Consumer sentiment toward housing improved for the third consecutive month, with optimism about home selling conditions rising. The Home Purchase Sentiment Index increased, showing a positive trend in the housing market. Expectations of lower mortgage rates and increased home sales are predicted for the upcoming year.
Plenty of factors can motivate charitable giving: Moral obligation, religious tithing, a desire to improve the world or leave a legacy.
But another factor — the tax benefits for giving — could soon change if lawmakers push through tax reform.
Few people donate simply because of the tax breaks and are unlikely to stop giving altogether if they don’t get any. But analyses from the Congressional Budget Office and others have found that tax incentives typically increase how much you choose to donate — whether in life or at death.
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That’s why Republican proposals to reduce or eliminate key tax breaks for giving has charity experts a little concerned. Specifically, President Trump and House Republicans have proposed to nearly double the standard deduction, lower income tax rates and repeal the estate tax.
Though it’s assumed the charitable deduction would remain in place, increasing the standard deduction would mean far fewer people would itemize and be able to claim the break, while lowering tax rates would make the deduction worth less for those who still take it.
Related: The deductions that could be killed by tax reform
The double whammy of doubling the standard deduction while lowering the top rate to 35% from 39.6% could reduce giving by between $5 billion and $13 billion a year, or up to 4.6%, according to a recent study by the Lilly Family School of Philanthropy at Indiana University.
Of those two changes, increasing the standard deduction has the greatest negative effect because it would reduce those who itemize to just 5% of filers, down from 30% today. That’s because the only reason to itemize is if your deductions combined exceed the value of the standard deduction.
“The 25% who used to itemize will probably give some but not as much,” said David Thompson, vice president of policy at the National Council of Nonprofits.
How much does it save
Here’s how the charitable deduction works:
If you itemize deductions, how much you save in taxes from your contributions is determined by your top income tax rate. If, for example, you’re in the 28% bracket, you’ll save $28 in taxes for every $100 you donate.
And if you are fortunate enough to have an estate worth more than $5.5 million (or $11 million for married couples), anything above those amounts would be subject to the federal estate tax after you die. Whatever you give in your lifetime or bequeath to your heirs upon death can reduce that taxable portion.
Related: The most controversial tax reform proposal has been nixed
Many charity groups have urged lawmakers to make the charitable deduction “universal” — meaning everyone can take it whether they itemize or not. “Our nation has a rich history of charitable giving. By making it a universal deduction we think that it recognizes this important value,” said Sean Parnell of The Philanthropy Roundtable.
By Jeanne S @ CNN Money
The longtime chief of J.P. Morgan Chase thinks that he has a clear view of what’s been holding back the U.S. economy over the past seven years.
“Ourselves! Our policies!” intoned Jamie Dimon during a question-and-answer session at a conference for investors hosted by J.P. Morgan Chase & Co. JPM, +0.21% on Tuesday in New York. Dimon pointed to toughened regulations against the financial system in the wake of the 2008-09 financial crisis and deadlocks that resulted in sequestrations, or across-the-board government spending cuts, as some of the headwinds that the U.S. economy has faced over the past several years.
“Those things hold back growth,” Dimon said. “Even regulatory policy sucked up a lot of bank lending capabilities that sucked up growth,” he said, echoing the common refrain from critics that tight regulations against the U.S.’s largest financial institutions has hampered the economy.
By Mark DeCambre at www.marketwatch.com
Like a field judge in the Olympic track and field events, Fed Chairwoman Janet Yellen may use her speech in Jackson Hole to start the race for a rate hike as soon as September.
Yellen will speak Friday from the Fed’s summer retreat at 10 a.m. Eastern. The subject of her remarks is “The Federal Reserve’s Monetary Policy Toolkit.”
“We see Jackson Hole as the ‘ready’ warning and look for Chair Yellen to err on looking at the optimistic side” of the outlook,” said Drew Matus, senior U.S. economist at UBS.
To be fair, Matus thinks the U.S. central bank won’t issue the “set” warning until its September meeting policy statement and then “go” at the December meeting.
But many economists think the central bank could “go” in September if the jobs data is strong.
The Labor Department has reported two strong months of employment gains — 255,000 for July and 292,000 for June.
“If the August employment report, scheduled for release on Sept. 2, is solid, then we expect the Fed to raise rates at its September meeting,” said Michael Gapen, chief U.S. economist at Barclays.
“We expect Yellen to deliver a stronger signal about the likelihood of near-term rate hike” at the Jackson Hole meeting, he added.
When it comes to investing in the stock market, you may lose your shirt, but you probably won’t lose your home. In fact, when the equity market gets rough, real estate tends to be a life raft for investors seeking safety.
“Real estate is Americans’ preferred investment for money that they won’t need for at least 10 years and that hasn’t changed,” said Greg McBride, chief financial analyst with New York-based Bankrate.com. “Nervous investors always look to real estate rather than shy away from it in times of volatility.”
While global uncertainty spreads and stocks fall worldwide in the aftermath of the British referendum to leave the European Union, it doesn’t necessarily mean déjà vu all over again, at least when it comes to a repeat of the real estate plunge of 2007. The crash that began that year accelerated sharply following the 2008 rout of the equities market, when home prices in late 2011 were down more than 20% from their peak in spring of 2007.
“There is a lot of Brexit panic going on,” said Francis Greenburger, chief executive of Time Equities Inc., a real estate development firm in New York. “When you realize that this is going to play out over years, and nothing substantive is going to change in the short term, it seems like an overreaction,” he said.
As a result, here’s why you shouldn’t be panicking post-Brexit if you’re looking to buy or sell a home:
Interest rates should stay low, and could go even lower.
And as markets reel post-Brexit vote, the pace of further Federal Reserve rate increases is likely to slow further, according to Kevin Finkel, senior vice president of Resource America Inc. REXI, -0.10% , a real-estate investment trust in Philadelphia.
“If the Fed had a decision to make to raise interest rates, it gets pushed back further now,” he said. “The slower growth in Europe that Brexit will likely cause and the worldwide global slowdown as a result will force the Feds to drag their feet.”
The Fed was already considering holding off on a summer rate increase when the news was announced earlier this month that the U.S. created just 38,000 new jobs in May and nearly half a million people dropped out of the labor force, raising doubts about the strength of the economy.
“The chances are the Fed is reading the (Brexit) signs as being negative to growth and activity,” said Time Equities’ Greenburger. “As long as inflation remains in check, the Fed is going keep their powder dry and leave rates as they are,” he said.
The 10-year Treasury, which mortgage rates follow, has plunged 20 basis points since the results of the Brexit vote were announced. For someone in the market for a $200,000 home, the pre-vote rate of 3.46% would have cost $715 for a 30-year fixed-rate mortgage with a 20% down payment, according to Zillow’s mortgage group. If mortgage rates fall 20 basis points, that monthly cost would be $697.
Finkel also notes that the uncertainty in Europe will mean the U.S. will continue to be a haven for real estate investors, pushing prices higher. That will help millions of Americans who were unable to refinance because their homes were underwater (meaning they owed more on the home than it was worth). Research firm Black Knight estimates that as many as 7.4 million borrowers could refinance their homes and Brexit could mean even lower interest rates when they do so.
Moreover, as interest rates stay low, the impact of “rate-shock” when short-term adjustable rate mortgages (ARMs) readjust will be minor compared with what happened between 2007 and 2012, when many Americans could no longer afford their new housing payments and defaulted.
One downside to the low interest rates however is that private buyers of mortgage pools, the so-called mortgage-backed securities, are staying away from the market because rates of return are so low. That hurts liquidity and prevents banks from making more loans. As a result, government-sponsored enterprises have to buy up the majority of the loans to create liquidity in the market. According to the Housing Finance Policy Center of the Urban Institute in Washington, D.C., the private label securitization market was valued at $718 billion in 2007 and plunged to just $59 billion in 2008. It was valued at just above $64 billion in 2015.
There’s less risk of a new mortgage bubble
The percentage of loans in foreclosure nationally is the lowest level since April of 2007, according to Black Knight. Foreclosures reached a peak of 4.6% in 2011 at the height of the real estate bust. This year, just 575,000 homes were in active foreclosure in May, down from 800,000 a year ago, a 29% drop, according to Black Knight. While new foreclosures starts last month of 62,100 were up slightly from a 10-year low set in April, they are still 20% lower than a year ago, Black Knight said.
“The recent rise in bank repossessions represents banks flushing out old distress rather than new distress being pushed into the pipeline,” said Daren Blomquist, vice president of Irvine, Calif.- based RealtyTrac, a real-estate research company.
Unlike the 2005 to 2012 mortgage meltdown, when so-called liar loans and exploding ARM’s flooded the market, the subsequent pullback in credit may have been overly tight, but it does mean in 2016 there are fewer real estate bubbles waiting to pop. While it’s true there are markets that have seen incredibly inflated real-estate values such as San Francisco and New York, it’s not fueled by unsustainable and loose credit standards.
“The changes that have taken place over the past five to seven years have built a more stable foundation” in the mortgage industry, said Michael McPartland, a managing director and head of residential real estate for North America at Citigroup’s C, +0.05% private bank. “There just aren’t a lot of the exotic products like interest-only [loans] and super-high loan-to-value [mortgages],” he said. “If things slow down, there will be a contraction, but not a pop.”
McPartland says with slow wage growth and high student loan burdens it may be harder for younger borrowers to afford a 20% down payment and monthly interest payments that are principal and interest, instead of just interest-only, but the flip side is increased home equity, so home buyers are less likely to leave the keys on the counter and walk away if things go bad.
Help for first-time home buyers
In 2014, the Federal Housing Administration began reducing mortgage insurance premiums on loans by an average of $900 a year, in an effort to nudge first-time home buyers and millennial borrowers who might not have much cash for a down payment to finally enter the housing market.
Those other federal moves include Fannie Mae and Freddie Mac making lower down payment loan options available to more borrowers. In 2014, the agencies began to buy loans with just a 3% down payment, or 97% loan-to-value ratio. Fannie Mae also announced in 2015 that it would allow income from a non-borrower household members to be considered as part of a loan applicant’s debt-to-income ratio. That could help some borrowers, who might have family members on Social Security or disability living with them, or a renter in a basement apartment, to boost their income levels and help them qualify for a loan.
Lower oil prices
At the end of 2008, gasoline prices, which had risen to a record $4 a gallon nationwide that summer, had crashed to under $2 a gallon. In that case, the cheap gas (and diesel) wasn’t a good thing, as the worldwide economy was shuddering to a halt.
While the U.S. economy (and world economy) is slowing down, the lowest gas prices since 2009, with the national average now close to $2 a gallon is likely to help the housing market.
“The continuing drop in gas prices is freeing up valuable disposable income,” says Resource America’s Finkel, which can help Americans absorb higher rent payments, or move up to a more expensive property.
Job growth
While jobs typically are a lagging indicator of an economic downturn, the U.S. has had a slow- but- steady rate of job creation for the past five years, though that appears to be tailing off in recent months. The U.S. had been averaging more than 200,000 new jobs a month since 2014 until a recent slowdown since March that’s seen hiring taper off to a 116,000 monthly range.
“The recession risks are elevated, but there’s not an abundance of people seeing one over the hood of the car,” said Mark Hamrick, senior economic analyst at Bankrate.com. Hamrick expects GDP growth to rebound in the second quarter at 2% for the rest of the year, which he said will be enough to support expansion in the housing market.
“I don’t think anybody is looking at the payroll numbers and deciding it’s a bad time to buy a home,” he said.
By Daniel Goldstein at Marketwatch.com
For decades, sales trainers and consultants have preached the gospel of connecting with the prospect and making them feel comfortable with the personal-advisor relationship. Annuity and life-insurance sales gurus encourage agents to sit down at the client’s kitchen table and present the “opportunity” face to face in order to help earn their trust. What a colossal bunch of archaic sales garbage. I guess they want advisers to keep using typewriters and Rolodex cards as well. Give us all a break.
Need a financial friend, buy a dog
I always tell people that if you need a friend in the annuity business, buy a dog and name it “Annuity.” That goes for your stock and bond broker, financial planner, wealth architect, or whatever made-up title your adviser goes by.
The days of an adviser pretending to care about every part of your life is officially over. And if you are under some illusion that this is needed, then you need to re-evaluate the role of your adviser. Do you want your doctor to not tell you that you have cancer? Do you want your adviser to be brutally honest and abrasively factual about your financial situation? Do you want a golfing buddy or someone that can really help you with your financial goals?
You can’t teach height
Both of my parents were basketball coaches when I was growing up, so sports analogies ran rampant through most conversations. My dad’s favorite line on the recruiting trail was “you can’t teach height.” That makes sense when you need to put together a competitive team, and it can also apply to your adviser.
You should care less if that person is likable, attractive, or is offensive at every turn. Like athletes, advisers have to produce. They have to bring value, or the coach can pull that scholarship. Has your adviser put up the stats to stay in your financial game? Have they earned that scholarship for the next year? Numbers don’t lie.
Bedside manner does not matter
I would rather my doctor or surgeon be the biggest jerk on the planet, but have the best skills and knowledge available. Nice doesn’t pay the bills. Being cordial doesn’t solve problems. You want an adviser (and a doctor) who shoots straight and is not afraid to stomp all over your emotions to get you moving in the right direction.
My lovely wife of 28 years makes me send my clients a holiday card every year because she thinks it’s important that they know I’m “human.” Can an airbrushed picture of my wife and two daughters do that? Because my wife is the boss, the cards go out every year even though I think it’s a waste. I don’t want my clients to like me. I want them to like my brutally honest advice. That’s it, and that’s my goal.
Friends can lead to fraud
Most Ponzi schemes and fraudulent financial advice typically falls under the veil of some friend or colleague that somehow won people’s trust. Madoff anyone? If you consider your current adviser a friend, and trust them implicitly, I would advise you to reevaluate that financial apathy you are embracing. You know better.
Hate the person, love the advice
The successful hedge-fund and private-equity gurus have already figured out this whole client-relationship issue. They don’t have any relationship except for portfolio performance. There’s a chance that some of these people are disgusting human beings, but their clients don’t care as long as the return numbers work. As the Los Angeles Drew Basketball League’s motto says, “No Excuse. Just Produce.” You might want to hand your adviser that slogan emblazoned on a T-shirt, and have them live up to that pledge.
‘F’ stands for Fiduciary, not Friend
With the recent Department of Labor’s recent “FiduciaryCare” ruling, “financial friend” is going to be permanently replaced with “financial fiduciary.” That’s a good thing in my opinion, even though the proposed law has some major flaws. At the end of the day, it’s up to you to keep the adviser in your financial lane and not allow them to cross that personal line.
By Marketwatch.com
After seven years of being under intensive care, Fed chief Janet Yellen doesn’t believe the U.S. economy is ready to leave the hospital just yet.
That’s why Yellen and her colleagues at the Federal Reserve decided last week to keep its benchmark rates at near 0%.
They might be right. The economy is hardly going gangbusters and there are real threats from China’s slowdown.
But some feel the Fed is coddling the economy by giving it more care than it needs. They argue emergency-level rates and Fed indecision are actually hurting confidence among consumers, investors and CEOs.
That’s why they believe a rate hike could actually boost the American recovery by reassuring the public, encouraging borrowing at cheap levels and generating some income for struggling savers.
“One particularly sad irony in all of this is that the Fed’s inaction may run entirely contrary to its own goals,” David Kelly, chief global strategist at JPMorgan Funds, wrote in a note to clients.
“By holding rates low, I believe the Fed is continuing to suppress economic growth and demand,” he said.
CNNMoney
The U.S. economy is looking a little tired. It’s losing momentum in puzzling ways. Hiring is still strong, but experts are starting to scale back their growth forecasts.
Federal Reserve chair Janet Yellen summed it up well in a speech Friday: “If underlying conditions had truly returned to normal, the economy should be booming.”
Economists say there are two main problems: Workers’ wages aren’t growing much, if at all. As a result, Americans aren’t going out and spending much. On top of that, many foreign economies are slowing down, which puts pressure on the U.S.
The question going forward is whether we’re just in a blip or a bigger shift is taking place.
“The consumer really hasn’t kicked in at full speed ahead,” says Peter Cardillo, chief market economist at Rockwell Global Capital. “We’re going through a soft patch.”
With March’s jobs report out on Friday, this economic head-scratcher will be in full focus this week.
Related: Good news: Unemployment at lowest in 7 years
Still strong on jobs: The U.S. added over half a millions jobs in the first two months of this year alone. That’s a 50% increase from the same two-month stretch a year ago when the Polar Vortex had much of America in a funk.
Job gains have come across the board: health care, construction, the service sector and retail businesses have all seen strong pick up. The unemployment rate is down to 5.5%, its lowest mark in seven years.
It would be a full-steam story on jobs except for one thing: wage growth.
Hourly wages only grew 2% in February. That’s a marginal bump up, but it’s too little for most Americans to notice the recovery’s progress. It’s also well below the Federal Reserve’s roughly 3.5% goal.
As Fannie Mae sees it, 2015 will be a good year for the housing market, even if residential real estate has to get dragged into the black.
Fannie Mae’s 2015 Economic Outlook, released Thursday, is less a picture of a purely positive housing market than an expectation of an economy so strong across several key growth sectors that it will propel the national housing market to greater heights than in 2014. Or, as Fannie Mae puts it, the economy is strong enough to drag housing behind it and create growth by default.
“Our theme for the year, ‘Economy Drags Housing Upward,’ implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace,” said Doug Duncan, chief economist at Fannie Mae.
Fannie Mae expects strengthening private domestic demand to drive the economy up 3.1 percent in 2015—up from the agency’s earlier prediction for 2.7 percent growth.
While that prediction is still modest, Fannie Mae says it’s strong enough to “drag last year’s unspectacular housing activity upward,” according to the report. Fannie Mae credits projections for continued low gasoline prices, firming labor market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds to usher in a year of steady, if “not yet robust” economic improvement that should lead to a higher rate of household formation in 2015.
“Consumer spending should continue to strengthen due in large part to lower gas prices, giving further support to auto sales and manufacturing,” Duncan said. “We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017.”
Duncan also said he suspects mortgage interest rates to stay low throughout this period, attracting steady supply of new homebuyers.
Fannie Mae’s report echoes the sentiments of the National Association of Home Builders, which also this week spoke of bluer housing and economic skies ahead. Top economists and housing experts in a panel at the group’s International Builders’ Show in Las Vegas predicted a recovering labor market, low interest rates, and improvements in credit availability for borrowers as the three main triggers for growth in the housing market this year.
These assessments, however, are not shared by everyone, at least not blanketly. Earlier this month, Trulia’s chief economist Jed Kolko warned that falling oil process could have a recessive effect on housing in major oil-producing state such as Texas, Oklahoma, and Louisiana.
Kolko did say, however, that lower fuel prices could just as likely stimulate flagging industrial economies in the north and Midwest, where oil production is virtually nonexistent.
Regardless, Duncan and Fannie Mae foresee big things, even if this year will not be a breakout year for housing. “We expect the rising share of new home sales to lead to a healthy increase in single-family construction of about 19 percent, or 765,000 units,” he said.
Scott Morgan from DSNews
MOUNTAIN VIEW — Google has been on an astonishing real estate spree in the last several years, buying or leasing dozens of buildings across a wide swath of the South Bay.
What’s even more astonishing: It’s been adding new space even though it has not yet filled buildings it already has, giving the company the flexibility to expand its already large Bay Area workforce by nearly 30,000 more workers.
“I’ve never seen anything like this sort of expansion from any one company,” said Phil Mahoney, a broker with commercial realty firm Cornish & Carey.
George Avalos at (408) 859-5167