Americans Still Believe Real Estate is Best Long-Term Investment

Americans Still Believe Real Estate is Best Long-Term Investment | MyKCM

According to Bankrate’s latest Financial Security Index Poll, Americans who have money to set aside for the next 10 years would rather invest in real estate than any other type of investment.

Bankrate asked Americans to answer the following question:

“What is the best way to invest money you wouldn’t need for 10 years or more?”

Real Estate came in as the top choice with 28% of all respondents (3% higher than last year), while cash investments – such as savings accounts and CD’s – came in second with 23% (the same as last year). The chart below shows the full results:

Americans Still Believe Real Estate is Best Long-Term Investment | MyKCM

The article points out several reasons for these results:

“After bottoming out at the end of 2011 following the worst housing collapse in generations, home prices have gone gangbusters recently, climbing back above their record pre-crisis levels. Prices jumped 6.6 percent during the 12 months that ended in May, according to CoreLogic.

Toss in persistently low interest rates, tax goodies that come with owning a mortgage, and the psychological payoff from planting your roots, and maybe it’s no wonder real estate remains popular.”

The article also revealed that:

“Bankrate’s Financial Security Index — based on survey questions about how people feel about their debt, savings, net worth, job security and overall financial situation — has hit its third-highest level since the poll’s inception in December 2010.”

Bottom Line

We have often written about the financial and non-financial reasons homeownership makes sense. It is nice to see that Americans still believe in homeownership as the best investment.

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IS A DEBT CONSOLIDATION LOAN WORTH IT?

There are two debt consolidation scenarios that are gaining popularity in today’s economy:

1 – If you already own a home: a debt consolidation loan is typically where you trade in your lower-balance home loan for a higher-balance home loan.  You could then use the “cash-out” proceeds to pay off other debt.

2 – If you are buying a new home: a debt consolidation loan is typically where you reduce your down payment and use a bigger mortgage on the purchase of your new home.  The extra money you have left over could then be used to pay off other debt.Here are three questions you can ask yourself to determine if a debt consolidation loan makes financial sense for you:

  1. What’s my after-tax interest cost on each debt? For example, home loan debt may be tax-deductible while credit card debt is not.  Please reference IRS publication 936 and see a CPA or tax advisor for more details.
  2. What’s my “blended interest rate” before and after the debt consolidation loan? This is basically the weighted average interest rate you’re paying on all your debts combined.
  3. What will I do with the extra monthly cash flow? For example, if you roll in your car loan balance into the mortgage balance, you’d be spreading out your car payments over 30 years whereas your car loan would otherwise have been paid off in 3 or 4 years.  This might only make financial sense if you invest your extra cash flow or if you make extra principal payments on your mortgage.

Please contact me for more information or to run the numbers for your specific scenario!

Measuring Your Ability to Achieve the American Dream

Measuring Your Ability to Achieve the American Dream | MyKCM

Forbes.com recently released the results of their new American Dream Index, in which they measure “the prosperity of the middle class, and…examine which states best support the American Dream.”

The monthly index measures several different economic factors, including goods-producing employment, personal and commercial bankruptcies, building permits, startup activity, unemployment insurance claims, labor force participation, and layoffs.

The national index score was rounded out to 100 in January and saw a modest jump to 100.5 in February.

Alaska represented the lowest score on the index at 80.7, due mostly to the recent collapse in oil prices. Nevada came in with the highest score at 108.8, boosted by big gains in goods-producing jobs and new construction activity. The full results can be seen in the map below.

Measuring Your Ability to Achieve the American Dream | MyKCM

Forbes Senior Editor Kurt Badenhausen explained why many states saw a boost in the index last month:

“[B]usinesses are hiring in part in anticipation of tax cuts and less regulation… Many areas of the country have experienced strong upticks in employment and construction, as well as declines in unemployment claims since the start of the year.”

Bottom Line

The American Dream, for many, includes being able to own a home of his or her own. With the economy improving in many areas of the country, that dream can finally become a reality.

How Long Do Families Stay in a Home?

How Long Do Families Stay in a Home? | MyKCM

The National Association of Realtors (NAR) keeps historic data on many aspects of homeownership. One of the data points that has changed dramatically is the median tenure of a family in a home. As the graph below shows, for over twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2008, that average is almost nine years – an increase of almost 50%.

How Long Do Families Stay in a Home? | MyKCM

Why the dramatic increase?

The reasons for this change are plentiful. The top two reasons are:

  1. The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property).
  2. The uncertainty of the economy made some homeowners much more fiscally conservative about making a move.

However, with home prices rising dramatically over the last several years, over 90% of homes with a mortgage are now in a positive equity situation with 70% of them having at least 20% equity.

And, with the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.

What does this mean for housing?

Many believe that a large portion of homeowners are not in a house that is best for their current family circumstances. They could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple planning to start a family that currently lives in a one-bedroom condo.

These homeowners are ready to make a move. Since the lack of housing inventory is a major challenge in the current housing market, this could be great news.

10 Rules for Children and Cell Phones

kids-and-cellphones

Last night my son preferred to use his mobile phone(no service just wifi – another story) than go to the movies or watch the Stanley Cup game(granted not a Penguins fan – I give him that)

The entire world has moved to the cell phone. It’s no longer a convenient tool to speak to someone when you are mobile. Now it is the town square. It’s the place to socialize, it’s the library, the arcade, the TV, the shopping mall, the remote control, etc. Kids know it and feel left out of the world when they don’t have one. So they will tell you that they need one and that everyone has one except them. A kid getting a smart phone today is similar to our generation getting a drivers license. [Tweet This] It is releasing them into a whole new world.

Unlike many other parenting topics, you cannot think back to how your parent handled the situation when you were a kid because cell phones were not around yet. Regardless of how old your child is when you decide it is time to give them one, here are 10 rules for kids and cell phones.

1. The Plan

Discuss with your child what their cell phone plan entails. Let them know how many minutes and text messages they have a month. Determine consequences for running over. One idea is to charge them for the price difference.

2. Picture/Video Messages

Let your child know if picture and video messaging is part of your plan. Tell them what is and isn’t appropriate. Discuss and forbid behavior such as sexting and let them know how inappropriate pictures can spread and ruin reputations.

3. Downloads

Set rules on downloads. Require your kids to talk to you before downloading something. Use your discretion. There is no rating system for video games for cell phones.

4. Numbers to Avoid

Give your child a list of relatives to call or text sparingly. Also, warn them of incoming calls from unknown numbers who may be trying to get their information.

5. Driving and Cell Phones

Be familiar with the state laws to know if a headset is required for talking on the phone while driving and to know if texting while driving is illegal. Make your own rules for using the cell phone while driving.

6. Cell Phone Etiquette

Share with your child when it is not appropriate to use their cell phone. Examples include, in school, at the movies, on dates, during meals with people (especially family), during tests, at appointments, etc.

7. Cyber Bullying

Stop cyber bullying before it starts. Discuss with your child how painful it is for the victim and how there is no escape from cyber bullying once it starts.

8. Internet Usage

Tell your child if your phone plan covers internet usage or not. If it does, inform your child of any websites or applications you do not want them on.

9. Communicate Clearly

Explain to your child to write clearly over text messaging or if it is an important conversation to use the phone or even better, have it in person. Many conflicts are created using texting through miscommunication.

10. Attachment

Today, everyone has their cell phone attached to their ear or to their thumbs. Warn your child of becoming dependent on their cell phone and of becoming so attached they miss what is happening in front of them.

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