economic update and forecasting for real estate professionals, mortgage professionals, and those...

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An Economic Update for

Awesometown, Iowa

By Mary Kelly, PhD,

CSP, CDR, US Navy (ret)

Governance

Business

Schools

Communities

Economic challenges

affect:

Everything is resource

allocation

Economics is largely

anecdotal

Do I have investments?

Are they still down?

Will my taxes increase?

Dow up! S&P up 22.11% over last 365 days

What stocks are doing well?

What goes down does not

come up

$1,000

- 40%

$600 +40%= $840

Investments still down?

Inflation

Do you have a job?

Do your friends have jobs?

Are you upside down on

your house?

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Well, yes, but it might not feel like it

US National Debt

Taxes are increasing

Over $6 trillion new debt last 3 years

• $17,702,226,121,312 per www.usdebtclock.org

• $141,119 per taxpayer last Dec 2013

• $151,897 Sept 2, 2014

• Top 5% of Americans pay 58.66% of Federal

income taxes collected

• Bottom 46.3% of Americans pay no federal

income taxes

Debt and Taxes

Taxes up more than $500 billion in 2013

• Average tax increase of $3,500 per household

• Married couple pays 28% vice 25% above

$72,300

• On income up to $8,900, goes from 10% to 15%

• Summary: Typical middle-class family making

$40,000-$64,000 sees $2,000 more in taxes

• Family making $110,000-$140,000 sees $6,000

more in taxes (Tax Policy Center)

TAXES!

Remember, for Americans,

economics is local

*Do we have more disposable income?

*Consumer confidence, housing, auto sales

higher

*Fiscal cliff? Sequester?

• $1 trillion over 9 years

• 50% DoD

• 50% other federal programs

• No on is talking about it unless

you are impacted

• Less federal funding for low-income housing

Sequestering

• The average duration of unemployment

• The value of outstanding commercial and industrial

loans

• The change in the Consumer Price Index for

services

• The change in labor cost per unit of output

• The ratio of manufacturing and trade inventories to

sales

• The ratio of consumer credit outstanding to personal

Lagging Economics

Indicators

$16,482,511,352,009 Sept 2, 2014

$51,704 per citizen (includes babies)

Comes from:

$13,236.544,560,010 Mortgage debt

$ 1,291,808,571,121 Student loans

$ 875,182,401,179 Credit card debt

Total Personal Debt

-$875,182,401,179 Sept 2, 2014

-$672 billion July 2012

-$805.7 billion March 2010

-Falling indebtedness due to defaults vice

repayments (Fed Reserve) 2010-2012

-72% of Americans carry CC debt

Individual US Credit Card

Debt

P R O D U C T I V I T Y

p h o n e # o r P e r s o n : R e g a r d i n g :

T i m e : P e r s o n / P l a c e :

Productive Leaders 2011©

D a t e : __________________________

F o l l o w U p

T o d a y ’s A c c o m p l i s h m e n t s

T o D o

S h o r t - T e r m G o a l s

A p p o i n t m e n t s / M e e t i n g s

C a l l s t o M a k e

-3,100,761 population 2,899,715

-72,358 unemployed 68,187

-402,863 Food Stamp 276,871

-$6,663 debt/citizen $10,297

-

Iowa/KS Numbers Sept 2,

2014

Iowa State Debt

68 Housing Authorities

42 operate Housing Choice Voucher

Make it easy for people who should have help get it,

and harder for people who should not.

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Low-income borrowers tend to stay

in debt, miss mortgage payments, be

delinquent on 2nd or 3rd mortgage

liens, and have unpaid property

taxes.

Average credit score in an area

Property values

Competition

Risk

What affects mortgage

rates?

Why are rates lower in

areas where the prices are

higher?

Lenders incur fixed

transaction costs so they

pass them along

$100K versus $300K

house

“It is only the first $1M

that is hard”

Supply and Demand for

lending and building

dollars

Lending Paradox

“In an area where the economy is struggling and fewer people have jobs, lenders need to lower rates in order to attract borrowers” and prevent defaults.

Governance Paradox

States that make it easier to foreclose on delinquent buyers tend to have cheaper properties

TranslationIf the economy is growing then the rates can go up.

Translation: Lenders have an interest in good economic growth and good jobs.

Groceries 2%

Housing 14%

Utilities 4%

Health Care ==

From Lincoln, Nebraska to

Des Moines, Iowa

Groceries 4%

Housing 10%

Utilities 10%

Health Care 8%

Colorado Springs,

Colorado to

Des Moines, Iowa

How are Americans

spending their income?

For the bottom

20% of

Americans, food

and shelter are

big expenses

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33.1 % of all consumers’

spending went to housing

costs while 12.8% went to

food.

Americans paying more than

30% of income on housing are

considered cost burdened and

may have difficulty affording

food, clothing, transportation

and medical care

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www.Kiwilive.com

Mary C. Kelly copyright 2012

www.ProductiveLeaders.com

• Keyword: DOG

• 5-Minute Business Plan

• 5-Minute Money Plan

• 5-Minute Career Plan

• Productivity System

Americans paying more than

30% of income on housing are

considered cost burdened and

may have difficulty affording

food, clothing, transportation

and medical care

Minimum and average wages in the area

Wages in the future

Resident support NIMBY problem

Crime rates

Zoning

Cost of land and construction labor

Taxes on new properties

Availability of jobs, nearby schools, hospitals, infrastructure, fire, police

Initial cost estimates (taxes, land, advertising, govtpermits, policies over life of development, repairs, maint)

What do you need to

consider for a new

development?

Iowa needs to continue economic growth, business development, and

community leadership

Welcome to Awesometown!

Will the area

become more

profitable over time?

Is the housing demand

growing in this area?

Will the city waive

building fees?

• Hard to start and sustain a

business

• Taxes, Regulations, Health Care

Note: Small businesses are where

the growth is

Keeps business owners

awake

• US taxes

• US debt www.usdebtclock.org (States info too)

• US spending

• US education

• EU recessing – Portugal, Italy, Greece, Spain

• Egypt instability

• Iran’s nuclear ambition

• Syria

• Terrorists

• Note: List has not changed in 3 years

What keeps me awake at

night

World Peace

• People need you now more than ever

• Consumer confidence is not terrible

• US economy growing

• American consumers account for 70% of

every dollar spent in US economy

• Housing values don’t matter as much as

people think

Toward Prosperity

1. Keep them informed-reduce/manage

uncertainty

2. Put client $ into foundations/tax-free/real

estate

3. Be smart about expenditures/fees

4. Taxes will go up, so take $ now

5. Guard against taxable income

6. Watch for buying opportunities

Businesses:

What to do to help your clients:

7. Run your business well – know profits and

losses

8. Know breakeven points

9. Stay on top of financials & investments

10. Connect with the right people

What to do help your business:

www.KiwiLive.com

How to give tools to

housing people?

• Sign up “DOG”

• Get 5-Minute Plans

Productivity plan

Mary C. Kelly

www.ProductiveLeaders.com

Mary@ProductiveLeaders.com

443-995-8663 (Mary’s cell)

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