MONEY real estate

The Pre-Recession Housing Problem That’s About to Slam Homeowners

aerial view of subdivision
David Sucsy

Millions of homeowners face major payment increases when their HELOCs reset in 2015-2016. Here are your options if you face massive HELOC payments.

The home equity line of credit (HELOC) had been around for many years before it became a hugely popular financial product in the early 2000s. When the financial crisis happened in 2008, drastically lower home valuations put a stop to the HELOC boom, and today we see far fewer being issued by lending institutions. However, millions of homeowners still have this type of contract and will face major problems when their HELOCs reach a 10-year reset point in 2015-2016.

The Office of the Comptroller of Currency (OCC) defines a HELOC as “a dwelling-secured line of credit that generally provides a draw period followed by a repayment period.” If you don’t know what these terms mean, then it’s time to have a fresh look at your contract. As a debt relief consultant who includes second mortgage and HELOC settlement negotiations in my practice, I routinely encounter clients who are worried about their homes having negative equity, but seem completely unaware of their looming reset problem.

There are numerous types of HELOC agreements, but one common variation is the 25-year contract, with a 10-year borrowing period and a 15-year repayment period. Let’s say you obtained a HELOC in 2005 that was structured this way, and borrowed $50,000 on your house to pay off other bills, do some home improvements, and so on. This whole time you’ve been paying interest-only at 6%, which is high compared to today’s rates, but since you are only paying interest on the principal balance, the payment is still manageable at only $250 per month.

What will happen at the end of your 10-year borrowing period? The line-of-credit feature of the HELOC will expire and the payments must then increase during the repayment period to cover repayment of the principal balance (plus ongoing interest). At a 6% annual percentage rate, the $250 per month payment will suddenly spike to $492 and remain at that level until the $50,000 is paid off (assuming a fixed interest rate).

This of course illustrates a 15-year repayment period, which is already greatly compressed compared to a traditional 30-year mortgage. Worse, some HELOC products were set up for a total contract duration of 15 years, meaning a 10-year borrowing period followed by only a 5-year repayment period. With such a short period of time to repay principal, the monthly payment in our example would jump to $967 after reset, almost four times the interest-only level. Talk about payment shock!

Still other types of HELOC contracts carry no repayment period at all. They were set up for a borrowing period of 5, 7 or 10 years, and at the end of that period the entire principal amount falls due in the form of a single lump-sum balloon payment. Using our same example, at the end of 10 years, instead of paying $250/month, you now owe $50,000 in a single payment.

Such financial products were built on the crucial assumption that real estate values would continue to rise, which would allow qualified borrowers to refinance to more favorable terms within a few years anyway. Essentially, these products were designed with the expectation that borrowers would extinguish the loans before reaching the point of reset, especially if there was a balloon payment rather than a reasonable repayment period.

Fast forward a few years, and the steep plunge in real estate values has left countless homeowners in a position where traditional refinancing is simply not available, thus exposing them to future payment shock when their HELOCs reset in 2015 or beyond. Since so many HELOCs were issued in 2004 through 2008 compared to prior years, the “HELOC reset” problem has the potential to affect America’s housing recovery for years to come.

According to the OCC, in 2012 approximately $11 billion in HELOC loans reached reset point, with “reset” defined as the point where the borrowing period ended and the repayment period began. By 2014, that figure had grown to $29 billion. It will nearly double again to $53 billion in 2015 and could exceed $111 billion by 2018. Between 2014 and 2017, approximately 58% of all HELOC balances are due to start amortizing.

HELOC-OCC

In the next few years millions of homeowners will face the HELOC reset problem and resulting payment shock. Many will have the ability to accept the higher payment after reset, or they will refinance to a new mortgage with more favorable terms. Others may already be planning to sell the home, either via traditional or short sale. But there will still be a large pool of homeowners who find themselves facing a true financial dilemma — a contractual trap based on a product designed years ago in a different banking era, before the “new normal” of underwater property values and strict loan-to-value ratios.

Options If Your HELOC Loan Is Due to Reset in 2015 or 2016

With all that in mind, let’s focus on potential solutions for homeowners facing HELOC reset. First, if you are not sure whether this is happening with your loan, please take a close look at your agreement document. Look for the dates pertaining to the Borrowing Period and the Repayment Period, bearing in mind your contract might use slightly different terminology. If you took a loan in 2005, for example, it’s likely the reset will happen in 2015.

Once you have confirmed the date on which your HELOC will reset, the next step is to determine the new payment schedule including principal. If you have not already received a notice from your lender with this information (many lenders are sending these out well in advance to warn consumers about the pending payment increase), then you should be able to determine the new payment from the contract terms and the help of a loan or mortgage calculator. Or, perhaps much easier, you can simply call your lender and ask them what the new payment will be after reset.

1. Absorb the New Payment

Using our first example above, some household budgets can tolerate a payment spike from $250 to $492 per month. If you can fund the new payment and otherwise don’t have any refinancing options available to you, then why not give the new payment a try for 12 months? See how you do before considering an aggressive solution that may entail serious credit damage.

2. A Traditional Refinance

Some homeowners facing HELOC reset will be able to obtain new mortgage financing that solves the problem. By combining the original first mortgage and the HELOC balance into a new single mortgage, all risk associated with the HELOC reset is extinguished with closing on the new note.

Of course, many homeowners will be blocked from this solution, based on three key factors:

  • Lenders require a loan-to-value ratio of 75-80%, so the property has to be worth enough at market value to offset the two combined notes and still leave 20-25% equity as a cushion. Many homes are still upside-down in value, worth less than the two note balances combined, or perhaps worth less than the first mortgage alone.
  • Your credit score has to be in excellent shape to qualify for the best rates. (You can see two of your credit scores for free on Credit.com.)
  • Your income has to support the new revised mortgage payment, based on strict debt-to-income ratio formulas.

Unless all three conditions are in place, a traditional refinance solution won’t be available to you.

3. Modify Your First Mortgage Under HAMP, or Second/HELOC Under 2MP

Although it was announced with some press attention a few years ago, it’s rare to see the government’s Second Lien Modification Program (2MP) discussed in the context of the HELOC reset problem. Government sponsored programs like the Home Affordable Mortgage Program or Home Affordable Refinance Program (HAMP and HARP) targeted mainly first mortgages, in an effort to stabilize payments so people could stay in their homes or refinance away from toxic mortgages.

While HAMP and HARP have helped millions of homeowners over the past half-decade, the 2MP has been something of a mystery. It’s common to hear someone report having successfully modified a first mortgage via the HAMP solution. Yet reports of successful second lien modifications under 2MP are quite rare. If HAMP modifications have proceeded like a gushing pipeline, 2MP modifications are more like a tiny trickle.

According to the Department of Housing & Urban Development (HUD) website, you may be eligible for 2MP if your first mortgage was modified under HAMP and you have not missed three consecutive monthly payments on your HAMP modification. What this should mean, at least in theory, is that once you have finished making your three trial payments under an approved HAMP modification, then your second lien should be reviewed for a corresponding modification.

Check with your lender directly to see if they are participating in the Second Lien Modification Program. I would also encourage readers looking for more information on the government-sponsored programs like HAMP, HARP and 2MP to call a HUD agency counselor at 1-888-995-HOPE (4673). There is no cost to you, and the HUD counselor can help determine eligibility for one of these programs.

4. Modify Your First Mortgage, Then Apply the Savings to the Payment Spike

A successful loan modification on your first mortgage can result in significant monthly savings. If you modified under HAMP but your second lien did not qualify for 2MP, or you did a non-HAMP modification directly with your mortgage lender (also called an in-house or a private modification), then your first mortgage payment should now be lower than it was previously.

In some cases, the difference may be sufficient to offset some or most of the expected payment spike associated with a pending HELOC reset. Your budget will naturally determine this. If you pursued the modification due to financial hardship, then it may be that even with a lower first mortgage payment you still can’t handle the increased HELOC payment after reset. But others will find that the savings achieved through the first mortgage modification provides enough relief that the payment increase on the HELOC will no longer cause such a severe budget problem.

5. A Loan Modification Directly With the HELOC Lender

There are many situations where none of the above solutions will apply. What if you can’t absorb the new payment after reset or you have a balloon payment coming up? What if traditional refinancing is not available to you because the house doesn’t meet the required loan-to-value ratio? What if none of the government programs apply? What if modifying your first mortgage won’t or can’t work, now what?

Lenders do not want a default to occur. A logical step would be to determine precisely what in-house programs your creditor is willing to offer and see if any of these options look realistic to you. Financial institutions have been issued a strongly worded guidance by the OCC on the subject of HELOC reset, and they want servicers to work with customers to salvage these loans. So it makes sense to find out what the servicer is offering for modified terms and then compare to the original payment spike.

To get anywhere with a loan modification application, be prepared to submit two years of tax returns, bank statements, pay stubs and a personal financial statement. Be patient and polite. Do your own math before you approach the servicer for a modification. Know what you want in terms of a payment and loan duration, including possible principal deferment or even principal reduction, before you enter the negotiation. You may or may not get exactly what you want, but it pays to know your own figures and to be able to argue your case effectively.

6. Strip the Lien via Chapter 13 Bankruptcy

Bankruptcy is an aggressive solution that would only apply in specific circumstances. I mention Chapter 13 bankruptcy specifically because it has a unique feature that allows a second lien to be stripped from a property. This can only happen if the property appraises for less than the balance owed on the first mortgage, and of course with the court’s approval. If the lien strip is approved, the HELOC or second mortgage balance then becomes an unsecured debt co-equal with other unsecured debts like credit cards, medical bills and so on. The debt is then discharged after the case is completed, with five years being the typical Chapter 13 case duration. The advantage of this solution is that it yields a one-mortgage property with no further threat of foreclosure or potential litigation. It’s crucial to get the advice of a good bankruptcy attorney if your intention is a lien strip via Chapter 13.

7. Lump-Sum Settlement

Settlement is also an aggressive strategy that comes with credit damage and only applies in specific circumstances. There are tax consequences of settlement, in the form of a 1099-C for the forgiven balance, taxable income unless an exemption applies.

During the peak years of the real estate crisis many homes plummeted in value to a level below the balance owed on the first mortgage alone. That left second lien holders in a position without collateral, i.e., “underwater.” Under such conditions, many homeowners were able to settle their HELOCs for 10-20% of the balance after having defaulted for an extended period.

While HELOC settlements are still happening in 2015, conditions have changed considerably. We are now in an era of rising property values, and creditors are more reluctant to absorb a loss when the property underwater today may be “in the money” again before too long.

As a debt consultant, I find I’m recommending the settlement strategy for HELOCs much more selectively than I did in prior years. It does still work quite effectively in many situations, but it’s important to have a clear view of the risks before attempting a hardball negotiation strategy like debt settlement on a second mortgage or HELOC.

The bottom line is there is no single best debt relief solution for the problem of HELOC reset. I’ve presented seven potential strategies above, but each of those will only apply under specific financial conditions. Aside from the sister program to HAMP, the 2MP for second liens, there are no “Obama programs” for HELOC relief, and no bank sponsored programs to enroll in. Based on hundreds of consultations with consumers struggling with HELOC issues, my experience has been that creditors are taking a battlefield management approach, with the goal of stemming further losses. So beware of companies or services claiming they can have your lien extinguished, or have your HELOC note declared invalid. The growing HELOC reset problem presents a new opportunity for debt relief scammers to pitch bogus programs that promise to “make your HELOC go away.” Buyer beware!

More from Credit.com

This article originally appeared on Credit.com.

MONEY Wealth

These Are the World’s Most Expensive Cities

No, New York isn't among the top 10. Nor is Tokyo. Hint about the most expensive city: Don't take any chewing gum when you visit.

MONEY winter

Sick of Clearing the Snow? Failure to Do So Could Cost Even More

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Steven Senne/ASSOCIATED PRESS

It's been a stormy winter for much of the country, so it's understandable if you're tired of clearing snow off your car and sidewalk. But there's more reason than ever to handle these chores like a good citizen.

Earlier this winter—before we knew just how bad of a winter it would be—we ran a post about why it is so essential to shovel your walkway after it snows. The reasons start with getting hit with local fines for failing to clear snow and ice, and they end with the possibility of being sued for hundreds of thousands of dollars if someone falls and gets injured on your property.

In Boston, which is on the verge of crossing the mark for having snowiest winter on record, Mayor Martin Walsh plans on increasing the fine fivefold for property owners who don’t clear their sidewalks or snow and ice, or who push snow into the streets. The highest possible fine could be $1,500, up from the current maximum of $300, if Walsh can convince the city council to get on board with the idea at a meeting on Wednesday, the Boston Globe reported. If property owners don’t pay the fines, they would simply be added to the owner’s property tax bills.

“Failing to remove snow from a sidewalk puts lives at danger. It’s a problem for every pedestrian, but it is especially difficult for our children, for the disabled, and for the elderly to face deep, unshoveled sidewalks, and be forced to walk in the road,” Walsh said in a press release. “I urge the City Council and state officials to move this legislation which grants us the authority to deter these violations, hold accountable those who are guilty, and recoup some of the added costs that these violations create.”

Getting sidewalks cleared of snow and ice has also proven to be a problem in many parts of New York City, especially in neighborhoods overrun with foreclosed properties and vacant buildings, where it’s sometimes impossible to track down who, if anyone, is the owner. According to a New York Times analysis, 331 tickets for failure to clear snow off sidewalks have been issued to just 10 notorious properties in the Bronx. The Bronx has been hit with the most fines per capita (more than 10,000 violations), though Brooklyn and Queens properties have received more tickets overall, with 14,000 and 13,000, respectively.

Meanwhile, in places like northeast Ohio, unshoveled sidewalks and walkways are causing a host of problems, including disputes among neighbors and gripes from elderly residents about the unfairness of fines. In some cases, the United States Postal Service has even stopped delivering the mail to residences where sidewalks, walkways, or streets are clogged with snow and ice.

Your obligation to clear snow doesn’t stop at the edge of your property, however. Laws have been passed in New Hampshire, New Jersey, and Connecticut, among other places, requiring drivers to clear snow from cars before heading out onto roads. In the latter, drivers face fines up to $1,000 if snow or ice flies off your vehicle and causes damage to another car or motorist, but in most cases, the fine would be a flat $75.

There’s also a bill currently under consideration in Pennsylvania that would allow police to pull over cars and trucks if the vehicle is covered in ice or snow that “may pose a threat to persons or property,” regardless of whether or not any damage has been caused. If the bill becomes law, drivers would face fines of $25 to $75 for not clearing snow and ice from vehicles. That’s cheap compared to Europe, where failure to clear snow from cars in the Alps could result in a fine of €450, or around $500.

TIME

Here’s How Much the Home of the Next President Is Worth

We don’t know who will replace Barack Obama in the White House, but we do know what kind of home he or she will be leaving behind. We’ve charted them below, using data from real estate sales tracker Zillow. Not surprisingly, the only former Fortune 500 executive on the list, Carly Fiorina, tops it with her $6.7 million mansion in Virginia.

Next up is the presumptive candidate from Chappaqua, N.Y., Hillary Clinton, with her $5.6 million Washington, D.C. home –a long way from Hope but just a hair above the former Arkansas governor turned commentator Mike Huckabee, whose Santa Rosa Beach house in Florida is valued at $5.5 million. Scott Walker, the Wisconsin governor, lives in the least expensive home among those whose information is available on Zillow.

To compare the homesteads of presidential timber, click a column header in the chart below to sort by category. Scroll right to see them all.

 

The median home of the more than a dozen likeliest presidential candidates is worth $1.5 million. That’s more than eight times the value of the median American home, worth $178,500 today, according to Zillow. (The average candidate home is worth $2.3 million.) But it’s still a long way off from the address many have their eye on: 1600 Pennsylvania Ave. Zillow estimates the White House would be worth $385 million were it to ever go on the market.

Candidates’ homes have a way of becoming campaign fodder during presidential campaigns. John McCain was lampooned for being unable to say how many homes he owned in 2008. In 2012, Mitt Romney was mocked for building a car elevator in his La Jolla, Calif., residence. And this past June, Hillary Clinton drew guffaws when she said she and President Bill Clinton left the White House in 2000 “dead broke” and had to increase their earnings to “pay off the debts and get us houses.” As the 2016 campaign heats up, you’ll likely be hearing more about one or two of these homes.

This article has been updated to include Clinton’s residence in Washington, D.C.

Methodology

The listings above reflect only the candidates’ residences available in public records. Some own multiple homes. All estimated home values are from Zillow.

TIME real estate

These Are America’s Happiest (and Most Miserable) States

alaska-sled-dogs
Getty Images

The ranking illustrates how states perform in the five essential elements of well-being: purpose, social, financial, community, and physical

Alaska led the nation with the highest level of well-being of all states, supplanting North Dakota, which plummeted to 23rd place. West Virginia remains the state with the lowest well-being for the sixth consecutive year.

The 2014 Gallup-Healthways Well-Being Index measures the well-being of Americans in each state based on interviews conducted between January and December, 2014. This year’s index incorporated a range of metrics categorized into five essential elements of well-being: purpose, social, financial, community, and physical. Based on the well-being index, 24/7 Wall St. examined the states with the highest and lowest scores.

Click here to see the happiest states in America

Click here to see the most miserable states in America

While Gallup’s index is based in part on subjective survey measures, the respondents’ perceptions are often closely tied to outcomes. According to Dan Witters, research director of the Gallup-Healthways Well-Being Index, well-being is closely linked to economic indicators and societal outcomes, such as median household income and teen pregnancy rates.

Witters explained that the five essential elements of well-being are interwoven, and a high score in one category can lead to a high score in another. However, this was not guaranteed by any means. All of the 10 happiest states rated better than most in the purpose category, which measures how much residents like their day-to-day lives and how motivated they are to meet their goals. However, in other categories, such as the financial element of well-being, two of the top states overall fared worse than most states.

Physical health, which together with healthy behaviors, was part of the physical element of well-being this year, is an especially important factor contributing to happiness, according to Witters. In fact, examination of healthy behaviors and outcomes measured by government data suggest this is the case.
In states with high well-being scores, residents were less likely to smoke and more likely to exercise regularly. Residents in nine of the happiest states were more likely than most Americans to have an exercise routine of some kind. All but one of the states with the lowest well-being, on the other hand, had more physically inactive residents compared to the national average.

The states with the highest well-being also enjoyed the positive outcomes of healthy behaviors, including lower obesity rates and smaller incidences of other common health problems, while in general the opposite was true for the states with the lowest well-being. High cholesterol, high blood pressure, as well as heart disease-related deaths were all far more common in the states with the lowest well-being.

While money certainly does not buy happiness, financial well-being plays a significant role in happiness. All of the most miserable states had median household incomes far below the national median income of $52,250 in 2013. However, the median household income in only half of the happiest states exceeded the national median income.

The states with the happiest residents also had relatively low unemployment rates, and people reported relatively few days of poor mental health. The unemployment rates in all of the 10 happiest states was less than the national rate of 7.4% in 2013. And nine of these states reported fewer monthly poor mental health days than the national average.

A regional pattern is also evident. According to Witters, while the top and bottom states change regularly from one year to the next, they tend to be in similar parts of the country. Witters said states in New England, the Northern Plains and Mountain West regions, as well as Alaska and Hawaii, generally and regularly report very good well-being. Low well-being, on the other hand, is found “around the Bible Belt…the South and heading north up through the industrial midwest.” Witters described this as “a very consistent pattern.”

“The thing about those southern states,” he said, “that really hurts them is that they do a lousy job taking care of themselves.”

24/7 Wall St. reviewed all 50 U.S. states based on their scores in the Gallup-Healthways 2014 Well-Being Index. Gallup-Healthways calculated a national well-being score as well as one for each state based on interviews conducted between January 2 and December 30, 2014, with a random sample of 176,702 adults. As part of the rank, Gallup combined five separate essential elements of well-being. In addition to the index, 24/7 Wall St. considered data from the U.S. Census Bureau’s 2013 American Community Survey, including median household income, poverty rates, and adult educational attainment rates. From the Bureau of Labor Statistics, we reviewed annual state unemployment rates and median hours worked among, both from 2013. We also reviewed 2013 obesity and teen pregnancy rates from the Centers for Disease Control and Prevention. Incidence of heart disease in 2013 is from the Kaiser Family Foundation. The share of the population with low incomes and low access to healthy food comes from the Department of Agriculture’s Food Environment Atlas. Low access is defined as living more than one mile from a supermarket in an urban area or more than 10 miles from a supermarket in a rural area. We also considered state violent crime rates in 2013 from the FBI’s Uniform Crime Report Program. Lastly, we used 2012 regional price parity from the Bureau of Economic Analysis as a proxy for cost of living. All other data come from the United Health Foundation’s 2014 report “America’s Health Rankings”.

These are the happiest (and most miserable) states in America.

The Happiest States in America

10. Texas
> Poverty rate: 17.5% (13th highest)
> Unemployment rate: 6.3% (17th lowest)
> Obesity rate: 30.9% (15th highest)
> Poor mental health days (last 30 days): 3.2 (9th lowest)

Based on the Gallup-Healthways Well-Being Index, Texas residents had the 10th highest well-being in the nation. Texas residents were among the most likely to be content with their jobs and be motivated to achieve their goals, with the state ranking second in the purpose category, one of five elements of well-being in Gallup’s Index. Texans worked 36.3 hours per week in 2013, the most nationwide. This may reflect in part Texans’ motivation and workplace satisfaction. Texans were not especially healthy, however, with an obesity rate of nearly 31% in 2013 and relatively few residents reporting routine exercise. More than 22% of residents did not have health insurance in 2013, the worst rate nationwide, which may have made it more difficult for Texans than most Americans to get the medical care they need. Despite these poor physical health indicators, nearly 71% of adolescents in the state were vaccinated in 2013, one of the higher rates, and less than 16% of adults were smokers, one of the lower smoking rates reviewed.

ALSO READ: The Worst Paying Jobs for Women

9. New Mexico
> Poverty rate: 21.9% (2nd highest)
> Unemployment rate: 6.9% (24th highest)
> Obesity rate: 26.4% (13th lowest)
> Poor mental health days (last 30 days): 3.7 (24th lowest)

Unlike most states with the happiest residents, a typical household in New Mexico had relatively low income in 2013, earning a median of less than $44,000. The median national household income was $52,250 that year. New Mexico also had an exceptionally high poverty rate, at nearly 22% in 2013, the second highest nationwide. While many New Mexico residents struggled with financial burdens, they tended to be in relatively good physical health. For example, the obesity rate of 26.4% was among the lower rates in the nation. Residents reported relatively few cases of high blood pressure and high cholesterol as well, which likely contributed to a lower incidence of heart disease. There were 147 heart disease-related deaths per 100,000 people in 2013, the 10th lowest such rate in the country. On Gallup’s survey, New Mexicans rated their physical health and habits fifth best in the country.

8. Utah
> Poverty rate: 12.7% (14th lowest)
> Unemployment rate: 4.4% (4th lowest)
> Obesity rate: 24.1% (4th lowest)
> Poor mental health days (last 30 days): 3.5 (18th lowest)

Utah is one of only a few states where less than one-quarter of adults were obese in 2013. Residents were also the least likely in the nation to report high blood pressure and high cholesterol that year. Utah residents generally reported healthy behaviors, which likely helped contribute to the good health outcomes and the state’s high well-being. Utah adults were the least likely to be smokers, with only 10.3% reporting the habit in 2013. Traditionally low smoking rates may have helped Utah residents stay healthy and out of the hospital. Between 2010 and 2012, there were less than 146 cancer-related deaths per 100,000 people, the lowest rate nationwide. In addition to strong physical health, Utah residents also liked where they lived, felt safe, and reported having pride in their community — the state ranked seventh in the nation in Gallup’s community element of well-being. Like most states scoring well in this category, Utah’s violent crime rate of 209 incidents per 100,000 people in 2013 was among the lowest in the country.

7. Nebraska
> Poverty rate: 13.2% (17th lowest)
> Unemployment rate: 3.9% (3rd lowest)
> Obesity rate: 29.6% (24th highest)
> Poor mental health days (last 30 days): 3.0 (6th lowest)

With an unemployment rate of 3.9% in 2013, the third lowest nationwide, Nebraska residents had the benefit of a relatively strong job market. Nebraskans were also more likely than most Americans to feel content with their jobs, rating their day-to-day contentment and motivation to meet goals — part of the purpose element of well-being — the seventh best nationwide. Workers also reported having just three poor mental health days per month in 2013, the sixth-lowest figure nationwide. While the median household income in Nebraska was slightly lower than the national figure, the cost of living was considerably more affordable than most states. As in most of the happiest states, Nebraska is also a relatively safe state. There were approximately 252 violent crimes per 100,000 people in 2013, one of the lower rates in the country.

6. Colorado
> Poverty rate: 13.0% (16th lowest)
> Unemployment rate: 6.8% (25th highest)
> Obesity rate: 21.3% (the lowest)
> Poor mental health days (last 30 days): 3.3 (11th lowest)

Colorado retained its 2013 standing on the list of happiest states, with a particularly high ranking in the physical element of well-being this year. The state had the lowest diabetes rate of all states, ranked second lowest in the percentage of the population with high blood pressure, and ranked third lowest in the percentage of residents with high cholesterol. The state also had the lowest obesity rate in the country, at 21.3% of the adult population. Residents were also relatively well-off financially. The state’s 2013 median household income of $58,823 was the 12th highest in the country. In addition, only 8.6% of Colorado households received food stamp benefits in 2013. Colorado households also had better access to services such the Internet, as 79.4% of residents reported having a broadband Internet subscription, the fourth highest percentage in the country.

ALSO READ: States Smoking the Most Smuggled Cigarettes

5. Montana
> Poverty rate: 16.5% (19th highest)
> Unemployment rate: 5.6% (14th lowest)
> Obesity rate: 24.6% (6th lowest)
> Poor mental health days (last 30 days): 3.3 (11th lowest)

As in most states with the happiest residents, Montanans were well educated. Nearly 93% had completed at least high school as of 2013, the third highest rate and considerably higher than the national rate of 86.6%. Montana residents were in exceptionally good physical health, which likely significantly contributed to happiness. Less than one-quarter were obese in 2013, for example, the sixth-lowest rate nationwide. Residents also had relatively low rates of diabetes and high blood pressure. Residents were not especially wealthy, however, earning a median household income of $46,972 in 2013, lower than the national figure of $52,250.

For the rest of the list, please go to 24/7WallStreet.com.

MONEY Investing

5 Things No One Tells You About Owning Vacation Home Rentals

Beach homes
Rich Reid—Getty Images/National Geographic

Owning a vacation rental can be a good investment, but a lot can go wrong if you're not prepared. Here's what to know before you buy.

Owning a vacation home can be a great investment opportunity, but it is one that does have some risk associated with it. Before you ever purchase a vacation home, you should do your homework and plan accordingly. Here are 5 things that can go wrong when owning a vacation home.

1. Annual Returns Can Go Negative

Oftentimes vacation homeowners are faced with a negative annual return especially if they had a down year for bookings or if they had a major repair. Before you ever purchase a vacation home, you should look at all the monthly bills associated with the property and be comfortable enough with the total amount that you could pay on these bills even if the vacation home did not bring in any money.

Just in a few recent years, we have had a terrorist attack on American soil and the second worst financial disaster in the history of our country. These two events had a major impact on people traveling and the amount of disposable income they have to spend on vacations.

The second thing you must research before you buy a vacation home is to figure out the average nightly rate guests are willing to pay for a similar property and how many nights a year the property should be occupied. Once you have these two figures, you can easily find out how much income the property will bring in on an annual basis. When you compare the income to the monthly expenses, you should have a positive cash flow. If not, I would think twice about purchasing the property.

Related: 5 Expert Tips for Managing Your Own Vacation Home Rental

You can find most of the information you are looking for by asking your realtor, property managers who manage properties in the area, and by calling homeowners who list their properties on VRBO.com.

2. You May Not Be Able to Visit as Often as You’d Like

Life has a funny way of jumping in and keeping us from doing things we really want to do. I can’t count on my hand how many times homeowners have told me that before they purchased a property in Orlando, they visited 3 or 4 times a year. Then after they purchased their vacation home, they never seem to be able to break away and visit. You oftentimes find this as kids get older and get into sports or other activities that seem to eat up your weekends.

3. Repairs Can Come Up

You will need to put money back into your property every year to keep it up and maintained. The National Realtors Association estimates that you should budget for 1.5% of the cost of your home to be spent on repairs and general upkeep every year.

So if you purchase a $200,000 vacation home, you should budget to put $3,000 back into the property every year. Now, if you are renting your vacation home out to short term renters, you might need to budget a little more. Guests may not treat a vacation home as nicely as they would their own house.

4. HOA Dues Always Go Up

If you purchase a vacation home in a community that has an HOA, the dues will always go up. In all the years that I have been managing vacation homes, I have never seen an HOA reduce their monthly or quarterly dues.

Related: 8 Clever Ways to Save BIG on the Monthly Bills for Your Vacation Rental

5. Vacation Homes Do Not Always Increase in Value

Just as we talked about before, when we have a huge natural, manmade, or financial disaster, investors get scared and sell their investments. This is what happened in 2008 and 2009. Too many vacation homes flooded the market, and the price on the houses plummeted. Many people were not able to sell their vacation home for anywhere near the price that they purchased it, and this caused many houses to go into foreclosure and some houses to be sold as short sales. The longer you hold onto a vacation home, the better chance you have of making money on the property, but buying a vacation home is not a surefire money maker.

Owning a vacation home is a good investment if you do your homework and research. Many people rush to buy a vacation home for the simple pleasure of just saying they own one. Take your time; buying any good investment is a marathon, not a sprint. Don’t be afraid to walk away from the property if you are not totally comfortable.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2015 BiggerPockets Inc.

More from BiggerPockets:

TIME real estate

Americans Are Running Out of Office Space

office space
Getty Images

And running out of privacy, too

Companies looking to trim the fat are looking to people’s workspaces, according to a new report, leading to a decline in in personal space and privacy at work, even among some corporate employees used to spacious offices.

“Every client we talk to, they’re using less space per person,” Kenneth McCarthy, an economist at the commercial real estate broker Cushman & Wakefield, told the New York Times.

The average space per North American worker in 2012 was 176 square feet, down from 225 in 2010, according to commercial real estate association CoreNetGlobal, and it’s expected to drop to 151 square feet in 2017.

Read more at the Times

Read next: How to Deal When Your Company Moves to an Open Floor Plan

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