It Will Cost You More to Buy a Home The housing market topped a new threshold over the past week. Buoyed by a strong economy and a series of interest rate increases by the Federal Reserve, thirty-year fixed mortgage interest rates reached 4.61 percent – the highest number since May of 2011. Rates crossed the 4 percent threshold in the week of January 11 and they have been on a relatively steady rise since then. If this pace continues, we may hit 5 percent before the year is out. Should rising interest rates deter you from buying a home? Not necessarily, but it may cause you to re-think your definition of an affordable home.
Average Homebuyer Score Rose from 700 in 2005 to 732 in 2016 Welcome to the 2018 home-buying market: Rising demand and an extremely tight supply of homes, especially in the critical starter-home market, make it difficult to realize your goal of home ownership. In this market, you’ll need two important things to land your dream home – more money and a higher credit score. Data from the Joint Center for Housing Studies (JCHS) at Harvard University highlight the credit score issue. According to the 2017 JCHS study, “The State of the Nation’s Housing – 2017,” the median credit score for successful mortgage loan applications increased from a FICO score of 700 in 2005 to 732 in 2016. Lenders are still conservative in their risk assessments – aided in part by regulations put in place during the housing crisis.
New Survey Shows a Bad Combination of Skepticism and Dependence Are you counting on Social Security for most of your retirement funds – and if so, how comfortable are you that the funds will be there at retirement? According to the recent Transamerica Retirement Survey of Workers, you probably aren’t comfortable at all. A surprising 76 percent of survey respondents are concerned that Social Security won’t be there when they retire – including 65 percent of baby boomers, the generation entering their retirement years.
The recent Tax Cuts and Jobs Act (TCJA) represents one of the biggest changes to the tax code in many years. Will the Internal Revenue Service be up to the challenge of enforcing these changes? For the last five years, the IRS has been examining fewer and fewer returns. In calendar year 2016, 1.1 million tax returns were audited (0.5 percent of all returns), down from approximately 1.7 million returns in calendar year 2012. Now the IRS faces a new regulatory challenge with approximately the same budget as in 2017 – a decrease of almost $1.5 billion (23 percent) from 2010 when inflation is taken into account.
It’s difficult to purchase a home in today’s market. Pent-up demand and an extreme shortage of homes have led to a rapid increase in prices that outpaces recent wage gains. The problem is acute in the market for starter homes and critical in high-value markets like San Jose, Seattle, and Austin. Desperate homeowners are stretching their finances to buy a home, and lenders and mortgage backers are increasingly willing to accommodate them.
President Trump promised changes in Washington upon his election. Whether you are a Trump fan or foe, there’s no question he’s succeeded in that goal. Sometimes the change is precipitated by the President’s choice to lead an agency, as in the case of the Consumer Financial Protection Bureau (CFPB). The CFPB was born out of the Dodd-Frank legislation in 2010 as a vehicle to both regulate banks after the Great Recession and protect consumers from harmful and predatory financial practices. The CFPB was intentionally structured to be independent of political forces. Its money comes from the Federal Reserve, not Congress.