2008 July 02 | Wheatworks Blog: Financial Matters

Archive for 2nd July 2008

The Housing Crash and Retirement Prospects

7/2/2008, 7:43 pm

This one’s not a pretty picture, but it’s very interesting reading.

“The Housing Crash and the Retirement Prospects of Late Baby Boomers” by Dean Baker and David Rosnick was released in just last month by the Center for Economic and Policy Research.

It’s a study of the retirement prospects of people between the ages of 45 and 54 under three alternative scenarios. The first is that real house prices fall no lower than the March 2008 level, the second scenario assumes the 2009 average will will 10% lower and the third assumes a 20% fall for the 2009 average.

You can read the full report online, but the stand out for me is that so many people may have planned to use their house as a source of funds for retirement. Interestingly, renters seem to come out ahead in this paper. The authors project renters in the same group in 2004 will have more wealth in 2009 than homeowners in all three of the scenarios!

The takeaway: buying one’s home is not about investing. Home buying is probably done best when one is actually buying a house in which to make a home.

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Tags: baby boomers, home buyer, housing crash, Retirement
Category: Retirement | 1 Comment

The FICO Game

7/2/2008, 5:06 am

“Credit cleanup: Higher scores sought as lenders get more selective” by Eleanor Laise is about the movement among lenders to require higher FICO scores for borrowers who want to receive the best interest rates on loans.

It also explains how many are tweaking the system to improve their FICO scores. And for some consumers, raising their FICO score is a game they play to join the “700″ club, the group of consumers who have FICO’s of 700 or above.

The takeaway is that one’s FICO is a result of one’s financial behavior which can be changed to impact one’s FICO score for the better. The higher one’s FICO, the less one pays in interest when he or she borrows money. Enjoy the article!

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