Want To Save Money? Live In These Cities and Leverage These IRS Changes

Here are my top 5 stories for real estate and money from this past week.?

1. How Bad Has It Become In Commercial Real Estate? ??
2. See The Cities With The Highest amp; Lowest Cost Of Living ??
3. The IRS Just Announced New Tax Brackets. Heres How To See Yours ??
4. Mortgage Rates Plunge By Largest Amount In A Year?
5. Freddie Mac Halts Dealmaking for Meridian Capital, Launches Probe ????♀?

How Bad Has It Become In Commercial Real Estate? ??

When the CEO of one of the largest real estate groups talks you tend to listen.?

Your ears really perk up when he sounds a warning .?

Last week that is just what Bob Sulentic, the CEO of CBRE did.?

The combination of higher borrowing costs for landlords times the reduction in time spent in physical offices by 25% led CBRE originally to say commercial values would come down 15%-20%.?

Now, they have revised that number to be another 10%!

That is a scary warning for real estate investors holding existing assets.?

See The Cities With the Highest and Lowest Cost of Living??

If you guessed Honolulu and McAllen, Texas as your highest cost and lowest cost cities to live in then congratulations you get a cookie!

And if you are living in McAllen then congrats you can get 2 cookies for the price of one if you are living in Hawaii, California, NYC, and Boston.

Each quarter, the Council for Community and Economic Research assembles a cost-of-living index designed to measure "regional differences in the cost of consumer goods and services."

The group's proverbial bucket includes housing, utilities, groceries, transportation, health care, and miscellaneous goods and services, and is based on spending by "professional and managerial households in the top income quintile."

The result is a snapshot in time for comparing relative costs across cities.

If you are reading this and are one of those lucky ones who can live and work anywhere then why not take your New York salary and head to the south or midwest to max out your dollar?

The IRS Just Announced New Tax Brackets. Here's How To See Yours ??

If there is a silver lining to all of this inflation it is that the IRS is willing to reduce your true taxes. Last week they introduced new income limits to provide taxpayers a break on their 2024 taxes.

After increasing the tax brackets by 7% in 2023, the IRS is following up with another 5.4% increase for 2024.?

For instance, in the 2023 tax year single tax filers will pay 10% on their first $11,000 of taxable income. In 2024, the first $11,600 of taxable income will fall into the 10% tax bracket, which means $600 of additional income will be taxed at 10%, instead of 12% in the current tax year.

On top of that, the IRS has increased the standard deduction by $1500 to $29,200 for married couples filing jointly.?

What does this all mean to you? A lower marginal tax rate so that more of your hard-earned money is going into your pocket vs the government.?

Mortgage Rates Plunge By Largest Amount In A Year ?

A year ago, the average 30-year fixed rate reached 7.08%, its highest level in 2022. The following week, rates dropped by 47 basis points. This year we saw a drop of 26 basis points to 7.5% on a 30-year mortgage.

Sam Khater, Freddie Mac’s chief economist explained the reason for the drop: “Incoming data show that household debt continues to rise, primarily due to mortgage, credit card, and student loan balances,” he said. “Many consumers are feeling strained by the high cost of living, so unless mortgage rates decrease significantly, the housing market will remain stagnant.

?While the median price of a home in October was about the same as last year, the monthly cost to buy a home has risen by over $166. That’s a 7.4% increase compared to the previous year and a new record in the year-over-year increase in the cost of buying a home, Realtor.com has found.

The Takeaway: We are in a new era for mortgage rates, where prospective homebuyers can expect rates to settle above 6%. ?

Freddie Mac Halts Dealmaking for Meridian Capital, Launches Probe????♀?

Freddie Mac is investigating loan information brokered by Meridian Capital Group , one of the largest commercial mortgage brokerages in the United States.

Why does this even matter? For one, it's another black eye on the industry. And if true, it will probably make it more difficult for everyone to get loans going forward as they will be under more scrutiny.

But it gets even more interesting after that. According to Andrew Cushman , if Freddie determines loan fraud was committed, the next thing they are going to do is look to see if the Borrower was complicit in the fraud. Inflating your occupancy? Hiding expenses? Adjusting revenue upward? All fraud to Freddie. Ok, now what? Well, those things trigger the "bad boy" carve-outs in the loan documents.

Once those are triggered the loan becomes full recourse to the borrower. If those same borrowers are short on cash and can't service the debt or rate caps, they can be thrown into default on their now recourse loans. And if the properties are worth less than the loan amount - which is common these days - there could be huge losses on those loans.?

What Can Running Harvard Stadium Teach Us???

In case you didn't see last week's blog then here it is again. If you have ever been to Boston and just so happen to like to exercise then I highly recommend you try to run the Harvard Football Stadium. I was recently turned on to this by Whoop CEO Will Ahmed and have been subjecting myself to the pain of running that stadium for the last couple of months now.?

In last week's blog , I translate the pain of that training into how we can achieve our longer-term goals.?