Eight States which include Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington all raised the minimum wage to keep pace with inflation.  The increase in these States ranged between 28 and 37 cents per hour and will take affect January 1.  More than 1.4 million low-income earners will see their wages go up on New Year’s Day.  While the Federal minimum wage is at $7.25 an hour, workers in Washington State will earn a minimum of $9.04 thanks to their recent wage increase.  18 States total, including Washington, D.C., have rates above the federal level.

The wage increase in the aforementioned states will result in an extra $582 to $770 a year for full-time workers.  The non-profit advocacy group, National Employment Law Project contends that the minimum wage increases will act as a mini-boost to the economy.  The expected increase in wages will result in an increase in those wages being spent, which is projected to add $366 million to the nation’s gross domestic product.  The National Employment Law Project also projects that the minimum wage increases also will result in a creation of more than 3,000 full-time jobs.

Paul Sonn, legal co-director at NELP states, “Increasing minimum wage is a key form of local stimulus.”  The increase in wages will put money back into the pockets of low-income families who will then spend that money at the local businesses.  Paul Sonn also believes that the eight states that are raising their minimum wage on January 1 are protecting themselves in case Congress can’t reach an agreement to extend the payroll tax break beyond February.  He believes that the boost in incomes for individuals living in those eight states will more than offset the loss that could come from the inability of Congress to extend the payroll tax break.

Source:

Blake Ellis, Minimum wage increases for workers in eight states, http://money.cnn.com/2011/12/23/news/economy/minimum_wage_increases/index.htm?iid=Popular (accessed 12/27/11)

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Some economic experts and analysts contend that there is little chance for a housing recovery.  That extremely pessimistic outlook is not based on feelings, but upon solid economic data.  The year of 2011 was a sad story for the housing market.  The market saw record low 30-year mortgage rates with few people taking advantage of the rates to buy new homes.  The New Year is likely to bring much of the same.  Doug Duncan, vice president and chief economist at Fannie Mae, contends that there might be a slight uptick in houses sold but the home prices likely will be down.  This means that although more houses will be sold in 2012, the total amount of money spent on purchases is likely to be the same as in 2011.

Despite the fact that the Federal Reserve has pledged to keep rates low through 2013, many content that because of the high unemployment and the historically low home prices, there will be no recovery of the housing market for the foreseeable future.  Last year saw a total of $1.3 trillion in home lending, which is down from $1.7 trillion in 2010 and $3.3 trillion in 2005.  Another disturbing figure is the fact that much of the $1.3 trillion in home lending last year did not result in new home purchases.  Approximately 4 out of 5 mortgage applications were for refinancing current mortgages.  Borrowers were taking advantage of the historically low rates, which averaged less than 4%, not to purchase new houses, but to refinance their current homes.

Not all analysts predict such doom and gloom for the housing market.  Others are optimistic about the future of the market.  Former top economics advisor to the White House and Wells Fargo & Co., Sung Won Sohn states, “Housing has hit the bottom and has begun to heal slowly.”  The events that have taken place over the past few years have “set the stage for a rebound” as Sung contends.  Whether or not we are to see a recovery in the near future most would contend that given the extreme damage that was inflicted on the housing market any form of recovery is likely to be slow.

Source:

E. Scott Reckard, Low mortgage rates likely to continue through 2012, experts say, http://www.latimes.com/business/la-fi-mortgage-rates-20120103,0,2240865.story (accessed 12/4/12)

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In the 40-year history of Freddie Mac’s Primary Mortgage Market Survey, interest rates on a 30-year fixed-rate loan is the lowest it has ever been.  Just in time for the holidays, the mortgage rate on a 30-year mortgage is now 3.94%.  Mortgage rates have been falling over the entire year, and since the beginning of the year, the rate has fallen .9%.  Frank Nothaft, Freddie’s chief economist notes the decrease in rates over the year results in a savings of $1,200 a year for a homeowner with a $200,000 mortgage.

These low rates are resulting in an increase in home sales, which is a good sign for the economy.  This past month saw the greatest new home sales since January.  Senior financial analyst at Bankrate.com, Greg McBride, contends that mortgage rates should remain low for much of 2012.  “For well-qualified buyers, interest rates should be no impediment to home buying in 2012,” said McBride.

Existing homeowners are taking advantage of these historic rates by refinancing their old loans into more affordable ones.  Nearly 80% of all mortgage applications last week came from existing homeowners.  McBride expects that lenders will ease up on borrowing requirements only slightly.  Some lenders are starting to require only a 720 credit score, where previously a 740 credit score was required for the best mortgage rates.  These baby steps will, however, help more people gain access to these historic rates.

Source:

Les Christie, Mortgage rates hit another record low, http://money.cnn.com/2011/12/22/real_estate/mortgage_rates/index.htm?iid=HP_LN (accessed 12/22/2011)

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Former Chicago Bulls star, Scottie Pippen, most notably known for his time playing alongside Michael Jordan in the Bulls six NBA championships, has filed a multimillion-dollar federal lawsuit Tuesday, December 13, 2011.  The lawsuit claims that several websites and media outlets falsely accused Scottie Pippen of filing for bankruptcy.  CNBC.com was among one of the many news outlets that reported Scottie Pippen’s alleged bankruptcy filing.  CNBC.com had listen Pippen in one of the “15 Athletes Gone Bankrupt.”  The article went on to mention that Pippen had lost $120 million in career earnings, including a $4 million corporate jet.

Scottie Pippen contends that all the reports about his bankruptcy are completely false and still has “substantial net worth, which has not been less than approximately $40 million in the last 10 years.”  The federal lawsuit names Comcast Corp., General Electric Co. and CBS Corp, among others.  The lawsuit contains three claims including negligence, false light and defamation.  The suit seeks approximately $9 million in damages.

Source:

Allison Horton, Scottie Pippen files suit against those who said he filed for bankruptcy, http://www.suntimes.com/sports/basketball/bulls/9426888-579/scottie-pippen-files-suit-against-those-who-said-he-filed-for-bankruptcy.html (accessed 12/13/2011)

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3. Sometimes Income Taxes Are Dischargeable In a Bankruptcy

As a general rule taxes are nondischargeable in a bankruptcy. However, in some circumstances, income taxes can be discharged in a bankruptcy. In order for income taxes to be eligible for a discharge in a bankruptcy, the taxes must have been filed for at least two years and the taxes must have been due and owing for at least three. For example, 2007 taxes became due and owing in 2008 and they can therefore be discharged after April 15^th in 2011 assuming that they were filed on time in 2008. There are some qualifications to this. If certain events have occurred during the three year period, the taxes will not be discharged. For example, an assessment will cause the waiting period to be extended. There are a variety of other tolling events. It is best to get a professional opinion regarding the dischargeability of taxes before assuming that a bankruptcy will wipe out the obligation.

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Consumer spending over the last three quarters of 2011 has shown a reversion to credit card use over debit card.  Silvio Tavares, senior vice president at First Data, which processes card transactions for 4.1 million merchants, notes that “Consumers have spent the last couple of years de-leveraging and reducing credit card use, but the past month — and since April — they’ve been using their credit cards more and are starting to return to pre-recession buying.”  The first quarter of 2011 saw an 8.2% increase in credit card use, followed by a 9% increase in the second quarter and a 10.6% increase in the third quarter.  On the other hand, debit card use increased by 9.6%, 8.3%, and 5.9% in quarters one, two and three respectively.  On black Friday alone, credit card use jumped 7.4% from the same day a year ago.

A major contributing factor to the rise in credit card use is that the banks are encouraging consumers to switch from debit to credit.  Credit card use is more profitable and cost effective for banks compared to debit/checking accounts.  To get consumers to make the switch, credit card mailings have increase 85% since early 2010, and many of these credit card offers come with new perks such as rewards points, miles, or cash rebates.  The number of credit cards offering such perks has increased over the past two years from 6 out of 10 of the credit card offers in 2009 to 8 out of 10 credit card offers today.

Analysts believe that an increase in credit card offers will continue to intensify as debit cards become less cost-effective for banks.  Banks have started to raise checking account fees and charge debit card usage fees, all of which is part of the attempt to get consumers to switch to credit cards.  Although consumers will not be charged with the same usage fees on their credit cards, Bill Hardekopf, CEO of LowCards.com warns consumers to pay off their balance each month because the interest payments will be much greater than any new debit card fee.

Source:

Blake Ellis, Credit card use is on the rise, http://money.cnn.com/2011/12/05/pf/credit_card_use/index.htm?iid=SF_PF_LN (accessed 12/7/11)

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Although most people would like to have zero debt compared to much debt, student loan debt may not be as bad as other kinds.  With low interest rates and flexible payment options, Carolyn Bigda from the Chicago Tribune contends that student loans tend to be more forgiving than other types of debt.  However, the primary focus should not be what debt people should get into, but rather, consider saving before paying off loans.

On average 65 percent of students who attend a four-year private college and 56 percent of students who attend public universities end up raking in $28,100 and $22,000 in student loan debt respectively.  A recent graduate may be concerned with paying off that debt as soon as possible.  Doing just that may not be the best idea.  Saving more of your income compared to paying off student loans may be the wiser decision depending on a person’s future goals.  For example, if you would like to buy a home, purchase a car, or take a vacation once in awhile, having savings will help pay for these things without increasing total debt.  If there are no savings available to pay for these goals, financing them is the only other option, which ends up leading to greater debt.

While completely neglecting student loan debt is not an attractive option either, there are ways to save money and pay off that debt.  Private loans may be refinanced, and if the interest rates are still burdensome, targeting private loans first may be advisable.  In the case of federal loans, student loans may be consolidated and interest rates could be reduced as much as .5 percent.  Also new rules announced in October would result in a waiver of any remaining balance if after 20 years of repayment a student loan balance still exists.

Depending on ones circumstances and financial situation, it may be wise to consider saving over paying off student loan debt.  College graduates Philip Taylor and his wife, Teresa did just that.  They held off a bit on paying back their student loans, they saved, and were able to purchase a house, pay off their credit card balances, and start funding a retirement account.  When all was said and done, they had enough saving to pay back a huge chunk of their student loans.

Source:

Carolyn Bigda, Consider saving before paying off student loans, http://www.chicagotribune.com/business/yourmoney/sc-cons-1117-started-20111118,0,6457015.story (accessed 11/18/2011)

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An Increase in Foreclosure Activity is a Good Thing

It is certainly a very scary time receiving a notice of default and having to go through the process of foreclosure.  There are few things worse than losing one’s home.  However, an increase in foreclosure rates may be a sign that the housing market is on its way to recovery.  As industry analysts put it, “the sooner the inevitable foreclosures get cleared out, the better.”

The Associated Press reports that in the month of October, more U.S. homes entered into the foreclosure process than in previous months.  The Associated Press also reports that there was a monthly increase in the number of U.S. homes scheduled for auction, repossession, and notice of default.  As a result of this increase in the month of October, homes that likely will be lost to foreclosure have reached a seven-month high.  Although these figures sound like terrible news for those struggling to make payments, industry analysts urge the necessity of the foreclosures in order to bring on the revival of the housing market.

It seems as if this housing crisis has been around for quite some time.  Some have contested that government intervention, which has required tedious filing practices on the part of the lenders, is behind this slowed process.  However, RealtyTrac CEO James Saccacio is optimistic that this will change, he remarks, “We’ll eventually see foreclosure processing go up.”

Insider trading data suggests that some already are beginning to feel the revival of the market.  Trading in the real estate and construction markets have lead some to believe that a rebound is not too far off.

Source:

Rebecca Lipman, Foreclosures Rising: Are We Nearing the End of the Housing Crisis?, http://community.nasdaq.com/News/2011-11/foreclosures-rising-are-we-nearing-the-end-of-the-housing-crisis.aspx?storyid=102828 (accessed 11/17/2011)

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Earlier this week, the bipartisan 12-member panel, the so called “super committee,” failed to reach an agreement on the goal of $1.2 trillion in debt reduction.  The final vote originally was set for Wednesday before Thanksgiving, but because the panel did not have a blueprint of a proposed package, the super committee announced on Monday, November 21, 2011, that it was unable to reach a deal.

Automatic budget cuts are scheduled to kick in 2013, and the cuts would slash $1.2 trillion in defense and nondefense spending.  However, programs such as Social Security and programs for low-income people such as Medicaid are exempt from the automatic budget cuts.  Medicare cuts would be limited in the cuts made as well.  Even though the cuts are to kick in 2013, Congress could easily reverse them.

Budget experts have continued to stress the importance of tackling the debt issue in order to get the country back on a sustainable fiscal track.  Some of those experts said, “Congress needed to ‘go big’ on a deal that tackles the big drivers of future debt — entitlements and health care.”  They contend this big deal would have to be some kind of bargain reaching $3 to $4 trillion over ten years.  The super committee’s failed attempt was a shot at $1.2 trillion and was nowhere near the level of debt reduction demanded by experts.

Source:

Charles Riley, Super committee: What’s next, http://money.cnn.com/2011/11/21/news/economy/super_committee_failure/index.htm?iid=HP_Highlight (accessed 11/23/2011)

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The Commerce Department reported Wednesday that consumer expenditures rose by a nominal .1% in October, which is down slightly from a .7% increase in consumer spending that we saw in September.  Meanwhile, U.S. incomes rose a bit, up .4% in October compared to a .1% increase in September.  However, despite these lack luster figures, there is room for optimism in the retail market, which is predicting an increase in spending of 2.8% compared to the 2010 holiday shopping season.

This week’s jobless claims rose by 2,000, to a seasonably adjusted 393,000.  The increase by 2,000 was the trend breaker of three previous consecutive weeks of jobless claims decline.  However, the Labor Department is not alarmed by this shift and does not find it unusual.  The four-week moving average of new jobless claims, which is a more reliable indictor because it handles the issue of unusually volatile weeks, actually is decreasing by 3,250.  Economists generally contend that jobless claims must stay below 400,000 in order to see any real market recovery.  Although, jobless figures are hovering only slightly below that mark, it is still positive to note that those figures are slightly below rather than slightly above the 400,000 mark.

Reports also have shown a decrease in purchases of durable goods.  Durable goods are products that are designed not to wear out quickly and are to be used over time, rather than consumed immediately.  Notable durable goods are products such as cars, jewelry, phones, refrigerators, and furniture.  Nondurable goods are products such as food, fuel, shoes, and paper.  The figure for durable goods is down .7%.  However, this estimate slightly is misleading because a substantial portion of the .7% decrease can be attributed to a large decline in purchases of commercial airplanes, which is down 16.4%.  Several other durable good sectors actually have reported gains, such as a 6.2% rise in orders for motor vehicles and parts.

Source:

Eric Morath and Tom Barkley, Spending Slowed in October, http://online.wsj.com/article/SB10001424052970204630904577055931450123646.html (accessed 11/23/2011)

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