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4 Signals It Might Be Time To Buy (vs. Rent) Your Home

Interested in buying a home but uncertain about making a move because of the economy? As always, our favorite real estate site, Trulia.com, has tips to help you get over your uncertainty:

To rent or to buy: what used to be a given – that you would buy a home as soon as you could afford to – has become an agonizing conundrum for many a would-be homebuyer, in the face of the housing market’s big bust and super-slow recovery. Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing. And that Catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.
Fortunately, there are handful of life, mortgage and local market signals which indicate that the time *might* be right to hop – scratch that – leap off the fence and into homeownership:

Mortgage rates are going up. Home prices have been low for the last several years, and in fact are currently looking like they’re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been low – this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity won’t be closing anytime soon.

While prices don’t look like they’ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a rollercoaster over the past few months, and with inflation and Fed rates set to spike later this year, today’s low interest rates might be as good as they’re going to get for a long time to come. And I mean a very long time – in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, they’ll probably be here for a long, long time.

Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.

Rents are going up. Rental rates in many areas are also on the rise – in fact, the foreclosure crisis has acted created additional demand on many markets’ rental housing inventory in several different ways. First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. As a result, rental homes are in high demand – and rents are rising.

Rising rents at a time when the prices of homes for sale are low and, in some places, falling? One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, too – to offset this risk, have a long-term plan, to minimize the possibility that you’ll owe more than your home is worth when you need to sell. Read on for more on how to plan for the long term and minimize your homebuying risk.)

Your income and career are stable for the foreseeable future. The smartest homebuyers look to their lives, not just the market, for signals about when the time is right to buy. Homebuying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant). Most lenders will require that you’ve been at your job – or in the same general field of work – for at least two years before you buy. But that’s the bare minimum – beyond that, you don’t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when you’re advanced in your career, but in an industry which is dying or downsizing the workforce in your region (unless you have a strong Plan B).
When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your homebuying dreams.

You can reasonably predict the home you’ll need in the years to come. Since successful homeownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right now – rather, you should aim to buy the home you’ll need 5, 7 or even 10 years down the road (to the best of your ability to predict, of course). You might be a newlywed with no kids now, but you plan to have them in a few years. Or maybe you’re a newly minted empty nester right now, but can project that you’ll want to retire – and might not want to climb two flights of stairs to get to and from your bedroom – 10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needs – not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.

If you’re able to predict – and afford, at today’s prices – a home with the space, amenity and geographic location you’ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent vs. buy fence.

With that said. . . buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesn’t mean you have the green light to run out and buy a home tomorrow – rather, it’s a good sign you should begin down that path, if you’re so inclined. You’ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.

It’s not overkill to check in with a mortgage pro, a tax pro, a local real estate broker or agent and a financial planner to make sure all your ducks – not just one – are in a row before you make your move.

Source: Trulia

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America Recovering, But Blacks Take Turn For The Worst

Taken from Our Weekly:

Economists say the recession is over. Recent national job reports illustrate an upward climb to the recovery. Yet these accomplishments have not effectively reached the urban communities of color—neither Black nor Hispanic.

This is according to the National Urban League’s 2011 “State of Black America” (SOBA) released recently. To combat this painful State of Black America in 2011, the NUL has declared a war on unemployment.

“With overall unemployment now at 8.9 percent and 13.7 million people still out of work …the recovery has yet to make a significant visit to communities of color,” said Marc Morial, president and CEO of the National Urban League (NUL).

Since 1987, the NUL has published its comprehensive publication, “The State of Black America,” to address what members, analysts and specialists see as the major issue affecting urban America for that year. Not much has changed. Last year it was “Responding to the Jobs Crisis.” This year, the issue is “jobs, jobs, jobs.”

Read the rest of this article here.

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Five Mortgage And Foreclosure Myths

In the last three years thousands of homes nationwide underwent foreclosure, and according to recent real estate reports the best is yet of come. This means that there are still deals out there for new homebuyers interested in getting in the market – and new opportunites available for home owners in danger of foreclosure. If you find yourself in either of these catagories, the following mortage and foreclosure myths from Trulia.com just might apply to you:

In a mortgage market that changes as quickly as this one, today’s fact is tomorrow’s fiction.  For buyers, misinformation can be the difference between qualifying for a home loan or not. Sellers and owners, knowledge is foreclosure-preventing, smart decision-making power! Without further ado, let’s correct some common mortgage misconceptions.

1.       Myth: Buyers with bad credit can’t qualify for home loans. Obviously, mortgage guidelines have tightened up, big time, since the housing bubble burst, and they seem likely to tighten even further over the long-term. But just this moment, they have relaxed a bit.  In the last couple of weeks, two of the nation’s largest lenders of FHA loans announced that they’ve dropped the minimum FICO score guideline from 620 (which allows for some credit imperfections) to 580, which is actually a fairly low score.

At a FICO score of 620, buyers can qualify for FHA loans at many lenders with only 3.5 percent down. With a score of 580, the lenders are looking for more like 5 to 10 percent down – they want to see you put more of your own skin in the game, and the higher down payment lowers the risk that you’ll default.  However, if your credit has taken a recessionary hit, like that of so many Americans, this might create a glimmer of hope that you’ll be able to take advantage of low prices and interest rates without needing years of credit repair.

2.     Myth: The Mortgage Interest Deduction isn’t long for this world. Homeowners saved over $85 billion in 2008 by deducting their mortgage interest on their income tax returns. A few months ago, the National Commission on Fiscal Responsibility and Reform caused a massive wave of fear to ripple throughout the world of real estate consumers and professionals when they recommended Mortgage Interest Deduction (MID) reform, which would dramatically reduce the size of the deduction.

Fact is, the Commission made a sweeping set of deficit-busting recommendations to Congress, a few of which are likely to be adopted.  Fortunately for buyers and sellers, MID reform is not one of them.  Very powerful industry groups and economists have been working with Congress to plead the case that MID reform any time in the near future would only handicap the housing recovery.  Congress-folk aren’t interested in stopping the stabilization of the real estate market.  As such, the MID is nearly universally thought of as safe – even by those who disagree that it should be.

3.       Myth:  It’s just a matter of time before loan guidelines loosen up. The US Treasury Department recently recommended the elimination of mortgage industry giants Fannie Mae and Freddie Mac. I won’t get into the eye-glazing details of it here, but the long and the short is that (a) this is highly likely to happen, and (b) it will make mortgage loans much harder and costlier to get, for both buyers and homeowners.   It’s possible that loans are as easy to get as they’re going to get.  So don’t expect that if you hold out, zero-down mortgages will c

4.       Myth: If you don’t have equity, you can’t refi. Much ado is being made about how stuck so many people are in their bad loans, because they don’t have the equity to refinance their way out of them.  If you’re severely upside down (meaning you own much, much more than your home is worth), stuck may be the situation. But there are actually a couple of ways homeowners can refi their underwater home loans.  If your loan is held by Fannie or Freddie (which you can find out, here), they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.  That means, if your home is worth $100,000, you could refinance a loan up to $125,000, despite the fact that your home can’t secure the full amount of the loan.

If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. While most mortgage workout plans are only available to people who are behind on their loans, the Short Refi program is only available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.  So, if you owe $250,000 on your home, you can refinance via an FHA Short Refi even if your home’s value is as low as $217,000. If you think you’re a good candidate for a short refi, contact your mortgage broker, stat – there are some in Congress who think that this program is so underutilized (only 245 applications have been submitted since it rolled out in September – no typo!) that its funding should be diverted to other needy programs.

5.       Myth: If you’ve lost your job and can’t make your mortgage payment, you might as well mail your keys in.  Until recently, this was essentially true – virtually every loan modification and refinancing opportunity required that your economic hardship be over before you could qualify. And documenting income has always been high on the requirements checklist. But there are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.

The US Treasury Department’s Hardest Hit Fund allocated $7.6 billion to the states listed below – all of which are now using some portion of these funds to offer up to $3,000 per month for up to 36 months in mortgage payment assistance to help unemployed homeowners avoid foreclosure.  Contact the state agency listed below if you need this sort of help:

Source: Trulia

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The Income Disparity Between African Americans

Last year, I did an article titled, ‘Combating the Poverty Crisis in Black America’, where I used many of the same Census Data that was cited in the article Mother Jones article on the Income Disparity in America. After reading that article I decided to crunch those numbers even further and create similar charts for African Americans.

Below is a chart, using the same data, to show how the income disparity looks just among African Americans.

The fact that the average income for 90% of African American is just slightly above the poverty line is simply appalling.

This income disparity among African Americans should be a wake up call. While, the rest of America has toned down and become more realistic about their reduced incomes, many of us seem to continue to be lost in the illusion of being rich. We are not. Based on this data, many of us are living lies. The Average African can not truly afford the lifestyles that we lead.

Let me give you an example. The average luxury car costs around $65,000. If you were to buy or lease, the cost with insurance, depending on credit would be around $1,000 per month. Rule of thumb, is that the price of your car should be roughly 25% of your income. In other words, you should at least $48,000 per year to drive a $65,000 car. According to the Census data, 60% of us can not afford it. Still how many of such cars do we see in our communities?

When you add the impact that mass unemployment, foreclosure and the overexposure to payday loans has had on our total net worth in recent years, you can see how the average income for 90% of us may fall even further.

Many African Americans, believe that having it, means that you can afford it. But, as we see from the data above, this is not true for many of us. Instead of that mentality, we need to develop one that says ‘not having doesn’t mean that you can’t afford it.’ We need to save and live more within our means. What we save could save us.

Source: Sickly Cat

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Hood Rich

As I write this article I acknowledge that I’m talking to me first. I have a birthday looming, and in talking to my husband about gifts I heard the words “Louis Vuitton” go flying out of my mouth without thinking twice. He looked at me, gave a few blinks and moved on, which for me was a silent reply of “keep dreaming” when it comes to the bag I have in mind. After all, we have a mortgage and tuition for our son’s school every month. Could he squeeze a Louis bag in there one month for wifey? Of course he could – but why would he when that same money could go towards a romantic trip out of town, an iPad, or a third of it used towards bolstering our savings and fixing up our house? Furthermore, why would I even expect it?

Because I, like so many of us, am a conspicuous consumer. I buy because I want things no matter the cost.  I also know certain high-priced items will get noticed – and I’m looking forward to receiving your compliment.

Don’t get me wrong: if one has the disposable income and the accoutrement of wealth-building, such as retirement accounts, solid investments, and a home and that $1000 is just a drop in the bucket then by all means, shop on. But for many of us this isn’t the case. We push $75,000 cars, wear $800 shoes, rock $1500 handbags – all of which finds itself housed in an apartment where we hand over checks monthly to enrich the bank account of somebody other than us. Rent plus what we’ve spent on these material goods equal not only a down payment, but a few mortgage payments as well. Those of us who do own homes want to continue to live the way we did before our monthly home expenses tripled, but doing so might get you one step closer to foreclosure.

Now I’m not saying everybody needs to run out and start rocking Kente cloth – but the next time you go to swipe your credit card on that purchase or establish new credit to buy something that is a bit outside of your spending limit, ask yourselves the following questions:

Why am I buying this?

Is it truly something I can afford?

If it’s stolen or lost will that break me?

Do I need it or can I live without it?

How much money is in my savings account?

What other options exist for me to put this money to better use?

We never know when a rainy day might come, and that Louis bag won’t fill our empty bank accounts.

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The Unholy Alliance: The Rise of an Internet Cartel

“The only way to predict the future is to have power to shape the future.” – Eric Hoffer

There was an announcement that seemed to have gone largely unnoticed in the financial and technology world today. Mainly because today Mubarak was reportedly stepping down as Egypt’s president – he did not. It went across the screen like any other typical headline reported on Bloomberg. Google and Facebook looking to acquire Twitter for a valued $8-10 billion. I recently closed my own Facebook over continued privacy concerns. Let’s see how long I can stay away given Facebook has become almost as necessary today as a cell phone it seems. That being said I took to my real addiction Twitter and said, Facebook posts today are going to be for this generation the tramp stamp and tribal tattoo of my generation. There will be things a lot of us did, thinking they were cool at the time, but will ultimately regret later in life. Ironically comments made on the internet are becoming as permanent as tattoos. Everything we say becoming a fixture that can be recalled later to our dismay and held against us.

Twitter and Facebook are places where people have become accustomed to expressing themselves to no end. Every random thought and feeling finds its way to Twitter or Facebook statuses. The problem is we’ve forgot that essential tool that we were raised with: the ability to filter. In the age of reality television it certainly could be argued that Facebook has become that for the everyday person. We see meltdowns, breakups, bullying, and every other imaginable thing happen via Facebook. Life imitating the art. So then why should the purchase of this pesky little Twitter company bother me? One word: POWER.

Over the past year we’ve seen Facebook, Inc. become a company valued (at press time) at $60 billion in its most recent valuation. This places the company’s value roughly equal to Ford Motor Company, U.S. Steel, and Monsanto (world’s largest agriculture seed company) – COMBINED. Three companies, who transport us, help us build, and feed us. A social media company is worth the equivalent. Wrap your mind around that for a moment and ask yourself why? And the answer is in one word: INFORMATION. Facebook and all social media are and will be the most valued companies for years to come because they do one thing better than any company previously who were paid to do it, and that’s get our personal information, thoughts, desires, hopes, fears, dreams and we give it willingly for FREE. As deputy editor at Forbes Nicole Perloth stated today in her article as it related to the almost 3 to 1 bid to value Facebook and Google offered to Twitter “The real value is going to be in the data Twitter already has and continues to amass about topics, people and their connections.” And information is power. The ultimate power for companies and organizations who want to control trends, purchasing, and attitudes of the consumer or voter.

So let’s get back to this alliance and why it alarms me. These companies are arguably the most powerful companies in their field. Let’s connect the dots and start at the beginning with America’s wealthiest and largest philanthropist – Bill Gates. The Microsoft corporation which at one point tried to buy Google but missed the window owns a small but influential portion of Facebook. Google now owns YouTube, the largest broadcaster of uploaded user videos and growing corporate and organizational videos. Al-Jazeera actually reported live from YouTube on Mubarak’s speech if you could not get to a television. Signaling computers and smartphones will be even more so the medium from which we get our news via the web. Google as well tried to purchase Facebook. Now there is Facebook and its 500 million users (minus one); a founder who has consistently run into abuse of power issues since the company’s very founding; a company that continues to become wealthier by the day; and that has reached a value of $50 billion just weeks ago with the announcement of an investment by none other than Goldman Sachs. The Goldman Sachs whose reach into Washington politics is so deep that if it played with Washington’s proverbial ass it could make the mouth talk. It also manages close to $1 trillion in assets, an economic weapon not to be take lightly, and who many say was one of if not the most influential player in our subprime crisis. Now there is Twitter. The company who has 200 million users itself and by some estimates are a make-up of the who’s who and everyday man. Politicians like mayor Cory Booker of Newark, New Jersey who is so popular being a follower of his is almost cult-like. His public schools just also happen to receive $100 million from Facebook founder Mark Zuckerberg. Who else is on twitter? The better question is who is not? Every major company worth its salt is on twitter, non-profit organizations, politicians, celebrities, bloggers, and everyday joes and janes.

There is a massive amount of information being consolidated in the hands of a few and it is has the potential to be extremely dangerous. Microsoft, Google, Facebook, YouTube, Twitter – all intertwined. Apple aside can you name companies more powerful roaming the internet and collecting your information? Now back to that conglomerate who has the financial and political backing of Goldman Sachs, who all but bullied the U.S. Government to use AIG as a backdoor bailout so it could avoid receiving pennies on the dollar for its bad debt and instead received dollar for dollar. Every search we search on Google, every video posted on YouTube, every bit of personal information from location to workplace to school we post on Facebook, and every thought we post to Twitter is all in the hands of a small group. Lest us not forget that Microsoft’s founder is head of the world’s largest non-profit organization. If you think non-profits can do no harm, ask Africa about the missionaries who came to “help”.  Or ask New Orleans about about non-profits that came to “help”. The proverb by Saint Bernard of Clairvaux says L’enfer est plein de bonnes volontés et désirs” better known as – The road to hell is paved with good intentions.

The very thing the internet was suppose to do is give everyone free uncensored access to information. The ultimate ability to level the playing field. That was because everyone was powerful on the internet. Nobody controlled the internet. Now we see that we might have hoped too  soon for this to be true. The way we have the diamond and oil cartels there is clearly a forming internet cartel and its commodity is information. Maybe the most valuable commodity on this Earth. El-Hajj Malik El-Shabazz famously said “Power never takes a step back – only in the face of more power.” The U.S. can vie to this truth with the rise of China. A superpower needs another superpower to keep it in check. And we are witnessing the rise of a superpower in a place that knows no borders. After all it is the World Wide Web. Did I forget to mention that Google was collecting your health data? This information cartel very well could know you better than you know yourself.

It may be 2011 but its feeling more and more like 1984.

Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & CEO of Sechen Imara Solutions, LLC. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as writing articles for other African American media outlets.

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Black Is: The Week In Photos

The week in photos; photos and headlines for the week of Feb 7th -Feb 14th 2011.


Tuskegee Airman Leo Gray signs autographs for students this morning at Fantasy of Flight in Polk City.

Tuskegee Airman Leo Gray signs autographs for students and shares stories of overcoming barriers, at Fantasy of Flight in Polk City, Florida.


Newly created Pac-12 conference and 2pac fan battle for domain rights in web squatter case.


Green Bay Packers fans rejoice in 9 degree temperatures at the Super Bowl XLV Championship celebration at Lambeau Field.


Egyptians celebrate the news of President Hosni Mubarak resignation.


2,012 students compete in a game of dodge ball at the University of Alberta in Edmonton, Canada, and set a Guinness World Record.


Former first lady Nancy Reagan attends a birthday celebration held in honor of Ronald Reagan. He would have been 100 years old on Feb 6th.


Jerry Sloan, Phil Johnson

Jerry Sloan(left) resigns as head coach of the NBA Utah Jazz after 23 season.


AOL will be adding Huffington Post co-founder Arianna Huffington to its arsenal.

AOL acquires Huffington Post for $315 million, Arianna Huffington to become media president.


Janet Jackson begins her world tour in Jakarta, Indonesia


Image: Abandoned buildings in New Orleans, La.

an estimated 3,000 homeless find refuge in the vacant and abandoned homes and buildings in New Orleans, that were damaged by hurricane Katrina.


Mississippi  proposes to issue specialty license plates honoring Confederate Gen. Nathan Bedford Forrest, who was an early leader of the Ku Klux Klan.

AFRO-American Newspaper has joined forces with Google to digitize its archives, making them available to anyone.


Garcelle Beauvais, Eva Amurri and Taraji P. Henson backstage at Heart Truth’s Red Dress Collection, which raises awareness for heart disease in women, during Fashion Week.

Nicki Minaj, Rihanna, Willow Smith, and Lady GaGa were some of the artist in attendance for the 53rd annual Grammy Awards.


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The Oprah Illusion: The Reality of OWN

Just because you rise to head an army, does not mean you’re part of the power system. – Amos Wilson on slave generals

As the launch of OWN came on New Year’s Day it seemed that a number of worlds were a buzz and all for very different reasons. The cable world was a buzz as it wonders if the “Oprah Effect” can help it continue to close the advertisement revenue gap that exists between cable and broadcast channels. The battle for advertising dollars currently sees cable companies getting only 39% of the advertising revenue pie. African America was a buzz because finally our shining star of wealth would be finally in possession of her very own network. The hope by many is that we will see positive images of African Americans and especially African American women, which is something that we all agree is sorely lacking in America’s mindset and our own community. This, after all, is the beauty of ownership – you get to dictate what your company puts out. But that is assuming you have not just an ownership stake but majority or controlling ownership. We were told this is Oprah’s Network so she must own it all right? Well, not exactly. Unfortunately, this is where our lack of financial literacy at times gets us in trouble. Technically, I own Disney but then again so do a lot of other owners of Disney shares. My say so in the direction of Disney is equal to that of my ownership stake. This leads me into the illusion of OWN.

Let me point out a few things. The first and probably most important thing is that this is a partnership between Oprah & Discovery, a 50/50 partnership at that. Discovery ponied up the $200 million to kick-start the infrastructure for the network, which was previously Discovery Health, so unless the big O finds a way to gain another percentage point in ownership, she will not have absolute control of the network without first having to check with her partner. Discovery will have equal say so in programming and all other things as it pertains to the OWN network. The appointing of an African American woman CEO might have been more symbolic for appearance sake than anything else. Not saying this is the case but with the CEO being the most public figure after Oprah herself, if one wanted to keep up the notion that this is indeed “Oprah’s Network” then this is a good move. See Sun Tzu’s Art of War.

We see similar cases of strong and silent European American influence over perceived African American controlled media. Like BET, who unknown to most of us until the sale had a large shareholder in Liberty Media who held a 33% stake in BET giving it quite a large say so in the direction of the company. Another African American perceived owned outlet is TVOne. It too is not majority owned by Radio One but a partnership with Comcast. In this instance it is highly likely that Radio One is actually a minority owner (given its financial state – market value of Radio One is $65 million versus Comcast $63 billion) and Comcast the majority.

Oprah’s company ironically could be one of very few African America’s businesses that creates voluminous amounts of capital flight out of the European & Asian America groups into African America. In the way that Arab & Asian stores create capital flight out of our neighborhoods into their own by the stores they own in our community. Far more money is going out of African America than coming, even with Oprah. On a more macro level capital flight is currently happening from the European Diaspora into the Asian Diaspora (primarily China & India). These same principles apply here on the micro level within the country community to community.

My concerns about OWN are a bit more long-term. Is this network sustainable into another generation after Oprah passes?African America passes few generational assets along. None will be bigger than Oprah’s estate at the moment. Her estate could mean major windfalls for African Diaspora institutions here in the U.S., Africa and the Caribbean, which is a circulation of our global dollar – something we are sorely lacking. But again, is there a market for OWN or Harpo Productions without Oprah herself as the primary asset?

On a social level, it is hard to put much of any social value on the network for African America or African American women. Notice I said the network not Oprah. There is only one thing that European American controlled corporations like more than profits and that is power. Companies have been known to take losses on products just to control the market share of a product and drive competitors out of the space. John Rockefeller was infamous for this in maintaining the oil inventory under his control in early 20th century and in more modern times we’ve seen DeBeers use this same ploy to control 85% of the world’s diamonds.

Power to control the social capital of the society in this case is no different. In order to do so they must maintain the status quo of where an African American woman’s value is in the society. This despite African American women controlling $0.85 of every $1.00 in African America’s $913 billion buying power pie, the second largest buying power of any ancestral diaspora in the U.S. trailing only that of European America (although Latino America is on the verge of surpassing us). The danger of allowing African American women to gather social capital is that African American women are more than willing to fight for the survival of the African Diaspora than many in society would like to give them credit for. They have and continue to fill the void of African American men being swept away by the system through abnormally high death rates, incarceration, and poor education. Thus they provide the “doggy paddle in an ocean” for survival of African America as we continue to try and right our ship. Dr. John Henrik Clarke said it best “Powerful people cannot afford to educate the people that they oppress, because once you are truly educated, you will not ask for power. You will take it.” This is the crux of social capital and thus, with African American women controlling the economics of African America they too must be kept in their place for they pose a threat to those who control the society. If you control the society you control the economics and politics of it as well. One of the most powerful parts of social capital is a positive view of images of oneself and because of this we must realize why Oprah potentially does not have majority control of her own network.

But there is hope. This is the beauty of the stock market. If we want to influence the programming on OWN then buy shares of Discovery Communications, Inc. (Ticker Symbol:DISCA) and establish an African American & Diaspora ownership block. You would not only have influence over OWN but of all of Discovery’s assets. In the past I’ve made this same suggestion for buying Disney shares, as they are the owner of ESPN, which makes it revenue primarily from sports where the labor is predominantly African-American. An owner’s gripe that is invested in the company goes a lot further than just a gripe from the crowd.

Follow the money and power. The decisions, people, and institutions tend to explain the reality of what actually is rather than the illusion of what is presented.

Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & CEO of Sechen Imara Solutions, LLC. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as a contributing author for a number of African American media outlets.

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STOP: African Americans should NOT be maxing out their 401(k)

“At the bottom of education, at the bottom of politics, even at the bottom of religion, there must be for our race economic independence. “ – Booker T. Washington

If two people are running a race and one has a head start can the person behind run at the same speed as the one in front and catch up? Obviously they cannot. The African America median net worth is shown to be dead last in a 2004 report by the UCLA Center for Asian American Studies out of the four major ancestral groups studied. The current order shows Asian America 1st with a median net worth of $144,000 followed in 2nd by European America with $137,200 then in 3rd Latino America with $19,300 and bringing up the rear is African America at $12,000. Arab America was not reported but it is not hard to imagine they too are well ahead of us. It is indeed time we rethink our financial strategy.

So then why am I saying we should NOT be maxing out our 401(k)? Suze Orman told me it’s a great thing. Flag on the play. One of the major issues is we continue to try to answer African American questions with European American answers. You can’t do as another is doing when your situation is not the same as a group. Most of the so-called financial help that we see on TV is based in an Eurocentric view of American life and reality.

To max out your 401(k) would mean to contribute $16,500 pre-tax income per year or $1,375 per month into it. We currently contribute at a median of approximately $175 dollars a month or $2,100 annually to our 401(k)’s as reported in the Ariel Capital Charles Schwab Black-White Investor Annual Survey. Its not hard to see why though when the median income for African America is approximately $32,500 (Asian & European America stand at $65,500 and $54,500 respectively) according to the latest U.S. Census Bureau data so the likelihood that we would be able to reach that plateau without putting our families into poverty ($22,000 is the poverty income level for a family of 4) is as likely as a year without a rap beef given that you’d be taking the median taxable income down to $16,000 by contributing the max. I don’t know many places in America you can make it on $16,000 a year. Unfortunately as noted in the census as well 25% of African America is below the poverty line.

Let’s make sure we understand though what the 401(k) as a vehicle is built to do and what it does. The major contention with the 401(k) is that its primary investment vehicle is mutual funds. Per Investopedia a mutual fund is “An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.” These funds are “actively” managed funds. That is there is a manager who buys and trades actively trying to beat the market. They of course then past that expense on to you. Usually you can find a mutual funds management cost as the expense ratio. Unfortunately, as Motley Fool points out in its mutual fund study “more than 80% of mutual funds underperform the stock market’s average returns.” The other problem with mutual fund for African America is that it does not equate to direct ownership of any company. In a self-directed Roth IRA you have direct control of where that money is going. So you can buy Google stock directly or you can place it in Index Funds, which have historically outperformed mutual funds because they are not actively managed and so have less cost built into them leaving more money in your pocket for the long-term.

So what SHOULD we be doing as African Americans?

1)    Build a six to nine month emergency fund. An emergency fund for African-Americans is a tricky dynamic because any money we hold in cash is capital that is earning very little and could be used in building long-term wealth. However, we are also more likely to suffer job loss, hospital visits with no insurance, helping family members, and other unforeseen needs so how one manages their cash (it is king after all) balances in short-term and long-term investments might be the most vital element to wealth creation.

2)    Try to max out your Roth IRA contribution (max $5,000 per year), which will give you control of where the funds are invested and can place them in less costly investment products. If you do no more than put them in index funds, which as stated have historically had better returns than mutual funds and also cost you less. Roth IRA’s also have tax-free earnings, which means when you have to take the money out at retirement in 30 plus years you won’t have to pay any taxes on it. And as the cost of living rises you will need dramatically more dollars tomorrow than you do today for the same standard of living. Because I believe we need more equity ownership though I’d suggest no more than 50% of your Roth IRA be in index funds. The majority should be in individual stocks and bonds.

3)    Next if your company matches 401(k) contributions then put in the percentage they will match and not a penny more. Its free money and so there is no reason to pass it up. At that point you want to treat the money in the most conservative manner possible. Remember if your company is giving let’s say $0.50 for every $1.00 you put in you’ve already made a gain of 50%! At that point there is no need to get cute and become greedy with an aggressive mutual fund that as we see is almost guaranteed to lose money. Or as I tell former clients if you walk into a casino and they give you free money. Put it in a bag and walk right back out (and say thank you of course).  That is to say get the return from your company matching and then put it in a safe product. Don’t gamble the free money away in high-risk mutual funds.

4)    All monies after that should be going into either starting a business of your own or an individual (or joint) brokerage account where you will buy and trade stocks, bonds, and other investment vehicles. This by far should be your largest account as it is the account that can give you the most direct ownership of companies through direct ownership of their stocks (equity) and bonds (debt) of companies with unlimited contributions.

This is a very basic game plan to address wealth creation. Wealth creation in of itself is a simple and complex creature. But these basic steps can help you and your families get started off on the right path. Recognizing where we are in the game and that is dramatically behind in the ownership category we cannot afford to put money into investment vehicles that do not give us any. Knowing is half the battle to quote a GI Joe. Now go out there a bit more armed to build for future generations.

Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & CEO of Sechen Imara Solutions, LLC. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as writing articles for other African American media outlets.

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Land Ownership: African America’s 40 Acres Crisis

“He felt his poverty; without a cent, without a home, without land, tools, or savings, he had entered into a competition with rich, landed, skilled neighbors. To be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships.” – W.E.B. DuBois (Souls of Black Folks)

The United States as a whole is comprised of 2.3 billion acres of land.  As the Civil War came to a close in 1865 it was General Sherman who issued Special Field Order No. 15 that would establish the 40 acres & a mule so that former slaves could establish family farms. With 4 million African Americans who were now free that would equate to approximately 160 million acres (or 7% of America’s land) in African American control. Unfortunately with the assassination of Abraham Lincoln this order would find no support by new president Andrew Johnson. The 10,000 African American former slaves who had received 400,000 acres would see this land stripped and returned to its former European American owners courtesy of the Johnson administration. This would have profound social, economic, and political (SEP) implications for African America going forward for generations to come, and be as close to reparations as African America would ever see from the U.S. Government.

In the early part of the 20th century as African America looked to establish itself,  the reality was and is that African America like all groups in America and in the world are in a competition for resources for the survival of its very existence and it is of no incentive for another group to make this competition easier for its opponent. In other words why would McDonald’s ever give Burger King a prime property rather than use it for its own development? Or America give Canada control over valuable resources it controls? This applies to ethnic Diasporas (African, Arabic, Asian, European, & Latino) as well. Control of land is the foundation of SEP development. In capitalism that equates to land ownership. As African American continues to lose wealth, the primary cause could be argued that this is in large part because of the depletion of our land ownership.

Land is at the base for everything. It develops neighborhoods and communities. Neighborhoods are designed with great detail, such as who will live in it, and not just haphazardly put together as many assume.  A land developer already has done multiple SEP studies before they dig the first piece of dirt from the Earth. Who they want to attract to the development can be something as simple as making sure there is a specific religious building in the development or pricing the housing at a high-end average like $5 million per home or $1 million per lot, or placing certain commercial developments in proximity such as a Whole Foods or Wal-Mart. You certainly know that will narrow you down to a certain demographic of people who most likely share similar values and the vice versa is true as well. On the lower income end when one builds government funded housing, which is typically owned by someone wealthy, they receive subsidized payments from the government for use of said property to house low-income tenants which brings a completely different demographic but again all well studied and placed depending on land values. Low-income developments tend to get the brunt of locations near undesirable locations in a town or city while more affluent will have access to city services more abundant per capita.

In any economic development you need land. Even a web-based business like Amazon has a facility or economic interest in land somewhere for production of its Kindle and other products. When a store chooses where to build a new business it searches for enough land that a lot of times they lease (which provides its owner long term cash flow) for its business’s building capacity to be met. It also seeks land around a demographic that it caters too. This is why luxury brands are located on Rodeo Drive and not in South Central. The location is catering to a certain demographic and hoping to discourage other demographics. My former professor happened to be in possession of a piece of property that a certain do-it-yourself orange box company wanted to build a store on. They leased land on a multi-decade lease and once the lease is up if they leave – he keeps the land, the building, and all the cash generated by the lease along the way. Its more likely they will continue to lease the property from him and he will pass the land and its cash flow onto his heirs.

Land also allows a group to control the political makeup of a community in terms of how political lines are drawn for voting districts and how schools are zoned in terms of funding. This is why there is often an uproar when lines are being redrawn and suc,h because by moving certain lines -be it schools or voting-it can ensure certain economic development will come your way in the future, be it through the development of neighborhoods or commercial. As a land developer you know you can get people to pay a premium if you build a neighborhood in a higher rated school district.

Historically control of land provided African America after reconstruction the opportunity to create and control the SEP of their communities as it was with European Americans when they first came to America, and all other cultural groups who followed in immigrating to the U.S. and built communities united by similar cultural values. Buying land they were able to build communities like Black Wall St. in Tulsa, OK and Rosewood in Florida. In these communities the strong social fabric of families, control of the curriculum in the schools, and faculty who could relate to the students helped provide a social setting that led to a strong economic development. This included a number of African American owned banks, grocery stores, doctors, and the only African American founded and owned automobile manufacturing company in Greenfield, OH named C.R. Patterson Automobile Company. These communities because they were controlled and owned by us (as with any group) hired predominantly people from its community and therefore it kept employment rates high and crime rates virtually non-existent. Unfortunately these communities had not been given enough time to develop proper politicalcapitalthat would allow them to defend themselves and many communities would find themselves burned to the ground with the complicit relationship that neighboring European American communities had with the mixing culture of the police and Klansmen (which is why the police distrust in large part continues today). With no way to protect themselves in many cases all out massacres would take place and these communities would be left with no way to rebuild as they appealed to governing bodies made of the very neighbors who burned them. Today we lose our land through gentrification of our neighborhoods (see Harlem), poor estate planning (social), unpaid taxes or rising taxes on the elderly on fixed incomes who can’t afford to keep up with them as developers use their political capital to muscle into an area, and simply just selling land to those outside of our community instead of circulating it.

So what is the state of our land ownership today? According to Federation of Southern Cooperatives Land Report the early 20thcentury was our zenith in terms of land ownership at almost 20 million acres –  a far cry from the 160 million acres we would have had if Special Field Order No 15 had been honored. However, today that number is even more tragic at roughly 7.7 million acres (or 0.0033% of America’s land) spread across the ownership of 68,000 African American landowners. To put this in perspective Land Report Magazine who tracks the top 100 landowners in the United States who are all European American – their top 5 landowners own 7.8 million acres combined. Ted Turner owning 2 million acres by himself or roughly 25% of African America’s total land holdings.

Another tidbit to note comes from my visit to Timberland Investment World Summit in 2009. I was the only African American present at this 3-day conference in which some of the heaviest hitters in terms of financial institutions were present along with timber companies looking to invest in land for the use of timber. It just so happened that during the recession timber was the only asset class that did not decline. Why? Because as one presenter said “As long as the sun is shining trees will grow and so will their value.” The minimum investment amount a family or business had to invest to have an institution manage their timber investment – $50 million (which was down from its $100 million minimum thanks to the recession and banks need for cash).

More importantly the question has to be what now? There is no recourse for our 40 acres and African American farmers continue to fight today for past discrimination with no resolve even under the Obama administration. But the fight is costly and many of the older farmers are dying out. I dare say the U.S. Government is simply waiting them out. My belief is with $800 billion (said to reach $1.1 Trillion by 2012) in buying power the largest amount by far of any minority group in America we must begin take this fight in our own hands with our own dollars as Native Americans have begun to do as featured in “Tired of Waiting, Native Americans Buy Back Their Old Land”. But it must become a priority and a conscious effort. Our HBCUs, primarily the Agriculture HBCUs and African American financial institutions must begin to hold more seminars that help us understand the process of the importance of buying land and the obstacles that go along with it which are much different than buying a home.

I didn’t even begin to mention land as the very base of agriculture (or this would end up being a doctoral thesis) which supplies the quality foods a community eats, the ethanol that is the new rage in alternative fuel, and the land which has valued minerals beneath it and water running through it which just happens to be the very base of life and existence. Land. Yea it’s kind of a big deal or as my grandmother always told me “They’re not making any more of it so you better hold what you have and try to get more of it.” A wise woman she indeed is.

Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & CEO of Sechen Imara Solutions, LLC. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as writing articles for other African American media outlets.