Archives for March 10, 2018

Some U.S. homeowners are getting started early. Really early.

Benjamin Ulloa, a 19-year-old real estate broker who lives with his parents in Oregon, purchased a home in Hoquiam, Wash., two years ago.

He had worked in construction during high school, in the summers and when he wasn’t in class, and saved what he made while living at home. He read the personal-finance book “Rich Dad, Poor Dad,” which inspired him to become a real-estate investor, he said.

When he was driving with friends one day, he saw a fixer-upper for sale in Hoquiam for $18,000. His father agreed to finance half the purchase (which Ulloa has now paid back), and Ulloa paid the other half. Now, after a little work, Ulloa rents the home. It has appreciated to be worth between $60,000 and $80,000, he said.

“I just bought it because it was the first step, even if I didn’t know what I was going into,” he said. “I figured I would rather learn through experience than just waiting.”

He’s one of a growing number of young Americans taking the plunge. More than 99,000 members of Generation Z — those born in 1995 and after, who are now 23 or younger — have mortgages, according to the credit agency TransUnion TRU, +1.08% Their average mortgage balance: $140,000.

“I’m a little surprised to see the numbers as large as they are,” said Rob Dietz, chief economist and senior vice president for economics and housing policy for the National Association of Home Builders. “The traditional life cycle is to rent, especially for younger consumers who might have student loans.”

Generation Z are buying into a strong housing market

It’s all the more impressive given the strong housing market. The existing home inventory is “tight,” Dietz said, and the cost of single-family homes is rising faster than incomes. Given those conditions, it’s possible even more members of Generation Z could own homes, but the prices might be too high at this moment, he said.

And just 1.2% of Generation Z mortgages are 60 or more days past due. That’s slightly less than the average of 1.6% for millennials, 2.3% for members of Generation X and 1.6% for baby boomers.

Members of Generation Z seem to value home ownership, nevertheless. Some 62% of the older members of Generation Z say owning a home is a key component of the American Dream — about the same number as the members of older generations, according to a survey released last year by the housing website Zillow.

Why are they taking the plunge? They are further removed from the housing crisis and may not be as afraid of home ownership as members of older generations, who either experienced the Great Recession themselves, or had close friends and family members who struggled, said Daren Blomquist, a senior vice president at Attom Data Solutions, a real estate research firm.

Members of Generation Z are also entering a more stable housing market, unlike their older siblings in the millennial generation, said Aaron Terrazas, a senior economist at Zillow. That has happened at the same time that renting has become less affordable and interest rates on mortgages are still relatively low, he said.

Some areas popular among Generation Z home buyers: Ocala, Fla., Kansas City, San Jose, Calif., and Nashville, Blomquist said. With the exception of San Jose, those cities also tend to have affordable housing markets, he said.

It’s also possible members of Generation Z are getting some help, Terrazas said. “The earliest home buyers tend to get family assistance,” he said. “Families see it as a worthwhile investment as well.”

Some millennials fared better when buying their first home

Generation Z homeownership is still small compared to older generations, who have had more time to pay down their debts and increase their credit scores and salaries.

Of course, some millennials did well during the downturn and paved the way for their younger cohorts. Michelle Schroeder-Gardner, who now writes a personal-finance blog, “Making Sense of Cents,” bought her first home with her boyfriend (now husband) when she was 20, in 2009, in a suburb of St. Louis.

They saved to buy the home while working full-time, both as retail managers. “It was easy for us to buy, since it was a buyer’s market,” she said. They sold the house in 2015.

In the fourth quarter of 2017, more than 12 million millennials had mortgages, compared to the 99,000 members of Generation Z. Nearly 24 million members of Generation X had mortgages during that time, compared to nearly 27 million baby boomers and 5.1 million members of the Silent Generation, TransUnion found.

Buying a home at such a young age can be risky. Ulloa said living at home with his parents was one factor that made it possible for him to use so much of his savings on a real-estate investment. “Even if I failed, I wouldn’t consider it a failure, I’d consider it a lesson,” he said.

But for members of Generation Z who don’t want to rent out their properties, buying might not always make sense, Blomquist said. “If you’re not going to live there for around five years, it’s probably not a great investment to buy a home,” he said.

“Think about the full costs of homeownership,” Schroeder-Gardner said. “You will want to think about the closing costs, home insurance, property taxes, maintenance and repairs.”

For families with a teen planning to attend a four-year college, visiting prospective campuses is a rite of passage. And so is worrying about money — starting with the visit itself.

College visits can cost a pretty penny for lodging and food, but it’s all relative when you consider college costs themselves: according to the College Board, an average of $34,740 a year for tuition and fees at private colleges or $25,620 for out-of-state residents attending public universities (not to mention room and board).

Given that it’s one of the biggest investments your family will make, visiting schools is a key way to help you make the wisest decision. With spring break — just around the corner for most high schools — a popular time for those road trips, here are five tips to help you get the most from those college visits.

for a family. But they also provide an invaluable inside look at institutions.

1. Have a focus. Assess your child’s interests as well as strengths and weaknesses. Have a frank talk with your teen. Would he or she prefer a large research university or a small liberal arts college? Is location important? What about extracurricular activities? How much can your family afford? Narrow down the top values important to your family and create a list of the schools you want to visit based on those things.

2. Plan ahead. Once you’ve targeted the schools you’re interested in, you must plan in advance to register for the tours. Register online for tours and informational sessions. Search for the admissions representative for your region and reach out directly to that person. Try to schedule a time to meet with the regional admissions representative to arrange a meeting before or after the sessions to make that connection. Colleges keep track of students who visit and it helps show demonstrated interest when the schools review applications.

3. Budget the travel. Consider grouping the college visits and staying outside major cities, where lodging and food are more expensive. Say, for example, you’re visiting Barnard College in Manhattan. Consider a visit to Vassar College in Poughkeepsie, Dutchess County, just north of New York City and plan a budget motel stay there. Grouping college visits geographically helps cut down on cost and time.

4. Combine business with pleasure. Make the college visits a mini family vacation and explore the surrounding areas to find out more about the local communities. If a younger sibling is along for the ride, make sure to include his or her interest with a visit to a special place outside of the college.

5. Don’t over-commit. While families may be in a hurry to see as many colleges as possible during these road trips to maximize efficiency, it’s important to set aside some extra time to observe and explore the campus. Some colleges will offer cafeteria vouchers for visiting families so that they may explore on their own after the formal presentations. Not only does it help with assessing the college, meals courtesy of the school also help with budgeting.

February may be over, but snow is still in the forecast! It’s not too late for area homeowners who are hoping to reduce their energy bills and maximize their indoor heat to take action.

“February temperatures may have hinted at spring weather, but responsible homeowners should recognize that winter is still in full swing,” said Contractor Magazine’s Contractor of the Year winner Ted Puzio, owner of Roanoke-based Southern Trust Home Services. “Thankfully, there are many easy steps homeowners can take to save energy through the rest of winter.”

Puzio and the Southern Trust team offer the following five tips for saving energy in winter:

1. Install a programmable thermostat. By setting lower temperatures when they are asleep or out of the house, homeowners can save money on heating.

2. Replace filters. The filters on heating units will tend to get dirty faster in winter months due to the prolonged periods of closed windows and time spent indoors. Remember to periodically check filters and replace them if dirty.

3. Check weather stripping and door thresholds. Over time, weather stripping can become brittle and begin to crack or break, resulting in warm air leaking out of the home and cold air leaking into the home, causing the furnace to work harder to maintain desired temperatures. Likewise, thresholds underneath doors can fall in height or move out of alignment. Taking the time to readjust them can help further seal the home and retain energy.

4. Get free extra heat from the sun. Whenever possible, leave curtains or blinds open on south-facing windows during the day. Warmth and energy coming in from the sun will help heat the home and maintain a steady temperature. Window coverings can be closed in the evening to help trap the warmth inside.

5. Use ceiling fans to your advantage. During the winter, make sure your ceiling fans are set to a clockwise rotation to push warm air down. Running on a low setting will help trap warm air in the room for extra comfort and efficiency.

“Homeowners often think about major changes and replacements when the issue of a high energy bill comes up,” Puzio said. “The good news is that not everyone has to invest in new furnaces and water heaters to reduce their energy bills. There are so many little steps homeowners can take to start saving surprising amounts of money, especially in winter.”

Let’s face it: Saving for retirement is no fun. Stashing money to satisfy far-off goals is tough, especially if your budget already feels tight. But if you’re struggling to save, fear not: There are creative ways to ease the process.

1. Start early (and change your perspective)

When it comes to money, the squeeze of scarcity is difficult to overcome. The average American job seeker thinks they are worth more than employers are willing to pay, according to an analysis by Opportunity, an employment networking service.

It’s difficult to save when you feel underpaid, but if there’s one thing you shouldn’t underestimate, it’s the power of compounding interest. Giving your money time to grow is the best way to ensure that you have enough once retirement age hits, and it also means you can scale back your efforts as time goes on. For instance, let’s assume you want to save the recommended $1 million before leaving the workforce. You earn $75,000 a year, and you can either commit to saving 5%, 10%, or 15% of your income in your 401(k). Assuming a 7% average annual return, here’s how quickly you’ll reach your goal:

Old age will come eventually, and tackling the math early can help you plan your life in the process. As you can see, even middle-of-the-road (10%) savings will secure your $1 million goal, while 5% savings barely scratch the surface. Take stock of what motivates you and try to see retirement planning as a challenge rather than a sacrifice. The million-dollar reward will be worth the effort.

2. Use your property

Real property is one of the most important assets in retirement, and you can use yours to pad your savings today. If you have an extra room or a rental home, the income you earn from it can close the gap between what you’re currently saving and what you should be saving for the future. For instance, the average Airbnb host earns $924 a month, according to a Priceonomics analysis.

Investment property can also help you earn real-time income that doesn’t affect your entitlements. For example, suppose you have reached retirement age and plan to draw Social Security in 2018. The Social Security Administration (SSA) caps your annual income at $17,040 as long as you’re withdrawing benefits, but what happens if you haven’t saved enough for retirement?

Unlike part-time or full-time employment income, investment profits are exempt from the SSA’s rules, which means you can earn any amount without worrying about losing your Social Security benefits. If you own a home, now is the time to capitalize on your investment with retirement savings in mind.

3. Channel your credit card rewards

What if you could save for retirement with everyday purchases? Using your credit card rewards is a painless way to prioritize retirement without much effort. Let’s say your credit card offers 1% cash back on all purchases. If you charge $3,000 a month, you’ll rack up $30 a month in rewards. While most issuers pay out benefits in gift cards and credits, you can adjust your household budget to account for the monthly savings by putting away more money into your 401(k), IRA, or other savings vehicle. As you can see, even a small contribution can add up over time:

These figures won’t lead to luxury in retirement, but it’s tough to beat wealth built on free money. Skip the gift card option in favor of a larger savings account.

4. Start a side hustle

The gig economy has become an employment reality for 3.9 million Americans currently working on-demand jobs, according to an Intuit study. If you need more money for retirement, logging a few extra hours a week can help you prioritize savings. It’s paying off for those embracing the opportunity. An Earnest analysis reported the following earnings for the most popular gig platforms:

As we have learned, even the smallest retirement contributions can add up thanks to time and compounding interest. If you’re looking for an income-generating edge, don’t forget to add side hustling to the equation.

Saving for retirement isn’t fun, but it doesn’t need to be a struggle. Use your creativity to lessen the burden.

The $16,122 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.