White House defends offer as 'good faith effort'

WASHINGTON (AP) — The White House is defending President Barack Obama's proposal to set a higher threshold for tax increases than what he vowed to do during his presidential campaign. The White House says Obama has moved halfway to meet House Speaker John Boehner on a "fiscal cliff" deal that raises $1.2 trillion in tax revenue, down from the $1.6 trillion Obama had initially requested.
White House spokesman Jay Carney says that offering to raise taxes on taxpayers earning more than $400,000 rather than the $200,000 he ran on demonstrates, in Carney's words, Obama's good faith effort to reach a compromise.
The new tax proposal is contained in a broader plan that Obama gave Boehner Monday that would cut spending further and lower cost-of-living increases for most Social Security beneficiaries.

Read More..

The fiscal cliff: Calculate how much it will cost you

There's still no deal to prevent the double-whammy of harsh tax hikes and spending cuts kicking in on Jan. 1. Who will feel the most pain if we take the plunge?
After several days of apparent progress, negotiations on a deal to avoid the fiscal cliff stalled on Wednesday. House Speaker John Boehner, the lead negotiator for Republicans, is vowing to hold a vote on his own plan to raise taxes on people earning over $1 million a year, sparing most Americans from the loss of Bush-era tax hikes but leaving in place deep, potentially damaging automatic spending cuts due to hit at year's end. President Obama has threatened to veto Boehner's bill, known as Plan B, although it appears dead-on-arrival in the Democrat-controlled Senate. Obama said the GOP was refusing to strike a compromise due to a grudge against him, and he challenged Republicans to "peel off the war paint" and make a deal on a 10-year, $2 trillion deficit-cutting agreement to avoid the cliff. Each day without an agreement, though, increases the chance that the fiscal cliff will actually hit. Economists have warned that could trigger another recession. How would going over the cliff affect ordinary Americans? Here, a brief guide:
Would the fiscal cliff cause instant calamity?
Many people might panic right away if Jan. 1 arrives without a deal, but the real impact of the fiscal cliff will occur gradually as $600 billion in automatic tax hikes and spending cuts (mostly to defense and domestic spending programs) start kicking in. But the money won't be sucked immediately out of the economy. It will happen over the course of the year, although we'll all feel the pinch right away.
SEE MORE: America already drove over a fiscal cliff
Where will we notice?
The first place most people will feel the pain is when they receive their first 2013 pay stub. Without a deal, the temporary reduction in the Social Security deduction — from 6.2 percent of pay to 4.2 percent — that was part of the economic stimulus package, will expire. The payroll tax will return to normal, and that extra 2 percent (of income up to $82,000) will go into the Social Security system, instead of your pocket. That will add up to $1,640 per taxpayer over the course of the year.
What about income taxes?
There, too, everyone will notice, although not everyone will suffer equally. The temporary tax cuts that then-president George W. Bush signed into law in 2001 and 2003 are set to expire for people at all income levels on Jan. 1. For married couples filing jointly, the rate will jump from 10 percent to 15 percent on the first $17,800 of adjusted gross income, it will remain at 15 percent on income from $17,800 to $60,350, and it will rise from 15 percent to 28 percent on income from $60,350 to $72,300. The taxes on a family making $80,000 will rise from 25 percent to 28 percent. Also, the standard deduction for married couples will fall from $12,100 to $10,150, and the child tax credit will fall from a maximum of $1,000 per kid to $500.
SEE MORE: Could Obama sidestep a debt-ceiling showdown by minting $1 trillion coins?
How much will that cost the average person?
It depends on how much he or she makes. The nonpartisan Tax Policy Center estimates that if all of the scheduled tax increases are imposed, the average household will pay an extra $3,400 next year. The lowest fifth of households, with $11,239 in income, will pay an extra $412. The middle fifth, with an average income of $49,842, will pay $1,984 more. The second highest fifth (average income $80,080) will pay $3,540 more. The highest fifth (average income of $178,020) will pay an extra $14,173. The top 1 percent of taxpayers, those making $1.3 million on average, will see their tax bills rise by $120,537. That means that, in dollar terms, the super wealthy will pay the most, but those closer to the middle — say, couples making $80,000 — will lose the biggest chunk of their income.
So that's how much more we'll pay if there's no deal?
Not necessarily. Even if there's no deal to avoid every element of the fiscal cliff, there's a chance Congress will pass some form of a deal to ease the pain, at least for some of us. Boehner's bill would preserve the Bush-era tax cuts for almost everybody. Obama's proposal would keep those lower tax rates in effect for households making under $250,000 (which is still almost everybody). It's confusing, but there are plenty of online calculators available to help you estimate what you'll pay under all of the most likely scenarios (under Boehner's plan, under the Democrats' plan, if we simply go flying off the cliff). A single person earning $50,000, for example, would pay $10,313 in federal taxes (21 percent) if we went over the cliff, $9,753 under the GOP plan (20 percent tax rate), or $8,753 under Obama's plan (18 percent effective rate). Policy wonks say it's a good idea to take the calculators for a spin. "Some but not all of these tax hikes are still likely to go into effect as part of any deal to fix the nation's giant budget deficit," says Ian Salisbury at SmartMoney. "But just which ones is anybody's guess."

Read More..

Why more NFL teams should start rookie QBs

Why more NFL teams should start rookie QBs
Andrew Luck, Robert Griffin III, and Russell Wilson are on the verge of making playoff history
If the NFL playoffs started today, a record three rookie quarterbacks would be leading their teams into the postseason. With two weeks left to play, Indianapolis' Andrew Luck, Washington's Robert Griffin III, and Seattle's Russell Wilson all have their teams roaring toward unexpected postseason berths.
This is no fluke. It's a reflection of the new approach teams have begun to take with their freshman play-callers.
Teams used to insist that rookie quarterbacks weren't ready to lead a team to victory. When the Cincinnati Bengals selected Carson Palmer with the first overall pick in the 2003 draft, they hailed him as their new franchise player. Yet the following season, Palmer never once left the sidelines. The Bengals benched their prized rookie for the entire year, thinking he would develop faster by first watching a veteran quarterback. This was hardly unusual. Teams had long believed that rookies should be nurtured and eased into the pros. If you threw them right into the deep end, went the conventional wisdom, they would surely sink.
Michael Vick, the first overall pick in 2001, started just two games his rookie year. Eli Manning, Ben Roethlisberger, Phillip Rivers, and Aaron Rodgers — all highly-touted first round picks — began their careers as spectators, too.
In recent years, however, teams have been more adventurous with their new talent. In turn, more and more rookies have proven the old watch-and-learn system wrong.
Baltimore Ravens head coach John Harbaugh surprised everyone by naming rookie Joe Flacco his starting quarterback prior to the 2008 season. Flacco promptly led the Ravens to the AFC championship game, falling one win shy of the Super Bowl. That same year, fellow freshman QB Matt Ryan started every game for the Atlanta Falcons and took his team to the playoffs.
Mark Sanchez followed suit in 2009 with the New York Jets, driving his team to the AFC title game. And last year, Cincinnati's Andy Dalton and Houston's T.J Yates became the first rookie quarterbacks to face each other in a playoff game.
Since the AFL and NFL merged in 1970, just 11 freshman quarterbacks have started a playoff game; six have done so since 2004.
Even QBs whose teams failed to make the postseason have turned in sparkling rookie seasons in recent years. In 2010, Sam Bradford brought the St. Louis Rams, fresh off a one-win season, to the brink of the playoffs. And last year, number one pick Cam Newton obliterated a slew of rookie passing records.
In no season has this new phenomenon been more prominent than the current one. Five rookie quarterbacks started on opening day this year. Never before had more than two rookie quarterbacks done so.

This year's rookies aren't flailing away either. Leading the pack is Griffin, whose 104.2 passer rating — a composite measure of key passing statistics like completions, passing yards, and touchdowns — ranks second in the NFL behind only Rodgers, last year's league MVP. If Griffin keeps up the pace, he would destroy the record for the highest rookie passer rating ever. On top of that, his 6.7 rushing yards per attempt leads the league — not just among quarterbacks, but among all players.
By Total Quarterback Rating — a more nuanced version of passer rating created by ESPN — the big three rookie passers (Luck, Griffin, and Wilson) all rank in the top 11 league-wide. And even lesser-name rookies are enjoying relative success. Ryan Tannehill is turning in a respectable season for the struggling Miami Dolphins. And with Griffin out last week due to injury, rookie teammate Kirk Cousins picked up the win, throwing for 329 yards and two touchdowns.
Perhaps the driving factor behind this surge of rookie success is that college football has transformed in recent years to more closely resemble the pro game. College coaches have placed an increased emphasis on passing, and have adopted more and more NFL-style formations and plays — in some cases, college teams have even developed new tactics later appropriated their pro counterparts. As a result, college passers now enter the league with a built-in knowledge of the playing style, allowing them to more seamlessly transition between the two levels.

Read More..

Gun Violence -- Let's Shift the Odds in Favor of the Good Guys!

The unimaginable horror of Sandy Hook jumpstarts another "national conversation" about firearm violence. President Barack Obama, promising "meaningful action," said: "We will have to change. ... We can't tolerate this anymore. These tragedies must end."
Let's examine four of the "commonsense" measures frequently proposed by "gun control advocates":
One, closing the "gun show loophole." What gun show loophole? Restricted from selling at guns shows prior to 1986, a licensed dealer today requires a background check whether he sells guns at a store, a gun show or the back of his SUV.
Two, banning "high-capacity" magazines. One of the firearms used by Adam Lanza was a Bushmaster .223, with a magazine that can carry as many as 30 rounds. Would there have been less carnage had he been limited to a firearm with low-capacity magazines? What is the appropriate amount of firepower? Clips with 10 rounds? Five rounds? If the idea is to reduce the lethality of the guns, what does this do to reduce the lethality of the shooter's intent?
The deadliest school massacre on American soil appears to have occurred in Chicago in 1958. A student set fire to the school, killing 92 students and three nuns. And in 1927, in Michigan, a former member of the school board set bombs at three schools, killing 45 (mostly second- to sixth-graders), including the bomber.
The Columbine tragedy could have been worse. Eric Harris and Dylan Klebold set bombs throughout the school, but only one partially detonated, doing little damage. But had the bombs gone off as intended, hundreds could have been killed.
Three, reinstating the so-called "assault weapons" ban. An "assault rifle" is one where puling the trigger unleashes a volley of bullets, like a Tommy gun or AK-47. Since 1934, these firearms require licensing and registration. And in 1986, these weapons were banned from civilian sale. These laws remain in effect. The "assault weapons" ban did not restrict fully automatic weapons. Again, they were already under strict guidelines.
What exactly did this ban do? It outlawed certain weapons based on cosmetic features, many of which have nothing to do with the firepower or lethality. For example, the ban defined as an "assault weapon" a firearm with three or more of the following features: a folding or telescoping stock; a pistol grip; a bayonet mount; a flash suppressor; a muzzle capable of launching a grenade; and a magazine capacity over 10 rounds. It outlawed the manufacturing of 18 specific models of semi-automatic weapons.
The Bushmaster .223 was not one of the outlawed weapons.
The ban, enacted in 1994, expired 10 years later. What has been the result? Nothing. Crime was unaffected. The reason is simple. Assault-style rifles (the kind banned by the law) are rarely used in crime. Less than 1 percent of weapons used in crimes are fully automatic rifles (illegal to buy for nearly 30 years). An estimated 1 to 2 percent of firearms used in crime are assault-style rifles, like the one used in Newtown.
Four, requiring a mental health test to prevent the "mentally ill" from purchasing a firearm. The goal is to predict who will use a firearm in an unlawful way. But how to define mental illness? Is it depression? Abraham Lincoln supposedly suffered from depression or melancholia. Would the 16th president be denied the right to purchase a firearm? Do you forbid someone from purchasing a firearm if he or she is in therapy? Should a psychiatrist be required to inform the police when a client expresses anger, hatred or feelings of revenge?
Apart from the Second Amendment, how many other amendments to the Constitution will have been violated by denying someone the right to purchase a firearm because he is predicted to use the gun illegally — based on a psych test.
So what can be done?
We can harden the target to make it more likely that the shooter will encounter resistance. We can re-examine the soundness of "gun-free" zones like schools and malls. By law and policy, these are places where bad guys know there are no guns.
Rampage school shootings in Pearl, Miss., Edinboro, Pa., and in Grundy, Va., have been stopped or minimized by citizens with legal weapons. More recently, it appears that a concealed-carry weapon (CCW) holder minimized the damage that a shooter sought to inflict at the Clackamas Mall near Portland, Ore.
Nick Meli, who has a CCW permit and was armed, positioned himself near the mall shooter. Meli did not shoot, but feels he stopped what could have been greater carnage: "I'm not beating myself up 'cause I didn't shoot him. I know after he saw me, I think the last shot he fired was the one he used on himself."
Americans, according to criminologist Gary Kleck, use guns 2.5 million times each year for self-defense, usually just brandishing the weapon. (The attacker is wounded in less than 8 percent of self-defense cases.) Of the 2.5 million, 400,000 claim that but for their gun they would have been dead. If we're serious about "doing something," we might consider shifting the odds in favor of the good guys.

Read More..

Why are flags flown at half-staff in times of mourning?

Flying a flag at half-mast has become a well-recognized symbol of national grieving, but where did this tradition originate?

How did the tradition of flying the flag at half-staff get started?
It's tough to say, but the oldest commonly accepted reference to a half-staff flag dates back to 1612, when the captain of the British ship Heart's Ease died on a journey to Canada. When the ship returned to London, it was flying its flag at half-mast to honor the departed captain.
SEE ALSO: 5 gun-rights advocates who changed their minds after Sandy Hook
Why would these sailors lower their flag to honor their departed captain?
According to one line of scholarly thinking, by lowering the Union Jack, the sailors were making room for the invisible flag of Death. This explanation jibes with the British tradition of flying a "half-staff" flag exactly one flag's width lower than its normal position to underscore that Death's flag is flapping above it.
How long is the flag flown at half-staff in the United States?
It depends on whom the nation is mourning. Title 4, Chapter 1, Section 7 of the United States Code outlines strict guidelines for how long the flag is flown at half-staff following the deaths of various members of the government. The death of a current or former president lowers the flag for 30 days, while the current vice president, chief justice of the Supreme Court, and Speaker of the House receive 10 days of half-staff flying following their deaths. Flags fly at half-staff from the day of death until the date of interment for cabinet secretaries, associate justices of the Supreme Court, former vice presidents, and the governors of states. The death of a current member of Congress lowers the flag to half-staff on the day of death and following day.
SEE ALSO: Why are there so few female mass murderers?
Does the president have any leeway when he's making these orders?
Yes. The president can make an executive order lowering the flag to half-mast to honor the passing of other important figures or tragic events. For example, President George W. Bush ordered the flags flown at half-staff until the interment of Pope John Paul II. With national tragedies, the length of time seems to be a bit more arbitrary. Following the Sept. 11 attacks, Bush ordered the flag be flown at half-staff until September 16, 2001. The Indian Ocean earthquake and resulting tsunamis in 2004 prompted flags to be flown at half-staff from a Monday through the end of the following Friday.
What days is the flag always flown at half-staff?
The flag always flies on half-staff on Patriot Day (Sept. 11 of each year), Peace Officers Memorial Day (May 15), and Pearl Harbor Remembrance Day (Dec. 7). On Memorial Day, the flag flies at half-staff until noon, at which point it is raised to the top of the staff.
SEE ALSO: Remembering Daniel Inouye: A quietly heroic life in politics
What if I can't fly my flag at half-staff?
Some flags, like the ones commonly seen in school classrooms or on houses, are fixed in a certain position on their poles. How does one handle the sticky situation of a flag that physically can't be flown at half-staff? The United States Code doesn't cover this conundrum, but the American Legion advocates adding a black ribbon to the top of the flag's pole to indicate mourning.
Can anyone other than the president order flags to be flown at half-staff?
Sure. Governors of states, territories, and possessions have the authority under the federal flag code to order a half-staffing, as does the mayor of Washington, D.C. It's not uncommon for a local mayor to order a half-staffing following the death of some prominent citizen, and occasionally businesses will half-staff their flags to honor the passing of a member of the company. Technically, these sorts of half-staffings aren't covered by the federal flag code. There's no penalty for breaking the federal flag code, though, so it's generally no big deal if a local leader wants to honor a prominent citizen in this way.
SEE ALSO: Big Brother's bird's-eye view
How does one raise a flag to half-staff?
Surprisingly, not just by raising it halfway up the flagpole. To properly fly a flag at half-staff in mourning, one quickly raises the flag to the peak of the pole before slowly lowering it back down to the half-staff position.

Read More..

The Newtown school massacre and America's gun obsession: By the numbers

The tragedy set off a surge in support for new gun control laws... and a buying frenzy in gun stores
In the wake of the Sandy Hook Elementary School shootings, in which 20 children and six adults were killed, President Obama is vowing to make gun control a priority in his second term. He promised to set up a task force and send Congress proposals on new restrictions in January, setting in motion what could be a bitter debate with Republicans, who oppose new restrictions on sales of guns and ammunition. The prospect of new gun laws (in a country with 270 million privately owned firearms) delighted some, and sent others rushing to sporting goods stores to buy weapons in case future restrictions make them harder to get. Here, a look at how the tragedy at Sandy Hook Elementary in Newtown, Conn., has affected America's obsession with guns:
5
States in which Walmart stores have sold out of five types of semi-automatic rifles like the one police say Adam Lanza used in the Sandy Hook killings, according to a Bloomberg News search on the company's website. The states where the weapons are out of stock include Pennsylvania, Kansas, and Alabama.
SEE MORE: Ronald Reagan would demand more gun control
$30,000
Sales at Pullman Arms in Worcester, Mass., on the Monday after the Newtown killings, up from $2,000 on a typical Monday. Most of the guns people bought were assault rifles, or ARs, like the Bushmaster rifle police say Lanza, who killed himself at the school as police arrived, used. "People want ARs because people are afraid there will be a ban on assault weapons," says Pullman Arms co-owner Alicia Merritt.
4,154
Record number of background checks submitted for gun purchases in Colorado on Saturday, the day after the Newtown massacre. The previous one-day record in the state, 4,028, was set on Black Friday of this year.
SEE MORE: Why states should take the lead in reforming gun laws
2,383
Background check requests made in Nevada from Friday through Sunday, another record, according to the Nevada Department of Public Safety. The previous weekend record in the state (2,315) was set over Black Friday weekend, which is typically the annual peak.
114,000
Background checks requested in Nevada this year, as of Dec. 16
SEE MORE: Is the Second Amendment obsolete?
104,288
Background checks requested in Nevada as of the same date last year
154,873
Applications for would-be gun buyers submitted to the National Instant Criminal Background Check System (NICS) on Black Friday this year, the most in a single day since the system's inception in 1998 and a 20 percent increase over the number submitted on Black Friday 2011
SEE MORE: What 'meaningful contributions' will the NRA offer after Sandy Hook?
2
Number of times the NICS shut down on Black Friday this year due to system overload. One shutdown lasted 18 minutes, the other 14 minutes.
16.4 million
Background checks run nationwide in 2011, according to the FBI
SEE MORE: The Connecticut school massacre: Read the NRA's first public comments
194,814
Signatures on a petition at Whitehouse.gov (as of early morning on Dec. 20) demanding the introduction of new gun-control legislation
8,000
New members the National Rifle Association, the nation's leading gun-rights advocacy group, says it has signed up daily since the Connecticut shootings
SEE MORE: The media should be ashamed of its Connecticut coverage
200
Percentage increase in prices on the eBay auction website for ammunition for Glock handguns (another type of weapon Lanza reportedly carried). The running bid for four Glock magazines rose to $118.37, compared to $45 on the day before the shooting. The bid in an auction for seven Glock magazines hit $201 on Dec. 17, up from $71.01 before the massacre.
200
Percentage increase in reported sales of armored backpacks for children since the Newtown shooting rampage. The backpacks, with bulletproof-plate inserts, cost up to $400. Kerry Clark, president of Texas-based Backpackshield.com, sold 15 of the backpacks on Wednesday. He first started making them following the Virginia Tech mass shooting in 2007, and in a typical month, he sometimes sells just one. "It's the busiest I've seen it in my life," he said.

Read More..

Why the Slowest Investors Win the Race

Anyone who attended kindergarten remembers Aesop's fable about the tortoise and the hare. The story's moral has implications for investors: Slow but steady wins the race.

Hare investors try to sprint to the finish line of a comfortable retirement without girding their portfolios against the perils of volatility — frequent ups and downs in asset value. So they tend to lag far behind tortoise investors, who take these precautions, which I'll explain in a moment.

Volatility reflects uncertainty, and markets tend to punish uncertainty with lower prices. Yet just because an investment is volatile doesn't mean it has no place in your portfolio. Because they may be less likely to go down with other assets in the portfolio, volatile investments may add highly beneficial variety, known as diversification.

Let's say you own tech stocks like Apple and IBM. Adding more tech stocks to your portfolio doesn't decrease overall risk, so you add a gold-mining stock instead. Though highly volatile in itself, the gold-mining stock is less likely to go up or down with tech stocks, so it increases the portfolio's diversification.

Because there's little correlation between gold-mining stocks' price movements with those of tech stocks, these categories are said to have a low correlation. That sounds complicated, but you can easily look up the differences in price movements between different types of investments to see whether they're correlated, and if so, how closely.

Aware of the downsides of volatility, tortoises avoid it by assembling highly diversified portfolios. That means traditional investments such as U.S. stocks and bonds, mixed with a dash of non-traditional (alternative) assets. These may include emerging market stocks, Treasury bonds and real estate securities. The price movements of these investments have a history of not being highly correlated with U.S. stocks or bonds.

Tortoises are like a savvy retailer on a tropical resort island who wisely sells umbrellas as well as sunscreen to help cover losses during rainy periods. Every once in while, the rain falls on everything -- which is what happened in late 2008, much to the dismay of investors. In the financial meltdown, stocks, bonds and real estate both in the US and abroad swooned, leaving little quarter for investors.

Tortoise-style investors add a touch of alternative investments, knowing this may cut their overall returns some years, but they'll sleep more peacefully with the knowledge that it can counter-balance heavy losses in traditional investments.

Hares aren't focused on this balanced approach. Instead, they assemble highly aggressive portfolios of assets that tend to rise or fall in lockstep. They're not concerned with cutting their losses because, compelled by greed, they're not planning to have any losses ior they believe they can defy gravity. This was not unlike the employees who loaded up on their company's shares before the recession, only to see their investment go south along with their job.

Like the Aesop's hare, hare investors are overconfident and turn a blind eye to the ravages of volatility, which take a long time to recover from. Tortoises, having sustained less damage, continue their slow but steady progress.

The math of recovering from hits may astonish you. Let's say your portfolio loses 33 percent of its value, leaving you with two thirds of what you had. Many believe they'd be back where they started if they gain 33 percent. But this gain wouldn't restore their losses. They would actually need to make a 50 percent gain to get back to where they started. The reason is that the gain is based on a lower value than what you started with.

Heavy gains followed by just a large losses from volatile investments is comparable to the hare in Aesop's fable sprinting for periods and then, winded, lying down to take a nap. Like the tortoise, investors with adequately diversified portfolios don't tend to need as much recovery time.

Such losses are even more damaging than they appear at first blush. Not only do hare portfolios lose time that could be used to make progress toward the goal, but they also miss out on the benefits of compounding from reinvested gains . Though tortoises' gains may be far lower than those made by hares during their sprints, they're more likely to enjoy the benefits of compounding.

These awkward reptiles plod steadily toward the finish line while the halting progress of hares leaves them far behind.

Ted Schwartz, a Certified Financial Planner®, is president and chief investment officer of Capstone Investment Financial Group http://capstoneinvest.net. He advises individual investors and endowments, and serves as the advisor to CIFG Funds. Because Schwartz has a background in psychology and counseling, he brings insights into personal motivation when advising clients on achieving their wealth management goals. Schwartz holds a B.A. from Duke University and an M.A. from Oregon State University. He can be reached at ted@capstoneinvest.com.

Read More..

Low prices boost SF home sales to 5-year Jan. high

LOS ANGELES (AP) — Home sales in the San Francisco Bay area reached a five-year high for January, as prices and mortgage rates plunged, a real estate tracking firm reported Thursday.

However, many of those purchases involved properties that were subject to foreclosures or short sales, indicating the housing market is far from recovered.

The survey by San Diego-based DataQuick also showed the median sales price in the region fell nearly 3 percent last month from December to $326,000 — less than half the peak price of $665,000 reached in 2007 but up from the low of $290,000 recorded in 2009.

A total of 5,479 new and existing homes were sold in the nine-county area, according to DataQuick. The figure was down nearly 27 percent from December but marked a 10.3-percent improvement over January 2011.

The December-to-January drop was normal for the season, while the January-to-January jump showed real improvement, DataQuick said.

The year-over-year increase in January marked the seventh annual jump in a row, the firm said.

Home sales were buoyed by "lower prices, ultra-low mortgage rates, a modestly improved economy and a record level of investor purchases," DataQuick said in a statement.

The lower median price in January was "a reflection of how skewed the market has become toward distressed, lower-cost properties," DataQuick President John Walsh said in the statement. "The higher-end sales have slowed in recent months as many struggle to qualify for loans and others just sit tight."

Distressed property sales — the combination of foreclosure and short sales — made up more than half of all sales of existing homes. Absentee buyers, who mostly are investors, bought more than a quarter of all homes sold, DataQuick reported

Read More..

Rate on 30-year mortgage drops to record 3.89 pct.

WASHINGTON (AP) — Fixed mortgage rates  fell once again to a record low, offering a great opportunity for those who can afford to buy or refinance homes. But few are able to take advantage of the historic rates.

Freddie Mac said Thursday the average rate on the 30-year fixed mortgage fell to 3.89 percent. That's below the previous record of 3.91 percent reached three weeks ago.

Records for mortgage rates date back to the 1950s.

The average on the 15-year fixed mortgage ticked down to 3.16 percent. That's down from a record 3.21 percent three weeks ago.

Mortgage rates are lower because they track the yield on the 10-year Treasury note, which fell below 2 percent. They could fall even lower this year if the Fed launches another round of bond purchases, as some economists expect.

Average fixed mortgage rates hovered around 4 percent at the end of 2011. Yet many Americans either can't take advantage of the rates or have already done so.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many don't want to sink money into a home that they fear could lose value over the next few years.

Mortgage applications have fallen slightly on a seasonally adjusted basis over the past four weeks, according to the Mortgage Bankers Association.

Frank Nothaft, Freddie Mac's chief economist, said that until hiring picks up and unemployment drops significantly, the impact of lower mortgage rates will remain muted.

Previously occupied homes are selling just slightly ahead of 2010's dismal pace. New-home sales in 2011 will likely be the worst year on records going back half a century.

Builders hope that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose in December to its highest level in more than a year.

But so far, they have had little impact on the depressed housing market.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week. The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan fell to 0.7 from 0.8; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate declined to 2.82 percent from 2.86 percent. The average on the one-year adjustable loan fell to 2.76 percent from 2.80 percent.

The average fee on the five-year adjustable loan rose was unchanged at 0.7; the average on the one-year adjustable-rate loan was unchanged at 0.6.

Read More..

Credit score focus of new celeb-backed debit card

NEW YORK (AP) — Personal finance media personality Suze Orman is thinking big. She's the   first out of the gate in the fast-growing prepaid debit card market with a card that aims to help its users build a credit score. It's a gamble that could pay off, if it can help create a way measure the creditworthiness of millions who function outside the traditional financial system.

The latest in a string of celebrities to put their stamp on a prepaid card, Orman will likely avoid the criticism about high fees lobbed at earlier offerings, such as those of hip-hop mogul Russell Simmons and reality show stars the Kardashians. Orman's card costs $3 to obtain, and then just $3 a month, rivaling the hugely popular Walmart MoneyCard.

Although some will question how Orman will recoup the more than $1 million she has invested in the card when charging that little, the real twist isn't the low fee structure. Orman is working with credit reporting agency TransUnion to create a new kind of credit score for users of "The Approved" prepaid MasterCard, one that's based on their spending habits.

Right now, using debit cards — both the prepaid kind and those tied to bank accounts — does not influence an individual's credit score, which is calculated with data related to borrowing. If Orman's experiment is successful, this new type of score could be a game-changer for the estimated 60 million Americans who do most or all of their personal business in cash or with cash alternatives like prepaid cards.

The TV adviser said she approached several companies, urging them to agree to develop such a score, and TransUnion ultimately agreed to gather spending data for 18 to 24 months. It will use that data to try to come up with a formula that works as a way to predict whether the user is a good risk for lenders.

"This is truthfully a work in progress," said Orman.

Banks and other lenders are interested in creating ways to measure how prepaid cards are used, because of the huge market they represent. Consumers loaded an estimated $70.7 billion onto prepaid cards in 2011, up from $2.7 billion in 2005, according to consultancy Mercator Advisory Group.

Mercator projects the market will top $120 billion this year if adoption continues at the same pace.

In general, users can be divided into three groups. The first subset is those caught up in the economy — people who had good credit until it was damaged by events like unemployment or foreclosure. Second are those who have not yet built credit histories, mainly the young and recent immigrants. The third group avoids banks, often because of negative experiences, such as racking up high overdraft fees.

"Wouldn't it be fabulous if, for the first time in history, people are literally rewarded for spending cash, versus penalized, in my opinion, for doing so?" Orman said.

The problem with traditional credit scores from FICO Inc. and its competitors is that they measure how well individuals keep up with their payments, but don't pay any attention to their overall financial health, she said. "Scoring doesn't question where the money is coming from to make payments."

Prepaid cards have already filled some of the void for those who don't use banks, especially because they can be used to receive paychecks via direct deposit. But because they don't contribute to credit scores, the cards can't help users get a mortgage, a car loan or a credit card.

Not having a credit score, or having a low one, also drives up the cost of living in other ways. Lower scores can mean higher car insurance rates, higher rent, difficulty getting a job and paying higher interest rates for any credit available. People with little credit history — known as a "thin file" in the industry — are also the most likely to use alternative services like payday lenders, check cashing stores and bill pay services. These are expensive options when compared with credit cards and banks.

FICO Inc. and other companies use data tied to borrowing to determine a score meant to measure the likelihood an individual will pay back future loans. FICO's 300-to-850 scale is based on an individual's history making payments on loans, the percentage of available credit that is being used and how long the individual has used credit, among other data.

Those with thin credit files have a better chance of having their creditworthiness reflected by FICO's "expansion score," which factors in data like utility bill payments and rent payments. FICO CEO Mark Greene said the expansion scores have shown that the population without traditional scores mirrors to the larger population in terms of credit risk. Other credit score providers are beginning to provide measures based on utility payments and other nontraditional data.

One big difference for developing a prepaid score, however, is that these alternatives still measure how well individuals meet obligations, not how they spend the rest of their income.

"Spending is not actually a great indicator of the thing that we're trying to measure, which is the likelihood you're going to pay your bill," Greene said. "We need to be careful about how we approach that issue."

Another issue a prepaid-linked score must address is the fact that the typical reloadable card is used for just three to four months, said Brian Riley, who analyzes the card market for the consultant The Tower Group.

That timeframe is likely to expand, however, because more users are beginning to have their paychecks deposited to reload prepaid cards. Adding rewards and services, and cutting fees, may also increase customer loyalty.

Orman is adamant that her card will carry only a $3-per-month fee for users who load at least $20 per month onto it. Fees will rise only if the user uses ATMs outside the network it is linked to when withdrawing cash. Consumers who use The Approved Card will also get daily text messages updating their balance, along with one after each purchase, and other free services like ID theft monitoring, credit monitoring and free credit reports from TransUnion.

The media star, whose new show on the Oprah Winfrey Network premieres Monday, said she knows creating the score will be an uphill battle, but believes that if successful, it will help both lenders and borrowers. "You've got to start it somewhere, and this is the beginning of that process."

Read More..