Latest imported feed items on Top Trending Articles From The Real Estate And Home Inspection Industry

COVID-19 is Driving the Housing Inventory Crisis in Unexpected Ways

2020-10-27T12:00:00.000+00:00

SEATTLE, Oct. 27, 2020 /PRNewswire/ -- A historic inventory crisis is driving up home prices to new highs, but understanding why would-be sellers are sitting on the sideline had been guesswork. Now a new Zillow survey[i] is shedding light on how the pandemic is influencing homeowners who are considering selling in the next three years, and the reasons why they're staying put. Life uncertainty, likely caused by COVID-19, is keeping more than a third (34%) of would-be sellers out of the market. Financial anxiety is a big part of that: 31% of homeowners considering selling in the next three years say a current uncertain or precarious financial situation is a reason to stay put, with 27% reporting a recent change in employment with a decrease in hours or pay, and 17% saying they or their spouse/partner were laid off or involuntarily unemployed -- which could be barriers to finding a new home. A lack of certainty around where they work is another contributing factor. According to Zillow's survey, the most common change for homeowners in the past six months is that they are working from home more often. Previous Zillow research finds two-thirds of those working remotely during the pandemic say they would consider moving if given the flexibility to continue occasionally working from home. However, those plans may be in limbo as homeowners await clear guidance from their employers on when -- or if -- they will return to the office. Nearly 40% of homeowners considering selling in the next three years say they anticipate a more favorable sale price if they wait, suggesting they don't feel pressure to list now in order to get a good price. Median sale prices are at all-time highs, up nearly 11% year-over-year for the week ending September 5th. Seller optimism has also rebounded; a September Fannie Mae survey finds a majority (56%) of people think it's a good time to sell, compared to 29% who felt that way in the spring. "Potential sellers are likely correct that home prices have yet to reach their peak, but in the long run prices tend to rise, so there's no clear 'right time' to sell," says Zillow senior economist Jeff Tucker. "Homeowners who feel life is uncertain right now may think they can still get a strong price if they delay selling until they have more clarity. The catch is that waiting to sell may raise the cost of a trade-up. This fall's record low mortgage rates, which make a trade-up more affordable on a monthly basis, are not guaranteed to last." More than 30% of homeowners (31%) considering selling in the next three years say their plans are paused because they are concerned about finding or affording a new home. A 2020 Zillow report[ii] finds 63% of sellers are also buyers; these dual-track homeowners may sell their home for top dollar only to enter an extremely competitive buyer's market where homes are going under contract in 12 days. Near-record low mortgage interest rates are giving buyers a leg up, but homeowners are also taking advantage of those low rates with 15% citing a recent refinance as a reason not to list their home for sale. Virus safety was one of the least-frequently cited concerns among homeowners who have been hesitant to put their home on the market. Zillow's survey found 25% of potential sellers said they weren't selling because they were concerned about their household's health and safety during the pandemic. The rapid adoption of real estate technology such as 3D Home virtual tours and video tours has allowed many home shoppers to limit in-person showings. Those digital tools coupled with new safety standards and cleaning protocols may be making more would-be sellers feel comfortable during the pandemic. A couple of other commonly-mentioned factors are holding homeowners back from selling, but to a far lesser extent. Zillow's survey found 6% of homeowners considering selling in the next three years indicated that taking advantage of mortgage forbearance was a reason to stay put. These programs allow homeowners to pause or reduce their monthly mortgage payments. One out of 10 homeowners said they weren't selling because an adult child or another family member had moved in with them during the pandemic. The cumulative effect is a nationwide supply crisis with inventory down 37% year-over-year. COVID-19 shocked the market in early spring, prompting both buyers and sellers to pull back at similar rates. Since then, buyers have returned to the market in force, driven by demographic factors, low mortgage interest rates, and the Great Reshuffling -- a pandemic-driven desire to move to a home better suited for our lives in this new normal. Sellers have been far more reluctant to return, leaving half a million fewer homes on the market than a year ago. These survey results provide a better understanding of all the reasons why many homeowners are putting their selling plans on hold. About Zillow Zillow, the most visited real estate website in the U.S., is building an on-demand real estate experience. Whether selling, buying, renting or financing, customers can turn to Zillow's businesses to find and get into their next home with speed, certainty and ease. In addition to for-sale and rental listings, Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Millions of people visit Zillow Group sites every month to start their home search, and now they can rely on Zillow to help them finish it — with the same confidence, ease and empowerment they've come to expect from real estate's most trusted brand. Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).

[i] Zillow Group Population Science collected a nationally representative sample of more than 1,000 homeowners (household decision makers that own their home and did not move in the past year). From September 29^th to October 5^th, 2020, the survey asked homeowners questions about their plans to sell and recent life events. Among those who did not have their home listed for sale (99% of the sample), the survey also asked why they were not currently selling. To achieve national representativeness, quotas for age, ethnicity/race, education, income, region, relationship status, and sex limited oversampling of any given demographic group. In addition to quotas, ZG Population Science used statistical ranking to weight the sample to the US Census Bureau American Community Survey 2018 sample of homeowners. Weighting used the same variables as the quotas. Margins of error are at a 95% confidence interval. [ii] Zillow Group partnered with independent market research and data analytics firm YouGov® to conduct a nationally representative, online quantitative survey that gathered information from a total of 13,000 key household decision makers, including 3000 buyers, 3000 sellers, 3000 renters that moved in the past year, 3000 homeowners, and 1000 new construction buyers. SOURCE Zillow

Investors are looking for chances to repurpose now-empty hotels

2020-10-26T11:04:10.000+00:00

Craig Deitelzweig made his mark in real estate by buying office buildings and making them look and feel like hotels. “Why shouldn’t you feel like you’re on vacation when you’re at work?” he asks. His redevelopment of the offices at 10 Grand Central is evocative of a chic, boutique hotel with a signature scent pumping through its ducts. Deitelzweig has done that at properties around the city, but now that tourism is in tatters and hotels sit empty and in danger of default, the chief executive of Marx Realty is looking at a new strategy: buy cheap hotels and turn them into offices. As a result of the pandemic, not all of the city’s 700 hotels will make it. Some 25% are expected to close by 2023, experts say.

“Anybody who is in the market today is looking for ways to make sense of it,” said Woody Heller, co-head of the capital markets division at Savills. In some cases, he said, conversions make the most sense. Rooms for rent At the low point earlier this year, hotels could fill only 15% of the city’s roughly 128,000 rooms, according to analytics firm STR. The number of rentable rooms has dropped by a third since then, to 85,000, now that more than 100 hotels have shuttered temporarily. The Roosevelt, the Marriott East Side, the AKA Wall Street and a consortium of Times Square hotels are among those that have closed permanently. More than 60 others have offered their space for alternative use on a temporary basis, including the Upper West Side’s Lucerne Hotel, which is housing homeless people and is at the center of a hot debate between neighborhood residents and the city over how long the people should stay. The W Hotel in Union Square, now owned by Marriott, is housing New York University students for the fall semester. A handful of developers are making moves to repurpose hotels permanently, including the owners of the Bryant Park Hotel, who are in talks to convert the landmarked, century-old building back to its original purpose: office space. “A lot of hotels in their past lives were offices, so they have the bones to be converted back,” Deitelzweig said. Although hotel floor plates tend to be too small for traditional offices, they’re ideal for boutique offices like his, he said, adding that a full conversion would take only 18 months. Hungry investors are watching for properties that are in distress. “A lot of people are preparing themselves for the bargain basement,” said Sabena Arora-Akarte, founder of Acadia Lodging Brokers & Advisors. “They’re putting out word that they’re ready to jump.” Deitelzweig said he is exclusively looking at properties that have been taken back by their lenders, so he can buy them from the banks at a good price. He might not have to wait long. Currently 10 hotels in the city are at least 90 days past due on their mortgage payment, according to data analytics firm Trepp. They collectively owe more than $800 million to their lenders. One of those hotels—The Standard, High Line, in the Meatpacking District—owes $103 million. Even at the Financial District’s Holiday Inn, where rooms are half the price they are at The Standard, $87 million in loans are in arrears. Occupancy rates have crept back up to 38% since cratering in March, according to STR, but the market won’t make any kind of meaningful rebound that will put hoteliers at ease until at least 2025, according to Vijay Dandapani, chief executive of the Hotel Association of New York City. It’s a dynamic situation, Dandapani said, but conversions are hardly a revolutionary concept in New York. The city’s structures are often built on the presumption that they’ll have many lives before they’re eventually torn down, if ever. In times like these, he said, all a property needs is some new packaging. At least 73 of the city’s many thousand residential buildings were once factories, schools or hospitals, though hotels were most commonly reborn as apartments, according to apartment search and analytics firm RentCafe. The 116-year-old Prince George in Madison Square was a glamorous hotel until the 1980s, when it became a welfare hotel. After sitting barren for seven years, it was purchased by Breaking Ground, an affordable housing developer, which rehabbed it into a residence for the homeless. “From the street level, it’s hard to absorb all the changes,” former Deputy Mayor Daniel Doctoroff wrote in Greater Than Ever: New York’s Big Comeback, his account of rebuilding the city after 9/11.

Hotel-to-apartment conversions were so hot in the city by 2015 that the controversial Local Law 50 was passed, barring Manhattan hotels with at least 150 rooms from converting more than 20% of them to other uses during a two-year period. The law expired last year. At Breaking Ground calls came early on in the pandemic from hotel owners looking to reposition their properties, said Brenda Rosen, the group’s chief executive. She has fielded calls from RFR Realty about its Paramount Hotel and from the Chetrit Group for the Hotel Carter, both in the Times Square area. The organization is converting 90 Sands St. in downtown Brooklyn, a former hotel it bought from RFR, into 500 units of affordable and supportive housing, Rosen said. And developer Fairstead is leading the $60 million renovation of the former Park 79 Hotel to 77 affordable units for senior citizens. Still, repurposing hotels is not always easy. “The devil is in the details,” JLL Senior Managing Director Jeffrey Davis said, referring to stringent zoning laws that outline what types of properties may exist in various pockets of the city and the unique requirements for each type. “You put that all in the blender and think of what can be,” Davis said. “You get a lot thinner about the actual properties that can make these changes.” Apartment buildings require a 30-foot-long yard, for example, while hotels need only 20 feet. To qualify for multifamily housing, apartments must be a certain size and include at least a kitchenette—which isn’t common in hotel rooms, noted James Power, a land-use lawyer at Kramer Levin. Zoning laws restrict certain building types to designated parts of the city. Apartments may not be built in most manufacturing zones, for example. Building supportive housing is one of the easiest ways to convert hotels into useful properties, said Jessica Katz, executive director of the Citizens Housing and Planning Council. The smaller units are better for studio apartments that can be used by single, homeless adults, she said. But, she said, there are still too many rules. “We need to take away some of the obstacles to rebalance the market,” Katz said. “If we get zoning regulations out of the way so the market can do its job, then we may find a much faster recovery.” The flexibility to adapt existing, empty buildings would help the city leverage its strengths, said James Whelan, president of the Real Estate Board of New York. But not every property will get the green light for conversion. And that presents a problem, Davis said. “What do you do with these hotels that can’t be used for anything else?” he said. “You have hotels that just don’t work as hotels anymore.”

The next phase in the evolution of real estate investment - Crain's New York Business

2020-10-26T10:41:03.000+00:00

With the uncertainty in the real estate markets brought on by the Covid-19 crisis, many real estate firms are reconsidering their investment strategies and the structure of their investments. This year has seen many new real estate funds form as real estate players look to gain market advantages. Are you contemplating starting a real estate fund? Have you recently launched your first fund? Raising capital for real estate investments through a fund can certainly have its returns. One of the biggest benefits: It provides the opportunity for a buyer to strike quickly and close deals with capital already committed and ready to be deployed instead of going through the process of raising capital and negotiating investor terms after identifying a potential acquisition. A fund can be a necessity when a buyer needs to move expeditiously to close a distressed deal. In this unpredictable and competitive real estate market, the flexibility of having committed capital at a buyer’s disposal can be the edge that gains the confidence and trust of the seller and wins the bidding war.

Other benefits to raising capital through a real estate fund: It allows you to attract larger commitments from larger investors, and it helps you to build relationships with institutional investors and gain their trust. This gives you added marketplace creditability and attracts others to invest alongside them. This means larger funds, more capital to invest, better investment opportunities, more management fees and momentum for the next fund. When launching a real estate fund, there are critical questions fund managers should ask themselves before they approach investors. For example, what is the real estate fund’s clearly defined strategy? In what types of assets will the fund invest? What class of properties? What geographies? What are the targeted returns? What is the execution plan to generate the targeted returns? To sell to potential investors, fund managers should be prepared to show their performance records on deals compared to industry benchmarks. This will provide investors the opportunity to assess managers using the same metrics. Funds should thoroughly research the market on fees and fee structures, such as management fees and how they are charged, acquisition-disposition fees, and preferred returns. In addition, funds should be prepared, through side letters, to meet any unique requirements by specific investors. Fund managers may need to demonstrate to investors that they have the capacity to handle the workload that will come from launching a fund, and they should be prepared to consider expanding their back office or seek outsourced solutions to fill gaps. For example, hiring a third-party fund administrator can assist in investor relations and financial reporting tasks, and engaging third-party property managers can ease the burden on fund managers of day-to-day, on-site operations. Fund managers should be able to leverage off the efficiency of the fund structure by better utilizing their internal resources. This should allow more for fund-level operations, including enhanced cash flow management to achieve the targeted returns. Many funds’ operating agreements require audited financial statements. Fund managers should ensure they are equipped with the proper internal controls and financial reporting systems to make it through a financial statement audit with an unqualified opinion. Furthermore, a fund would be required to report its investments at fair value on its financial statements if the fund meets the definition of an “investment company” under U.S. Generally Accepted Accounting Principles. FASB Accounting Standards Codification 946-10-15-6 states that an investment company has these fundamental characteristics: “obtains funds from one or more investors and provides the investor(s) with investment management services” and “commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.” While fair value reporting could add complication and require additional sophistication to the financial reporting process, fair value financial statements are generally seen as more useful to investors. Fund managers should be familiar with the rules and regulations of the Securities and Exchange Commission and their states’ regulatory agencies, and consult with their professional service providers on whether they must file to become Registered Investment Advisers, which have additional oversight and reporting requirements. Finally, fund managers should work with their tax attorneys and accountants during the formation process to ensure that the fund is tax-efficient and optimally structured for all parties. Ownership, operation and disposition of real estate through funds should provide investors with at least the same tax benefits as deal-by-deal transactions. After assessing the benefits and considerations of launching a real estate fund, make sure to consult with your professional service providers to address your opportunity. The time is now to prepare for the new wave of real estate investment. The structure of real estate deals is evolving. Focus on what counts and call your trusted advisors to help put evolution into action.

FASB Accounting Standards Codification 946-10-15-6 states that an investment company has these fundamental characteristics: “obtains funds from one or more investors and provides the investor(s) with investment management services” and “commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.” While fair value reporting could add complication and require additional sophistication to the financial reporting process, fair value financial statements are generally seen as more useful to investors. Fund managers should be familiar with the rules and regulations of the Securities and Exchange Commission and their states’ regulatory agencies, and consult with their professional service providers on whether they must file to become Registered Investment Advisers, which have additional oversight and reporting requirements. Finally, fund managers should work with their tax attorneys and accountants during the formation process to ensure that the fund is tax-efficient and optimally structured for all parties. Ownership, operation and disposition of real estate through funds should provide investors with at least the same tax benefits as deal-by-deal transactions. After assessing the benefits and considerations of launching a real estate fund, make sure to consult with your professional service providers to address your opportunity. The time is now to prepare for the new wave of real estate investment. The structure of real estate deals is evolving. Focus on what counts and call your trusted advisors to help put evolution into action. For more Citrin Cooperman thought leadership on real estate funds, visit http://bit.ly/finreport4funds Visit us at www.citrincooperman.com/industries/real-estate To view the PDF, click HERE.

Six Months into the Pandemic, Leading Investors Outline the State of Real Estate

2020-10-26T07:13:02.000+00:00

Amazon e-commerce warehouse in Madrid, Spain / Wikipedia Since the beginning of the spread of COVID-19 in March, some real estate sectors are growing while others are contracting. At the Urban Land Institute (ULI)’s fall meeting, Owen Thomas, CEO of Boston Properties, explained that the biggest gains are being seen in data centers, industrial, science, self-storage, and healthcare properties, while residential, lodging, shopping centers, and malls have seen the greatest declines. Thomas asked a panel of real estate investors with more than $300 billion in assets to provide their take on the current real estate market. He noted that in July 2020, e-commerce sales were up 60-70 percent over the same time the previous year. According to Hilary Spann, managing director and head of the Americas for real estate investments at CPPIB America, Inc., this e-commerce growth is occurring among all demographic segments, even those who previously preferred shopping in person. Even after the pandemic, she thinks e-commerce will succeed in keeping these new buyers. With the digitization of the U.S. economy and the growth of online shopping and entertainment, there has also been massive growth in data centers and last-mile warehouses and distribution facilities. AJ Agarwal, senior managing director at Blackstone added that “we are seeing less infill warehouses in cities, and more 20 miles or so outside urban centers.” For Francois Trausch, CEO of Allianz Real Estate, the trick has been how to figure out what people are doing in the real world via online proxies. For example, Allianz is now tracking Open Table reservations in major cities around the globe, as lunch reservations can be viewed as a proxy for nearby office building occupancy. “In Germany and other parts of Europe, we can see from Open Table that things are essentially back to normal. But in New York City, reservations are down 40 percent.” He also noted that from his analysis, Asia seems to have largely overcome the coronavirus. “China is back at work. They have unbelievable capabilities and can administer COVID-19 tests to 9 million people in the city of Qingdao in five days; that’s something Paris could never do.” Thomas noted that with any recession, demand for office space goes down, but over the long-term, office building development is tied to the location of jobs. “Where will jobs go? We are seeing an out-migration from cities into suburbs.” He added that “working from home is here to stay.” There’s only 20 percent occupancy in office buildings in the U.S. right now, and those numbers may not come back to where they were post-pandemic. All panelists seemed bullish on the long-term value of the world’s leading cities. “Our creative cities can’t experience disruption forever,” Spann argued. While she sees Millennial families leaving the city for nearby suburbs, many people want to stay in the city. “With a viable vaccine, cities will continue to thrive over the long term.” Across all real estate sectors, “the biggest change has been the impact of the fiscal stimulus,” said Agarwal. The stimulus, combined with recent actions by the Federal Reserve, means that “financing costs for real estate are now 30 percent less than they were pre-COVID.” But this has not translated into increased investment in certain sectors. All were also negative about the prospects for shopping centers and malls. Frausch wondered whether malls can fill their vacant spaces, whether there are enough large retailers who will take on the risk. He sees a positive trend in the re-purposing of malls as hospitals, offices, and community spaces. “In Japan, there are now educational classes in malls.” The investors then discussed the future outlook for hotels. When a vaccine is developed, Agarwal thinks there will be an explosion of leisure travel to resorts. But what is considered essential business travel will be redefined, and many trips will be deemed unnecessary. As a result, business hotels in cities will face continued challenges. When asked what they foresee as the #1 topic in six months, answers were all over the board: the efficacy of vaccines, the distribution of vaccines, tax burdens for real estate development, and what shape the recovery will be. Frausch explained: “We could have a V-shaped recovery, or a K-shaped one, which bifurcates the economy into one that does well for some people and not well for others.” Perhaps one positive note: the COVID-19 recession could also yield some innovation in the building sector. “We’ll soon see new companies that enable the online visualization of construction sites” — software that better facilitates the collaborative, virtual planning and design of projects, Spann said.

A real-estate investor who was able to retire at 37 breaks down how he makes $15,000 a month in passive income

2020-10-26T06:43:50.000+00:00

Education Images / Contributor/ Getty Images

This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now.

On an episode of the podcast "The Side Hustle Show," hosted by Nick Loper, real-estate investor Dustin Heiner explained how he was able to retire at 37 by investing in rental properties.
Heiner broke down the steps investors should take before buying a new property and how those rental properties could make them money.
He stressed picking the right city and state, assembling the right team, and the importance of the $250 monthly passive-income benchmark.
Visit Business Insider's homepage for more stories.

Dustin Heiner is a seasoned real-estate investor who retired at 37 and makes about $15,ooo a month in passive income from his rental properties. On an episode of the podcast "The Side Hustle Show," hosted by Nick Loper, Heiner explained how he went from working in a local government office to working for himself and laid out the steps investors should take before deciding where to buy property. In 2006, Heiner bought his first rental property in Ohio for $17,000 in cash. He said on the podcast that in his first month of renting out a home, he made about $350 after expenses. That number would prove significant as Heiner began investing more and more. To turn the side hustle into a full-time gig, he said, he had to invest in more properties that gave him the same type of monthly cash flow. "If I were to multiply that out, one property is $300, 10 properties, oh my goodness, that's $3,000 a month. That is $36,000 a year," Heiner said. In 2016, he had about 26 properties, so he quit his day job and focused full time on rental-property investments. He said he now owns over 30 properties. Heiner said he was lucky with that first deal he found in Ohio. "I did everything wrong," he said. However, over 10 years and many properties later, he has developed a system of steps he suggests everyone takes before making a new purchase, he added.

First, pick the state you want to invest in

Once he has decided on the state, Heiner uses Zillow to do research on the cities within that state. He looks at highly populated cities with a lot of available properties, he said. Once he's narrowed down the city, he looks at all the properties within that city to see if they meet his criteria. This means looking for a property that matches up with the amount of money set aside for the investment and high rental-income rates. "Here's a principle for everybody listening, you want to buy for $250 or more in passive income after every single expense," he said on the podcast.

The next thing to do is build the business

This step requires "finding the right people to actually run the business for us," Heiner said. These people include the property managers, realtors, wholesalers, investors, insurance experts, and maintenance workers. The most important hire, according to Heiner, is the property manager. He suggested interviewing at least six property managers before narrowing in on one. One time, Heiner said, "I flew to Illinois, I went to Springfield, Illinois, a great town, a great place, but I literally could not find a good property manager." While the town was great, he said he left empty-handed because he wasn't able to secure a manager he trusted. When it comes to finding the right property manager, Heiner said, there are three things to look for: someone who has a personality that meshes well with your own, is trustworthy, and is good at communication and doesn't take long to respond to phone calls. "A big pro tip is to ask them, 'If you were to invest your money right now in this city, where would it be? Where would you buy?' Those are great key areas of where you should start looking," he said. After the Illinois experience, Heiner said he realized he didn't need to fly to a place to build out a business there. "Now I literally do everything remotely," he said. "I found there's no need to actually fly to another city ever again to start in a brand-new place." But the key to being able to stay remote is to have a solid team so that the business runs automatically and makes money every month. In fact, Heiner said this system allowed him to work just 30 minutes a month.

Why $250 a month is an important benchmark

Making $50 or $100 a month off of a property is too little, according to Heiner. "If you extrapolate that out, $100 a month is literally $1,200 a year. If you have one bad thing, like a roof go out, there goes your entire profit," he said. Of course, it is important to have savings set aside to cover things like repair expenses, but at $100 a property, that doesn't leave a ton of money to live on, he said. If you seek only properties that are going to make you $250 or more, once all other costs, like capital expenses, repairs, and property-management fees are paid for, then you will have a "life-changing business model," according to Heiner. But the key here is to have multiple properties in different areas making you passive income each month. This will not only bring in more money but also limit the risk of the investment. "I've literally not paid any money for my properties out of my pocket, I want to say for 10 years, because I have so many properties now that make me so much money that if there are any issues with any of these properties, that is coming out of the rents I'm getting from the next month," he said.

5 other ways investors make money off of a rental property

Picking up properties at a discount means that when they are sold again, the sellers will realize the equity gains. This is called equity capture, Heiner said. "We're investors, if the property is worth $100,000, we're going to offer $78,000 and then work our way to were we're probably going to be settling for $85,000 or $88,000, so we're getting the value down," he added. Then there's forced appreciation, in which renovations increase a property's value, as well as market appreciation, a natural increase in value over time as the market goes up. The other two ways to make money off of a rental property are tax advantages offered to investors and mortgage buydowns, which means the monthly rents from tenants cover the mortgage expenses. According to Heiner, he doesn't pay insurance, taxes, or property managers out of pocket. Those expenses are covered by the rents he collects from his tenants.

Property Investment For Beginners – 10 Common Mistakes

2020-10-25T06:24:00.000+00:00

[embed]https://youtube.com/watch?v=dJ5dSLv1Ego[/embed] When it comes to property investment, there’s no shortage of information available about what budding investors should do in order to ensure success. But perhaps more important are the pitfalls to avoid so you don’t become a statistic of the property game. While many investors start out with the intention of making it big in real estate, only a handful will ever get past their first investment and even less will create real wealth by climbing to the top of the property ladder. To help you out, I’m going to share with you a basic guide to property investment for beginners. In this article, I’ll explain 10 of the most common mistakes investors make and some tips on how you can overcome these to win big with real estate.

1. Heart over Head

When buying a home, about 90% of your purchasing decision will be based on emotion and only 10% on logic. This is understandable, as your home is where you’ll raise a family. It’s your sanctuary. When it comes to investing, however, letting your heart rule your buying decision is a common trap to be avoided at all costs. Allowing your emotions to cloud your judgement means you are more likely to over-capitalise on your purchase, rather than negotiating the best possible price and outcome for your investment goals. Beginning property investors should always buy the property based on analytical research. Will it provide the gains and returns you require? It is in the best location to attract quality tenants? Will it appeal to the owner-occupier market that sustains property prices in the long term? By answering these questions, rather than buying a house because you loved the curtains or thought it would make a good holiday retreat, you’re thinking based on financial gain rather than personal feelings. And at the end of the day, investing is all about economics, not the emotions.

2. When beginning property investors fail to plan, they plan to fail

It’s an old adage but very true. The key aim of most beginning property investors is to build a lucrative property portfolio. One that will one day give them financial freedom. However, doing so without a plan of attack is like setting out on a road trip without a map…you’ll inevitably take a wrong turn and end up lost! In reality, planning is bringing the future into the present so you can do something about it now! Successful wealth creation through real estate requires you to set goals, determining where you want to end up, and then devising a cohesive plan to get there. You need to focus on both the short and long term and ensure your investment decisions gel with your overall strategy. Work out what you want to achieve with regard to income – are you chasing short term yields or long term capital growth – and how you can best manage your cashflow as a smart investor. What type of property do you need to buy in order to meet your income goals? With a carefully thought through outline of your investment journey, you will end up exactly where you want to be. So plan your action and then action your plan. If you’re a beginner looking for a time tested property investment strategy or an established investor who’s stuck or maybe you just want an objective second opinion about your situation, why not let the independent property strategists build you a personalised Strategic Property Plan. When you have a Strategic Property Plan you’re more likely to achieve the financial freedom you desire because we’ll help you:

Define your financial goals;
See whether your goals are realistic, especially for your timeline;
Measure your progress towards your goals – whether your property portfolio is working for you, or if you’re working for it;
Find ways to maximise your wealth creation through property;
Identify risks you hadn’t thought of.

And the real benefit is you’ll be able to grow your wealth through your property portfolio faster and more safely than the average investor.

Click here now and learn more about how you could benefit from having a Strategic Property Plan built for you.

3. Diving in or Dithering

Two of the most common traits of budding real estate investors who never make it beyond their first property (or sometimes never even make it to their first!), are either acting too impulsively or being overly cautious and never acting at all. The first is being in too much of a hurry. They think they have to have it all yesterday. They attend one seminar and buy into the first crazy scheme they’re sold without thinking it through and when it doesn’t make them rich overnight, they lose heart and throw in the towel, saying property just isn’t for them. The second are procrastinators and their own worst enemy. They attend every seminar, read all the books, listen to all the property podcasts and watch all the videos, only to end up overloaded with information and unable to act. We call this paralysis by analysis. While the former can sometimes learn from their mistakes and make a success of their investment endeavours, the latter will never overcome their fears. The best you can do is find a happy medium – sure, learn as much as possible to make you comfortable with your investment decisions but don’t think you can ever know it all before you begin. You will always have something else to learn and the best way to gain knowledge is to immerse yourself in the game itself. At the moment with all the property pessimists out and about and negative property media, many investors are second-guessing themselves and wondering if it’s a good time to buy or whether they should wait for the market to bottom. Don’t try and time the markets…even the experts get it wrong! Of course, I understand why investors would think it’s the right thing to do. I know many financial planners recommend ‘when-to’ investments, which means you have to know when to buy and when to sell. Timing is crucial with these investments: if you buy low and sell high, you do well. If you get your timing wrong though, your money can be wiped out. Shares, commodities, and futures tend to be ‘when-to’ investments. I would rather put my money into a ‘how-to’ investment such as real estate, which increases steadily in value and doesn’t have the wild variations in price (if, and only if, you buy the right type of property.) Yet is still powerful enough to generate wealth producing rates of return through the benefits of leverage. While timing is still important in ‘how-to’ investments, it’s nowhere near as important as how you buy them and how you add value. ‘How-to’ investments are rarely liquid but produce real wealth. Most ‘when-to’ investment vehicles (like the stock market) produce only a handful of large winners but there tends to be millions of losers. On the other hand, the real estate produces millions of wealthy people and only a handful of losers. Having said that if you also get the timing right with property investment, if you buy at the right time in the property cycle, it can massively accelerate your investment returns.

4. Speculation over Patience

I’ve found many beginning property investors are hoping to become overnight millionaires. They think the property will be a quick fix to their financial problems, but the truth is seeking short term gains in real estate is more about speculation than strategic investing. The primary reason that bricks and mortar is a long term prospect is that it lacks the liquidity and hence the volatility of other assets classes, such as shares. In other words, it’s not all that easy to buy and sell property, and doing so will rarely make you rich. It takes time to sell real estate and then there are the numerous costs involved, including capital gains tax. Where some might see this as a shortcoming, I see it as a strength; because the property is a proven commodity that we all need, it has the tried and tested ability to provide steady, long term gains through the power of compounding. In other words, you use the gains you make from one property to leverage into another property and then with the combined gains you make from those two properties, you buy more to add to your portfolio. Better still, you can use other people’s money (borrowed from the banks) to do so. No other commodity gives you the ability to do this so successfully. By approaching property investment with patience and persistence, you will gain far more success (and wealth) than if you seek out the “next big thing”. Securing proven, high performing property that grows consistently over the long term is the only way to ensure you make it to the top of the property ladder. Just look what’s happened to property values over the last 25 years… The median house value nationally has risen by 412%, or $459,900. Twenty-five years ago, the median house value across Australia was just $111,524 and units showed a slightly higher median value, at $123,840. Since 1993, median house and unit values have increased by 412% and 316% respectively, providing homeowners with a significant wealth boost. The capital gain over the past 25 years equates to an annual growth rate of 6.8% for houses and 5.9% for units and in dollar value terms. The median value of the typical Australian house has risen by $459,900 since 1993 and unit values are $392,000 higher. But, as always… Long term annual capital gains have been reasonably diverse across the capital cities, with growth in house values ranging from 5.9% per annum in Adelaide and Brisbane to 8.1% in the Melbourne property market. Across the capital city unit markets, annual growth rates have ranged from 4.1% in Darwin to 6.6% in Melbourne. In dollar terms, the Sydney property market stands out, with the average annual increase in house and unit values equating to $34,426 and $23,594 per annum respectively over the past twenty-five years. The diversity in growth rates over a long period of time highlights the cyclical nature of the housing market, with dwelling values rising at different speeds from region to region and period to period. What’s ahead for property values? If property prices were to rise at the same rate as the past twenty-five years, Australia’s median house value would reach $2.9 million by 2043. While the past isn’t always the best predictor of the future, it’s a worthwhile benchmark to consider where housing values maybe twenty five years from now. Based on national house values rising at the annual rate of 6.8% per annum over the past quarter of a century, in 2043, the national median house value would be approaching the $3 million mark ($2.93) and the median unit value would be just over $2.1 million ($2.15). Source: CoreLogic Median values have been extrapolated based on applying the annual compounding growth in median values over the past twenty-five years to current median house and unit values.

5. Not doing your homework

Understanding property markets takes time. And getting to grips with the cyclical nature of real estate is something that even eludes many experts. So don’t think you can attend a seminar or two, or read a couple of books and have a handle on exactly what to buy. Sure you can research an area on the internet or go to 100 open for inspections. The problem is what is lacking in perspective and that’s something money can’t buy. The trouble is most beginning investors get this step wrong because there’s a big difference between knowing your local neighbourhood and understanding the investment fundamentals of your property market. That’s why more and more property investors and homebuyers are turning to the independent team of property strategists and buyers agents at Metropole to help level the playing field for them. Why not click here now and leave us your details and have a complimentary, obligation-free session with one of our property strategists to discuss your individual needs & let our unbiased property strategists formulate a plan or review your existing portfolio.

6. Buying the wrong property

Of course, this is one of the biggest investment blunders of all! Firstly you’ll need to choose the right investment location, one that will outperform the averages because it is going through gentrification, or because it is where affluent owner-occupiers want to buy. Then you’ll need to buy an investment-grade property – one that will remain in continuous strong demand by owner-occupier and tenants in the future. With close to 10 million properties around Australia, less than 2% of those currently on the market are what I would call investment grade. You may want to read: What makes an investment-grade property.

7. Poor cashflow management

It’s easy to fall into the trap of poor cash flow management as a beginning property investor. Understanding all of the costs involved in acquiring and holding property can be difficult and you should always seek the advice of a professional accountant who knows about real estate investment to ensure you know exactly what you’re getting into financially. You also need to make sure that you can afford to hold onto any property you buy. In other words, how much income will your investment(s) generate and will it be enough to cover your outgoings? If not, can you manage any shortfall? Don’t forget to account for any contingencies, such as extended vacancy periods or unexpected maintenance costs. A good rule of thumb is to allow about 10% of the property’s value for costs such as rates, land taxes, insurance, maintenance, and management fees. It’s great to dream about the riches you can make from real estate, but it’s critical to enter into property investment with your eyes wide open when it comes to all the out of pocket expenses you’ll incur along the way. Examine each potential investment analytically and ensure you make adequate allowances. By underestimating your income and overestimating your expenses you’re more likely to avoid any nasty surprises. You may also want to read: Your complete guide to property investment

8. Financing faux pars

As you progress through your property journey you’ll realise that real estate investing is a game of finance with some houses thrown in the middle. So the best advice I can give any beginning property investor when it comes to financing your property investments is to seek help from a qualified, professional mortgage broker. Going it alone can be daunting and time-consuming and obtaining the right type of finance can save you thousands in the long run. Setting up an incorrect financial structure can be just as detrimental to your investment endeavours as selecting the wrong type of property. There are numerous considerations to make here and a good broker who understands investment will be able to guide you in the right direction. To help you understand what I’m getting at you may also want to read: 10 Things your Banker won’t tell you!

9. Being less than thorough

So you’ve found the right property and you’re ready to make a move. Have you really done every little bit of research into the investment? Do you know why the vendor is selling? Knowing the vendor’s motivation can make a big difference when it comes to negotiating a good price. During the initial inspection look for clues as to the vendor’s personal situation; are they going through a divorce for instance? While it might sound a little callous, this gives you an opportunity to buy a bargain, as well as giving the seller a chance to move on with their lives. Have you had the relevant inspections done to uncover any structural defects or signs of pest infestations, like termites? The fees for these are tax-deductible and paying say $800 for this type of peace of mind can save you thousands in the long term. Finally, is the property liveable from a tenant’s perspective? Remember, while you won’t be living here, someone else will, and they’ll be paying you to do so. Ask yourself, is the floor plan appealing and will the property provide a comfortable, practical home? Always do a second and third inspection at different times of the day. Is it noisy during peak hour? How does light work at different times? Are the neighbours party animals or quiet? Ticking all of the right boxes when you inspect a property will ensure you buy the best possible investment every time.

10. Saving by self-managing

You’ve done all the groundwork and secured the perfect property investment…now the hard work really begins! Many investors think by self-managing their portfolio; that is finding their own tenants and acting as their own property managers by organising the collection of rents, maintenance, etc will save them a packet and give them greater profit. Wrong, wrong, wrong! In the short term, this might seem plausible enough, but what happens when you have a portfolio of say twenty properties? The ongoing management of such a portfolio essentially amounts to a full-time job! You have to find and qualify suitable tenants, know the laws pertaining to renting, have a firm grip on the value of your rental, conduct regular inspections to ensure your tenants are looking after your asset, collect the rent, represent yourself at tribunal should things go awry, deal with all the maintenance issues that crop up and be on call 24/7 for your tenants. Sound appealing? I didn’t think so. Paying a professional property manager to handle all of these things on your behalf will not only mean you get the best outcome for your rental property in terms of a good tenant and the best possible returns, but it will also give you something just as valuable as money when it comes to investing – time. All of that time spent managing your properties could be put to far better use…finding more investments to add to your portfolio and generating even greater wealth.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

If you’re wondering what will happen to property in 2020–2021 you are not alone. You can trust the team at Metropole to provide you with direction, guidance and results. In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award-winning team at Metropole. If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! This will give you direction, results and more certainty. Click here to learn more
Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.

You may also want to read:

Where Smart Investors Are Looking to Buy Real Estate in 2020

2020-10-24T13:58:14.000+00:00

From the rolling hills to the riverbanks, the landscape surrounding Cincinnati is picturesque. Located along the Ohio River in the southwest corner of the state, residents experience a wide variety of temperatures, with snow in the winters for Christmas and hot summers. Known as the “Queen City of the West,” Cincinnati has become popular among professionals and millennials looking for an affordable place to raise a family. The University of Cincinnati, Xavier University, and other nearby educational institutions attract more than 50,000 students to the area. The Cincinnati metro actually bleeds into Indiana and Kentucky and is the third largest metro area in the United States. Ohio has the 7th largest economy in the Midwest and the total GDP for the Cincinnati metro area is around $141 billion dollars. The median household income is approximately $65,000. Cincinnati's affordability and job growth continues to attract a diverse population, which is a major reason it has become a hot spot for investors looking for cash flow. Some neighborhoods have delivered high appreciation over the past few years and continue to. That said, our world has experienced a lot of change and uncertainty in 2020. No city or state in the U.S. has gone unscathed by the coronavirus pandemic. But there are still strong real estate markets out there and key indicators of a healthy market remain the same. First, let’s consider how COVID-19 has impacted Cincinnati and what it means for investors looking to buy there.

The Impact of COVID-19 on Cincinnati

Before COVID-19 crashed the party, the national unemployment rate was at an all-time low. When the pandemic forced businesses to shut down, most states began seeing job losses pile up quickly and unemployment claims skyrocket. As of August, national unemployment rates were around 8.5%. In the Cincinnati metro, the unemployment rate was 8%. As the economy reopens, jobs are coming back. About 600,000 jobs returned to the nation’s workforce in September. The good news is, Cincinnati’s workforce is expected to go up by at least 6% over the next 10 years. More jobs means more people, and people will always need a place to live.

4 Best Practices for Investing in Cincinnati

No. 1: Invest in properties that the average person in the area can afford.

A 2019 report by Realtor.com ranked Cincinnati as the second most affordable place to raise a family in the U.S. The cost of living is 10% below the national average. Housing expenses are 24% less when compared nationally. Healthcare costs are 2% below the national average and utilities and groceries cost less, too. The median home price in Cincinnati proper is $174,276 (as of October 2020), which is 33% below the national average. The average home price in the Cincinnati metro area is currently $197,135—a 7.2% increase compared to last year. Zillow predicts home values will go up 5.3% over the next year. Overall, Cincinnati is amazingly affordable compared to other big cities around the country.

No. 2: Invest in areas that are growing.

Over 1,000 people moved to the city of Cincinnati last year. The total population of the metro area is about 2.2 million. The number of people moving to the Cincinnati area has steadily increased over the past 10 years. While the rate at which people are moving to Cincinnati may not be as high as other cities around the country, the growth is steady. As of 2019, the best up-and-coming neighborhoods in the Cincinnati area include:

Downtown
Walnut Hills
Mount Adams
Oakley
West End

No. 3: Invest in areas with job growth.

In September, almost all employment sectors in the Cincinnati metro saw job gains. More than 12,600 jobs were added to the metro. The industries with the biggest job gains were: government, professional and business services, trade, transportation and utilities, employment services, education, and health care. Job growth in the greater Cincinnati area since last month was up 1.2%. However, there are still 5.5% fewer jobs than there were last year, due to the pandemic. Cincinnati, like many towns in the Midwest, was known for manufacturing. While manufacturing is still a big contributor to Cincinnati’s economy, jobs in other industries are growing, as well. Health care, service, and business and professional sectors all play a major role in adding jobs to the workforce in Cincinnati. Cincinnati is home to more than 30 Fortune 500 companies. The city’s largest employers include:

Kroger (21,000+ employees)
University of Cincinnati (15,000+ employees)
Cincinnati Children’s Hospital Medical center (12,000+ employees)
Procter & Gamble (12,000+ employees)

Other major employers with headquarters in the Cincinnati area are Macy’s, GE’s Global Operations Center, and TriHealth. Nearly a fifth of the jobs around Cincinnati are health care jobs. CVG or Cincinnati/Northern Kentucky International Airport sees more than 8.9 million people travel through their airport every year. CVG provides direct flights to 38 top markets across the U.S. and Europe. One of DHL’s Express Super Hubs moves upwards of 1.2 million tons of cargo coming through the airport.

No. 4: Invest in areas with strong rental demand.

The average rent for an apartment in Cincinnati is around $1,007 per month—well below the national average. Rents have gone up 4% compared to 2019 and 30% in the last five years, according to Zillow. Cincinnati has high rental demand. More than half (55%) of all households in Cincinnati are renter-occupied, while 44% are owner-occupied. This demand is in large part due to the student population that the educational institutions attract. Over a third of residents have at least a bachelor’s degree. And 87% have either a high school diploma, some college education, or are university graduates. The best neighborhoods around Cincinnati for young professionals include:

Downtown
East Walnut Hills
Hyde Park
Mount Lookout
Over-the-Rhine

The best neighborhoods around Cincinnati for young families include:

Deer Park
Pleasant Ridge

The best neighborhoods around Cincinnati for rental demand are:

Pleasant Ridge
College Hill
Loveland
West End
Evanston

Sample Properties in Cincinnati

Here’s an example of cash-flowing rental property located in a good market in Cincinnati. (Keep in mind these numbers are estimates.)

Sample Property No. 1: Single Family Rental

Property: 4-beds, 2.5-baths, 1,700 square feet
Purchase Price: $219,900
Down Payment if Financing: $43,980 (80% loan-to-value at 4%)
Initial Cash Invested (including closing costs): $48,378
All Cash Purchase Initial Cash Invested (including closing costs): $222,099
Monthly Rental Income: $1,725
Monthly Cash Flow: $462 with loan; $1,302 cash purchase
Annual Cash Flow: $5,544 with loan; $15,624 cash purchase

Sample Property No. 2: Single Family Rental

Property: 4-beds, 2.5-baths, 1,646 square feet
Purchase Price: $229,900
Down Payment if Financing: $45,980 (80% loan-to-value at 4%)
Initial Cash Invested (including closing costs): $50,578
All Cash Purchase Initial Cash Invested (including closing costs): $232,199
Monthly Rental Income: $1,845
Monthly Cash Flow: $451 with loan; $1,359 cash purchase
Annual Cash Flow: $5,412 with loan; $16,308 cash purchase

Conclusion

Savvy investors look for markets that are recession-proof. The Cincinnati housing market was barely affected by the last downturn. Today, it is one of the fastest recovering markets after the COVID-19 shutdowns. The laws are landlord friendly and the home prices are low, while rents continue to rise. Cincinnati is one of the last places in the U.S. where you can still get high cash flow and the potential for appreciation over time.

How Much Does It Cost to Sell a House? The Ultimate Guide

2020-10-23T17:29:04.000+00:00

Did you know that in 2020, existing home sales reached a 14-year high in the month of August? This, of course, has to do with the extraordinary circumstances surrounding the outbreak of the coronavirus pandemic. Whether you’ve been thinking about selling your house for a while or recent events have led you to consider the possibility, it’s important to factor in all the costs associated with selling a house. How much does it cost to sell a house? Let’s take a look.

Realtor’s Commission Fees

One of the biggest fees you’ll pay when selling your house is the real estate commission. This is usually 5 or 6% of the sale price. This means that if you sell a house for $300,000, your commission fees could end up being a whopping $18,000. The seller almost always bears the cost of the commission, which is typically split between the buyer’s agent and the seller’s agent. It’s possible to negotiate a lower commission. Agents are usually more willing to do this if the local market is strong, the listing price of the home is high, or if the house is otherwise expected to sell quickly. If you forgo having a real estate agent in order to avoid these fees, you will have a lot more duties than you will with an agent.

Major and Minor Home Repairs

There are likely a number of projects you’ve been putting off that could enhance the value of your property. This can mean anything as small as fixing a leaky faucet up to redoing the kitchen or bathroom.

Home Pre-Inspection

Having your home inspected before selling it is completely optional. This might cost roughly $400 or even more. Some sellers decide that this cost is worth it because it gives them time to know what issues might come up for potential buyers. This means that they can go ahead and fix things before putting the house on the market. You should know, though, that if a pre-inspection brings up material defects of your property, it’s your responsibility to disclose these issues to buyers.

Home Staging

Lots of people will repaint the interior and exterior of their homes before selling. They also might do things like putting in new flooring. On top of this, it’s become increasingly popular to stage homes. The median amount spent on home staging according to a 2019 report was $400. The cost can vary widely depending on whether or not you hire a professional, how big the home is, how long the house is on the market, and several other factors. This is a particularly good idea if your house is vacant. Having staging furniture and decor can help potential buyers envision themselves living in your home.

Landscaping

People like to spruce up the outside of their house before listing as well. If your landscaping is leaving a lot to be desired, it could be harming the curb appeal of your home. This can mean anything from adding some flowering plants to installing a walkway. Whether or not you hire professional landscapers will have a big impact on the cost. Either way, you want your lawn to be well-manicured and well-taken care of.

Cleaning

Before you start having showings or open houses, you’ll want to make sure your house is sparkling clean. This might mean hiring a professional cleaning service. If there are any carpets in the house you’ll want to get them steam cleaned by a professional and the windows washed as well.

Professional Photographs

The photographs of your home is one of the things that draws people out to check out your place. This means that getting a professional real estate photographer to take and edit the pictures is often a very good idea. This is one of the costs associated with selling a home where the investment is small but the payoff can be huge. The cost of hiring a professional photographer will vary depending on your local market and the size of your property. Typically, though, it costs between $150 and $200. The cost of paying a professional photographer is sometimes covered by a full-service listing agent.

Marketing Costs

If you hire a real estate agent, this will typically be covered by them. If you’re selling your house FSBO, though, you’ll have to do all the marketing yourself. Have you made it this far into the list and are realizing just how many fees there are when it’s time to sell your house? You can avoid a lot of these by choosing to sell your house fast.

Mortgage Payoff

When you sell your home, the money will first go to pay off your outstanding mortgage. There will be a payoff amount listed on your mortgage statement, which tends to be slightly less than you owe. Sometimes there is a prepayment penalty attached to mortgages, so that’s something to look into. There will also likely be prorated interest that will be added to the balance.

Closing Costs and Other Fees

Normally, the buyer takes care of the closing costs. However, if you’re in a buyer’s market don’t be too surprised if they ask you to cover these fees. These costs could include attorney fees, property taxes, homeowners association fees, title insurance, and transfer taxes. It’s possible that you’ll be asked to pay a courier fee, an escrow fee, and a brokerage fee in addition. Closing costs typically end up being between 2 and 4% of the amount the house sold for.

Capital Gains Tax

Another thing you’ll want to keep in mind is taxes. If you are able to sell your home for more than you bought it for, it’s considered a capital gain and you might have to report it as a part of your federal taxes. Luckily, though, lots of homeowners are eligible for a tax break. Up to $250,000 of the profit can be excluded for single people and $500,000 for married couples filing jointly of their primary residence from their taxes. The catch is that you can’t have used the same tax break within the last two years. You can only utilize this tax break if the house you profited off of was your primary residence for at least two of the last five years.

Property Tax

Property taxes are often paid in advance. Up until the closing date, you should pay the prorated amount of the tax if you’re selling a house. This money should be placed in escrow. It’s possible that you’ll actually get a rebate at closing if you already paid your property taxes for the year.

Home Warranty For Buyer

When sellers want to make a deal more appealing to a buyer, sometimes they pay for a home warranty. The cost of this depends on the coverage but can cost somewhere around $300 to $500.

Relocating Costs

There are a number of costs associated with relocating when you’re selling your house. You’ll have to factor this in when you’re asking the question: how much is it to sell a house?

Temporary Housing

It is nearly impossible to get the timing perfectly right when selling a house. You can either buy a new home and cover two mortgages for a while, or live in temporary housing between closings.

Utilities

If you aren’t living in your home but showing it on the market, you’ll also have to cover utility costs. Once the house is sold and you’ve totally vacated, make sure to turn off the utilities so you’re not paying more than you have to.

Moving Costs

How much it costs to move can vary widely. It depends on whether or not you hire pros, how big your house is, how much stuff you have, and the distance between your old home and your new one. Even if you do it yourself, though, it’s important to understand that there are always costs associated with moving no matter how frugal you try to be.

Homeowners Insurance For Vacant Property

If you’re moving out of your home before it has sold, it’s important to know that your current homeowner’s policy might not cover the property if it’s vacant. Talk to your agent if you’re going to be leaving your house empty.

How Much Does It Cost to Sell a House? The Short Answer: It Depends

How much does it cost to sell a house? This has to do with a number of different factors, but it isn’t necessarily cheap. While some of the costs come out of what the buyer is paying you, other costs will need to be made before the house is on the market.Did you find this article about the cost to sell a house useful? If so, be sure to check out the rest of our blog for more informative articles!

7 Repairs to Make Before Selling a House

2020-10-23T17:29:03.000+00:00

As of August 2020, most homes in the US stayed on the market for 56 days on average, from listing to closing. Sure, this was 8 percent less time than homes spent on the market a year prior, but it’s still a long time when you’re looking to sell your home quickly and move on. The fact is it’s possible to get your home to sell weeks faster than other homes in the area and still make a handsome profit in the process. The best way to do so is to make sure that, before selling a house, you invest in strategic home repairs. Of course, selling a house as is will still attract offers, but chances are these offers will be few and much less than what you expected for the house. Getting a reputable contractor to give your home the necessary house repairs and touchups before you list it boosts your chances of getting generous offers the moment you put it on the market. So, which improvements will do the most to entice potential home buyers? Read on to learn more.

1. Start With the Roof

The roof plays a huge role in a home, so every potential buyer will be greatly interested in finding out the condition of this essential part of the house before signing any papers. Get a seasoned roof inspection expert to inspect your roof. If you recently replaced your roof or have kept up with regular maintenance, chances are you don’t need to worry about expensive repairs. However, if the roof inspection reveals certain structural flaws, address them immediately. Of course, the top question on your mind right now may be, “How much will it cost to replace my roof?” That depends on structural factors, including:

The type of repairs required
The materials used
The pitch of your roof
The time of year you’re doing the repairs
The roofing company you work with

To give you a good idea of what you should expect to pay for roof repairs, the current national average cost is $896.

2. Repair Damaged Flooring

What’s the state of your flooring? Do you see damaged-up wood or tired linoleum? Is the carpeting worn out? A roof that’s in bad shape is an instant turn off for many home buyers. Just one step inside your home is enough to make a potential buyer scratch the home from their list. If you’re serious about enhancing your home’s value before putting your home on the market, then invest in top-notch floor repair. In case your home has different flooring types for different rooms, you may consider investing in a new floor that’s uniform for all rooms. The goal is to have a seamless feel throughout the home. What if you cannot afford to overhaul the entire flooring and install a new one? Well, you can still consider refinishing it, especially if you have a hardwood floor. Fitting new carpeting is also a cost-effective floor improvement project that can help.

3. Repair the Doors and Windows

Another thing you need to pay attention to before starting the process of selling a house is whether the doors and windows are in good condition. Outdated doors and creaking windows will scare away even the most willing buyer. If you’ve been using the same doors and windows for decades, chances are some of them don’t close or open properly. Don’t assume that buyers won’t notice these things. Address these issues on time.

4. Rid Your Home of Any Leaks

Leaks in your home may be caused by a variety of problems, including plumbing issues. These leaks can cause water damage, which is the last thing a potential buyer wants to deal with after purchasing your home. The solution is to look for any signs of water leaks in your home and deal with them before listing your home. Inspect around showerheads, faucets, and the swimming pool. Walk around the basement and check for any indicators of nearby leaks. Once you notice any leaks, don’t try to cover them up. Have a contractor patch them up, so they don’t come up during the home inspection.

5. Give the Walls a Paint Job

Giving a home a paint job is a low-cost upgrade that has a huge ROI. An attractive coat of paint can immediately give your home the aesthetic appeal it needs to attract many buyers. Rather than choosing the type and shade of paint to use based on your preferences, get a professional to help out. That’s because a trained expert can recommend paint options that show your property in its best light.

6. Remodel the Kitchen

There’s a reason that many people consider the kitchen the heart of a home. A great kitchen will have buyers scrambling for your house. Don’t give the kitchen a full renovation though as the cost of doing so may be very high. Instead, focus on low-cost upgrades that make the greatest impact. For instance, you can update the hardware, replace the countertops, and repaint the cabinets. Consider replacing the backsplash and updating the lights too. These simple updates can leave your kitchen looking glam without costing you too much.

7. Landscape Your Yard

Now that you’re finished with the interior of the home, it’s time to focus on the outdoors. The yard is among the first areas of your home people see first. You need to make sure that potential buyers like what they see to boost your chances of getting great offers. If your yard looks patchy, overgrown, or generally neglected, it’s time to sort that out. There’s hardly a better occasion to hire the services of a professional lawn maintenance services. A lawn that looks refreshed and lush can create a powerful first impression, which is exactly what you need when selling your home.

Always Do Necessary Repairs Before Selling a House

Selling a house quickly and for the right price does not need to be the preserve of professionals. All you need is to prepare the home well before listing it on the market. Get your home in the right shape, and you’ll have buyers lining up to snatch it up in no time. Would you like to read more great content on home repairs? Please keep visiting our blog.

Is renovating my home a good investment?

2020-10-05T23:11:13.000+00:00

Many of you may be wondering if you should renovate your house if you are planning to sell it when it reaches the minimum occupation period (MOP) of 5 years. While renovated houses tend to fetch a higher selling price, some features in the house may also hinder a buyer’s decision whether to purchase it or not. These tips explain which home features do well when selling your home and which you can probably skip and save on.

Save: Cabinetry

Built-in shelving creates bulk in rooms and will wear and tear over time. Buyers are unlikely to pay extra to hack them.

Splurge: Paint

Updating colour is a cheap way to revamp a space. Before selling off your home, be sure to give your walls a fresh coat of paint.

Save: False Ceilings

False ceilings make the room appear smaller, which is counterproductive especially in small HDB homes.

Splurge: Bathroom

The bathroom is one of the most overlooked places in the home. However, a well-maintained bathroom most often seals the deal.

Other considerations

My advice would be to stick to a budget, however, I would not recommend going cheap with your renovation. You want a house to go home to relax to, without any worries. At the end of the day, this is your home you will build with your spouse and children and create many memories together even in those short five years. Create a home that feels good on the inside, not one that just looks good on the outside.

5 common mistakes to avoid when investing in real estate

2020-10-05T22:46:05.000+00:00

For most people the main purpose of buying real estate as an investment is to make profit. However, there can be instances where you might buy a property without considering all factors involved and without calculating the full cost. And when you do this, you may not get the returns you wanted, or worse, make a loss. To make sure you don't make a loss while selling the property or even end up being saddled with an illiquid investment, here are five mistakes to avoid while investing in real estate. 1. Not knowing your credit score If you apply for a loan for your property purchase, your lender is going to investigate your credit history. Adhil Shetty, CEO, BankBazaar.com said, "Any problems in your credit history may lead to a loan application being rejected or being approved but with a high rate of interest. The best loan offers are typically reserved for borrowers who have a credit score of 750 or more. They get the benefit of the lowest rates." Therefore, before you apply for a loan, take a few minutes to check your credit score online. 2. Not weighing full cost of real estate investment When you invest in real estate, you must weigh the full cost of investment. For instance, on a base price of Rs 100, your additional charges of homeownership such as GST, registration, stamp duty, brokerage, furnishing, costs of borrowing etc. can easily pull the whole bill to Rs 120 or Rs 130. Shetty said, "In an under-construction property, you will need to pay GST at 5 per cent, and 5-7 per cent on registration and stamp duty depending on your state norms. Furnishing the house maybe another 5 per cent. You may be looking at 15 per cent of your base price easily. If the cost is Rs 1 crore, you will need to spend Rs 15 lakh on these additional costs." Shetty further explained: Assuming a base price of Rs 100 for a resale property in Delhi, the additional charges may be Rs 7 for stamp duty and registration. Apart from this, you may pay a charge for costs of borrowing (processing fees and MOD charges), which may be upwards of Rs 0.10, or brokerage of up to Rs 1. Assuming the house to be unfurnished, one can also add Rs 3-5 in most cases for furnishing costs, but this is a matter of taste and budget, so costs could vary wildly from one case to another. Besides, a bank will typically fund 75 per cent in a high-value loan or up to 90 per cent in a low-value loan. The rest needs to be provided by you. Therefore, in most cases, you are going to need at least 20-25 per cent of the budget ready as cash in hand, says Shetty. 3. Impulse buying Santhosh Kumar, Vice Chairman, ANAROCK Property Consultants said, "A buyer should have checked out at least 10 properties before the search can even begin to be comprehensive. Impulse buying can happen if one has insufficient resistance to sales pitches, or if one is wooed by freebies which have nothing to do with the value of a property. Often, an unethical broker guided purely by commission will be instrumental in one buying an inappropriate property." 4. Not doing one's homework and due diligence A good property purchase is always the result of adequate personal research on several different variables. Apart from the obvious ones of price and location, the buyer should also factor in how much space he or she will need further down the line, whether the infrastructure of the area will improve, whether the property is under litigation or otherwise legally problematic, and who the seller is. "When it comes to developers, sticking with reputed names is a major way of de-risking the proposition. Likewise, a buyer should check out the neighbourhood infrastructure and decide if it is adequate for the family's needs, what the price trends have been over the last 5 years, and if all necessary facilities are available nearby," Kumar said. 5. Not comparing with other forms of investment Purely as an investment, it's much easier and far cheaper to invest in financial instruments such as mutual funds, small savings, or equity. The costs of and barriers to financial investing are negligible. Unlike real estate where you'll need to pay maintenance costs and property tax, there are no costs of maintaining your investments barring minor charges such as demat annual fees, brokerage, expense ratio in case of mutual funds etc. It's also much easier to get out of financial investments. Financial investments can be part-liquidated when you need liquidity. But you cannot part-liquidate a property.

Buy vs Rent and Invest: Planning for Financial Independence

2020-10-04T14:47:10.000+00:00

Reading Time: 11 minutes I’d like to help you understand how to analyze the decision of buying a home vs renting and investing your downpayment. Living arrangements are an important part of your plan for financial independence. What are the costs of owning a home and how does that affect your plan for financial independence? What’s better: buy vs rent and invest your downpayment? The final answer is almost certainly going to come with a dash of “it depends”, but I can at least teach you how to figure out how to create your own unique calculation.

Is the Best Investment You Can Make Buying a Home?

The townhouse we lived during my high school years pictured from behind. Jenni spent many after school afternoons tutoring me in chemistry here (no, really!). My parents moved into their current house in 2002. This month, they’re finishing up a significant bathroom renovation and intend to put their house on the market for sale relatively soon. And, don’t worry—I haven’t tried to convince them to use one of my recommended websites to sell your stuff to facilitate that transaction. My dad happens to have a realtor license. My parents worked hard to pay down their 30-year-mortgage early in the last 18 years and they’ve nearly done it. As I described recently, they answered the “pay off mortgage or invest” question by making lots of extra payments toward their debt over the years. My dad is often flabbergasted at the value of the house and how it’s risen since they moved in all those years ago. They keep the place spotless and maintain it well. He’ll often flippantly mention:

“This house is the best investment we’ve ever made!” My dad

But I wanted to know: is that true? Is a house really an investment? More importantly, how can you ask yourself the same question and figure out if buying or renting and investing makes better sense for you?

Buying vs Renting and Investing

At the end of this analysis I want to answer the question: were my parents better off buying their house with a 20% downpayment or renting the same home and investing the downpayment. I’d like to calculate the total cost of ownership and compare that to renting and investing.

Comparing the rate of return

Let’s start off with the easier, initial question. Is residential real estate or the stock market a better investment? We’ll take a look at my parents’ anecdotal experience and then bring in historical context. My parents purchased their house in 2002 for just shy of $350K. Today it’s worth just under $666K. Just glancing at the numbers it’s easy to see how that $316K increase in value, or potential profit, would seem like an incredible investment. Over the 18 year timeframe we’re analyzing, the compound annual growth rate (CAGR) is 3.64% for this house. We’ll use the S&P 500 index to represent “stocks”—I like investing in index funds vs individual stocks. If we took the same ~$350K and invested in the S&P 500 when they purchased the home in 2002, would the resulting value today be more or less than $666K? Make your own guess before we calculate this! On the date of their mortgage opening, the S&P 500 was at 1,153 points. The S&P 500 was at 3,363 points on the date of their most recent property value estimate in 2020. If they purchased an S&P 500 index fund with $350K in March of 2002 and left the dividends reinvested it’d be worth about $1.37M today. That’s near 4x more! The CAGR for the S&P 500 investment is 7.88%! I don’t think it’ll be a surprise to most people that the S&P 500 beat my parents’ house in terms of appreciation, but we needed to calculate this in order to set up the rest of our analysis.

Historical residential real estate return rate

How has my parents’ property compared to the average residential real estate CAGR in the US? The St. Louis Fed exposes the data for the S&P/Case-Shiller U.S. National Home Price Index to calculate CAGR easily. For the same 18 year period, the average home earned a 3.51% CAGR which was just behind my parents’ house 3.64% return rate. The CAGR for the same home price index (HPI) going back several decades suggests this is pretty close to average which is about 3.9%. HPI varies around the country. Since they purchased their home, the US went through a massive housing crunch in 2008-2009. This timeline video will give you a sense of house HPI varies around the country. Housing Price Index Source: CaseLogic & New York Fed. You can easily calculate your own CAGR via Moneychimp’s CAGR calculator. Of course, this is a very simplified comparison between index funds and a primary residence. We’ve ignored multiple key factors:

Real estate often uses leverage
Housing has additional expenses

Before diving into how additional housing expenses affect the primary residence vs stocks equation, let’s look at using debt—leverage.

Leverage in real estate investments

Simply put, a mortgage is by far the most common form of debt the average person will use to amplify an investment. This amplification through debt is leverage. If you put $70K down on a $350K house, you’ve only invested 20% to obtain the underlying asset and its growth. If the home value goes up 10% to $385K, your investment is worth $35K more whether you paid in full or not. It’s the increase relative to your initial investment that matters. You stand to have a 50% gain over your initial transaction cost in the leveraged scenario! Of course, the risky part is that if the house were to lose just 10% in value, you’d stand to lose 50% of your initial investment!

Debt can increase rate of return

Let’s reanalyze our initial rate of return calculation for the house which suggested that it earned a $316K profit off of a $350K investment over 18 years. If we only put $70K down but still earn the same $316K profit after paying the remaining $280K debt balance from our $666K sale, our CAGR rises to a whopping 8.73%! That beats long term CAGR for the S&P 500 stocks. Again, this is a simplified explanation with 0% debt interest. While it’s not something I’d do, you can use leverage (margin) to invest in stocks as well.

Mortgage interest rates’ impact on rate of return

As you near paying off your mortgage, your rate of return will decrease as you have more of your money tied up in the asset but still earn the same growth on the asset. Let’s make this quantified comparison of primary residence vs stocks a little more realistic by including the effects of leverage and the related interest on the debt. Let’s assume a 20% downpayment ($70K). In March of 2002, the average 30-year fixed-rate mortgage had an interest rate of about 7% which we’ll use.

Year	Debt ($)	Interest Paid ($)
Mar 2002	280,000	0
2003	277,893	14,651
…
2020	183,890	300,496
Sep 2020	176,618	309,983

We can see from the table above that while the home value nearly doubled over 18 years or so, almost $310K of interest would be paid with a 7% mortgage. Meanwhile, just a bit over $100K of the original debt would be paid down.

Extra costs of real estate

So far, we’ve ignored these additional housing costs:

Realtor fees
Transaction fees (transfer taxes, title, etc.)
HOA fees
Maintenance, improvement
Property taxes
Insurance

These expenses can really add up as we’ve revealed in our own annual FIRE budget, making the actual principal and interest payment look small. Not to mention the fact that interest rates these days are near historic lows. My parents have refinanced since their initial mortgage at 7%. Let’s try to account for some of these larger expense factors and also add refinancing into the equation.

Refinancing to increase real estate returns

Let’s assume a refinance occurred about midway through the payoff period with a newly refreshed 30 year fixed rate mortgage at 4% in early 2012. The fee for the refinance itself would have been around $5,500 which we’ll include in the total interest paid column at the refinancing point. Let’s take a look at our mortgage table again.

Year	Debt ($)	7% Loan ($)	4% Refi Loan ($)
Mar 2002	280,000	0
2003	277,893	14,651
…
2013	237,890	179,637	14,301
…
2020	202,959	179,637	76,305
Sep 2020	198,604	179,637	82,338

Our initial 7% mortgage sits at a total cost of $180K from the start of 2012 onward. Getting rid of the higher interest loan at 7% really juices returns. The mortgage refinancing would cut their total interest paid so far from $310K to $262K.

Ongoing costs of real estate

But what about some of those housing expenses? Property taxes are probably the element most folks would like to see included. Here’s the tax history for their property:

Year	Property Taxes ($)	Tax Assessment ($)
2020	6,098	589,140
2019	6,034	577,450
2018	5,709	526,150
2017	5,783	514,030
2016	5,887	518,080
2015	5,882	512,420
2014	5,842	505,760
2013	5,947	493,550
2012	5,602	453,600
2011	5,872	457,000
2010	5,798	451,300
2009	5,736	441,900
2008	5,774	457,500
2007	5,458	527,300
2006	6,337	612,200
2005	5,522	533,500
2004	5,308	512,800
2003	4,520	436,700
2002	3,891	375,900
Total	107,000

That’s $107K worth of property taxes they’ve paid so far on their place! What about HOA fees? Their current HOA fee is $119 per month. Over the course of their ownership, it has averaged $101 per month. That’s another $22,422. Over the course of 18 years, their home insurance has run an average of $1,140 per year. Total cost: $20,520.

Real estate transaction costs

Transaction costs when selling a home will vary from person to person. I’m going to give our scenario the benefit of the doubt in the calculation. We’ll assume my dad, with his realtor license, will sell the home himself to cut the 3% fee that is typical for a listing agent. They’ll still need to pay the buyer’s agent 3%. If they were to sell around $666K, that’s another $19,998. Transfer taxes vary as well, but we’ll lump them in with title insurance, escrow fees, attorney fees, and prorated property taxes. 1% is a common rule of thumb, which is $6,659.

Ongoing home maintenance and improvement costs

Consider that the average maintenance and improvement cost for a home is 2% per year. You can cut some maintenance and improvement costs by not being fearful of DIY projects. Nonetheless, home maintenance and improvement costs are estimated at $126K in this scenario! I know they’re working on a bathroom renovation right now I suspect will ring in at $20-30K!

Homeownership tax deductions

Back in 2002 the standard income deduction every married couple gets on their federal taxes was $7,850. People without itemized deductions would claim this standard deduction. In that year, they were certainly paying more on their property taxes, mortgage interest, and state income tax so they would have itemized their taxes. These state and local taxes (SALT) would have been deducted from their income to reduce their tax liability. The value of tax deductions for owning a home are highest in the beginning of ownership because you’re paying the most interest at the start of the mortgage. For example, we know that by 2003 my parents paid about $15K in interest on their loan. This along with the property taxes for the year ($3,891) would have resulted in an itemized deduction of about $19K. That’s about $11K more than the standard deduction. If we assume their federal and state tax rate combined was about 32%, the tax deduction was worth about $3.5K in year one! However, this number would have shrunk when they refinanced since they were paying less interest and the standard deduction has kept increasing. Let’s use 2013 as another snapshot to test the tax deduction value. With the newly refinanced loan at 4%, they would have paid $9,435 in interest. Their property taxes were $5,947. The standard deduction in 2013 for them was $12,200. Without any other deductions, their itemized deduction would be $3,182 over the standard deduction. If we assume the same ~32% effective tax rate, the tax deduction on their house was worth $1,018. With the Tax Cuts and Jobs Act of 2017, the standard deduction is now $24K for married couples. SALT deductions are also limited to $10K! Like many couples who own a single home and don’t have many itemized deductions, they’ve taken the standard deduction since at least 2018. Overall, I’ve estimated their tax deduction for owning their home as worth $36K.

Downpayment opportunity cost

Lastly, we need to account for the opportunity cost of the original downpayment. The 20% they put down on the loan to secure it would otherwise be invested over their 18 years of ownership. We know from our earlier discussion about this home’s price appreciation vs the stock market that an S&P 500 index fund would have increased more than four fold. In fact $70K invested then would be worth $274K today with dividends reinvested! The growth, $204K, is the opportunity cost of the downpayment being locked away in this house for 18 years. Adding opportunity cost into their homeownership cost calculation treats the analysis like it happens in a vacuum—as if alternatively, they could have lived at some other place free of charge.

True Cost of Homeownership

What has been the true total cost of home ownership in my parents’ scenario?

Description	Value ($)
Home Sale	665,941
Income tax deduction	36,144
Debt	(280,000)
7% Loan Interest	(179,637)
4% Refi Interest + Fee	(82,338)
Property Taxes	(107,000)
HOA Fees	(22,422)
Home Insurance	(20,520)
Buyer’s Agent	(19,998)
Closing Costs	(6,659)
Maintenance & Improvement	(126,000)
Initial Downpayment (20%)	(70,000)
Downpayment Opportunity Cost	(203,727)
Total homeownership cost	(416,216)

It’s incredible to look at this real estate investment that has increased in value from $350K to nearly double at $666K yet because of all the expenses associated with owning your own home, it can be a pretty bad investment. But the truth is, my parents didn’t buy their primary residence with an eye for it to be strictly an investment. Assuming the sale goes through at the price they expect and without any last-minute repair needs, it’s cost them $416K to live there for 18 years. Over 222 months, that’s $1,875 per month on average. Really, I don’t think that’s a bad deal! But, is it an investment? No. Their asset has cost them money, it’s not something they were able to rent out to produce cash flow and the appreciation wasn’t enough to overtake the expenses. Someone looking to retire early through real estate investing would analyze the situation from a perspective of rental rates, my parents just wanted a place to live that would increase in value, too.

Rent and invest or buy?

Let’s come back to my original question: would they have been better off, financially, to rent and invest their downpayment or to have purchased their home as they did? We’ll analyze that opportunity cost of the downpayment as an actual second scenario. The estimated rent for their home currently is $2,900 per month. There happens to be a very similar house available nearby that this rate so we’ll assume it’s accurate. Rental history for homes in the area back in 2002 shows monthly rent rates around $1,950 per month. We’ll estimate that as an average of $2,425/month over the same 222 month period. We know that had they invested $70K in the S&P 500 (or even better, a total US stock market fund like VTSAX or VTI), they would have earned $203,727 over the initial $70K. Typically, renting a home requires 1-month of rent as a security deposit, so we’ll subtract that from our $70K investment. $68,050 invested would be worth $266,102 (earnings of $198,052).

	Rent & Invest	Buy
Initial cost ($)	(1,950)	(70,000)
222-month cost ($)	(538,350)	(537,917)
Investment earnings, stocks	198,052	0
Investment earnings, home¹	0	395,428
Security deposit return	1,950	0
Net	(340,298)	(212,489)

1) Investment value, home = sale price + tax deduction value – debt – buyer’s agent – closing costs Strictly financially speaking, given rental rates for similar homes, buying was the smart move for them. The decision to buy their home instead of rent and invest their downpayment put them ahead by about $128K over their 18 years of homeownership.

Buy vs Rent Pros and Cons

As an investment, your primary residence is very unlikely to produce a positive return once figuring in all the expenses related to homeownership. On top of that, unless you rent out a portion of your primary residence, you can only rely on appreciation (which tends to be 3-4%/year in the US) to increase your total investment value. The story is much less clear when you begin to analyze buying property to rent out versus investing in the stock market, but that’s an analysis for another time. Your primary residence is almost certainly a liability. Nonetheless, as the old saying goes, you need to live somewhere. Even with all the expenses associated with homeownership, it may be smart to include it in your plan for financial independence. That’s extremely dependent on the myriad variables involved with your decision between renting or buying. If you’re quantitatively analyzing that decision, NYT has an excellent comparative rent vs buy calculator. In tighter housing markets, rental rates should reflect the underlying costs of homeownership pretty well. In that case, consider the pros of renting vs the pros of owning. Perhaps that’s more relevant to your decision that the strict financial costs. Renting pros:

Housing flexibility
Less responsibility for maintenance
More liquid assets

Owning pros:

Housing security
Easier to mold your home to your liking
Asset appreciation possibility

There are many more detailed differences between the two approaches. I think that for most people, much of the decision simply comes down to housing availability within a particular location. Many want to live in a particular place or neighborhood and the availability of rental units or purchasable units may be limited in that location. Ultimately, the most important thing you can do to help yourself to achieve financial independence is to run your own analysis and create a plan. For your own specific criteria, renting may be the smarter choice. For others, buying could be the ticket. It’s not a one size fits all question. Use the buy vs rent and invest criteria outlined in this post to help make your own smart decision on the path to financial independence.

What do you think drives people to decide to rent or buy? Which is healthier for those on a path to financial independence? Let us know in the comments!

Our Related Posts

Hemp Opportunity Zones: A New Opportunity for Real Estate Investors

2020-10-04T00:37:56.000+00:00

In August 2020, Congress established a new opportunity zone for real estate investors and business owners with the designation of Hemp Opportunity Zones. As with other opportunity zones, these come with significant, long-term tax advantages to the investor. This new type of opportunity zone could be an additional way for investors to benefit from tax advantages while gaining access to a budding industry. Learn what an Hemp Opportunity Zone is and the opportunity for investors in this market. Opportunity zones, explained An opportunity zone is intended to attract capital to low-income or undercapitalized areas of the United States as identified in the 2017 Tax Cuts and Job Act. Metrics such as the poverty rate and median income are used to classify census tracts as areas in need of economic stimulus. – Read the entire article at Motley Fool.

Investors Spotlight: Digital Realty Trust, (DLR)

2020-10-03T14:27:56.000+00:00

Financial data analysis graph showing stock market trends on a trading board. Horizontal composition with copy space and selective focus.

Digital Realty Trust, (DLR) exchanged 1725423 shares on hands in most recent trading session and observed an average volume with 1432.52K shares. The stock acknowledged active focus on shares in the current trading session. DLR disclosed a change of 1.43% and its listed share value at $149.35 in the recent trade transaction. This company belong to USA Country and part of Real Estate sector. It has a market capitalization of $M. Using market capitalization to display company size because this is basic factor of different characteristics to develop the investors’ interests including risk. PERFORMANCE REVIEW: DLR revealed weekly performance of 5.16% and shown yearly performance of 15.19%. The stock moved to 9.42% in last six months and it maintained for the month at -3.65%. The stock noted year to date performance at 24.73% and changed about 1.04% over the last three months. The stock’s price situated at -9.75% from 52 week high and stock price seen at 42.24% when looking at 52 week low price. ANALYSTS OPENION: According to data provided by FINVIZ, the current analyst consensus rating supposed at 2.3 on company shares (1.0 Strong Buy, 2.0 Buy, 3.0 Hold, 4.0 Sell, 5.0 Strong Sell). Looking ahead of 52-week period, the stock will achieve $147.89 price. This mean target price is expected by analysts. TECHNICAL INTERPRETATION: A Simple moving average is one of the most flexible as well as most-commonly used technical analysis indicators. It is highly popular among traders, mostly because of its simplicity. It works best in a trending environment. Simple Moving Average calculated as an average of the last N-periods (20-Day, 50-Day, 200-Day).The share price is positive from its 20 days moving average with 2.81% and trading from 50 days moving average with -1.15%. The stock price is performing along rising drift from its 200 days moving average with 7.77%.Any type of moving average can be used to generate buy or sell signals and this process is very simple. The charting software plots the moving average as a line directly into the price chart. Currently Relative Strength Index (RSI-14) reading of stock is 52.42. RSI reading varies between 0 and 100. Speed and change of stock price movement is measured by the RSI momentum oscillator. J. Welles Wilder developed Relative Strength Index (RSI) that is used most commonly as momentum indicator. Commonly when RSI goes below 30 then stock is overload and stock is overbought when it goes above 70. 30 to 70 are considered a normal reading of a stock. General trend, finding deviations and failure swings can be detected by using RSI. VOLATILITY ANALYSIS: Volatility remained at 2.14% over last week and shows 2.71% volatility in last month. Market risk that established with market trade and it is measured by beta factor. Beta indicator lies at 0.28. Risk is measured on the beta factor, if beta is higher than 1 then risk is higher and if beta is lower than 1, then risk will be low. VOLATILITY is also measured by ATR an exponential moving average (14-days) of the True Ranges. ATR value stands at 3.8. PROFITABILITY SNAP: Net profit margin of the company is 18.20% that shows the company earning by every dollar of sales. Gross margin is detected at 62.10% and Operating Margin is noted at 18.10%. Return on Assets (ROA) shows that the company is profitable as compared to its total assets which is 2.20%. Return on Investment (ROI) is 3.30%. Return on Equity (ROE) is 5.30%.

5 Common Home Layout Mistakes to Avoid

2020-10-03T01:32:12.000+00:00

When considering renovations to create your dream home, it’s easy to get lost in the magic of planning and imagination. Envisioning your dream home is a rabbit hole we all fall down from time to time, but that home needs careful planning—especially if you’re in the process of making the dream a reality in your remodel. Top-notch home designs, especially layout considerations, are essential to a fully-functional and stylistically beautiful home. Nothing sours a remodeling project quite like an immediate realization that a seemingly carefully-chosen design element wasn’t picked carefully enough and now creates chaos in your daily routine. Fortunately, with the foresight of planning, you can avoid these easily made mistakes before they become a problem in your home.

Carelessness with Color

Market research suggests that choosing the wrong color combinations in your home costs you significantly on resale value. Not only does it hit you in the checkbook, but poorly considered color combinations can also affect your mood as well. The right color can make a house feel like a new home, poor choices may affect the appeal for a long time. Color choices can be tested fairly easily. There are tons of online resources for visualizing your proposed mixes, or you can get some sample cans from your local hardware store and paint sections of the wall with the desired color to get a sense for how it fits in your space with your own eyes and unique lighting.

Adding Furniture Afterwards

Furniture may feel like an addition to the space of a home, but during the renovation or design process furniture is an integral part of successful home design. Adding a piece that doesn’t quite fit in a corner or against a wall can throw off the balance of the entire room. In order to make the best use of all your space, consider furniture inclusions along with the redesign, not afterward.

Mixing Communal and Private Spaces

Another no-no is creating passageways to communal areas that must snake through more private space. If you want your back porch to be an inviting place to host guests, you need its entryway to extend through the living room instead of a master bedroom. This is something architects deal with regularly, so avoiding this one should be as simple as a routine planning inspection.

Neglecting the Basement

Basements are the cornerstone of northern homes. Washing machines and storage space revolves around proper basement utilization and the prevention of damage to this fragile under home space. Maintaining your pipes and foundation and keeping up with any necessary repairs before they become major issues is a crucial part of keeping your entire home up to scratch, and it starts with the basement (check out BasementGuides.com for more on repairs and maintenance).

Ignoring Storage Needs

Speaking of storage, closet space, the laundry room, garage, and attic are all essential components of a good floor plan. If you don’t prepare for the necessary storage space in your house plan, you will have to keep items out in the open that would better be stashed away during off-season months or even year-round. Whether you have an extensive collection of Christmas and Halloween decorations or a large array of suitcases for travel, having precise and out-of-the-way solutions for keeping them safe and conveniently stored is a must in any home. Planning your remodel or upgrade in advance takes some work, but getting it right will give you your dream home without any additional fumbling or changes. Take the time to plan it all ahead of your big reveal in order to start making the most out of your space right away.

Hamptons home sales begin cooling after summer’s frenetic pace

2020-10-02T18:41:55.000+00:00

Home sales in the Hamptons, the ritzy New York getaway for Wall Street titans and Hollywood celebrities, showed beginning signs of cooling off in September after a pandemic-induced boom during the summer months. Signed contracts to purchase single-family homes rose 76% in September from a year ago as wealthy New Yorkers sought refuge from COVID-19. That’s slower than the 109% annual increase in August and 121% gain in July, according to a report on Friday by Douglas Elliman Real Estate and Miller Samuel, a New York appraiser. There were declines in signed contracts in the extreme edges of the market last month: homes priced under $500,000 dropped 55% compared with a year earlier and the number of contracts on homes priced over $20 million fell 60%. Contracts on homes priced $500,000 to $999,000 fell 1.7% from a year ago, compared with an 11% gain from a year earlier in August. September’s sweet spot was in the $4 million to $4.99 million range, which saw a gain of 240% from a year ago, according to the report. In August, the gain in that price category was 340% from a year earlier. Homes priced $2 million to $3.99 million in September saw a 213% gain in signed contracts from a year earlier, slower than the 270% gain in August, and contracts for homes priced $10 million to $19.99 million increased 200%, compared with a gain of 150% in August. New Yorkers began fleeing to less-dense areas when the nation’s most populous city became the center of the COVID-19 pandemic in April, with many opting for vacation homes in getaway spots like the Hamptons, on the eastern tip of Long Island. New York City has registered 249,000 COVID-19 infections, about 3.5% of the 7.3 million cases in the U.S., and has lost 23,829 people to the disease, 12% of the nation’s 207,791 fatalities, according to data from Johns Hopkins University.

TRID Rule Has Helped Borrowers Understand Their Loans

2020-10-02T15:31:20.000+00:00

The TRID Rule has been in effect for exactly 5 years (October 3, 2015) and the Consumer Financial Protection Bureau (CFPB) has published an assessment of its effects and effectiveness. The TRID Rule and its associated disclosures and forms was part of a mandate to CFPB included in the Dodd-Frank Wall Street Reform and Consumer Protection Act to combine previously separate mortgage disclosures given to consumers under the Truth in Lending Act (TILA) and the 1974 Real Estate Settlement Procedures Act (RESPA). Dodd-Frank also mandates an assessment of the rule within five years of the effective date. Before the TRID Rule, Federal law generally required that consumers applying for mortgages receive two different forms, one with disclosures regarding the cost of credit (TILA) and another concerning real estate settlement costs, the Good Faith Estimate (GFE). Shortly before settlement consumers received two additional forms: the final TILA disclosure and the RESPA settlement statement (HUD-1). The TRID Rule mandates an early loan estimate including that integrates the GFE and the early TILA disclosure as well as certain Title XIV Disclosures. The TRID Rule's Closing Disclosure form integrates the HUD-1 and final TILA disclosure as well as certain Title XIV Disclosures. The Rule also specifies the time frame under which the forms and disclosures are provided to the consumer. The goals of the rule include:

Facilitating compliance with the disclosure requirements of TILA and RESPA
Ensuring that consumers receive full and accurate information on their mortgages
Making it easier for consumers to locate key information
Allow consumers to compare the cost of different mortgage offers and the estimate of actual terms and costs
Aid consumers in understanding the mortgage and help them decide if they can afford a mortgage

It was also hoped that the rule would enable consumers to pick the best loans for them, know whether they actually get the price and terms they expected, allow time for questions and negotiation between application and settlement, promote more efficient closings, and lower paperwork burdens. The assessment found: § TRID disclosure forms improved prospective borrowers' abilities to locate key mortgage information and improved their abilities to both compare the features and costs of different mortgage offers and to compare estimated and actual loan terms and costs. § Most evidence showed the disclosure forms improved borrowers' ability to understand loan estimates and loan transactions. § Evidence was mixed regarding whether the Rule increased consumer shopping for mortgages. CFPB Director Kathleen L. Kraninger said that the Dodd-Frank Act does not requirement assessments to include a cost-benefit analysis, but she has made it a priority to include them. However, despite the Bureau's best efforts it was not possible to obtain the data necessary to do such an analysis of the TRID Rule. It does, however, appear to have created sizeable implementation costs for lenders and closing companies. The assessment included surveys of lenders and closing companies and found the typical cost for a lender to implement the TRID Rule was $146 per mortgage originated in 2015, or roughly 2.0 percent of the average cost of originating a mortgage. Similarly, a typical cost for a closing company to implement the TRID Rule was $39 per closing in 2015, or about ten percent of the average cost of closing. The effects on ongoing costs is less clear. Industry data indicate that mortgage lending costs have steadily increased over the past decade, but there is no data that demonstrates how much, if any, of these increased costs are attributable to the TRID Rule. This is compounded by the fact the Bureau implemented other mortgage rules at roughly the same time that also may have affected costs. Lenders indicated their largest implementation costs to be new information technology systems, policies, and training while closing companies said their costs largely stemmed from efforts to understand the requirements of the Rule and from new information technology systems, policies, and training. The TRID Rule appears to have decreased mortgage originations and increased closing times and the time it was implemented, butt these measures returned to pre-TRID Rule levels in a relatively short period of time. Originations of home purchase mortgages and refinance mortgages dropped notably in the first two months after the Rule's effective date (roughly 14 percent and eight percent, respectively) but recovered quickly. This pattern may be explained by the increase in typical closing times, which would have pushed back the origination dates for some mortgages. A mortgage quality control software provider reports the share of mortgages with at least one critical defect, one that would result in the mortgage being uninsurable as part of a security or ineligible for sale to its intended recipient on the secondary market, did increase to 1.8 percent during the quarter the rule was implemented (Q4 2015) from 1.2 percent the prior quarter. However, 1.8 percent was also the approximate defect rate in Q2 of that year.

Don't Buy A House Without A Home Inspection

2020-10-02T10:09:46.000+00:00

Here’s a sadly common example of a home buyer question that is asked after the purchase of a house with an FHA home loan has closed, the new owners have moved in, and suddenly discover there are serious issues with the property: “I did not get a home inspection when I purchased my house and now there are problems. Do I have any recourse?” If what is meant by “recourse” involves some form of intervention or relief from the lender or the FHA, the general answer is no–you don’t have any avenues of recourse when buying a home if you choose not to pay for the optional but very important home inspection and choose to rely only on the FHA appraisal instead. An FHA appraisal is NOT a home inspection in spite of the fact that many in the industry casually refer to FHA appraisals as “inspections”. How can you tell if your house has been appraised and not inspected? Because you, the borrower, are the one responsible for hiring a qualified home inspector to perform a thorough review of the house. If you did not arrange for an inspection, it didn’t happen. The other sort of recourse would be legal in nature–and the best advice we can give in such cases is to retain legal counsel with experience in your state’s real estate law to learn what options may be open to you based on the laws of your state. The FHA official site contains a publication explaining the whys and hows of home inspections titled, “For Your Protection, Get A Home Inspection”. That document includes the following: “Buying a home is one of the most important purchases you will make in your lifetime, so you should be sure that the home you want to buy is in good condition. A home inspection is an evaluation of a home’s condition by a trained expert. During a home inspection, a qualified inspector takes an in-depth and impartial look at the property you plan to buy.” The inspector’s job is to review the property including in the following ares: –Evaluate the physical condition: the structure, construction, and mechanical systems. –Identify items that should be repaired or replaced. —Estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure, and finishes. FHA appraisers DO NOT perform home inspections, and FHA appraisals must never be mistaken for an inspection. You also cannot assume the FHA as “approved” the condition of the property even with the appraisal. For Your Protection, Get A Home Inspection also reminds us, “Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property. Appraisals are for lenders; home inspections are for buyers.” FHA loans cannot move forward without an appraisal, but they can do so without an inspection-it’s the borrower’s responsibility to get the inspection. FHA appraisals are not meant to tell the borrower the home has zero defects and that the property is ready to buy. Only a home inspection will make the true condition of the home apparent.

Low Rates Forever? Not Exactly, But The Word "Indefinitely" Sounds Better All The Time

2020-10-01T21:28:00.000+00:00

Low Rates Forever? Not Exactly, But The Word "Indefinitely" Sounds Better All The Time

Mortgage rates were mixed today, depending on the lender. The underlying bond market (which dictates day to day changes in rates) has been more volatile in the past 48 hours compared to the past 4 weeks. Mortgage lenders respond to this volatility in different ways. It's those differences that account for higher rates for some lenders and lower rates for others. But those differences are only in day-over-day terms. In other words, one lender might be higher in rate compared to yesterday only because they didn't respond to yesterday's market volatility in a timely way. Specifically, lenders have a choice as to whether or not they will adjust their mortgage rate offerings based on market conditions. Some are jumpier than others. Quite a few lenders increased rates in the middle of the day (yesterday) and consequently were able to offer slightly lower rates by the end of the day today. Lenders who held firm in the face of weaker market conditions yesterday were forced to offer higher rates today. In the grand scheme of things, we're not talking about any extreme movement. In fact, rates have rarely been this calm for so many months on end. That will eventually change, but if it's going to change in a major way in the next few weeks, you'd be hard pressed to find anyone claiming to know why. In other words, rates are seen remaining in a historically low, narrow range for the foreseeable future. Many experts are thinking about that time frame in terms of months and years as opposed to days and weeks. The nearest flashpoint on the horizon is the presidential election, which always has the potential to cause market volatility. Apart from that, all eyes are on the course of the pandemic and the economy's slow battle to restore as much of its pre-covid glory as possible. The longer that takes and the slower it goes, the longer experts will be right about the low, narrow range for rates.

Invest Back Into Your Home With These Value-boosting Renovations

2020-10-01T20:25:09.000+00:00

If you’ve been on the fence about selling your home, there’s no time like the present to get moving. High demand and low inventory is driving a robust seller’s market right now, which means you can get more for your home and realize the equity you’ve waited so patiently to build. However, you can take it even further. By making strategic renovations to your home, you can maximize your return on investment (ROI) when you sell.

Rethink your kitchen

Among today’s homebuyers, remodeled kitchens aren’t just in high demand—they’re often a “must-have” item on the checklist. If your home features an outdated kitchen, it could be at a competitive disadvantage when you list, depressing buyer interest and, eventually, your return when you sell. If you’re looking to invest back into your home, a kitchen remodel is the perfect starting point. On average, kitchen renovations net homeowners a 80.5% ROI, making them well worth the initial investment. Granite countertops are an essential part of the remodeled kitchen. Both durable and beautiful, stone countertops have made the transition from being a luxury upgrade to becoming a kitchen standard. The right granite countertops, paired with new or refurbished cabinets, can be the visual centerpiece of the kitchen. When buying granite, don’t compromise for anything but the best-quality stone: it’ll last longer and look better, and it’s often worth the premium. To save on your new countertops (and cabinets), work with a wholesaler, or talk to your contractor and ask if they have any special pricing options available to them.

Give your bathroom a fresh start

Buyers also love a renovated master bathroom. In this space, focus on practicality over luxury. Sure, every homeowner likes the concept of a jacuzzi tub, but just how often will they use it compared to an upgraded shower? In general, you’ll want to prioritize replacing or upgrading the shower, vanities, toilet, and flooring. To limit your overhead and get more out of your project, try to avoid the temptation to change up the floorplan: many bathroom remodeling projects tend to balloon in costs when pipes and wiring need to be moved by a professional. At the surface, a bathroom remodel might seem like a relatively DIY-friendly project. Be careful not to bite off more than you can chew, however. When it comes to pipes and electrical outlets, we recommend you work with a professional contractor.

Make small, high-impact changes

Not every upgrade needs to involve thousands of dollars and weeks of work. If you only have a few hundred dollars to invest, you can still make a positive impact on your home’s value ahead of sale. Here’s what we recommend:

Interior painting: Give your walls a fresh coat of paint—especially if you’re planning on listing in the near future. Fresh paint sends all the right signals to prospective buyers. Plus, it’s a DIY-friendly and inexpensive project that can often be completed in a weekend or two.
New lighting: Does your house still feature sconces and light fixtures original to the home? If so, they’re probably a bit dated, and don’t put your home in its best-possible light—literally! Change out these lighting fixtures, especially in the kitchen, and both you and potential buyers will see the difference.
Landscaping: A barren backyard is a blank canvas, but it also can make a home feel sterile and cookie-cutter. If your backyard is just grass or dirt, plant some shade trees around the perimeter. This will make the house feel more like a home, while also providing some much-needed, efficiency-boosting shade.

Start with professional advice

If you’re thinking about putting some cash back into your home, you should start by talking to a local realtor. A real estate professional will be able to steer you toward high-ROI projects and give you an overview of what comparable properties in your area feature. By the time you list your home, it’ll already be in the best-possible position for a quick, high-offer sale.

Residential Construction Spending Up 7%

2020-10-01T15:22:11.000+00:00

Construction spending expanded again, with residential construction among the healthier sectors. The U.S. Census Bureau put total August public and private construction spending at a seasonally adjusted annual rate of $1.413 trillion compared to $1.393 trillion in July. This is a 1.4 percent increase and is 2.5 percent higher than the prior August. On a non-adjusted basis, the spending was $130.183 billion, about $3 billion more than in July. For the year-to-date (YTD), total expenditures of $927.705 billion are 4.2 percent above the total during the same period in 2019. Private sector spending was at a seasonally adjusted rate of $1.061 trillion, 1.9 percent more than in July and 1.5 percent ahead of spending in August of last year. For the YTD, private sector spending, at $696.743 billion is 3.6 percent ahead of last year. Residential spending on behalf of the private sector was at a rate of $589.437 billion in August, 3.7 percent growth from the prior month and a 6.7 percent year-over-year gain. Single-family construction spending was up 5.5 percent for the month at a rate of $287.884 billion, 2.9 percent more than in August 2019. Multi family spending declined fractionally (-0.1 percent) from July but was 8.9 percent higher for the year at $85.407 billion. Monthly spending (non-adjusted) on residential construction was $54.414 billion, $26.680 billion for single family and $7.393 billion for multifamily projects. YTD residential spending totals $380.106 billion, a 6.9 percent change. Single-family spending at $186.217 billion and multifamily at $54.508 billion represent increases of 3.1 percent and 0.2 percent over the comparable periods last year. Public sector construction put in place in August was at an adjusted rate of $351.392 billion annualized and $35.258 billion unadjusted. Public Sector spending YTD is up 3.6 percent to $696.248 billion. Public sector residential spending was down 0.7 percent in August to an annual rate of $9.119 billion. While the number is still small, it has increased by 37 percent from the previous August. YTD residential spending totals $5.498 billion, a 36.4 percent improvement over last year.

Pending Home Sales Just Hit a New All-Time High

2020-09-30T14:04:53.000+00:00

Contracts for existing home purchases rose for the fourth straight month in August and more than doubled the increase expected by most analysts. The National Association of Realtors® (NAR) says its Pending Home Sales Index (PHSI) rose from 122.1 in July to 132.8 in August, an increase of 8.8 percent. The PHSI, based on contracts to purchase existing single-family houses, townhouses, condos, and cooperative apartments, is now at an all time high and is 24.2 percent above its level in August 2019. The index is also up 44.6 points from the point to which it plunged in April after the widespread business closures and stay-at-home responses to the COVID-19 pandemic. Most analysts had looked for a strong report, but still didn't come close to predicting the actual gains. Those polled by Econoday had looked for an increase between 2.0 and 4.0 percent with a consensus of 3.1 percent. Analysts forecasting for Trading Economics had a consensus increase of 3.4 percent. "Tremendously low mortgage rates - below 3 percent - have again helped pending home sales climb in August," said Lawrence Yun, NAR's chief economist. "Additionally, the Fed intends to hold short-term fed funds rates near 0 percent for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtably aid homebuyers continuing to enter the marketplace. "While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly." Given the record high level of the PHSI, Yun did try to somewhat dampen expectations. He noted that not all contracts lead to closings and that, combined with the usual variations in sampling and analysis, the index may not be followed by record sales numbers in the following months. He again noted as well that without an increase in the supply of available homes this level of recovery will not be sustainable. "Home prices are heating up fast," he said. "The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment." The increase in pending sales from July to August applied to all four of the nation's major regions and did double-digit year-over-year gains. The PHSI in the Northeast rose 4.3 percent to 117.1 in August, a 26.0 percent jump from a year ago. In the Midwest, the index rose 8.6 percent to 124.5 and was 25.0 percent higher than a year earlier. Pending home sales in the South increased 8.6 percent to an index of 154.2 in August and was 23.6 percent higher year-over-year. The West saw a monthly increase of 13.1 percent and year-over-year gains of 23.6 percent. The region's index reads 120.3. The PHSI is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. Existing-Home Sales for July will be reported October 22. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

Mortgage Applications Slowed as Many Rush to Beat the Adverse Market Fee

2020-09-30T12:34:00.000+00:00

Mortgage application volume has fallen into an up and down pattern over the last few weeks and last week went to the negative side. The Mortgage Bankers Association said its Market Composite Index decreased 4.8 percent on a seasonally adjusted basis during the week ended September 25 and lost 5 percent on an unadjusted basis.

The Refinance Index fell by 7 percent but was 52 percent higher than the same week in 2019. Refinancing continues to dominate the action, although its share of total applications was down from 64.3 percent during the week ended September 18 to 63.3 percent.

The Purchase Indexdecreased 2 percent on both an adjusted and unadjusted basis from the previous week but was 22 percent higher than the same week one year ago. An unbroken string of annual increases now dates back to the week ended May 22.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"First off, we're not really seeing a big enough drop in either side of the application numbers to label it as anything other than normal volatility in the bigger picture," according to MBS Live CEO Matt Graham. "But if there is a cause and effect relationship here, it's that refinance activity is being pulled forward aspeople have rushed to get applications and locks in before getting hit with the new adverse market fee. This primarily took place on the week of 9/14 through 9/18 as that's when a majority of lenders began to re-implement the adverse market fee. A bit of a drop off in the following week (i.e. last week) is a logical consequence. Incidentally, it also helps explain the relative surge in applications reported last week."

"Mortgage rates decreased last week, with the 30-year fixed rate mortgage declining 5 basis points to 3.05 percent - the lowest in MBA's survey. Despite the decline in rates, refinances fell over 6 percent, driven by a 9 percent drop in conventional refinance applications," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week's decline in refinances. Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept."

Added Kan, "Purchase applications also decreased last week, but activity was still at a strong year-over -year growth rate of 22 percent. Even as pent-up demand from earlier in the year wanes, there continues to be action in the higher price tiers, with the average loan balance remaining close to an all-time survey high."

The FHA share of total applications increased to 11.4 percent from 10.1 percent the previous week and the VA share decreased to 11.9 percent from 12.0 percent. The USDA share of total applications was 0.5 percent. The average size of the week's loans was $321100 compared to $324,000 a week earlier. Purchase loans averaged $370700, down from $371,000.

Except for 15-year fixed-rate mortgages (FRM) both contract and effective rates moved lower. The average contract interest rate for 30-year FRM with balances at or below the conforming limit of $510,400 decreased to 3.05 percent from 3.10 percent, with points increasing to 0.52 from 0.46.

Jumbo 30-year FRM, loans with origination balances above the conforming limit, had an average rate of 3.33 percent, down from 3.35 percent the prior week. Points declined to 0.39 from 0.42.

The rate for 30-year FRM backed by the FHA decreased to 3.15 percent with 0.43 point from 3.23 percent with 0.37 point.

Fifteen-year FRM rates increased an average of 1 basis point to 2.65 percent. Points grew to 0.49 from 0.47 and the effective rate increased.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 2.95 percent from 3.19 percent, with points decreasing to 0.55 from 0.64. The ARM share of activity remained unchanged at 2.2 percent of total applications.

MBA says a further decline in loans serviced for the GSEs, took the total number of mortgage loans in active forbearance plans down to 3.4 million last week. The percentage of all loans in plans dropped 6 basis points to 6.93 percent. By stage, 30.26 percent of total loans in forbearance are in their initial forbearance plan while 68.37 percent are in a forbearance extension. The remaining 1.37 percent have reentered their plans.

The share of Fannie Mae and Freddie Mac loans in forbearance dropped for the 16^th week in a row to 4.46 percent - a 9-basis-point improvement. The forborne percentage of Ginnie Mae (FHA/VA) and portfolio/private label securities (PLS) were both unchanged, at 9.15 percent and 10.52 percent, respectively. The percentage of loans in forbearance for depository servicers decreased 7 basis points to 7.11 percent, and the percentage of loans in forbearance for independent mortgage bank (IMB) servicers dipped 3 basis points to 7.23 percent.

"The share of loans in forbearance continues to decline and is now at a level not seen since mid-April. Many homeowners with GSE loans are exiting forbearance into a deferral plan and resuming their original mortgage payment but waiting to pay the forborne amount until the end of the loan," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "However, the overall picture is still somewhat of a mixed bag. The recent uptick in forbearance requests, particularly for those with FHA or VA loans, is leaving the Ginnie Mae share elevated, as the pace of new requests meets or exceeds the pace of exits."

Added Fratantoni, "The continued churn in the job market is likely keeping many homeowners who have been in forbearance reluctant to exit, given the level of economic uncertainty."

MBA's latest Forbearance and Call Volume Survey covers the period from September 14 through September 20 and represents 74 percent of the first-mortgage servicing market (37.1 million loans).

We're Just Saying … These Home Inspections Will Leave You With Questions

2020-09-30T04:33:22.000+00:00

Every week, the detail-oriented folks at Green Scene Home Inspections will give CandysDirt.com readers an education in inspection. Want to see what they see? Tune in for “Upon Closer Inspection.” As home inspectors, we are generalists, which means our job is to go into a house and observe and test the various systems to see what’s working, what’s not working, and where potential problems might be. So here are some cases where we may not be the expert, but we’re just saying…

We’re not roofers, but …

Loading the shingles on the roof like that seems like a poor choice.

We’re not decorators, but …

If the blades of the fan are hitting the ceiling, you might want to hang it a little lower.

We’re not home builders, but …

This is kind of a weird kitchen design, right? [embedded content]

We’re not electricians, but …

There’s going to be a problem when these folks need to flip a breaker. [embedded content]

Sales of existing homes surge to a 14-year high

2020-09-22T16:00:44.000+00:00

Sales of existing homes rose to a 14-year high of 6 million in August, the National Association of Realtors said in a report on Tuesday. Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, prior to the COVID-19 pandemic, last month’s sales were 11% higher, NAR said. “Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” said Lawrence Yun, NAR’s chief economist. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.” The median existing-home price last month was $310,600, up 11.4%, and prices rose in every region, NAR said. The number of properties on the market at the end of August totaled 1.49 million, down 18.6% from the year-ago month, the report said. Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was 3 months, NAR said. That’s down from 3.1 months in July and compared with 4 months a year ago. The cheapest home financing costs on record are driving demand for homes, Yun said. Mortgage rates have reached new lows nine times since the Federal Reserve began buying mortgage bonds in March to expand access to credit, according to a weekly survey by Freddie Mac. The average U.S. rate for a 30-year fixed mortgage increased one basis point to 2.87% last week, the second-lowest on record, rising from the prior week’s all-time low, Freddie Mac said on Thursday. The less-popular 15-year rate fell to a record low of 2.35% last week, the mortgage giant said.

Home Values Soar Even Higher In August As Inventory Tightens

2020-09-18T12:00:00.000+00:00

SEATTLE, Sept. 18, 2020 /PRNewswire/ -- Pressure from this summer's housing inventory shortage caused U.S. home values to rise sharply in August. They are up 0.7% from July to $256,663, the biggest month-over-month increase in nearly seven years, according to the August Zillow® Real Estate Market Report¹. Home value growth accelerated last month in 48 of the 50 largest markets and was relatively constant in the other two: Birmingham, Ala. and Richmond, Va.

Year over year, home values are up 5.1% in August, the largest annual rise since March 2019. Markets with the highest year-over-year increases in home values were Phoenix (10.5%), San Jose (10.3%) and Seattle (9.2%). The smallest year-over-year gains in home values among major metros were seen in Chicago (1.9%), New York (2.3%) and San Francisco (2.7%).

"American home shoppers faced an historic shortage of listings to choose from this summer, and that scarcity is now reflected in rapidly appreciating home values after a sluggish start to the home shopping season this spring," said Zillow economist Jeff Tucker. "Builders are racing to catch up with demand, and rising prices should encourage more potential sellers to come off the sidelines and list. Still, the shortage of inventory should keep housing markets unusually tilted in sellers' favor this autumn."

Nationwide, demand continues to outpace supply. Homes continue to fly off the market at a record pace and inventory is contracting, according to the most recent Zillow weekly housing market data. Listings' typical time on the market was 14 days, as of the week ending Sept. 12. That's 14 days faster than the year before.

Looking forward, upward price pressure seems likely to continue at least through the fall, thanks to the large inventory deficit. Purchase demand is holding steady at high levels, reflected in strong pending sales data, perhaps due to delayed purchases from earlier this spring and summer. Given that the housing market typically begins to cool off by late August, this stable volume of sales looks even more impressive: pending sales were up a whopping 23.3% year over year in the week ending September 12.

The Fed expects to keep interest rates near zero through at least 2023, and allow periods of higher inflation, in an effort to revive the economy. This news reinforces the Federal Reserve's commitment to keeping credit flowing using a broad policy toolkit that included purchases of mortgage-backed securities this year. In that context there is little reason to expect mortgage rates to rise significantly any time soon, which should help keep buyers active.

While the for-sale market has strengthened since April, the rental market has softened. The U.S. has seen yearly rent price appreciation decline every month since the pandemic began, dropping from 3.8% year-over-year rent growth in February to just 0.7% in August. The typical U.S. rent was $1,771 in August, down 0.3% from July, which is the largest monthly decrease seen since September 2017.

"Rents softened further this August, especially in New York and the San Francisco Bay Area," Tucker said. "Rental demand has been battered by still-elevated unemployment as well as some renters opting out of expensive markets with their ability to work remotely during the pandemic. The rental market may also be feeling an early gust of demographic headwinds, as the bumper crop of Millennials in their early 30s begin making the leap to homeownership."

Compared to last year, typical rent is down 4.6% in New York, 4% in San Francisco and 3.8% in San Jose. In Boston, the fifth most expensive metro within the top 50, rents are down 2.8% since last year. Typical rents in Washington, D.C., Chicago, Austin, Houston, and Denver also declined since last year. The softening is especially pronounced in areas where higher shares of college students typically live.

Meanwhile, rents in Midwestern and Sun Belt cities are making headlong strides upwards. Memphis leads the way with 8.3% rent appreciation since last year, and has seen monthly increases throughout the pandemic. Phoenix rents bounced back with 1.1% month-over-month growth in August after posting negative figures in April and May.

Mortgage rates listed by third-party lenders on Zillow started the month at 3.1% and rose to twin peaks of 3.17% on Aug. 12 and Aug. 28. High volatility in mid-August led to a minimum of 2.97% on Aug. 13. August closed with rates at 3.12%. Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Group Mortgages site by third-party lenders and reflect recent changes in the market².

Metropolitan Area*	Zillow Home Value Index (ZHVI), August 2020	ZHVI - YoY Change, August 2020	Total Inventory - YoY Change, Week Ending Sept. 12	Zillow Observed Rent Index (ZORI), August 2020	ZORI - YoY Change, August 2020
United States	$256,663	5.1%	-29.4%	$1,771	0.7%
New York/Newark, NY/NJ	$493,579	2.3%	-13.4%	$2,716	-4.6%
Los Angeles, CA	$706,714	5.9%	-23.8%	$2,627	0.0%
Chicago, IL	$246,357	1.9%	-26.9%	$1,791	-1.0%
Dallas-Fort Worth, TX	$261,739	4.1%	-29.0%	$1,620	1.1%
Philadelphia, PA	$262,437	5.1%	-37.8%	$1,620	1.3%
Houston, TX	$222,936	3.1%	-25.8%	$1,537	-0.6%
Washington, DC	$452,030	5.1%	-33.1%	$2,161	-1.2%
Miami-Fort Lauderdale, FL	$310,471	4.1%	-9.6%	$1,947	1.2%
Atlanta, GA	$251,454	5.7%	-25.3%	$1,609	3.3%
Boston, MA	$514,321	4.9%	-24.2%	$2,490	-2.8%
San Francisco, CA	$1,127,066	2.7%	1.5%	$3,167	-4.0%
Detroit, MI	$188,420	4.3%	-36.4%	$1,316	2.5%
Riverside, CA	$400,664	5.7%	-46.7%	$2,097	5.5%
Phoenix, AZ	$312,317	10.5%	-21.8%	$1,521	5.7%
Seattle, WA	$559,226	9.2%	-26.7%	$2,000	0.4%
Minneapolis-St. Paul, MN	$305,202	5.4%	-25.6%	$1,602	1.5%
San Diego, CA	$643,903	5.9%	-36.7%	$2,422	1.8%
St. Louis, MO	$187,795	5.0%	-31.5%	$1,155	2.7%
Tampa, FL	$242,924	7.2%	-31.9%	$1,580	4.1%
Baltimore, MD	$302,464	2.9%	-44.4%	$1,732	0.3%
Denver, CO	$458,600	4.5%	-31.1%	$1,821	-0.1%
Pittsburgh, PA	$167,172	5.2%	-24.5%	$1,148	1.1%
Portland, OR	$429,608	5.3%	-31.0%	$1,688	1.3%
Charlotte, NC	$249,960	8.0%	-39.7%	$1,520	1.9%
Sacramento, CA	$444,733	5.7%	-41.1%	$1,908	4.3%
San Antonio, TX	$211,964	3.2%	-23.4%	$1,395	1.5%
Orlando, FL	$266,005	5.4%	-13.7%	$1,619	1.1%
Cincinnati, OH	$197,135	7.2%	-37.4%	$1,293	2.9%
Cleveland, OH	$168,298	6.7%	-38.3%	$1,166	2.8%
Kansas City, MO	$214,639	6.3%	-42.4%	$1,251	4.3%
Las Vegas, NV	$302,071	4.0%	-22.5%	$1,478	3.0%
Columbus, OH	$222,467	7.1%	-37.8%	$1,356	4.6%
Indianapolis, IN	$192,677	7.9%	-40.2%	$1,340	4.8%
San Jose, CA	$1,224,366	10.3%	-19.0%	$3,129	-3.8%
Austin, TX	$357,346	6.1%	-32.2%	$1,598	-0.8%
Virginia Beach, VA	$252,041	4.8%	-36.3%	$1,413	3.8%
Nashville, TN	$289,792	5.9%	-17.2%	$1,620	2.4%
Providence, RI	$333,191	5.7%	-36.5%	$1,635	4.4%
Milwaukee, WI	$212,166	7.5%	-8.2%	$1,147	2.6%
Jacksonville, FL	$240,785	4.8%	-33.1%	$1,419	3.2%
Memphis, TN	$164,254	8.5%	-40.6%	$1,396	8.3%
Oklahoma City, OK	$165,014	6.0%	-33.9%	$1,096	2.0%
Louisville, KY	$189,706	6.8%	-41.8%	$1,098	4.4%
Hartford, CT	$246,821	4.0%	-40.4%	$1,428	3.9%
Richmond, VA	$256,417	4.6%	-35.1%	$1,355	3.0%
New Orleans, LA	$215,218	5.7%	-42.3%	$1,470	0.5%
Buffalo, NY	$183,071	5.2%	-32.4%	$1,116	4.5%
Raleigh, NC	$292,160	4.5%	-37.7%	$1,546	1.8%
Birmingham, AL	$174,875	7.0%	-33.7%	$1,152	4.0%
Salt Lake City, UT	$405,189	7.9%	-41.4%	$1,461	1.3%


*	Table ordered by market size

¹ The Zillow Real Estate Market Reports are a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Real Estate Research. For more information, visit www.zillow.com/research/. The data in Zillow's Real Estate Market Reports are aggregated from public sources by a number of data providers for 928 metropolitan and micropolitan areas dating back to 1996. Mortgage and home loan data are typically recorded in each county and publicly available through a county recorder's office. Methodologies and all current monthly data at the national, state, metro, city, ZIP code and neighborhood level can be accessed at www.zillow.com/research/data.

² Zillow Group Marketplace, Inc. is a licensed mortgage broker, NMLS #1303160.

About Zillow
Zillow, the most visited real estate website in the U.S., is building an on-demand real estate experience. Whether selling, buying, renting or financing, customers can turn to Zillow's businesses to find and get into their next home with speed, certainty and ease.

In addition to for-sale and rental listings, Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase.

Millions of people visit Zillow Group sites every month to start their home search, and now they can rely on Zillow to help them finish it — with the same confidence, ease and empowerment they've come to expect from real estate's most trusted brand.

Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).

SOURCE Zillow

Builder confidence reaches 35-year high in September

2020-09-17T20:05:49.000+00:00

The National Association of Home Builders and Wells Fargo Housing Market Index rose five points to 83 in September – the highest score the series has seen since its inception 35 years ago, according to a release from NAHB on Wednesday. Based on a scale from zero to 100, the index gauges builder perceptions of current single-family home sales and sales expectations for the coming six months.

In September, all HMI indices, including current sales conditions, sales expectations and traffic of prospective buyers, reported their highest readings ever, the release said.

Regionally, the West continued to see the greatest confidence in the three-month moving averages – jumping seven points to 85. Following suit, the South rose eight points to 79, the Northeast gained 11 points up to 76 and the Midwest increased nine to 72. Month-over-month, however, regional confidence gains slowed from the double-digit spikes August saw.

For months now HousingWire has reported evidence that an urban exodus is underway and NAHB chief economist Robert Dietz furthered that narrative on Wednesday, saying a growing number of builders throughout the country reported calls from customers in high-density markets asking about relocation.

According to Dietz, a shift toward suburbia coupled with low interest rates is keeping home builders busy. So busy in fact, that residential construction employment rose by 27,700 in August to 2.9 million, according to the Bureau of Labor Statistics.

While construction employment is booming, in a release from Sept. 4, Dietz noted the lumber industry has only gained roughly half of the jobs it originally lost due to the pandemic.

“Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said NAHB chairman Chuck Fowke. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”

With growing demand for lumber, insufficient supply and 20% tariffs put in place on Canadian supply, escalating prices are putting pressure on an already volatile situation. Since mid-April, lumber prices are now up 170% – piling more than $16,000 on top of the price of a typical family home, Dietz said.

First-time homebuyer activity decreased in Q2, but there’s still plenty of buyers out there

2020-09-17T16:33:26.000+00:00

First-time homebuyer activity decreased mostly in part due to the economic effects of the pandemic, but it still remains the most active segment in the purchase space of the housing market.

During the second quarter, 539,000 single-family homes were purchased by first-time homebuyers, down 4.6% compared to last year, according to Genworth Mortgage Insurance. This represented 40% of single-family homes purchased during Q2, Genworth said.

Compared to the first quarter of this year, it is an 18% drop.

“The COVID-19 pandemic pushed the U.S. economy into the sharpest recession on record in March,” Tian Liu, Genworth’s chief economist said. “The housing market also began correcting in April, resulting in an 18% decrease in the number of first-time homebuyers in the second quarter compared to the first quarter. A quick rebound in May moderated the market decline.”

Although buyer purchasing power has increased, many may not be able to find a home that’s affordable due to high home prices as a result of low inventory.

In 35 states and Puerto Rico, there were fewer first-time homebuyers in the second quarter of 2020 than the second quarter of the prior year. In 15 states and Washington, D.C., there were actually more first-time homebuyers reported.

The report also noted that first-time homebuyers relied on smaller down payments for their mortgages.

Overall, 449,000 first-time homebuyers used some form of low down payment mortgage products to finance their home purchase in the second quarter, roughly 83% of all first-time homebuyers. That’s a record, according to Genworth.

Between April and June, Genworth researchers found that the number of rate locks by first-time homebuyers increased by 55% and no states reported negative growth.

Rate locks of over 100% between April and June happened in New York, Pennsylvania, New Jersey and Michigan.

Liu said that despite the challenge the pandemic handed first-time homebuyers, credit availability was maintained in the housing finance system, as the private mortgage insurance industry played a huge role.

“The main reasons that the housing finance system has largely maintained credit availability to date include a focus on prudent underwriting, having adequate capital in the financial system, a significant presence for the agency market that will take credit risk during periods of market stress, and continued investment in technology to make the industry capacity more elastic,” Liu said.

College-Area Rents Are Falling Behind as Schools Move Online

2020-09-17T12:07:00.000+00:00

SEATTLE, Sept. 17, 2020 /PRNewswire/ -- Rent prices in college neighborhoods have fallen this summer as colleges and universities across the country have opted for remote learning during the coronavirus pandemic. The drop throughout college areas stands out even in a rental market that has softened across the board since February with rent price growth slowing and landlords offering more concessions.

Data from The Chronicle of Higher Education and Davidson College show 44% of U.S. colleges and universities are operating fully or primarily online for the Fall semester, while only 27% are offering classes fully or primarily in person. A new Zillow® analysis shows reduced demand in this largely remote environment is having a noticeable impact on rents in ZIP codes in which at least 20% of the population is college students, who make up about 8% of the U.S. rental market in a typical yearⁱ.

In these neighborhoods with a high share of college students, average rent prices were growing 4.7% year over year in February. By August, when many students would typically move back near campus, rents were down 0.5% from the year before, marking the first time since at least 2017 -- the earliest Zillow data is available -- in which college-area rents were lower than the previous year. Meanwhile, rents in ZIP codes with a lower share of college students were up 2.6% annually.

In May, the average rent was only 1% lower in college areas than non-college areas. By August, that gap had widened to 3.4% as rents continued to fall in college areas but rose elsewhere. That's the furthest college-area rents have fallen below rents elsewhere since at least 2017.

Pricier areas with a high share of college students are often seeing steeper rent declines. For example, the average rent is down 7% year over year in Boston's 02115 ZIP code that includes Northeastern University, which is made up of about 60% college students, and down 5% in the 94704 ZIP code in Berkeley, Calif., with about 70% of the population being college students.

"The softening rental market across the country is more stark in college neighborhoods as pandemic-mandated campus closures and opportunities to complete courses online have provided motivation for young people to move back home," said Zillow senior economist Cheryl Young. "With many leases ending at the end of the summer or the beginning of the fall, we can expect even greater impacts in the months ahead. The good news for rental owners is administrators seem to be itching to bring students back to campus as soon as they can do so safely, so it's possible this will be a relatively short-term shock to rent prices."

Rising unemployment and campus closures, among other factors, pushed about 2.7 million American adults to move back in with parents or grandparents last spring. Those numbers dwindled during the summer months, but there were still 2 million more 18- to 25-year-olds living at home in August than there were a year earlier, an 11% increase. The jump in the share of these college-age Americans living at home was sharpest among Black and Asian and Pacific Islander young adults. Nearly two-thirds (65.7%) of Black 18- to 25-year-olds were living at home in August, up from 56.5% last year.

With demand for rentals softening, landlords are offering discounts or other incentives as they strive to attract new tenants. Rent concessions on Zillow listings across the country are nearly twice as common as they were in February. Even small discounts or short-lived vacancies can have a big impact on landlords -- previous Zillow research has shown rental owners typically spend more than half of their rental income on fixed costs of property ownership such as mortgage payments, property taxes and insurance.

	College Areas		Non-College Areas
Month	Average Rent	Average Rent - YoY Change	Average Rent	Average Rent - YoY Change
February 2020	$1,809	4.7%	$1,825	3.3%
May 2020	$1,800	1.5%	$1,819	1.2%
August 2020	$1,787	-0.5%	$1,851	2.6%

Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).

ⁱ Source: U.S. Census Bureau, 2018 American Community Survey

SOURCE Zillow

EasyKnock launches solution that lets homeowners lease back their home after selling

2020-09-15T17:40:47.000+00:00

Residential sell and lease-back company EasyKnock has added another product to its portfolio. ReLEASE provides homeowners with the option to sell their home and rent it back from EasyKnock as long as they would like, the company said.

“We’re launching this product today because Americans need options now,” EasyKnock CEO Jarred Kessler said in a statement. “Historically, financing options have been limited and lending standards have not worked in favor of the consumer. EasyKnock is here to change this with solutions that help a wider range of homeowners achieve their goals. We want homeowners to feel their financial circumstances do not have to define them.”

The product is now available for qualified homeowners in Florida, Michigan, Arizona, Colorado, North Carolina, Tennessee, Utah, Texas, and Georgia. ReLEASE is the third solution EasyKnock offers to homeowners.

Sell and Stay and MoveAbility are its other products available to homeowners. Sell and Stay offers homeowners longer-term lease options with the opportunity to buy back their home, while MoveAbility enables greater flexibility for homeowners who want to sell but are waiting for the right time to move.

EasyKnock says hassle-free options provide customers with a competitive price on their house and can close in as few as seven days.

“As the nation faces a rise in forbearance and as credit inevitably tightens, U.S. homeowners are in greater need of flexible financial solutions,” the company said in a release. “With EasyKnock, customers can use the value of their home to pay down personal debt, invest in a business, diversify retirement portfolios, make a down payment on a new home, or relocate.”

Last month, Viola FinTech added $5 million to EasyKnock’s Series B funding round, bringing it to $25 million. Kessler said this round of funding with Viola FinTech will assist consumers who have faced economic uncertainty because of the pandemic.

Poised for Growth, These Are The Dozen Mid-Sized Metros to Watch

2020-09-15T12:07:00.000+00:00

SEATTLE, Sept. 15, 2020 /PRNewswire/ -- This year has been anything but normal and, like 2020 as a whole, this summer's most in-demand housing markets are not the usual suspects.

A new Zillow® analysis shows mid-sized¹ cities like Boise, Syracuse, and Portland (ME) are now leading the country as the top markets poised for growth, replacing expensive coastal metros such as San Francisco and Seattle that have led the way in the past. Many of these markets also happen to offer home shoppers more space for their money, as the coronavirus pandemic has reshaped where and how people want to live.

The analysis weighs a variety of factors to show demand in the market, and continued opportunity for growth. Those include recent and forecasted home value growth, the share of homes sold above list price, and how quickly homes sell.

Home shopper behavior continues to evolve throughout the pandemic, but many are reconsidering their home's functionality or dreaming of more space -- factors which might drive their next move. A recent Zillow survey² found nearly one-third of Americans who could occasionally work remotely said they would consider moving in order to live in a larger home (30%), have a home with more rooms (29%), and have a home with a dedicated office space (31%).

As remote work opens up more opportunities for home ownership, many first-time buyers may seek out a starter home in a more affordable area. These are the top dozen mid-sized metros that offer more space for growing families and big-city amenities for urbanites.

1. Boise, Idaho

Population: 616,561³; typical home value: $334,965

Boise, Idaho, is an up-and-coming city drawing young professionals, families, and retirees alike. Home values are strong and continue to rise, increasing 11.8% from last year, and are expected to grow 5.6% into next year. Buyers are snatching up houses in record time here, with the typical home going under contract in as little as five days.

"Boise offers that small-town feel people crave from the movies, and has something for everyone," says Michael Edgar, owner of Michael Ryan Real Estate, who relocated to Boise in 2003 from California. "There's an abundance of outdoor activities right outside your doorstep, plenty of restaurants to choose from, and not a lack of career opportunities. Its affordability makes it a great place to raise kids, retire, or work remotely."

Boise, which was an under-the-radar hot market last year, offers both a bustling downtown, with quiet neighborhoods and access to outdoor recreation.

2. Huntsville, Ala.

Population: 417,593; typical home value: $203,242

Huntsville, known as Rocket City, is home to the U.S. Space and Rocket Center. Home values have also skyrocketed, increasing 11.5% compared to last year, and home values are forecasted to increase 5% over the next year.

3. Ogden, Utah

Population: 597,159; typical home value: $344,816

Ogden offers the benefits of urban life with easy access to the outdoors. The demand in this market is strong, with 41.5% of homes selling above list price -- helping sellers who want to trade up and signaling there are buyers eager to settle in Ogden. Zillow is forecasting home values in Ogden will increase 4.6% in the next year, showing the demand for this market is here to stay.

4. Spokane, Wash.

Population: 527,753; typical home value: $293,655

Spokane has seen accelerating home value growth, increasing 9.5% from a year prior. The Spokane market is hot for sellers, with 45.1% of homes selling above list price. Competition for homes here may be attributed, in part, to the metro's vibrant downtown, trail system and growing microbrewery and winery scene.

5. York, Pa.

Population: 434,972; typical home value: $195,837

York is the oldest city on this list, dating back to 1777 as the first U.S. capital. Today, York has a suburban feel mixed with its history, and sales of these architecturally unique homes do not appear to be slowing down anytime soon. Home sales increased a whopping 75.7% from the previous month, and are 17.7% above last year's levels.

6. Colorado Springs, Colo.

Population: 645,613; typical home value: $336,927

Colorado Springs' hot housing market bumps it up the list, with home values sharply increasing and poised to continue strong growth. Home values have seen a 9.5% increase from last year, and are forecasted to grow 4.8% over the next year. Home sales are up 17.8% above last year's levels.

"If you love the outdoors and you love biking, hiking, camping and all the things that come with the Colorado lifestyle, you'll love the Springs," said Jacob Mueller, a Colorado Springs native and a Zillow Premier Agent with Atlas Real Estate. "You can get into the mountains really easily and that's very attractive. The city is also experiencing tremendous economic growth, so people can grow their careers here without having to leave for a bigger city."

7. Lancaster, Pa.

Population: 519,445; typical home value: $242,009

Homes are flying off the market in the growing city of Lancaster, and home sales continue to boom. Sales are up 78.6% from last month, with homes typically going under contract in 7 days. With its proximity to city hubs and great walkability, Lancaster offers wide open spaces, with proximity to plenty of bars and restaurants.

8. Modesto, Calif.

Population: 514,453; typical home value: $340,762

Homes in Modesto are in high demand, with 39.1% selling above the list price -- indicating buyers are competing to put down roots in this agricultural hub. Homes are only on the market for 7 days before going under contract, and home values here are forecasted to increase 4% over the next year.

9. Syracuse, N.Y.

Population: 662,577; typical home value: $154,596

Syracuse is the market to watch in upstate New York. Home values here continue to appreciate, and are 6.8% above last year's levels, and projected to increase 4% by this time next year.

"Syracuse offers a great quality of life at a reasonable cost," said R.J. Long, managing partner at Coldwell Banker Prime Properties in New York state. "It's got gorgeous hills and terrain, and proximity to the water with the Great Lakes and the Finger Lakes nearby. It offers beautiful homes, good jobs and it's accessible from anywhere in the state."

10. Visalia, Calif.

Population: 442,179; typical home value: $232,800

Visalia is a vibrant community with a small-town feel and a gateway to the outdoors. Home values continue to climb here, up 7.5% since last year. Home value growth is forecasted to continue into next year, expected to rise another 4.3%. Additionally, more than one out of every three of homes on the market sell above list price, indicating buyers are ready to settle down in this community.

11. Portland, Maine

Population: 514,098; typical home value: $334,650

"For those looking for an arts and foodie-driven lifestyle on the ocean, Portland can't be beat," says Nate Wildes, Executive Director of the nonprofit Live and Work in Maine. "Portland offers the Maine quality of life, matched with a uniquely quaint urban experience and genuine sense of place. The communities of greater-Portland are a thriving destination."

Home values in this seaport metro continue to grow, up 7.5% from last year and are expected to see 3.9% growth into next year. There are very eager buyers ready to make Portland home, with nearly 40% of homes selling above list price.

12. Lansing, Mich.

Population: 464,036; typical home value: $170,011

Rounding out the list is Michigan's capital, Lansing, where buyers are active and ready to secure their next home. Monthly sales are increasing at a rapid pace, up about 68% from the previous month, and 40% of homes are selling above the listed price.

Methodology

"Mid-Sized Markets" are metropolitan areas ranked by size between 76-125 of all U.S metros. The analysis of these metros weighted five variables equally to determine the list:

Home value growth year-over-year
Forecasted home value growth
Days a home stays on the market
Share of homes sold above list price
Month-over-month sale counts

About Zillow

Zillow, the most-visited real estate website in the U.S., is building an on-demand real estate experience. Whether selling, buying, renting or financing, customers can turn to Zillow's businesses to find and get into their next home with speed, certainty and ease.

Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG).

¹ Mid-size cities are ranked by size between 75-125 of all U.S metros

² This survey was conducted online within the United States by The Harris Poll on behalf of Zillow from May 4-6, 2020 among 2,065 U.S. adults ages 18 and older. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact press@zillow.com.

³ Population data are the most recent numbers from the 2010 Census

SOURCE Zillow

This missile silo-turned luxury bunker might be just what 2020 needs

2020-09-14T21:48:28.000+00:00

About a year ago, RE/MAX agent Ken Flaspohler took on what he said is the most exciting luxury listing he’s ever had. Hidden somewhere in rural Kansas and nestled 15 stories below the ground, the listing consists of condos constructed in a repurposed Atlas missile silo.

The exact location wasn’t shared with HousingWire, or even posted on the listing site, but Flaspohler said keeping the location information low key is what comes with the territory.

The site’s developer, Larry Hall, purchased the silo in 2008, then remodeled it into the survival bunker it is now. Surrounded by concrete walls that are nine feet thick, Flaspohler said the over 20,000-square-foot space consists of individual condos with their own kitchenette and bathrooms.

What was once used by the U.S. Air Force for missile storage has been transformed into a luxury, secluded living experience.

“People say this looks like it’s out of the Jetsons,” Flaspohler said.

According to the listing site: “Survival Condos run from $1.5 mil to $4.5 mil and most banks will not finance. You must be liquid to become an owner.”

Other features in the silo include a library, his and hers workout rooms and steam rooms, a bar, an inground swimming pool, a hospital and dental room, a dog park and a media room.

Flaspohler, a RE/MAX agent based in Kansas City, has been in real estate since 1986. He said this listing is like nothing he has ever taken on before. Taking shelter in place to a whole new level, residents can survive in the missile silos for up to five years, if needed.

“This is not your typical second home to have,” Flaspohler said. “[It’s] in case you feel like there could be something, like maybe a little bit of what we’re going through now, a pandemic or a world event that might require maybe a little extra caution and safety.”

Running water is connected to underground wells that run through the silo’s treatment plant, and there are wind turbines and diesel generators that create power.

The silo also has its own aquaponic system, where the community can grow its own vegetables.

Since the pandemic hit., Flaspohler said that there has been a lot of interest in the listing, bringing people from all over the country to take a tour.

“At the beginning of COVID, people weren’t quite sure what was going to happen…and I don’t think it got as bad as maybe people might have thought at the beginning of COVID, so it seems [interest] kind of tapered off a little bit. And then I don’t know why now, [interest] picked up here in the last month,” Flaspohler said.

As for how this compares to other listings he’s had, Flaspohler said this one is basically similar to a condo in Kansas City, but has a higher quality of “extras” and prices.

“I’ve been doing this since 1986, and certainly sold houses, farms, land, a couple of buildings,” Flaspohler said. “This was just such a unique property. I knew I was going to enjoy working on because it’s such a unique property.”

Zillow and Redfin among companies vowing to add Black board members

2020-09-11T19:32:39.000+00:00

Zillow and Redfin are among the companies that are signing on to The Board Challenge, a pledge to add a Black member to their board of directors within one year.

Rolled out this week, the Board Challenge is part of a movement to increase diversity and inclusion since the death of George Floyd at the hands of police officers in Minneapolis in May.

“The perspectives and ideas we listen to, and the voices we elevate, will determine the future of our industries, our companies, and ultimately our world,” Zillow Cofounder and CEO Rich Barton said in a statement. “It’s obvious that Black people are underrepresented in corporate boardrooms and other positions of leadership and power. It is something we don’t talk about enough.”

According to the Wall Street Journal, data from Boardlist shows about 66% of Fortune 500 company board members are white men and 18% are white women; 9% are Black men and women.

PwC’s 2019 Annual Corporate Directors Survey reports that 94% of directors agree that board diversity brings unique perspectives to the boardroom, while 87% thinking board diversity enhances board performance and 76% say it enhances company performance.

In a LinkedIn post, Barton said that Zillow has been sharing its workforce diversity and pay equity data since 2016, to “hold ourselves accountable to do better for our own team members.”

Zillow has had a spot open on its board since former CEO Spencer Rascoff stepped down in April, a spot Barton said he is actively looking to fill.

“The search for a Black director is already well underway at Zillow, and we’re very excited about the talented candidates we’ve been able to talk to,” Barton said.

Also listed as a supporter of the Board Challenge, Redfin’s CEO Glenn Kelman has been vocal about Redfin’s effort to add diversity to staff as well as anti-discriminatory practices.

“We just recruited a new director to our board, which was just another reminder of how many fantastic candidates of color there are for roles at the most senior levels,” Redfin CEO Glenn Kelman said in a statement to HousingWire.

“Diversity is crucial to one of a board’s foundational responsibilities, to ensure the company is fairly run,” Kelman said. “This fairness depends not just on our board’s decision-making, but also on employees’ confidence in that decision-making. No matter how hard we try to be an open company, it can be daunting for any employee to escalate a problem to the board, but especially for an employee of color who doesn’t see a director with the life experiences to process that problem.”

Other supporters of the Board Challenge include United Airlines, Sonos and Uber, to name a few.

How agents are winning bidding wars in America’s most competitive markets

2020-09-09T22:13:52.000+00:00

In the ultra-competitive Westchester market, the odds were stacked against Heather Harrison and her client. A stately suburban home that was listed on Tuesday already had 30 showings lined up for that upcoming Saturday.

“I put in a full price offer at $1.275 million, that was the asking price,” Harrison said. “The client went to highest and best on Monday at 5 p.m., and I counseled my client to bid accordingly, waive his mortgage contingency, then we bid $1.45 million and we got it.”

With the suburbs seeing record volume, agents and brokers like Harrison, who runs Compass’ operations in Westchester alongside her husband Zach, are counseling their clients on how to prevail in a fierce bidding war.

According to Redfin, offers on single-family homes in August were most likely to be involved in a bidding war, at 56.6% of offers, followed by townhomes at 54.7% and condos at 41.3% – 54.5% of offers overall engaged in bidding wars.

Time waits for no buyer in the suburbs

With record-low interest rates, paltry inventory and a surge in buyers, agents are advising clients to be extraordinarily aggressive to win.

“You’ve got to really advise your clients appropriately, quickly and make sure that they know there’s not even a week to come see the property – you’ve got to go,” Harrison said. “The property comes on within 24 hours, and if it meets your buyers criteria you want to get them out to see it.”

When it comes to counseling a client through a bidding war, education is paramount, Harrison said. Prospective buyers need to be armed with as much data as possible about the market they’re targeting. Another critical element, according to agents, is not to make the deals contingent upon things like inspections and not to “nickel and dime” the client. That will set the prospective buyer apart, Harrison said.

“I’ve also been encouraging them to write kind of like a love letter so to speak to the sellers, so they’re not just like an offer on a piece of paper, they’re giving a little color about themselves, why they’re moving, why they like their house, and giving a picture of them so that the sellers can feel good about who they’re selling to and it’s not just about the numbers,” Harrison said.

To win, waive those contingencies goodbye

Susan Hamblen, broker and owner of Long Island-based EXIT Realty Achieve, said that her agents are slammed with business, and homes that are “priced right” are getting offers within the first 24 hours.

“Homes are going $40,000 to $60,000 over ask, easily,” Hamblen said, attributing the bidding wars partly to the influx of buyers from New York City. “We have about two months of inventory and the buyer demand is just crazy.”

Eugene Cordano, vice president and director of sales at Halstead in New Jersey, said that in his market, bidding wars have triggered offers between 15% and 20% over asking, across all home prices.

To that tune, Cordano agreed with Harrison that it’s important to stick out in a bidding war.

“The old axioms of real estate do not change,” Cordano said. “But the highest bid does not always prevail.”

The influx of buyers from New York City to New Jersey at the beginning of April through June meant that there was more money to spend on homes.

“For our seller-clients, we were counseling them on how the buyers waive appraisals or waive mortgage contingencies,” Cordano said. “With the influx of New York City buyers bidding these houses up, oftentimes waiving the financing/mortgage/appraisal contingencies was not a difficult thing to ask for and most of them did that.”

When it comes to buyers, it’s a different story.

“If the buyer really wanted that home, it was often, “How do we structure this offer to make sure that it stands out and wins the day?’” Cordano said. “That’s not a scientific process. Sometimes that is something that’s very emotionally driven, or driven to the point where the buyer really wants it and is just willing to pay and will offer, either in price or in terms, something that will win the day versus all the other buyers that were there.”

Spreading out in the hottest market will cost you

Vickie Mox, an agent with RE/MAX Dallas Suburbs, covers the Collin County area, north of Dallas. She said the surrounding towns are busiest right now.

The Dallas suburbs of Frisco and Plano are the hottest because they have low rates of inventory and are priced to sell, spurring bidding wars, Mox said.

“Houses that are more unique with large lots and that have been totally updated [sell quicker], and there’s nothing for the buyer to do but move in,” Mox said. “[That listing] could conceivably have 10 offers, and that’s usually between the price range $250,000 to $400,000.”

Once you get over $400,000 there are fewer buyers and there’s less demand for the property, according to Mox.

“But a $500,000 house could have multiple offers if it has everything the buyers are looking for which is being updated to a large yard or a three-car garage, in the right neighborhood and right school district,” she said.

In Colorado Springs, which Redfin said recently has the No. 1 hottest ZIP code right now, there could be at least three to five offers on a home in the first 48 to 72 hours of being listed, according to Keller Williams Associate Broker Scott Sanchez.

“The typical thing here in the Springs has been a $10,000-plus minimum to go over list price,” Sanchez told HousingWire.

“Maybe two years ago it was kind of common for five grand over, maybe $10,000 tops,” Sanchez said. “Last year, you start getting into the $10,000 to $15,000 range and this year it’s been $20,000 on the good homes that are well marketed and even if they’re priced up, they still will get 20 grand over.”

Bidding wars aren’t necessarily uncommon for Peck Barham, a real estate agent at TeamBarham, Keller Williams Homewood outside Birmingham, Alabama, but not at this rate.

“We haven’t seen [bidding] quite like this,” Barham said. “I think in August something like 600 homes went under contract in a three-week period, which for Birmingham is a lot. That’s a lot of homes going real fast.”