brass Blog

Note: this is the second entry in a two-part series on real estate. Check out the first post to catch up.

When my parents bought their home in Hawaii in the 70s, they put most of everything they had into the deal. The time was right and they went for it. The result was a beautiful two-story home nestled in a small valley named for its swirling winds.

Over the past 30 years or so, the house has been a constant. My parents twice opened a home equity line of credit, a loan that has a limit based on a percentage of the total value of your home, minus the balance still owed on the mortgage. They tapped it once to buy a new car, then again several years ago to make some renovations.

The house is likely my parents’ largest investment (other than me; kids are expensive!) and their largest single asset — its value has appreciated ten-fold over time. Traditionally speaking, the home has usually been the greatest asset for many Americans. But as a whole, the concept of someone’s home being their monetary bedrock is starting to shift.

In early March, it was reported that for the first time since 1945, home equity rates averaged below 50 percent. So what does this mean? In a nutshell it means that on average, American homeowners owe more for their homes than they own.

Traditionally, a home has been an asset. But with this big housing downturn, we’re starting to get stuck with depreciated money pits instead. Home equity lines of credit can’t work well if you don’t own a decent stake in your home. With their backs against the wall between resetting mortgage rates and plummeting home values (which were overinflated to begin with), some folks are choosing to walk away. This is when a beleaguered homeowner literally hands over the house keys to the creditor, says “I’m through,” and walks out. Obviously, this is not what creditors or the Federal Reserve want. Cutting your losses by quitting a mortgage wrecks your credit, but for some people, they’d rather get hit by foreclosure rather than bankruptcy, which stays on your credit report for 10 years. Since some owners entered the market paying little to no money down, they’re attempting to cut their losses and increase their rebound time by walking away. The idea is to wait a few years, try and heal their credit and then buy a new home - for a lower price. There’s even a new industry that has developed from people choosing to walk away from mortgages, which was recently covered by ABC News. If you’re in a mortgage bind, check out what the FTC has to say about your financing options before throwing in the towel.

In March, Fed Chairman Ben Bernanke urged lenders to go beyond scaling back interest rates and start cutting the size of mortgages, a move that would hopefully persuade homeowners not to walk away, according to a report in the LA Times.

If you’re thinking about buying a home down the road like I am, it’s good to keep at least a casual eye on all this news. Right now, the housing climate is cutting both ways - not only forcing some owners into bankruptcy, but swinging back and bopping lenders on the nose too as folks walk away from their houses. The concept of home equity is shifting, especially for our generation. It may take a while before the homes we buy become a resource rather than a liability.

– Peter

Note: this is the first entry in a two-part series on real estate. This first entry deals with housing depreciation in today’s current housing market. Check back on Friday for Part 2, where I will talk about home equity.

Forget about the flashy sports coupe, my greatest material goal is home ownership. Cliché, I know. Obviously, the picture here is not of me, but in a few years I hope to stand in front of my new home and scream jubilantly just like these two - my neighbors will be thrilled.

Anyway, graduating from school and starting a career does weird things to your outlook on life. You start thinking in terms of years rather than semesters and realize, “Hey, in time I think I could actually afford a home.”

I’m an idealist and an optimist. But it’s both a strength and a weakness someone could exploit to push me into a risky real estate deal. Take a good look at me, because I could be the kind of person predatory lenders would go after. Predatory lenders don’t go after our account numbers like identity thieves; rather they prey on our optimism. In turn, we’ve been lured into acquiring mortgages we ultimately can’t handle.

A recent article in The New York Times says many economists blame “overly loose credit and abusive loans” as a large source for the current housing downturn, one that’s had a far reaching impact on the entire U.S. economy and beyond. Basically, aggressive lending to sub-prime borrowers (note the definition of sub-prime, as in not ideal), coupled with low interest rates, fueled a housing boom which greatly inflated market prices. I’m no expert on real estate, but it sure sounds like building a shopping mall over a sinkhole to me. But for many (homeowners and lenders alike) I guess the dream was just too tempting. Here’s a link to a no-holds-barred Slate report on MSN, with links to other helpful articles about foreclosure. Here is a link to an article by the U.S. Department of Housing and Urban Development on how to sniff out and avoid predatory loans.

The bubble has popped, and today many young home owners have been left to pick up the slack. Many borrowers financed with nontraditional loans like zero-down mortgages have run into big trouble. Folks were lured in by low initial teaser rates, but then found themselves drowning as their mortgages reset and payments mushroomed. This has led to scores of foreclosures and a market flooded with excess homes.

A flooded and troubled market means falling home prices. This has translated into a fierce case of depreciation for many. Home prices are down 15 percent on average from their high in July 2006. The California housing market has been especially hard hit, with home values falling 26 percent from just a year ago. According to the Slate article, a house in San Bernadino purchased for $310,000 in 2005 would now be offered for $199,900.

I want a house pretty badly, but I know I’m in no shape money-wise right now to handle it. On the other hand, if you do have the money, now would seem to be a great time to buy since prices are low. After seeing what’s happening, I think I’ll do things the old fashioned way — pay my dues, save up for a solid 20 percent down payment, and sign on with a fixed-rate mortgage. This is my dream, and it’s one I’m willing to wait for.

The federal government started its check distribution of the much-touted economic stimulus bill this month. In the end, the U.S. Treasury will send checks to about 130 million taxpayers by July.

Individuals who filed taxes in April and make less than $75,000 annually should be receiving a check for $600; couples should receive $1,200; and parents will get an additional $300 for each child.

Direct deposit payments are well under way, but payment via paper checks will take a bit longer. Want to know when your check will be sent? The stimulus payment schedule is arranged according to the last two digits of your Social Security Number. You can check out the schedule HERE.

In the end, with Americans spending their checks on all sorts of things across the economic board, the government hopes to start the U.S. economy on a swing toward recovery.

So what are you planning on using your stimulus check for? I asked brass staffers what they’re planning to spend their checks on, and the answers were pretty diverse.

• Katie Kacvinsky plans to do her part in “boosting” the economy by traveling around the Pacific Northwest and to “kick back, drink wine and love life.”
• Jennie Bartlemay also says she wants to use the money to travel. She’ll be heading to Las Vegas this summer with friends.
• Brady Sahnow says he will put his children’s portions into their investment fund. For himself he might splurge on an Xbox 360 game and save the rest to pay for groceries.
• Joel Ranck is thinking about stashing his check in a rainy day fund, or throw it into the pot for an eventual down payment on a house.
• Zack Marker is likely to spend it on high-quality groceries. Having miraculously recovered from his ketchup only diet, he gave a great link to a site listing what other people are spending their stimulus money on. Check it out HERE.
• Sarah Higginbotham says she will be taking a big bite out of her student loan debt.
• As for myself, I will invest in my photography business. I recently upgraded to a Nikon D300, and my stimulus check will help make up part of the cost.

At brass, we’re doing our part in all kinds of ways and having fun while we’re at it. Well, some of us at least. Happy spending.

– Peter

I’ve been following a Freakonomics blog series on The Economics of Happiness. Blogger Justin Wolfers explores this topic from multiple perspectives, including whether richer countries are happier than poorer countries (part 2) and whether raising the incomes of all would make everyone happier (part 5). Here are some interesting points made in part 6 of this series, where he jumps more deeply into just what it means to be “happy” and how that relates to a country’s GDP:

• Richer countries are less likely to experience physical pain, depression, boredom, and anger, and more likely to eat “tasty food.” They also are more likely to report having been treated respectfully and feeling ownership over their time.
• On the flip side, reports of being well-rested and taking pride in recent achievements don’t seem to be related to economic development.
• GDP doesn’t seem to correlate to how much a country’s population worries.
• As it turns out, money can’t buy love–it’s likely to be experienced in countries all across the GDP map.

As Wolfers points out, the issue of wealth and living conditions as it relates to happiness and life-satisfaction affects all facets of society including economics, psychology, sociology, anthropology, and political science. A few months ago I read about an entertaining study/project where a psychologist produced a “World Map of Happiness.” Defining happiness is not an exact science, but as this article explains, the three biggest indicators of national happiness according to a recent survey included (in order of influence) health, wealth, and education. See a list of the 20 happiest nations in the world according to the World Map of Happiness here (the U.S. falls at number 23).

In light of all this discussion on levels of national happiness, writer Eric Weiner decided to spend one year researching the world’s happiest places for a book called The Geography of Bliss. Check out this slide show on nine of the places spotlighted from Weiner’s year of happy exploring. According to this article, the book reveals a few commonalities between the happy people in Weiner’s destinations: family, a sense of community, and a sense of humor. You can read the first chapter of his book online, courtesy of the New York Times.

From all of the current dialogue on the contributing factors to happiness, I think it’s clear that having lots of money isn’t a first-class ticket to perpetual bliss. However, the ability to stay healthy, get an education, and have a say in the direction of your own life and community are significant factors. The ability to make, manage, and multiply your own money skillfully and conscientiously–whether that’s paying for health insurance, taking out a reasonable loan for school, or donating to charity–can definitely help keep the good times rolling. Knowing how to make money work for you helps you avoid troublesome situations so you can focus on what keeps you smiling and satisfied. And for me, that’s grabbing another free bagel in the break room courtesy of brass.

Happy Friday!

- Sarah

If you’ve kept up with the news at all, you know that basically anyone who files a 2007 tax return on time should be getting a check from the U.S. government come May. It’s all part of the $150 billion economic stimulus plan meant to kick our economy back into rhythm like a jolt from the biggest pacemaker in the universe.

So you know the gist of the stimulus package, but you still have questions about getting your check. Well, don’t stress. Turns out the IRS (in association with the American Payroll Association) posted a series of short informational videos on YouTube to help out.

In my mind, the IRS using YouTube as a vehicle for public service announcements proves how much streaming online video has made an impact on society. The web is the new “it” medium to distribute video content easily and quickly. The IRS gets it — and that’s pretty cool.

Each 30 second clip lays out basics like how to qualify for a stimulus check, what form you need to file and how to avoid the scam artists who’ve come out of the woodwork to try and sucker you out of your stimulus money.

Tons of folks will be clamoring for your stimulus money — retailers, businesses and crooks alike. But just remember, in the end it’s YOUR money and you spend it however you’d like. The IRS is trying to help by keeping you informed — check out what they have to say.

Stay classy.

– Peter

As you may already know, students who have to borrow more than the maximum amount for the federally subsidized loans, turn to private loans to pay for school. These almost always have higher interest rates. As a student I had to do this just a few years ago when I paid a heftier price to attend an out-of-state school. While I don’t regret attending my alma mater, I do wish I had tried harder to establish residency in the state of my chosen school. That’s because my private loan rates now make me cringe each month. With our country in what is currently called a “credit crunch” by the media, private education loans are becoming more costly and difficult to access, according to this report on NPR. It’s getting harder for companies and nonprofit organizations to find investors who are willing to “buy debt” which in turn means these institutions have less money to lend.

This translates to more stringent restrictions on credit scores for interested borrowers and in some cases, less available private loan options altogether. As the NPR story points out, this has been affecting private schools that provide specific professional training like culinary or technical schools first.

So what does this mean? No college (or no more college) for you? Not necessarily. It will definitely force you to more closely examine which colleges or universities you can afford to attend as well as which might get you off on the best foot (read: finding options that won’t leave you with loans that have outrageous interest rates). For example, you might not discard community colleges so quickly knowing they have the potential to save you big bucks down the road. The situation could encourage you to ask yourself if you really looked at all the programs offered by public universities in your state? Coming from someone who wishes she had thought a little bit more about this herself, I think having to reexamine your options when it comes to college could be a significant bright side to an otherwise discouraging piece of news.

- Sarah

Hello all, Peter here. I’ve been tracking a pretty interesting story lately. With so many people using social networks now for everything from sharing pictures to selling books, this is one story you’ll want to know about.

A first-year engineering student in Toronto, Canada joined a study group on Facebook for help with chemistry homework, a move which ultimately resulted in him being charged with 146 counts of academic misconduct and facing possible expulsion from his university for cheating.

Chris Avenir, 18, is the Ryerson University student at the center of a maelstrom. His story has sparked fierce debate on the use of Facebook as either a means for constructive learning or a proverbial rat’s nest of academic dishonesty. Here’s a quick rundown on the story so far:

According to multiple media reports, Avenir joined in the Fall and became an administrator of the Facebook group “Dungeons/Mastering Chemistry Solutions” (Dungeons refers to the nickname of a popular study hall on Ryerson campus). Over time, 146 students joined the group, looking for help with chemistry concepts and homework, which counted for 10 percent of their final grade.

The problem is the chemistry professor had stipulated that homework be worked on individually; when he discovered the Facebook group over winter break and saw Avenir listed as its administrator, he took swift punitive action. The professor changed Avenir’s grade from a “B” to an “F” and reported him to school administrators, accusing him of cheating. The administration in turn hit him with 146 counts of academic misconduct, one charge for every student in the study group.

The story quickly spread online, across blogs and forums as well as coverage by mainstream media like CNN, CBC-TV and The Canadian Press.

On Tuesday March 11th, Avenir (still attending class this term) attended an expulsion hearing. There is no final decision yet as to his academic fate, but he told reporters he was optimistic. The university will make its decision by next week.

“I feel pretty confident and optimistic about the appeal meeting we just had,” he told the Canadian Press after the 90-minute closed-door meeting. “I don’t have any regrets about what happened inside.”

At present, the debate rages on. Scores of students, bloggers and Facebook users have expressed shock and outrage at the charges, arguing that a group on Facebook is no different than traditional study groups held in person. Ryerson officials have responded by saying they understand what Facebook and other social networking sites are, and that the issue is not the venue, but whether or not what happened can be called cheating.

In either case, this story has garnered such attention because it illustrates a new technological and social development scraping against a time-honored and solid establishment. It’s a testament to the speed in which we as young adults react and mobilize, for better or for worse.

Do I have questions about the story? You betcha. I know it’s impossible to find out the complete story just by reading media reports, and for that reason I’m trying hard not to fall either way opinion-wise, but something is definitely up. I’m anxious to see how this story resolves itself.

So now I turn to you, brass Blog readers. What do you think?

- Peter

Remember when you used to write down your thoughts and activities in a journal to have something to look back on later in life? And how you would paste ticket stubs and magazine cutouts the old-fashion way? These days having a blog is a hyperactive version of an old school journal. The blog craze has hit everywhere, including news sources, magazines (like here at brass!) and more, but 37% of bloggers cite “my life and experiences” as a primary topic of their blog . (source: pewinternet.org)

Interestingly, about 54% of bloggers use a pseudonym. If you’re writing about sensitive information or worried about certain people seeing your blog it may be a good idea to use a pseudonym. A friend of mine with a blog has had to adapt and start to use nicknames for friends and has shut down the entire blog several times to deal with outside repercussions. However, that same friend also was recently recruited and hired as the editor of the college blog network collegeOTR.com, after being discovered through her blog.

It’s a crazy media-filled world out there, but it looks like blogging could be for just about everyone – whether you choose to make it a personal interactive diary or a launching pad into the media world.

I get a lot of press releases in my inbox. Many of them helpful, some more spam-like. They range from new products, recent surveys, and up-and-coming young adults to hot tips on imaginary hedge funds. When I recently got an email regarding a reality TV show about life on Wall Street, I was interested. We often hear about new music groups (one perk of the job is discovering new bands via the press release pipeline), but a reality TV show about investing that actually sounded entertaining? That was definitely worth taking a peek.

The show Wall Street Warriors, originally released in 2006 and recently launched into its second season, allows viewers to “witness the extreme power and intense competition that defines Wall Street through the eyes of those who thrive there.” What I think is fantastic is the range of roles they cast for the fast-paced and crisply edited 30-minute episodes:

• The Stock Broker
• The Rookie
• The Fund Manager
• The Hard Sell
• The Floor Trader
• The Options Broker

You get a glimpse at how the wheels of the stock market turn–and what it’s like to be the one turning them. One of my favorite story lines is that of “The Rookie”– a 21-year-old, trilingual, recent college graduate attempting to “make her mark” as a day trader. The episode currently airing on the website follows her to a job interview in Paris–while it may be an atypical career move, she faces many of the same dilemmas the rest of us do upon entering a career.

Season 2: Wall Street Warriors

Photo Courtesy of MOJOHD

I hadn’t heard of MOJO before, the network that airs the show. It’s a relatively new, 100% hi-def cable channel, which explains why I hadn’t heard of it–my premium cable went out the window during a rigid round of college budgeting and never made it back in. I do most of my cable-show watching on the web now anyway. MOJO seems to have a handle on the evolution of television and they have a pretty sweet website allowing users to experience their favorite shows from all sorts of angles. For Wall Street Warriors this includes photos, episode descriptions, cast bios, a glossary for stock lingo heard in the show, and of course, video. When you’ve got some time, take a peek at the episodes they have available on the website. It looks like at least the first season is available on DVD at Amazon for $26.99. I couldn’t find it at our public library, but you can always consider requesting the library order it. I’m looking forward to the promo DVD the nice folks who handle the show’s promotion are shipping our way.

The show was built into a special block of shows labeled MOJO Money Night featuring three “fiscally-themed series,” along with Start-Up Junkies and Bobby G: Adventure Capitalist. So if you’ve been lacking in the enthusiasm department when it comes to investing, an entertaining (and potentially educational) antidote might just be a few episodes of Wall Street Warriors. Check out the shows online and let me know what you think.

- Sarah

If you received a package of very official looking information about foreign currency and $25 owed to you, it might not be a scam. People who made foreign currency card transactions between February 1, 1996 and November 8, 2006 may be eligible to receive part of a legal settlement. The cards in question include credit, debit and ATM cards branded by Visa, MasterCard or Diners Club and issued by a few major financial institutions.

A court case settlement was affirmed November 2006 to the tune of $336 million, though it’s still subject to final approval. The case alleged that the card companies overcharged when converting foreign currency into dollars and didn’t show all the fees. Another case against American Express is currently pending.

If you didn’t receive a notice, but think you might be eligible, visit ccfsettlement.com for more info and to submit a claim form. The website has an extensive FAQs section and should be able to answer any questions you have. Have more questions? You can call 1-800-945-9890 toll-free.

Before you pick up the phone, here are a couple of things you’ll want to know if you are eligible for a settlement. First, you may not get the money for months or years–there are still a few items the court has to work out. Second, you’re not going to become a millionaire–sorry. There are three refund options, ranging from taking $25 straight-up to two different tabulations based on your travel or your applicable transactions.

The deadline to file claims for a refund is May 30, 2008. If you were traveling or studying overseas with a credit, debit or ATM card, there could be money with your name on it.

- Jennie