Unemployment Report: No Need to Be Terrified
Last Friday, the Bureau of Labor Statistics (BLS) released its latest jobs report. It revealed that the economic shutdown made necessary by COVID-19 caused the unemployment rate to jump to 14.7%. Many anticipate that next month the percentage could be even higher. These numbers represent the extreme hardship so many families are experiencing right now. That pain should not be understated.
However, the long-term toll the pandemic will cause should not be overstated either. There have been numerous headlines claiming the current disruption in the economy is akin to the Great Depression, and many of those articles are calling for total Armageddon. Some experts are stepping up to refute those claims.
In a Wall Street Journal (WSJ) article this past weekend, Josh Zumbrun, a national economics correspondent for the Journal explained:
“News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression…the comparison does more to terrify than clarify.”
Zumbrun goes on to explain:
“From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade...This time, many economists believe a rebound could begin this year or early next year.”
Here is a graph comparing current unemployment numbers (actual and projected) to those during the Great Depression:
Clearly, the two unemployment situations do not compare.
What makes this time so different?
This was not a structural collapse of the economy, but instead a planned shutdown to help mitigate the virus. Once the virus is contained, the economy will immediately begin to recover. This is nothing like what happened in the 1930s. In the same WSJ article mentioned above, former Federal Reserve Chairman Ben Bernanke, who has done extensive research on the depression in the 1930s, explained:
“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession.” He went on to say that today - “the banks are stronger and much better capitalized.”
What about the families and small businesses that are suffering right now?
The nation’s collective heart goes out to all. The BLS report, however, showed that ninety percent of the job losses are temporary. In addition, many are getting help surviving this pause in their employment status. During the Great Depression, there were no government-sponsored unemployment insurance or large government subsidies as there are this time.
Today, many families are receiving unemployment benefits and an additional $600 a week. The stimulus package is helping many companies weather the storm. Is there still pain? Of course. The assistance, however, is providing much relief until most can go back to work.
We should look at the current situation for what it is – a predetermined pause placed on the economy. The country will recover once the pandemic ends. Comparisons to any other downturn make little sense. Bernanke put it best:
“I don’t find comparing the current downturn with the Great Depression to be very helpful. The expected duration is much less, and the causes are very different.”
Will the Housing Market Turn Around This Year?
Today, many people are asking themselves if they should buy or sell a home in 2020. Some have shifted their plans or put them on hold over the past couple of months, and understandably so. Everyone seems to be wondering if the market is going to change and when the economy will turn around. If you’re trying to figure out what’s going to happen and how to play your cards this year, you’re not alone.
This spring in the 2020 NAR Flash Survey: Economic Pulse, the National Association of Realtors (NAR) has been tracking the behavior changes of homebuyers and sellers. In a reaction to their most recent survey, Lawrence Yun, Chief Economist at NAR, noted the beginnings of a turn in the market:
“After a pause, home sellers are gearing up to list their properties with the reopening of the economy…Plenty of buyers also appear ready to take advantage of record-low mortgage rates and the stability that comes with these locked-in monthly payments into future years.”
What does the survey indicate about sellers?
Sellers are positioning themselves to make moves this year. More than 3 in 4 potential sellers are preparing to sell their homes once stay-at-home orders are lifted and they feel more confident, which means more homes will start to be available for interested buyers.
Just this week, Zillow also reported an uptick in listings, which is great news for the health of the market:
“The number of new for-sale listings overall has shown improvement, up 5.9% last week from the previous week. New listings of the most-expensive homes…are now seeing the biggest resurgence, up 8%. The uptick is likely a sign sellers are feeling more confident because of improving buyer demand, as newly pending sales have also jumped up during the same period.”
What does the survey note about buyers?
The recent pandemic has clearly impacted buyer preferences, showing:
· 5% of the respondents said buyers are shifting their focus from urban to suburban areas.
· 1 in 8 Realtors report changes in desired home features, with home offices, bigger yards, and more space for their families becoming increasingly important.
· Only 17% said buyers stopped looking due to concerns about their employment or loss of a job.
If you’re thinking about putting your house on the market, let’s connect today. There’s a good chance an eager buyer is looking for a home just like yours.
How and Why You Want to Improve Your Credit Score
Let’s begin by looking at how different credit scores affect your interest rate and what it means to your monthly mortgage payment. Your credit score certainly isn’t the only thing that goes into how lenders determine the interest rate they will charge, but it is the biggest factor. Besides your credit score, other factors that determine your interest rate are the Federal Reserve Rate, how much you have for a down payment (loan-to-value ratio), loan type (fixed or ARM), and other considerations that go into the lender's underwriting process.
Statistics don’t mean everything and you are not a statistic. You can be sure that lenders study statistics thoroughly. According to the Federal Housing Authority (FHA), this is a breakdown of the percentage of loans approved by credit score ranges:
· Range of 500 to 619 – 11.58% of borrowers.
· Range 620 to 639 – 15.53% of borrowers.
· Range 640 to 679 – 39.07% of borrowers.
· Range 680 to 719 – 21.28% of borrowers.
· Range 720 to 850 – 12.54% of borrowers.
As you see, the vast majority (39.07% + 21.28% = 60.35%) of borrowers fall in a credit score range between 640 and 719. If your score is in that range or higher, you can feel confident of being approved for a mortgage and being given a decent interest rate.
This is what you can do the quickest:
· Pull your credit report and resolve any issues or errors.
· Pay your bills on time, every time.
· Pay down debts, particularly high-interest ones.
· Settle or resolve any collections or overdue accounts.
Clean up your credit report! According to a 2019 study conducted by the Federal Trade Commission, one in five people has an error on at least one of their credit reports. Errors on your credit report always lower your credit score. Before you do anything else, go to AnnualCreditReport.com to get your credit report from each of the three big nationwide credit-reporting companies:
You want to learn how to read the details of the reports (especially what the codes mean) and review everything. A lot of errors are found in these reports. Anything from a different person with the same name as you being reported on your account to payments that you made not being credited to your account. Each report should tell you where to send a dispute.
Scores between 500 and 700 often see the most dramatic and fastest results – just by cleaning up account errors.
The credit score model (FICO) has five major components. Each has a different weight, meaning that improving the component with the highest weight improves your credit score faster. The components and weights are:
· Payment history - 35%
· Amounts owed – 30%
· Length of credit history – 15%
· New accounts – 10%
· Types of credit – 10%
The “payment history” counts the most. Late payments, defaults, and bankruptcies have the biggest effect on the score. That’s history and you can’t change it much. What you can do is obtain a copy of your credit report and review it for accuracy. You can dispute anything you don’t think is accurate. The original lender has to document the accuracy. If you dispute it and the lender can’t document it (they often can’t), the bad rating must be removed from your credit history. This improves your score.
Something you should know is that the bad stuff counts less and less as time goes by. The weight of old information counts less than new information.
The “amount owed” component fools a lot of people. Many people think that having a high balance owed and making payments on time is the best way to improve their score. The high balance does damage. The FICO model wants to see consumers borrowing a small amount of the available credit limit AND keeping payments current. That small amount is close to 30% of the available balance. Instead of one high balance, your score will benefit from two lower balances – and on-time payments. This is also better than paying a little extra on a bunch of accounts with small balances owed.
Also, pay close attention to the “length of credit history.” The longer the history of on-time payments to a particular account, the better for your score. Even if the balance was paid off years ago but you could still borrow against it today (like a line of credit or old store account). Don’t close these accounts. Leave these open. This shows a good history of repaying loans.
You want to be very careful about opening “new accounts” shortly before applying for a mortgage. Definitely don’t do it during the application period or before the loan closes. Opening new accounts send up red flags that you might be living on credit to pay your monthly expenses.
Doing these few things can be the most effective way of quickly raising your credit score to make you a happy homeowner in a few short months!
If you need more information or have questions, please call us. You can also reach us by calling at (678) 570-8123. We'll be glad to help you!
Budget Tips When Saving a Down Payment
Are you one of the many people who are tired of renting? A lot of people want to make the move from renting to owning because rents show no indication that the relentless increases will end soon. Rising rents will not make it any easier to save for homeownership in the future. Your best decision today is taking steps to save a down payment.
As a , no one knows better than you that the biggest obstacle are the finances. Here are some budgeting tips to help you save a down payment.
Step 1: Have a clear goal of how much you need to save. This takes a little research on your part. The down payment is a big part of qualifying for a mortgage but it is only one part of the equation. Your income and the amount of debt that you have are also important parts of obtaining a mortgage.
Other information you need to know includes first-time buyer mortgage programs that lower the amount you need to save to buy your home. You also need to know how much of a mortgage you can be approved for based on your income and other debts. The size of the mortgage determines the amount of down payment needed.
Step 2: Begin an automatic transfer of funds to a special savings account. You can usually do this through your bank. The best way to do this is to have the transfer happen on paydays. When you never see the money in your general banking account, you are less likely to miss the money. Also, commit to never using the money for anything other than your down payment. A money market savings account is usually the best type of account for saving your down payment. It doesn’t pay a lot of interest but your funds will be safe there.
Step 3: Make a budget and stick to it. This can be a difficult part because it requires some lifestyle changes. But there are ways to reduce how much you spend. It may only be the amount equal to your automatic transfer to the savings account but with determination, you can probably make it even more than that. The first thing to do is thoroughly go over your current budget. Take a close look at all of the transactions you make every month. Pull up your debit and credit card accounts and go through them line by line. Your rent, utilities, car payment, and a few others are probably fixed amounts that you can’t change much. But what about all of your discretionary spending? Here are a few things that you might be able to stop spending money on or cut back on.
· Start packing a lunch instead of going out to eat. Only go out to dinner on special occasions.
· Reduce your clothing budget
· Buy less expensive and generic brands when grocery shopping.
· Replace the premium TV cable package with the basic package.
· Reduce entertainment spending.
· Look for other saving opportunities. Especially impulse purchases.
Those basic savings alone add up fast. In a year, that could be a healthy addition to your down payment account.
Step 4: Taking a look at your retirement savings. If you have a 401k at work, you have three choices about how this can help with your down payment. First, you can temporally stop making contributions to put the money in your down payment account instead. Second, you can borrow from your 401k. then pay back the loan with interest, the interest also goes into your retirement account (you’re paying interest to yourself). Granted, you’re taking money out of your retirement account but you’re using it for the biggest and most secure investment that you’ll probably make in your life.
Step 5: Take a temporary part-time job. With unemployment is low as it is right now, employers are looking everywhere for competent employees. Having a second job for a short period of time could bring in a good chunk of money.
Step 6: Look everywhere for saving opportunities. Can you plan on a work bonus that goes directly into your down payment savings account? Maybe this year you don’t take a travel vacation or at least cut back on the vacation you do take. When you look closely at your credit and debit accounts, don’t look at just one month. Look at your spending for a full year to find seasonal opportunities to save instead of spend.
Step 7: Reduce your high interest and other debts. This one should probably be higher on this list. Lower interest charges mean smaller monthly payments. Something else to consider is transferring the balance from high-interest rate cards to lower interest rate cards or a personal bank loan. Reducing your debt has two big effects on buying a house. First, once you pay off the debt, that monthly savings can start going into your savings account. Second, when you lower your debt, your debt to income ratio goes down. The lower your debt to income ratio, the larger mortgage you can qualify for.
Step 8: A monetary gift from a relative. This isn’t an option for everyone but it could work for you. You can get a gift from a family member to help with the down payment. It requires a couple of forms for the person who is giving the gift but that is all.
There you go, eight steps towards saving for your own home. How long it takes you to save enough is at least partly up to how diligent you go about it. It’s not unreasonable to expect you’ll have saved enough within 12 to 18 months.
If you need more information or have questions, please contact us. You can also reach us by calling us at (678) 570-8123. We'll be glad to help you!
Moving? 10 Things To Do Before You Pack
I doubt anyone really enjoys moving except for the thrill of living in a new home. You amp up that “newly moved-in” feeling by working through a checklist that makes sure everything gets done in a timely manner. Getting started a month or two before the move is the best way to make time for everything, make sure everything gets done, and make sure it gets done right. Here are 10 things to do before the moving truck and big day arrives.
1. Decluttering has many advantages. All of us have stuff that we no longer need. You want to start a month or more ahead of time to find ways to lighten your load of unneeded stuff. You can sell some of it to bring in money that you’ll probably need for the move. Whatever you get rid of now won’t need to be packed, you can eliminate some packing boxes, you won’t have to load and unload it from a truck, and it won’t have to be unpacked at your new home.
Begin by sorting things into piles. A good place to begin is in closets and the garage where you’ve probably stored unused stuff. Find a place to designate for sorting. A pile to sell, a pile to give to friends and family, a pile to donate, and a pile that needs to go out with the trash. Recycle or dispose of corrosives, flammables, and poisonous items. As you work through everything, you’ll also find this to be a convenient time to start separating stuff for the move into the appropriate piles. There is no doubt that decluttering ahead of time can be a huge time, space, and money saver when moving day arrives.
2. Start a “Moving paperwork file” to keep track of what needs to be done. This is more than just a checklist. This is a file or a binder where you keep all of the paperwork involved for your move in one place. A checklist is probably the first page but behind that, you can keep a budget of expenses, copies of final utility receipts, address change notices, and telephone numbers that you’ll need. It can include a list of quotes if you’re using a moving company and telephone numbers of handymen if you need help moving your couch and bed. It can include your work schedule if you’ll be taking time off from work. It can include the new school schedule for the kids. It includes all the paperwork you need in one convenient file. Always put it away in one location so that you don’t misplace it when everything in your house is in boxes. This is a separate folder from your home purchase paperwork.
3. Make a plan for moving large and fragile items. If you use a moving company, make sure they are prepared to handle a grand piano, your gun collection, and grandmother’s antique china. If you move yourself, be sure you have the right packing materials and enough muscle help with the big stuff.
4. Start collecting moving boxes. If you’re moving, about 4 or 6 weeks before the move, start stopping by restaurants, liquor stores, grocery stores, and office supply stores. If you need to store a lot of boxes, you can flatten them for now and all you’ll need to make them sturdy again with a roll of good boxing tape. Even if you move yourself, you may want to stop by a moving truck rental company to buy a few specialty boxes for your fragile items. Also, pick up a few good permanent markers so that you can clearly mark boxes when you start packing. The sooner you have boxes, the sooner you can start packing seasonal items and stuff you can go without for a few weeks.
5. Keep other paperwork organized. Something to think about is purchasing moving insurance that covers your belongings during the move. At least check with your agent to understand what your current policy does or does not cover. You also have important paperwork that you want to keep track of as everything goes into boxes that might not be opened back up for a couple of weeks. This includes records like financial, legal, medical, dental, optical, birth certificates, and passports for the entire family. You want to keep these with you at all times. Also, be sure your pets have ID tags on their collars and request copies of vet records and get any necessary pet medication.
6. Take care of errands in the local community. Pick up clothes from the dry cleaner. Update your voter registration. Return borrowed items from neighbors, friends, and family. Also, take care of canceling any local memberships like the gym that you won’t be using anymore.
7. Change your address and notify utilities sooner rather than later. You can notify the post office ahead of time about your address change and tell them what day it takes effect. You can start the delivery to your new address a day or so before the move to be sure it happens. Even if you pay bills online, also submit your change of address for credit cards, banks, insurance companies, and other businesses that you regularly interact with. You probably need to order bank checks with your new address. You can also notify utilities several weeks ahead of time about when your last day will be. Utility companies may need to schedule a meter reading on your last day. Of course, you need to notify your work (HR department) of your address change. There is also your driver’s license and car registration to take care of. When you buy a house, part of the purchase transaction usually includes switching renter or homeowner insurance to the new address but remember to switch any other insurance such as the car and motorcycle.
8. Pack smart by starting early. Pack a little every day. This helps you avoid being rushed a couple of days before the big move and helps identify where you might have problems. You can start separating out household items that can be used as packing materials like towels, blankets, t-shirts, and socks to pack glassware. You also want to take photos of the wiring for your electronic gear before you unplug it. As you disassemble furniture, you want to bag and label the hardware. Set a packing schedule to follow based on something like a number of boxes per day, closets and drawers per day, and finally finishing a room each day.
9. Keep your essentials ready and available. You might not need more than an overnight bag to get you through one day or you might need a box with everything you need for a week. You may need one change of clothes to go to the escrow office to sign closing paperwork and another change of clothes for moving day. Of course, you need toiletries and don’t forget your phone charger. You’ll almost certainly be tired at the end of moving day so plan for that night and the next morning.
10. Make time for other important activities. Explore your new neighborhood – local shops, supermarkets, libraries, cafés, and grocery stores. Find a restaurant in your new neighborhood where you might want to eat for a day or two while your old kitchen is packed up and until it is unpacked at your new home. Take time to say good-bye to old neighbors. Send out moving announcements. There are plenty of creative ways to share your new address.
You’re moved in! You’ve checked off everything on your moving checklist. This is the exciting time of living somewhere new and being in your new home. Start making your new place yours. Unpack, decorate, and have fun personalizing your new home. Send thank you notes to friends and family who helped you move. We hope this pre-move checklist is helpful. Let us know. Happy moving!
If you need more information or have questions, please contact us. You can also reach us by calling at (678) 570-8123. We'll be glad to help you!