Most people are excited to move out of their parents’ home and gain a little independence. The only major downside is having to pay a mortgage or monthly rent. The big question is whether to buy or rent. No matter which you go for, the rule of thumb is always to keep your housing costs to no more than 30% of your monthly income.
Harvard’s Joint Center for Housing Studies states that over 21 million tenants who rented in the last year spent much more than 30% of their monthly income. About a quarter of these people experiences a higher degree of a financial burden because over half of their monthly income goes to rent. In those cases, these individuals have to compromise the remainder of their budget. The study states the result is a 55% drop in healthcare spending and a 40% in grocery shopping to compensate. The primary reason that so many people are struggling is rental prices are climbing higher than ever while wages are on the decline.
From 2001 until 2014, the average household income decreased by about 10% while rental prices inflated 7%. Last year, the average apartment cost $1,380 to rent, which is a 25% increase compared to prices three years ago. Even so, there is still an incredible demand for apartments, and the national vacancy rate has been pushed to a 30-year low. Nowadays, low-income households are not the only ones struggling; about 20% of middle-class households find themselves in the same predicament. As if things couldn’t get any worse, experts, like chief economist of Zillow, Svenja Gudell, speculate that prices will only go up over the next year, by about 3% to 5%.
Still, not all hope is lost for those that are looking for something cheaper. Interestingly enough the head of strategic marketing at Zumper, Devin O’Brein, states that prices will be more leveled out in metro hot spots like New York City, San Francisco, and Boston. O’Brien believes that there will be price gains in Oakland that will outpace those in San Fransico in 2016. He also suspects that there will be an increase in growth around Dallas, Miami, Austin, and Houston.
Is there a lesser evil between buying and renting?
If you had to make a smart move between one of the two, it might be a better option to purchase a house this year. Although mortgage interest rates are also expected to climb for the first time in about a decade, there is still a chance you might find a bargain on a home. House prices are expected to drop this year; the opposite of rentals. If you have been contemplating purchasing a home, but you have been stuck in the wave of high prices, it may be your only chance for a while to find a deal.
Around six million homes are projected to be sold from April through September alone this year, and not everyone will be able to take advantage of what is out there. Jonathan Smoke, chief economist at Realtor.com, stated the slowdown in home prices will push more homeowners to list their houses, which means you will have plenty of options. It is also believed that new home markets will climb next year with builders keeping a watchful eye on both starter and middle-range homes. There will likely be a significant amount of homes listed, so the amount of bidding will decrease.
With increased interest rates on the way, the window for record low mortgage rates will soon end. Higher rates will push up borrowing costs and monthly mortgage payments. If you are considering to buy or have a rental contract that is almost up, it won’t hurt to look into becoming a homeowner. Housing Economist at Trulia, Ralph McLaughlin, stated that mortgage interest rates would need to rise as high as 6.5% for the cost of buying a home to equal the cost of renting. Are you happy where you currently live?
Need Income? Here Are 8 Safe Stocks That Yield More Than 2.5%
With interest rates at all-time lows, it is becoming increasingly difficult for investors to earn a decent yield in today’s environment. Savings accounts pay a little more than 1% and Treasurys pay even worse.
For seniors or retirees looking for income, there are a handful of companies that have been paying a consistent dividend for more than 100 years that also have a yield higher than 2.5%.
Here are eight companies to take a look at:
Dividend Yield: 3.6%
Coca-Cola is the newest addition to the list, with 2020 marking the 100th year that the company has paid a dividend. The company also announced in February that it was increasing the quarterly dividend, making it 58 straight years where the payout has increased. Even with health trends shifting away from sugary drinks, the company has a robust product lineup. It has also been expanding into new beverage lines like coffee and energy drinks.
Dividend Yield: 2.9%
Chubb is an insurance company based in Switzerland that primarily writes policies for property and casualty, accident, health, life and reinsurance and is the largest publicly traded property and casualty company in the world. In addition to paying a dividend for more than 100 years, the company has also raised its payout to shareholders for 27 consecutive years.
Dividend Yield: 3.2%
You probably recognize General Mills’ brands every time you head to the grocery store. They own brands like Cheerios, Wheaties, Betty Crocker, Pillsbury, Haagen-Dazs and many more. The company has been paying out a dividend for more than 120 years and have increased that payout for 15 straight years.
Dividend Yield: 2.5%
Another company with plenty of household brand recognition, Colgate-Palmolive owns brands like Colgate, Palmolive, Speed Stick and Tom’s of Maine. The company has paid out dividends for 125 years and has raised its dividend consistently for the last 57 years.
Procter & Gamble
Dividend Yield: 2.8%
The company owns iconic brands like Pampers, Tide, Bounty, Charmin, Gillette, and Head & Shoulders. It has been paying a dividend for more than 100 year and has raised that dividend every year for the last 63 years.
Dividend Yield: 3.6%
Based in Cork, Ireland, the company provides fire, HVAC and security systems for buildings. The company has been paying a dividend to shareholders since just after it was founded in 1887, a streak of 133 years.
Dividend Yield: 4.3%
Starting way back in 1823 as the New York Gas Light Company, Consolidated Edison provides gas, electric and steam power to New York City and Westchester County, NY. The company has a long history of paying dividends to shareholders dating all the way back to 1885, a streak of 135 years.
Dividend Yield: 7.7%
The massive energy company started as two spinoffs of John D. Rockefeller’s Standard Oil company, Exxon and Mobil. The two companies merger in 1998, but investors in the companies have been receiving consistent dividend payments since way back in 1882.
Mark Cuban Proposes ‘Use it Or Lose It’ Debit Cards to Boost Recovery
Mark Cuban hasn’t been shy about voicing his ideas to get our country back on the road to recovery. His latest proposal is that the government issue debit cards to US households to help businesses by boosting consumer spending. The caveat to Cuban’s plan is that the debit cards have a “use it or lose it” feature.
“… I think we need to do a debit card program where we give money literally to each household and make it ‘use it or lose it,’ whether it’s $1,000, or $1,200, or whatever that number is, every couple of weeks and say, ‘You have X number of days to use this debit card, or you lose the money that’s been deposited on there.’”
Cuban came up with the plan. As he said, “we’ve got to get to a scenario where consumers have enough confidence to go out there and spend money… the primary reality is no business can survive without sales. And two-thirds of the economy is consumer-generated demand.”
Without an increase in business, many businesses can’t afford to re-hire their employees. Even if they could, some are receiving more money from their unemployment benefits than they are from working.
Cuban says his plan is a “perfectly timed stimulus program” and “…by doing that, and timing it right, that’s going to create demand for these companies so they can afford to bring their employees back after they’re off of all that unemployment CARES enhancement.”
The CARES Act became law in March. It added an extra $600 weekly payment on top of the amount someone receives under state law. Those additional benefits will end in July unless the government extends it.
Cuban has also proposed that the government start a federally-guaranteed jobs program. He said these should give people “confidence in their jobs” and help start the rehiring process.
“We’re going to have to have a transitional, not permanent transitional federal jobs program,” he said. He also included jobs like the ones created during the pandemic to track and treat COVID-19 patients.
“And so we’re going to need to hire people, millions of people, you know, preferably for testing, tracing, tracking, supporting vulnerable populations, long-term care, you know, giving people jobs that they know, are stable, because that gives them the impetus to spend money,” Cuban added.
While Cuban’s plan would absolutely boost consumer spending, Scott Baker, an associate professor of finance at the Kellogg School of Management at Northwestern University says it won’t help every industry.
“Some industries you won’t be able to stimulate this way,” said Baker. He also said that the plan cant help the tourism industry. He said this because, even with extra money in their pockets, Americans aren’t travelling.
Baker also says that during economic uncertainty, most Americans will delay durable goods purchases, like electronics, appliances and vehicles.
Cuban, who has become more vocal about his ideas to help the country recover from the coronavirus pandemic, also hasn’t officially ruled out a 2020 presidential run.
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4 Ways To Lower Your Mortgage Payments
The number of Americans who have lost their job due to the coronavirus pandemic standing at more than 40 million. With this, many are struggling to pay their mortgage bills each month.
For nearly every one of us, housing is the single largest monthly expense. And unlike kicking a Starbucks habit to save a few dollars every month, your mortgage payment can’t be trimmed out of a budget.
Fortunately, you have some options available to help lower your monthly mortgage payment.
Refinance Your Loan
The Federal Reserve lowered rates back down to zero in late March in response to the coronavirus pandemic. With this, mortgage rates hit new record lows in early May. Bankrate.com is advertising 30-year fixed-rate mortgages as low as 3.5% and 15-year fixed-rate mortgages as low as 2.89%.
The benefit of refinancing at a lower rate is two-fold. The main benefit is with a lower rate on your mortgage, your monthly payment will go down, making it more affordable. The secondary benefit is that with a lower rate, you’ll pay less interest over the life of the loan. This potentially lets you save tens or hundreds of thousands of dollars.
You’ll incur some costs to refinance your loan. So, make sure that your monthly savings are large enough to justify the expense. Additionally, if you’ve had your existing mortgage for a number of years, you’ll be resetting your mortgage amortization back to 15 or 30 years. So if you’ve been paying on your 30-year mortgage for 8 years, instead of having 22 years left, you’ll reset back to 30 years (or down to 15 years if you take a shorter term).
Put Your Stimulus Check or Tax Refund Towards Your Loan
If you still have the $1200 of stimulus funds available, or are collecting a tax refund this year, consider using them towards your monthly mortgage payment. It may only cover a portion of your mortgage or maybe just a month or two. However, using this money instead of dipping into your savings or retirement account is preferable. There are discussions ongoing about a potential second stimulus check, but that may not be until later this summer.
Talk To Your Lender About Mortgage Forbearance
If you don’t have the financial ability to continue paying your mortgage, ask your lender about mortgage forbearance. If granted, this will allow you to skip a few months of payments without becoming delinquent or falling behind on your loan. Before you agree to a forbearance plan, make sure your lender explicitly lays out how you are expected to make up the skipped payments. Some may demand a lump-sum payment for the amount you skipped once your forbearance plan ends. Others may tack the amount onto the end of your loan term. Be sure you know exactly what the lender will do once you enter the forbearance agreement.
Find Out If A Mortgage Modification Is Available
If you find yourself falling behind on your mortgage payments and are facing default, your lender may be able to offer you a mortgage modification. A modification changes the terms of the original loan, such as lowering the interest rate, extending the term, or even reducing the principal balance. Typically, a modification is only allowed when the loan is in default. Therefore, if you are making timely payments and are current on your loan, this likely won’t be an option for you. But if you are having financial difficulties, your lender may be able to modify the loan and prevent you from going into foreclosure.
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