Uncommon Knowledge
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Clothing is an often overlooked expense when planning a budget, but pretty much everyone has to spend some money on clothes for work, off hours, and social occasions. Whether you are a trial attorney who needs a wardrobe full of quality suits or a landscaper who gets good and muddy, there are ways to buy clothing without spending a fortune.
Here, learn what factors go into retail pricing, where to buy quality clothes, and how to snag some bargains.
Fashion brands establish pricing on a cost-per-unit basis. The final retail price is set by factoring in various expenses and business strategies, such as manufacturing and material costs and marketing and branding expenses.
The cost of raw materials, labor, packaging, and shipping are obvious factors that determine the price of clothing. But pricing is more nuanced than that. Popular brands or high-end brand names will set higher prices for their products on the assumption that they offer higher quality and better designs. There are also marketing costs to consider.
Whether a brand is perceived as a luxury brand, like Versace, or a value brand, like those sold at big box stores, will play a large part in pricing. For example, LuluLemon is a popular, in-demand brand that can price its clothing at the higher end of the scale. Sometimes a popular in-demand brand will have to slash its prices because it no longer holds the prestige it once did.
Supply and demand is a huge factor affecting the final price of a product. If a style, product, or brand is in demand, retailers can mark up the prices substantially. The fact that there is not enough to go around means people will likely pay more. (Inflation can be part of this equation, too.)
However, if the supply exceeds demand, retailers will have to drop the price to try to encourage sales so they are not left with inventory they cannot sell.
Another factor in the price of clothing is the distribution chain. Some brands manufacture their own clothing and sell exclusively through their own retail outlets, which can help them keep the price lower. Warby Parker is an example of a retail brand that sells exclusively through their own retail outlets and website.
This business model means fewer add-on costs for the consumer. However, most brands sell through selected independent retailers who add on their own margin. Retailers set the final price by implementing their own desired markups, as well as any subsequent promotions and discounts to ensure they aren’t left with inventory.
đź’ˇ Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.
Some fashions are in demand for a season only and can be priced high until they lose their popularity. At that point, the price will drop or clothes are sold in a clearance sale as retailers try to get rid of old inventory.
You can save money by buying clothes in the off-season or when they are sold on clearance. There are also other ways to make sure you’re not blowing all of your budget on clothes.
Coupons are a sales strategy for retailers, but they also benefit the consumer. Consumers can shop online for less using coupons and other sales discounts. The buyer inputs a coupon code when they check out, and that code initiates a discount on the price.
Coupons can be found on many websites such as Saving Says, RetailMeNot, and SlickDeals. Also, many brands offer a discount if you sign up for their email list.
Buying second-hand clothes is one way to find quality clothes while sticking to a budget. Thrift shops and websites that sell pre-owned clothing are growing in popularity, particularly because of consumer interest in sustainable practices and brands that support the environment.
ThredUp is a popular online consignment and thrift store where consumers can buy and sell high-quality secondhand clothes. Other ideas for where to buy good quality clothes for less include ASOS Marketplace, Buffalo Exchange, Depop, Etsy, Poshmark, and Vinted.
Recommended: Guide to Selling Used Items
Avoid buying on impulse by purchasing clothing in the off-season when you can find quality items on sale. Retailers want to get rid of stock when products are not in season. For example, few people are looking to buy ski gear in the height of spring or summer. Because there may be more supply than demand for ski gear at that time, retailers will reduce the price and sell the clothing at a discount.
đź’ˇ Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
Fashion trends typically last one season, and then new styles and products appear on the market. Retailers may find themselves with too much inventory going into a new season. To sell the inventory and not lose too much money, they will sell items in clearance sales, often with slashed prices.
Also, certain retailers are known for having regular sales cycles, such as the Gap and Old Navy. These can be good resources for where to buy good quality clothes on sale.
Why does one t-shirt cost $50 and another $15? It could be because the $50 t-shirt has better quality fabric. Similarly, a pair of boots made of leather will be more expensive than a pair made of synthetic leather. In some cases, you might pay more for an item of clothing made of more durable or breathable materials. Investment pieces may be made of finer materials and crafted with more care to last longer.
However, if an item is serving a short-term fashion need, the quality of materials may be less important.
Also, less pricey synthetic materials may get a bad rap. For example, faux leather may be considered an unsuitable material for a shoe because it is unbreathable and less durable. Polyester is often compared to silk and is lambasted for not being “natural.” However, faux leather footwear may appeal to vegans, and polyester blouses last a lot longer than their silk counterparts. So, don’t discount alternatives.
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If you do opt for the less expensive option, you might want to see the item before you buy it. If the item is too cheap and flimsy, it won’t last long. Check the seams and the hems to see if the stitching is acceptable, and check that the zip works. Buying a reasonably priced item of clothing is one thing, but there is such a thing as too cheap.”
Buying fewer clothes will save you money, so you might think about items to save up for, perhaps one or two quality pieces that will last the test of time. You can pair those quality and timeless pieces with other less expensive items. For example, a couple of quality suits for work can be paired with a number of blouses or shirts that come from a mid-range retailer. You can also build a wardrobe based on a basic color, like black or blue, so that all of your clothes can be mixed and matched.
Note: Also remember to note care labels when purchasing clothes. Those that say “Dry clean only” mean they will cost you more over their life in cleaning than those that can go in the washer or be hand-laundered at home.
Some mid-price quality fashion brands recommended by experts are COS, Everlane, H&M, Land’s End, LL Bean, and Uniqlo.
Dressing well does not have to be a wallet-busting affair if you know where to buy quality clothes and which strategies to follow. In some cases, it is better to pay more for an item that will be durable and serve its purpose rather than to buy something cheap and experience frustration when it doesn’t wear well. However, even then, you can find discounts by using coupons, searching for clearance sales, buying second hand, or buying off season.
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Consignment stores and thrift stores are good places to buy good quality clothes for cheap. If you want to buy new, popular mid-range fashion brands are COS, Everlane, H&M, Land’s End, LL Bean, and Uniqlo.
Avoid spending too much money on clothes by setting a budget and sticking to it. Also, don’t buy on impulse and focus on buying a few classic, high-quality pieces to match with less expensive tops and accessories. Build your wardrobe around a color so that you can mix and match and get more wear out of your clothes.
The trick to being fashionable on a low budget is to choose a few quality items that you can pair with inexpensive, trendier items.
Photo credit: iStock/pixelfit
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Source: sofi.com
In the far northwestern corner of the United States lies the vast landscape of Alaska. Renowned for its rugged wilderness, towering mountains, and icy fjords, Alaska offers an adventurous lifestyle for those seeking it. Cities like Anchorage, with its urban amenities amidst stunning natural surroundings, and Juneau, the picturesque capital nestled amid mountains and glaciers, exemplify life in Alaska. However, living in Alaska does present its own unique challenges. In this ApartmentGuide article, we’ll outline the pros and cons of living in Alaska, helping you decide if the “Last Frontier” state is right for you.
Alaska’s landscapes offer breathtaking views that include towering mountains, expansive forests, and pristine waterways. Residents can enjoy outdoor activities like hiking in Denali National Park or kayaking among glaciers in Kenai Fjords National Park, immersing themselves in nature. Whether it’s witnessing the northern lights or encountering majestic wildlife like bears and whales in their natural habitats, Alaska offers unparalleled experiences.
Alaska is known for its extreme weather conditions, ranging from frigid temperatures in the winter to intense storms and high winds. For instance, parts of the state can experience temperatures dropping below -50°F during the coldest months, posing risks of frostbite and hypothermia. Coastal areas face the brunt of severe storms, with the Bering Sea experiencing powerful winter storms known as “Bering Bombs,” characterized by hurricane-force winds and heavy snowfall.
Alaska offers unparalleled wildlife experiences, with diverse ecosystems providing habitats for a wide range of species. Visitors can witness majestic creatures like grizzly bears fishing for salmon at Brooks Falls in Katmai National Park or marvel at pods of orcas swimming along the Inside Passage. Additionally, Alaska’s remote wilderness areas offer opportunities for wildlife enthusiasts to observe rare and iconic species.
Many areas in Alaska are remote and can only be accessed by plane or boat, leading to a sense of isolation from the rest of the country. This can also result in higher costs for goods and services due to transportation challenges. Cities like Unalaska is a great example where you’ll need to take either a ferry or plane to reach it.
Alaska offers prime viewing opportunities for the mesmerizing aurora borealis, or northern lights, thanks to its proximity to the Earth’s magnetic pole. Visitors and residents alike can witness the dancing ribbons of colorful light illuminating the night sky, especially during the winter months. Popular viewing spots include Fairbanks, Denali National Park, and remote areas away from city lights.
Alaska’s harsh winter conditions create challenging driving environments, with icy roads and snowstorms posing significant hazards to motorists. Drivers must navigate treacherous conditions, particularly in rural and remote areas where road maintenance may be limited.
Alaska stands out as one of the few states in the U.S. with no state income or sales tax, offering residents significant financial savings. This unique tax structure allows Alaskans to keep more of their income and enjoy lower overall tax burdens compared to residents of other states.
Despite the absence of state income and sales tax, the cost of living in Alaska is high due to the expense of transporting goods to the state. This affects prices for groceries, utilities, and other essentials, making daily life more expensive. To take this into perspective, Alaska has the highest food prices in the nation as well as healthcare costs. If you’re planning a move to this state, you’ll want to make sure to budget in these factors.
Alaska is rich in indigenous cultures, with a significant portion of its population belonging to Native Alaskan communities. This cultural diversity is celebrated through various festivals, arts, and traditional practices, enriching the state’s cultural landscape. The Festival of Native Arts in Fairbanks is a great example as it provides cultural education through traditional dance, art and music.
The job market in Alaska is heavily dependent on industries like oil, fishing, and tourism, which can be susceptible to economic fluctuations. This can lead to limited job opportunities in other sectors, affecting employment prospects for residents.
Alaska’s vast and varied landscapes provide unparalleled outdoor recreational opportunities for adventurers of all kinds. Whether it’s hiking through Denali National Park, fishing in world-class rivers, or skiing down pristine slopes, Alaska offers endless possibilities for outdoor enthusiasts.
Alaska experiences long periods of darkness during the winter months, especially in northern towns such as Utqiaġvik, which can be challenging for residents adjusting to reduced daylight hours. The lack of sunlight can affect mood and energy levels, potentially leading to feelings of seasonal affective disorder (SAD) for some individuals. Additionally, the prolonged darkness can impact daily activities and outdoor recreation, requiring adaptation and resilience during the winter season.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
Source: apartmentguide.com
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As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
Source: forbes.com
Preneed insurance is a small whole life insurance policy that you purchase through a funeral home to prepay your final expenses. Unlike a standard life insurance death benefit, which goes to your survivors when you die, a preneed insurance payout goes to the funeral home you’ve selected.
People often buy preneed insurance because they’re worried about burdening their loved ones with funeral costs. The median cost of a funeral with a viewing and burial was $8,300 in 2023, according to the National Funeral Directors Association
. Some typical expenses that preneed insurance covers include:
Funeral home costs.
Embalming, preparing and transporting the body.
Casket or urn.
Death certificate fees.
Preneed insurance allows you to lock in today’s rates for a funeral and burial and pay for these expenses in monthly installments. Plus, it’s usually easier to qualify for than a standard life insurance policy. However, you’ll often pay higher premiums for less coverage than you would for life insurance. You could even wind up paying more in premiums than the funeral actually costs
.
Not all prepaid funeral plans fall under the preneed insurance umbrella. Some funeral homes offer the option of paying expenses in an upfront lump sum. When funeral costs are paid with a single premium, the funds are deposited in a trust account rather than being used to buy a life insurance policy.
The cost of preneed insurance will vary based on your age, where you live and what type of final arrangements you want. Typically, premiums cost between $125 to $300 per month and are paid over three to 10 years.
If you’re considering preneed insurance, read the details of the contract carefully. Some services may be guaranteed, which means the funeral home will cover the expense regardless of how much it costs when you die. Other services are nonguaranteed, which means your loved ones may have to cover the difference between the cost of the service and what your plan covers.
If you’re considering preneed insurance, there are a few alternatives you should be aware of. Final expense insurance, also known as burial insurance, is designed to cover your funeral and other end-of-life expenses, but nothing else. The death benefit is often higher than you’d get through a preneed policy, and it goes to your survivors instead of the funeral home.
If you have enough money to cover funeral expenses, you could also set up a savings account with a payable on death designation and make a loved one the beneficiary. The money will automatically transfer to the person you designate when you die, and they can use that money for your final expenses.
Source: nerdwallet.com
American renters are fearful that their home-owning aspirations are increasingly getting out of reach, according to a recent survey by the real-estate platform Redfin, amid an environment of high home prices and elevated mortgage rates.
Almost 40 percent of the renters polled told surveyors they did not believe they would own a home of their own, up from 27 percent in a similar survey Redfin conducted in May and June. Part of the struggle for these Americans is that homes are beyond what they can afford. Securing a down payment can prove elusive, and high mortgage rates may discourage them from acquiring property.
Read more: How to Get a Mortgage in 2024
The Redfin survey sampled about 3,000 U.S. residents in February, and its analysis of renters’ expectations came from a 1,000 renters in the poll.
Mortgage rates in particular have stayed elevated over the past six months. After hitting a peak of 8 percent—the highest level since the turn of the century—mortgage rates declined to the mid-6 percent range at the end of the year and into 2024. In recent weeks, however, the cost of home loans have ticked up to above 7 percent, depressing activity in the mortgage market.
On April 11, the 30-year fixed rate rose to almost 7.4 percent, Mortgage News Daily reported, the highest levels since November 2023. The rise follows news that suggests borrowing costs may stay elevated for longer than economists initially anticipated.
High mortgage rates now mean that first-time buyers must earn about $76,000 to afford what the industry describes as a starter home, which is an 8 percent increase from a year ago and almost 100 percent higher than it was before the pandemic, Redfin said. It added that home prices have soared more than 40 percent since 2019, as buyers took advantage of low borrowing costs during the pandemic to acquire houses, increasing demand, escalating competition and pushing up prices.
Read more: Compare Top Mortgage Lenders
“Buying a home has become increasingly out of reach for many Americans due to the one-two punch of high home prices and high mortgage rates,” Redfin wrote.
Renters being unable to buy homes has in turn contributed to increased competition and price jumps in the rental market. The median asking rent is at $2,000 in the U.S., close to the record high it reached in 2022, Redfin said. Still, despite the elevated cost of rent, renting may be a more affordable option than homeownership.
“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now—especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Daryl Fairweather, Redfin’s chief economist. “While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting.”
To purchase a house, a buyer would need about $60,000 as a down payment for a home loan, an amount that is out of reach for many Americans.
Fairweather added, “The sheer expense of purchasing a home is causing the American Dream of homeownership to lose some of its shine.”
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Building equity is one of the biggest advantages of owning a home. With a home equity loan or home equity line of credit (HELOC), you can take advantage of that equity to finance home improvements, consolidate debt or pay for other big expenses.
While getting home equity financing is a fairly simple process, it’s important to review the details before applying. Lenders have standard criteria that homeowners must follow to qualify for either loan, as well as their own specific requirements. Make sure to compare different lenders and take a look at the requirements before applying.
Below, we’ll cover the general criteria for home equity loans and HELOCs as well as more on how to choose the right financing option for you.
Home equity loans and HELOCs are secured loans that act as second mortgages. Both use your property as collateral for the debt.
With a home equity loan, you get access to a lump sum of cash upfront and pay it back over a period of five to 30 years at a fixed interest rate.
A HELOC is an ongoing line of credit from which you can withdraw funds as needed. With a HELOC, you have the draw period and the repayment period. During the draw period (typically 10 years), you can borrow money on a revolving basis, up to a limit, and you’ll typically pay interest only on what you’ve borrowed. During the repayment period (often 20 years), you’ll pay back both the principal and interest on the loan.
Both are good options for homeowners in need of access to cash, but there’s always a risk when you borrow against your home. If you default on your payments, you run the risk of losing your property.
The requirements to qualify for either a home equity loan or HELOC are similar. Although each lender has its own qualifications, the following checklist provides general criteria to help you get started.
Home equity refers to the ownership stake in your home. Your equity is calculated by the amount of your down payment together with all the mortgage payments you’ve already made. With each mortgage payment you make, the less you owe on your home and the more equity you have. If an appraisal increase the value of the home, that will also yield more equity.
Most lenders require you to have at least 15% to 20% equity in your home to take out a home equity loan or HELOC. If you made a 20% down payment when you purchased your property, you’ll have already met the requirement to borrow against your equity.
​​Your loan-to-value ratio, or LTV, is another factor lenders consider when deciding whether to approve you for a home equity loan or HELOC. Your LTV is determined by dividing your current mortgage balance by the home’s appraised value. Having a lower LTV means less risk for mortgage lenders.
If your home is worth $300,000 and your loan balance is $200,000, here’s how you’d calculate your LTV:
$200,000 / $300,000 = 0.67
Your LTV is expressed as a percentage. In this example, your LTV is 67%, meaning you have 33% equity in your home.
While requirements can vary across lenders, the rule of thumb is that your LTV shouldn’t exceed 80%. Making a higher down payment and paying down your mortgage are two ways to lower your LTV.
Most lenders want to see a minimum credit score of 620 in order to qualify for a home equity loan or HELOC.
Lenders use your credit score to determine the likelihood that you’ll repay the loan on time, so a better score will improve your chances of getting approved for a loan with better terms. A higher credit score of 700 or more will make you eligible for a loan at a lower interest rate, which will save you a substantial amount of money over the life of the loan.
Your debt level is determined by your debt-to-income ratio, which is your monthly debt payments divided by your gross monthly income. Your DTI ratio helps lenders determine if you’re capable of paying back your loan on time and of making consistent monthly payments.
To calculate DTI, lenders tally the total monthly payment for the house — mortgage principal, interest, taxes, homeowners insurance, direct liens and homeowner association dues — and any other outstanding debt. That total debt is then divided by your monthly gross income to get your DTI ratio.
Some lenders prefer that your monthly debts don’t exceed 36% of your gross monthly income, but many others are willing to go as high as 43%. If your DTI ratio is higher than 43%, consider paying down your debts first to lower your DTI.
Lenders want to make sure that you can pay back the loan, so they’ll lend only to those who can prove sufficient income. If you don’t have traditional employment or a stable source of income, you may have trouble qualifying for a home equity loan or HELOC.
The more equity you have in your home, the more you’re eligible to borrow. In general, you can borrow around 80% to 85% of the equity in your home, minus your current mortgage balance.
You can determine how much money you’ll be able to obtain from a home equity loan by starting with the current value of the home. If, for example, your home is worth $300,000 and a bank lender allows you to borrow up to 80% of the value of your home, you simply multiply the two values to get the maximum amount you can borrow, which is $240,000.
$300,000 x 0.8 = $240,000
But if you have a balance on your mortgage of $200,000, you need to subtract it from the $240,000 maximum the bank will let you borrow.
$240,000 – $200,000 = $40,000
That means you can borrow $40,000 for a home equity loan or HELOC.
Home equity loans and HELOCs can be used for similar purposes, but they have some important differences. Neither product is better than the other, so consider your own expenses and goals.
If you need to fund a single project with a set cost, a home equity loan may be the better option, especially if the predictability of a fixed interest rate and monthly payment appeals to you. A HELOC may make more sense if you want flexible access to funds over a long period of time rather than an upfront sum of cash.
You need access to credit for an extended period of time. HELOCs have a draw period that typically last five to 10 years.
You need more time to repay the loan amount. The repayment period for HELOCs ranges from 10 to 20 years.
You aren’t sure how much money you’ll need. HELOCs give you the flexibility to withdraw money in installments and not all at once. During the draw period, you can borrow up to a limit as many times as you like, and only pay interest on what you borrow. This makes HELOCs a good option for managing variable or unpredictable costs.
Your want a predictable monthly repayment schedule. Unlike variable-rate HELOCs, home equity loans have fixed interest rates, making it relatively easy to factor into your monthly budget.
You have a specific expense in mind. You receive 100% of the funds from a home equity loan upfront, which can be useful if you need a set amount of cash to cover a home improvement project, pay off high-interest debt or another need.
A home equity loan or HELOC can be a good way to fund large expenses, but there are other financing options that may be a better fit for your situation. Some alternatives you may want to consider include:
A home equity loan and HELOC are two ways you can tap into the equity of your home. To qualify for either loan with reasonable terms, you should have at least 15% to 20% equity in your home, a LTV ratio of 80% or lower, a credit score of at least 620 (the higher, the better) and a DTI ratio no higher than 43%.
Though specific qualifications vary between lenders, make sure you have a reliable payment history and source of income to be eligible for a home equity loan or HELOC.
Some lenders will provide a home equity loan or HELOC if you don’t have a job or are retired, but instead have regular income from a retirement account such as a pension. The income can also come from a spouse or partner’s employer, government assistance or alimony.
Lenders are typically seeking at least 15% to 20% equity in your home in order to qualify for a home equity loan or HELOC. However, some lenders will allow you to borrow with less equity.
Minimum credit scores vary from lender to lender, but most require you to have at least a 620 credit score. You’ll have a better chance of qualifying and getting access to lower interest rates if your credit score is 700 or above.
You can improve your credit score before you apply for a home equity loan by making payments on time, paying down the amount that’s owed on credit cards and avoiding taking out any new loans or making any major purchases.
Source: cnet.com
Refinance rates are still high, but your personal interest rate will depend on your credit history, financial profile and application.
Average refinance rates reported by lenders across the US as of April 10, 2024. We track refinance rate trends using information from Bankrate.
Mortgage refinance rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
A vast majority of US homeowners already have mortgages with a rate below 6%. Because mortgage refinance rates have been averaging above 6.5% over the past several months, households are choosing to hold on to their existing mortgages instead of swapping them out with a new home loan.
If rates fell to 6%, at least a third of borrowers who took out mortgages in 2023 could reduce their rate by a full percentage point through a refinance, according to BlackKnight.
Refinancing in today’s market could make sense if you have a rate above 8%, said Logan Mohtashami, lead analyst at HousingWire. “However, with all refinancing options, it’s a personal financial choice because of the cost that goes with the loan process,” he said.
Mortgage rates have been sky-high over the last two years, largely as a result of the Federal Reserve’s aggressive attempt to tame inflation by spiking interest rates. Experts say that decelerating inflation and the Fed’s projected interest rate cuts should help stabilize mortgage interest rates by the end of 2024. But the timing of Fed cuts will depend on incoming economic data and the response of the market.
For homeowners looking to refinance, remember that you can’t time the economy: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of factors. Your best move is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough percentage drop, said Matt Graham of Mortgage News Daily.
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly.
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates.
The current average interest rate for a 30-year refinance is 6.98%, an increase of 2 basis points from what we saw one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
The average 15-year fixed refinance rate right now is 6.46%, an increase of 5 basis points compared to one week ago. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
The average 10-year fixed refinance rate right now is 6.34%, an increase of 4 basis points compared to one week ago. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
Source: cnet.com
A tax deduction reduces your taxable income, potentially lowering the amount of income you can be taxed on. A tax credit directly reduces the amount of tax owed. Tax deductions are based on expenses or contributions, such as mortgage interest or charitable donations. Tax credits are applied after calculating how much you owe in taxes and can provide a dollar-for-dollar reduction.
When you file your federal and state tax returns, you probably look for ways to reduce the amount of money you owe. To maximize your savings, you need to know the difference between a tax credit vs. a deduction. Both affect the amount of tax due, but they do so in different ways. Here’s how to distinguish between the two.
Note: This is for informational purposes only and is not tax advice. Please consult your tax professional to discuss your individual situation.
A tax credit is a tax incentive that allows you to subtract the amount of the credit from the amount of tax you owe. For example, if you owe $2,000 in taxes and take a credit worth $1,000, the credit reduces your tax bill to $1,000. The tax credit is a dollar-for-dollar adjustment.
In contrast, a tax deduction is an amount of money deducted from your income. When you take a deduction, it reduces your taxable income by the same amount of money. For example, the standard deduction allows you to deduct $14,600—$29,200 for married couples—from your adjusted gross income.
Here’s the main difference between the two. Tax credits reduce your tax bill directly, as they offset your tax liability. Tax deductions don’t reduce your taxes directly, but they lower your tax bill by reducing the amount of taxable income you have.
Once you understand the difference between a tax credit vs. a deduction, you also need to know the difference between refundable and nonrefundable tax credits. The type of credit you apply makes a big difference in determining the size of your refund.
If you owe less than the amount of a refundable credit, you get the difference back from the IRS or your state revenue agency. Assume you owe $500 and are eligible for a refundable credit worth $1,500. Not only would the credit wipe out your $500 tax bill, but it would also help you qualify for a $1,000 tax refund.
With nonrefundable credits, you don’t get back the difference between the amount of the credit and the amount of tax you owe. In the scenario above, the credit would reduce your tax bill to $0, but you wouldn’t get the extra $1,000 as a refund.
Before you prepare your tax return, take time to learn about some of the most common tax credits and deductions for taxpayers in your situation. Many credits and deductions are based on your income, family size, and filing status. You may also qualify for credits and deductions based on college enrollment, self-employment, or charitable donations.
The EITC is a federal tax credit for filers with low to moderate incomes. To qualify, you must have earned income, which is income you get from working. Dividends, bank interest, and other forms of passive income don’t count as earned income.
You must also earn less than $63,398 annually. The amount of the EITC ranges from $600 to $7,430, depending on how many children you have.
The American Opportunity Tax Credit is a federal tax credit worth up to $2,500 per year. You may qualify if you have expenses related to your first four years of higher education, such as tuition, textbooks, or course fees.
Additionally, the AOTC is partially refundable. If you owe $0, you can get back 40% of the remaining amount of the credit as a refund. For example, if you owe $0 and are eligible for the $2,500 maximum, you can get a $1,000 refund when you file your return.
To qualify for the AOTC, you must have a modified adjusted gross income of no more than $80,000 per year—$160,000 if you’re married and file a joint tax return.
The Lifetime Learning Credit is also an educational credit, but it’s a little more flexible than the AOTC. To claim this credit, you must meet the following requirements:
This credit is worth up to $2,000 per year, and there’s no limit to the number of times you can claim it.
The child and dependent care credit reimburses you for some of the expenses you paid for the care of a qualifying individual. If you have a child, they must be under the age of 13 at the time you pay for care. A qualifying individual may also be an adult who’s mentally or physically unable to care for themselves.
The IRS only allows you to claim this credit if you paid for care because you were working or actively looking for work. You can’t claim the credit if you needed child or dependent care for another reason, such as attending school or taking time off to care for an elderly parent.
If you qualify for the credit, the amount you can claim depends on your income. Under the IRS rules, an eligible taxpayer may claim 20% to 35% of their child and dependent care expenses. However, you’re only allowed to claim up to $3,000 in expenses for one dependent or $6,000 in expenses for two or more dependents.
Assume the following:
In this scenario, you can’t claim the full $3,600 in expenses, so you’d multiply $3,000 by 35% to determine the amount of your credit.
The medical expense deduction allows you to deduct unreimbursed medical expenses on your federal tax return. However, you can’t use this deduction unless you itemize, which involves deducting specific expenses rather than taking the standard deduction. Itemizing doesn’t always save you the most money, so consult with a tax professional before you take this deduction.
If you decide that itemizing is right for your situation, you can only deduct medical expenses that exceed 7.5% of your adjusted gross income. Here’s an example:
Assume you have an AGI of $60,000 and $7,000 in unreimbursed medical expenses. If you multiply $60,000 by 0.075, you get $4,500. You can only deduct expenses exceeding the 7.5% threshold, so your deduction would be $2,500, not the full $7,000.
An unreimbursed medical expense is any expense that hasn’t been reimbursed by your health insurance company or another entity. Note that you can’t claim expenses that were paid from a flexible spending account or a health savings account, as both types of accounts already have tax advantages.
If you have a home loan, you may be able to deduct the interest on your federal tax return. To qualify for this deduction, you must file Form 1040 or Form 1040-SR, itemize your deductions on Schedule A and have an ownership interest in the mortgaged property.
The amount of money you can deduct depends on the amount of your mortgage and when you took it out. Calculating the deduction can be a bit tricky, so don’t be afraid to consult a qualified tax professional.
If you have student loans, the IRS allows you to deduct $2,500 or the amount of interest you paid during the year, whichever is less. For example, if you paid $2,346 in interest during the year, you can deduct $2,346 from your AGI. You can’t deduct the full $2,500.
Additionally, you can’t claim the student loan interest deduction if you earn more than $75,000 as a single filer or $155,000 if married filing jointly.
Credit and deduction amounts aren’t set in stone. The IRS may decide to change the eligibility criteria for some of these credits and deductions. It’s wise to consult a tax professional if you need help determining the best way to file your tax return.
Note that the credits and deductions above apply to your federal tax return only. Your state may offer additional savings opportunities, or it may have different eligibility criteria. Ask your tax professional if you qualify for any state-level credits or deductions.
Visit Credit.com for more information that may help you during tax season.
Source: credit.com
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