiene. Over time, taking care of those things was a bit easier because I wasn’t letting mountains of trash pile up. Cleaner space and slightly healthier living gave me a morale boost I wasn’t expecting and it pushed me to be more diligent in cleaning myself and my area. I’m still not in a great place mentally, but I’m leagues ahead of where I was a year ago.”
“Exact opposite for me. Weed takes away any energy I have to actually make my life better. It systematically ends up destroying any good intentions I have,” replied by one user.
17. Get a Better Job
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“A better paying job with more interesting work, better coworkers, less hours and a boss who believes in making sure people have what they need to function instead of putting pressure on them. Give me far more time to be at home to take care of things there (and to chill, mind you) plus a bigger spending range and so much more happiness in the job itself,” one Redditor shared.
18. Quit a Toxic Job
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One online user shared, “Quitting my job!! I’ve been at a new job for about three months now and have really been doing so much better. I had previously worked in an animal control facility for about 3.5 years. I had been promoted several times, was the head of my department and several unrelated projects and was completely overwhelmed. Asking for help because I didn’t have time to do everything I needed to was met with unhelpful answers about figuring out how to balance everything. Not having any ideas of how to balance it, I was literally told, ‘It’ll be easier when you figure out how to balance everything.’ I took a $4 pay cut to go to a new job. I’m the newest and dumbest person in an art department, have no customer interaction, and don’t see animal death daily. This is the best pay cut I’ve ever taken. I’m only now starting to notice how much the compassion fatigue at animal control was affecting me.”
19. Set Boundaries With Family
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“Pulling away from family. I love them, truly, but no one needs constant reminders of mistakes in their teens when you’re almost 30. Not to mention I have the kind of family if I return such a favour that I am told I am a child for bringing up the past. I used to call my brother and sister almost daily and I stopped last month. Best decision I have made in a long time,” one user commented.
Do you have more healthy ways of keeping up your mental health aside from the list above? Share it in the comment section!
Source: Reddit.
These are 10 Things That Completely Destroyed The Love in a Relationship
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There’s no question that relationships can be confusing, but here are some of the top things to avoid if you want to keep your relationship healthy!
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We all have a favorite actor or actress, but most of us have a least-favorite as well. Check out this list of actors and actresses people never want to see performing again!
Top 10 Worst Human Inventions of All Time
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Some inventions are world-changing, and some of them, well, they change the world in the wrong ways. Here are some of the worst inventions Redditors could think of.
10 Famous Celebrities Who Look Like They Smell Terrible
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We’ve all had moments of hygiene faux pas—but these celebrities just look like they don’t take care of themselves at all.
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Every fad has its time in the limelight, but some of them come and go faster than others; and some just need to die out right away. Check out this list of fads of which people were happy to see the last.
Airline credit cards typically offer standard benefits, like bonus miles on airfare purchases, free checked bags and priority boarding. But one of the most valuable perks any airline credit card can offer is a companion ticket that can cut your cost of travel in half.
Thanks to its high welcome bonuses, earning structure and airfare discounts, the British Airways Visa Signature Card has long been considered one of the best credit cards from a foreign airline offered in the U.S., especially when you consider British Airways’ extensive U.S. route network. But it also comes with one of the most interesting companion travel benefits: the Travel Together Ticket.
The rules around redeeming this perk have recently been improved, and it is now easier to use and more valuable than ever.
Here are the details on this companion deal and how to maximize it.
How to earn the British Airways Travel Together Ticket
THE POINTS GUY
U.S.-based British Airways Visa Signature Card cardholders who spend $30,000 on their card in a calendar year can earn a Travel Together Ticket (posted within 4-6 weeks). The voucher is valid for outbound travel up to 24 months from the issue date (the return flight can be after that).
The British Airways Visa Signature Card offers 75,000 Avios after spending $5,000 in the first three months and exclusive offers when flying the carrier, such as a 10% discount on British Airways flights originating in the U.S., up to $600 in statement credits for award flight taxes and fees every year and earns 3 Avios per $1 spent with British Airways, Aer Lingus, Iberia and Level. The annual fee is $95.
Only the main cardholder with a registered address in the U.S. is eligible to earn the Travel Together Ticket; additional cardholers are not. Only one voucher can be earned each calendar year, even if the cardholder spends more than $30,000 on the card.
Rules for redeeming The Travel Together Ticket
The Travel Together Ticket comes with several conditions worth considering when it comes time to redeem it, some of which are positive and some negative.
Previously, these vouchers could only be applied to award bookings using British Airways Avios and on British Airways-operated flights. However, this rule has recently been relaxed, so they can now be redeemed on flights operated by Aer Lingus and Iberia, though note you must still book your flight(s) through British Airways Executive Club.
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The Travel Together Ticket differs from other companion tickets, which are more like a two-for-one paid deal. In this case, you’re getting a two-for-one award redemption but are still responsible for the taxes and other carrier-imposed charges on your ticket (which can be substantial). This also means you’ve got to find two awards open on the same itinerary in the same cabin. If you wish to travel in first class, two award seats on the same flight can be tough to come by.
For solo travel, you can redeem it for 50% of the Avios required for one passenger, which is a handy perk if you would rather travel alone and save Avios.
Previously, the voucher could only be used on round-trip itineraries originating in the United States. However, this rule has also recently been relaxed, so voucher holders can now commence their itinerary anywhere in the world that British Airways, Iberia or Aer Lingus operates from (provided there is Avios availability).
Your companion must be booked in the same cabin on your itinerary (unless you redeem it for solo travel). So if you book a business-class award for yourself, you must find a second one for your companion on the same itinerary. Stopovers are allowed.
Though the terms are not explicit, you should plan to have your card open and in good standing at the time your want to use your Travel Together Ticket.
Related: How to avoid fuel surcharges on award travel
When it makes sense to redeem the Travel Together Ticket
BECKY BLAINE/THE POINTS GUY
Now we come to the real question: Is it worth using the Travel Together Ticket? The answer depends on how you plan to redeem it.
British Airways awards are notorious for high taxes and surcharges on flights through London. While this generally makes economy awards a bad value, it can still be worth paying less than $2,000 per person to fly in business or first class as part of an award ticket compared to shelling out the cash fare, which will be many thousands of dollars, especially with premium fares across the Atlantic as high as they currently are.
BA introduced a new option in 2022 called Reward Flight Saver to use more Avios to reduce the cost of the taxes and surcharges on Avios redemptions.
British Airways award availability between the U.S. and Europe tends to be much better than what U.S. and other European carriers make available. So if you want to book an award, your chances of finding it are good.
The other key benefit is that British Airways has retained an award chart, so you can be confident of how many Avios you will need on any day — no 400,000 points per flight pricing with this program.
Related: Dynamic pricing vs. fuel surcharges — which is the lesser of two evils for your next redemption?
Now, let’s take four scenarios and compare the cost of using the Travel Together Ticket compared to purchasing airfare to determine whether this is a good deal.
To make things simpler, we’ll look at a single route from Atlanta (ATL) to London Heathrow (LHR) over a single set of dates in November since award availability was open across all four cabins offered by BA on these flights (these are off-peak dates). The taxes and fees are typical examples of what you would expect to pay, both for two people traveling together and solo travelers, given the ticket can also be redeemed for solo travel.
First up, economy. A round-trip award on this itinerary for two people using the lowest surcharge Reward Flight Saver option would cost 120,000 Avios plus 300 British pounds ($393) in taxes/fees.
BRITISHAIRWAYS.COM
If you were using this as a Travel Together Ticket, you’d still be paying 60,000 Avios plus $393 for two tickets. This is because you would only be charged the Avios for one passenger but the fees, taxes and surcharges for both. Compare that to the regular economy fare on the same dates of around $1,000 per person for non-stop flights and this would be a great way to use Avios to save hundreds of dollars.
If you are a solo traveler, you can redeem the Travel Together Ticket for 30,000 Avios plus $196 in fees, taxes and surcharges, saving over $800 on the cash fares for the same flight.
Related: A review of British Airways’ A350 in economy from London to Dubai
Now for premium economy. Here’s a sample award from the same week that would cost 190,000 Avios plus 660 British pounds ($864) for two passengers.
BRITISHAIRWAYS.COM
A paid fare on the same dates would be $1,813 per person, so $3,626 for two passengers. With a Travel Together Ticket for two passengers, you would be charged 95,000 Avios plus $864, saving you thousands off the cash ticket.
Solo travelers could redeem 45,000 Avios plus pay $432 in taxes and surcharges, another excellent way to save big on the $1,813 cash fare.
Related: Is British Airways premium economy worth it on the Boeing 777-300ER?
In business class, British Airways will charge 360,000 Avios plus 900 British pounds ($1,179) in taxes and surcharges for two passengers at the Reward Flight Saver rate.
BRITISHAIRWAYS.COM
With the 50% reduction in Avios with the Travel Together Ticker, you would still be charged a huge 180,000 Avios plus the full $1,179 co-payment. However, with cash fares on these dates close to $4,000 each roundtrip in business class, you would still save thousands of dollars using the voucher.
For solo travelers, just 90,000 Avios plus under $600 in taxes and fees saves versus $4,000 for a cash ticket is a great deal.
Related: British Airways’ Club Suites don’t disappoint: On board a retrofitted 777 from London to New York
Reward Flight Savers are not offered in first class, so while you’ll only need marginally more Avios than the business class rates above, you must pay the full fees, taxes and surcharges. For two passengers using a Travel Together Ticket this would be 170,000 Avios roundtrip plus an eye-watering 3,263 British pounds ($4,279).
BRITISHAIRWAYS.COM
While this would represent a decent saving on the cash fares of almost $6,000 per person, given the thousands of dollars of surcharges you must pay for a first class redemption, using the voucher for business class instead would be a much better deal.
How to earn Avios
ZACH GRIFF/THE POINTS GUY
If you want to use a Travel Together Ticket but don’t have enough British Airways Avios in your Executive Club account, British Airways is a transfer partner of Capital One, Chase Ultimate Rewards, American Express Membership Rewards, Bilt Rewards and Marriott Bonvoy, making Avios one of the easiest currencies to earn.
Points transfer from Chase, Bilt and Amex at a 1:1 ratio (in addition to occasional transfer bonuses of up to 40%), while Marriott points transfer to Avios at a 3:1 ratio. Plus, you’ll get a 5,000-Avios bonus for every 60,000 Marriott points transferred.
The following cards all currently offer strong welcome bonuses that you could easily convert to Avios:
American Express® Gold Card: Earn 60,000 Membership Rewards points after you spend $4,000 on purchases in the first six months of account opening. Terms apply.
The Platinum Card® from American Express: Earn 80,000 Membership Rewards points after you spend $6,000 on purchases within the first six months of card membership. Check to see if you’re targeted for a 125,000-point welcome offer through CardMatch (offer subject to change at any time). Terms apply.
Capital One Venture Rewards Credit Card: (see rates and fees) Earn 75,000 bonus miles once you spend $4,000 on purchases within the first three months from account opening.
Capital One Venture X Rewards Credit Card: (see rates and fees) Earn 75,000 bonus miles once you spend $4,000 on purchases within the first three months from account opening.
Chase Sapphire Preferred Card: Earn 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening.
Chase Sapphire Reserve: Earn 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening.
Ink Business Preferred Credit Card: Earn 100,000 bonus points after you spend $8,000 on purchases in the first three months from account opening.
Bottom line
The British Airways Visa Signature Card’s Travel Together Ticket can save you thousands of dollars on British Airways, Iberia or Aer Lingus flights from anywhere in the world by allowing two passengers to travel together, in any cabin with award availability and only pay the Avios required for one passenger. The spending requirement to earn the perk is high, though.
Following last years Reward Flight Saver rollout to allow passengers to reduce the notorious BA carrier-imposed surcharges by paying more Avios, this voucher is a valuable credit card perk for economy, premium economy and business class flights. However, the savings are less in first class as the Reward Flight Saver option is not available.
While browsing the web the other day, an ad popped up on the screen for a company called EquityKey.
Normally I’m not too moved by banner ads, but this particular ad aligned nicely with the type of stuff I talk about on my blog.
In a nutshell, EquityKey allows homeowners to tap into the equity in their property without taking on a monthly payment.
It’s kind of like a reverse mortgage (for senior citizens), but works quite a bit differently because it’s tied to future home price appreciation.
How EquityKey Works
I dug into the details on their website to see how the program actually works.
As noted, in exchange for a share of your home price appreciation, the company will provide you with an upfront lump sum payment.
This upfront payment is not a loan, meaning no interest is collected and no monthly payments are due, but it does need to be paid back when you sell.
Additionally, you will part with anywhere from 30% to 75% of future appreciation, so it can obviously cost you quite a bit to cash in today.
You can receive up to 17.25% of your property’s current value, so for a home valued at $500,000, the max you could receive would be $86,250.
With a typical home equity line of credit or second mortgage, you’d have to make a monthly payment on the loan balance each month. However, when it came time to sell your home, you’d keep all the equity less the outstanding loan(s).
How Your Property Is Valued
With EquityKey, you avoid the monthly payments but part with appreciation, which is measured using the S&P/Case-Shiller Home Price Index.
When you make an agreement to share your equity, EquityKey will take the designated index for your property location and use that value as the Beginning Index Value for the transaction.
Your home will also be appraised at the time of taking out the equity, and these two figures will determine how much appreciation EquityKey receives when you sell.
The example posted on their website features a San Diego property appraised at $750,000 with a Beginning Index Value of 113 in the year 2000, per S&P/Case-Shiller data.
When the hypothetical property was sold in 2012, the Ending Index Value was 160, representing a 42% increase.
EquityKey would receive whatever percentage of appreciation you allocated when you made the original agreement with them.
This is regardless of what you actually sell your house for. So you are basically incentivized to take care of your property so it fetches a good sales price, and doesn’t underperform the index.
Additionally, you are entitled to the equity beyond the index value of your home. In other words, if that hypothetical home in San Diego sold for $850,000 because of a hot real estate market and pristine upkeep and/or improvements, that $100,000 belongs to you.
However, if that same home were to sell for just $700,000, you’d still be on the hook for the $750,000 valuation. Clearly this could make selling a bit more difficult.
There’s also a pretty important caveat. If you sell, transfer, or change ownership in the first six years after your agreement with EquityKey, the so-called “Minimum Settlement Amount” will apply.
It’s a little unclear what this amount is, but I believe it’s the amount they originally paid you, plus a fee to cover origination and investment return if appreciation isn’t large enough to cover those costs.
My Thoughts
At the end of the day, this sounds like a fairly expensive way to tap into your equity. Sure, you don’t have to make payments each month, but you also part with a good deal of your home price gains, which is one of the major benefits of owning a home.
In the illustration above, you’d get $68,999, but you’d have to pay that back and part with $144,073 in home price appreciation, which is 50% of the projected gain over 10 years.
So it might make better sense to just go with a HELOC or a standard cash-out refinance if you can handle the increase in monthly payments. The interest expense would likely be much lower than the appreciation given up.
This product could make sense for someone unable to pull equity via the traditional methods, or perhaps for someone lacking income to make monthly payments, assuming they really needed the money.
And I suppose a homeowner could “win” if their home value went down because EquityKey won’t take a cut if that’s the case, nor require repayment if the home value drops by more than the payout you originally received.
But the chances of that are probably slim, and you’d have to question why you would stay in a home if the value were destined to drop big time.
EquityKey Program Details
[checklist]
You can receive up to 17.25% of property’s current appraised value
You part with 30-75% of future appreciation
Primary residences and second homes are eligible
Max LTV/CLTV at time of application is 80%
No underwriting or origination costs, but third-party costs still applicable
Takes roughly 4-6 weeks to fund
You can refinance, but typically not above 60% LTV
Might pay a fee if you sell in less than six years
While the housing outlook has certainly improved significantly, some 5.1 million homeowners remain underwater on their mortgages.
This means they are unable to sell their homes because they owe more than their properties are worth, and possibly barred from a mortgage refinance unless they can take advantage of a program like HARP.
While 5.1 million is a lot less than it used to be, it still represents more than 10% of all homes with a mortgage, per data from CoreLogic.
Additionally, some two million of these unlucky homeowners owe at least 25% more than their homes are currently worth.
Clearly this doesn’t provide much motivation to stick around and make costly monthly mortgage payments, especially if these homeowners can’t take advantage of the current low mortgage rates.
Principal Reduction Today for Your Appreciation Tomorrow
Enter a new bill aimed at tackling the problems associated with underwater mortgages, like high default rates and zombie foreclosures, the latter of which results in property blight.
The so-called “Preserving American Homeownership Act,” introduced this week by U.S. Senator Robert Menendez (D-NJ) is essentially a shared equity mortgage modification program.
It’s supposed to be a win-win situation for both homeowners and lenders, giving each party motivation to modify and keep up with payments, respectively.
The way it works is fairly simple. A borrower with an underwater mortgage has their principal balance reduced to 100% of the current value, provided the borrower can make payments.
The principal reduction takes place over a period of three years or less, in increments of one-third each year. So if borrowers make timely payments their principal balance will be reduced further over time.
The mortgage rate may also be cut if the principal reduction isn’t enough to make payments affordable.
Once it comes time to sell or refinance, the bank (or investor) will received a fixed share (up to 50%) of the increase in the home’s value. This amount cannot exceed twice the dollar amount of the principal reduction.
The value will be assessed via appraisal when the borrower first enters the pilot program, and again when they sell or refinance.
The program would be available on primary and secondary homes, and borrowers would be eligible regardless of how deeply underwater they are.
The plan is to launch two pilot programs, one under the FHFA and another under the FHA.
Menendez noted that a similar program launched by a private mortgage servicer led to a near-80% participation rate and a re-default rate of just 2.6%.
That sounds pretty good, especially when you’re giving away half of your future appreciation. The question is whether this type of relief comes a little too late in the game.
But for those who really love their homes and want to remain in them, it could be a lifesaver seeing that widespread principal reduction never came to fruition.