Archive for the 'Real Estate' Category
Friday, May 11th, 2012
…because it looks like I’m getting another one. After seeing repeated news articles titled “Mortgage rate set record lows”, I’m now looking at refinancing to a 15-year fixed mortgage for 3% with all lender closing costs covered. I’ve seen multiple quotes for under 3% and getting under or close to zero in net fees.
Here’s a chart of the historical mortgage rate averages, courtesy of HSH.com. It includes the 30-year fixed, 15-year fixed, and the 5/1 30-year adjustable. Since I bought my home less than 5 years ago, 30-year fixed mortgage rates have ranged from a high of 7% to just above 4% today.
Even though I stopped trying to predict mortgage rates a while ago, I still find it hard to believe that I started with an interest rate of over 6% and now could be paying under 3% with a no-cost refi.
Alternative investments
If I successfully close on this loan, I don’t know if I’ll be aggressively paying it down as much as before. It’s important to note that the risk levels are not the same for the options below, but the interest rate environment is finally tipping to the point that I’d consider investing instead of paying off 3% debt.
- I could buy super-safe US Treasury bonds, with yields at ~2.2% for a 15-year maturity. Interest on Treasury bonds are exempt from state income taxes.
- I could buy a municipal bond fund like the Vanguard Intermediate-Term Tax-Exempt Fund (VWIUX), which invests in investment-grade municipal bonds. The fund holdings have a duration of about 5 years and yields nearly 2% federally tax-exempt. If you’re in the highest tax bracket, that would be an effective yield of ~3%.
- If I lived in California, I could buy shares of the Vanguard California Long-Term Tax-Exempt Fund (VCITX) with 2.60% yield that is exempt from both federal and state income taxes, with a duration of 6.4 years. That could be an effective yield of well over 4%.
- I could take on more risk and buy shares of mature, dividend-paying companies. The Vanguard Equity Income Fund (VEIRX) has a current dividend yield of nearly 3%.
I’m going through a local mortgage broker, but you can find similar rates over at Amerisave. If the “all lender fees and points” is negative, that means the credit they give you is more than all closing costs including appraisals and title insurance. (Anyone use them before?) Compare that with rate quotes from and Quicken Loans.
Posted in Investing, Real Estate | 30 Comments »
Tuesday, May 1st, 2012
The Calculated Risk blog has shared an updated graph of inflation-adjusted housing prices through 2011, based on Prof. Shiller’s data.
Mr. McBride also digs a little deeper and argues that because Shiller changed up the data series he was using in 1987, the true slope of the line should be a little more slightly positive. Using the original data series would result in an overall slope of housing prices increase slightly faster than inflation (1.5% per year) vs. the Shiller line (0.5% per year). His conclusion:
In many areas – if the population is increasing – house prices increase slightly faster than inflation over time, so there is an upward slope for real prices.
This reminded me of this chart via Sober Look that compared the US age distribution in 2000 and 2010 (US Census). The Boomers are getting old, and there is a little gap before the Echo Boomers come in. How will this affect housing prices in the future?
To me, the main takeaway is still that housing prices over the long run don’t rise much faster than inflation. This is not unexpected, as the cost of housing is by definition a big component of inflation. Of course, housing also provides dividends in the form of rent. So if you actually owned a house instead of most people “owning” a house with a big fat mortgage, your overall return on investment would be much better. I can’t wait to really own my house so I can earn that imaginary (imputed) rent.
In reality, what many people seem to do nowadays is hold on and rent out their properties for less than their mortgage payment and hope for price appreciation. This might work I suppose, and one could argue from the graph that prices overall are now close to historical averages. There are now some places where you can buy a house that rents for more than the mortgage payment, but unfortunately not anywhere near me (unless we’re talking huge down payment). As for me, I suppose I’ll just stick with owning low-maintenance REITs and getting my “rental income” that way.
Posted in Real Estate | 10 Comments »
Monday, April 23rd, 2012
It’s time for some Spring cleaning and I have updated this post which explains my ratio-based method of tracking our financial progress towards early retirement (as shown by the status indicator on the top right of every blog page). I’ve made some clarifications/edits and also added links to recent updates.
Cash Reserves / Emergency Fund
Our goal is to always have a full year of expenses in cash equivalents as our “emergency fund”. (This is not the same as a year of income. Our expenses are much lower than our income.) This is a cushion for a variety of potential events including job loss, health concerns, or other unplanned costs. It also allows us to take a more long-term view with our investment portfolio since we know we won’t have to touch it.
Since our emergency fund is relatively large, I try to maximize the yield. If we stuck it all in a money market fund, the yield would be barely above zero. With a bit of work, our cash earns a blended rate of over 2% annually without taking on extra risk. We use the same accounts to make money from no fee 0% APR balance transfer offers, but currently don’t play that “game”. Here are recent updates on where we keep our cash:
March 2012 Cash Reserves Update
May 2011 Cash Reserves Update
January 2011 Cash Reserves Update
Home Equity
I don’t think everyone should buy a house (or more accurately, take out a huge loan on a house). I don’t necessarily think it works out a very good investment over time. However, if you are geographically stable, I do think buying and eventually owning a house free and clear can be a solid component of an early retirement plan. My current forecast is to have our house paid off in 10-15 years. Housing is very expensive where I live, so once that mortgage payment is gone, the actual income my investments will have to produce will drop drastically.
There are many ways to define home equity, and I am sticking to a simple method of calculating home equity by taking 100% minus (outstanding mortgage balance / original home purchase price). As of 2011, our home price has rebounded to over the original purchase price according to a refinance appraisal and comparable sales. Overall, I’d rather enjoy having continuous progress without worrying about my home’s exact market value. Here are some historical mortgage updates:
November 2011 Mortgage Payoff Update
February 2011 Mortgage Payoff Update
Investment Portfolio
The goal of my investment portfolio is allow withdrawals to support our needed expenses in “retirement”. Again, income and expenses are not the same thing. After mortgage payoff, I expect our required expenses to be less than 25% of our current income. I like to assume a simple 3% safe withdrawal rate, which means for every $100,000 saved, I can generate $3,000 a year of inflation-adjusted income for the rest of our lives. I used to use 4%, but since our target “retirement” age is in our 40s and not 60s, I feel that 3% is better. Even 3% is not guaranteed, but again it does provide a quick estimate of progress. Here are recent portfolio updates:
February 2012 Investment Portfolio Update
November 2011 Investment Portfolio Update
July 2011 Investment Portfolio Update
My initial goal was to try and keep the home equity and expense replacement ratio about the same so that both will reach 100% at the same time, but we’ll see. I am still (very slowly) researching shifting to a more income-oriented portfolio that yields about 3% and has a principal value that can grow with inflation.
The actual implementation of my plan will probably require more flexibility. At some point, I plan on using some of my money and invest in an immediate annuity to hedge against living too long (a problem I hope to have). I’ll also need to vary my exact withdrawal rates a bit from with market conditions. Once I reach age 70 or so, Social Security will kick in something. I don’t think Social Security will disappear although I do expect means-testing, but I also don’t expect to be so rich as to not get anything.
Posted in Goals, Investing, Real Estate, Retirement | 24 Comments »
Tuesday, February 28th, 2012
During the housing boom, nobody worried about appraisals. If you put in a bid to purchase a house for $300,000, the appraisal was basically guaranteed to come out at $300,000 or above. Appraisers are hired by lenders, and back then lenders wanted to make the loan happened no matter what. Therefore, if you were an appraiser and you didn’t reliably provide the number that the lender wanted, then your phone might stop ringing. I was told directly that the intended purchase price itself was a “strong indicator of value”. Rather self-fulfilling, no?
Nowadays, banks are much more cautious, and thus so are appraisers. In addition, recent legislation created new Appraiser Independence Requirements for Fannie Mae and Freddie Mac loans. At the same time, mortgage rates are at lows and refinance requests are at highs. Your ability to refinance is often dependent on what the appraiser says your house is worth, as you will need to satisfy a certain loan-to-value ratio. So what can you do to maximize your appraisal?
Feel out the lender first. Appraisers still work for lenders, and a good mortgage broker should be able to give you an idea of your chances for an adequate appraisal given the current environment and your basic home details. Check recent sale prices in your neighborhood on sites such as Zillow.com and Trulia.com to get a realistic sense of what to expect.
Collect supporting documents. If you’ve made any improvements to the house, gather up any blueprints or housing permits to provide to the appraisal. You could also make a list of the best “comps”, or recent sales of comparable homes in the area. If you’ve gotten one recently, dig up your last appraisal, and see if there were any omissions or changes. A busy appraiser might simply copy stuff from the previous appraisal. You may even find that they just bring a copy of the old appraisal and mark off things as they go.
Prepare your house. The appraiser will call you to schedule a time to see the interior of your house. Some people have suggested that you should hire a landscaper and basically stage your house as if you were selling it. I don’t know about spending that much energy on things, but I would definitely keep things neat and tidy. Have the kids and pets playing elsewhere. You want the house to come off as well-maintained and cared for.
Meet the appraiser. You’re dealing with a human, so be nice. Walk the appraiser around your house, answer any questions he or she may have, and point out any changes that you have made to the house. When I met my appraiser he was happy to see our official building permits that showed our legal additions. We also pointed out any remodeled areas and newly-installed hardwood flooring.
I don’t know if all appraisers would be open to debating about exactly what houses make good comps to yours or not, it might rub them the wrong way. But you could probably point out ways that your house is different than other potential comps (bigger yard, pool, view, etc.).
Read the appraisal report and follow-up if needed. Request a copy of the report and review it for any inaccuracies. The workload is high right now, and it could be that they mixed up details with another house or just copied stuff over from other sources. Point out any errors along with supporting evidence and you may be able to get the appraisal re-evaluated. On the extreme end, you might ask for another new appraisal at your cost.
Don’t worry about property taxes. While the local government might consider your house’s sales price history when figuring out your home’s tax assessment, they will not be notified of the value from an independent appraisal. In fact, they probably have a rather rigid formula to figure out your home’s assessed value (they do have to do this on a lot of houses) based on things like number of bedrooms, number of bathrooms, square footage, lot size, etc. If anything, you might volunteer data from the new appraisal to appeal your assessed value – assuming it’s lower of course!
In the end, by taking these steps we felt that we had done our best… and our refinance was a success, so good luck!
Posted in Real Estate | 20 Comments »
Monday, February 27th, 2012
Credit Sesame might be best known for offering people a free credit score every month, but they make their money by providing mortgage quotes. That makes sense given how sensitive mortgage interest rates are to credit scores. They just rolled out a new tool called the Mortgage Map that lets you visually compare various mortgage loan options. Here’s an example screenshot:
The vertical axis appears to be savings (refinance) or cost (new loan), and the horizontal axis appears to be interest rates. Different colors denote fixed-rate, variable-rate, and interest only loans. A little house icon appears for refinance quotes to indicate your existing loan. Mortgage rates are still reaching new historic lows, so it’s good to be aware of the options out there.
Of course, I played around with it using my own numbers, even though I already refinanced last year into a new 15-year fixed mortgage. Almost all of the loan options given were worse than my existing loan, which I suppose made me happy. However, a 7/1 ARM or 10/1 ARM would save still save me money if I paid it off during the fixed initial term (makes sense, although these are lesser-known flavors). I noticed that the default setting for refinancing a 30-year mortgage is that you will only keep it for 7 years, my guess is that’s how often the average person changes houses. But you’ll want to remember to change that to better reflect your own situation.
All of the quotes that I wanted to “learn more” about seemed to be offered by First Choice Bank, which I am guessing is a mortgage broker? As a result, I don’t really know how many different lenders are behind this map, and how it would compare to something like LendingTree.
Posted in Real Estate | 1 Comment »
Thursday, February 23rd, 2012
I’ve been thinking more about whether I should commit some additional funds to pay down the principal on my mortgage and reduce my interest paid.
There is already a good deal of discussion on this topic in my posts Why Paying Down Your Mortgage Early Can Be A Smart Investment and 10 Reasons You Should Never Pay Off Your Mortgage, but I’ve tried to summarize and update all the pertinent points into something more coherent below.
Other Higher Priorities?
I don’t think paying extra towards a mortgage should be the highest priority. If you have no emergency fund, high-interest credit card debt, proper insurance, or don’t have your IRAs/401ks maxed out, then you probably should focus on those things before worry about paying extra towards your mortgage.
What is your tax situation?
Next is the topic of tax-deductibility of mortgage interest. Everyone already gets the standard deduction, which in 2012 is $5,950 for singles, and $11,900 for married filing jointly. Only the amount that your itemized deductions exceed this amount actually saves you money. If you have a $200,000 mortgage at 4%, your interest is only $8,000 the first year (and decreasing in subsequent years). If that’s your only deduction as a married couple, you’re not getting any real tax benefit at all.
However, some people have a big cushion of deductions, like high property taxes, state income taxes, charitable contributions, etc. Some don’t. Some people are in high marginal tax brackets, where saving 35% sounds really nice. Some are in the 15% or lower tax brackets. As for us, we are in a high marginal tax brackets, and pay a good deal of state income tax, so the deductibility is definitely in effect.
Paying 4% mortgage interest fully-deductible would be perfectly counteracted with a bond earning 4% interest fully-taxable.
Comparing with other investment options
One major argument against paying extra towards a mortgage is that you can earn a better return elsewhere. Who cares about saving 4% interest annually when your money could be earning 8% somewhere else? As we’ve seen recently, stock market returns are not guaranteed, and also not without lots of heartburn. Do you really want to invest in stocks using borrowed money? If anything, you should compare your mortgage interest with a high-quality bond or bank account interest.
Liquidity
Another argument against paying extra is that it is hard to access the equity in your house. You may not get a home equity line of credit, or it may be frozen later. However, if your alternative investments are in IRAs or 401k’s, then those aren’t exactly liquid either. Also, if you have an adequate cash cushion (as we do) and proper insurance, then liquidity will become a lesser concern. I don’t need to have access to every penny of my portfolio at all times.
Inflation hedge
A nice thing about mortgage payments is that if you have a fixed mortgage, the payment stays the same each month. Meanwhile, rents will increase with inflation. If inflation starts to rise significantly, you’ll be very happy to have a loan at 4-5%. But we also may stay in an era of prolonged low interest rates.
A possible strategy?
After all that, my idea is to simply look at the current yield of a comparable U.S. Treasury bond and compare it to my mortgage interest rate. If my mortgage interest rate is a lot higher than the bond rate, then I should pay extra towards the mortgage. Otherwise, if the Treasury rate is higher, then I should invest in bonds or bank accounts directly instead. If it’s close, stick with liquidity.
As of 2012, my mortgage rate is now slightly under 4%. I expect to pay off my mortgage in under 10 years, ideally closer to 5-7 years. This means that I’ll effectively be earning 4% a year for 10 years, whereas the Treasury rate for a 10-year bond is only 2%. If rates do rise, then I’ll stop paying extra toward the mortgage. In the meantime, since I already have bonds in my asset allocation, I’d much rather earn 4% by paying down the mortgage than 2% in the market. (Remember, I’m already maxing out both IRAs and 401ks for the year.)
I really don’t like the idea of staying in debt longer just for the possibility of investing for higher return elsewhere, especially as the difference for such a short time is minimal. I have plenty of money in stocks and if they go up 8% a year over the next 5-7 years, then I’ll still be fine.
(Posted originally in 2009, but I have updated the numbers for 2012.)
Posted in Real Estate | 78 Comments »
Monday, February 13th, 2012
Speaking of internal frugality, I’d say one of the most basic ways to save on rent or mortgage payments is to… live in a smaller place. No, wait, really. Let’s think about it.
Even though it’s now easy to make fun of 10,000 square feet McMansions, they are only a side effect of an overall trend towards larger houses. According to this 2006 NPR article, the size of new houses has more than doubled since the 1950s. The average new home sold in 2007 was a whopping 2,629 square feet.
I know we’re getting fatter and need a bit more space to move around, but not by that much! In fact, the average family size has actually been decreasing over time. Here are some stats I pulled from the U.S. Census:
Source: U.S. Census BureauFrom 1970 to 2004, the average household shrunk by 27%, but the average square footage grew by 66%. Using median numbers gave similar results.
There are several theories as to why this is happening. For starters, we may simply want a higher standard of living. (Sharing bathrooms? That’s for people in 3rd-world countries!) Perhaps it’s from us continually one-upping our neighbors. Maybe builders are pushing bigger homes through marketing. Or it may be a result of the breaking up of the American family, and how we don’t like spending time together anymore.
Most importantly, we don’t need the extra space. If a family of four could live well in 1,500 square feet back in 1950, there is no real reason they can’t do so today. It’s just a choice like any other, and we have to examine whether it is really worth the price. In cities like New York, Tokyo, or Hong Kong where space is at a great premium, families have long adapted to much smaller living spaces.
Finally, the extra costs don’t stop with the bigger sticker price. There’s the higher property taxes and insurance rates. A bigger home costs more to heat, cool, maintain, and repair. More rooms means more furniture, more wall decorations, more room for clothes, and just more stuff in general. More appliances mean more electricity used. The list goes on and on.
In my opinion, many people don’t even notice that they are stretching to buy homes that just keep getting bigger and bigger. They just follow the crowd. It’s hard to be different. This unconscious choice may partially explain why many of us feel so much more stressed financially than our parents.
Update: After the housing bust, there has been a growing counter-culture celebrating living well in smaller places. There is even the extreme end of buying tiny houses and the small house movement. We may not need to all live in 300 sf houses, but it’s good to explore our options.
This post has been added to my Expense Reduction Guide: Housing.
Posted in Frugal Living, Real Estate | 62 Comments »
Friday, February 10th, 2012
Where are the best places to consider relocating to? I knew that almost every major financial media outlet had their own “best places to live” list, and my plan was to see which cities popped up most amongst them. Well, that was a bust as every list seemed to be so different; The top city on one list might not even be on the next list at all. Why? There is no one best place to live, it all depends on what criteria is important to you.
Instead, I’m just going to give you the direct links to all the major Top 10 lists (alphabetical-ish), and let you peruse at your leisure over the weekend. I listed the top city pick for each one – all in different spots across America!
Let me know if I missed one, but be careful since many other smaller lists are actually based on those above. In the end, choosing where to live is just one factor in your life, and you may already be happiest where you are right now. But why not make sure it’s a conscious decision? A good place for additional research is BestPlaces.net which I believe used to work with CNN Money on their list.
This post is part of my Expense Reduction Guide: Housing.
Posted in Frugal Living, Real Estate | 15 Comments »
Monday, February 6th, 2012
One of my overall goals for 2012 is to make this site more of a permanent resource for information. As part of this, I want to create an “Expense Reduction Guide” that will provide an organized way to find ways to maximize personal value and make your spending efficient.
I would like this to be similar to my Favorite Posts on Investing page and Our First-Time Homebuying Experience guides (which also need to be cleaned up…).
Expense #1 – Housing
I am going to go through all the major categories, but let’s start with the biggest expense – housing. I’m keeping this part to ways to reduce either rent or mortgage PITI (principal, interest, taxes, and insurance). Things like reducing heating bills or furniture costs will be kept separate for later.
Move to a different city/state/location
- Ideas for relocation: Roundup of Top 10 Lists
- What cities are people actually moving to?
- international living (working or retired)
Renting
- Rent comparison sites
- rent vs buy calculators
- buying a house for psychological benefit vs. financial
Move to a different house
- live in a smaller house
- neighborhood, location
- shared living, multigenerational living
- multiple units
Buying a house
- Getting a mortgage loan
- Credit scores, income, points, etc
Refinancing mortgages
- Rate comparison
- Mortgage types (fixed, ARM, length)
- Maximizing home appraisal
Homeowners Insurance
- Shopping for homeowner’s insurance
- Deductibles, options
- Renter’s insurance
Property Taxes
- Appealing assessment value
- Special rules in certain states
I’m just starting out and I know I’ll need to write several new posts to fill in the gaps. However, I want to make this an open brainstorming post so that you the reader can make sure I don’t forget anything. Got something to add? Please leave a comment with a tip, a link, or an idea to explore further.
Posted in Budgeting, Frugal Living, Real Estate | 19 Comments »
Sunday, January 8th, 2012
Reminder for 2012! The most well known part of the Fair and Accurate Credit Transactions Act (FACT Act) is that you can get a free copy of your credit report from all three major credit bureaus once every 12 months. However, there are also several other consumer databases that you should check as well which are also available absolutely free once every 12 months, and they can also have a significant financial impact. If you got one last year, you can now get another one and reset the 12 month clock.
ChexSystems Banking History
ChexSystems is a consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the bank’s version of a credit bureau. If a person commits check fraud or overdraws their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database. Getting a negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks.
Get your free ChexSystems consumer report here.
Medical History Used For Insurance Underwriting
MIB (previously known as Medical Information Bureau) is run by 470 insurance companies and has a “primary mission of detecting and deterring fraud that may occur in the course of obtaining life, health, disability income, critical illness, and long-term care insurance.” They record information of “underwriting significance” for those who have applied for life and health insurance with MIB member companies. If you have not applied for individually underwritten life, health, or disability income insurance during the preceding seven year period, then you probably don’t have a record.
Get your free MIB consumer file here.
Insurance Claims History
CLUE stands for Comprehensive Loss Underwriting Exchange, and they collect information that is used to calculate your potential risk of loss and thus your insurance premiums. You can also find out about previous claims on the house you are currently renting or recently bought, even if they weren’t made by you.
The C.L.U.E. ®Personal Property report provides a seven year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
The C.L.U.E. ®Auto report provides a seven year history of automobile insurance losses associated with an individual. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
Get your free CLUE Auto and Personal Property Reports here.
In addition, you should also request your free A-PLUS report (Automated Property Loss Underwriting System), which is a smaller database that also contains information about property loss claims.
Employment History
When a potential employer runs a background check through LexisNexis (formerly known as ChoicePoint), this is the information they see. It doesn’t seem to claim be comprehensive, and they may have only limited or even no data about you, but I would still check for potentially negative data.
LexisNexis Screening Solutions Inc. provides Employment History Reports to employers only with a job applicant’s or employee’s consent. Employers utilize a variety of companies to obtain employment history information. Our files would only contain information on you if LexisNexis provided your Employment History Report to an employer.
Get your free LexisNexis employment history report here.
Tenant History
This report can be important if you are a renter and someone runs a background check on you at LexisNexis (ChoicePoint).
LexisNexis Screening Solutions provides Resident History Reports to housing providers that have the subject’s consent. Housing Providers utilize a variety of companies to obtain tenant history information. Our files would only contain information on you if LexisNexis provided your Resident History Report to a housing provider.
Get your free LexisNexis tenant history report here.
Now you know some of what Big Brother does. 
Posted in Banking, Insurance, Real Estate | 10 Comments »
Tuesday, December 20th, 2011
It’s time for a end-of-year checkup on the ole’ portfolio, as I’m afraid that I’ll forget about it between Christmas and New Year’s. There isn’t much change to my investment portfolio itself, the target asset allocation is the same, and the specific fund holdings are pretty much the same. I’m closer to 70% stocks and 30% bonds now. With only about 7 trading days left, I wanted to see how the various asset classes that I own performed in 2011.
My portfolio is similar to the David Swensen model portfolio, which uses low-cost index funds to gain exposure to specific asset classes. Here is an implementation of the portfolio using actual ETFs in a recommended 70% stocks / 30% bonds breakdown.
30% Domestic US Equity (VTI)
15% Foreign Developed Equity (VEA)
10% Emerging Markets (VWO)
15% Real Estate (VNQ)
15% U.S. Treasury Bonds (IEF)
15% Inflation-Protected Securities (TIP)
The chart below shows the growth of $1,000 invested this way (eMAC) at the start of 2001 until the end of November 2011, as compiled by the financial advisory group ETF Portfolio Management for benchmark purposes.
I have also taken the liberty of updating their annual returns table to including 2011 year-to-date total returns (see highlighted) using Morningstar data as of 12/19/2011.
The weighted year-to-date return of the overall model portfolio is 0.35%, essentially zero for 2011. But from the table, you see that each individual asset class may have moved a lot. European and Emerging Market stocks performed quite poorly (in case you don’t read the news), the S&P 500 looks like it will more or less go nowhere for the year, REITs (Real Estate) did okay, and Treasury bonds did very, very well considering this low-yield environment. Inflation-Protected bonds (TIPS) were the superstar in my portfolio, they saved my bacon.
Another year, another reminder that predicting short-term market movements is way beyond me. I continue to be happy with owning various asset classes with long-term expected positive returns, but which tend not to move in sync and thus smooth out the ride.
Next year, I intend to learn more about an income-oriented portfolio as that may potentially work better – at least psychologically – for the early-retirement set. My secret crush, the Vanguard Wellesley Income Fund (VWINX) was up 7.91% in 2011 YTD. It’s a income-oriented actively-managed fund with about 35% in dividend stocks and 65% in corporate bonds – but with a tiny expense ratio of only 0.28% for investor shares, 0.21% for admiral shares.
Posted in Investing, Real Estate | 15 Comments »
Tuesday, November 29th, 2011
I can’t stop posting map infographics! They’re just so pretty. Richard Florida of The Atlantic shared the map above, which shows the percentage of residents of each state that were born in that state. He then goes one step further and concludes that this map backs up his theory that America is being divided into two economic classes – the stuck and the mobile:
The mobile possess the resources and the inclination to seek out and move to locations where they pursue economic opportunity. Too many Americans are stuck in places with limited resources and opportunities. This geography of the stuck and mobile is a key axis of cleavage in the United States.
If mobility was once considered to be a quintessentially American attribute, it is now one that only an elite sliver of the population can lay claim to. It is both a significant shift and a sobering one. (source)
He cites the fact that fewer Americans are moving now than before, ostensibly because they are stuck in underwater homes. Still, using this particular map as proof of such a class divide seems like a stretch to me. There are many reasons why someone may or may not end up living in the state they were born. This map is the result of decades of complex interactions, not just what happened the last few years.
Just to throw out some examples, perhaps some states simply created significantly more job openings than could be filled by existing residents (DC Metro area, Alaska, Nevada). Some are retirement havens (Arizona, Florida). Also, I can’t tell if this map excludes residents born outside the US. Hundreds of thousands of immigrants came from around the world to settle in America – they were often both poor and mobile. Immigrants also tended to settle in coastal areas, which would affect the results above as they obviously weren’t born in the state they currently reside in.
In the end, I bet this map would have looked very similar even before the housing crash. A quick look at the same US Census data from 1990 confirms that states like Ohio, West Virginia, Kentucky, Pennsylvania, Mississippi, and Louisiana also had “low mobility” over 20 years ago, and states like Alaska, Arizona, Florida, and Washington DC had “high mobility”. I’m afraid I don’t see the evidence that mobility has been limited to an “elite sliver of the population”.
Posted in Real Estate | 9 Comments »
