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HACE 2100: Final Review
Front end ratio |
-PITI/gross income
-needs to be less than 25-28% of gross income (monthly) |
Back end ratio |
-PITI+ other debts/gross income
-should be less than 33-36% of gross income |
Housing bubble |
-occurs when the market price of the asset is substantially higher than the fundamental economic value
-expectations are for housing prices to continually rise but then demand levels off and bursts bubble |
Housing affordability index |
-median family income/ annual income needed to buy median priced home
-if over 100, median income more than covers loan payments
-if under 100, median income covers less than needed
|
Current housing affordability index |
133.6 |
Solvency ratio |
-shows how much of a decline in the market value of your assets a family can handle before becoming insolvent
-SR= net worth/total assets
-desirable: >.5 |
Liquidity ratio |
shows how much of their one year liabilities they could pay with their liquid assets
-LR=liquid assets/total current liabilities
-total current liabilities includes one year's worth of mortgage and other loan payments
-divide by .083= # of months
-desirable is .5/6months or better
|
Savings ratio |
-shows level of preparedness for the future
-SR=cash surplus (or amount saved)/annual net income
-gross income-taxes/SS= net income
-include stocks and retirement funds in cash surplus***********
-desirable is 5% or better
|
Debt Service Ratio |
-shows burden of family's debt relative to income
-DSR=annual loan payments/annual gross income
-the lower the better
-.35 or less |
Indemnity plan |
-typically 80/20 coinsurance
-amount paid based on UCR
-most flexible type of plan
-"cadillac policy", "plan of the past"
-expensive for provider
-accepted by all doctors, do not need referral to specialist |
Fee-for-service health plans |
indemnity plan |
Managed care health plans |
-HMO
-PPO
-POS |
HMO |
health maintenance organization
-low co-pay
-low premium
-either group or IPA |
Group HMO |
-from a central location (larger cities)
-cannot choose physician or personnel
-must be referred into specialist
Ex: Kaiser permanente |
IPA HMO |
individual practice association
-physicians practice from their own practices and hospitals that are affiliated with IPA
-physicians agree to participate and accept terms
-have some choice over physician and hospitals
|
PPO |
-use services of particular physicians and hospitals that agree to specific, set schedule of fees
-have a deductible
-copay and coinsurance
-network of doctors (and out of network payments) |
POS |
-point of service plan
-hybrid between PPO and HMO
-allows members to go outside of HMO network and reimburses a certain percentage |
Consumer driven health plans |
-HDHP and HSA |
HDHP and HSA |
-high deductible
-low premiums
-high stop loss
-"plan of the future"
-paired with health savings account |
Goals of Affordable Health Care Act |
-cover >94% of population
-bar insurance companies from discriminating
-tax credits and cost sharing for insured lower and middle income households |
Distribution of health care purchases |
-1/10 buy insurance themselves
-1/10 may not have it at all
-5/10 get it from employer
-3/10 medicaid |
Number of births |
-actual number of live births to any individual in a population
-total number of children born
-no denominator |
Crude birth rate |
-number of births per 1000 population
-includes post-menopausal women and men
-used as economic indicator between countries |
General fertility rate |
-number of births per 1000 women aged 15-44
-if you divide by 1000 and multiply by 100, it tells us what percentage had a birth
-in baby boom=11.83%, now=6.32% |
Age specific fertility rate |
-number of births by women of a specific age in relation to all women in that age range
-25-29 is the highest age group (used to be 20-24 but not people postpone)
-huge increase in 35-39 and 30-34
-decrease in teen pregnancy recently
|
Total fertility rate |
-average number of children that would be born to women by the time she ended childbearing
-synthetic rate
-shows us on the scale of replacement rate |
Replacement rate |
2.1 children per woman |
Fertility trends |
-1930's: all time low
-1950's and 60's: baby boom
-1970-1980: baby bust
-1990: baby boomlet
-decrease since 2008 |
Causes of long term fertility trends |
-increase in costs of having and raising children (inflation, increase in child quality, opportunity costs)
-decrease in economic benefits of children (don't work in fields anymore)
--decrease in the costs of avoiding having children (bc, legalization of abortion, secularization)
-social acceptance of being child-less
|
Price effect |
"an increase in the price of children will decrease the number of children demanded" |
Income effect |
"a rise in one's income will increase the number of children demanded" |
Period effect |
a change in fertility of all age groups (all cohorts) in a similar manner that results from something happening at that historical time
-influences taste and preferences |
Cohort effect |
a change in fertility of a group born at the same time that results from earlier shared experiences |
Relative income effect |
-most likely explanation for cyclical changes
-income relative to expectations
-relative to parents' income and expectations of future income |
Percent childless since 1976 |
risen across all age groups |
Foreclosures |
-occurs when homeowners with mortgages default on their loans and lenders choose to exercise their collateral claim on the home
-currently 1 in every 1136 homes is foreclosed in US
-GA is 1 in 841
-top state is florida
|
Underwater on mortgage |
-house is worth less than mortgage you are paying on it
-negative equity position
-about 2.4 mill in US |
Mortgage interest rates 1963 to 2005 |
1963: 6%
1980's: 15%
2005: 6% |
Housing options |
-single family homes
-cooperatives
-condominiums
-apartments |
Single family houses |
-a housing unit detached from others
- own the land, building, and all improvement |
Advantages of single family homes |
-resale value generally the highest
-investment option
-causes you to build equity
-some tax benefits
-you can modify and improve as you wish
-feelings of permanence and stability
|
Disadvantages of single family homes |
maintenance time and costs
-repair costs
-resale hassles
-more expensive |
Cooperatives |
-democratically governed non-profit corporation in which the residents, as shareholders, own stock representative of the value of their unit
|
Advantages of cooperatives |
low maintenance
-more amenities
-higher security |
Disadvantages of a cooperative |
-only own a share
-limited equity
-tax benefits related to ownership
-difficulty in obtaining mortgage
-rent increases to cover maintenance costs of empty units
|
Condominiums |
-residents have sole ownership of the living space but joint ownership of the land and common areas |
Advantages of condos |
-less exterior maintenance and repairs
-often more reasonably priced
-may have higher security
-more amenities |
Disadvantages of condos |
-responsibility for condo association fee
-less privacy
-hard to sell
-only own from interior walls inward |
Apartments |
-multi-unit developments
-rental properties |
Advantages of an apartment |
-mobility
-no liability for mortgage
-no down payment
-no responsibilities for repairs and maintenance
-no property taxes
-no responsibility for vacancies |
Disadvantages of apartments |
-limited remodeling
-limited lifestyle choices
-less privacy |