MAY 2015

In This Issue



Why Homebuyers Face a  Tough Spring
by Yahoo Finance


Eager to buy your first home this spring? Already own, but want to trade up? Be warned: there'll be plenty of competition.


Bidding wars have broken out in hot real-estate markets like Denver and Los Angeles, where there aren't enough houses to meet demand. The lack of supply is a key reason home sales nationwide have yet to return to healthy levels following the housing collapse in 2008.


"Inventory is still fairly low in a lot of markets across the country," said Skylar Olsen, senior economist at real estate data firm Zillow. "Buyers are not going to have the easiest time out there."


Further tilting the market in favor of sellers are low mortgage rates, which have ratcheted up pressure on buyers to wrap up deals before borrowing becomes more expensive.


Then there's the matter of price. While the overall rise in home prices has slowed this year, fierce competition in many cities and markets will make the cost of buying much harder this spring. Prices are peaking or coming close in roughly half the country. Seven states set highs in March, including Colorado, New York, Tennessee and Texas, according to real estate data provider CoreLogic.


Homebuyers this spring will need to pay attention to six major factors:



There just aren't enough homes for sale in many parts of the country, and properties are moving fast. In March, one measure showed it would take fewer than five months to sell all the homes on the U.S. market. Normally, it should take six.


Among the toughest markets for buyers: San Jose, San Francisco and Los Angeles, as well as Seattle, Denver, Dallas-Fort Worth, Texas, Nashville and Boston, according to Zillow.


Homes in those areas are selling an average of 48 days faster than properties in markets where buyers have the edge.

"The same day the house gets listed, it's not unusual to get four, five or six offers," said Brian Callahan, an agent for real estate brokerage Redfin in Madison, Wisconsin, where homes take fewer than four months to sell, on average.


Homebuyers are likely to find more listings and pay less than asking price in Philadelphia, Chicago, Cleveland, Detroit and Miami-Fort Lauderdale, Florida.

Markets with a bigger inventory of homes tend to have weaker job growth and more construction. In cities with tighter inventory, job growth tends to be stronger.




There's heavy demand for houses at the lower-end of the market, and that means people hunting for those homes are seeing prices rise faster.

Homes valued at $135,000 or less climbed 9 percent in price for the 12 months ending in February, according to data from CoreLogic.

"This is the hottest home price appreciation prior to the spring selling season in nine years," said Anand Nallathambi, president and CEO of CoreLogic.

By comparison, homes that priced for $226,800 or more rose 5 percent.




Long-term mortgage rates remain near historic lows. The latest national average for a 30-year fixed-rate mortgage was 3.80 percent, compared with an average of 4.21 percent a year earlier.


Those cheaper rates are good news for some homebuyers, who will get better houses for lower monthly payments.  How long rates will remain this low, however, is a source of much speculation.


The Federal Reserve has opened the door to begin raising its key short-term interest rate from near zero sometime this year. That would likely lead to higher mortgage rates.


"The reason we see so much competition is people have an incentive to get in there before that interest rate goes up," Olsen said.


Even with low rates, rising home prices and stagnant wages have made it tougher for many people to save for a down payment.


Many buyers are choosing adjustable-rate mortgages, which accounted for 16 percent of all home purchase loans so far this year, according to the Mortgage Bankers Association. Popular before the housing bust, ARMs have interest rates that are initially lower than a traditional 30-year, fixed-rate loan, but the rate can jump after a few years.




When housing prices bottomed in 2012, institutional investors such as The Blackstone Group started buying troubled properties in ways that fueled their recovery.


As prices rose by roughly 20 percent over the next three years, these investors backed away. Now they account for 3.4 percent of single-family home sales, down from a peak of 8.7 percent in early 2013, according to the housing data firm RealtyTrac.


"The reason investors aren't in the market is prices are so high," said Glenn Kelman, CEO of Redfin. "The smart money has left the building."

That means traditional buyers - with a mortgage and a desire to live in the homes - won't have to compete with as many all-cash offers from investors who want to rent or flip.


All-cash purchases have hit a four-year low, accounting for 26 percent of single-family home and condo sales at the start of this year, according to RealtyTrac.


Metropolitan areas around Boston, San Jose, California, Albuquerque, New Mexico, and Jackson, Mississippi, are markets where there's the least competition from institutional investors.


In some cases, investors who bought a few years ago are looking to sell the properties to traditional buyers, Kelman said.


Still, bidding wars between investors and traditional buyers are strong possibilities in places like Memphis, Charlotte, North Carolina, Atlanta and Jacksonville, Florida. Those are markets where institutional investors bought up the most single-family homes between January and March, according to RealtyTrac.




After the housing boom, a widespread surge of foreclosures helped push down prices. A rash of short sales, when an owner sells their home for less than what they owe on their mortgage, also contributed to the drop.

Fire sales still happen, but not as many as before. The reason? The number of homes in some stage of foreclosure is down 12 percent from a year ago, and bank-owned homes are down 34 percent, according to RealtyTrac.

"Distressed sales are dropping precipitously," said Daren Blomquist, vice president at RealtyTrac.


Buyers will be hard pressed to find such bargains in Salt Lake City, Albuquerque, New Mexico, and Austin-Round Rock, Texas, where foreclosures accounted for 4 percent or less of all home sales through February.


Elsewhere, though, distressed properties represent more than 20 percent of sales, especially in areas around the Florida cities of Palm Bay-Melbourne-Titusville, Jacksonville and Tampa-St. Petersburg-Clearwater.




Buyers are snapping up vacation homes, thanks to stock market gains and a wave of baby boomers searching for a pleasant spot to spend their golden years.


Vacation homes accounted for 21 percent of sales last year, the highest share ever measured by the National Association of Realtors. The number of purchases shot up 57 percent in 2014.


Those sales are expected to hold steady this year, although prices might increase as more baby boomers cash out of stocks, said Lawrence Yun, chief economist at the Realtors.


With the stock market at all-time highs, Yun says, "this is benefiting the top 10 percent and one percent of the families in the country and they're in a good position to buy vacation homes."



  5 Questions to Help You Find the Right Buyer's Agent



The relationship between buyer and seller is one that could last a very long time. The dynamic home-buying process can take unexpected twists and turns, so having the right agent by your side makes all the difference.


Unlike a seller, who signs an agreement with an agent, a buyer rarely has anything in writing that binds them to an agent or requires an agent to perform particular tasks. This makes it important to choose the right agent, instead of just jumping in with the first one who comes along.

What's most important is to go with your gut. This person will be a significant presence in your life while you search for a home. Above all, you must feel comfortable with them.

Here are some questions to ask a buyer's agent before you start working with them.

How long does it take typical buyers you've worked with to find a home and close?

If he tells you that his typical buyers move quickly, within weeks or a month, he is probably used to working with buyers who've done a lot of independent research prior to engaging the agent. If he says it's more like a year or longer, he is likely more patient and lets the home-buying process run its course.

In which towns or neighborhoods do you do the most business?

Agents tend to focus on where and what they know. Most have a solid knowledge of a few towns, and then a cursory knowledge of nearby areas.

Your home search can take you through multiple towns and school districts. If you start working with a real estate agent you meet at your first open house, and she only truly works in that town, someone else for another area may better serve you. But its better to have one agent throughout the process, which is why good agents typically cover a broader geography.

Do you work independently or with a team? Do you have an assistant?

Home buying is incredibly personal, so you want to make sure you know who you'll be working with. It's helpful to have the same person by your side during the journey so they can track your experience.

Ask your agent what her arrangement is and make sure you are comfortable with it. If she works with assistants or junior agents, make sure you won't be pushed off to someone with less experience.

How do showings work?

There are multiple ways to see properties, and the most effective approach is different for every buyer and in every market. Some markets rely heavily on open houses, where buyers can see the home on their own. Others require private appointments or the use of a lock box to see homes. If the agent prefers that you leverage open houses as much as possible, but you desire a little more handholding, she may not be the agent for you.

How do you search for properties, and what's the best way to collaborate or communicate?

Buyers don't rely only on their agent to find properties anymore. What's more, many agents encourage buyers to search online independently. Agents leverage their local multiple listing service (MLS), and will send buyers emails and alerts from there.

Good collaboration makes for a seamless process, so ask the agent how they collaborate with their buyers for searches. Finally, ask if they're a phone, text or email kind of person. Identify an agent who works well with your own communication style. 

Employees Missing Out on $24 Billion in Employer Matches
by Daily Finance


Over the past decade, employers have increased efforts to enroll workers in retirement savings plans. And they've paid off.

Participation rates are at all-time highs with nearly 8 in 10 employees taking advantage of defined contribution plans like 401(k)s when they have access to them, according to estimates by Aon Hewitt.

Persuading workers to max out their savings in those plans, though, has been tougher.

By 2013, the "vast majority [of employers] offered some type of employer-matching contribution" to encourage workers to save more, according to a recent Aon Hewitt analysis of nearly 150 plans with 3.5 million eligible employees. But even when employers offer matches, employees don't always take advantage of them.

A new report released Tuesday by the independent investment advisory firm Financial Engines found that 1 in 4 employees is missing out on receiving the full company match by not saving enough-leaving an average of $1,336 on the table each year. Or an estimated $24 billion altogether.


The match is one of the best deals employer plans offer.

"The match is one of the best deals employer plans offer," said Greg Stein, director of financial technology at Financial Engines, which examined the savings records of 4.4 million retirement plan participants at 553 companies. "It's an instant return on the retirement plan and demonstrates why it's so important to communicate the benefit of participating fully, and how much money is at stake."

As retirement plan researchers can tell you, unclaimed employer match money isn't a new phenomenon. But what's interesting is that one of the very mechanisms for encouraging participation in retirement savings plans may have inadvertently exacerbated the problem.

By the end of 2013, about 65 percent of companies reported having auto-enrollment programs, in which employees are automatically defaulted into a plan with an option to opt out, a feature that became increasingly widespread after passage of the Pension Protection Act in 2006, which provided safeguards for employers that adopted it. (Before the law passed, an estimated 20 percent of employers had retirement plans with auto enrollment; the number has more than tripled since.)

But the default contribution rate for most of those plans remains at 3 percent, the amount many companies adopted when they first added the feature-well below the 10 to 15 percent of annual income that advisers often recommend savers set aside for retirement.

"That's what was written into the code as the example, and suddenly everyone else was doing it. It was the herd mentality," said Rob Austin, director of retirement research at Aon Hewitt. Its latest report found more than 6 in 10 companies had a default contribution rate of 3 percent or less in 2013.

Meanwhile, most employers with matches offer 50 to 100 percent of as much as 6 percent of an employee's salary. "The problem that we have is often people are defaulted into rates that don't take full advantage of the match," said Robyn Credico, senior consultant at Towers Watson, a global professional services firm. "And we know most people don't do much once they default. So automatically they're missing out."

Combating Intertia

In the last few years, employers have begun taking steps to combat the inertia effect.

Fifty-seven percent of plans that automatically enroll participants also default employees into automatic escalation programs that increase employee contributions annually. That's up from 45 percent of plans in 2011, according to Aon Hewitt.


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The plans typically increase contributions by 1 percentage point a year until they reach a cap-and Austin said the cut-off level has been climbing in recent years in an effort to boost employee savings rates. About one-third of companies that offer auto-escalation programs now increase contributions up to 10 percent of employees' salaries, and some have caps that are even higher.

"The theory is that if you turn people off when they hit 6 percent, it sends the message that that's enough to save, and it probably isn't for most people," said Austin, adding that some auto-increase programs now continue until employees hit the maximum they can contribute per year. That's $18,000 this year for a 401(k).

Some companies have also begun raising the default contribution rates in their auto-enrollment programs-sometimes to 10 or even 15 percent, said Austin, "though that's more the exception than the norm."

There's one simple reason for that. "Cost is a big barrier for companies," he said.

Recruitment Tool

Companies use matching plans to attract new hires in a competitive marketplace, but they're keenly aware that employees often stick with the default option. If their contributions are automatically increased each year, the amount employers will be paying out in matches will surely grow as well.

More common, said Austin, are efforts to encourage employees to save more through education and increasingly personalized outreach. Some employers offer small group and one-on-one meetings to outline the benefits of participation. Others go further, even texting nonparticipants with a link to a streamlined sign-up page.

"Instead of sending the same postcards to everyone," said Austin, "they say, let's hone in on nonparticipants or those who aren't meeting the match to let them know they're leaving money on the table."

And it can be substantial. The Financial Engines researchers found employees gave up anywhere from a few hundred dollars to more than $20,000 in employer match money a year. If you factor in the additional money that could be earned each year had it been invested instead, the loss is even greater.

"It's a lot of money," said Stein. "It's enough to make a significant difference to people's quality of life in retirement."



Top 10 Things You Should Never Buy New
by Money Talks News

Some things really are better the second time around. In fact, many used items can be every bit as good as those purchased new. Plus, buying used is almost guaranteed to save you cash.


Without further ado, here's our top 10 list of things you should never buy new:

1. Cars

This had to be No. 1 on the list, right? After all, we've talked about it time and time again. The value of a new car drops like a rock as soon as you drive it off the lot.


Rather than be upside-down on your car loan five minutes after signing the paperwork, look for a quality used car that has already taken the huge depreciation hit. You can find advice on how to do that in our article on the six things to check before buying a used car.


2. Big toys like boats, motorcycles and RVs

Actually, that advice about buying a used car can apply to any type of vehicle. With rare exception, virtually anything with an engine, from off-road vehicles to yachts, will depreciate in value over time. In most cases, you'll get more bang for your buck by purchasing used.


If you need more help, we have articles on buying a boat and which brands of motorcycle are considered most reliable.

3. Houses

Your house is another big-ticket item that it makes sense to buy used rather than new. According to a 2014 study by real estate website Trulia, a new home costs 20 percent more than an existing home with similar attributes in the same ZIP code.


Plus, older homes may have better "bones" than some new construction. That doesn't mean new construction can't be high quality, but some features that were standard in the past, such as real hardwood floors, will cost an arm and a leg to install new today.


And if you love the idea of new construction, don't forget that an existing home doesn't necessarily have to be one that's 50 years old. If you want an energy-efficient home with new amenities, you can probably find it at a lower price if you're willing to be owner No. 2 or 3.

4. Timeshares

Oh, please don't ever pay full price for a timeshare. Some people are practically giving them away because they're so desperate to get out from under the annual fees.


You can find out more by reading our story on whether timeshares are a fabulous opportunity or a financial trap.

5. Books

We could take this category one step further and say you shouldn't be buying books, period. After all, many of us live near a public library system that can meet most of our reading needs.


However, we won't go quite that extreme. I personally enjoy having a well-stocked home library, and I realize some books, such as college textbooks, have to be purchased. But that doesn't mean you have to pay full price.

Head to or the Amazon Marketplace to buy cheap used books, often as good as new.


We've also got this article on building a personal library and another one specifically for college textbooks that can help you learn how to buy for less. When you're done with your books, don't forget to turn around and sell them to put some of that cash back in your pocket.


6. Movies and CDs

Many of the same places that sell used books also sell used DVDs, Blu-Rays and CDs. No need to spend money for a new disc when you can get a cheaper, used one online, at a garage sale or in the thrift shop. Of course, there's also the library where movies and music are free for the (temporary) taking.


7. Sports gear

Raise your hand if your kids have ever started a sport and quit after one season. I'm right there with you.


Instead of spending tons for new equipment, go to a specialty store like Play It Again Sports and buy used items. You can also scour garage sales, thrift stores and Craigslist for bargain finds.


Don't forget to look for fitness equipment for yourself, too. Buying new weights and kettlebells doesn't make sense if you can get used ones for a fraction of the price.

8. Musical instruments

Musical instruments are another purchase that parents make that could be money down the drain. A quick check of Craigslist shows plenty of people trying to offload old instruments. To avoid buying something overpriced or broken, consider spending a few dollars to have it appraised by a local music store. Or, better yet, but a used item directly from a shop.

Renting an instrument is another option for instruments - and often you can rent-to-buy, so you will ultimately own the instrument if your child stays with it. However, keep in mind that renting a clarinet for three years could ending up costing you more than if you purchased a used one in the first place.

9. Jewelry

Like vehicles, jewelry typically depreciates in value, which makes it better to buy used than new. Before buying off Craigslist or from a private seller, be sure to get an appraisal, particularly if a significant amount of money is involved.

Estate jewelry from jewelers or reputable pawn shops are another way to find quality used baubles. If you want to buy online, eBay and may be good ways to go so long as you keep your eyes open for scams and use a safe payment method (i.e. no wire transfers, people).

10. Pets

Some of you might disagree, but there really is no reason to spend lots of money on a brand new pet when plenty of pre-loved (or not so loved) animals are looking for homes. My local animal shelter and humane society regularly have free or almost-free adoption days, during which you can get dogs and cats as well as other pets from bunnies to birds. Your local shelter might offer the same.


Unless you're planning to show your pet, spending hundreds or even thousands on a purebred animal is probably not money well spent. The $50 puppy from the pound is just as likely as the $500 puppy from a breeder to smother you with wet kisses and stare at you with unbridled adoration.

That wraps up our list of stuff we think you should never buy new.