Caryn Sullivan: Friday Food for Thought

President Biden sold Americans on the “Inflation Reduction Act” as a means to stimulate a stalled economy. Of course, it did the opposite. Inflation increased as soon as it was signed into law.

Friday Food for Thought
Caryn Sullivan

With traditional values under siege, it often feels like we’re living in an inside out, upside down world, where right is wrong, and left is right, and those who speak up are shut down. Friday Food for Thought offers readers news to chew on over the weekend.

Home is where the debt is

Thirty years ago, Bill Clinton’s campaign headquarters featured signage saying, “It’s the economy, stupid.” As we race towards the finish line for a high stakes midterm election, I can picture similar signage in kitchen windows across the state.

In January 2021, inflation was at 1.4 percent. Last month, it was at 8.2 percent. We haven’t seen inflation rates like this since Michael Jackson released “Thriller.”

During the Trump administration, property values went up as interest rates stayed low. We’ve witnessed a dramatic flip flop. In the past 11 months, interest rates more than doubled. They’re the highest they’ve been in 20 years.  What does that look like for the family budget?

Last January, interest rates were at 3.25 percent. If a first-time buyer was in the market for a $300,000 home with a 30-year mortgage, with a standard down payment, principal and interest payments would have been just over $1200 per month.

With interest rates at 7.1 percent, if that same buyer was looking at the same home today, the principal and interest payment would be $1,910. Do the math and take a breath as you consider the impact on the family budget. The higher interest rate amounts to $675 more per month; $8,000 per year; and $240,000 over the life of the loan.

And we haven’t seen the worst of it. Interest rates are expected to go up even more late next week.

Such a dramatic change in rates will have far-reaching impacts.

Relocating or down-sizing … maybe not

Thinking about selling to relocate or down-size? Sellers will have a smaller pool of buyers than last year as higher rates will keep prospective buyers out of the market. They’ll either remain in their current homes, mom and dad’s basement, or a rental property. If you do plan to sell, remember that as interest rates go up, market prices will adjust.

Taxes, taxes, taxes

As city councils, school boards, and county commissioners address inflation, homeowners will likely see big bumps in their annual property tax bills, be it for single family homes, condos, townhomes, or duplexes. Meanwhile, commercial property values are dropping. That’s another story for another day.

Though most of those increases won’t be announced until December, St. Paul residents were told to expect a whopping 15 percent increase. The average St. Paul homeowner will pay $4,000 in property taxes, which go into a variety of buckets, including public schools (which are seeing a reduction in students).

Home equity

Many folks use equity in their homes to finance other things. Thinking about using it to finance your kid’s college tuition, a kitchen remodel, a wheelchair ramp, a new business venture, or outstanding medical bills? You’re going to pay a lot more to do so, as those interest rates are up as well.

Of course, if you’re going to just live in your home, that’s not getting any cheaper, either. Food, electricity, gas … everything’s going up.

The Inflation Reduction Act that wasn’t

President Biden sold Americans on the “Inflation Reduction Act” as a means to stimulate a stalled economy. Of course, it did the opposite. Inflation increased as soon as it was signed into law.

Wondering how Minnesota’s senators and congressional representatives voted? All the Democrats voted for it and all the Republicans voted against it

Before you cast your vote on November 8, check out the history of the 1980s — not the hairstyles or the music — but the double-digit interest rates. It wasn’t pretty.

Just 11 days until the election. You know what to do.

The views and opinions expressed in this commentary are those of the author and do not represent an official position of Alpha News. 

 

Caryn Sullivan
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A retired attorney and author of the award-winning memoir, "Bitter or Better: Grappling With Life on the Op-Ed Page," Caryn Sullivan has inspired readers with her thoughtful commentary for the past two decades. To learn more about Caryn’s work or to connect, visit carynmsullivan.com