Some 57 million Uber users’ personal information was exposed in October 2016 when the car-hailing company experienced a cyber attack, the company announced Tuesday — more than a year after the occurrence of the incident.
Bloomberg reported the company paid $100,000 to the hackers responsible for the attack to keep the breach private.
Dara Khosrowshahi, Uber’s new CEO who was appointed by the board in August, said in a statement that two people outside the company “inappropriately accessed user data stored on a third-party cloud-based service that we use.”
The attackers stole data of the 57 million people across the globe, including their names, email addresses and mobile phone numbers. About 600,000 U.S.-based drivers were among 7 million Uber drivers whose license numbers and names were exposed in the breach.
The data breach was the latest in a string of high profile cyber attacks that weren’t revealed until months or years later. Fortunately, it doesn’t appear that Uber users have to worry about any of their financial information being exposed. Khosrowshahi said no evidence indicated that trip location history, credit card numbers, bank account numbers, or dates of birth were stolen.
What was done?
After the attack happened, Uber “took immediate steps” to safeguard the data and blocked further unauthorized access to the information, according to Khosrowshahi. The company identified the hackers and made sure the exposed dada had been destroyed. Security measures were also taken to enhance control on the company’s cloud storage.
“None of this should have happened, and I will not make excuses for it,” Khosrowshahi said. “While I can’t erase the past, I can commit on behalf of every Uber employee that we will learn from our mistakes. We are changing the way we do business, putting integrity at the core of every decision we make and working hard to earn the trust of our customers.”
The company let go two employees who led the response to the incident on Tuesday, according to the statement. Uber is also reporting the attack to regulatory authorities.
What can you do?
Uber said no evidence shows fraud or misuse connected to the data breach.
If you are an Uber rider…
The company said you don’t need to take any action. Uber is monitoring the affected accounts and have marked them for additional fraud protection, Khosrowshahi said. But you are encouraged to regularly monitor your credit and Uber accounts for any unexpected or unusual activities.
If anything happens, notify Uber via the Help Center immediately. You can do this by tapping “Help” in your app, then “Account and Payment Options” > “I have an unknown charge” > “I think my account has been hacked.”
If you are an Uber driver…
If you are affected, you will be notified by Uber via email or mail and the company is offering free credit monitoring and identity theft protection.
You can check whether your Uber account is at risk here.
Check out our guide on credit freezes and other steps you can take to protect your identity if personal information is compromised in a data breach.
House and Senate Republicans have rolled out separate versions of tax-reform plans, aiming to cut taxes for corporations and individuals. Although the two bills diverge in a number of ways and the fate of both remains in flux, one thing’s for certain: Homeowners would be affected under both plans.
In this article, we lay out the changes to housing-related provisions under both plans and explain what they would mean for existing homeowners and first-time homebuyers.
The Senate’s bill is to go to the full Senate for a vote the week following the Thanksgiving holiday. President Trump has called on lawmakers to pass one cohesive bill by Christmas, and Republican legislators would like to see the reforms take effect in 2018.
What are the changes?
Here’s a quick overview of housing-related changes proposed in the bills:
Both bills nearly double the standard deduction, while eliminating personal exemptions.
The House and Senate both proposed changing residency requirements for capital gains home-sale exclusions by increasing the live-in time period to five out of the last eight years. Current law allows people to write off up to $250,000 — or $500,000 for couples filing jointly — from capital gains when selling a home, as long as they have lived in it for two out of the past five years.
Under the House plan, mortgage borrowers can deduct mortgage interest on loans up to $500,000, for debt incurred after Nov. 2, 2017. Currently, the tax deduction cap is $1 million. The deduction for state and local income taxes would be gone. But the state and local property tax deduction would remain but be capped at $10,000. (There is no cap, currently.)
The Senate bill would leave the mortgage interest deduction unchanged, but eliminate all state and local tax deductions (SALT), including deductions for property taxes.
Fewer people will claim mortgage interest deductions
The National Association of Realtors (NAR), a vocal critic of the tax reform proposals, expressed through statements and press briefings that both plans would negatively affect homeownership. The association has called the tax reform legislation an “overall assault on housing.”
“Simply preserving the mortgage interest deduction in name only isn’t enough to protect homeownership,” NAR President Elizabeth Mendenhall said in a statement.
Nearly doubling the standard deductions and repealing some itemized deductions would likely mean that far fewer people would itemize when they file taxes. NAR officials worry that these moves will undercut the incentives to pursue homeownership.
The standard deduction is a fixed dollar amount, based on your filing status and age, by which the IRS lets you reduce your taxable income. The itemized deduction allows you to list your various deductions, including the mortgage interest deduction. You can claim one or the other — whichever lowers your taxable income more.
The standard deduction for a married couple filing jointly is $24,400 under the House plan and $24,000 under the Senate plan. Wolters Kluwer, a global information services company, suggested in an analysis that only those taxpayers who would deduct more taxes through itemizing than taking the bigger standard deduction — the top earners — would benefit from itemizing deductions like the one for mortgage interest.
Impact under House plan
Capping the mortgage interest deduction
The good news is that the majority of existing homeowners won’t be affected by the cap on the mortgage interest deduction, because only about 21 percent of American households take the deduction under the current law, according to the Tax Policy Center.
But about 18.5 percent of new homebuyers would get hit with a bigger tax bill on their housing-related tax liabilities, according to an analysis released by Trulia, an online real estate resource for homebuyers and renters.
“Because the mortgage interest deduction skews to upper-income families, it encourages people to buy bigger homes,” Nela Richardson, chief economist at Redfin, a Seattle-based real estate and technology company, told MagnifyMoney. “It also encourages builders to also build bigger homes, so it encourages sprawl.”
Less than 10 percent of the bottom 90 percent of the income distribution receive the tax subsidy on mortgages, the Tax Policy Center said.
Richardson added that this doesn’t mean the deduction should be completely eliminated. She said she thinks putting a cap on the deduction is only to make the math work for the corporate tax cut, though it is not structured in a way to help middle-class homeowners.
“People who have the means to buy those homes” with a mortgage of more than $500,000 “would continue to buy those homes,” Richardson said. “What we’d like to see is [changes] to help buyers who wouldn’t be able to afford a house unless they got some kind of tax credit. That would be a subsidy that was progressive instead of regressive.”
A silver lining to some: Middle-class homeowners might benefit from an income tax cut, which hopefully would help them purchase a house, experts say.
“The result of that is still a little fuzzy,” Richardson said. “It’s not clear that middle-class buyers in the long run would actually receive an income tax cut.”
What does it mean to first-time homebuyers in expensive cities?
The mortgage interest deduction provides little benefit to new home buyers because many new U.S. homeowners do not itemize or are in the 15 percent tax bracket or lower, William G. Gale, chairman of federal economic policy in the Economic Studies Program at the Brookings Institution, wrote in an analysis for the Tax Policy Center.
First-time buyers are generally looking for cheaper homes. Nationally, the median sales price for existing homes is $245,100, according to the Federal Reserve Bank of St. Louis, well under the $500,000 cap, so capping the mortgage interest deduction shouldn’t affect them too much.
But for buyers in high-cost markets, where demand is high and affordability is challenging, the cap will sting, Richardson said.
“You cannot find a $500,000 home in the Bay Area,” Richardson said. “Good luck with that.”
In San Francisco, the median home sales price is around $1.2 million, according to Redfin and Trulia.
Home prices are expected to go up next year, as the Federal Reserve is expected to increase the short-term interest rate by year’s end, economists say.
“For the first-time buyer, you are dealing with this double whammy,” Richardson said. “If you add onto the fact that really expensive states’ first-time home buyers won’t be able to deduct all of the mortgage interest, then that is an additional expense. So it really is a challenging situation to put new buyers in.”
Trulia reported that across the 100 largest markets, more than half of homebuyers in coastal California, New York and Cambridge, Mass., would experience an increase in their home-related tax liabilities if they purchased a home under the House plan.
Impact on housing supply
Real estate experts expect less movement in the housing market since people who already own homes with big mortgages can continue to deduct the interest. This would make the housing supply crunch even worse in those expensive markets because people may choose to stay in the same house, knowing they couldn’t deduct the same amount of interest on their next big mortgage.
Factor in a longer live-in requirement for capital gains exclusions of homes sales, which economists believe will result in more homeowners waiting longer before moving to a different house to save on capital gains, and it would be even trickier for first-home buyers to bid for a desirable house in higher-end markets.
“It’s definitely not going to help alleviate price increases,” Cheryl Young, senior economist at Trulia, told MagnifyMoney. “But it will also contribute to competition.”
Trulia found that roughly 10 percent or more of existing homeowners in California and the Northeast would lose the incentive to sell their homes. Nationwide, the figure is 2.5 percent.
What does it mean for homeowners in high-tax states?
People living in high-tax states, such as New Jersey, New York and California, where homes are also costly, will see a rise in their property tax liability on taxes paid above the $10,000 property-deduction cap.
Trulia estimates that more than 20 percent of existing homeowners in New York and San Francisco would experience an increase in their property tax bills. Nationally, about 9.2 percent of existing homeowners will experience an increase in their property taxes.
Impact under Senate plan
Bigger property tax liability
Although the Senate plan is in some respects seen as more straightforward than the House bill, removing all SALT deductions would have a more expansive impact on homeowners across the country. That’s because they wouldn’t be able to deduct their property taxes anymore, Trulia’s chief economist, Ralph McLaughlin, explained in an analysis.
Existing homeowners in the Northeast and the Bay Area — New Jersey, New York, Connecticut and California — would be hit the hardest, according to McLaughlin.
A study commissioned by the National Association of Realtors and conducted by PricewaterhouseCoopers (PwC) found that, for many homeowners who currently benefit from the mortgage interest deduction, the elimination of other itemized deductions and personal exemptions would cause their taxes to rise, even if they elected to take the increased standard deduction.
The study found that homeowners with adjusted gross incomes between $50,000 and $200,000 would see their taxes rise by an average of $815.
Mortgage interest deduction would be worth less
Leonard Burman, a fellow at the Urban Institute and professor of public administration and international affairs at Syracuse University, wrote in an analysis that if homeowners cannot deduct state and local income, sales and property taxes, only the very wealthy and the very generous would benefit from itemizing. As a result, he estimated that only 4.5 percent of households would itemize under the plan, compared with the current 26.6 percent.
“Even for those who continue to itemize, the mortgage interest deduction may be worth much less than many homeowners believe,” Burman wrote. “This is because net tax savings depend not only on whether mortgage interest plus other deductions exceed the standard deduction, but by how much.”
For lots of people, holiday shopping consists of frantically running through the crowded aisles at Target, Walmart, T.J.Maxx, Macy’s and Best Buy — or typing things like “gifts for Mom” into the Amazon search field. And while they spend a good deal of time and effort shopping (and stressing), the outcome is all too often a load of generic products from big-box stores and a generous helping of conspicuous consumers’ guilt.
If you’re looking to break that pattern, there are lots of places where you can find holiday gifts that will stand out among all the other “stuff.” Here, we rounded up some noteworthy retailers and brand websites you could explore for interesting, unusual gifts, based on the personality of the person you’re shopping for.
A plus: You can feel good about spending money in these places because someone else will benefit from your dime.
For the sassy and quirky
BlueQ is the place to buy a gift for someone with a good sense of humor. The Pittsfield, Mass.-based novelty gift manufacturer was founded in 1988, and its self-described mission is simple: “We just want you to be happy.”
From colorful stocks to quirky reusable handbags, and tin boxes to oven mitts, almost every item sold at BlueQ features a sassy phrase combined with edgy, vintage imagery. Want a taste?
Fun stuff doesn’t need to be costly. The price range for the goods is from $1.80 to $15.
The joy-bringing gift shop donates 1 percent of the sales of its socks to Doctors Without Borders and 1 percent of oven mitt and dish towel sales to hunger relief programs throughout the world. Another 1 percent, this from profit selling recycled purses and bags — made from 95 percent post-consumer goods — goes to support international environmental initiatives. BlueQ also employs people with disabilities to assemble its products.
Where to shop
You can order from BlueQ’s website, and many bookstores and gift shops carry BlueQ’s items. Find a store near you here.
For the creative and ethically conscious
Uncommongoods is a marketplace for artists and crafters from across the world to sell independently designed, often fair-traded and hand-crafted products. To name a few:
The company values sustainability as a business and a product distributor. Many the items sold on its website are made of recycled materials. Customers can choose a nonprofit organization that partners with Uncommongoods to give $1 with every order.
A team of buyers not only evaluates goods based on materials and function, but also cares where each design comes from, how it’s made and who made it, according to the shop’s website.
During the peak winter months, when Uncommongoods hires hundreds of seasonal workers, the company says it pays its lowest paid hourly worker 100 percent more than minimum wage.
To make your shopping experience easier, Uncommongoods has a search engine for gift suggestions for your loved ones, letting you filter different personalities and hobbies.
Mouth is a paradise for your foodie friends and family. The company prides itself on producing interesting, indie, small-batch foods. You can buy your friends specialty eats from 40 states, and learn about the people who made the food you purchase here.
Why we like it
You won’t find convenience-store staples like Doritos or Hershey’s on Mouth. Most of the foods that Mouth sources are either handmade at local stores or workshops across the country, or come from brands started as homemade concoctions, according to its website. You would be supporting small, local businesses by purchasing treats that match your friends’ tastes. For ingredients that cannot be sourced domestically, such as coffee and chocolate, the company makes sure they are fair-traded and organic.
While Mouth is dedicated to selling treats that are made in an environmentally friendly, relatively healthier way, it by no means claims that everything on its website is good for you. But Mouth promises that its foods are not full of chemicals, preservatives or unhealthy fats.
Independent stores tend to have a rich history and offer diverse specialty books depending on the theme of the store and its location. Chicago’s Women and Children First, for instance, opened in a modest storefront in 1979 and is one of the country’s biggest feminist bookstores — it would be a great place to shop for someone passionate about supporting women. Sales from Indy Reads Books in Indianapolis support a nonprofit dedicated to improving adult literacy, and a book from there could be a meaningful gift for a philanthropic friend.
Why we like them
Apart from offering personalized services, specialized book selections and a platform for literary gatherings, many local bookshops are increasingly carrying gift items — pins, mugs, T-shirts, cards — consistent with the history or theme of the store.
If you have bookworms on your shopping list, pick a book from their favorite author or a souvenir from the shop they loyally frequent. This is a great way to support small businesses.
Where to find independent bookstores
You can use this guide to find a local independent bookstore near you.
For the artsy and modern
Museum gift shops are stocked with fine-art-inspired collectibles — not just totes or posters. Gift shop items often embody the very best design principles in a form of functionality or art.
Depending on where you are and what types of art you like, you can find prints, office stationery, books, dining sets, home furniture, apparel and more from the country’s art museums or through their websites
Why we like them
The gift shop is usually a critical revenue generator for a nonprofit museum, according to the State Department Bureau of International Information Programs. So when you buy a Monet umbrella or an American Gothic magnet while visiting a museum, you’re showing your support. If you are a member of a particular museum, you can often get a discount. And the purchase is likely to be appreciated by your art-loving friends.
The Art Institute of Chicago: The Art Institute is America’s second-largest art museum after the Met in New York. It is best known for Impressionist and Post-Impressionist art collections. The collectibles at the gift shop well represent the museum’s masterpieces.
Museum of Modern Art: The MoMA in New York has an outstanding history with design. In 1932, the museum established the world’s first curatorial department devoted to architecture and design. The MoMA Design Store features a vast range of modern and innovative design objects. It is currently offering 20 percent off on 100 gift items.
San Francisco Museum of Modern Art: The SFMOMA gift store offers an impressive selection of modern and contemporary art books. Apart from that, you can order gallery-quality reproductions of artworks that are often exclusive to the museum, through its website.
Update: House Republicans have passed a sweeping tax bill that would cut both corporate and income taxes by $1.5 trillion, bringing the country one step closer to the biggest taxation overhaul in decades.
The House passed the Tax Cuts and Jobs Act in a 227-205 vote, bringing President Trump nearer to his first major legislative accomplishment since he took office in January.
“Today’s vote brings America one step closer to historic tax cuts that will allow Americans to keep more of their hard-earned money,” Ronna McDaniel, chairwoman of the Republican National Committee, said in a statement shortly after the vote. “President Trump and Republicans in Congress are keeping their promise to give workers a raise, support American businesses and grow our economy.”
Some experts say the whopping $1.5 trillion tax cut will benefit many taxpayers. But will some lose out? And what does it all mean for you?
As expected, in order to pay for the tax cuts, lawmakers chose to get rid of or limit many key tax breaks. Some of the items on the chopping block under the Republicans’ plan, which include personal exemptions, deductions for medical expenses, paid student loan interest and paid mortgage interest, could impact millions of Americans.
“It really depends on the individual situation whether they’ll be more helped or hurt,” Mark Luscombe, principal federal tax analyst at Wolters Kluwer, told MagnifyMoney. You can read the entire bill here.
What happens next?
The bill will move for a vote in the Senate, which hasn’t yet voted on its own version of a tax cut plan. Trump has called for lawmakers to pass one cohesive bill by Christmas. Republican lawmakers would like to see the reforms take effect in 2018.
But the tax overhaul has a long way to go. The House and Senate proposals differ on a number of major provisions, which will make it tough for the two bills to be reconciled and spur clashes over tax policy. To see what the Senate has in store, check out this post.
Keep reading for a summary of the tax changes to come and how they might affect your bottom line:
The bill compressed the current seven-tier tax system into four tax brackets: 12 , 25, 35 and 39.6 percent. The top individual tax rate remains unchanged at 39.6 percent.
The new bottom bracket of 12 percent is higher than the current bottom bracket of 10 percent but replaces the 15 percent bracket as well. The proposal will also push some in the current 33 percent bracket into the 35 percent. So there will be some shuffling, and its impact on you depends on your earnings picture.
Here’s the breakdown of brackets for married filers:
The income threshold for the 25 percent bracket moves to $90,000, up from $75,900 for married couples. The 35 percent bracket starts at $260,000, and the top tax rate starts at $1 million.
Next, let’s look at tax deductions. Under the plan, some would increase.
Deductions that would be increased
Under the House plan, the standard deduction would be almost doubled. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed.
For individuals, the standard deduction would rise from $6,350 to $12,000. For married couples, it would go up from $12,700 to $24,000.
But personal exemptions, currently $4,050 per person, would now be included in the standard deduction, so the actual increase isn’t as big as it seems at first blush. Under the current tax code, taxpayers could claim one personal exemption for themselves and one for a spouse.
The change in personal exemption will likely offset the benefits from the standard deduction for many to some extent. “If they are doubling the standard deduction but eliminating the personal exemption, a single parent with a number of kids could actually be hurt by that on a net basis,” Luscombe said.
Child tax credit
The House bill also proposes to expand the child tax credit, which allows parents to offset expenses of raising children, from $1,000 to $1,600.
The bill also will provide a credit of $300 for each parent with a dependent who is not a child, such as a grandfather or a college student. Those $300 credits expire in five years.
Those credits are seen by advocates as helping some families make up for the loss of personal exemptions.
401(k) contribution limits
Unlike what was suggested in an earlier round of rumors, the Republicans did not call for reducing the contribution limits for 401(k) accounts. Phew.
For 2018, workers under age 59.5 can contribute $18,500 to a 401(k) on a pre-tax basis.
But still, more changes are proposed, with some deductions changed or ended under the proposal.
Deductions that will be eliminated or altered
The House bill keeps the home mortgage interest deduction for existing mortgages. But for newly purchased homes, the home mortgage interest deduction is lowered to $500,000 from the current $1 million debt limit.
It could well put a damper on higher-end home purchases, where half of a $1 million mortgage is not eligible for interest deduction, Luscombe said.
Medical-expense deductions are going away. Right now, individuals can deduct qualified medical expenses that exceed 10% or 7.5% of their adjusted gross income (depending on age). Households with outstanding medical costs and are eligible for the deductions will feel significant effects from the repeal. The provision could have big implications for families with high medical costs during the year.
Student loan interest
The deduction for student loan interest could also be eliminated under the Republican tax reform.
Under current rules, borrowers may deduct up to $2,500 in interest payments on student loans on their federal income tax returns. The loss of the deduction would put a heavier financial burden on hundreds of thousands of college graduates grappling with significant education debt.
The state and local income tax deduction
The Republicans are further calling for an end to the deduction for state and local income/sales taxes.
The IRS allows those who make payments for state and local income taxes to deduct them on their federal tax return. The loss of the deduction is seen by some critics as hurting people in high-income tax rate states, such as New York and California.
But the proposal would keep in place the state and local property tax deduction, although capping it at $10,000.
The estate tax
Republican lawmakers proposed to double the estate tax exemption from $5.49 million to nearly $11 million and eventually do away with it. The estate tax is the tax you pay to inherit property or money from a deceased person.
This means families don’t have to pay taxes on any inheritance under $11 million. The bill calls for repealing the estate tax after six years.
In addition to reducing or eliminating several tax breaks, Republicans hope that the tax cuts will boost the economy, foster business growth, make the U.S. business environment more competitive with other countries’ in terms of tax rates, and even spur wage growth. This, in, turn, would bolster tax revenue, supporters say. But critics fear a surge in the budget deficit, with implications for future generations.
Senate Republicans on Tuesday proposed to repeal the individual mandate under the Affordable Care Act by 2019 as a part of their tax reform plan.
With open enrollment for 2018 Obamacare coverage well underway, and after two failed attempts earlier this year to repeal the ACA, the Senate’s proposal has reignited feelings of uncertainty over the health care law’s future.
The Senate’s proposal also came a couple of days before House Republicans’ planned Thursday vote on their own tax reform bill. (The House’s version does not propose to touch the insurance coverage requirement.)
Part of the reason behind the Senate’s proposal to cut the individual mandate is to help free up federal dollars and partially offset a sweeping $1.5 trillion tax cut proposal. Without the mandate, fewer people would likely sign up for coverage and that would mean less money the government would need to spend on the tax subsidies it offers to balance out the cost of premiums for millions of Obamacare enrollees.
The Congressional Budget Office estimates that if the individual mandate is eliminated, it will save the federal government $338 billion, and 13 million more people — mostly the young and healthy — will be uninsured by 2027.
Here is what you need to know about the individual mandate and what it means if it goes away:
What is the individual mandate?
The individual mandate is a provision under the ACA that requires most U.S. citizens and noncitizens who lawfully reside in the country to have health insurance. It was signed into law in 2010. Consumers who can afford health insurance but choose not to buy it have to pay tax penalties unless they are otherwise insured or meet certain exemptions.
The purpose of the mandate was partially to ensure that even healthy and young Americans would sign up for health coverage, balancing the so-called insurance risk pool and helping to keep premiums affordable.
Why is the mandate unpopular?
The provision has been widely unpopular since its introduction. The Kaiser Family Foundation’s latest poll suggests that 55 percent of Americans supported the idea of removing the individual mandate as part of the Republican tax plan.
More than 27 million people in the United States remained uninsured in 2016, the foundation reported, down from 47 million prior to the implementation of the ACA.
How does the individual mandate work?
The tax penalty for nonexempt individuals who do not sign up for health coverage is calculated as a percentage of household income or as a fixed amount per person. You’ll pay whichever is higher.
For 2017 the penalty was either:
$695 per adult and $347.50 per child, up to $2,085 per family, or
2.5 percent of household income
The maximum penalty can be no more than the national average price of the yearly premium for a Bronze plan (the minimum coverage available in the individual insurance market) sold through the insurance marketplace.
HealthCare.gov hasn’t yet published the 2018 guidance, but Kaiser has launched a calculator using 2018 projections from Bloomberg BNA. For 2018, the calculator estimates the amount of penalty is $3,816 for a single person and $19,080 for a family of five or more, according to the foundation.
You meet exemptions if coverage is considered unaffordable based on your income — under the ACA, “unaffordable”’ is if you would have had to pay more than 8.05 percent of your household income for the annual premium amount for health coverage in 2015 or 8.13 percent last year.
If you have experienced economic hardships or difficult domestic situations, such as homelessness, the death of a family member, bankruptcy, substantial medical debt or the toll of a disaster that damaged your property badly, you may apply for a hardship exemption.
People who are ineligible for Medicaid because their state hasn’t expanded that program also qualify for a hardship exemption. Those whose incomes are at or below 138 percent of the federal poverty level are eligible for Medicaid. That 138 percent means a little over $16,600 every year for a single person and nearly $34,000 for a family of four.
See more examples of people who qualify for penalty exemptions at IRS.gov.
You can find out if you are exempt from health care coverage using this tool:
What does it mean if the individual mandate is lost?
The immediate concern is that without fear of a tax penalty, not enough young, healthy people would get covered. When these low-risk people drop out of the market, coverage is skewed toward older, sick people who really need coverage. And that can lead to rapid increases in premium costs and even induce some insurers to drop out of the market.
Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation and senior adviser to the foundation president, summarized his thoughts on the loss of the mandate in a series of tweets Wednesday, saying he’s “doubtful” insurers would remain in the marketplace if the mandate were removed:
Repealing the ACA's individual mandate doesn't sound like something that could be bad for anyone. But, it's the mechanism that allows guaranteed coverage for pre-existing conditions.
The housing market is heating up again. Home prices have risen faster than income growth in the past five years, and the combination of low housing supply and increasing demand is driving home values ever higher.
Could we be in danger of another housing bubble?
Economists don’t seem to be too worried about the national housing market.
Across the U.S., increases in home prices have outpaced income growth by 34 percent since 2012, driven by economic expansion. However, this percentage is less than half the pace seen between 1997 and 2006, according to a recent Urban Institute study.
For the most part, homes are still affordable relative to household incomes, experts say.
According to the Urban Institute, a Washington D.C.-based think tank that carries out economic and social policy research, a median-income household can afford a house that is $70,000 more expensive than the price of the median house sold on the market. In contrast, in 2006, there was a $22,000 shortfall between what the median household could afford and the median sales price.
“Yes, prices are high, yes, the market is expensive, and yes, housing is unaffordable for some people, but that does not mean we are in a bubble yet,” Nela Richardson, chief economist at Redfin, a Seattle-based real estate and technology company, told MagnifyMoney. “Those attributes of a classic bubble are missing.”
By “classic bubble” attributes, Richardson is pointing to telltale signs of trouble, such as lax mortgage lending standards, rapidly rising mortgage rates and the levels of speculation in the housing market we experienced 10 years ago.
Even as home prices were skyrocketing, soft underwriting practices allowed a record number of people to purchase homes with very low down payments. As the crisis intensified, housing prices began to nosedive and borrowers who bought more home than they could afford eventually defaulted on mortgages.
In the wake of the Great Recession, the federal government implemented stricter mortgage lending regulations that have made it much harder for financially unstable borrowers to qualify for a mortgage loan.
“Any of the mortgages made today [are] just super clean” and there is a historically low default rate, Bing Bai, an Urban Institute researcher, told MagnifyMoney. “We are not in that kind of risk like the risk we had before in previous bubble years.”
Mortgage default rates have fallen to 3.68 percent for single-family homes, not quite as low as pre-recession levels but much better than the peak of 11.53 percent in 2010.
10 Metros at Risk of a Housing Bubble
So, the nation as a whole might not be facing an imminent bubble. However, Urban Institute economists have put certain cities of the country on the “bubble watch” list.
In the study, they analyzed 37 metro areas across the U.S. to find how much housing prices have gone up since their lowest point following the financial crisis and how affordable homes are based on the median income for that city. Below are the top 10 cities in danger of a housing bubble.
#1 San Francisco-Redwood City-South San Francisco, Calif.
California snags five of the top eight spots, led by the San Francisco metro area.
In San Francisco, for example, a family earning the median income for the area needs to dedicate at least 70 percent of income for a typical 30-year fixed-rate mortgage, Bai said. The median home sales price is $1.2 million in the Bay Area, according to Redfin and Trulia, an online real estate resource for homebuyers and renters.
The overheated housing situation in the Silicon Valley and Seattle is largely a result of the tech boom during the years of economic recovery, Richardson said. Yet demand is still going strong with healthy job increases despite stunning home prices.
“There’s a lot of money looking for a place to land,” Richardson added.
“It’s not just about the local economy in these markets,” Richardson said. “It’s about the global economy.”
Advice for home buyers in super expensive cities
The truth is, experts don’t see a sign of price decline in hot markets any time soon.
“Demand is still there, with low supply, [and] it’s just going to keep prices high,” Cheryl Young, senior economist at Trulia, told MagnifyMoney.
If you are looking to buy in cities where home prices are sky-high and competition is extremely fierce, here is what pros suggest you can do to bid for a desirable house:
Time it right
“Home buying is all about timing,” Young said. “We always say you shouldn’t rush to enter the housing market if you are not ready.”
If you’ve definitely decided to buy, the best time to start looking might be during the fall. Young said home prices are, in general, at their nadir in the wintertime, so you may want to start looking in the fall when prices started to dip as home supply is higher than they are at other times of the year.
When you are ready to start looking, you also need to save up for a down payment, Young said.
A good rule of thumb for a down payment is 20 percent. That way you could avoid paying for the additional cost of private mortgage insurance. But the reality is that it’s tough for buyers to put down that much money, especially if you are in a super-expensive market. It’s fine if you can’t save up for 20 percent, but of course the more you can scrounge up, the better.
Also recommended: Have all your financial statements ready and compare mortgage rate offers from several financial institutions to be sure you’re getting the best deal. Avoid these common mistakes homebuyers make before they apply for mortgages.
“Working with someone who knows the local area, who knows how to strategize how to make an offer that is as good as cash or almost as good as cash if you are in a competitive market is very important,” said Richardson.
Capital One announced Tuesday that it would shutter its profit-losing mortgage and home equity origination businesses.
As a result, the banking and financial services company will cut about 900 mortgage-related jobs in three states, a Capital One spokesperson told MagnifyMoney via email.
In addition to its mortgage loan business, the banking and financial services company offers a variety of products that includes credit cards, checking and savings accounts and auto loans.
But the company has struggled to make its mortgage business as profitable as the competition. Capital One originated $901 million in home loans in the third quarter of 2017, but that wasn’t enough for the bank to make the list of top 40 mortgage providers, according to Inside Mortgage Finance, a trade publication.
“Given the challenging rate environment in this space, we are structurally disadvantaged and we are not in a position to be both competitive and profitable,” the company’s spokesperson said.
Ted Tozer, senior fellow at the Milken Institute (a nonprofit, nonpartisan think tank focused on global prosperity) and former president of Ginnie Mae, told MagnifyMoney that Capital One’s exit should not have a negative impact on the home lending business because it has not been an effective player since it entered the space some eight years ago.
“It’s come to light that they don’t have a cost-effective operation because they really haven’t invested in technology,” Tozer said.
In fact, he said, this will be good news for the industry because other financial institutions will then absorb Capital One’s customers in an increasingly competitive business.
The competition in the home lending business has grown fiercer as interest rates rise, driving fewer homeowners to refinance, Tozer noted. The country is also still experiencing historically low homeownership rates.
Nonbank financial institutions that have sprung up since the Great Recession are taking an increasingly big slice of the business. Legacy banks such as Capital One are losing customers to industry disruptors, like Quicken Loans, that have invested heavily in technology to streamline the lending process, experts say.
“Everyone’s trying to compete for the fewer borrowers out there and you have to really have a cost-effective infrastructure to be able to compete in this kind of cut-throat environment we are going through right now,” Tozer said.
“Capital One is hamstrung by old technology, whereas the new nonbanks are doing this 21st-century technology, and they are able to get the consumer a better experience for a cheaper price.”
So how will the end of Capital One’s mortgage business actually affect consumers?
If you were hoping to get a Capital One mortgage …
You’re out of luck. Capital One is not going to take additional home loan applications effective immediately.
If you have a Capital One mortgage or home equity loan already …
Not much will change for you. The bank will continue to service the loans in its portfolio. The company’s spokesperson told MagnifyMoney that consumers who have a loan in process or whose loan is being serviced by Capital One can continue to access their accounts the same way they’ve done so far – through digital means, by phone or by visiting a bank branch.
If you are the middle of processing a Capital One mortgage application …
The spokesperson said Capital One would close all open mortgage applications soon. If a loan cannot be closed promptly, the financial institution will refund any fees would-be borrowers have paid so that they can find another lender.
Capital One will continue to provide specialized multifamily financing to the real estate development and investment community through Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA), according to to the company.
Capital One will also continue lending activities for affordable housing supporting the low- and moderate-income markets.
Experts suggest consumers reach out to their loan officer or customer service to receive an update on their loan if they have questions.
If you plan to buy a fresh Christmas tree this holiday season, you might want to leave a bit more wiggle room in your budget.
The National Christmas Tree Association, which represents more than 700 member farms, estimates that the prices for U.S.-grown Christmas trees will rise 5 to 10 percent this year because supply is tighter than usual. The tree species impacted will be farm-grown Noble and Fraser firs, which are most popular around the holidays.
The good news is that although prices are increasing, finding a tree isn’t expected to be a big problem.
“We are optimistic that everybody who buys real Christmas trees will still be able to find a real Christmas tree this year of their liking,” Doug Hundley, a spokesman for the association, told MagnifyMoney.
Local tree sellers are already seeing evidence of pricier trees this season. Popi Costa, a sales rep at U S Evergreens, a wholesale florist based in New York City’s Flower District, says the store is still awaiting its shipment of Christmas trees, but other decorative Christmas evergreen items, such as the branches used to make wreaths, have already arrived and are 5 percent more expensive than usual.
U S Evergreens sources all of its Christmas evergreens from farms in Oregon, the biggest Christmas tree producer in the nation.
“We haven’t received the price list yet, but we think it will be a little bit more than it was before,” Costa says.
What’s behind the price uptick?
The price increase of Christmas trees is actually one of the far-reaching consequences of the Great Recession. For a few years following the financial crisis, Christmas trees prices fell as cash-strapped consumers bought fewer trees than were available on the market.
As a result, the revenue stream that growers would typically use to fund following year’s harvest was depleted, leading farms to plant fewer new trees. Another reason is that there have been fewer seedlings — young plants grown from seeds that are later sold to farms — available for farms that rely on them to jumpstart their planting.
Now, consider the seven to 10 years it takes to produce a mature tree of six or seven feet. No wonder we’ve ended up with a supply issue of holiday-ready trees. And as the demand catches up during the economic recovery, the price go up.
Although there are fewer trees available, Hundley says there should be more than enough evergreens available to meet demand.
However, if you prefer a specific type of Christmas tree, he encourages you to purchase as early as possible — he suggests shopping no later than the week after Thanksgiving. A typical fresh Christmas trees lasts for about a month if properly cared for.
America’s love for Christmas trees: By the numbers
According to the tree association, some 350 million Christmas trees are currently growing on thousands of family farms across the country to meet the demand for a decade to come. The top three Christmas tree-producing states are Oregon, North Carolina and Michigan.
Hundley, who has been in the industry for more than three decades, says when the economy is improving, people often buy bigger Christmas trees. He said growers are expecting the same demand for the coming sales season, if not larger, with Americans in general feeling better about the economy.
Consumer confidence has risen to its highest level in almost 17 years, according to data released last week through The Conference Board, a global, independent business membership and research association.
Another tree trend to watch: Americans are slowly swapping out the real thing for fake trees, data show.
The number of real Christmas trees purchased in 2016 was 27.4 million, down from a recent peak of 33 million in 2013, according to the National Christmas Tree Association.
Meanwhile, Americans purchased 18.6 million artificial Christmas trees in 2016, up nearly 59 percent from 2009.
Fake trees are generally more expensive than real trees. A 6- or 7-foot Fraser at U S Evergreens cost $75 last year, while artificial trees are priced at from $90 to $150 online.
Conventional wisdom says it’s smart to save up for unexpected expenses, like covering the basics after a job loss or settling medical bills after an emergency treatment. But because the costs of medical care can be so unpredictable — and often so wildly expensive — should you even try to save up for them and tap your rainy day reserve when they occur?
Yes and no.
Financial planners say you should set aside money for medical expenses — expected or unexpected — so if anything happens, you will at least have a cushion. But it’s not a good idea to drain your emergency fund on hospital bills so large that your emergency fund won’t cover all of it.
“If you were to drain all your emergency fund on that medical bill, let’s say a car breaks down,” says Juan Guevara, a certified financial planner based in Colorado. “Then the only resource at that point is getting into debt.”
In fact, if you can come up with other strategies to pay down those medical expenses, it may be wiser to preserve your emergency fund as much as possible. Here’s what you can do when you are surprised by a big medical bill:
Ask for a payment plan
First, you should reach out to the hospital or doctor. Many medical institutions actually provide low-interest or even no-interest payment plans for patients who cannot pay bills — particularly big hospital bills — in full.
“Anyone whom you owe money to is a good place to start with: Is there some kind of financing they could provide?” says Catherine Hawley, a certified financial planner in California.
“There’s not one kind of ubiquitous standard, but it’s definitely something to look into.”
But you have to ask; this isn’t something hospitals are advertising.
Guevara says his family got a medical bill for more than $11,000 a few years ago after his wife had an emergency surgery. The couple called the hospital, asking if they could work out a payment plan, and the hospital agreed to a one- or two-year plan with no interest after an initial $4,000 payment.
“If there’s no interest, why not to spread it out a little bit more?” Guevara asks. He chose to pay off the hospital costs over two years.
It’s also possible to negotiate a lower bill with hospitals and doctors.
Guevara says some of his friends who didn’t have health insurance coverage have successfully done this. They explained their predicament while showing the willingness to pay in cash, and the hospital not only reduced the amount they needed to pay, it also provided payment plans.
“For a hospital, it’s better to collect something than collecting nothing,” Guevara says.
It’s OK to tap your emergency fund — just don’t wipe it out
When a huge, unexpected medical bill arrives, your emergency fund may not come close to covering it. Still, financial advisers suggest you save some money for such emergencies and tap part of your rainy-day fund when needed.
“You are making things a little bit easier for yourself,” Guevara says. “If you start treating a lot of things as not-unexpected, when it actually happens, you already have some money there.”
To come up with the $4,000 to cover part of his wife’s surgery costs, Guevara had to take $1,000 out of the family emergency fund, in addition to using funds from their Health Savings Account (HSA).
Guevara suggests that, as a rule of thumb, no more than half of your emergency fund should be applied to expensive health care costs.
For those who feel reluctant to touch their rainy-day cash for medical emergencies, Hawley recommends you learn what your out-of-pocket maximum is — the most you have to pay for health care services in a plan year — and include that amount in your fund. After you hit your out-of-pocket max, your insurance company covers your health care costs for the rest of the year.
If you anticipate a lot of medical bills in the coming year or have a personal or family history of medical problems, you might want to set aside separate money so you can preserve your emergency fund as much as possible, Hawley advises.
Take advantage of an HSA
People with a high-deductible health plan (HDHP) are eligible for a tax-advantaged Health Savings Account. Pros highly recommend that those who have an HSA use it not just as a medical fund for unexpected emergencies, but also as a long-term retirement savings account.
The money you put into an HSA is tax-deductible. The balance grows tax-free and rolls over each year. Withdrawals from your HSA for qualified medical expenses are not taxed.
The annual maximum HSA contribution in 2018 is $3,450 for an individual and $6,900 for a family. If you are at age 55, you can contribute an additional $1,000 annually.
“For very high medical bills, it’s not going to be the only answer, but it could be a nice piece of the puzzle,” Hawley says.
When a surprising hospital bill arrives, instead of paying for it in cash, Guevara suggests you take the money out of savings account and deposit it into your HSA first. Paying the medical bill with an HSA helps you save money, because then you can deduct that contribution on your income tax return.
An FSA (Flexible Spending Account) can be similarly helpful, though it can be tricky to decide how much to put in such an account: FSA funds must be used by the end of the year.
Enlist help from family and friends
Before resorting to credit cards or other types of loans, look for ways to pay bills without having to take on interest-bearing debt. You may not like the idea of asking for help, but a loan from a family member or friend may be your most affordable option.
“You gotta push yourself out of your comfort zone and ask for people to help you,” says Dan Andrews, a financial planner based in Colorado. “And put yourself in their position like, ‘If i was the loved one of the person that comes to me for help, I would want to help them.’”
What to do if after you dip into your fund
Replenish your fund after withdrawals so you’re prepared for future unexpected costs.
A drastic lifestyle change may also be needed so that you could redirect more of your money to pay down the medical debt. If you “don’t need a car as much as they used to, sell that, or maybe find other ways to increase your earnings,” Andrews says.
Americans appear to be back to their pre-recession savings habits. The personal savings rate in the U.S. dropped to 3.1 percent in September 2017, according to the Commerce Department — the lowest level since the Great Recession took hold.
Meanwhile, Americans are spending more (household debt is at a 10-year high) and consumer confidence has risen to its highest level in almost 17 years, according to data released Tuesday through The Conference Board, a global, independent business membership and research association.
Household debt is on the rise again. Total household debt increased to $12.84 trillion in the second quarter of 2017, up $114 billion, or 0.9 percent, from the same quarter last year, the Federal Reserve Bank of New York reported in August. This was a new high since the third quarter of 2008, the peak of the mortgage crisis. People may feel they can get access to funds by borrowing when it is needed, rather than holding money in savings, said Andrew Opdyke, economist at the First Trust Advisors.
But incomes are up and we’re spending more. While personal income rose 0.4 percent in September, consumer spending surged 1 percent, the fastest pace since 2009, Commerce reported.
Hurricanes don’t come cheap. The Commerce Department Bureau of Economic Analysis (BEA) said August and September estimates of personal income and spending reflected the effects of Hurricanes Harvey and Irma. Millions were displaced by the hurricanes, and experts say the spending jump was driven by a hurricane-induced uptick in auto sales and increases in gas and household utility prices.
It’s not exactly news that Americans aren’t the greatest savers. The Federal Reserve reported that in 2016, 44 percent of Americans could not come up with $400 in cash to cover emergencies.
But should we worried that we’re saving less and spending more than we have in a decade?
Economists say that as the economy is humming along, consumers are feeling more confident that they can spend and borrow more without putting themselves in financial distress. It’s no coincidence that Americans saved the most in the same year (2012) that consumer confidence was comparatively low.
Brian Wesbury, chief economist at First Trust Advisors, writes that rising debt levels aren’t so alarming when you factor in overall income growth. Household incomes grew by 3.2 percent between 2015 and 2016, according to the Census Bureau.
“Yes, consumer debts are at a record high in raw dollar terms, but so are consumer assets,” wrote Brian Wesbury, chief economist at First Trust Advisors. “Comparing the two, debts are the lowest relative to assets since 2000 (and that’s back during the internet bubble when asset values were artificially high.”
How to calculate your personal savings rate
Take your total monthly income from all sources (salary, retirement account, etc.), less taxes and money spent on everyday expenses, including debt payments.
Next, divide your monthly savings amount by your total income. Then multiply by 100 to get your personal saving rate.
There’s no magic savings rate to aim for. A good rule of thumb is to save 10 percent of each paycheck for retirement, and establish an emergency fund covering at least three to six months’ worth of basic living expenses.
Evidence suggests that many Americans are just getting by, shouldering record levels of student loan debt while grappling with rising fixed costs. The Consumer Financial Protection Bureau in September reported that 43 percent of American adults struggled to make ends meet in 2016.
But savings is key to achieving financial security. The CFPB study found that adults with savings and financial cushions had a higher level of financial well-being than those who didn’t have a safety net to fall back on.
7 strategies to boost your savings:
Automate. Many employers can set up automatic deposits of your income into multiple checking or savings accounts. You can have a portion of your paycheck automatically transferred into a savings account so that you will be less inclined to touch that money. It makes easier for you to resist the temptations to spend.
Make retirement a priority. If you are not able to set aside 10 percent of your income, you should try to contribute enough to capture the full company match for your 401(k), if your employer offers one.
Track your spending. You will be surprised by the amount of money you spend on groceries or Starbucks once you actually track the money coming in and out. The more you know about your finances, the better off you’ll be. A simple app to track spending patterns is a good place to start engaging in day-to-day money management and establish a habit of saving and budgeting.
Get rid of high-interest debts. Debts are anti-assets. It makes more sense to pay off high-interest debt, such as credit card debt, than to save. Here are four tips to help you pay down debts.
Avoid lifestyle inflation. Lifestyle inflation means people spend more as their incomes increase. It is one of the ultimate budget-killers.
Don’t keep up with the Joneses. Forget them. The key to being satisfied with the state of your finances and your life is focusing on your needs and goals rather than comparing with your friends and co-workers
Find ways to help break your negative spending habits. Here is a simple $20 rule that can help break your credit card addiction. We’ve also written about other strategies to break bad money habits here.