Monday, February 20, 2012

Even With New Greek Debt Deal, Europe Faces Long Road Ahead

It sometimes seems as though every day we are treated to a new twist or turn in the roller coaster that is the European debt crisis. While it appears as though the worst is passed, that the Euro is safe and that the EU powerhouses will finally pull the continent through the economic downturn, news from Europe continues to put a wrench into any rosy forecasts. Most recently, negotiators in Greece agreed to severe austerity measures in exchange for a 130 billion Euro bailout package from the IMF and the EU. This is the good news. The bad news is what came after the deal was announced – a widespread uproar and infighting among Greece’s political order, and calls for yet another 2-day strike by the country’s angry citizens.
While such a reaction was not unexpected, the situation nonetheless calls Greece’s bailout hopes and stabilization prospects into question once again. In order to implement the EU deal, Greek Prime Minister Lucas Papademos will likely need to restructure his cabinet, a move that could spell a collapse for the unity government and another round of elections. Of course, Papademos will also have to address the turmoil in the streets and the grinding halt in the workforce if he wants to assure government ministers to vote for the austerity measures in the face of widespread opposition. The measures include pension cuts, minimum wage reductions, widespread layoffs, and collective bargaining impairments. Although they are still demanding over $400 million more in cuts in the long term, eurozone finance ministers sent global stock markets higher by agreeing to the measures in principle.

Greece has a debt that stands at 160 percent of its GDP. Its unemployment rate, meanwhile, hovers somewhere between 20 and 25 percent. European leaders want to see both of these numbers substantially slashed.

Even if Greece can get austerity cuts passed and make turn a bailout package into reality, a few larger questions looms on the horizon. Will the Eurozone recover? Can the continent handle another debt crisis? Considering the rapid pace at which government debt is rising relative to GDP in several countries – chief among them Spain, Portugal, and Ireland – it’s not inconceivable that the Greek debt crisis will quickly give way to a Spanish and Irish incarnation. Will those countries be able to successfully implement austerity measures without threatening political and social disorder? It’s a question that few European finance minister are willing to ask but one that many have probably considered.

All signs suggest that Greece is not the final roadblock in the EU’s effort to emerge from the financial turndown. It is likely that future bailouts and austerity plans are in the future for several other countries. While Greece may have shouldered most of the burden this time around, there’s little doubt that, the longer this issue persists and the more widespread it becomes, the more likely all of Europe is to descend into a period of mid-term stagnation. Furthermore, many analysts predict that large-scale austerity measures will only initiate a negative feedback loop that stifles recovery and pushes Europe further into a new recession.

In Europe, recovery and growth will both depend highly on the power of state resources. Too much austerity, and growth will be difficult to spark. Too little, and spiraling debt will only further exacerbate budgets and markets. In order to move forward, then, as a strong and unified continent, Europe needs to forge an appropriate path between the two – in Greece as well as in Spain, Portugal, and Ireland. Until that happens the global economy will continue to feel its reverberations.

Monday, February 13, 2012

How to Maintain Your Credit Score

Whether you're buying a vacation home or just buying a fun retirement car to roll around town in, you've probably picked up that your credit score has become one of the most important numbers in your life. While you probably aren't going to be taking out 30 year fixed loans, sometimes you want to pay for part of your large purchase with a loan so you can keep that hard earned cash on hand. Having a good credit score is paramount.
First, what is a good credit score range? According to Fair Isaac Corporation, originatore of the FICO score, anything above 760 is fantastic. Anything above 700 is great. If your score is lower, you might want to improve it before taking out any large loans.
In retirement, chances are you can do little to affect your credit history. Whatever you've done, good or bad, has been done and has marinated in your credit report. There are, however, still some things you can do to affect positive change.
Check your credit reports for errors. Errors and omissions on your report are not uncommon, so use to review your credit reports. The most common credit report errors are erroneous accounts, inaccurate personal information, outdated information, and improper collections and chargeoffs.
Keep inquiries to a minimum. Anytime you apply for a card, the company makes a hard inquiry of your credit report and it'll cost you a few points. If you plan on taking out a loan, avoid this at all costs.
Keep making payments on time. If you have any outstanding debt, like credit cards or a mortgage, just keep making payments on time. Missing a payment will hurt your wallet, in fees, and your score, in a late payment record.

Keeping your credit score high, especially if you have a nice long history of good behavior, should be fairly easy. You can knock out some of the low hanging fruit by disputing errors on your credit report but otherwise just keep doing the right thing and you'll do fine.

Monday, February 06, 2012

Taking a Long View of the Housing Market

The current recession has had a tremendous impact on the nation’s psyche and on its economic future. Americans have learned to invest more cautiously, to not expect perpetual growth or guaranteed returns, and to appreciate more the employment opportunities that they have. On an economic front, the recession has insured that, even as unemployment figures continue to fall, it will be years if not decades before many corporations higher at their previous rates. Even as home sales begin to stabilize and rise, it will be a long time before many American buy a home that they cannot afford and expect its value to double during the term of ownership.

On that last note, the housing market is where the recession’s impact will likely be most visibly and permanently felt. Foreclosure signs show no indication of going away. Developments will continue to sit vacant. And residential construction projects will probably happen only in trickles and spurts. There’s no question about it: as far as housing is concerned, the recession stands to literally change the national landscape for years to come.

On a micro and economic scale, this change means tighter mortgage restrictions, lower rates of home ownership, and more conservative real estate investments. But the impact on the physical landscape also means changes on a more societal level – changes of which any long-term investor or home owner should be aware.

Here are the biggest of these overarching changes and trends:

-Unpredictability on the coasts. When the next housing bubble grows and then inevitably pops, its impact will likely be largest felt in the Sunbelt and in the coastal metropolitan regions of the country. These are the places that rose the highest and fell the hardest over the past several years. For those who invest in homes in places like St. Louis, Kansas City, and Minneapolis, returns over time can be much more predictably positive.

-Metropolitan areas are looking inwards. On a metropolitan level, urban residential parcels have far outpaced suburban and exurban developments in value and resale strength during the recession. Although downtown condos have suffered alongside suburban housing developments, the former has more successfully weathered the downturn in all but a few cities. This reflects the importance of surrounding infrastructure and amenities in tampering the effects of a dismal market.

-Transportation matters. On a similar note, experts have long predicted that growing cities and populations would, over time, increasingly favor residences with good transit access. We saw this play out over the past few years, as developments and neighborhoods with less convenient train and highway access have seen their values suffer more. We can only expect this discrepancy to be greater during future economic downturns.

These are just a few of the main ways in which the current housing market reflects – and predicts – long term trends in America’s built landscape. While homeowners across the country have seen their investments lose value over the past few years, not all areas are created alike. It’s a lesson best kept in mind as we recover from last decade’s bubble and begin to move forward.