Asset Planning, Inc Blog

The latest from the team.

California Budget Deal

Today lawmakers announced that a deal had been reached to close California's 26 billion dollar deficit. We are anxiously awaiting the details as voting is scheduled to begin tonight. The final details of the budget will be released in the next couple of days. News reports of the deal show the largest cuts to higher education, prisons, and Medi-Cal. Primary grades will also face large cuts however federal stimulus money will help make up the difference. The cuts will be painful but necessary. The state,like our own households, can't spend beyond their means forever.

We will provide more analysis as the details of the budget are released.

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BEWARE! Property Tax and Loan Modification Scams

Back in December I blogged about property tax appraisal scams. I want to reemphasize that there is NEVER any fee for the county to review a property tax reassessment or appeal. I just refinanced my house and I have been inundated with offers from these companies that state that if I send money that my property tax will be lowered or reviewed. They actually sent me a copy of my Grant Deed to make it look official. Anyone can get a copy of a Grant Deed or property information from the county. The information is public and fairly easy to access. The only time you send money in regards to your property taxes is when you pay the actual property tax bill. If you have questions about your property value assessment, please go to the county website. The Los Angeles County website is: www.lacountypropertytax.com and the Orange County website is: http://www.ttc.ocgov.com/proptax/

Another scam that is occurring is with loan modifications. These scam artists are targeting at-risk homeowners by getting information in newspapers and public sites about homes in foreclosure status. They use deceptive marketing practices to convince homeowners that they are reputable and that they represent the government. One tip is you should not have to pay for help. The government offers HUD-approved counseling for free. Another tip is to ask for the local address of the company and then go and visit it to see if it is legitimate. Referrals from other clients are also a good source. Just remember, if you or your family or friends are in this situation to be skeptical and cautious if you are asked to pay fees.

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1588 Hits

Orange County home prices will still decline as median price rises

Today the Orange County Register's May Housing Report reported a $30,000 rise in the OC median home price from April to May 2009. The reported gain in the median price misleads many into believing the housing market has bottomed. On the contrary, a rise in the median could signal we are headed for more price declines. An understanding of how the median is calculated and the stages of foreclosures in Orange County will help to see what the future holds.

The median home price reflects the exact mid point in a line up of all the homes sold from lowest to highest. For example, consider the 7 home transactions below. The $450,000 house that falls in the middle is the median.

$250,000- $300,000- $300,000- $450,000- $450,000- $550,000- $2,000,000

The flaw with the median is if a few pricier homes outnumber the lower priced homes one month or vice versa the median can rise or fall due to the make up of homes sold. Consider the following make up home sales:

Month 1- Seven homes sell for the following prices:

$200,000- $200,000- $250,000- $250,000 - $300,000- $500,000- $500,000 Median=$250,000

Month 2 - Seven Homes sell for the following prices:

$200,000- $250,000- $250,000- $300,000- $500,000- $500,000- $500,000 Median=$300,000

In this example the median price increased 20% in one month. This can be deceptive, though, because prices could be stagnant with the cause of the increase being due to the fact that one less home sold for $200,000 and one more home sold for $500,000. Another possibility for an increase in the median, and which is the case in Orange County, is when higher priced homes decline it attracts more buyers. So in actuality prices are falling but the median is rising. This makes perfect sense if you consider the cycle of foreclosures the market is going through.

This first wave of foreclosures from 2007 to 2008 was due to sub-prime loans which correspond to the lower tiers of the market. The large price declines at the low end spurred buying among first time buyers and investors. Inventory is declining for the inexpensive homes as the foreclosures in this category begin to tamper off. The higher end homes have yet to correct as much as the entry level homes. The delay is due to the Alt-A and Option Arm loans associated with pricier homes that are just starting to go bad. 2009 is showing record foreclosures in the upper tiers of the market. From April to May Foreclosure Radar reports California foreclosure auctions are up 75% from March to May with distressed sales increasing in the upper tiers of the market. The result is increasing price declines for larger homes. The Register reports that Orange County's pricey coastal region experienced the second to highest price drop from a year ago.

The bottom line is home prices will continue to decline with the largest drops in the higher end and a flattening out of prices in the lower end. The good news is we need home prices to return to an affordable level to diversify our local economy and sustain growth. Homes need to be affordable so enough money is left to spend on other goods and services. The positive effects of affordability returning to the market can already be seen in the rebounds in consumer discretionary spending in the last few months.

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FDIC Extends Coverage Limit And New Credit Card law

Last week, President Obama signed an extension to keep theincreased FDIC limits until December 31, 2013. If you have anaccount insured by the FDIC then you are insured up to $250,000 per depositoror $500,000 for a joint account. Theselimits were originally set to expire at the end of 2009.

President Obama also signed a new credit card law that becomeseffective in 2010. Here are some highlightsof the changes.
CreditCard companies will not be able to raise rates on existing balances except ifthe card has a variable rate or there is a late payment.
Promotionalrates have to last at least 6 months.
Ifa consumer pays more than the minimum then the excess payment must go to payoff the higher interest rate balance first.
Requirespayments due at least 21 days after the bill was mailed.
Requiresanyone receiving a credit card under age 21, they must have parent or legalguardian sign that they are responsible for the debt.
Thereare also limits on fees that can be charged for late payments and over-limitcharges.

The critics think that this will mean that more credit cardswill have annual fees and there will be less reward programs because the creditcard companies will have less revenue sources.

This law only affects credit cards issued by banks. Credit Unions are not affected by thisregulation because they have their own rules and they already had guidelinessimilar to this in place.

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931 Hits

Pension Lump Sum Distributions

The market downturn of the past year will affect future pension payouts. If your company offers a pension plan this will probably affect you. Most pensions allow the retiring employee to choose to receive their pension as a lump sum rollover or as an annuity. The annuity is guaranteed for life, but there is usually no cost of living increases. Most employees opt for the lump sum payout, assuming it can be managed to receive better returns than the company. Also, if you don't think the company will be in business during your entire retirement, this could be due to bankruptcy or a merger or takeover, then the government via the Pension Benefit Guarantee Corporation has to take over the plan. If this happens there is a maximum annual annuity. Currently, the limit is $54,000/year.

A company cannot offer the lump sum payout if the pension is less than 80% funded. Businesses must update their funding status annually by October 1. It is widely believed that many pensions have lost value due to the falling stock market and will fall below the 80% funding limit. This limit is put in place by the Government to prevent pensions from being drained of cash, when assets are low. This law (The Pension Protection Act) has been around since 2006, but hasn't been much of an issue until this year.

If you have a choice, you should analyze the different pay-out alternatives before you decide. It is a very important decision and you should consult a Certified Financial Planner to help guide you in the decision.

Carol Somoano

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934 Hits

Helping Seniors with Daily Living Activities

A recent survey done by AARP estimated that 10 million American seniors need help with daily activities. The same survey showed that family members find themselves responsible for 80% of such care giving, many of which are overwhelmed or live far away.

Organizations such as Rally Round Non-Medical Home Care can help with services that enable seniors to remain in their homes, while keeping their independence and dignity. These services reduce the burden on the adult children and allow them to spend quality time with their parents. They include:

  • Companionship
  • Respite or relief for family
  • Meal preparation
  • Light housekeeping
  • Errand services
  • Grocery shopping
  • Recreational activities such as walks
  • Medication reminders
  • Personal Care
  • Incidental transportation
  • Mail assistance and organization
  • Pet care (pet walking, clean-up, vet visits, grooming visits)
  • Computer Services (setting up online bill pay system, minor computer troubleshooting, email, new computer set-up,
  • software installation)
  • Professional grooming (hair and nails)
  • Electronics set-up, troubleshooting
  • Secure Web access to Activities of Daily Living reports (Future Service)
  • Discussion Forum

Rally Round Non-Medical Home Care caregivers complete a training program that helps them understand the challenges seniors faces. They are insured, bonded and hold Red Cross approved certifications in both CPR and First Aid. Many of them have cared for their parents or grandparents and want to help others. For more information or to request a complimentary in person assessment of needs go to www.rallyroundhomecare.com

I have personal knowledge of this company and the owners. I find them to be honest, compassionate and trustworthy- the best qualities to have when working with seniors.

Sandy

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1332 Hits

Zillow estimates

If you have not been to www.zillow.com, I invite you to visit the site. Enter your own address and view the facts on your home. You may claim the home as your own and modify the facts the site has on record. You may have added rooms or had improvements to your home that are not reflected in the market value.

I listened to the CEO of Zillow speak this morning and heard some interesting things. He said that 50% of all current home sales are short sales or homes in foreclosure. Another fact: 30% of homeowners are ready to put their home on the market to sell but are still waiting for a better time. The average American homeowner moves every five to seven years. So, those homeowners that wanted to sell their homes up to two years ago are still hanging on, waiting to get a better price.

Zillow estimates are updated three times per week as home sales rise in value or nearby homes are sold.

21.8% of all homes are underwater right now, meaning the home value is less than the mortgage owed on the property. I have heard that banks are holding between 500,000 and 600,000 properties in inventory without putting foreclosure signs on them, for fear of flooding the market. The housing market is picking up but lending standards are very tight, with verification of every document and account. Rates on the 30 year mortgage are very volatile, moving up within the week.

People are out shopping for good deals. The LA Times profiled several couples trying to buy a home and some homes had up to 80 offers on them. Open house days are crazy with people filing in and out of houses, looking for deals. I have heard Dr Adibi say the next wave of foreclosures will begin this summer and this wave is the upper tier of mortgages. These loans were with documented incomes, and many were made with adjustable rates, now ready to reset to higher percents than the teaser rates they purchased.

While all of this is indicating the bottom of the housing market may not be near, I have ventured into the water and I am in escrow on a new house. The economy is looking better, the markets have improved and I will be able to walk to work from the new house. So, I am doing my part to reduce gas emissions from my car!

Sandy

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Market gains since March low

March 6th was the low market point of the first quarter of 2009. We have had six weeks of gains since that low point in March. The S&P 500 has rallied approximately 29% from that low. It is nice to see companies begin to beat earnings estimates and they release sales numbers in this quarter. The rally has been led by the financials, and several banks have posted profits. American Express surged 21% after they released better than expected earnings. Even with the recent rally, we are still below where the year ended in 2008 and the S & P 500 is 37 points, or 4% below the December end.

We are not out of the woods yet and I expect a pullback from this recent rally. That said, it could be short lived if earnings estimates continue to surprise with good numbers. The mood of investors is starting to lean toward positive as things are progressing through Spring. As Treasury Secretary Tim Geithner released the bank stress test results, the market was relieved that more banks do not need more funding and that most US banks are well capitalized. The Federal Reserve released a white paper, saying "Most U.S. banking organizations currently have capital levels well in excess of the amount required to be well capitalized. However, losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks."
Several banks shares gained as the results of the stress tests were announced.

This weekend the meeting of G7 and G20 will be held in Washington. These are the leaders of the world who are shaping our response to the global financial crisis. May it be a productive meeting!

Sandy

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824 Hits

Ways to save money

Property Taxes
If your home has fallen in value, you can request a property tax reassessment if you think the appraised value exceeds the estimated market value. This may help you save on reduced property taxes. You may contact us for help on this or refer to a past blog posted by Carol, who outlines how to do it at no cost.

Travel
For those that are traveling, very good deals on hotels and airfares are plentiful. Check out www.kayak.com and www.yapta.com to watch airfares. You set the parameters of the trip you want to take and they watch the fares on multiple airlines and email you a summary when the price drops or increases. They also find flights, hotels, email alerts and help you get refunds from airlines when fares drop.

Refinance
Look at refinancing your mortgage as interest rates are very low. Several clients and staff have taken advantage of these new low rates but lending is still somewhat restricted. Be prepared to show all documentation of income, etc. This is the way lending should have been over the past several years.

Utilities
Talk to your service providers such as your cell phone, cable TV, Internet, and land line to see if you can bundle your services together for a cheaper overall price. Ask if your monthly service fee can be reduced to match any promotions currently being offered.

Memberships
Review your gym and other memberships and cancel, freeze or downgrade if you can save money. Costco offers two year memberships for 24 Hour Fitness that are cheaper than buying directly from 24 Hour. 24 Hour Fitness also offers a restricted membership for a cheaper price where you can work out only three times per week. I see many of my clients in the 24 Hour Fitness where I work out- all on a regular basis. It certainly helps combat the stress of the uncertain economy and stock market.

Sandy

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858 Hits

Fed Takes Action!

Yesterday, the Federal Reserve announced its plan to buy up to $300 billion of long term government bonds and $750 billion in additional mortgage-backed securities plus they are keeping the federal funds rate between 0% and .25%.  This is likely to produce a drop in mortgage rates.  The rates today are under 5% and might go to 4%.

What does this mean?  Basically, if you have a good job, solid credit and you have 20% equity in your home you should consider refinancing.  You need to consider how much it would cost to refinance – points paid, appraisal fees, title insurance, etc. vs. how much you would save in the long run.  How much longer is the term on your current home? Does it make sense to start a new 30 year term loan?  Every situation is unique.  For example, it makes sense for me.  My current loan is only 3 years old and if I just refinance my current balance (and not take any cash out) I will lower my monthly payments by $1,000/month.  The extra cash flow will be great as my expenses will be increasing as my children get older and enter college in the next few years.  Every situation is unique and should be evaluated as such.

This also is a good time for 1st time home buyers to take advantage of the low rates and the $8,000 tax credit.  The criteria for getting a loan is much harder because the banks learned their lesson and don’t want to be stuck with bad loans.  This is good because that should keep home prices from rising as dramatically as they did from 2004-2007.  Prices should rise gradually now.

This action by the Fed will also likely weaken the dollar and increase inflation in the future.  Commodity prices will likely rise as investors anticipate the rise in inflation.  Prices for gold and crude oil have all risen sharply since the Fed announcement.

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1195 Hits

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