The August 2 Deadline on National Debt Ceiling

The government has reached its legal borrowing limit on May 16 (Source: CNNMoney July 1, 2011).  Currently, the U.S. debt is over $14 trillion.  This is the sum of all outstanding debt owed by the Federal Government.  Nearly 2/3 is the public debt, which is owed to the people, businesses and foreign governments who bought treasury bills, notes and bonds. The rest is owed by the government to itself.  (Source: www.useconomy.about.com)

Lawmakers and Obama need to reach a deal by August 2 or the United States will face an unprecedented default on its debt.  (Source: Reuters, July 25, 2011)

According to CIA World Factbook, the U.S. debt is the largest in the world.

How did it get so large?  The Reason?

1. Economic Stimulus Package in February 2009

The economic stimulus package was planned to jumpstart the economic growth by saving 900,000 - 2.3 million jobs.  A total of $787 billion fund was allocated for tax cuts, extended unemployment benefits, education fund and healthcare benefits and for job creation using federal contracts, grants and loans.

2. 2008 Government Bailout Measures 

Starting year 2008, the Federal government spent hundreds of billions of dollars in bailout funds to Bear Stearns, Fannie Mae and Freddie Mac, AIG, Citigroup - to name a few, to help them deal with the recession.

3. $800 billion a year defense/security spending 

4. Reduced income from the recession

According to US Department of Labor, the unemployment rate hit 9.2% last June.

Higher unemployment rate results to lower purchasing power.  When less people buy, the retail sector will decline. The same goes for the government revenue from taxes.   

5. Tax Relief Acts

    a. EGTRRA or Economic Growth and Tax Relief Reconciliation Act of 2001 - This act reduced income tax rates for most taxpayers by a few points.

    b. JGTRRA or Jobs and Growth Tax Relief Reconciliation Act of 2003 - This tax relief focused on investment taxes.

(Source: Office of Management and Budget)

The tax relief, although it helped putting more dollars into people's pockets, ultimately hurt the economy by decreasing government revenues and thereby increasing the US debt.

Year after year, the government cut taxes and increased spending.  In the short run, the economy and voters benefited from deficit spending.  Usually, however, holders of the debt want larger interest payments to compensate for what they perceive as an increasing risk that they won't be repaid.  The rise in interest rates will hamper the revival of the US housing industry.

The Implications if National Debt Issue is Not Resolved

If Congress fails to raise the $14.3 trillion debt limit by August 2, the Treasury Secretary, Tim Geithner said that, "This would have a catastrophic economic impact, causing huge harm to the country and the suspension of government services, such as the payment of Social Security funds.  Interest rates would probably rise, increasing government debt while also affecting businesses and homeowners and possibly triggering another recession".  The Americans could face declining dollar, among other problems. As the cost of borrowing rises,   individual mortgages, car loans and student loans could become significantly more expensive.

Officials also warn that, without an increase in the debt limit, the federal government will not be able to pay all its bills next month. Obama recently indicated he could not guarantee Social Security checks would be mailed out on time.

Unemployed Get Extension To Avoid Foreclosure

The Obama administration recently made an announcement that starting August 1, the FHA or Federal Housing Administration will allow unemployed homeowners to miss mortgage payments from the current time frame of 3 months to a full year.  This will allow qualified homeowners to concentrate on seeking employment without the worry of foreclosure.   The foreclosure process will begin after the grace period of 12 months.

The extended grace period will only apply to FHA-backed loans, which are usually granted to low and middle income borrowers.  The officials said that about 3,500 FHA-backed homeowners per month will be eligible.

Missed payments during the forbearance period, plus interest, will be added on to the cost of each home loan.

Thousands of Americans have lost their jobs due to an economic recession. According to the US Department of Labor, the unemployment rate for the month of June is at 9.2%.  Unfortunately this has occurred in many states and severely impacted different areas of the country.  As a result, people lose their homes because they cannot afford to live in them anymore.  "Today, 60 percent of the unemployed have been out of work for more than three months and 45 percent have been out of work for more than six.  Providing the option for a year of forbearance will give struggling homeowners a substantially greater chance of finding employment before they lose their home,”  Development Secretary Shaun Donovan said.   Last year, roughly 17,000 homeowners received a government-supported delay on their mortgage payments.

Development Secretary Shaun Donovan hopes this move will compel Fannie Mae and Freddie Mac to follow suit and make the time allowance extension as well.

Decorating Tips on How to Make Your House Look Bigger

Do you or someone you know feel cramped or would like to remodel to have a more spacious feel in your home?  Here are some inexpensive and easy decorating tips that can be accomplished without breaking the bank.   There's no need to move any walls – with some color selection, furniture arranging and interesting lighting, your home will certainly feel roomy and inviting.

1. Use Light Colors

Color is important for any house, but especially for a small house. Choose your paint and furniture in light colors.  Light colored walls are more reflective, which helps maximize the effect created by natural light. It doesn't have to be white - it can be light green or cream beige.

Furniture tends to blend with the space if their colors match the wall color. So, it's better to stick with light colored furniture. 

2. Use Proper Lighting 

Any place will look larger if it's well-lit, either by natural or artificial lighting. Open up your windows to let the light enter into the room. Or you can add lamps into your home.


3. Use Mirrors

One of the most effective but least expensive ways to decorate a small house and create an illusion of more space is to use mirrors. A large wall mirror will act as a room expander when strategically placed to reflect light or a beautiful outside view.  Use glass-front or mirrored cabinet doors to make spaces feel large and uncluttered.  A large mirror on the long wall of a narrow room will make the room appear wider.


4. Clear Out the Clutter

 
A small space can feel more cramped when you have too much stuff! Clean your house, then give away the things that you haven't used for a long time. Build storage from floor to ceiling corner book shelf or a floor to ceiling space shelf that only takes 12-inches of floor space - where you can put your book, DVD collection and other stuff in one place. When your things are neatly arranged, the space will feel open and orderly.

5. Less Furniture

Make the living room and bedrooms appear larger by limiting the furniture.  Too many furniture makes a room look cramped.

For home owners, the spacious feel of their home makes them want to relax after a hard day’s work. 

When potential home buyers look for their home, they look for space and have researched the market to make an educated decision (usually assisted by an experienced Realtor).  Buyers always look for the most value for their money.  For home sellers, stage your home to make it more spacious and presentable to potential buyers.  The more marketable your home is then typically the more you may be able to price your home depending on your local competition.

If you or anyone you know needs assistance in visualizing how your home should look, please contact me. I can give you a list of professional home stagers.  Before you know it, you’ll be having the ‘SOLD’ sign on your front yard!

Home Warranty

The last thing a home buyer wants to worry about after closing is if the household items break in his/her new home. It's a good idea to obtain a home warranty for the home buyer's peace of mind. A warranty can also be helpful if a home buyer has just spent all his savings to buy a home and wants to avoid any additional major expenses just in case something breaks in his/her newly purchased home.  A home warranty is an appliance service protection plan that covers the repair expenses associated with household items such as refrigerator, dishwasher, HVAC units, plumbing system, electrical wiring etc.  In some cases, the service provider may even replace the broken down system or appliance depending on the coverage of the home warranty.

When you buy a new home, it is most likely that home warranty is included in your contract.  If you decide to buy a property that has been previously owned, there is also a good chance that the seller may offer to purchase home warranty on the first year on your behalf for your peace of mind that any component of a home that fails can be fixed at an affordable rate.

A home warranty may range from $250-$500 per year.  Home warranty companies sometimes run special sales and have discount policies offered to the home buyers.  Some companies have started offering flexible coverage, for an additional fee, this means that the home owner can get a coverage for pre-existing conditions. Some providers offer plans for selected appliances only - which is economical  if the home owner is on a budget but still wants  a coverage for some of the household items.

How does home warranty works? 

- When any of the household items covered in the home warranty contract breaks or stops working, the home owner calls the home warranty company.  

- The home warranty company calls a provider to fix the appliance.

- The specific provider calls for an appointment for the repair.

- The provider fixes the problem.  If an appliance is malfunctioning and cannot be repaired, 

depending on the contract coverage, the home warranty company will pay to replace and install the appliance.

- The home owner pays a small trade service fee for the service provided by the home warranty company (usually less than $100)

Before purchasing a home warranty, homeowners should read the fine print written on the contact and carefully consider whether home warranty is needed or not. If you decide on getting a home warranty, you may contact me for a list of reputable companies that will pay for legitimate repairs when they are needed.