The Steve Pomeranz Show

The global communications we take for granted are the result of heroic and persistent attempts by determined entrepreneurs to lay the first transatlantic cable. Would we be as determined today?

All right, now let me get to some of your questions. By the way, thank you so much for all of these great questions. I’ve combined them in terms of topic to make things a little bit easier to answer everyone as efficiently as possible. So, here are the answers, in general, to these questions. Of course, I don’t know your particular personal situation, so these answers are generic. 401(k) Contributions And Portfolio Allocations Q: Mercedes says she currently contributes 15% of her paycheck to her 401k and asks if she should lower her contributions. She’s lost $30,000 so far, as of the writing of this question, and she’s planning on retiring in 17 years. And Lorraine asked me about rebalancing her 401k and Harving just says, “401k?” A: Unless you’re retiring within the next three years, you should be rebalancing your 401k and increasing your allocation to stocks. Mercedes, you should not lower your 15% deduction from your paycheck. I mean, if you have a steady job and you’re not afraid of losing it, and you have excess money in the form of an emergency fund, keep the 15% deduction. Keep plowing that money into the plan. Lowering your deduction is a classic mistake. Do not do that. You have 17 years until you’ll need the money. Q: Anne wants to know about rebalancing a portfolio and the frequency of doing so. And Jill asked, “Should I be buying now? Should I be changing my asset allocation?” A: As far as rebalancing, everybody should be rebalancing now, getting back to whatever the rebalance percentage was—60/40, 80/20—get back to that now because it’ll force you to buy stocks at lower prices. And this is all advice with the idea that you’re thinking long-term with this money. This has nothing to do with short-term money that you might need. That money does not belong in the stock market, it belongs in CDs, money markets, things that hardly yield anything but that are there for a specific purpose. Possible Negative Interest Rates And Bonds Q: Robert asks the question, “Please cover negative interest rates for treasury bills, notes, and bonds. How to make money in Treasury securities if interest rates go negative.” A: Well, Robert, it’s an esoteric question, but the answer is easy. If you buy bonds, you buy Treasury bonds especially, they will do extremely well if rates go negative. Social Security And Annuities Q: Talibah asks, “Am I at risk for income loss with retirement funds coming from Social Security?” Or, she went on, from her FRS, which is a pension plan with the state and a medical annuity. A: Talibah, Social Security will not be in danger. Generally, immediate annuities are very safe. And your pension plan should send you an annual report where you can check to see if they’re adequately funded. Q: Karen asks about annuities, fixed annuities, variable annuities: “Do you think that this is a good economic climate to invest in those, especially with interest rates falling?” A: My personal opinion is that investing in fixed annuities now would be a mistake. Rates are just too low, but I also want to make another point, and I have seen this time and time again. When markets get bad, insurance companies start to advertise, promoting safe investments. Buying “safe investments” right now is like closing the barn door after the horse has left the barn. It’s too late. If you want safety, you would do it when the markets are up very, very, very high, and then you can look for something safe. But right now, you have to ride through this and not get sucked into this idea that you’ve had this terrible decline and now you’re going to sell everything and lock into low rates. It’s a way of selling low. And then in terms of buying the annuity, you’re buying high with the annuity.

All right, now let me get to some of your questions. By the way, thank you so much for all of these great questions. I’ve combined them in terms of topic to make things a little bit easier to answer everyone as efficiently as possible. So, here are the answers, in general, to these questions. Of course, I don’t know your particular personal situation, so these answers are generic. 401(k) Contributions And Portfolio Allocations Q: Mercedes says she currently contributes 15% of her paycheck to her 401k and asks if she should lower her contributions. She’s lost $30,000 so far, as of the writing of this question, and she’s planning on retiring in 17 years. And Lorraine asked me about rebalancing her 401k and Harving just says, “401k?” A: Unless you’re retiring within the next three years, you should be rebalancing your 401k and increasing your allocation to stocks. Mercedes, you should not lower your 15% deduction from your paycheck. I mean, if you have a steady job and you’re not afraid of losing it, and you have excess money in the form of an emergency fund, keep the 15% deduction. Keep plowing that money into the plan. Lowering your deduction is a classic mistake. Do not do that. You have 17 years until you’ll need the money. Q: Anne wants to know about rebalancing a portfolio and the frequency of doing so. And Jill asked, “Should I be buying now? Should I be changing my asset allocation?” A: As far as rebalancing, everybody should be rebalancing now, getting back to whatever the rebalance percentage was—60/40, 80/20—get back to that now because it’ll force you to buy stocks at lower prices. And this is all advice with the idea that you’re thinking long-term with this money. This has nothing to do with short-term money that you might need. That money does not belong in the stock market, it belongs in CDs, money markets, things that hardly yield anything but that are there for a specific purpose. Possible Negative Interest Rates And Bonds Q: Robert asks the question, “Please cover negative interest rates for treasury bills, notes, and bonds. How to make money in Treasury securities if interest rates go negative.” A: Well, Robert, it’s an esoteric question, but the answer is easy. If you buy bonds, you buy Treasury bonds especially, they will do extremely well if rates go negative. Social Security And Annuities Q: Talibah asks, “Am I at risk for income loss with retirement funds coming from Social Security?” Or, she went on, from her FRS, which is a pension plan with the state and a medical annuity. A: Talibah, Social Security will not be in danger. Generally, immediate annuities are very safe. And your pension plan should send you an annual report where you can check to see if they’re adequately funded. Q: Karen asks about annuities, fixed annuities, variable annuities: “Do you think that this is a good economic climate to invest in those, especially with interest rates falling?” A: My personal opinion is that investing in fixed annuities now would be a mistake. Rates are just too low, but I also want to make another point, and I have seen this time and time again. When markets get bad, insurance companies start to advertise, promoting safe investments. Buying “safe investments” right now is like closing the barn door after the horse has left the barn. It’s too late. If you want safety, you would do it when the markets are up very, very, very high, and then you can look for something safe. But right now, you have to ride through this and not get sucked into this idea that you’ve had this terrible decline and now you’re going to sell everything and lock into low rates. It’s a way of selling low. And then in terms of buying the annuity, you’re buying high with the annuity.

With Rick Newman, Senior Columnist for Yahoo Finance Steve spoke this week with Rick Newman, Senior columnist for Yahoo Finance and seasoned author, about the economic responses to the current COVID-19 pandemic and what they imply for world and personal finances. Ignoring The Horrific Economic Numbers Everyone is panicking a little in light of the current coronavirus pandemic, and this panic has been reflected in the economy. But Rick has recently written an article which encourages people to ignore most of the horrific-sounding economic numbers being circulated. “The terror really began with Goldman Sachs predicting a 24% decline in the second-quarter GDP,” Rick said. But the truth that we really need to pay attention to is that history is the greatest of teachers. “The Great Depression is really our benchmark for how bad the economy can get, and the worst decline our country experienced in GDP during that time was 14% in 1932,” Rick continued. Morgan Stanley predicted an even greater decline of 30%. But what both Goldman Sachs and Morgan Stanley are talking about is a change in the GDP from the first fiscal quarter to the second fiscal quarter on an annualized basis. “But it’s that annualized basis that’s screwing everything up,” Rick pointed out. There are reasons to annualize a quarterly figure under normal circumstances: it identifies an economic pace to give an indication of what the rest of the year will look like. But during this coronavirus pandemic, things are just not normal. “We could see significant GDP declines, but no economist thinks that the entirety of 2020 is going to decline by 24% to 30%. That would require the GDP to fall that percentage for four quarters in a row,” Rick said. He noted that the general consensus is that 2020’s GDP will fall by about 5% compared to 2019, which is terrible but not as bad as some of the figures make it seem. Steve pointed out that skewed numbers affect the investment world, too. “You could look at your returns and be up 10% for the quarter. But that doesn’t mean you’ll be up 40% for the year.” Putting Annualization Into Context Rick used the auto industry as a good example of annualizing numbers. The idea is to get the pace of sales. “In February, the pace of sales was 16.6 million vehicles. But what most forget to say is that auto dealers didn’t sell 16 million vehicles in February. That figure is the seasonally adjusted annualized rate or SAAR. It gives everyone an idea of how sales are paced this year versus last year. In 2019, the figure was 17.1 million vehicles. This means the pace of sales slowed a bit. But it’s not helpful to use annualized figures during dramatic world changes and the reference point is totally out of whack.” Steve concluded, “I think Morgan Stanley and Goldman Sachs should have reported those numbers differently.” In reply, Rick pointed out, “But the fact is that those two giants were talking to each other. It’s Wall Street research for Wall Street analysts. That’s why we feel it’s important to provide context. With context, it’s not as bad as some of the numbers would make it seem.” Employment Numbers Steve asked Rick about another article he’s written, ominously entitled, “We May Have Lost 21 Years of Job Growth.” The coronavirus pandemic is really hitting employment numbers the hardest. “Some employment numbers are out-of-date because it’s a government survey that comes out about two weeks behind the survey. Under normal circumstances,

With Rick Newman, Senior Columnist for Yahoo Finance Steve spoke this week with Rick Newman, Senior columnist for Yahoo Finance and seasoned author, about the economic responses to the current COVID-19 pandemic and what they imply for world and personal finances. Ignoring The Horrific Economic Numbers Everyone is panicking a little in light of the current coronavirus pandemic, and this panic has been reflected in the economy. But Rick has recently written an article which encourages people to ignore most of the horrific-sounding economic numbers being circulated. “The terror really began with Goldman Sachs predicting a 24% decline in the second-quarter GDP,” Rick said. But the truth that we really need to pay attention to is that history is the greatest of teachers. “The Great Depression is really our benchmark for how bad the economy can get, and the worst decline our country experienced in GDP during that time was 14% in 1932,” Rick continued. Morgan Stanley predicted an even greater decline of 30%. But what both Goldman Sachs and Morgan Stanley are talking about is a change in the GDP from the first fiscal quarter to the second fiscal quarter on an annualized basis. “But it’s that annualized basis that’s screwing everything up,” Rick pointed out. There are reasons to annualize a quarterly figure under normal circumstances: it identifies an economic pace to give an indication of what the rest of the year will look like. But during this coronavirus pandemic, things are just not normal. “We could see significant GDP declines, but no economist thinks that the entirety of 2020 is going to decline by 24% to 30%. That would require the GDP to fall that percentage for four quarters in a row,” Rick said. He noted that the general consensus is that 2020’s GDP will fall by about 5% compared to 2019, which is terrible but not as bad as some of the figures make it seem. Steve pointed out that skewed numbers affect the investment world, too. “You could look at your returns and be up 10% for the quarter. But that doesn’t mean you’ll be up 40% for the year.” Putting Annualization Into Context Rick used the auto industry as a good example of annualizing numbers. The idea is to get the pace of sales. “In February, the pace of sales was 16.6 million vehicles. But what most forget to say is that auto dealers didn’t sell 16 million vehicles in February. That figure is the seasonally adjusted annualized rate or SAAR. It gives everyone an idea of how sales are paced this year versus last year. In 2019, the figure was 17.1 million vehicles. This means the pace of sales slowed a bit. But it’s not helpful to use annualized figures during dramatic world changes and the reference point is totally out of whack.” Steve concluded, “I think Morgan Stanley and Goldman Sachs should have reported those numbers differently.” In reply, Rick pointed out, “But the fact is that those two giants were talking to each other. It’s Wall Street research for Wall Street analysts. That’s why we feel it’s important to provide context. With context, it’s not as bad as some of the numbers would make it seem.” Employment Numbers Steve asked Rick about another article he’s written, ominously entitled, “We May Have Lost 21 Years of Job Growth.” The coronavirus pandemic is really hitting employment numbers the hardest. “Some employment numbers are out-of-date because it’s a government survey that comes out about two weeks behind the survey. Under normal circumstances,

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s Real Estate Roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about the state of the real estate industry and how agents are being affected during a time when most states are under mandatory quarantine. The Rules Have Changed With the majority of the country in quarantine, the rules have changed for the real estate industry. Though agents are considered essential workers, they have to follow different guidelines when helping clients find a home. “We’re not allowed to be in the house with a client when showing it,” Terry said. “The seller can’t be in there either. We’re allowed to show up and let the client in. Only the buyer can be in the home.” But the majority of agents are taking even further precautions to help prevent potential spreading of the novel coronavirus and maintaining social distancing. “Most agents have created walking tours of homes ahead of time to offer clients. It’s only once they’ve expressed serious interest about the home that we invite them to tour in person. We also have sanitizer, gloves, booties, and other protective elements to help do our part to stop the coronavirus pandemic,” Terry said. The video walking tours are popular online features anyway. They let agents show potential buyers a home room-by-room without the agent or buyer having to be in a location at a specific time. These virtual tours are especially helpful now and can be made more personal for specific clients. Terry added, “Despite everything that’s going on, homes are still being looked at, bought, and sold. We just have to adapt and keep everyone as safe as possible.” Prices And Inventory As can probably be expected, prices and housing inventory are being affected by the coronavirus pandemic as well. Terry said, “Prices are coming down. But as I’ve said before, you tend to get more and more quality offers when you lower the price of a home. However, I have seen some lowball offers. I have a property on the market for $740,000 and there was a $350,000 offer. We know times are hard, however, this is a precedent that we’re not going to set.” “And no one’s at that level of desperation just yet,” Steve added. But there are a lot of questions. How long will the recession last? How long will people be out of work? What will the economy look like in a few months? Prices could continue to take some hits and inventory is affected also. Terry said, “Right now, we’ve been in a buyer’s market. We’re down to like three months of inventory, which is extremely low. A balanced healthy market is at six months.” Steve pointed out the additional fact that people who are quarantined in their homes aren’t going to be able to sell. It’s Terry’s hope, however, that potential sellers will take advantage of the opportunity available to them. “With inventory down, now is a great time to sell. There are more people competing for fewer houses, which means more offers. If more sellers think like this, we’ll be able to boost inventory levels.” Mortgages Despite what’s happening in the world, it’s still relatively easy to get a mortgage if you’re buying a home, provided you qualify. The only situation where this isn’t quite as true is with jumbo mortgages. “Jumbo mortgages, at least in my market, are mortgages over $510,000. Lenders end up putting deals together and then selling them on the secondary market,” Terry said. Steve offered some additional info on jumbo mortgages: “A mortgage broker told me that banks, hedge funds, and even some private investors typically buy these mortgages. But many don’t want to get stuck with such long-term mortgages at the low -interest rates being offered with so much uncertainty.” All of this means that you really need to consider what type of home you want and ne...

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s Real Estate Roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about the state of the real estate industry and how agents are being affected during a time when most states are under mandatory quarantine. The Rules Have Changed With the majority of the country in quarantine, the rules have changed for the real estate industry. Though agents are considered essential workers, they have to follow different guidelines when helping clients find a home. “We’re not allowed to be in the house with a client when showing it,” Terry said. “The seller can’t be in there either. We’re allowed to show up and let the client in. Only the buyer can be in the home.” But the majority of agents are taking even further precautions to help prevent potential spreading of the novel coronavirus and maintaining social distancing. “Most agents have created walking tours of homes ahead of time to offer clients. It’s only once they’ve expressed serious interest about the home that we invite them to tour in person. We also have sanitizer, gloves, booties, and other protective elements to help do our part to stop the coronavirus pandemic,” Terry said. The video walking tours are popular online features anyway. They let agents show potential buyers a home room-by-room without the agent or buyer having to be in a location at a specific time. These virtual tours are especially helpful now and can be made more personal for specific clients. Terry added, “Despite everything that’s going on, homes are still being looked at, bought, and sold. We just have to adapt and keep everyone as safe as possible.” Prices And Inventory As can probably be expected, prices and housing inventory are being affected by the coronavirus pandemic as well. Terry said, “Prices are coming down. But as I’ve said before, you tend to get more and more quality offers when you lower the price of a home. However, I have seen some lowball offers. I have a property on the market for $740,000 and there was a $350,000 offer. We know times are hard, however, this is a precedent that we’re not going to set.” “And no one’s at that level of desperation just yet,” Steve added. But there are a lot of questions. How long will the recession last? How long will people be out of work? What will the economy look like in a few months? Prices could continue to take some hits and inventory is affected also. Terry said, “Right now, we’ve been in a buyer’s market. We’re down to like three months of inventory, which is extremely low. A balanced healthy market is at six months.” Steve pointed out the additional fact that people who are quarantined in their homes aren’t going to be able to sell. It’s Terry’s hope, however, that potential sellers will take advantage of the opportunity available to them. “With inventory down, now is a great time to sell. There are more people competing for fewer houses, which means more offers. If more sellers think like this, we’ll be able to boost inventory levels.” Mortgages Despite what’s happening in the world, it’s still relatively easy to get a mortgage if you’re buying a home, provided you qualify. The only situation where this isn’t quite as true is with jumbo mortgages. “Jumbo mortgages, at least in my market, are mortgages over $510,000. Lenders end up putting deals together and then selling them on the secondary market,” Terry said. Steve offered some additional info on jumbo mortgages: “A mortgage broker told me that banks, hedge funds, and even some private investors typically buy these mortgages. But many don’t want to get stuck with such long-term mortgages at the low -interest rates being offered with so much uncertainty.” All of this means that you really need to consider what type of home you want and ne...

Last week, I held a special call-in show to focus on the new world we find ourselves in, from changes in the economy to challenges in the stock market. So, I thought I would give a recap of my discussion in case you didn’t have a chance to dial-in. I began the call painting by the picture of where we are today regarding the economy and the markets. I don’t think it requires much detail to give everyone a sense of what the economy is doing right now. You don’t have to be an economist to see the loss of business, loss of wages, and the insanely volatile market we have seen over the last 30 days. Though things have settled down a bit, the kind of volatility has taken the breath away from even the most seasoned investors. I focused more on the market because so many Americans have a stake in the stock market—either through your 401k or your IRA or even your pension plans (which also invest in the stock market although you really don’t see it). In my opinion, the markets have reacted appropriately in many ways. The object of the market is to give investors a place to buy and sell their investments. I know this sounds too simple, but when you boil it all down, it is that simple. It is not so much a stock market as it is a market for stocks, like a market for corn or wheat, a place to sell and buy at a given price. What is the price? It is a number agreed to between buyer and seller. If both have confidence in the future, the price will reflect that; if neither has confidence in the future, the price will affect that also. Thirty days ago, there was no confidence in the future. Period. But something else happens in periods like this. If there are only sellers and no buyers, markets could freeze up. It’s this freeze that is most dangerous and puts the economy in its most precarious position. It is the precursor of a serious economic decline and can cause a depression. If the market operated in a vacuum, a freeze could be devastating. But fortunately, the market does not operate in a vacuum and there is something that can be done. It is called Government Intervention or Stimulus. Since the government has the ability to print money, it has the greatest financial power in the country—it can pretty much do anything it wants. And do something it did. It announced that the U.S. Central Bank will buy unlimited amounts of Treasury bonds and mortgage bonds to help ensure that the markets function properly. It also set up programs to ensure corporations and state and local municipalities could have access to credit Did this quiet the market and prevent a freeze-up? Yes! The market reacted positively, signs of stress in the corporate debt sector eased, bond funds rallied. But Wait, That’s Not All Congress can also do something. And do something it did. Congress approved a historic, $2 trillion stimulus package that produced one of the most  far-reaching measures Congress has ever considered—all with unanimous bipartisan support. So with this backdrop, here is a rundown of my discussion on the call’s talking points. My first point I posed was: What Should One Do If The Market Keeps Going Down And Stays Down? Well, what does down really mean? The Dow Jones Ind. Avg. high for this year was 28,538. One year ago, it sat at 26,000 and as of last Friday, it stood at 24,000. The last time the Dow approached 24,000 was on December 24th, 2018. I remember it not so fondly as one of the worst Christmas gifts ever! So, if the market stays at this level for a while, what does that mean to you?  No appreciation for a few years. I used to call a market like that a “RoomsToGo” market, back when Rooms To Go used to offer 0% financing...

Last week, I held a special call-in show to focus on the new world we find ourselves in, from changes in the economy to challenges in the stock market. So, I thought I would give a recap of my discussion in case you didn’t have a chance to dial-in. I began the call painting by the picture of where we are today regarding the economy and the markets. I don’t think it requires much detail to give everyone a sense of what the economy is doing right now. You don’t have to be an economist to see the loss of business, loss of wages, and the insanely volatile market we have seen over the last 30 days. Though things have settled down a bit, the kind of volatility has taken the breath away from even the most seasoned investors. I focused more on the market because so many Americans have a stake in the stock market—either through your 401k or your IRA or even your pension plans (which also invest in the stock market although you really don’t see it). In my opinion, the markets have reacted appropriately in many ways. The object of the market is to give investors a place to buy and sell their investments. I know this sounds too simple, but when you boil it all down, it is that simple. It is not so much a stock market as it is a market for stocks, like a market for corn or wheat, a place to sell and buy at a given price. What is the price? It is a number agreed to between buyer and seller. If both have confidence in the future, the price will reflect that; if neither has confidence in the future, the price will affect that also. Thirty days ago, there was no confidence in the future. Period. But something else happens in periods like this. If there are only sellers and no buyers, markets could freeze up. It’s this freeze that is most dangerous and puts the economy in its most precarious position. It is the precursor of a serious economic decline and can cause a depression. If the market operated in a vacuum, a freeze could be devastating. But fortunately, the market does not operate in a vacuum and there is something that can be done. It is called Government Intervention or Stimulus. Since the government has the ability to print money, it has the greatest financial power in the country—it can pretty much do anything it wants. And do something it did. It announced that the U.S. Central Bank will buy unlimited amounts of Treasury bonds and mortgage bonds to help ensure that the markets function properly. It also set up programs to ensure corporations and state and local municipalities could have access to credit Did this quiet the market and prevent a freeze-up? Yes! The market reacted positively, signs of stress in the corporate debt sector eased, bond funds rallied. But Wait, That’s Not All Congress can also do something. And do something it did. Congress approved a historic, $2 trillion stimulus package that produced one of the most  far-reaching measures Congress has ever considered—all with unanimous bipartisan support. So with this backdrop, here is a rundown of my discussion on the call’s talking points. My first point I posed was: What Should One Do If The Market Keeps Going Down And Stays Down? Well, what does down really mean? The Dow Jones Ind. Avg. high for this year was 28,538. One year ago, it sat at 26,000 and as of last Friday, it stood at 24,000. The last time the Dow approached 24,000 was on December 24th, 2018. I remember it not so fondly as one of the worst Christmas gifts ever! So, if the market stays at this level for a while, what does that mean to you?  No appreciation for a few years. I used to call a market like that a “RoomsToGo” market, back when Rooms To Go used to offer 0% financing...

Nathan’s Famous: The hot dog that inspired a movie. In These Vagabond Shoes, Kevin Bacon travels across NYC on a quest for the iconic Coney Island frankfurter.

Nathan’s Famous: The hot dog that inspired a movie. In These Vagabond Shoes, Kevin Bacon travels across NYC on a quest for the iconic Coney Island frankfurter.

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s real estate roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about the current state of home prices and mortgage interest rates. They spoke about the fact that despite the consistent rise in home prices, the current housing market situation is notably different from what was seen in the years prior to the housing market crisis of 2007-2008. The Current Housing Market In the six years prior to the housing market crisis, home prices climbed consistently and sharply. Starting in 2000, “Prices were up 8.6% for the year. The percentage continued to increase, compounding on itself. In 2004, home prices skyrocketed, up by 12.5%,” Steve noted. Compare that with the past six years. Steve had the numbers handy: “In 2014, prices rose by a little over four percent, 2015 by five percent, then six percent—but then back down to five and then under five, 4.8, 4.7%.” Prices are rising, but we’re seeing a decline in the rate of appreciation. They’re still going up, but not as fast as they were a few years ago. Terry said that according to the National Association of Realtors (NAR), the peak for housing prices nationwide was in 2017. Keep in mind that your home appreciates in price the longer you own it. The current statistics show this and reveal why we don’t appear to be running headlong toward another market crisis. “Median home prices over a seven-year period show an average appreciation of 29%. Eight years? – 32%. Ten years? – 39%.” Terry offered listeners some more detail as far as regional statistics. The western part of the country has the strongest market, showing an average 10-year home price appreciation rate of 43%. The South’s 10-year appreciation is about 39%; the Midwest, around 37%; and the Northeast limps into last place with a 10-year appreciation of only 34%. Steve pointed out the nearly 10% discrepancy between the West and the Northeast. It’s Not Like 2006 The home mortgage market is quite different now than it was back in 2006. Steve explained that banks were just handing out mortgages to people who didn’t even come close to qualifying for the size of home loans they were getting. Terry added that many of those mortgages had ridiculously low introductory rates—as low as 1% or 2%—with huge balloon payments on down the road causing homeowners to default on those loans. That’s not the kind of mortgage market that we have now. Steve reminded listeners about negative amortization, one of the crazier aspects of mortgage lending in the early 2000s. He recalled, “You had the ‘pick a payment’ mortgages. Somebody would get a mortgage loan where the payments were about $1,200 a month, but if they felt like that was just too much, they could choose to just make payments of, say, $300 a month. Of course, that other $900 a month didn’t just disappear, it got added onto the back end of the loan. So, voila’! – you ended up with negative amortization.” Positive News Amidst Coronavirus Concerns News about the novel coronavirus is everywhere, and unfortunately, the numbers coming in are terrifying. But there is some good news for homebuyers—the effect on interest rates. The stock market has been chaotic, to say the least. Institutions are pulling out of the market, selling shares in massive amounts. Steve explained, “…that money has to go somewhere. And it’s going into bonds. This drives the price of bonds up. When prices go up, yields come down and loans tied to bonds decrease in interest. That means mortgage interest rates are coming down.” While it’s true that interest rates have been low for a while, the market is moving even more favorably right now. Terry summed it up as “Interest rates are crazy low. It’s a great opportunity for homebuyers,

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s real estate roundup, Steve spoke with Terry Story, a 31-year veteran at Keller Williams, about the current state of home prices and mortgage interest rates. They spoke about the fact that despite the consistent rise in home prices, the current housing market situation is notably different from what was seen in the years prior to the housing market crisis of 2007-2008. The Current Housing Market In the six years prior to the housing market crisis, home prices climbed consistently and sharply. Starting in 2000, “Prices were up 8.6% for the year. The percentage continued to increase, compounding on itself. In 2004, home prices skyrocketed, up by 12.5%,” Steve noted. Compare that with the past six years. Steve had the numbers handy: “In 2014, prices rose by a little over four percent, 2015 by five percent, then six percent—but then back down to five and then under five, 4.8, 4.7%.” Prices are rising, but we’re seeing a decline in the rate of appreciation. They’re still going up, but not as fast as they were a few years ago. Terry said that according to the National Association of Realtors (NAR), the peak for housing prices nationwide was in 2017. Keep in mind that your home appreciates in price the longer you own it. The current statistics show this and reveal why we don’t appear to be running headlong toward another market crisis. “Median home prices over a seven-year period show an average appreciation of 29%. Eight years? – 32%. Ten years? – 39%.” Terry offered listeners some more detail as far as regional statistics. The western part of the country has the strongest market, showing an average 10-year home price appreciation rate of 43%. The South’s 10-year appreciation is about 39%; the Midwest, around 37%; and the Northeast limps into last place with a 10-year appreciation of only 34%. Steve pointed out the nearly 10% discrepancy between the West and the Northeast. It’s Not Like 2006 The home mortgage market is quite different now than it was back in 2006. Steve explained that banks were just handing out mortgages to people who didn’t even come close to qualifying for the size of home loans they were getting. Terry added that many of those mortgages had ridiculously low introductory rates—as low as 1% or 2%—with huge balloon payments on down the road causing homeowners to default on those loans. That’s not the kind of mortgage market that we have now. Steve reminded listeners about negative amortization, one of the crazier aspects of mortgage lending in the early 2000s. He recalled, “You had the ‘pick a payment’ mortgages. Somebody would get a mortgage loan where the payments were about $1,200 a month, but if they felt like that was just too much, they could choose to just make payments of, say, $300 a month. Of course, that other $900 a month didn’t just disappear, it got added onto the back end of the loan. So, voila’! – you ended up with negative amortization.” Positive News Amidst Coronavirus Concerns News about the novel coronavirus is everywhere, and unfortunately, the numbers coming in are terrifying. But there is some good news for homebuyers—the effect on interest rates. The stock market has been chaotic, to say the least. Institutions are pulling out of the market, selling shares in massive amounts. Steve explained, “…that money has to go somewhere. And it’s going into bonds. This drives the price of bonds up. When prices go up, yields come down and loans tied to bonds decrease in interest. That means mortgage interest rates are coming down.” While it’s true that interest rates have been low for a while, the market is moving even more favorably right now. Terry summed it up as “Interest rates are crazy low. It’s a great opportunity for homebuyers,

Last week I spoke with greater detail about the one-time payment that most Americans will be receiving, probably by mid-April. The checks will be for, at least, $1,200 plus another $500 for each child in the family. This payment and the information I’m going to be talking about today is from the Cares Act which was passed by Congress in late March in what amounted to a truly massive and ultimately, historic piece of legislation. Also, while the media’s focus has been on these one-time checks, there were a lot more goodies included in that bill that I want you to know about because, basically, there’s a lot of good stuff coming our way. First, for retirees, there are some changes that will offer a lot of relief, especially during this time of low-stock prices and low-interest rates. You may want to have a pen and paper handy as I list these things, or just come to our website, stevepomeranz.com, to read or hear this commentary. Also, if you are signed up to receive our Weekly Update, you’ll get it there too. You can easily sign up for the Update at the website too. Here’s the first “biggie”: For your retirement accounts like IRAs, Pensions, and so on, the Required Minimum Distribution, commonly referred to as the RMD, has been suspended this year. Yes, you heard me right, you will NOT be required to pull out ANY money from your retirement accounts in 2020. Of course, you can if you want, but it will not be REQUIRED. This will help you if you have to sell your stocks to raise the cash to distribute.  This moratorium will allow you to hold on to your stocks with the hope that they will rebound in the near future. This is not the first time Congress allowed you to delay your RMD. This previously happened during the last financial crisis when the stock market crashed in 2008-09. Congress suspended RMDs for 2009. And another thing, since the calculation for your withdrawal is based on your account values as of December 2019 when the market was much higher, had you been required to take a distribution this year, you would have had to pay taxes on money that has essentially disappeared. That’s one of the “Biggies” I was talking about. For you folks younger than 59 ½, you will be able to take up to $100,000 from your 401k free from a withdrawal penalty. You may remember that retirement plan withdrawals prior to age 59 ½ carry a 10% penalty. This law waives the penalty up to a $100,000 withdrawal. Here’s another cool benefit from the law:  You can take up to 3 years to pay back the taxes due on the withdrawal. You see, they’re thinking about your cash flow and this will help your cash flow in the near term. Once things aright themselves, you can pay back all or a portion of the withdrawal within three years too, and that’s over and above any contributions that you make to the plan. Let me take a minute to give you a little second-level insight to a conundrum I have talked about for many years on this show. We all know that it’s never a good idea to dip into your 401k because this is money set aside for the future, and you’re going to need it because the future isn’t getting any cheaper. However, if you are in dire straits, you gotta do what you gotta do. No guilt about it, you have to survive. But there’s an irony to all this. Experts will tell a young person to invest in stocks for the long term because the potential to create wealth that way is very strong. There is nothing wrong with this advice except that it doesn’t take real-life into consideration. I often say that if we were all Rip Van Winkle and fell asleep and woke up 20 years later the chance of waking up considerably wealthier is very high. Fortunately or unfortunately,

Last week I spoke with greater detail about the one-time payment that most Americans will be receiving, probably by mid-April. The checks will be for, at least, $1,200 plus another $500 for each child in the family. This payment and the information I’m going to be talking about today is from the Cares Act which was passed by Congress in late March in what amounted to a truly massive and ultimately, historic piece of legislation. Also, while the media’s focus has been on these one-time checks, there were a lot more goodies included in that bill that I want you to know about because, basically, there’s a lot of good stuff coming our way. First, for retirees, there are some changes that will offer a lot of relief, especially during this time of low-stock prices and low-interest rates. You may want to have a pen and paper handy as I list these things, or just come to our website, stevepomeranz.com, to read or hear this commentary. Also, if you are signed up to receive our Weekly Update, you’ll get it there too. You can easily sign up for the Update at the website too. Here’s the first “biggie”: For your retirement accounts like IRAs, Pensions, and so on, the Required Minimum Distribution, commonly referred to as the RMD, has been suspended this year. Yes, you heard me right, you will NOT be required to pull out ANY money from your retirement accounts in 2020. Of course, you can if you want, but it will not be REQUIRED. This will help you if you have to sell your stocks to raise the cash to distribute.  This moratorium will allow you to hold on to your stocks with the hope that they will rebound in the near future. This is not the first time Congress allowed you to delay your RMD. This previously happened during the last financial crisis when the stock market crashed in 2008-09. Congress suspended RMDs for 2009. And another thing, since the calculation for your withdrawal is based on your account values as of December 2019 when the market was much higher, had you been required to take a distribution this year, you would have had to pay taxes on money that has essentially disappeared. That’s one of the “Biggies” I was talking about. For you folks younger than 59 ½, you will be able to take up to $100,000 from your 401k free from a withdrawal penalty. You may remember that retirement plan withdrawals prior to age 59 ½ carry a 10% penalty. This law waives the penalty up to a $100,000 withdrawal. Here’s another cool benefit from the law:  You can take up to 3 years to pay back the taxes due on the withdrawal. You see, they’re thinking about your cash flow and this will help your cash flow in the near term. Once things aright themselves, you can pay back all or a portion of the withdrawal within three years too, and that’s over and above any contributions that you make to the plan. Let me take a minute to give you a little second-level insight to a conundrum I have talked about for many years on this show. We all know that it’s never a good idea to dip into your 401k because this is money set aside for the future, and you’re going to need it because the future isn’t getting any cheaper. However, if you are in dire straits, you gotta do what you gotta do. No guilt about it, you have to survive. But there’s an irony to all this. Experts will tell a young person to invest in stocks for the long term because the potential to create wealth that way is very strong. There is nothing wrong with this advice except that it doesn’t take real-life into consideration. I often say that if we were all Rip Van Winkle and fell asleep and woke up 20 years later the chance of waking up considerably wealthier is very high. Fortunately or unfortunately,