Homebuyers at Record Low, Bitcoin in 401k, Inflation Eases, Accredited Investor Explained, Buyer’s Market Ahead? U.S. vs Europe Biz, Kraken Stock Tokens & FICO History

First Time Homebuyers Hit a Record Low

With the high cost of housing and higher interest rates, people trying to get their first home dropped to a record low around 23% in 2024. The average age of the first-time homebuyer has increased 10 years over the historical average to 38 years old. The median income is now $97,000 and the first-time home buyers are coming up with an average down payment of 9% of the value of the home. Many of these young buyers are using FHA loans, which require a very small down payment and according to research roughly 30% of all FHA mortgages have a debt service ratio of over 50%. This means more than half of these buyers’ incomes is going toward servicing debt. This could be a hard pill to swallow for young buyers with not much money left over for luxuries like vacations and new cars. However, if when they buy the home, they understand that if they really tighten their belts for the next three to four years, they will probably be fine.

New home builders are doing what they can to try and get rid of the largest inventory of unsold homes on their lots since 2009. The median price of a new home is currently less than one percent higher than the median price of existing properties, which historically has seen a 17% premium. The home builders are using profits from their homes to buy down mortgages. Even though the 30-year mortgage was recently around 6.8%, home builders can buy these mortgages down which led buyers of new homes to a rate around 5%. Buying down these rates has cost home builders about 8% of the purchase price of the home. This reduces their profits but better than the alternative of sitting on unsold homes with a carrying cost for the builder.

I don’t see this situation getting better anytime soon because I’m not looking for a large decrease in mortgage rates and incomes over the next year will probably increase somewhere around 3 to 4%. We continue to believe the rapid increase in the price of homes over the last few years will not last and it will now take some time to get back to normal market. Maybe we will see a better real estate market in 2027 or 2028.

Is Bitcoin coming to your 401k?

I have been concerned with bitcoin and crypto as a whole for several years for many reasons including fraud, illicit activity, and the fact that there is really no way to derive an intrinsic value for it since there is no earnings, cash flow, or anything really backing the asset class. I was disappointed to see the current Labor Department removed language that cautioned employers to exercise “extreme care” before making crypto and related investments available to their workers. They cited “serious concerns” about the prudence of exposing investors’ retirement savings to crypto given “significant risks of fraud, theft, and loss.” While this isn’t necessarily a full-on endorsement for placing crypto in 401k plans, it definitely seems like the administration is continuing on its path to try and normalize crypto as an established asset class. Even with this change in language I would be surprised to see a huge surge in cryptocurrencies within 401k plans.

Ultimately, ERISA bestows a fiduciary duty on employers and company officials overseeing 401k investments and that means legally employers must put the best interests of 401(k) investors first and act prudently when choosing which investments to offer (or not offer). Given the extreme volatility within crypto I believe it would be a huge risk for these companies to offer it as it could open them up to lawsuits if there are major declines. We’ll have to see what other changes are made as time progresses, but I don’t believe crypto has any place within a 401k plan at this time. 

Inflation report shows continued progress

The personal consumption expenditures price index, which is also known as PCE and is the Federal Reserve’s key inflation measure, showed an annual increase of just 2.1%. Core PCE, which excludes food and energy, showed a gain of 2.5%. Both results were 0.1% below their respective estimates. Overall, inflation has continued to cool and is now quite close to the Fed’s 2% target.

The question that remains is how will tariffs ultimately impact inflation? An economist from Pantheon Macroeconomics said that he believed core PCE would peak later this year between 3.0% and 3.5%, if the current mix of tariffs remained in place. I would say it is difficult to forecast the tariff impact since we don’t know what will ultimately be passed on to the end consumer.

It will definitely be interesting to see what numbers look like in the coming months, but ultimately, I believe most of the concerns around inflation are overblown and even if the rate for PCE is around 3%, I don’t see that as being problematic for the economy.  

Financial Planning: What it Means to be an Accredited Investor 

An accredited investor is someone who meets specific income or net worth thresholds—such as earning over $200,000 annually ($300,000 with a spouse) or having over $1 million in net worth excluding their home—and is allowed to invest in private securities offerings not registered with the SEC. These investments, which include private REITS, private equity, hedge funds, and startups, often promise high returns but carry significant risks such as illiquidity, limited transparency, and the potential for total loss. While many of these offerings are only available through fiduciary advisors—who are legally obligated to act in their clients’ best interest—investors must still exercise caution.

Fiduciary duty applies only in certain contexts (such as investment advice) and may not extend to related areas like insurance or commission-based products. Additionally, what qualifies as “acting in your best interest” is often subjective and open to interpretation. Working with a fiduciary does not guarantee protection, and investors should remain vigilant, ask questions, and independently evaluate any recommendation. Also, private investments aren’t necessary better than public investments, so just because you qualify as an accredited investor doesn’t mean you should be investing in private securities.

Is a buyer’s market coming to the housing market?

Interest rates on mortgages have stayed pretty much above 6% since September 2022 and it doesn’t look like they’ll be falling anywhere close to 6% anytime soon. But for those looking to buy a new home, we could be looking at a homebuyer’s market soon. It’s not here yet, but there are signs that the number of homes listed for sale this spring has increased, while sales have actually decreased. Nationally, existing home sales are down 2.4% through April while the number of properties for sale has increased by 5.1%. Unfortunately for buyers, prices for homes are still high and mortgage rates have increased which has led to affordability still being a major problem.

On a national level, about 20% of home sellers cut prices on their homes in April, which was the largest amount of price cuts since April 2017. Zillow expects a national drop on average of 1.4%, but areas where there is higher priced homes and rising listings, the drops could be larger. Areas where there are second home owners could also see declines as many of them are sitting on a lot of equity in that house and they may not be using it as much as they thought they would. This could lead them to take advantage of that equity and sell at a reasonable price.

Unfortunately, for the entry-level homebuyer competition is still fairly high and supply remains quite low, but that could change in the future as well. If you’re a buyer waiting to buy a home, I would be patient and keep your down payment in a high-yield money market, which should pay you around 4% while you wait to get that home that you want. Patience pays off in investing and home buying.

The U.S. is far ahead of Europe in Business 

People love to travel to Europe to see history and maybe drink the French or the Italian wine, but when it comes to growing the economy Europe is far behind the US. Going back 50 years the US has created 241 new companies worth more than $10 billion, Europe pales in comparison creating only 14 new companies of that size over the last 50 years.

Europe continues to fall behind the U.S. in productivity, 35 years ago the average EU worker produced 95% of what Americans did. Fast-forward to 2025 and Europeans now produce less than 80% of an American worker. It’s surprising that even though Europe has 449 million people, which is over 100 million more than the US, their economy is now 1/3 smaller than the US economy. Investors and entrepreneurs in Europe say the obstacles that prevent growth are a timid and risk adverse business culture, strict labor laws, regulations that stifle any type of growth and a smaller pool of venture capital. It is estimated that European businesses spend 40% of their IT budgets on complying with regulations. Also, many of these companies are confused as 2/3 of European businesses don’t understand their obligation under the EU AI act.

I suggest to take this as an important history lesson for younger people who may think that more government is good. More government does not produce a growing economy and if you and your children want a higher standard living going forward, it takes hard work and competition, not government regulation and control. 

Crypto Exchange Kraken is going to offer digital tokens backed by stocks

I can’t believe that this is happening, but it is and crypto exchange company Kraken said it would occur within the next few weeks. The company will be rolling out digital tokens that are supposed to be back by stocks such as Apple, Tesla, Nvidia and other popular companies. This also includes ETFs, like the SPDR S&P500 and the SPDR gold fund. These will not be available to US investors, but it is instead for other countries around the world to invest in US stocks. This is supposed to be easier than the current way of investing in US stocks through local brokerages. These digital tokens will be referred to as Xstocks And will be on the Solana Block chain platform.

It is expected that Kraken’s partner, Backed Finance, will acquire new shares of stock as these tokens are sold to back up the value of the digital tokens. Trading of these digital tokens will be allowed 24 hours a day seven days a week. I’m concerned this could cause extreme volatility for some of these stocks as they may need to be purchased in large quantities each week day morning based on the activity that occurred while the market was closed. I think some crazy things could happen. I see huge concerns here and lots of room for fraud as it could be discovered the digital tokens are not backed by the correct number of shares. Maybe my thinking is old-fashioned but just seems to me if I’m going to invest in a company, I want to actually hold shares in that company not have someone acting as a middleman.

I think unfortunately people trading these digital tokens don’t care about true investing and it’s just going to be more speculation. I do hope they fail like the crypto company Binance did when they tried the same thing back in 2021. The regulators around the world felt like Binance did not have the correct licenses to do this. But don’t worry, Kraken is regulated by the Wyoming division of banking and has a special purpose depository banking license. Well, that should make investors feel a whole lot better, right? 

The History of FICO

Most people have heard of a FICO score, however I’m sure most have no idea how it was established and also that it is a public company that has performed very, very well over its history. The company was started back in 1956 by an engineer named Bill Fair and a mathematician named Earl Isaac. Each put in $400 of startup capital and it took two years to sell their first credit score. The name of the company is Fair Isaac company, which is where they came up with the FICO score. 31 years later on July 1987, it went public and sold 1.4 million shares at $9.50 per share. The stock now trades around $1650 for a total return of about 17,200%. There are very few investments that could come even close to that type of return.

The company does not collect money directly from the customers who receive their credit score, it generally comes through application fees and is paid by the lenders. The company has what is known as inelastic demand, which unlike many other companies they can raise prices and the customers will still pay for their service. Sounds like a little bit of a monopoly to me. They are used by 90% of US lenders and do over 10 billion credit decisions a year. They do over $30 billion a year in sales with only 3700 employees. The free cash flow of the company increased by 30% to $607 million last year and it bought back $822 million of stock. The company sounds very attractive; however, it trades it around 40 times forward earnings, which is rather pricey and the slowdown in the real estate market could hurt the company going forward.