Things aren't getting any easier for pharmecutical salesmen. Drugmaker Eli Lilly announced it's sending pink slips to 30 percent of its U.S. sales force, which works out to about 1,000 people. Patents are expiring on two of the company's marquee drugs, so competition from generic brands is about to put a big dent in Eli Lilly's bottom line.
The company loses the patent on its antidepressant Cymbalta in December. Next March the game is up for the osteoporosis drug Evista. "Our U.S. revenue with those two medicines makes up about one-fifth of our corporate revenue," says spokesman Scott MacGregor. "It's a pretty significant impact."
When patents expire, generic drug makers will swoop in and sell the product for much cheaper. MacGregor says Eli Lilly is ready to make up for some of the losses, expanding a different sales team to push a new diabetes drug.
But there's something else that's threatening the livelihood of pharmaceutical sales reps. Their relationships with doctors are more restricted after controversy erupted over lavish spending on gifts and expensive meals in exchange for business.
MacGregor blames new health care regulations that further restrict a doctor's time. "That inherently changes the nature of the way they want to interact with us," he says. "And certainly we continue to see access restrictions, particularly in big academic institutions."
So what's a drug company to do? For one, go digital, says Perdue University College of Pharmacy Dean Craig Svensson. "Certainly there are ways of providing information that used to be only by the sales force that now you can provide it digitally," he says, "and it doesn't require that salesperson to interact with the physician or other health care provider face-to-face."
Svennson says using pop-up ads on websites targeted to doctors is becoming more common, along with social media. He says health care providers are also more distrustful of biased information. So a hospital might form an advisory board that makes recommendations on what drugs to perscribe, leaving the sales rep out of the equation.
Very few people in this world wake up in the morning excited to go do tax returns. After 10 years in this job -- and I'm only 34, so I guess I've been doing this now a third of my life -- I actually do wake up every morning excited to go to work. And the reason is, I'm truly helping people.
Of course there are bad days. The phone calls when I have to tell someone they owe $60,000 and they pass out, but there's so many good days. I make most of my income April of each year, so the rest of the year I get to stay home with my kids and have a good time. It really is a great profession.
So tax return pricing -- I personally have a price list. It's per form. So if you have a Schedule C, I'm going to tell you that is going to cost between $85 and $175.
Whether we state this or not, accountants have little extra charges they throw in for the people who make their lives more difficult. So if somebody arrives with everything tied out in a nice, neat pile -- the price is going to be cheaper than somebody that arrives with a shoebox. We might not put that in writing. We might not state that out front. However, jokingly in the industry it's called a PITA fee -- Pain In The (fill in the blank). If you make our life more difficult, if you end up calling a month later and say, 'Oh whoops, I forgot these three things,' then we are going to call it the remailing fee or the reprinting fee.
The more easy you make your accountant's life, the cheaper your price will be. I did actually have for the first time this year somebody that called and said that their dog ate their 1099. So I honestly didn't charge for that excuse because that just cracked me up. So if you also make me smile, sometimes your price is a little cheaper as well.
There's always some pretty memorable clients. For instance, someone works in a hair salon that insists they get to deduct their hair and nails because they're in the industry. And they would talk to the other girls in the shop and everybody would say they are taking the deductions. Well I looked at a couple of returns and I found out that no one was taking the deduction.
What accountants sort of do is shake our heads and smile and nod and say, 'Sure, no problem. We'll take that.' And then we never put it on the return because, of course we don't want to get our clients upset, but we also don't want them doing anything illegal.
Our tax dollars pay for things like pensions, police and firefighters, services that uphold our safety and maintain the peace. But when it gets down to the day-to-day decisions about where our tax dollars should go in a tough economy, how exactly do cities prioritize their spending of our hard-earned cash? Kevin Klowden has tracked this. He's a managing economist at the Milken Institute, where he serves as director of the California Center.
So after we pay taxes, where does all the money go?
"Depending on the state you live in, it can be very, very different. Some states, a lot of it will stay more locally. A lot of states -- like here in California -- because property taxes are limited, most of the money actually goes to the state government who then cycles it around and then sends a bunch of it back locally," says Klowden.
Different parts of the government decide where taxpayer money goes. City councils at the city level or the state legislature at the state level decide what the budget priorities are and how to divide the money, says Klowden. Usually, cities spend taxpayer dollars to fund essential public services, but the amount that's doled out can vary. For example, one municipality might have a larger discretionary fund for their parks than a neighboring city.
"Most of the money tends to go to city salaries or city services or maintaining parks and roads and things we expect from year to year to year," says Klowden. "Then you have that discretionary budget, that certain amount of money, that goes to either fixing problems that they've let sit for years or building or doing something new and interesting."
Problems do arise when cities decide to over-reward employees at a much faster rate than inflation -- especially when it comes to salaries, pensions, and health care benefits. And of course, in bankrupt cities like Stockton, Calif., services like police and firefighters will often go by the wayside because the municipality's focus is paying off its creditors.
The Russian president says the part of the money will go to complete a new launch facility under construction in the country's far east.
Mattel says its "Barbie Dolls of the World" typically come with a passport and "animal friend." It's had to respond to some criticism from this week from some who say the Barbie Mexico doll plays into stereotypes.
The late Venezuelan president Hugo Chavez believed in sharing his country's oil wealth with his Latin American neighbors. But now, Venezuelans are electing a new leader, and there are questions about whether the new president will continue those policies. NPR's Tom Gjelten talks about the effects of Venezuela's oil diplomacy, from Cuba to Connecticut.
At long last, housing is helping the U.S. economy. More new homes are going up, the prices of existing homes are going up too -- more than 7 percent last year, according to the Case-Shiller Index, and it could be even more this year. Builders and roofers and window-installers and home-improvement stores are all hiring.
And in many markets this spring, homes are selling again, fast -- multiple offers, sometimes at or above the asking price. At least -- if it’s a nice house, not in default or foreclosure, and spiffed up for sale.
So, what’s worth fixing up, and what’s just as well left alone, to get a deal done in this changing market?
Real estate broker Chris Suarez at Keller Williams in Portland, Ore., has been showing a $425,000 Victorian townhouse in an upscale urban neighborhood full of boutiques and brewpubs. The owner spent thousands on improvements over several years: a new gas fireplace, baby nursery, wine-nook in the finished basement.
That’s a change, says Suarez. “Two and three years ago, I was recommending ‘don’t put money into your home,’” he says. “If you’re in a situation where you need to sell and it’s the right thing for you to do, then let’s try to get as much equity out as we possibly can.”
But Suarez says in many markets, investing in home improvements does make sense now.
The reason? Home prices are rising again. And more and more homeowners who had been on the sidelines, are finally deciding to sell. Suarez says you want your house to be in better condition than the one down the block with a ‘For Sale’ sign.
“It’s more a condition war,” says Suarez. “You’re putting in that money so that you show up well, based on what other product is out there in the market.”
Michael Farr, chief investment officer at Farr, Miller and Washington, follows the housing and home-improvement sectors. He says the challenge for homeowners now is to figure out which improvements to plough their cash into.
“You don’t want to try and repair a house that’s simply falling in market value,” says Farr. “People want to know if they invest more money in their homes to repair or refurbish, that they’re going to be able to get that money out, that it’s going to be worth it.”
And it turns out there is a way to figure out what’s ‘worth it.’ It’s called the Cost Value Report, published annually in Remodeling magazine.
It can tell you how much you’re likely to recover at sale time if you put in a really upscale kitchen for $100,000 or more, versus a no-frills one at half the price.
Sunrooms, home offices and bathroom additions get the lowest return -- often less than 50 percent of the remodeling cost. The biggest bang for the buck comes from improvements that increase curb appeal: a remodeled entryway, new garage door, new siding or exterior paint. Those upgrades matter even more in a market where potential buyers surf the web and see online listings -- along with Google street-views -- first, before they ever drive past your property or get inside for a look-around.
Here’s the catch though: you’re not ever likely to get back 100 percent of what you put in, when you sell.
But realtor Chris Suarez points out: your house isn’t just an asset that you’re going to sell, eventually. You have to live in it now. “Sometimes -- and this is the unfortunate part," he says, "a seller does everything weeks before they put it on the market, when then they realize that they’ve really never gotten to enjoy it."
When you are ready to sell, though, it’s best not to do renovations out of ‘house-love,’ says Justin Riordan of Spade and Archer Design in Portland. He stages homes for sale.
“The idea of doing a bathroom the way you would want it to be done? You should never do that,” says Riordan. “Because, of all the people in the world that might buy your house -- you are not one of them.”
Riordan’s firm will completely furnish and decorate a vacant property, like the $800,000 mid-century colonial where I met him in Irvington, a neighborhood of grand old homes in one of Portland’s most fashionable residential districts.
In this case, Riordan’s decorating touches included an expensive-looking living room set, paintings, Art Deco glassware, vintage ice skates on the mantelpiece.
Riordan has made a study of home-buyer behavior -- he’s sort of a pop real-estate psychologist.
“Buyers are in a condition I call ‘buyer stupid,’” he says. “I was in that state when I bought my house. They’re leading their own life, they’re trying to sell their house, they’re raising their kids. They have the attention span of a gnat. If there’s one thing that pulls their emotional attention away from that house, we’ve lost them. We have five to seven minutes to win them over. And basically all we’re trying to keep them from doing is saying ‘no.’”
Here are more of Riordan’s Rules for getting to yes: Don’t leave out any prescription drugs, alcohol, firearms, political posters. No fur -- live or stuffed. No strong smells, or personal photos of any kind, or mirrors on the ceiling.
“Number one, the house has to be light,” he continues. “Nobody ever walks into a house and says, ‘I love this house, I just wish they had more window coverings.’ They’ll definitely walk in and say ‘This house is dark, we’re out of here...'”
Congress introduced the joint return in the 1940s, to ensure families with equal incomes paid equal taxes. Back then, nearly everyone got married. Couples typically married young, had kids early on, and stayed together for the long term. When marriage equalled family, the joint return made sense.
Today, only half of American adults are married. Kids today may live with married parents, step-parents, or cohabiting parents. More than a third of kids live with single parents.
But the tax law seems to be stuck watching reruns of "Leave it to Beaver" while the rest of us have long since moved on to "Modern Family."
Other countries have already updated their tax laws to reflect the new reality. Most developed nations have adopted individual filing. In countries like Canada and the U.K., every person -- married or unmarried -- pays taxes on his or her own income.
It may be tempting to, well, romanticize the joint return, to see in it a symbol of a shared life. But the joint return doesn't reliably reward marriage. Instead, it generates arbitrary tax penalties and bonuses, depending on how much each spouse earns compared to the other.
The Supreme Court will rule later this year whether the federal tax law should recognize the marriages of same-sex couples. A favorable ruling would mark a critical victory for marriage equality. But the joint return, with its random marriage penalties and bonuses, is a pretty lousy gift to mark the occasion.
Personally, I'm fine with the changing American family. My own modern family includes married, divorced, remarried, and never-married couples. But even if you think that America would be better off if more people got married and stayed that way, you shouldn't put your faith in the joint return. A true pro-marriage policy would start with individual filing as a base and then add marriage incentives provided on equal terms to all married couples.
Vote: Who is your favorite poet?
"On one level, the idea of taxes can just be sort of metaphorized as the idea of any kind of debt or repaying what you owe, which is a very fertile ground," says Kearney. "It's been a territory that poetry has explored forever."
Kearney says lines from hip-hop songs were on his mind as he thought about poetry and taxes, like Ice Cube's "A Bird In The Hand." In the song Ice Cube raps, "Now I pay taxes that you never give me back / what about diapers, bottles, and Similac" -- a sort of sociocultural critique. Another emcee, Lyrics Born, has a song called "Stop Complaining" that features a riff about taxes, where he says: "This is fiscal harassment / they keep fondlin' my assets!" Kearney says he's building what one might call a conceit.
The great thing about poems, Kearney says, is that they are great for surprises. And we were certainly surprised by the number of poems about taxes we received from our listeners this month. Listed below is a sampling of some of the works that were submitted. Vote for your favorite poet and we'll send the winner a special Marketplace Money prize!
By Michael Panhorst
Stock your I. R. A.
By Venida Corda
As April approaches I suddenly see the prospect of money leaving me.
I saved all my receipts for taxes and such,
But I can tell I don't have enough.
With medical, work, and charity giving,
I should have spent more.
So tax man I prey please get out of my way for Aprils the month I most want to avoid.
Good-by to my wealth, I wont see you again, but what can I say but wait till next year. By John Baglio
Where's my tax refund?
The feeling of found money
Sweet self-deception. A Sonnet for Tax Day
By Linda Mitchell
In this, the anxious time of year
When taxes loom before our eyes,
I sit with Marketplace in my ears
And ponder payments as advised.
But hark! My notebook within which
My logged expenses I do pen,
Doth now provide the needed stitch
That saves my time no matter when
I do my taxes, logged into
Computer programs made to bring
Me peace of mind, and refunds too,
In hours mere, Tax done! I sing.
The lesson here I hereby teach:
With records clear, you wont overreach. Ode to Tax Payers
By Carol Stahl
The kids are in school
the firemen fight fires
the bridges stand sturdy
the pot holes are filled
the hungry are fed.
Every April we show what we value.
Paying our taxes tells who we are.
By Rob Jackson
He led a revolution once.
We all dream of it.
There you are, standing in the back of a jeep like Fidel,
waving to people on a crowded street.
You circle the post office April 15th,
honking the horn at your comrades in line.
smiling and brandishing a Cohiba,
blowing fat smoke rings to show them
how easy it is,
how little youre paying,
how zero can be enough.
It took years for the phone to ring
with the call he dreaded, the sniper-shot
that left him slumped in his chair.
He hung up, called his son-in-law, an accountant,
and ended his resistance with payments, penalties, and pain.
Most revolutions end this way.
He knew that.
It must have felt good for a time, though,
this thrill of not paying.
For a decade he was Che.
For a decade my grandfather was king. The following three poems by Barbara Bowles
Hail to the April season of taxes
Refined through endless years of praxis
Spring calls us to play,
Instead we must pay
Is it a wonder so many are fractious?
We live in a state of taxicity
Acquiescent to our complicity
Torture, rape and bombs
Violence that numbs
Nostalgic for unknown simplicity
Infrastructure that fails becomes taxing
Inspections, repairs waning and waxing
We commonly trust
Before all is rust
Public works go for bust, no relaxing Another ode to the IRS
By Marsha Hood
It's April, I can't stand the tension
Crunching numbers to file an extension
I can't make a dent
Like the top one percent
It's taxing to not have a pension By Keli MacIntosh
My father was an accountant;
working numbers was his trade.
Years of helping him with my 1040s,
a tax preparer I was made.
Now without his assistance
juggling schedules A to D,
I realize the knowledge
he so kindly passed to me.
Though tax forms aren't
the most fun I've ever had,
as I approach the task each April,
I enjoy fond memories of my Dad! Another ode to the IRS
By Joan Berly
Leave it behind -
troubles and scam.
No money in pocket -
No taxes advance! By Cyrus Khan
Alas, 'tis the time to file my tax
Let's see if I can deduct the max
The IRS I'm sure is twiddling their thumbs
Maybe this time I'll throw them a few crumbs
Should I file myself or use the pros?
With each passing minute my anxiety grows
Hours on end I work for uncle Sam
Sometimes it feels like one big scam!
It's time to bid farwell to all my money,
Won't have a penny to take out my honey,
I should fear not, be happy and stand tall,
Maybe I'll get a check to party at the mall!
No use huffing and puffing day in and day out,
Everyone pays no matter what their clout,
Sigh,for taxes are here forever to stay
Toil away, pay your share and just move on I say!
Tax day haiku
By Kari Lawrence
Too poor to pay in
Behind in my student loan
No refund for me By Joshua Christolear's wife
Waste of time
Take my money
Spend it poorly
By Neal Levin
Whose forms these are I think I know.
Tomorrow is the deadline though;
My income I must first declare,
And then I'll find out what I owe.
I dread this awful questionnaire,
I grind my teeth, I pull my hair.
I wonder how much they will take
As I perspire in despair.
My head begins to pound and ache.
I start to sweat, my fingers shake.
I owe too much, I'm in too deep.
There has to be some big mistake.
There's nothing I can do but weep.
I'll have no money left to keep.
Just lots of nights of losing sleep,
Just lots of nights of losing sleep.
Everybody pays a tax
Doctors, lawyers, quarterbacks
Teachers, waiters, lumberjacks
Publishers of paperbacks
Salesmen who sell Cadillacs
Socialites who shop at Saks
Take some comfort in these facts
Everybody pays a tax The following two poems by Steven Kaplan
When did It become
“Un American” “Un Patriotic”
To Pay Taxes?
A long time ago, I got my first real paycheck from the
“Happiest Place On Earth” and I was pissed off! I vented
to my father why I was angry “Look how much they took out
in taxes!” I said in dismay, about to continue my rant
my father, with disregard for how I was feeling, bluntly said
“ shut up, sit down, be quiet, and listen to me”
My father, a very smart, well educated, experienced man,
who also had one hell of a back hand. So out of respect, I did as ordered
and he proceeded to say . . .
“It is a Privilege to pay taxes in the U.S. of A!”
“If not for America
Our people, would not have the freedom to bitch and complain!”
“ Let alone be alive to even do it!”
“So shut up” he said, in his deep Virginia drawl, and be thankful
for what you’ve got, right now and in the future,in good times and bad,
being born in this country, is the greatest gift you will ever have.” It is a privilege to
breathe the fresh air that freedom provides.”
And I knew in my heart, he was right.
I was 18 then, 52 today, and Dad has just recently passed away
And when tax season comes and it is time to pay
I always remember what he told me that day
“It is a “Privilege” I say to myself, and I admit, with some regret,
I sit down and write that damn check . . . .
Little Fat Man
There is this short little bearded fat fellow
a Harvard man I understand, an Objective believer in Ayn Rand
who Apparently decided, at the age of 12,
for what ever reason, is compelled to perform an act
I grew up, believing was treason
His goal in life, you see, is to drown, Our Federal Government,
(Which, by the way, equals You and Me)
in a bath tub full of water or Gin until “We the People”
are quite thoroughly done in
An extremely Machiavellian point of view, I believe, and very Ironic,
owing to the fact that Machiavelli was writing metaphorically, and in the sardonic.
By now many soon-to-be high school graduates are settling on their choice of where they plan to attend college. Brian Brosseau is one of those students. Luckily, he got into every school he applied to and will be attending Bowling Green State University this fall.
"We were very specific of applying only to the schools that we felt were within our requirements," says Brosseau's mother, Jena.
Among the requirements: somewhere close to home with fields of study that interested Brian. And of course, financial considerations. Because Brosseau would be living on campus, his family would be paying roughly $23,000-$32,000 a year for many of the schools he applied to. He did receive a small scholarship from Bowling Green for out-of-state students, but costs will still be about $27,500. And at this point, Brosseau's family is not considering loans to pay for his education.
While Brosseau's family seems to have figured out how they will pay for his higher education, many other families are trying to decide how to choose between a dream school and a more affordable option. That's where Trever Ramos comes in. He's a certified college planner with College Funding Remedies in Pasadena, Calif.
"The way this system is structured, you get accepted to colleges and then you find out how much they cost with only a few weeks to make a decision," says Ramos. "Many parents are not aware of what college is going to cost them until this point. There are private student loans and there are government student loans. If the student's in a situation where [the parent] is looking at private student loans upward of 10-12 percent, I'd rather them take the decision of going to the school that is going to mitigate some of those loans."
For students planning to apply for federal financial aid, Ramos says it's important to note that if their family makes over $185,000, they likely won't receive a ton of money from the federal or state government. He also says families should remember -- as their high school senior considers different schools -- that they can go to the college and negotiate financial aid offers that they've received.
When seeking more money in financial aid, Ramos says families have a few options. First, they can go to the school and say that the financial aid package they received is not realistic -- and inquire about whether there's anything more that can be done. Second, if the income a family is bringing in includes things like unemployment or situations that aren't apparent on paper, families can explain their circumstances to a financial aid officer. Lastly, if a student is accepted to multiple colleges, that can be used as leverage to appeal for more aid.
Computer activists threaten to reveal identities of teenage boys linked with the alleged rape of Rehtaeh Parsons, who, after more than a year of harassment and online bullying, committed suicide this month.
There are few things more divisive than taxes. Many Americans feel they pay too much, and get too little in return. But is that true? One way to look at it -- take an international perspective. We asked Derek Thompson, senior editor at The Atlantic, to look into how American tax rates, and the return on that investment, compare to other countries around the world.
When you compare the median income of a family of four who lives in a wealthy, industrialized nation -- like Japan or Sweden -- what percentage of that family's income goes to the government in taxes?
"If you look across all these developed economies, the OECD average for taxes as a share of the economy is about 33 percent. In the U.S., however, it's about 25 percent. It's considerably lower. And actually among these developed economies, only Mexico, Chile and Turkey have lower taxes than the U.S. as a share of our economy," says Thompson.
So where is the money coming from and where is it going? It's coming from our income and wages. And the money is mostly going to four groups of people -- the sick, poor, retired, and military. Those four groups account for about 80 percent of the federal budget. At the state level, education, Medicaid and transportation make up the bulk of spending from the taxes collected by the government.
Thompson says the U.S. is different from a lot of the countries it's often compared to because the federal government doesn't have a national consumption tax. Plus, in addition to having a federal government, America also has state and local governments. Consumption taxes -- when you account for state and local -- adds up to about one-fifth of total U.S. revenue. As a result, country-to-country comparisons are a little tricky because the U.S. has consumption taxes at the state and local level and then income and Social Security taxes at the federal level.
But when it comes to deciding where to spend taxpayer money, Thompson says governments of developed countries are remarkably similar.
"Rich, old countries tend to have the same values. They tend to spend a lot of money to help the poor, to help poor families. They tend to spend a lot of money on retirement protection -- what we would call Social Security. They also spend a lot of money on health care. Most developed countries have a public health care system," says Thompson.
Conventional wisdom says before you make a decision you should make a list of pros and cons, but Chip and Dan Heath say that's wrong. The brothers are co-authors of "Decisive: How To Make Better Choices in Life and Work."
"The pros and cons list is a good way of setting up a situation where you've got potentially one option that you're doing thumbs up and thumbs down on," says Chip. "Good decision-making starts with having multiple options available to you. Good decision-making involves collecting information that may contradict your initial opinions that you can sit at home with your pros and cons list and come up with a beautiful justification for whatever you wanted to do in the first place. What we're trying to do is widen out the process of making a good decision."
Dan Heath says one of the classic villains of decision making is what psychologists call "narrow framing" -- a temptation to get stuck in making decisions in a "whether or not" frame. Whether or not you should buy an iPad. Whether or not you should quit your job.
"What the research tells us is if we can just generation another option -- just one or two -- it greatly increases the chance we're going to make a good decision," says Dan.
Dan says one of the most important principals of decision-making is to trust the actual experiences of other people over our own instincts.
"We're always wise to trust the experience of other people over our own intuitions. For instance, if you're thinking of where you're going to go out to dinner tonight, you might be wise enough to go onto Yelp and look at the reviews and trust the place that has 100 good reviews over your own judgment about which menu looks good," says Dan. "When it comes to people's portfolios, they totally throw that logic out of the window."
The Heaths say part of being a good decision maker is knowing when not to trust yourself -- and figuring out how to not let your emotions get the best of you.
"Often the best thing we can do -- especially when it comes to something like retirement -- is get out of [your] emotional melee and create some distance," says Dan.
Since the financial crisis, JPMorgan Chase and Wells Fargo have reported healthy report quarterly earnings. So can we finally stop worrying about the health of our financial system?
One business sector that has been turning out very strong earnings reports recently is the auto industry. Last month, Chrysler, GM and Ford had their best month of sales in 5 years. Marketplace Economics Correspondent Chris Farrell explains why long-term auto loans, which are boosting car sales, could be a bad deal for borrowers.
Disney is letting go of nine of its animators from the company’s hand drawn animation team, a month after it announced it has no further plans to work in the traditional 2D format. That’s despite the success of the Oscar winning short Paperman, a hybrid of hand drawn and computer animation. So how did Disney go from Snow White to Wreck-It Ralph?
More women than men said they felt very tired or exhausted most days or every day when government surveyors asked them. Overall, about 15 percent of women said they were worn out compared with 10 percent of the men.
More women than men said they felt very tired or exhausted most days or every day when government surveyors asked them. Overall, about 15 percent of women said they were worn out compared with 10 percent of the men.
Radio 1 had an issue: Should its Official Chart show play the song, or would that be too tasteless since it was pushed to the top of the charts by critics of Margaret Thatcher? Those who didn't admire the Iron Lady have used the song to make their voices heard.
The judge says the severance would violate a federal code aimed at reining in large payouts to departing CEOs of bankrupt companies.
To buy or not to buy?
The leap into homeownership is always a big decision. But buying now, post-housing crisis, can be especially challenging -- especially for lower-income buyers.
“Everyone’s looking to apply for a mortgage,” says Chris Gilliam, a counselor with Beyond Housing, a Saint Louis nonprofit, which does community development and runs home-buyer education classes.
Gilliam stands in front of roughly two-dozen potential homeowners on a recent Saturday morning.
“Credit will be evaluated,” he tells them. “They’re looking at more things than they used to. They’re going to look at your bank statements.”
Some workshop attendees know they’re going to buy and are here to qualify for down-payment assistance. Katherine Estrada, a vet technician, is not so sure.
“When I was younger, we had a great house,” she says. “But unfortunately, you know, things fell through. My father lost his job, he was injured.”
Her family was foreclosed on in 1998, and spent a long time bumping from family member to family member, rental to rental. Now, Estrada is 22 and out on her own. She’s looking for some stability -- and a good investment.
“I’ve been thinking about it for a while, since everyone’s like, ‘Foreclosures! Property, this, property that,’” she says. “But it’s like if I get in a house and three years later, if I need a new roof, I’m not going to be a situation where I have to get another loan out to pay for something.”
It’s a position echoed by many here: on the one hand, there’s this fear of missing out on low interest rates and low housing prices. But on the other, there’s caution.
“Fear and trepidation about foreclosure is higher than it’s been in the past,” says Beyond Housing CEO Chris Krehmeyer, while driving through some affordable neighborhoods where the organization builds and rents homes. “We think that’s a good thing. We want people to go into this eyes wide open.”
He stops on short on a dead-end street, in front of a new brick home with beige siding that’s been on the market for over a year. “From a sheer what-you-can-buy-for-what-you-can-afford [perspective], the house itself is a great value,” he says. “However, when you think about the neighborhood and the community, is this the place that you think is the best investment possible for you?” The house next to it is vacant, boarded up with rotting plywood. A few houses down, there’s what Krehmeyer figures is a fresh eviction; a former tenant’s belongings are piled on the front lawn.
Krehmeyer wants people to buy here, because homeowners who are literally invested in a neighborhood can help stabilize it. But he also knows that some of the best deals right now can be risky investments. It’s difficult for a potential homebuyer to know whether that nice brick home will retain its value. And will that value increase over time? It’s hard to predict what will happen to a neighborhood in five or ten years.
Plus, money that’s tied up in a house can’t be invested in other places.
“Historically, the stock market has outperformed the housing market in terms of an investment,” says Ray Boshara, a senior advisor with the Federal Reserve Bank of Saint Louis. “Many people even think it’s wrong to think of home-ownership as an investment given the risk.”
Boshara says low-income buyers need to build up savings and other investments; they shouldn’t let all their money get tied up in a house. But homeownership does have its advantages.
“There are tax subsidies to support homeownership for a big part of the population,” he says. “And there’s other evidence that when people own homes, there’s other outcomes associated with that, like saving and investing. Your kids are more likely to go to college.”
While homeowners with mortgages do pay interest, their monthly payments can become a form of automatic investing -- they’re less likely to skip a mortgage payment than other kinds of saving during a tough month.
“It’s a forced savings plan,” explains Boshara. “It requires you, by making that mortgage payment, to put money into your house.”
Ultimately, the decision to buy is part economics, part emotion.
“I just want to leave my kids something,” says home health-aid Coretta Johnson. “I want to have something in my life that I can said I accomplished and I did. And so as of right now, I can’t say that. I can’t say that I can leave them anything.”
Johnson already works seven days a week, but she wants to pick up some night shifts to pay down a few thousand dollars in credit card debt. She hopes that will help her qualify for a loan under the new, tighter standards.
“I have to do this,” she says.
The package addressed to the controversial Arizona lawman was safely destroyed. Tests for explosive residue confirmed it contained black powder, authorities say.