What next?

By Robert Wang

The economy has stabilized, at least for the time being, more than a year after the world financial system collapsed, causing massive job losses, the obliteration of people’s savings and a widespread climate of fear.

Stark County has not yet recovered from the economic convulsions of 2008. There’s still a climate of caution, as residents — many of whom are seeking to pay down their debts — are more aware that one wrong step could lead to financial ruin.

But while the crisis has brought heartache, it also has brought opportunities. Investors have been able to buy stocks, houses and other investments at bargain prices. Interest rates have approached the lows of 2002. And the federal stimulus package, which was passed in reaction to the economic turmoil, gave first-time home buyers an $8,000 tax credit that was to last until this month. And it appears it might be extended.

About magazine talked to a financial adviser, mortgage banker and real-estate agent to ask them what they are advising their clients to do to navigate the aftereffects of the recession.

ADAM OLENICK, financial advisor

Adam Olenick, a financial adviser for Edward Jones, advises residents in their 30s who have just started their retirement planning to couples in their 80s. Many of them have portfolios in excess of $100,000.

But despite the damage several of those portfolios sustained last year, Olenick says his advice hasn’t changed. It’s still to stick to your long-term investment strategy.

“If you’re focused on the long term, you should stay hitched to your plan,” he said. “If your needs haven’t changed, which typically they haven’t ... you should stick to what you have.”

If you’re saving for retirement and you have decades before you start cashing out your 401(k), a longer time frame means you have more time to recover from losses, which means your portfolio can take on more risk to maximize the returns. Olenick said a few of his clients couldn’t handle last year’s volatility and sold their stocks.

“Unfortunately, they’ve missed out on a 50 percent rebound in the market,” he said.

Meanwhile, portfolios of some other clients have gained back much, but not all, of their losses. Olenick says people should rebalance their portfolios to ensure the percentage of their investments in asset classes such as stocks and bonds or domestic and international stay in accordance with their investment strategy. Differing returns can throw that out of whack.

He says investors should diversify their assets among different asset classes such as stock and bonds, in case one asset class performs poorly while another does well. But just because they have money at two different institutions doesn’t mean they’re diversified if both put all the money into equities.

“Don’t focus on just one investment,” he said. “There’s no single best investment out there.”

SALLY GOODNOW, real estate agent

In real estate, it’s now a buyer’s market. Sally Goodnow, a real estate agent for Howard Hanna who specializes in luxury homes, doesn’t deny it, saying she’s seeing a chronic shortage of buyers.

“What changed the last two years is simple for Realtors,” she said. “A listing that should sell for $1 million can’t even be listed in the 9s now. It has to be listed in the 8s.”

Goodnow said sellers shouldn’t be in denial. Just because they believe their house is worth $1 million, doesn’t mean it will sell for that amount if no one is willing to pay it. She urges sellers to list their home at a realistic market price or postpone putting it on the market until the price rises to what they want. Otherwise they lose credibility with buyers. Then their home sits on the market for months, and the sellers garner a reputation as being unreasonable and naive.

“People aren’t shopping for their dream homes. They’re shopping for the deal. That’s the difference between today and 21⁄2 years ago,” said Goodnow, who added that she hears people in bars brag about how little they paid for a house.

She said it’s crucial the house is in pristine shape for a showing. Otherwise, the prospective buyer will move on to other homes.

As for buyers, they should get a bank-approved loan before making an offer and should act now to take advantage of extremely low interest rates, but “forget about it if you don’t have good credit,” Goodnow said.

BOB CATLIN, mortgage banker

Yes, sellers of homes may have to take a loss. But the good news is they’ll often recoup that loss when they buy their new home at a bargain-basement price, says Bob Catlin, president of Signature Mortgage in Jackson Township.

“As long as you can mentally break even,” he said. “Aren’t you going to be happier about that new house?”

He said that with interest rates below 5 percent, housing prices well off their highs and the $8,000 first-time home-buyer tax credit, now is a good time to buy. The environment could be very different in two years.

“That $400,000 house you bought three years ago might sell for $335,000,” he said. “That $600,000 house you loved last summer, you can buy it for $520,000. ... this is the cheapest time to buy and probably a good time to actually furnish your house.”

With banks taking over homes in foreclosure, many are eager to dump the properties at low prices. Catlin recommends  prospective buyers sell their home before buying a new one, so they’re not stuck with two house payments at once. But if they don’t, they could refinance to an interest-only adjustable rate mortgage on their old home, which would knock a couple of hundred dollars off a monthly payment, though that still comes with a risk.

If you don’t want to move, an option is to refinance to lower interest rates, Catlin said. But, he noted, you have to have good credit to get any financing — at least a 620 on the Equifax FICO score, ideally 720. If you don’t, you may not get the loan, or you may have to pay much higher interest rates. The larger the down payment you can make, the better.

Catlin said if there’s any possibility of a job loss down the road, now may be a good time to get refinancing to lower payments or a new mortgage. Once the income is lost, getting a loan will be virtually impossible, he said.