Why 2009 won’t be so bad for consumers
The economic climate in 2009 won’t be all bad, according to the editors of Kiplinger’s Personal Finance and Kiplinger’s forecasting.
Here are the dozen things they say will make this year more bearable for consumers:
It will be a great time to buy or refinance a home. Kiplinger.com reports that the median home price nationally has fallen 20 percent since the housing market’s peak in July 2006.
In Wisconsin, that decline has been less drastic — sales of existing homes dropped 16.7 percent and average prices were down 5.3 percent in third quarter of 2008 compared with the same period in 2007, the Wisconsin Realtors Association found. The average home price statewide was $160,000, compared with $168,900 in 2007, which is good news for buyers.
And mortgage rates are lower than they’ve been in nearly 40 years — in Wisconsin, rates are averaging 5.3 percent for a 20-year fixed rate mortgage and 5.51 percent for a 30-year fixed. (See more rates.)
It’s a good time to buy equities. Kiplinger’s offers some advice on the kind of big, diversified financially strong companies and index funds you may want to invest in while prices are still low. Those without extra money to invest can buy at bargain rates through their retirement accounts. Annual contribution limits have been raised for 2009 to $16,500 for a 401(k) — $22,000 if you are 50 or older.
No more debt binge. People are saving again instead of living beyond their means.
Less sticker shock for consumers. Grocery prices are expected to rise 2 percent this year, compared with 7 percent last year. Retailers are adding value to purchases such as televisions, GPS devices, small appliances and computers, Kiplinger says.
Medical procedures to cost less. LASIK eye surgery, plastic surgery and braces are among the services that may be reduced in the year ahead.
More tax cuts are coming. This year’s economic stimulus package could include a payroll tax holiday.
Travelers get a break. Flying will be a little cheaper, but book ahead as flights will be scarcer, Kiplinger recommends. Cruise lines and resorts are offering big discount packages.
Retirees get more. This year’s 5.8 percent cost-of-living increase for Social Security beneficiaries is the largest in more than 25 years, Kiplinger reports. Also, for the first time since 2000, the monthly Medicare Part B premium deducted from Social Security won’t rise. Another plus: the requirement to take an annual minimum distribution from IRAs or 401(k)s has been waived for 2009 for those 70½ and older.
College money is still available. Legislation has kept money available in the form of low-cost federal student loans for the 2009-10 academic year.
The green revolution continues. Congress has restored the tax credit for energy-efficient home improvements in 2009, giving taxpayers up to $500 for things such as adding insulation or putting in a high-efficiency air conditioner or furnace.
Gas – and car prices – are cheaper. Prices will creep up from the below-$1.70 average per gallon right now, Kiplinger says, topping out around $2.15 a gallon. At the same time, car manufacturers and dealers are eager to sell.
Health care reform could be coming. “[T]he economic crisis may actually be the necessary spark for bipartisan cooperation” in Congress, according to Kiplinger.
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