“2008 dawned a financial age of instability and uncertainty in the private business, banking sectors and homeowners across the United States”, states Ty J. Young. Ty J. Young is an American business executive who serves as the CEO and Founder of Ty J. Young Inc. Young has over 20 years experience in the investment and insurance industry. He is a regular guest on national and international media, including CNBC, CNN International, and Fox Business.
The infamous banking collapse that ricocheted throughout the United States in 2008 may seem like a distant memory to some – a bad memory. “The ramifications continue to be felt nearly six years later and are likely to last many more years to come”, notes Ty J. Young.
This extraordinary financial disaster prompted many Americans and private sectors companies to take a closer look at their wealth management plans. Wealth management is not merely reserved for the wealthy. It offers tools that can be applied to a wide range of small to large companies and personal income brackets.
CEO and Founder, Ty J. Young explains “It's not how much you make, but how much you get to keep.” Wealth management as an investment-advisory discipline incorporates financial planning, investment portfolio management, and a number of aggregated financial services. High-net-worth individuals, small business owners, and families call upon wealth managers. They require coordination with retail banking, estate planning, legal services, tax professionals and investment management.
The 2008 banking collapse bore witness to the fall of ostensibly impervious financial institutions, creating chaos domestically and abroad. Businesses and individuals watched helplessly as investments hemorrhaged their hard-earned money. Overextended homeowners could no longer make their payments. Far too many Americans lost their homes. They saw their credit-rich lifestyles reduced to struggling to meet basic needs.
Lessons learned from the past, are supposed to help prevent similar or even repeat situations in the future. In order to effectively benefit from the wisdom of these lessons, a complete and in-depth understanding of the event is required. Data collection, analysis, dissemination and integration are all necessary components to reach ‘lesson learned’ status. The data collected pertaining to why an event took place includes the history leading up the event, decisions made, directions taken, consequences considered, and a thorough analysis of causality. The key to ensuring the lesson has been learned is to take all this knowledge gleaned from the event and take tangible, measurable and committed action.
Ty J. Young Explains the Events Leading to the 2008 Housing Collapse
Leading up to the 2008 banking collapse, America was enjoying an economic boom. Wealth appeared to be increasing for many Americans and money was being spent with great enthusiasm. With proper wealth management planning, the warning signs of overspending, excessive borrowing, and ill-considered investments would have been identified. This would have allowed for steps to be taken to mitigate the risk.
The encouragement of politicians and the availability of high ratio mortgages prompted many Americans to take the plunge into home ownership. The risk of home ownership by Americans who could not afford it was compounded by easily accessible credit. Between 2000 and 2008 debts were doubled in households and financial companies with U.S. households owing 10 times more than they had in 1980.
Wall Street experts forecast that house prices would continue to climb. Owning a home was sold by the experts as being a low risk, high gain investment. Historical data was interpreted to support the position that housing value does not go down; it goes up. This provided the justification for people to use future income in the present to acquire better homes and consume more. The reasoning was flawed and the American public paid the price. The lesson here is that even an experts’ forecast is an educated guess based on historical data; it by no means should be taken as a guarantee.
The current state of the U.S. economy and recovery should still be tempered with a clear and complete understanding of the risks associated with debt. What lessons about overextending credit have been learned and applied going into 2014? While the lessons may have been identified, they have not been learned.
The debts held by households and financial institutions are still higher than they were in 2006. Corporate and federal debts continue to spiral out of control. Those consumers unaffected by, or those who have since recovered from, the 2008 collapse are borrowing freely again. “Concern for the consumer centers around the lack of awareness that home prices can still fall, incomes can be lost, but making payments on debt will remain the same”, explains Ty J. Young.
Money and investment-savvy first-time home owners can still benefit from the 2008 collapse and the ensuing real estate bubble. After the bubble burst, depressed house prices provided an attractive and achievable opportunity to invest in real estate. While housing prices have seen a marked increase since 2012 there is still opportunity in certain districts to benefit from prices still at 20% below their fundamental value.
The economic recovery efforts of the Federal Reserve have led to historically low mortgage rates. This combined with lower house prices is encouraging some Americans to downplay the events of 2008 and purchase homes beyond their means.
When comparing house prices and affordability today versus the bubble years, people make a critical error. They don’t “normalize” the bubble years metrics to account for the incremental buyer/refinancer used “other than” 30-year fixed mortgages. In other words, they assume everybody always used market-rate 30-year fixed rate financing.
Ty J. Young - Tips to Consider When Deciding on a Home Purchase
To ensure homebuyers reap the benefits of the bubble while keeping risk low, these tips should be considered when deciding on a home purchase:
1. Seek guidance from a reputable financial advisor to clearly identify your current and projected future financial health.
2. Take the time to save up at least a 10-20% down payment in order to avoid high ratio mortgage commitment.
3. Set your maximum home purchase budget and don’t allow temptation by realtors, lending institutions to sway you.
4. Purchase a home within your current and projected future financial means.
5. Have a contingency plan - what happens if you lose your job or the value of your home decreases?
Ty J. Young, sought for his expertise on politics, finance, and economics, explains his wealth management strategy with the media on vimeo. His philosophy is not how much money you make, it is how much you get to keep.