Like 2006 All Over Again? Could the U.S. Be Headed Into Another Housing Bubble?


This ‘micro-house’ in Brooklyn, NY built from a tool shed, was recently listed on Trulia for $500,000…

by: Teresa Kuhn, President/CEO, Living Wealthy Financial Group

Will 2016-2017 see a repeat of the housing meltdown that pulled our economy into a recession and destroyed millions of dollars of Americans’ wealth?

I’ve been looking at the trends lately and am seeing a disturbing amount of irresponsible practices creeping back into the marketplace; practices that directly contributed to the bursting of the last bubble.

The idea that a housing bubble is barreling down on us is controversial, to be sure.  Real estate industry insiders say that even though standards have loosened a bit lately, they are nowhere near what they were in the days of stated income and no down payments.  There is a lot more documentation and a whole new set of requirements and hoops that must be navigated prior to purchasing a home, they claim.

However, I have observed some unsettling trends that I believe will ultimately lead to another marketplace crash in the near future.

Loans are getting easier to get

Standards are once again loosening up with risky loans disguised as something innocuous. Many of these loans are, in fact, the same highly risky, subprime-style loans we had during the meltdown. The only real difference is now they are now being made with government (taxpayer) guarantees rather than originating with private investors. In spite of being coated with government promises, they reek of risk.

Mortgage software company Ellie Mae recently reported that the average FICO credit score of an approved home loan plunged to 719 in January, 2016 down from 731 a year earlier. This figure is well below the peak of 750 in 2011.  Lower FICO scores, of course, correlate directly to higher risk of loan defaults. This is a dangerous sign that lenders are continuing to loosen underwriting standards.

Home prices are rising a lot relative to income

For the past few years, home prices have been rising about 5%-6% a year, but incomes are growing at only about 2% or 3%.

What does this mean? It is a tell-tale sign that housing affordability is worsening. As fewer people can afford homes various players in the housing market have a lot to lose and are pressured into relaxing lending standards even further to preserve the illusion of growth.

On the other hand, construction of new housing units over the last four years is at around half the pace of the bubble year construction. This lack of supply pushes home prices well above people’s ability to pay.

Flipping is once again a hot pastime

Another sign that the real estate market is teetering on the brink of collapse is the resurgence in popularity of real estate speculation and home “flipping”.

Flipping is once again trendy and hitting levels not seen since just prior to the last mortgage crisis. In 2015, almost 180,000 homes were sold and then resold last year — the highest level since 2007. Frenzied flipping in metro areas such as New York, San Diego, and Miami is actually exceeding peaks set back in 2005. Low interest rates and easier credit once again make this possible.


After researching current real estate market behaviors and seeing history repeat itself, I can’t help but side with economist and demographer Harry Dent.

Writing in Economy and Markets, Dent observed:

“… I’m predicting net housing demand will fall – even turning negative over the next two decades – especially starting later this year.

This critical demographic indicator shows it won’t turn positive again until after the year 2039 – 23 years from now. The same indicator explains why the echo boom in Japan never caused a bounce in housing even after its all-time bubble highs and 60% crash.”

Source: http://economyandmarkets.com/markets/housing-market-markets/the-dumb-moneys-at-it-again-always-the-last-sad-sack-to-the-party/

“Brexit” Triggers Wave of Nations Clamoring for Sovereignty. What Does This Mean for the U.S.?

by Teresa Kuhn JD, RFC

President/CEO, Living Wealthy Financial Group

Logo_brexit_new_size2One of the many unfortunate side effects of globalism is the inevitable market reaction to any unexpected event.  When a thread comes loose in one country, no matter how far away that country may be, it usually results in upheaval everywhere else.

Britain’s recent decision to exit the European Union was a shocker that blindsided everyone from policy pundits to betting parlor odds makers.  Most of the experts thought it inconceivable that Britain would ever decide to leave the European Union, no matter how unpalatable the bureaucracy was to the average Brit.

That’s why the vote to exit has sent most major markets into panic-driven slides, with Wall Street poised to have its’ worst month since January.

Markets are notoriously unpredictable so it’s hard to know what impact “Brexit” will ultimately have on Americans and how long will this impact last.

My own research indicates that Americans can expect the following as a result of the decision to leave:

1. A stronger dollar.

While this is great for tourists planning their European vacations, the long term effects of a strong dollar on the economy are not well understood. Even experts disagree on whether the return of a robust dollar is a good thing or a bad thing. One outcome that is nearly inevitable is that a strong dollar gives the Fed another reason to avoid raising interest rates. Fed Chairwoman Janet Yellen recently admitted that “Brexit” concerns were indeed a factor when she decided not to press ahead with plans to raise rates.

2. A potential re-finance boom.

Pressure to keep interest rates at historic lows could trigger a new wave of refinance as home owners scramble to lock in rates that will save them thousands on their mortgages.

3. Falling CD and Bond Yields.  

Another potential impact from the dollar strengthening against the pound is that yields from U.S. certificates of deposits and treasuries could drop significantly. Bond and CD yields move in the opposite direction of their pricing.  Since yields are already very low, further drops would be harmful to more conservative investors as demand increases and yields dry up.

These are only three of the most immediate economic results that I see coming from “Brexit”. There is no consensus among economists regarding the long term effects of this decision.

If you have optimized your Bank On Yourself policy, you have safeguarded your wealth against some of these negative impacts.  You also have the means to take advantage of opportunities to make solid investments and purchase quality stocks at lower prices.

Living Wealthy Financial will continue to monitor the situation overseas and give our clients insights and information to help them make the best possible financial decisions possible in this uncertain world.

If it has been a while since you’ve spoken with us, call (800)382-0830 today and make an appointment to discuss your questions and concerns.

Recent COI Increases Reveal the Weaknesses of Universal Life Insurance

By Teresa Kuhn, JD. RFC, CSA

President, Living Wealthy Financial

There’s a certain amount of trust and faith required when entering into a business relationship, as well as a fair amount of reliance on companies to follow accepted practices and do the right things for their clients.

And, while most of us realize that the way products are marketed may be the polar opposite of how they actually work, we continue to have faith that what we are being told about the things we buy is at least somewhat truthful.

As some of the most trusted and respected entities, American life insurance companies have been successful mostly because ordinary people have put so much faith in them and their promises.

Throughout our country’s history, people have bought insurance policies that last for years, often entire lifetimes.  They do this believing that the insurer would never violate their trust by failing to honor the original policy terms or by doing things that would harm them financially.

Most people, for example, never expect the company to suddenly exercise a provision in the contract that would have an adverse financial consequence for them.

Unfortunately, however, such trust may no longer be justified.

Except for whole life insurance policies, most other permanent life insurance policies have a right to increase the cost of insurance built into their contracts.

In the past, most people did not pay much attention to this particular provision simply because insurers realized it would be bad business for them to use it. Increasing the cost of insurance (COI) was just something that was seldom, if ever, done.

Recently, though, unprecedented types of premium increases have begun to hit consumers.  These rate hikes call into question the trustworthiness of some insurance companies and threaten the entire industry.

At least four major insurance carriers have published significant rate hikes with no warning to consumers.

These rate hikes result from increases in the cost of insurance (COI) companies charge their existing customers.

For those of you who may not know what COI is, it is the pure insurance protection portion of a policy and is tied to mortality risks.

In the past, COI increases have been unthinkable and consumers have relied on the implicit and explicit promises of  life carriers that they will never have COI increases.  The breaking of this promise by four big insurance companies virtually guarantees that others will follow.

There’s nothing subtle about these premium increases, either.  Policy holders are getting bills with anywhere from 40% increases in premiums to over 100 percent!   Such increases come at a time when health insurance, automobile, and other insurance premiums are also increasing.

The impact on older Americans, especially those over age 65, is tremendous.   This is because the highest COI rates occur as people approach and surpass their expected mortality.

So why are these carriers suddenly starting to raise these rates and what can you do to avoid having this happen to you?

To understand the reasons for this situation, you need to know a little bit about how life insurance works.

Nearly all permanent life insurance policies, including indexed universal life, whole life and variable life, use projected COI to help determine how the policy will be priced.

Even “guaranteed universal life” contains a mortality component  found on the company’s side of the risk equation.

If an insurance company’s projections are off and more insureds die than expected in a particular group, the company can pass those additional costs along to their policyholders.

This has always been a possibility, but until this year, COI rate hikes were very rare.  Insurance companies realized that doing this would create massive PR headaches and potentially tarnish their public image.

Now however, major insurers such as Transamerica say they can no longer afford to maintain public perception at the expense of profitability.

The company recently revised COI costs for a huge block of universal life insurance business written in the 1990’s and now requires all proposals for these policies to be illustrated at the guaranteed mortality rate, guaranteeing large rate increases.

Another large issuer of universal life insurance,

Voya Financial has also notified many of its’ universal life policyholders  about coming rate increases.

AXA , which is the largest insurance company in the world, also recently increased COI rates for a block its’ universal life policies.   These policies, in addition to being singled out due to bad mortality rates, were also chosen according to premium payment patterns.

Universal life and flexible premium policies let owners choose how much they pay each year, provided there is sufficient cash value in the policy.

In addition to adverse mortality rates, the Fed’s stubborn insistence on maintaining ZIRP (zero interest rate policies) has had a negative effect on customers’ abilities to fund policies.

If you have one of these types of policies and you’ve experienced rate increases such as those above, you should contact our office.  We’ll suggest alternate strategies that may help you offset some of these increased costs.

As an advisor and agent, I can’t believe that insurance companies would have such callous disregard for their loyal policy holders.  The consequences of increasing COI are not reflected in a bunch of numbers on the company balance sheet, but rather in the daily lives of people, especially older Americans who must somehow deal with this blow to their budgets.

On a positive note, I work hard to ensure that none of my clients will ever experience such devastating impacts on their budgets.  At Living Wealthy Financial we are extremely selective about the companies we use to implement our Bank on Yourself® strategies.

We know that other permanent life solutions shift the risk back onto the insured, which in effect means the INSURED is now responsible for making the insurance company’s guarantees work.  How crazy is that?

Sure, whole life might not seem as “sexy” as these other types of insurance, but how much of your savings can you afford to risk?  I would guess your answer is “none.”  If that’s the case, then you need a strategy that reflects the true purpose of insurance- to pass risk from the INSURED to the COMPANY, not vice-versa.

If you are working with a stock company, versus the mutual companies with whom I work, then you should know that those stock companies are geared toward making decisions designed to maximize their shareholder’s wealth…not yours.  That means that in the long run they are not too motivated to do what works best for policyholders.

PS: If you have a universal or variable life insurance policy that is with a stock company, or are thinking of purchasing one, and you’d like us to analyze it and make recommendations at absolutely no cost or obligation to you, then call our office now at(800) 382-0830.

Wall Street’s Trick or Treats: More Tricks than Treats?



by Teresa Kuhn JD, RFC

President, Living Wealthy Financial

“How would another drop of 49% or more in the market affect your current standard of living or your future security?”

– Pamela Yellen, Bank On Yourself.com

We’ve seen these signs before…

Extreme uncertainty and nervousness in the markets that translates to volatility and ultimately losses.

While no one knows for sure if these extreme ups and downs portend another recession, many experts are drawing attention to some nearly identical behavior patterns that occurred prior to the 2008 recession.

One of those experts, demographer Harry Dent, claims the stock market bubble we have today is the biggest ever.

His colleague David Stockman is even less optimistic, saying in a recent edition of his newsletter that, “The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.”

What is for certain in all of this, though, is that Wall Street’s trick or trick pumpkin is slowly rotting away, and having less of your money mingled with the rot seems like a prudent idea.

“Are you tired of worrying about his day in and day out?”

I continue to believe that building up cash in a well-designed Bank On Yourself policy is the only way to regain the peace of mind you may have lost being on Wall Street.

Having the the use, liquidity, and control offered by a Bank On Yourself policy can give you a lot more flexibility and the ability to take advantage of bargains when you find them.

Don’t have a policy yet or need a quick review?

Call our office at (800)382-0830 Monday-Friday to arrange a consultation.

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