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Extra homeowner relief; Big-city affordability; 401(k) crash? 😱

By July 27, 2021 No Comments

Homeowners still struggling could get 25% principal reduction

The national foreclosure moratorium is set to lift in just days, but there are still options for homeowners struggling with the impact of COVID-19 on their lives.

Here’s a breakdown of the options.

According to the Biden-Harris administration, many homeowners will need deeper assistance due to pandemic-related income loss. 

For example, due to the economic crisis caused by the pandemic, some homeowners are earning less than they were before the pandemic. 

Homeowners with government-backed mortgages that have been negatively impacted by the pandemic will now receive enhanced assistance, especially if they are looking for work, re-training, having trouble catching up on back taxes and insurance, or are continuing to experience hardship for another reason.

The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. 

This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.

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Everyone is rushing to Phoenix for cheaper housing with big-city feelings

Rise&Shred reported last week that new rankings show how the housing boom has ignited homebuying in smaller to midsize cities around the U.S.

Billings, Montana is the new No. 1 hottest housing market on The Wall Street Journal/ Emerging Housing Markets Index, boosted by its affordability and appeal to remote workers.

But what about larger markets? Where can you still but in a place with big-city feelings?

Once a poster child for the foreclosure crisis, Phoenix’s housing market is booming again, boosted by robust population growth and relative affordability. 

Phoenix was a hot market before the pandemic, and it has been a major beneficiary of new remote-work policies, as workers in expensive cities decided to move for cheaper housing.

Even as home prices in Phoenix soar, housing in the area is still cheap compared with many other big cities in the West.

The Phoenix-area median existing-home price was $399,900 in June, up 31.1% from a year earlier, according to the Arizona Regional Multiple Listing Service. That’s more than $100,000 below the median home prices in San Francisco, Los Angeles, Seattle, Portland, Ore., and Denver.

“When people come here from Seattle and Portland, they are thrilled at what they can buy,” said Alan Jones, division president for homebuilder Lennar Corp. “And from California, they go beyond being thrilled.”

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Op-ed makes doomsday predictions about 401(k) performance

If you have a 401(k) and you’re of a nervous disposition, you probably don’t want to continue reading this.

Even by the standards of GMO, the super-cautious money management firm in Boston best known for its famous co-founder Jeremy Grantham, it’s terrifying. 

It shows about the worst medium-term forecasts on record for pretty much all the assets most of us own in our retirement accounts, according to an op-ed in MarketWatch. 

Large company U.S. stocks like the S&P 500?

Small company U.S. stocks like the Russell 2000?

International stocks? 

U.S. bonds, foreign bonds, inflation-protected bonds? 

GMO thinks if you buy them now and hold them over the next seven or so years, they will all – all—lose you money in real, purchasing-power terms.

In the case of some of these mainstream investments, the predicted losses are huge. 

8% and 8.5% annual losses on U.S. large-caps and small-caps? 

If that happens, they’ll mean your SPDR S&P 500 ETF and Vanguard S&P 500 Trust and Schwab U.S. Small-Cap ETF will lose about half their value, in inflation-adjusted terms, by 2028.

“I’ve been following GMO’s forecasts for nearly 20 years. I’ve never seen one this bad, and I’ve seen some that were really bad—like the ones they made in 2000 and 2007, just before the two big crashes,” the op-ed states.

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