HP Employees: Rising Rates Join Long List of Housing Dilemmas

While rising interest rates continue to remake the housing market, HP employees must be vigilant about adapting their home-buying strategies and financial planning to limit short-term impacts on long-term financial goals, 'says Paul Bergeron, a representative of the Retirement Group, a division of Wealth Enhancement Group.

For HP employees, knowing the bigger economic picture will help them navigate these rising mortgage rates and housing costs that will affect today and into retirement, 'says Kevin Landis, of the Retirement Group, a division of Wealth Enhancement Group.

In this article we will discuss:

1. Roaring mortgage rates & home prices affect HP employees.
2. Limited inventory and rising costs are among the housing market challenges.
3. Strategies for first-time homebuyers and retirees about the current housing market.

Homebuyers who entered the hot U.S. housing market have seen a transformation. HP employees must admit the average 30-year fixed mortgage interest rate jumped from about 3.2% at the beginning of 2022 to 5.3% in mid-May, the highest level since 2009. This increase came after the Federal Reserve raised the federal funds rate - a key benchmark for short-term interest rates - to combat some of the highest inflation in decades. As a HP employee, you need to understand why these rates have fluctuated and what their future projections are.

Although mortgage rates aren't directly tied to the Fed funds rate, monetary policy dictates all borrowing costs. The yield on the 10-year Treasury is sensitive to changes in the federal funds rate and also depends on bond market longer-term expectations for economic growth and inflation. HP employees can use this information to decide how to allocate funds to treasuries and other assets.

Housing Costs Are Soaring

You might be thinking how buyers have dealt with low inventory, bidding wars, and rising prices for almost two years now - as a HP employee. The national median price of existing residences increased 14.8% last year to USD 391,200 by April 2022. Almost seven out of 185 metropolitan areas recorded double-digit annual price increases in the first quarter. Price increases in more affordable small and medium-sized cities outpaced those in more expensive metropolitan markets as more homebuyers took advantage of working remotely. HP employees must account for these atypical gains to avoid buying property at an undervalued price.

The market conditions and home values may differ regionally and even by neighborhood in the same city. The ten most expensive cities had median home prices of USD 662,000 in Denver and USD 1,875,000 in San Jose in April. One-half of the nation's ten most expensive housing markets is in California, where there is a persistent housing shortage. HP employees must consider the housing shortage when considering buying California real estate and, if possible, wait until prices normalize.

I've seen rent prices go up with home prices as a HP employee looking to rent a home. The median rent for 0- to 2-bedroom properties in the 50 largest U.S. metropolitan areas was USD 1,827 in April 2022 - up 16.7% year-over-year. More pronounced increases were in Sun Belt cities like Miami (51.6%), San Diego (25.6%), and Austin (24.7%).

Those looking for a home might be in a tough spot right now - especially prospective homebuyers, renters renewing a lease, and anyone else looking for somewhere to live. Consider this article as you become a HP employee and avoid the situation above.

Affordability Is Waning

For those HP employees with slim financial resources, rising mortgage rates and property prices have impacted affordability. A USD 300,000 borrower would pay USD 1,666 per month at 5.3%, versus USD 1,297 per month at 3.2% today. Even more important is affordability in high-cost areas and for first-time buyers who have not benefited from gains in home equity. It suggests HP employees in high-cost areas do market research and consider other less-expensive and more reasonable locations.

Mortgages originated by borrowers who started a home search and were prequalified by a lender before interest rates spiked may not still be approved. In recent months, demand for lower-rate adjustable-rate mortgages (ARMs) has spiked. An ARM that has a fixed rate for the first three, five, seven, or ten years of a 30-year term before adjusting to market rates might tempt borrowers who expect to move someday and need a lower monthly payment to qualify for a larger mortgage.

Other buyers adjust expectations and settle for a cheaper home. Still, others might give up the search because the homes they want are not affordable, or their dream neighborhoods are out of reach. And as a HP employee considering buying or renting a home, you have to understand how many entry-level buyers may be priced out of the market - at least temporarily - because of these ridiculously high prices.

Because purchase contracts are signed many months before the homes are built, buyers of new homes may be particularly exposed to changing interest rates. With their deposits in jeopardy, HP employees planning to buy may pay the extra fee to extend rate locks for six, nine, or twelve months.

I also work for a HP employee and understand how rising borrowing costs could halt homebuilding demand so as to curtail price increases - and how prices could drop in some overheated markets. Yet most economists do not foresee a collapse in property prices as market fundamentals remain relatively solid. Inventory levels are low, and lenders have been cautious, so most homeowners who bought in the last few years can still afford their mortgages. Cash purchasers include downsizing retirees and investors, who account for about 26% of transactions, are unaffected by interest rates. Assuming the economy and employment remain steady, millennials in their prime home-buying years should be in high demand.

Tips for Bewildered First Buyers.

If HP employees will take a mortgage, buying a home would stabilize their housing costs for as long as the payment is fixed, while paying rent indefinitely might not help their finances. Or you could create equity in your home as you pay down your loan balance, especially if the home goes up in value.

No one knows where mortgage rates are heading or what will happen next in the housing market despite widespread speculation to the contrary. So how does a HP employee know whether buying a home is financially prudent? As always, the answer is dependent on where you want to live, how you want to spend your time and money. Here are three ways HP customers can get ready for homebuying.

Develop into a better borrower. HP employees should get a copy of their credit report before applying for a mortgage to catch errors and correct mistakes. High credit scores may qualify for low interest rates.
Collect a down payment. Conventional mortgages require 20% down, but some loan programs allow down payments of 5% to 10%. Should parents or another relative 'gift' cash as a down payment, lenders might ask for a letter of verification as to where the money came from. Local programs might help HP employees who earn enough to qualify and who attend homeownership classes with down-payment assistance.

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Figure out what you can afford to spend. Our HP customers understand their budgets. Start with online calculators that consider income, debt, and expenses. A mortgage lender can determine how much you could borrow. Real estate transaction costs can be three to five years before they recover, so consider the stability of your HP employment and your income.

Bloomberg May 12 & May 19, 2022.

2-3, 7) National Association of Realtors, 2022
Realtor.com, 2022
National Association of Realtors, 2022
Realtor.com, 2022
National Association of Realtors, 2022
Realtor.com, 2022
National Association of Realtors, 2022
Realtor.com, 2022
Realtor.com, 2022
Realtor.com, 2022
Realtor.
The Wall Street Journal May 5, 2022.
NPR, May 12, 2022.
Wall Street Journal, December 14, 2021.

Added Fact:

Rising Rates Add to Long List of Housing Dilemmas:
Those 60-something HP workers and retirees need to understand how rising interest rates could affect their retirement plans and housing decisions. A study by the National Association of Realtors in March 2023 found that 60% of homeowners over 60 have mortgage debt. It means an enormous chunk of this age group could be affected by rising interest rates, which could mean higher mortgage payments and possibly affect retirement savings and financial stability. Age-related issues include evaluating housing options and assessing whether rising rates will affect retirement plans.

Added Analogy:

So the current housing market situation of sky-high prices, low inventory, and rising interest rates is akin to sailing across rough water on a sailing trip toward retirement. Now imagine yourself as a sailor approaching turbulent seas with whipping winds and crushing waves. The housing market is like a body of water - with its moving prices and shrinking options - and rising interest rates are like winds against your financial stability. You must navigate bidding wars and mounting costs while adjusting your sails to reflect the market conditions. As a seasoned sailor looks at wind patterns and charts course to avoid rocky reefs, HP workers planning to retire and current retirees need to evaluate market conditions, assess financial potential, and make sound decisions about how to sail toward retirement goals.

Sources:

'How Higher Interest Rates Are Impacting Retirees.' Retirement Stewardship , 20 Sept. 2023, www.retirementstewardship.com/2023/09/20/how-higher-interest-rates-are-impacting-retirees/ .
Malagies, Didier. 'How the Housing Crisis Impacts Your Retirement Savings.' U.S. News & World Report , 9 Jan. 2025, money.usnews.com/money/retirement/articles/how-the-housing-crisis-impacts-your-retirement-savings .
'Nearly Half of Retirees Worry They'll Outlive Their Savings, While 25% Are Burdened by Housing Costs.' DDAMortgage , 9 Jan. 2025, www.ddamortgage.com/nearly-half-of-retirees-worry-theyll-outlive-their-savings-while-25-are-burdened-by-housing-costs .
'Older Homeowners Are Financially Confident Aging in Place.' Fannie Mae , 29 Feb. 2024, www.fanniemae.com/research-and-insights/perspectives/older-homeowners-are-financially-confident-aging-place .
'How Housing Can Play An Important Role in Retirement Security.' Investopedia , Nov. 2024, www.investopedia.com/how-housing-can-play-an-important-role-in-retirement-security-8746025 .

How does HP Inc. ensure that the pension plan benefits will remain stable and secure for employees in the future, and what measures are being implemented to mitigate financial volatility associated with these benefits? Employees of HP Inc. should be particularly aware of how the transition of their pension payments to Prudential will affect their financial security and what protections are in place to ensure that these payments are maintained without disruption.

HP Inc. ensures pension plan benefits remain stable and secure by transferring the payment obligations to Prudential, a highly-rated insurance company selected through a careful review by an Independent Fiduciary. This move is aimed at reducing financial volatility associated with HP's pension obligations while maintaining the same benefit amount for retirees. Prudential's established financial stability provides additional security to employees(HP Inc_November 1 2021_…).

What specific details can HP Inc. employees expect to learn in the Welcome Kit from Prudential, and how will these details help them understand their new payment system? HP Inc. pension participants will need to familiarize themselves with the information outlined in the Welcome Kit to make informed decisions regarding their pension benefits going forward.

The Welcome Kit from Prudential will provide HP Inc. employees with instructions to set up an online account, along with details on managing payments, tax withholdings, and other resources. This information will allow employees to familiarize themselves with Prudential’s system and ensure a seamless transition without disruptions(HP Inc_November 1 2021_…).

In what ways does the selection process for Prudential as the insurance provider reflect the commitment of HP Inc. to the well-being of its employees? Understanding the rationale behind this decision will give HP Inc. employees insights into the fiduciary responsibilities and governance processes that protect their retirement benefits.

The selection of Prudential reflects HP Inc.'s commitment to employee well-being, as it involved the Independent Fiduciary conducting an extensive review of insurance providers. Prudential was chosen based on its financial strength and ability to manage pension payments securely, showing HP's focus on protecting retirement benefits(HP Inc_November 1 2021_…).

How will the annuity payments from Prudential differ from the previous pension payments in terms of tax implications and reporting for HP Inc. employees? It is crucial for employees of HP Inc. to comprehend the tax treatment of their new annuity payments to avoid any potential pitfalls in their personal financial planning.

The annuity payments from Prudential will be taxed similarly to the previous pension payments, though employees will receive two separate 1099-R forms for 2021 (one from Fidelity and one from Prudential). For future years, only a single form will be issued. This ensures employees are aware of how to manage tax reporting(HP Inc_November 1 2021_…).

What resources are available to HP Inc. employees seeking assistance regarding their pension benefits, and how can they effectively utilize these resources to address their concerns? Knowing how to access support and guidance will empower HP Inc. employees to manage their retirement benefits proactively.

HP Inc. employees seeking assistance can access live customer support through Fidelity or contact Prudential directly after the transition. Additionally, the Welcome Kit will include important contact information for managing their benefits, making it easy for employees to address concerns(HP Inc_November 1 2021_…).

How can HP Inc. employees verify the financial health and stability of Prudential, and why is this factor important in the context of their pension benefits? Employees must ask how Prudential's financial standing influences their view of long-term pension security and what metrics or ratings they should consider.

HP Inc. employees can verify Prudential’s financial health by reviewing Prudential's annual financial reports, which are publicly available. Prudential’s strong financial ratings were a key factor in its selection, assuring employees of long-term pension security(HP Inc_November 1 2021_…).

What steps should HP Inc. employees take to update their personal information, such as banking details and tax withholding preferences, following the transition to Prudential? Understanding these processes will ensure a smooth continuation of benefits for HP Inc. employees as they adapt to the new system.

Employees do not need to re-submit their personal information to Prudential, as HP will securely transfer all necessary data, including banking and tax withholding preferences. This ensures the continuation of pension payments without the need for employee intervention(HP Inc_November 1 2021_…).

How does HP Inc. plan to address potential changes in the financial landscape that may affect pension benefits, and what role does the insurance contract with Prudential play in this context? HP Inc. employees should be informed about the company's strategic outlook and how it aims to safeguard pension assets against economic uncertainties.

HP Inc. plans to address potential financial changes through its contract with Prudential, which guarantees pension payments will remain the same. Prudential manages these risks as part of its core business, providing added security against economic volatility(HP Inc_November 1 2021_…).

In what circumstances might HP Inc. employees see changes in their net pension payments following the transition to Prudential, despite assurances that payment amounts will remain unchanged? This understanding will help employees manage their expectations regarding future payments and any adjustments they may need to make.

Employees might see changes in their net pension payments due to tax adjustments or changes in withholding instructions, but the gross payment amount will remain unchanged. Any garnishments or other deductions will continue as before, ensuring consistency in payment structure(HP Inc_November 1 2021_…).

How can HP Inc. employees contact the company directly to learn more about the pension transition process, and what channels are available for them to have their questions addressed? Clear communication lines are essential for HP Inc. employees to ensure they receive timely and relevant information regarding their pension situations.

HP Inc. employees can contact the company through the Fidelity support line or directly through Prudential for any questions about the pension transition. The Welcome Kit and other resources will provide contact details, ensuring employees have access to timely support(HP Inc_November 1 2021_…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

HP offers a defined benefit pension plan calculated based on years of service and final average pay. The plan provides a stable monthly income upon retirement. It does not include a cash balance component.

Layoffs and Cost-Cutting: HP Inc. plans to cut up to 10% of its workforce over the next three years as part of a cost-cutting initiative aimed at saving $1.4 billion (Source: Bloomberg). Operational Efficiency: The restructuring is intended to streamline operations and focus on growth areas like digital printing and 3D printing. Financial Performance: HP reported a 3% increase in net revenue for Q1 2024, driven by strong demand for its printing and personal systems products (Source: HP).

HP Inc. grants stock options (SOs) and RSUs to its employees as part of its equity compensation packages. Stock options allow employees to purchase company stock at a set price after a specified vesting period, while RSUs vest over a few years based on performance or tenure. In 2022, HP focused on enhancing its equity programs with performance-based RSUs to align employee incentives with company goals. This continued in 2023 and 2024, with broader RSU availability and performance-linked stock options. Executives and middle management receive significant portions of their compensation in stock options and RSUs, fostering long-term alignment with company performance. [Source: HP Annual Report 2022, p. 56; HP Q4 2023 Report, p. 23; HP Q2 2024 Report, p. 12]

HP Inc. has been proactive in updating its employee healthcare benefits to address the current economic, investment, tax, and political environment. In 2022, HP introduced its "Future Ready Transformation Plan," which included enhancements to its healthcare offerings. The company provided comprehensive healthcare plans, including medical, dental, and vision coverage, alongside mental health support and wellness programs. These benefits are designed to support employees' overall well-being, ensuring they have access to necessary healthcare resources to maintain a healthy work-life balance. This initiative reflects HP's commitment to fostering a productive and satisfied workforce, which is crucial for sustaining business success in a competitive market. In 2023, HP continued to refine its healthcare benefits as part of its ongoing efforts to support employee health and productivity. The company introduced innovations such as telemedicine services and enhanced mental health programs, which provide employees with convenient access to healthcare professionals and wellness resources. This approach aligns with HP's broader strategy to create a supportive and flexible work environment, particularly as hybrid work models become more prevalent. By investing in robust healthcare benefits, HP aims to attract and retain top talent, ensuring long-term resilience and success amid economic uncertainties.