North Korea, Hurricane Maria, Tax Plan: Wealth Economic Update Sept. 29, 2017

U.S. and World News

  • jets-525969835_360China has requested that President Trump and Kim Jong Un end the ongoing war of words after the foreign minister of North Korea referred to Trump’s latest warning of “they won’t be around much longer!” as a declaration of war. North Korea has responded by threatening to shoot down any American warplanes beyond North Korean airspace while Washington stated that North Korea’s interpretation of Trump’s words was “absurd”. China, North Korea’s most important ally, has ordered all North Korean companies operating in China to shut down by January 1st, as part of recently passed sanctions by the United Nations.
  • Hurricane Maria is estimated to have caused $85 billion in insured losses after it made landfall in Puerto Rico last weekend. Most of the island was destroyed, and bondholders are attempting to put together a $1 billion restructuring deal consisting of private money to aid the struggling U.S. territory. The price of Puerto Rican debt has fallen to record lows as a result of the devastation.
  • President Trump has unveiled his tax reform plan which aims at lowering corporate and personal tax rates. The plan includes a proposal that allows a one-off low tax rate for corporations repatriating profits from overseas. The tax plan is also said to make the tax code simpler and create millions of new jobs for Americans.

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.72% and closed at 2,519. The Dow Jones rose 0.25% for the week and closed at 22,405. Year to date, the S&P is up 14.10% and the Dow is up 15.30%.
  • Interest rates extended their rally this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.93% and 2.34%, respectively.
  • The spot price of WTI Crude Oil increased by 1.82% this week, closing at $51.58 per barrel. Year to date, Oil prices have fallen 3.98%.
  • The spot price of Gold ended the week lower by 1.33%, closing at $1,280.01 per ounce. Year to date, Gold prices are up 11.55%.

 Economic Data

  • Initial jobless claims increased by 12,000 from last week, coming in at 272,000. The increase was attributed to the southeast region as a result of Hurricane Irma. The four week moving average for claims rose to 278,000.
  • Real GDP growth for Q2 was revised up to 3.1% from 3%. The revision was attributed to a faster pace of inventory accumulation.
  • Sales of new single-family homes fell by 3.4% in August to a seasonally-adjusted annualized rate of 571k units, below expectations. The south region in areas affected by the hurricane contributed to 75% of the decline.
  • The core PCE price index (excluding food and energy) increased 0.1% last month, below expectations of a 0.2% increase.

Fact of the Week

  • After adjusting numerical data from the past for the impact of inflation, the median household income in 2016 ($59,039) is the highest ever recorded in the United States, surpassing the previous median income record high ($58,665) set in 1999 (source: Federal Reserve Bank of St. Lous).

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Did Your Credit Score Get a Boost?

Roger Legner, Vice President—Residential Lending 

Recent changes in the information appearing on your credit report may give your score an added boost. It’s estimated that 12 million consumers can expect a 10- to 20-point gain once information on tax liens and civil judgements is removed by the three credit reporting bureaus. While modest, those gains could help mortgage borrowers with scores hovering near 610 or so earn a loan approval. For those with higher scores, it could mean access to a slightly better interest rate on their loan.

Why the Change Occurred

Credit scores are like a big cauldron filled with the factors of your financial life. They reflect your past use of credit as much as your lack of history and your timeliness in making payments. They are also an accounting of your current and previous debt levels. Until recently, any tax liens that you might have had, court judgements and unpaid medical expenses were also included in this financial stew.

Going forward, reports of those tax liens and court judgements will disappear from your record, and medical expenses will also be removed at a later date. Although you still owe the amounts, they will no longer be reported due to widespread inaccuracy in the outstanding balances and personal information. Often, information related to judgements and liens not only appeared with incomplete information, it was posted to the wrong records.

5 Tips for Improving and Maintaining Your Credit Score

Whether or not you are impacted by the changes, there are still many other ways to improve your credit score. Here are five of the best moves you can make.

Tip #1: Have credit outstanding. Even if you pay your credit card bills off each month, using your cards is a positive for scoring purposes.

Tip #2: Keep your utilization rate low. It’s actually better to have multiple credit cards with balances well below the maximum for each account than it is to use one card in a way that brings you close to its limit monthly. For instance, your utilization rate is better if you charge $300 to two cards, each having $1,000 ceilings than if you charge $600 to one card with a $1,000 limit.

Tip #3: Refrain from closing accounts. This is especially advisable when you intend to apply for a loan. Closing accounts increases your utilization rate over all your credit accounts. One of our clients recently closed all his accounts, deciding to go to an all-cash payment method. His score dropped from 812 to 708!

#4: Make timely payments. It isn’t about how much credit you have but how well you handle it. Lenders look at your score for reassurance that you will repay them and view late payments as a red flag that may signal financial issues.

#5: Check for accuracy. While the recent changes were made to improve the accuracy of credit records by removing the items most likely to contain errors, accuracy is not a given. This is especially important in light of recent cyberattacks that may have compromised personal credit information. Visit www.annualcreditreport.com at least once a year to review your records.*

There Isn’t Just One Score

While you can review and exert control over your credit record, different lenders use different scoring systems to interpret it. For instance, a residential mortgage report will look at and score your credit history differently than a retailer will. Similarly, different mortgage programs have different minimum scoring requirements.

To discuss your credit history and score, as well as how it might affect your chances for a loan approval, give us a call at 815.361.6469. One of our residential lenders would be happy to walk you through the different mortgage programs available to you and any additional steps you might want to take to help get you through the door of home ownership sooner.

*With the recent announcement of a cyberattack on consumer data housed at Equifax, you should visit www.equifaxsecurity2017.com to see if your information was compromised. If it was, you will have the option of enrolling in a year of credit-report monitoring.

Interest Rates, Puerto Rico, North Korea: Wealth Economic Update Sept. 22, 2017

U.S. and World News

  • puerto-468910550_360The Federal Reserve left interest rates unchanged during their September meeting this week. They did however announce that they will begin to let their over $4 trillion balance sheet run off starting in October. The pace of the runoff will begin slowly and progressively pick up in size until the Fed’s balance sheet has become normalized, unwinding its massive and unprecedented Quantitative Easing program. The Committee’s projections continued to show that a third rate hike of 2017 is probable in December but that only two rate hikes were anticipated in 2018. In Fed Chair Janet Yellen’s post-meeting press conference she noted that while there may be a short-term growth impact from the recent hurricanes, she does not expect them to “materially alter the course’ of medium term growth. The market is currently pricing in a 63% chance of a rate hike in December.
  • Puerto Rico was rocked by a hurricane for the second time this month as Hurricane Maria slammed into the island this week. Still picking up the pieces from Hurricane Irma, Maria knocked out power to the entire island that has a population of over 3 million people. It’s estimated that the damage will likely cause $30 billion in damage for the island that had recently sought bankruptcy protection.
  • The North Korean saga continued this week with President Trump and Kim Jong-Un trading barbs and threats through various means. Speaking at the UN, Trump threatened to “totally destroy ‘Rocket Man’s regime”. Additionally, Trump issued an executive order that would penalize any company or person doing business with North Korea by either cutting off their access to the U.S. financial system or freezing their assets, a move seen as aimed at Chinese financial institutions which have long been tied to North Korea. In response, Un released a statement that said that Trump was ‘mentally deranged’ and that North Korea could test a hydrogen bomb over the Pacific Ocean in response to the threats.

Markets

  • Markets edged higher with both the S&P 500 and Dow Jones Industrial Average setting new All-Time Highs during the week. The S&P rose 0.21% and closed at 2,502. The Dow Jones rose 0.90% for the week and closed at 22,350. Year to date, the S&P is up 13.43% and the Dow is up 15.17%.
  • Interest rates continued to rise from their recent lows. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.86% and 2.25%, respectively.
  • The spot price of WTI Crude Oil increased by 1.52% this week, closing at $50.65 per barrel. Year to date, Oil prices have fallen 5.45%.
  • The spot price of Gold ended the week lower by 1.77%, closing at $1,296.81 per ounce. Year to date, Gold prices are up 13.01%.

 Economic Data

  • Initial jobless claims declined by 23,000 from last week, coming in at 259,000. The drop reflected a rebound from the effects of Hurricane Harvey, and a smaller than expected the impact from Hurricane Irma. The four week moving average for claims rose to 269,000.
  • Housing starts fell by -0.8% in August, worse than the forecasted 1.7% increase. The more volatile multi-family category (-6.5%) dragged the total down while single family starts showed a 1.6% increase.
  • Existing home sales fell -1.7% in August, lower than an expected 0.2% increase in existing homes. Data was mixed regionally as existing home sales in the South (-5.7%) and West (-4.8%) fell while they rose in the Midwest (+2.4%) and Northeast (+10.8%).

Fact of the Week

  • Prior to the first round of Quantitative Easing (QE) beginning on November 26, 2008, the Fed’s balance sheet stood at $480 billion and only held Treasury bills, notes and bonds, but not any mortgage-backed securities. As of September 6, 2017 Fed’s balance sheet stood at an enormous $4.2 trillion and included $2.4 trillion of Treasury bonds and $1.8 trillion of mortgage-backed securities. (Source: Federal Reserve)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Hurricane Irma, North Korea: Wealth Economic Update Sept. 18, 2017

U.S. and World News

  • florida-532409298_360Hurricane Irma tore through Florida and the southeast last weekend, knocking out power to nearly 8 million homes and causing an estimated $25 billion in damage. In combination with Hurricane Harvey, which is expected to be one of the costliest disasters in U.S. history, the storms are likely drag 3rd quarter GDP by at least 1%.
  • The North Korea saga continued this week. First the United Nations voted unanimously for fresh sanctions against North Korea which will cap oil imports and impose an embargo on the country’s textile trade. Then, for the second time in less than a month, North Korea fired a ballistic missile that flew over Japan. This prompted an emergency meeting of the UN Security Council. Also in response, Secretary of State Rex Tillerson continued to urge China to use its leverage as North Korea’s principal supplier of oil to dissuade them from further pursuing its development of nuclear weapons.

Markets

  • Markets rallied this week with both the S&P 500 and Dow Jones Industrial Average closing at new All-Time Highs. The S&P rose 1.63% and closed at 2,500. The Dow Jones spiked 2.19% for the week and closed at 22,268. Year to date, the S&P is up 13.25% and the Dow is up 12.20%.
  • Interest rates rebounded from last week’s declines. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.80% and 2.20%, respectively.
  • The spot price of WTI Crude Oil increased by 5.06% this week, closing at $49.88 per barrel. Year to date, Oil prices have fallen 7.15%.
  • The spot price of Gold ended the week lower by 1.87%, closing at $1,321.38 per ounce. Year to date, Gold prices are up 15.15%.

 Economic Data

  • Initial jobless claims declined by 14,000 from last week, coming in at 284,000. The drop reflected a rebound from the effects of Hurricane Harvey, however, the effects of Hurricane Irma have not yet been included. The four week moving average for claims rose to 263,000.
  • Headline CPI (measure of inflation) rose by 0.4% in August, more than expectations of 0.3%. This was largely due to a 2.8% increase in energy prices related to Hurricane Harvey. Over the last 12 months, headline CPI has risen 1.9%.
    • Core CPI (excludes food and energy prices) rose 0.2% in August, in line with expectations. Over the last 12 months Core CPI has risen 1.7%.

Fact of the Week

  • Only 40% of American households reporting between $100,000-$199,999 of income have investments in the stock market. The percentage of stock ownership drops to 20% of American households for those reporting between $50,000-$74,999 of income. (Source: Federal Reserve Bank of St. Louis)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Hurricane Irma, Debt Ceiling, DACA: Wealth Economic Update Sept. 8, 2017

U.S. and World News

  • hurricane-499087970_360As Texas gets the cleanup and reconstruction process underway following Hurricane Harvey, Florida is bracing for Hurricane Irma which is expected to hit the U.S. mainland on Sunday. Irma, which has developed into one of the most powerful storms ever recorded in the Atlantic Ocean, has already decimated many islands in the Caribbean, including Puerto Rico, on its way to East Coast.
  • A short term deal regarding the debt ceiling is close to completion, pushing the deadline back 3 months to March 2018. The temporary fix will be coupled with more than $15 billion in aid funding for Hurricanes Harvey and Irma. Some economists see this as a potential negative for tax reform prospects as the debt ceiling will now be breached sometime in the 1st quarter of 2018, right when it’s expected that tax legislation would be unveiled which may complicate matters further.
  • President Trump has decided to revoke the DACA program that shields young unauthorized immigrants from deportation. Trump announced that no action will be taken on those in the ‘Dreamers’ program for six months, giving Congress time to craft a solution. Absent action from Congress in that time frame, Trump said that he will “revisit the issue” when that deadline hits. Presumably, if a resolution isn’t found, over 800,000 young adults brought into the country illegally would become eligible for deportation.

Markets

  • Markets dipped this week. The S&P 500 fell 0.58% and closed at 2,461. The Dow Jones dropped 0.82% for the week and closed at 21,798. Year to date, the S&P is up 11.45% and the Dow is up 12.20%.
  • Interest rates fell quite substantially this week. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.64% and 2.05%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.57% this week, closing at $47.56 per barrel. Year to date, Oil prices have fallen 12.52%.
  • The spot price of Gold ended the week higher by 1.63%, closing at $1,346.78 per ounce. Year to date, Gold prices are up 17.37%.

 Economic Data

  • Initial jobless claims rose by 62,000 from last week, coming in at 298,000. This is the highest level of claims in more than two years; however, this mostly reflects a large jump (52,000) of jobless claims in Texas associated with Hurricane Harvey. The four week moving average for claims rose to 250,000.

Fact of the Week

  • According to the Census Bureau, 53% of the owner-occupied homes in the U.S. are owned by people who are age 55 or older. Ten years prior, the proportion of age 55+ homeowners was just 43%.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

T+2: What a Change in Settlement Dates Means to You

Brad Johnson, CFA CFP® Vice President—Investment Officer 

A seismic change hit the securities markets on Sept. 5, 2017, without causing so much as a ripple. That is the day financial companies, Old Second included, will figuratively flip a switch and begin settling stock, ETF, corporate and municipal bond, and some limited partnership transactions two business days after their trade dates. Previously, trades settled on a T+3 basis, or in three business days.

What This Means to You

With the change to T+2, when you sell exchange-traded securities you will receive your money one day sooner than in the past. As a buyer, you can expect to pay and take ownership of these securities one day earlier. Treasuries and most mutual funds are unaffected. They will continue to offer a faster settlement.

While shortening the settlement cycle seems like a big deal, it mainly will affect mindsets. It also may require a bit more planning, at least initially, to ensure cash is available to accommodate the earlier payment date.

For corporate cash managers, the shortened cycle may also mean adjustments in their liquidity strategies. However, increased efficiency should be the end-result.

Why the Change?

The change reflects the electronic nature of securities transactions. Today, there is no need to accommodate paper-based delivery of securities, which is where the processing delay originated. It’s also a move that will align the United States and Canada (which will be making the switch to T+2 at the same time) with settlement procedures already in practice on other global market exchanges.

Also, T+2 will help reduce some market, counterparty and credit risk, specifically for firms that clear transactions. With less time to settle, there is less time for things to go wrong. When they do the response and resolution should similarly occur that much faster.

Once the markets and investors have had an opportunity to adjust to T+2, a move toward T+1 is expected to follow, which would improve efficiencies further. In addition, some experts suspect that the switch could eventually lead to lower collateral requirements when securities are pledged against loans. However, we are not there just yet.

Should you have any questions about how the change to T+2 affects your trading or cash management strategies, call me at 1-630-906-5545.

Harvey, North Korea: Wealth Economic Update Sept. 1, 2017

U.S. and World News

  • flood-184878691_360Almost a quarter of the country’s oil refining capacity is offline this week and 10% of those refineries currently offline may remain unavailable for several months after Hurricane Harvey wreaked havoc in southern Texas last weekend. As a result, gasoline prices in the U.S. have reached $2 per gallon, the highest since 2015. Hurricane Harvey is expected to be the most expensive natural disaster in American history at an estimated $190 billion after the storm left the most rainfall ever measured in the U.S according to AccuWeather.
  • Kim Jong-un has warned that his regime will be testing more ballistic missiles and that the missile launch over Japan was a “meaningful prelude to containing” the island of Guam. The UN has responded by calling for the implementation of harsh sanctions that have recently been developed and agreed on. Defense Secretary James Mattis and Secretary of State Rex Tillerson expressed their hopes of having some dialogue with North Korea and solving the issue in Southeast Asia diplomatically while President Trump tweeted on Wednesday that “Talking is not the answer!”

Markets

  • Markets rose higher this week. The S&P 500 gained 1.40% and closed at 2,477. The Dow Jones rose 0.92% for the week and closed at 21,988. Year to date, the S&P is up 12.10% and the Dow is up 13.11%.
  • Interest rates had a volatile week but ended relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.74% and 2.16%, respectively.
  • The spot price of WTI Crude Oil decreased by 1.15% this week, closing at $47.32 per barrel. Year to date, Oil prices have fallen 11.91%.
  • The spot price of Gold ended the week higher by 2.62%, closing at $1,325.19 per ounce. Year to date, Gold prices are up 15.48%.

 Economic Data

  • Initial jobless claims rose by 1,000 from last week, coming in at 236,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims moved down to 237,000.
  • The core PCE price index (excluding food and energy) increased 0.09% last month as expected and the year-over-year figure dropped 0.1% to 1.41%.
  • Pending home sales declined by 0.8% in July which was below expectations of a 0.4% gain.
  • Quarter 2 Real GDP was revised up 0.4% to 3.0%; the best figure in two years, after a larger-than-expected revision to personal consumption and business fixed investment.
  • Nonfarm payroll growth came in at 156,000 in August which was lower than expectations of 160,000 and the previous two months were revised down. The unemployment rate ticked up to 4.4% while the participation rate remained at 62.9%. Average hourly earnings increased by 0.1% in August and the year-over-year rate remained stable at 2.5% missing consensus expectations of 2.6%. Average weekly hours declined 0.1% to 34.4.

Fact of the Week

  • More than 114,000 Social Security recipients have their benefits garnished to pay student loan debt, debt that in many cases was taken out on behalf of a child, grandchild or other relative’s education rather than their own. The report, by the GAO, said that is an increase of 540 percent over the last 10 years and that in some cases the beneficiaries fall below the poverty line as a result.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

Fed summit: Wealth Economic Update Aug 25, 2017

U.S. and World News

  • Monetary policymakers from around the world have gathered in Jacksonjackson-hole-507309204_360 Hole, Wyoming for the Federal Reserve’s annual summit on economic policy. Janet Yellen, possibly on her last trip to Jackson Hole as Fed Chair, delivered a speech on past and prospective reforms to the financial system but did not offer any additional details regarding the future path of Fed rate hikes or balance sheet reduction. Also in focus will be European Central Bank Chair Mario Draghi who may offer clues as to when the ECB will begin to taper their Quantitative Easing program.

Markets

  • Markets bounced back this week following consecutive weeks of declines. The S&P 500 gained 0.75% and closed at 2,443. The Dow Jones rose 0.71% for the week and closed at 21,814. Year to date, the S&P is up 10.54% and the Dow is up 12.14%.
  • Interest rates ended the week relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.76% and 2.17%, respectively.
  • The spot price of WTI Crude Oil decreased by 1.46% this week, closing at $47.80 per barrel. Year to date, Oil prices have fallen 11.02%.
  • The spot price of Gold ended the week higher by 0.55%, closing at $1,291.13 per ounce. Year to date, Gold prices are up 12.52%.

 Economic Data

  • Initial jobless claims rose by 2,000 from last week, coming in at 234,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims moved down to 238,000.
  • New home sales declined by 9.4% in July, disappointing compared to consensus estimates. The July weakness was fairly broad-based with only the Midwest (+4k) seeing an increase versus declines in the Northwest (-10k), South (-14k) and the West (-39k).
  • Existing home sales declined -1.3% in July, lower than expectations of a 0.5% increase. The regional data were mixed with increases in the West (+5.0%) and South (+2.2%) and decreases in the Midwest (-5.3%) and Northeast (-14.5%).

Fact of the Week

  • The average interest rate paid by the U.S. government on its interest bearing debt was 2.28% as of 7/31. The average interest rate that the government was paying on its debt 10 years ago was 5.04%, or more than double what it is now. Every 1% increase in the cost of debt on our country’s $14.4 trillion of debt is equal to $144 billion of additional annual interest expense. (Source: Treasury Department)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

Lot Loans: Perfect Homes Start With the Perfect Spot

Jocelyn Retz, Vice President—Home Loans 

Whether it’s the unobstructed view or the opportunity to build a custom home, what are your next steps after you find the perfect vacant lot?

If you plan to finance the property, the first step is to find a lender, like Old Second, that is willing to make a “lot loan” for the property you wish to purchase. With the abundance of undeveloped land in the counties we serve—and those where our clients frequently vacation—we have extensive experience in financing this type of purchase.

For clients interested in building a home on an empty lot, however, we do require that it be an improved lot. This means that there is infrastructure—roads and utilities—already present.

Other Considerations

Before purchasing, we also recommend running through a list of considerations to help determine whether the property will suit your plans and your budget. Specifically, we suggest you ask yourself:

  • Will you need to install a septic tank? This may require some adjustments and added costs along with ongoing maintenance.
  • What is the soil like? Depending on previous use of the land, it may require extra attention.
  • Can the topography support your plans? For instance, if you envision having a walk-out basement, will that be possible with this lot?
  • Could any local ordinances or permit fees affect your plans? Each municipality has unique restrictions and construction ordinances.
  • Will your plans require approval by an architectural review committee? Many developments have homeowner’s associations that have rules in place to maintain a certain look within the neighborhood.
  • How much can you expect to pay in property taxes? While the property taxes for the lot will be on the listing sheet, you may want to look into the taxes you would expect to incur once your home is built in order to budget properly. You can do this by reviewing the public records for nearby homes of similar style and size.

When it comes to borrowing against the property, many of the same things that apply in a home loan will apply here. The bank will order an appraisal of the property. We will look at your credit. One different aspect is that the down payment on vacant land is higher. At Old Second, for example, we require 25 percent.

Benefits

Building your own home means it will be a while before your move-in day. However, when that day comes, you’ll be moving into a home that is unique to you. It will reflect your tastes and your choice of materials—and the closets will be exactly where you want them!

When you find the right spot for that home, visit us here or call 1-877-966-0202. We cannot wait to talk to you about how a lot loan can get you that much closer to your move-in day.

Charlottesville, Bannon, Fed: Wealth Economic Update Aug 18, 2017

U.S. and World News

  • iStock-137169606_360In the wake of President Trump’s response to the violent and deadly acts at a white nationalist rally in Charlottesville, Virginia last weekend, many high profile CEOs began resigning from Trump’s Manufacturing Council. President Trump originally responded to the first resignations by tweeting, “For every CEO that drops out, I have many to take their place.” However, as the resignations began to mount, the Manufacturing Council as well as the Strategic and Policy Forum were disbanded as more and more CEOs refused to be associated with this administration. In addition to the CEOs that have abandoned ship, famed investor Carl Icahn stepped down as a special advisor to the President late Friday afternoon.
  • Chief White House Strategist Steve Bannon has left his duties at the White House, though the nature of his departure remains unclear. A person close to Bannon said that the strategist had submitted his resignation on August 7, but the announcement was delayed after the violence that occurred at a white nationalist rally in Charlottesville, Virginia on August 12. Traders on the floor of the New York Stock Exchange audibly cheered when the news broke, reflecting the views on many on Wall Street. Stock markets initially rose on the news before fading late in the day as traders may think that with Bannon’s ouster and Chief Economic Advisor Gary Cohn remaining on the staff, the prospects of passing a budget and getting tax reform improve.
  • Minutes from the Federal Reserve’s July meeting were released this week and showed that policymakers are divided over the timeline for future rate hikes. While some members appeared wary about the recent weak inflation figures, others were more eager to have an additional rate increase sometime in 2017. The minutes also seemed to indicate that an announcement regarding the reduction of the Fed’s balance sheet could occur at the September meeting. The market is currently pricing in a 35% probability of an additional rate hike this year.

Markets

  • Markets fell this again this week following a rally on Monday. The S&P 500 dropped 0.58% and closed at 2,426. The Dow Jones fell 0.77% for the week and closed at 21,675. Year to date, the S&P is up 9.73% and the Dow is up 11.36%.
  • Interest rates ended the week relatively unchanged. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.76% and 2.20%, respectively.
  • The spot price of WTI Crude Oil decreased by 0.28% this week, closing at $48.68 per barrel. Year to date, Oil prices have fallen 9.45%.
  • The spot price of Gold ended the week lower by 0.32%, closing at $1,289.30 per ounce. Year to date, Gold prices are up 12.00%.

 Economic Data

  • Initial jobless claims fell by 12,000 from last week, coming in at 232,000. The Labor Department noted no factors affecting the data this week. The four week moving average for claims remained at 241,000.
  • Housing starts declined -4.8% in July, lower than the median forecast of a 0.4% increase. The volatile multi-family category led the decline (-15.3%), while the more stable single family starts figure dropped -0.5%. Starts declined in the Northeast (-15.7%), Midwest (-15.2%) and West (-1.6%) but edged up in the South (+0.6%).
  • The University of Michigan consumer sentiment index rose 4.2 points to 97.6 in the preliminary August report, rebounding from declines in June and July. Although the survey’s current conditions index dipped, the expectations for the future component had the largest jump in four years.

Fact of the Week

  • Of the 8.56 million new households formed in the last 10 years, 95% of them (8.13 million) were comprised of families that are renting. (Source: Census Bureau)

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Steve Meves, CFA® – (630) 801-2217 – smeves@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

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