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09.28.2023 by Gerrit Petersons

America’s Housing Conundrum

Interest Rate In-sensitive? When the Federal Reserve began raising interest rates at the fastest pace in decades, economists and forecasters expected housing to be impacted, as mortgage rates rose from 3% to over 7%. However, home prices have not dropped but risen, up 15% on an annualized basis in the second quarter, bringing the cost of homeownership to record highs. What’s causing the stability, and even rise, in prices? The United States has a vast and diverse housing market, with some areas rising and falling but the overall cause is likely the lack of inventory in existing home sales. As households locked in mortgages at low, fixed rates (82% of homeowners are estimated to have rates below 5%), they are less inclined to sell their homes and move somewhere else, just to pay a higher interest rate. This may lead to a structural housing problem where the lack of supply keeps home prices high and higher interest rates keep housing unaffordable. Median homes and families are now paying nearly 29% of household income to their mortgage. Homebuilders are offering up deals with a one-time fee upfront for a lower interest rate. Additionally, 84% of recent homebuyers are planning to ‘buy now and refinance later,” with the majority hearing the phrase from their real estate agent or broker. The Federal Reserve has indicated that rates will be higher for longer to tamp down inflation. The question becomes if most buyers are expecting mortgage rates to fall at some point in the future and base their decisions on this assumption, propping up demand, will house prices come under pressure? Or is it just a matter of time before interest rate hikes have an effect?

Buy Now, Refi Later | Mortgages and Advice | U.S. News

US Housing Affordability Remains a Record Low | Bloomberg

Property Paradox |

Closed for October? A government shutdown is looming if Congress does not vote to fund the government by September 30th. Essential services like the Military, TSA, and air traffic controllers will be required to work, however, will not be paid and there may be an increase in delays for services that remain open. Social Security payments will still be made but National Parks will be closed. Hopefully, a last-minute deal will be made to avoid the shutdown and a more reasonable conversation will commence around government spending and priorities, but the clock is ticking. What happens if the federal government shuts down |

Financial Planning/Investment Strategy Corner:

How Much Cash Should You Have? I saw an old ad from 1993 where Burger King began accepting credit cards vs. cash and people were mortified that credit cards were used for small purchases. The video is worth it alone for some fashion time travel (I had one of those bowl cuts). Then I heard a U.S. Senator stored cash in envelopes and suits in his closet, where the funds originated is to be determined and under federal indictment. Whenever I check my winter coats for that misplaced twenty, my hopeful hand has only been rewarded with (unused) dog bags, but it got me thinking about how much cash I typically have on hand. I try to keep cash for visiting local artisans or farmer’s markets, to avoid any unnecessary credit card fees for small, local businesses. This article was helpful in thinking about how much to have on hand as everyone’s comfort with cash at home will vary. Now that cash is paying some interest at the bank, it may be time to reevaluate how much is under the mattress. Here’s How Much Cash Americans Keep Stashed at Home in 2023 | Is It the Right Amount? (

Happy Fins: I was talking to a friend about wanting to travel to Finland and they weren’t dismissive, but they did say – “but what about life in Scandinavia is inspiring? Even the food isn’t inspiring.” Well, Finland was awarded happiest country for the sixth year in a row and people are trying to understand why. One of the priorities is connecting with nature, which may be as little as taking a walk, even in a city. I know I am in some of my better moods after I’ve taken a hike, even a short one. The other lessons are living a life of balance between wants and satisfaction and how our homes and spaces affect our well-being. It did remind me of the time Conan visited Finland so that at least made me happy watching this clip again. Finland happiness: |

Quick Hits:

Retirement Bootcamp: I am excited about our upcoming webinar. In my sociology class, it was burnt into my brain that retirement is a life adjustment on par with joining the military and going through boot camp. After saving and working for so many years, we may find it uncomfortable to spend money without our normal paycheck coming in. That’s one hurdle, but we also may be unprepared for the social change that comes. We hope this webinar will be useful to form a thoughtful retirement: RSWA Webinar October 12th at 5:00 PM – Retirement Beyond the Financials. The webinar is open to everyone so please share the link with anyone interested. If you haven’t received an email invite, please reach out to anyone at RSWA and we will get one to you.

Quote: “You realize that for all the shenanigans that go on in the big circus of politics, everybody wakes up and goes to work.” – Lewis Black

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