May Starts With Big News

Volume 13 Issue 5 May 2018

T

he jobs report is the most intensely watched of all monthly economic releases.

As far as events are concerned, meetings of the Federal Reserve's Federal Open Market Committee (FOMC) stand as one of the most important events as well. To have them both happen in the same week is somewhat of an anomaly. During the first week of May, we will get the pleasure of experiencing both hap-penings, and it will certainly be an interesting start of the month for market-watchers.

The first question is -- will the Fed hike interest rates again at their meeting? We have had increases in December and March, which means that a hike at this meeting is not a certainty. Most observers expect another two to three increases this year and if the Fed holds off this month, a schedule of two additional increases may be slightly

more likely. Either way, market watchers will be analyzing the Fed statement for clues regarding the likelihood of future increases.

In This Issue P2 Education is the Key || P2 Should I Pay Off My Mortgage?

P3 May Starts With Big News || P4 Millennials Start to Dominate

Did You Know…

Some housing economists believe that “granny flats” could be the key to alleviating housing shortages across the country, and they are calling on more cities to ease up the rules to allow such dwellings to be built into more homes.

These dwelling units tend to be separate, cottage-like struc-tures, but also may be a converted garage or basement that houses an extra living area.

Source: Market Watch

Selected Interest Rates April 19, 2018 30 Year Mortgages——–4.47%

2017 High (March 16 %

2017 Low (Sept 14)———3.78%

15 Year Mortgages——-3.94%

5/1 Hybrid ARMs——–—–3.67%

10 Year Treasuries—–—–2.91%

Sources—Fed Reserve, Freddie Mac

Note: Average rates do not include fees

and points. Information is provided for

indicating trends only and should not be

used for comparison purposes.

Continued on Page 3

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Should I Pay Off …

W

hen there was easy money to be made in real estate and stocks, mortgage debt seemed

like nothing to fear. Now an increasing number of homeowners are wondering if it makes sense to hasten the day they can say goodbye to a big month-ly expense while earning the equivalent of a de-cent, guaranteed return.

Maybe you’re part of a young family, and whittling down your loan balance seems like a sound strategy. Or maybe you’re counting down to retirement (perhaps even already kicking back), have only a few years of payments left, and are wondering if you should just knock off the balance.

But if you’re thinking of such a move, you’re also well aware that mortgage interest is tax-deductible — and if history is any guide, putting money into stocks will earn you a higher return over the long haul than putting it into real estate. The answers to the questions below can help you determine your best course of action. The Considerations:

*Pressing Financial Needs

*How Long Are You Staying?

*The Tax Deduction

*Alternative Investments

Do you have more pressing financial needs?

Anyone who has credit card debt or isn’t maxing out her 401(k) should make those the priority. You should also have at least six months’ worth of living expenses in cash.

A few years ago you would have been able

to pull money out of your home quickly if, say, you lost your job. Now that lenders have tightened up, that’s not so easy.

Retirees and near-retirees contemplat-ing a lump-sum payoff need to ensure they have enough liquid savings to handle emergencies such as unex-pected medical expenses, especially because it’s hard to tap equity on homes without first mortgages.

And you shouldn’t pull money out of your IRA to pay off your home loan, since the IRA funds will be taxed at ordinary income rates.

How long do you plan to stay?

If you plan to trade up to a larger home or downsize to a smaller one within five years, it doesn’t make sense to put extra money into your mortgage.

Page Two

“…stocks will earn you a higher

return over the long haul...”

T

housands of potential

homeowners fail to

pursue the American

Dream due to confusion

over the homebuying process,

according to the fifth annual

America at Home survey from

NeighborWorks America. The

survey found that the average

Millennial believed that the

minimum required down is 21%,

while 70% of respondents believed

they lacked the necessary funds for

a down payment.

Seventy-four percent of adults and

84% of Millennials found the

homebuying process complicated,

while 29% of respondents said they

knew someone who delayed home-

ownership because of student loan

debt. Furthermore, nearly 73% of

all consumers and 62% of Millen-

nials were either unaware or unsure

about down payment assistance

programs in their communities

for middle-income homebuyers.

Among those familiar with these

programs, 53% reported receiving

“not much information” or

“nothing at all” about them.

However, there was still reason to

be optimistic despite the mostly

negative data: 93% of adults

believed owning a home is part of

the American Dream, while 81% of

adults and 72% of Millennials felt

homeownership increases financial

stability...

Source: NeighborWorks America

Education is the Key

Page Three

“You don’t want to tie up your cash in your home and then not be able to sell,” says La Jolla, Calif., financial planner Christopher Van Slyke.

What do you really gain from the interest tax deduction?

Assuming you itemize your deductions, you can find out what you save by multiplying the mortgage interest you paid last year by your tax rate (federal plus state). A couple in the 28% tax bracket, with a $200,000 loan at 5.0%, for example, will save $2,781 in taxes the first year of a loan. Your tax savings decline the further you get into the loan, as more money is applied toward principal. To that you would add the same savings on the real estate taxes you pay.

For many retirees and near-retirees close to the end of the mortgage, the interest deduction is not a reason to avoid paying off the loan, especially since retirees often end up in a lower tax bracket, says planner Peter Canniff of Nashua, N.H.

How would you otherwise invest the money?

Put your money into stocks and bonds and you’re likely to get a higher return over the long run than you would paying off your home loan, given today’s low rates.

If you itemize, you can calculate your effective return by multiplying your mortgage rate and your tax rate, then subtracting the answer from your mortgage rate (you can do this with the mortgage tax-deduction calculator at bankrate.com/calculators.aspx).

So for someone in the 28.0% tax bracket with a 5.0% mortgage, the effective rate of return on paying off the mortgage is 3.6%. By comparison, a 50/50 stock/bond portfolio has historically earned 8.2% long term, though it’s sensible to expect future returns to be a more modest 6.0%...

Source: Money Magazine

...My Mortgage?

©2018, All rights reserved

The Hershman Group www.originationpro.com

1-800/581-5678

May Starts With Big News

Continued from Page 1

“…or perhaps the numbers level out…”

One thing is for sure, the Fed will be watching April’s jobs numbers closely, especially after the release of the initial estimate of economic growth in the first quarter. While employment growth has been very steady overall, there has been volatility on a monthly basis.

February's numbers were much higher than expected and March's numbers were lower than forecast. Thus, the markets and the Fed will be observing whether this month breaks in one direction or the other -- or perhaps the numbers level out. As always, the Fed will also be paying close attention to the numbers reported on wage growth, an important indicator of the potential for inflation...

Millennials Start to Dominate

Address Correction Requested

In This Issue:

May Starts With Big News

L

iving with a roommate isn’t a trend only among renters, nor is it

limited to families living in multigenerational homes. The latest U.S.

Census Bureau data reveals a growing number of adults who are

living with other adults with whom they are not in romantic partner-

ships. The trend increased after the last recession, and “nearly a decade later,

the prevalence of shared living has continued to grow,” according to a new

analysis of census data by the Pew Research Center. It was initially driven by

millennials who moved back in with their parents. But the longer-term increase

has been driven by parents moving in with their adult children or friends and

roommates moving in together to share the costs of housing.

Nearly 79 million adults—or 32% of the U.S. population—lived in a shared

household in 2017. A shared household is defined as a household with at least

one extra adult who is not the head of household, a spouse or unmarried

partner of the head, or an 18- to 24-year-old student. For comparison, in 1995,

55 million adults—or 29% of the population—lived in a shared household,

according to Pew Research. However, millennials living with their parents is

still a popular trend. A separate Pew report in 2016 found that for the first time

in 130 years, American adults ages 18 to 34 were more likely to be living in

their parents’ home than living with a spouse or partner. Pew says that dating

back to 1880, the most common living partner was a romantic one...

Source: MarketWatch