Anyone who has gone through the process of mapping out their retirement knows there can be a lot to keep in mind. Saving, investing, anticipating medical costs, and making sure you have enough tucked away for years to come is just the start. One question many people overlook is: “Should I pay off my mortgage before I retire?” The answer is more complicated than you may think.
Maintaining a Mortgage in Retirement
Imagine you have $300,000 set aside to pay off your mortgage. But rather than using those funds to pay off your mortgage, you instead invest that money. Sure it’s tempting to stop making a monthly payment, but what if that $300,000 earned a hypothetical 6% for the next five years. You would have a little more than $400,000. Yes, your house may appreciate in value over the same period of time, but you should consider all your choices for that lump-sum of money.
Eradicate (Other) Debt
Before you pay down your mortgage, any extra cash might be better suited to paying off other kinds of debt that carry higher interest rates, especially non-deductible debt, such as credit card balances.
Make Your Mortgage Work
Many homeowners benefit from a mortgage interest deduction on their taxes. Here’s how it works: the amount you pay in mortgage interest is deducted from your gross income, which reduces your federal income tax burden. But remember, the further along you are toward paying off your mortgage, the less interest you’re paying. If you’re unsure if you’ll be able to take advantage of this mortgage benefit, it’s best to consult your financial professional.
Retire Your Mortgage
Your monthly mortgage payment may be a large part of your available capital, especially in retirement. Eliminating unnecessary subsidies can significantly reduce the amount of cash you need to meet monthly expenses.
Depending on the length of your mortgage term and the size of your debt, you may be paying a substantial amount in interest. Paying off your mortgage early can free up money for other uses. True, you may lose the mortgage interest tax deduction, but remember as you get closer to paying off your loan: more of each monthly payment goes to principal and less to interest. In other words, the amount you can deduct from taxes decreases.
Home Is Where the Heart Is
There’s a value to your home beyond money. It’s where you raised your children, made fond memories, and you may want it to remain in the family. Paying off the mortgage may help make your home part of your legacy. After all, some things you just can’t put a price on.
Picture it: 40 picturesque acres nestled in Wisconsin lake country.
That is the ideal getaway the grandfather of Chicago financial planner Tim Obendorf’s wife built around 50 years ago. Then the property passed to the next generation, with ownership shared by four people.
Now they are thinking about the next generation: 11 potential owners.
Without the right planning, that paradise could turn into hell.
As brothers, sisters, parents, aunts, uncles, cousins and grandparents gather this summer at family homes to go hiking, canoeing or swimming, there will also be arguments over schedules, property taxes or mortgage costs, and upkeep duties, along with the thousand other matters that come with shared homeownership.
“Whenever a number of families are under the same roof, conflicts are going to arise,” said Jill Shipley, managing director of family dynamics for Abbot Downing, a division of Wells Fargo that handles high-net-worth families and foundations.
That is why Obendorf’s family has already logged a couple of family meetings. “It’s never going to be perfect, but you have to decide you value the place, more than the hassles of working through family issues,” said Obendorf.
It is not surprising that vacation homes have become a point of contention. Many vacation homeowners are baby boomers: They possess the bulk of the nation’s assets and are projected to hold over 50 percent by 2020, according to a study by the Deloitte Center for Financial Services. They are now beginning to retire as they hit their 60s and 70s.
The potential problems are plentiful: Is the place big enough for everybody? Who gets it on July 4th weekend? Do they split costs equally? Who cleans up, handles repairs, or stocks the fridge?
And the big one: When the owners eventually pass on – who gets the place?
How can families get the most out of shared vacation properties this summer, without either going broke or killing each other? Some tips from the experts:
Draw Up a Calendar
Just like season tickets for a sports team, some dates will be in high demand. So if the property is not big enough to handle multiple families at once – or, let’s face it, you just do not get along – pick your spots. “Establish a rotating lottery each year, and allow each family member to pick their respective dates,” suggests Kevin Reardon, a financial planner in Pewaukee, Wisconsin.
Write Down a Policy
Everyone has different opinions of what a getaway should be, so hash it out and put it all down on paper. One key item: Whether ongoing costs like property taxes, homeowner’s association dues and repairs are split equally, or allocated based on usage.
Create an Opt-out
A sure way to guarantee family resentment: One member being forced into an arrangement they do not want. If a family cottage is being passed to the next generation, allow an escape hatch that permits one member’s share to be bought out by their siblings. After all, not everyone might be able to use the property to the same extent, especially if they have moved far away.
Bring in a Pro
Siblings, of course, do not always get along. In fact, 15 percent of adult siblings report arguing over money, according to a new survey from Ameriprise Financial. To make sure everyone is heard, bringing in a trained facilitator is probably your best bet, advises Shipley.
Have the Discussion Now
“I have been in many family meetings where the kids ask, ‘I wonder what mom and dad would have wanted?'” says Shipley. So if you are fortunate enough that the family matriarch and patriarch are still around, arrange a family meeting and find out what they envision for the property in the decades to come.
Maybe they want it to stay in the family, as a legacy for the grandkids. Or maybe, because of family circumstances like far-flung siblings, it would be wiser to just sell the property and split the proceeds.
Set up a Trust
One way to take future financial squabbles out of the equation altogether: If families have the resources, they should create a trust to “fund the maintenance and ongoing use of the property in perpetuity,” says Shipley. “That is one solution to reduce conflict, and keep the property in the family for generations.”
Opinion: When the rich won’t acknowledge their own success, what hope is there for anyone else?
Rarely a day goes by where I don’t hear some politician or pundit claim that the American Dream has become unattainable for too many. It’s also a common theme in my Facebook feed.
Sometimes the culprit is student debt. Sometimes it’s static wages, or the disappearance of pensions and manufacturing jobs. Sometimes it’s how predatory lenders have the disproportionate capacity to financially maim so many.
And I have responded by despairing for their desperation, for their newfound conviction that America is no longer the land of opportunity–that the prospect of upward mobility has become a cruel mirage. My only solace was my equally strong conviction that I not only have achieved at least some version of the American dream (yes, via a combination of privilege, hard-work and luck), but that my daughter will have a chance to do the same.
But, for the first time, I’m no longer so sure my daughter will get there. Not because she’ll lack for intelligence or dedication or good fortune, but because she will be raised in an era of unprecedented entitlement. If it takes a village to raise a child, then her father’s voice will be drowned out by millions of naysayers.
So, What Changed?
My breaking point came yesterday, upon reading a Legg Mason survey of affluent investors, which Legg Mason defined as individuals with more than $200,000 in investment assets. It found that just 55% of those surveyed believe that the American Dream remains within reach, with only 23% “strongly agreeing” that they are living proof of its existence.
Remember, these people are prosperous, by almost any relative measure of global or American life in 2016. Their $200,000 isn’t an annual salary. It’s the amount of cash sitting in bank accounts or investments that are designed to appreciate in value. It doesn’t even include the value of their home, or even their second or third. (Legg Mason excluded vacation properties.) It’s income after tax, mortgage payments, and literally every other past expense. There should be little worry about where the next meal, or next lifetime of meals, is coming from. If the car dies, these survey respondents can afford to immediately buy another one without the help of a financing plan (save for the event of an unexpected medical disaster or macro economic meltdown).
But they don’t feel rich. And before you tell me that $200,000 doesn’t go as far as it used to, particularly in certain cities, please realize that only 36% of those with at least $1 million in investible assets “strongly agreed” that they had attained the American Dream.
A few more stats from the Legg Mason survey:
— 64% of those with annual household incomes of at least $250,000 believe the American Dream is now out of reach.
— 62% of those between 55 and 64 years-old believe the American Dream is unattainable.
— Women are 14% more likely than are men to believe the American dream is unattainable.
To be sure, the “American Dream” has no official definition, making it largely in the eye of the beholder. But when asked to give their top characteristics of someone who has achieved the American Dream, Legg Mason survey respondents said the following (in order):
Feeling financially secure
Having the freedom to live the way you want to
Being able to retire at 65 and live comfortably in old age
Owning your own home
Knowing that working hard pays off
We’ve already addressed and dismissed the first one, and the second is equally absurd. If you have $200,000 of investible assets–let alone $1 million–and you don’t have the “freedom to live the way you want to live,” perhaps that’s more reflective on your expectations than on your actual means. For example, I want to live with a private helicopter (with a dedicated pilot) sitting outside of my home so that I can avoid traffic when heading into the city. A private chef would also be nice, plus a heated indoor pool, and court-side season tickets to the Boston Celtics. Am I missing out on the American Dream until those luxuries materialize? Of course not.
Retiring at 65 (or maybe an extra couple of years, given average lifespan increases) should be possible for most of these survey respondents, again depending on their definition of living comfortably. And I’d assume that most people with this much cash either own their own home, or have intentionally decided that it’s too much of a hassle (helicopter pad maintenance and all). Finally, if you’ve achieved the first four, it’s hard to imagine that the fifth remains elusive.
But, again, none of this is about objective logic. It’s about sentiment, and a political and societal climate that can no longer distinguish between those who actually have been victimized and those who simply fuel their own narcissism with self-pity. How can the most Americans aspire to the American Dream when those who have achieved it refuse to acknowledge their own success?
They probably can’t, which means this cycle of pessimism will feed on itself and, in some cases, become self-fulfilling. I really hope my daughter doesn’t fall into that trap, that she will take advantage of opportunities and, if successful, that she will be grateful for it. Not ignorant of it.
When I look at my retirement stash, I have to admit it’s kind of small. When I look at my house, I realize it’s kind of big. And when I consider the two together, I think that maybe I should downsize and use the equity in my house to buy a condo or add to my retirement savings and rent.
Downsizing isn’t for everyone, but it’s one of the few strategies — along with working longer, delaying Social Security or spending less later in retirement — available to near-retirees who find themselves short on retirement savings and don’t have time to catch up, says Steven Sass, of the Center for Retirement Research at Boston College. “The house is a major source of people’s savings. If you don’t want to work longer or give up eating out in retirement, downsizing should be part of the plan.” (Another way to get at home equity is to take out a reverse mortgage)
Do the math. Before you sell your house and move, add up the costs that can chip away at the amount you free up. For starters, fixing up a house to sell often means spending thousands of dollars in repairs and upgrades (new roof, anyone?). Once the house does sell, you’ll pay commissions to real estate agents on both sides of the transaction, usually to the tune of 6% of the home’s value. Packing and transporting enough furniture to outfit a two-bedroom condo will run $1,500 if you move a few miles away and $5,000 or more if you move across the country, according to the calculator at http://www.moving.com. As for the furniture you don’t keep, you could find yourself spending a few thousand dollars to ship the good stuff to your kid across country and paying a hauler to cart away the rest.
Even after the move, you won’t be home-free. Condo association fees run at least several hundred dollars a month, on top of insurance and property taxes, and if the building needs a major improvement, such as a new roof, you’ll get hit by a special assessment to help cover the cost. Renting is more predictable but leaves you vulnerable to annual rent hikes. And whether you rent or buy, you’ll surely want to buy new furnishings that fit the smaller space, says Paul Miller, a certified financial planner in Boca Raton, Fla. “You think you’re freeing up all this money by downsizing, and then you spend thousands to refurbish.”
Other expenses you might not have considered: Instead of the driveway you currently enjoy, you’ll probably have to fork over cash for a parking space. If you can’t squeeze Grandma’s armoire into the second bedroom (or bear to part with it), you’ll pay $100 a month to rent a storage unit. Because you won’t want to stash those old tax records in the second bedroom, you’ll spring for storage space in the building. Moving far away from friends and family? Factor in the expense of traveling back to the old neighborhood a few times a year. As for the next family reunion, that won’t be happening in your two-bedroom condo: Count on covering the cost of renting a beach house.
Of course, moving to a condo or apartment also allows you to cut your utility bills, eliminate yardwork and snow shoveling, and get rid of your mortgage or trade it for a smaller one — and maybe you’ll make your kids chip in for the beach house. Still, be sure to add up the pluses and minuses before you put out the For Sale sign, not after.
“There are a lot of considerations that go into the downsizing decision,” says Miller. “This may be the last move you’re going to make, so you’d better make it a good one.”
To pay off or not to pay off your mortgage when you’re on the verge of retirement can be a mystifying dilemma.
Making end-of-career decisions is challenging, but adding a mortgage ready to expire can generate a significant dose of confusion for even the most financially adept consumer.
On the one hand, you want the piece of mind brought by reducing your financial liabilities as you move to a period of reduced income. On the other, you don’t want to blow a chunk of money on paying off your mortgage and leave yourself in a precarious position during a period of reduced income.
All things considered, it’s generally best to go ahead and pay off the mortgage, says Tim Moran, a financial planner and managing partner of Moran and Company in Rochester, Mich.
“That being said, we won’t instruct them to pay it off if they don’t have liquidity or emergency money,” he said.
Though whether or not you have that financial cushion can make or break the decision for you, there are a few more elements to wrap into your consideration.
What To Consider If You Pay off the Mortgage
Not carrying a mortgage sounds like a dream come true to many borrowers, but just because you aren’t writing a check to your lender each month doesn’t mean all financial property obligations end.
Kevin Driscoll, vice president of advisory services at Vienna, Va.-based Navy Federal Financial Group (NFFG) says although your mortgage payment may fade away, your tax and insurance bill isn’t going anywhere.
“Some homeowners forget that no mortgage doesn’t mean no payments,” Driscoll says. “Unfortunately, you are still going to get a tax bill for that property and maintaining sufficient funds is something every homeowner should consider long before that mortgage is paid off.”
He says the same efforts will need to be made for insurance and homeowner association fees. “Although you are free of two-thirds of that monthly payment, you will still need that remaining third,” Driscoll says. “Establishing a safe and stable account to maintain the funds that will be paid to a municipality, insurance and taxes is vital to maintaining stability.”
Driscoll suggests homeowners investigate safe savings options before the last mortgage payment is made. “Consider an NCUA protected savings or money market account for the funds you plan to set aside for tax, homeowner association and insurance payments,” he says. “Never park your funds in anything risky, because you don’t want to be surprised if the money you invested is no longer sufficient or available when it comes time to pay the bill.”
Beyond squirreling cash to pay insurance and taxes, Moran says mortgage-free homeowners should consider using the cash that went to pay off the mortgage to pay down other debts. “Often, people will pay off the house and then increase their spending and not save money,” Driscoll says. “They may be carrying high interest rate credit cards or other high interest debt that should be paid off first.”
Make Contact with Tax and Insurance Companies
Once you know how you will maintain savings, make a point to contact each payee with regard to how the money will be delivered on an annual or monthly basis. “Your mortgage company is no longer going to escrow the funds so you will need to handle each company on an individual basis,” Driscoll says. “For instance, let your insurance company know you are paying off your mortgage and will be handling payments.”
One reason reaching out to the tax appraiser and insurance company is vital is because if your mortgage company is managing your tax or insurance invoice, you don’t want future communications to end up on the mortgage broker’s desk with the possibility that invoice or important letter could fall through the cracks.
“Not only could you miss important communication, missing an invoice could result in late fees if you are missing payments–you don’t want this to occur due to a computer glitch,” Driscoll says.
Another reason homeowners should make an individualized effort to reach out, especially to the insurance agent, is to maintain proper coverage in case of a catastrophic event.
“Make sure your insurance company knows you are no longer carrying a mortgage and that your mortgage company be removed from your policy as a payee,” Driscoll says. “In case something catastrophic happens to your property, your payment will go to you and not get hung up with your previous mortgage company.”
Ultimately, homeowners should obtain a document that states the borrower is relieved of all mortgage obligations. “It puts the period at the end of the sentence,” Driscoll says.
If You Aren’t Close to Retirement, Should You Still Pay Off Your Mortgage
Moran says the same mortgage pay off rule for retirees doesn’t apply to clients who plan to stay on the job.
“Clients who are far away from retirement and are younger, in most cases, we advise them not to pay off mortgages because interest rates are really low,” he says. “Plus they are still building a retirement fund, so we would rather see them build that fund, rather than paying off a low rate mortgage loan.”
Financial goals should always be on the borrower’s forefront, Driscoll adds. “Every single situation is broadly different,” he says. “Advice will differ as you could be working with someone who has refinanced their home several times and is paying a mortgage rate of 4.5% versus someone who may still be paying a rate of 8%; so our advice extends to the borrower’s current financial situation, his or her mortgage rate and future goals.”
Ultimately it all boils down to identifying the goal you’d like to achieve with new money and then targeting your strategy toward that goal.
“If my goal is to put kids through college in two and a half or three years or leave a few dollars for the grandchildren in 15 years, your plan of attack will be different,” Driscoll says. “Everything is goal-based, because your money is so important to you.” That means there’s no one-size-fits-all solution; whether or not to pay off your mortgage needs to be strained through your particular lens and stage of life.
In a recent blog post, Rande Spiegelman, vice president of financial planning at Schwab Center for Financial Research offered a smart strategy for mortgage management. “If your mortgage has no prepayment penalty, an alternative to paying it off entirely before you retire is paying down the principal,” Spiegelman said. “You can do this by making an extra principal payment each month or by sending in a partial lump sum.”
The borrower saves in the interest and the loan payoff goes faster while still maintaining liquidity and diversification.
Ever hear of an eight-minute workout? How about an eight-minute mortgage?
Quicken Loans, the third-largest mortgage lender by marketshare, launched a new website called “Rocket Mortgage” last week that allows users to refinance or purchase a home in as little as eight minutes.
The service cuts out the conversation between loan officer and consumer, as the consumer inputs his or her financial information directly into Quicken’s database. Then, the website crunches the numbers like an underwriter would, and offers customizable, real-time rates to the site’s user.
Traditionally, it would take one week to several months to be approved for a housing loan, all of that, of course, after you’ve spent weeks shopping for that loan in the first place. But with Rocket Mortgage, shopping for a loan and applying for it is a process that requires little in the way of time and effort. (California homebuyers also have a speedy mortgage option via the new service Google Compare: Mortgage.)
Since the 2008 real estate bust, traditional lenders have had to compete with techies in Silicon Valley who wanted in on the housing recovery, as start-ups like Sindeo and Lenda — which claims that its clients save an average $8,000 in closing costs when they refinance with their service — try to streamline the residential mortgage process. Other websites and online tools have popped up to create more transparency for home shoppers and refinancers, and nearly anyone can crunch the numbers on a virtual mortgage rate calculator.
Though it only takes a few keystrokes to search for and use a mortgage calculator online or find a startup that’ll connect you with a lender, Rocket Mortgage Product Lead Regis Hadiaris says that nothing is as comprehensive as Quicken’s new service. Calculators use all kinds of assumptions about a consumer that may not hold true, and startups and other non-bank lending platforms don’t have the kind of reach that Quicken does, according to Hadiaris
“We can customize solutions based on income, assets, property, our products and pricing, interest rates, and underwriting guidelines,” Hadiaris says. “The system figures out the very best option for each client. No more assumptions. It’s true clarity in the process.”
Speed is Rocket Mortgage’s biggest selling point. But that doesn’t mean the eight minute-mortgage approval is the end of the home-buying road for consumers. The loan can close in a week, but is “only as fast as the slowest vendor, such as local municipalities and insurance companies,” TechCrunchreports.
Keith Gumbinger, vice president of mortgage and consumer lending information site HSH.com, isn’t convinced that a service like Rocket Mortgage will speed up the home buying process at all for inexperienced and first-time shoppers who may have questions that slow down the process.
“How much more quickly do you actually need to get a mortgage? In the case of a purchase, few borrowers are ready to go, pack up and move in as little as eight minutes, let alone two hours or two weeks,” Gumbinger says. “Having your financing in place more quickly may be of some benefit but may not change the timeframe.”
Rocket Mortgage’s website says that the platform has bank-level encryption and 24/7 security monitoring, but Gumbinger also worries that volunteering personal financial information to a third party creates new ways for a buyer’s financial and personal data to be compromised.
“To just allow some outside party to go through, traipsing through your personal finances, just to get a rate on a mortgage, there’s that and the concern of not necessarily knowing what you’re getting yourself into,” he says.
Of course, you’re not committing to anything through the service unless you reach the end of the process and choose to lock in your rate (after you’ve been approved). And you can call a Quicken Loans representative to help you through the easy-to-use program if you’re confused about the kind of information that’s required. Of course, a step like this will slow down the process–not that that’s necessarily a bad thing.
Conventional wisdom holds that retirees should not enter their golden years still holding a mortgage. However, Diahann Lassus, the president and chief investment officer of wealth-management firm Lassus Wherley, says, “That’s not a one-size-fits-all answer today, because there are many other factors you have to think about.”
Thanks to today’s low interest rates and reasonable long-term returns from investments, it may make more sense for retirees to carry a mortgage for a longer than usual period, she noted. Trouble is, many people are “obsessed” with paying their mortgage off. Either way, there are two parts to any such decision: the math and the emotion.
If you’re considering paying off a mortgage “because it’s really bothering you that it’s hanging over your head, you really want to start thinking about a longer time frame than tomorrow,” said Lassus. She recommends thinking 10 or even 15 years out but still making extra payments each year. However, don’t take money out of 401(k) plans and the like to help pay down your mortgage, she cautioned, “because it will benefit you more for the long term to build those retirement accounts.”
Conversely, carrying a mortgage into retirement offers a lot of financial positives — especially if you have a very low interest rate. “What you can do is invest those dollars [and] your earnings could be significantly higher, which means you’re using someone else’s money to earn more so that you’re able to build your retirement assets over time,” said Lassus. “And that tax deduction makes it even more cost-effective.”
In the end, act only after you’ve looked at the math in terms of investment returns vs. mortgage costs, she said. “But you also have to be able to sleep at night.”
Rags-to-riches stories have been popular throughout history, proving that you don’t have to be privileged or have things handed to you to be a success. These Fortune 500 success stories encapsulate the idea that hard work, determination, and a positive spirit are the necessary ingredients to bootstrap your way out of poverty, off the streets and into the realm of millionaire and even billionaire.
Before he became known as an entrepreneur, motivational speaker, CEO and author, Chris Gardner and his son were living on the street after his wife left him and he was trying to subsist on very little money. His background was not much prettier, having grown up in the midst of domestic violence, poverty, alcoholism and more barriers.
While he could have given into these barriers and followed that same path, Gardner wanted something completely different for himself and son. Now, he runs Gardner Rich LLC with offices around the country, is a multi-millionaire and even had a movie made from one of his books that starred Will Smith called “The Pursuit of Happyness.”
Although she is a high-school dropout and runaway who spent time as a homeless youth and experienced poverty and sexual abuse, Linda Singh completely transformed her life. Even when she was struggling to stay off the streets, she still attended high school as long as she could and pulled good grades before having to give it up. She has become a model of female leadership in careers that often don’t see women in these roles.
She has previously served as a managing director at Accenture and as a Major General in the U.S. Army. Now, she is a Major General, leading Maryland’s National Guard through some very tough situations, including the Baltimore riots after the funeral of Freddie Gray. Her time on the streets and in Afghanistan have served as the proving ground for a woman who is not afraid to take on dangerous situations and high-pressure conflicts. Like many other leaders, Singh has proven that a successful leader often has come from tough roots and overcome significant adversity. She may not be valued in the millions, but her success story is priceless and has garnered her recognition and high-powered positions.
Iranian-born Manny Khoshbin overcome hard times to become wildly successful. His family arrived in America when he was a teenager and he quickly saw the opportunities to work hard and create wealth.
However, it took many failed ventures and sleeping in his car for a time while out of work before he found the venture that aligned with his skill set. Khoshbin got his real estate license and became a loan officer, then started a realty and mortgage company focused on distressed and bank-owned properties. Now, he oversees multiple companies that focus on commercial real estate. He continues to seek new opportunities for his entrepreneurial spirit. Once having nothing, Khoshbin is now valued in the multi-millions.
Being successful doesn’t come from college degrees. Destiny Global CEO Dani Johnson proves a great idea and hard work is enough to go from a broke, homeless cocktail waitress to a millionaire in just a couple of years.
Since her initial foray into entrepreneurship with a weight loss company, Johnson has expanded her empire to include other services related to helping people improve their relationships, finances. and lives. She has authored multiple bestselling books and offered her expertise on numerous television shows and media outlets. Becoming a millionaire many times over, she now gives away over a million dollars each month to help children in need around the world to remind herself where she has come from and what more she can accomplish.
While there are many profiles to be shared, one of the most interesting is the idea of a company that is speaking directly to currently homeless individuals with talents and big ideas but lacking the opportunity to prove themselves. Many success stories have come from TechShop, a company that offers all the equipment, tools, mentoring and even financing to help all types of individuals reach their goals.
For some, this assistance has led to getting off the streets, receiving funding and starting companies that are on their way to growth. As chairman and founder Jim Newton noted, “Everybody has creative abilities but people just don’t express them. I mean, I see people come in here that are afraid to try anything. We give them some classes and some encouragement. And they have some success with their projects. And you see them just change. You see them light up. You see them say, ‘Wow, I really can do this.’ This is stunning. They’re stunned.”
A VentureBeat article showcased some of the homeless who have capitalized on this opportunity to turn their ideas into viable businesses. Now, they are off the streets and leading their own companies, generating wealth and creating jobs for others. Many are finding ways to return the favor by opening the door to opportunity for those that have simply hit hard times.
In addition to these turnaround stories, many other famous faces have been homeless early on in their lives, including Jim Carrey, Daniel Craig, Dr. Phil, Suze Orman and more. Others had hard times but surpassed these to become wildly successful, such as Steve Jobs, Larry Ellison, and J.K. Rowling just to name a few.
It just goes to show that no barrier is insurmountable to those who work toward success without becoming discouraged by setbacks or initial failures. The lesson here is you can’t focus on being down but must, in the face of any and all adversity, look forward and never give up.
The volatile U.S. multifamily housing market has returned to pre-recession investment levels, driven largely by millennials putting off home-buying and settling for rentals, but in the long term it will be baby boomers that will drive the market as they downsize, according to the Kansas City Federal Reserve.
Millennials, those born between 1980 and 2000, have shown strong interest in apartments as the economy has recovered, partly because of a preference for city living but also because they are delaying marrying and having children due to debt and unemployment.
Kansas City Fed senior economist Jordan Rappaport wrote in a report that the share of young-adult households renting apartments in multifamily units decreased from 2000 to 2007 when looser mortgage credit standards and expectations of rising house prices made home ownership more attractive, but the share has since returned to normal levels.
Older Americans, meanwhile, are “increasingly downsizing” to apartments, generally beginning around age 70 and doing so more often by age 75, Rappaport wrote.
The oldest baby boomers will turn 70 next year, and the number of Americans aged 70 and older will increase by more than 20 million in the next 15 years, the Census Bureau projects.
“In consequence, multifamily home construction is likely to continue to grow at a healthy rate through the end of the decade and thereafter remain well above its level prior to the housing crisis,” the report said.
Building permits for the multifamily segment soared 24.9 percent in May, and permits for buildings with five or more units reached their highest level since January 1990.
The report said that builders would need to adapt to the changing trends because while millenials lived in compact city spaces, older buyers tended to want more space and amenities.
Boston has happy home buyers, while Las Vegas lacks reliable residents, according to a new study.
WalletHub, a consumer finance website, looked at how the housing recovery affected consumers across the country. Having the right type of financing could set home buyers up for success — and the risky kind could set families up for failure down the road, said WalletHub spokeswoman Jill Gonzalez.
So WalletHub ranked 25 metropolitan areas on homeowners’ “financial freedom,” using data from the Census Bureau’s American Housing Survey. Researchers looked for signs of a healthy housing recovery: places with high home equity, a short amount time left on mortgages, and where a buyer with an average credit score could get an affordable interest rate and down payment of less than 20%.
The researchers also doled out black marks against cities with potentially risky borrowing, like “easy” mortgages. If a high percentage of buyers were using government assistance, had a home equity line of credit or a lump-sum home equity loan, or owed more than their house was worth, the city moved down the list.
The complete rankings (by metro area):
2. Oklahoma City
3. San Antonio
4. Northern New Jersey, NJ
5. Hartford, Conn.
7. New York City
8. Rochester, N.Y.
9. Philadelphia, PA-NJ not sure why NJ is in there, but Philly is a stand-alone city
Tie #13 Baltimore
Tie #13 Washington, D.C.
Tie #13 Chicago
18. Richmond-Petersburg, Va.
21. Minneapolis-Saint Paul
24. Tampa-Saint Petersburg-Clearwater
25. Las Vegas
Metro areas with high equity values, low interest rates and strict lending practices show promise for a stable housing market recovery, Gonzalez said, while cities near the bottom still face challenges.
Consider the percentage of “underwater” mortgages: where the consumer owes more on the home than the home’s value. Nationally, about 15% of mortgages fall in to this category, WalletHub said. Fewer than 7% of mortgages in Boston would be considered “underwater,” while in Las Vegas, that figure is close to 40%.
Similarly, fewer than 10% of mortgages in Boston were obtained with no proof of income, assets or debt. In Tampa, that number is close to 24%, well above the national average of 17%.
“Each city has its own obstacles to overcome,” said Gonzalez. “A place that is bringing in more young people, like Boston and New York, that’s going to be setting more people up to be buying than somewhere like Las Vegas.”
Jeff Taylor is a managing partner at Digital Risk, an analytics company for mortgage lenders. He said there are a variety of regional trends that can affect a local housing markets, from first-time buyers looking to save money on rent, to foreign, all-cash purchases of pied-a-terres.
“Nationally we have absolutely stabilized, but we still have two dynamics going on,” Taylor said. “There are areas that will see price increases that’s based on high demand, like Miami and San Francisco. In Orlando or the Midwest, prices are growing more slowly as inventory has not made its way through the foreclosure process.”
The study is not the first to show the housing market mounting an uneven recovery. While cities such as Denver and San Francisco are seeing home values skyrocket, others are seeing steady, but tapering, growth, according to the S&P/Case-Shiller Home Price Index, a measure of housing prices in 20 major American cities that was released Tuesday.
“We have outliers, like Orlando,” Taylor said. “But as a country, we are heading in the right direction.”