Many Still Insecure About Housing Affordability

In this job, I regularly receive email and telephone calls that qualify as balderdash. This I define as questionable information, typically involving online surveys from groups I have never heard of, sent in the hope that I will publish them as “click bait” without checking further than the end of my fingertips.

But one survey in particular, from the NHP Foundation, was not balderdash by any measure. The foundation is a nonprofit organization dedicated to making investments that preserve and create affordable multifamily housing for low- to moderate-income families and seniors. The foundation’s survey found that 75 percent of 1,000 Americans questioned were afraid of losing their homes; that 40 percent feared job loss would result in such a loss; and that 65 percent were “cost-burdened,” meaning they spend more than 30 percent of their income on housing.

Worries that rents would be raised or retirement would bring deep income cuts also persisted. Affordable housing is housing for which occupants pay no more than 30 percent of their income. Those who spend more on rent or mortgages are considered cost-burdened. Why aren’t these survey figures hard to believe? Perhaps because a record number of Americans — I believe nearly 8 million between 2006 and 2013 — lost their homes to foreclosure. Many were victims of a now-discredited finance system that gave unqualified borrowers who didn’t have a prayer of ever repaying any amount they wanted — if only they could exhale after inhaling.

But many, many more were victims of the financial collapse brought on by this mortgage madness, including those who lost their jobs in downsizing, or whose wages were reduced to retain their employment, or whose spouses were laid off in the same cutback frenzy. It reminds me of a story of the London Blitz, when a woman stopped her car to give a married couple a lift to the wife’s sister’s in the countryside. “We were bombed out last night,” the husband told the driver. “Was it your house?” she asked. “Would have been Tuesday,” he replied. Think of the years of mortgage payments for a house that was turned to dust when a Dornier Do 17 medium bomber dropped a 500-pounder on it.

The effect the Great Recession and the bumper crop of foreclosures have had on millennials has been well-documented. Watching their parents struggle to keep their homes during hard times is often cited as a major reason that millennials choose to rent and delay buying. One interesting part of the NHP Foundation survey is that although most of the respondents believed that housing people could afford was important, 20 percent were “unlikely to welcome” it in their neighborhood.

Foundation president and CEO Dick Burns attributes this opposition to “an outdated concept of affordable housing.” “Today’s affordable housing is comprised of new and upgraded garden apartments and high-rises; amenity-laden developments that look nothing like ‘projects’ of the past,” he says. “It all starts with housing,” Burns says. “Without the underpinning of a secure place to live, it’s nearly impossible for an individual or head of household to find and keep a job and provide for themselves and their loved ones.”

Millennials Will Redefine The Economy

They’re known for bouncing around jobs, delaying marriage and holing up in their parents’ basements. Dubbed recently as the “children of the Great Recession” by Democratic presidential nominee Hillary Clinton, millennials are the best educated and most diverse population of young people in U.S. history. They are also perhaps the most coddled, some would say spoiled. As they emerge this year as the United States’ largest demographic group—some 75 million strong—millennials are taking up the mantle as the most impactful generation since the baby boomers.

Their influence has started slowly, due largely to the economic instability that has left many struggling to find good-paying jobs and saddled with staggering student loan debt. But millennials—adults under 35—are certain to shape the economy for decades to come. And their coming of age in the midst of the worst financial crisis since the Great Depression has bred distinct traits that could pose special challenges for the nation’s future growth and prosperity. For starters, millennials are not big spenders, at least not in the traditional sense.

Millennials tend to prefer experiences over buying things and accumulating stuff. To them, an impressive selfie capturing a memorable moment is, in some sense, as enviable as a new car or fancy watch was to their parents.Neil Howe, an economist and demographer who coined the term “millennials” with co-author William Strauss, sees it as part of a redefining of American conspicuous consumption.

Instead of material wealth, millennials show off through their travels, hobbies and even meals, which get photographed and posted on Facebook, Instagram and other social media.

“If you’re a foodie, you can go out and have some incredible dining experience, and then you can curate it almost as if it were a thing,” Howe said. Millennials are one reason restaurants have been doing well—and hiring so many workers. Dominick Ardis, 29, typifies his generation. In between jobs this year, the Tallahassee, Fla., resident scrounged money from family and friends so he could immerse himself in Hebrew studies this summer at Middlebury College in Vermont. Last year it was the art of glass-blowing. And before that he was getting voice lessons.
“Music is such an emotional and experiential event,” he said. Ardis is interested in his career and making money, too. It’s just that he’s got other things on his mind, like taking a trip to Cuba next year.

Such priorities may well give Ardis and his fellow millennials a more fulfilling, well-balanced life than, say, workaholic boomers. But that may not be great for a U.S. economy driven by consumer spending, which accounts for two-thirds of the nation’s gross domestic product. Young Americans are unusually optimistic, which could propel purchases—and economic growth—as their disposable income increases. But they’re still not likely to have as much left over because so much is going to skyrocketing rents and education expenses.

The low home-buying rate of young adults already has been a big factor in the slow housing market. The homeownership rate for those under 35 slipped to a low of 34 percent this year, compared with around 40 percent for young adults in the prior three decades. And people today are getting married and having children later, which will weigh on home sales in the future. Like other millennials, Summer Lollie is keenly interested in having her own place. She wants something close to her parents’ two-story, four-bedroom house in the Dallas suburb of Mesquite where she grew up and currently lives, she says. But the 27-year-old community organizer can’t imagine how she will be able to save up for a down payment and afford a mortgage.

While Lollie’s parents never finished college, she graduated from Washington and Lee University, a well-regarded school in Lexington, Va. But with more than $35,000 in student debt and a car loan to boot, she has struggled to make ends meet. She moved back with Mom and Dad in April 2015, paying a little rent to them. There’s more than economics behind the living-at-home phenomenon, however. Lollie doesn’t mind the arrangement at all because she likes being with her parents—something more common among millennials than people of their age in previous generations. Experts think that reflects their protective upbringing and more frequent exchanges, thanks in part to the rise of texting and social media. “I have loving parents here,” Lollie said.

Another key difference with their predecessors, particularly Generation X, is that millennials are not big risk takers. That seems especially true when it comes to starting businesses. The rate of new startups is higher today than 10 or 20 years ago for every major age group—except those between 20 and 34 years old. The result is that the composition of new business formation, already turning grayer with the aging of baby boomers, has shifted even more sharply to older adults in recent years. Two decades ago, a little more than 34 percent of all new entrepreneurs in the U.S. were younger than 34 years old. Today it’s just 25 percent.

Startups represent dynamism in the economy. New and young businesses have long created the bulk of new jobs in America, and are critical for productivity growth, too. Some would-be entrepreneurs are being held back by their heavy student debt load. Nonetheless, it’s puzzling that there seems to be relatively less entrepreneurial zeal among millennials, particularly since they grew up in an era when people like Facebook founder and millennial Mark Zuckerberg, 32, have been celebrated in business schools and popular culture. In fact, however, there’s evidence that young adults today would rather work for big companies than take their chances at budding firms or in their own garages. Compared to boomers, millennials are more interested in having the same job through most of their life.

Their relative risk-aversion may have something to do with the protective environment that parents and schools created for millennials, emphasizing participation over winning. Partly because of such pampering, millennials are more self-absorbed than prior generations, even narcissistic. But at the same time, research suggests that young adults today are also very community-minded. If baby boomers were known as the “me” generation, millennials might be called the “we” generation.

$500 Million Awarded To Help Flood Victims By HUD

U.S. Housing and Urban Development (HUD) Secretary Julián Castro awarded a total of $500 million last week to help Louisiana, Texas and West Virginia to recover after severe flooding events that occurred earlier this year.  Provided through HUD’s Community Development Block Grant – Disaster Recovery (CDBG-DR) Program, these recovery funds will assist the most impacted communities that experienced the most serious damage to their housing stock.

President Obama signed the Continuing Resolution into law on September 29, 2016.  This stopgap spending measure directed HUD to allocate $500 million “in the most impacted and distressed areas” that experienced presidentially declared disasters in 2016, but prior to September 29th.  As a result of this limitation, HUD considered all 33 major disasters that occurred within this period of time.  Areas effected by Hurricane Matthew are not eligible as for these funds as disaster declarations for Matthew occurred after the Continuing Resolution became law.

“Immediately after President Obama signed this spending bill into law, my team began identifying the strongest cases to receive disaster recovery funds,” says Secretary Castro.  “These three states – Louisiana, Texas and West Virginia – experienced intense and destructive flooding causing great damage to residents’ homes and draining state resources. Today, we make a critically needed investment to help these communities recover and help families rebuild their homes.”

For more information, visit

Majority Of Investors Want To Invest In Real Estate

Could real estate be the hottest trend in investing? While the concept itself isn’t new, confidence and intrigue in this investment strategy are high according to recent findings from a national survey of U.S. investors by Better Homes and Gardens® Real Estate, which found 89 percent of U.S. investors surveyed are interested in incorporating real estate into their investment strategies. The results also revealed that 80 percent of U.S. investors surveyed believe a real estate portfolio is one of the best financial legacies they could leave for their family, so what could this mean for the real estate industry?

Real Estate Investors of Today and Tomorrow

  • Nearly all (96%) of U.S. investors surveyed who have invested in real estate believe their decision has helped them achieve some form of financial success:
    • 52% greater overall financial stability
    • 51% greater long-term net worth
    • 45% greater monthly cash flow
  • 94% percent of those who have invested in real estate are interested in making a future investment of this kind
    • 84% who have invested in real estate indicated that they willmake another real estate investment
      • 2 in 5 planning to do so in less than a year
    • 80% of investors surveyed who have never previously invested in real estate expressed an interest in making this financial commitment:
      • 96% of Millennial investors are interested in making a real estate investment, showing greater interest than their Boomer counterparts (83%).
      • Millennials are more drawn to personal real estate investments (79%) than commercial (49%).

Family Motivations behind Real Estate Investment

Despite capturing the public’s fascination through reality TV, only a small portion of respondents (29%) view property flipping as a beneficial real estate investment. Rather, research revealed that family is a driving motivation behind real estate investments.

  • 79% of investor respondents feel it is important to invest in a property that they could use for themselves or a family member at some point.
  • 83% of parents who invest would consider buying a property for or with their child or grandchild to:
    • Co-manage and profit from together (40%)
    • Manage and profit from it themselves (39%)
    • Have their children or grandchildren live in the home during college (35%)
    • Fund college tuition in the future (35%)

Investing More than Money

Unlike many other investments that can be made with the click of a button, real estate investments are often complex and require careful consideration. In fact, 89 percent of investors who have made a real estate investment in the last five years feel it is important for a real estate investment property to be geographically close, so that they could either manage or use it themselves.

For non-investors, this commitment can be a deterrent. Eighty-nine percent of non-real estate investors surveyed who cited concerns about jumping in on an investment property, the top reason was that they don’t know enough about investing in real estate (42 percent), followed by it requires too much time (41 percent), demands too much starting capital (35 percent) and that it is “risky” (28 percent). There is a clear need for real estate professionals and their insights – 30 percent would be more likely to invest if they had access to a real estate investment professional for advice, or resources to explain how to get started.

This need translates into a set of expectations. Approximately 53 percent of respondents expect a real estate agent to advise on managing the investment, as well as provide guidance on terms (49 percent) and down payment advice (47 percent).

To see consumer confidence of this magnitude is very promising. Through this research, we’ve discovered that a majority of investors, including Millennials, Gen Xers and Baby Boomers, believe real estate is the best way to diversify an investment portfolio. What’s fascinating is that even when it comes to real estate investments, for many, there are still emotional drivers that accompany this type of transaction. Consumers are starting to look forward and see real estate as a viable investment strategy, and as an industry, we need to help educate and guide these individuals on the right path to achieve this goal.

The aspiration to invest in real estate is there, yet it is up to real estate professionals to explain the fundamentals and help to serve as strategic sources throughout the process. Our hope is that this research empowers our industry to provide the resources and develop the necessary information to accelerate this opportunity for both current and future real estate investors.

Tips For Buying Foreclosures

Despite increases in home prices and a stabilizing housing market, many experts say the foreclosure crisis is far from over. But buying a foreclosed home is different from buying a typical resale. In many cases:

— Only one real estate agent is involved.
— The seller wants a preapproval letter from a lender before accepting an offer.
— There is little, if any, room for negotiation.
— The home comes as-is, and it’s up to the buyer to pay for repairs.

On the upside, most bank-owned homes are vacant, which can speed up the process of moving in.

Buying a foreclosure is definitely a bit of a grind. It’s not easy. You’re getting fantastic pricing, but sometimes it takes going through a lot of houses and writing a lot of offers to get the home you want.

Get a Broker and Lender
The first two steps in buying a foreclosure should happen almost simultaneously: Find a real estate broker who works directly with banks that own foreclosed homes and get a preapproval from a lender.

First visit any site with a database of foreclosed homes. You also could look at a local real estate website that lets you filter the results to see only foreclosures. You might find the acronym REO, which means “real estate owned” (by a bank, that is). This signifies that a home has been through foreclosure and the lender is selling it.

Get a Broker on Your Side
The goal of combing through foreclosure listings is not to find a house; it’s to find an agent. Banks usually hire a few real estate brokers to handle their REO properties in a market. In a lot of cases, the buyer works directly with the bank’s broker instead of using a buyer’s agent. That way, the commission doesn’t have to be split between two brokers.

A lot of these realtors have a long-term relationship with these banks, and they know of listings that haven’t even come on the list yet. Call them about the listings that you’re interested in, but also ask them about listings that may be coming up because sometimes it may take a day or two or even a week before a listing actually comes onto the database.

In places where thousands of foreclosed properties are for sale, you might not get much one-on-one attention from overloaded agents. To prove that you’re serious about buying, right before or after you meet with the agent, meet with the lender.

Get a Preapproval Letter
Unless you plan to pay cash, you’ll need a recent preapproval letter from a lender. The letter will describe how much money you can borrow, based upon the lender’s assessment of your credit score and income.

The problem is, buyers want to find the house first, and then they think they’ll work out the financing. But the problem is, the really good deals on these bank-owned, they go quick — and the buyer doesn’t necessarily have time to try to work out the financing afterward. They need to work that out first.

Some first-time buyers make the mistake of assuming that the bank selling the home will also finance the mortgage as part of the deal. Don’t expect to get financing from the bank that foreclosed on it. That’s a totally separate transaction, and they view it that way. The people in the (bank’s) REO department are not loan officers. They are getting rid of bad assets.

Pricing Depends on Sales Pace
There’s no rule of thumb on what the bank’s bottom line is on price. Just as with any other real-estate purchase, you have to look at the recent sales prices of comparable properties, or “comps.”

You really have to look at the comps in today’s current market conditions and write a competitive offer based on that. Sometimes the bank prices the homes really low, and the home will have multiple offers over list price within hours. Sometimes it’s priced too high, and you can come in lower. A lot of times, buyers will come to me and say, We want to write offers for half price. It just doesn’t work that way.

Don’t Expect a Repair Discount
Keep in mind that foreclosed houses generally are sold as-is. Let’s say the house is listed for $200,000, all the comps are $200,000, and so the client comes in and said, Hey, look, I want to buy this house but I’ve got to do paint, carpet and fix some mold damage, so I want to take $15,000 off the price. You know what? All the other ones were in the same condition, and they sold for $200,000.

Look at the “absorption rate for your product class.” That means you should find out how quickly comparable houses are selling. In foreclosure, a 3,500-square-foot house with a pool in a gated community might sell within days or hours, whereas more modest homes might sit on the market for weeks.

If homes in your product class are selling swiftly, the best advice on a bank-owned property is to come in at your highest and best, unless the property has been sitting on the market forever with no activity. If you’re going to be upset because you would have gone $5,000 more, but you lost the property, just bid the higher price in the first place.

Are New Laws Impacting Real Estate in Your State?

New state laws relating to real estate have taken effect over the summer, many of which could impact homeowners, homebuyers and sellers in certain states.

One such law, enacted in California, equalizes the rules governing escrow services performed by real estate brokers, independent escrow companies and underwritten title companies (UTCs). The law, sponsored by the California Land Title Association, allows a UTC to handle transactions involving properties located in a county where it is not licensed, among other provisions.

Another California law, effective at the beginning of July, requires condominium projects’ annual budget reports include a statement about status as a Federal Housing Administration (FHA)-approved project and as a Department of Veterans Affairs (VA)-approved project.

A third law, new to California, requires mobile home park management to provide to buyers and sellers, in writing, the standards that determine the approval of a prospective homeowner; it also allows management to withhold approval based on concealment of material facts, deceit or fraud.

In Florida, a newly-enacted law allows property owners to challenge the property assessment indicated on their Truth in Millage (TRIM) notice. The owner, who may be represented by a real estate attorney, agent, broker or appraiser, can challenge the assessment before his or her county’s Value Adjustment Board (VAB).

Another new law in Florida addresses homeowners insurance coverage for sinkholes, which had previously been limited due to misuse of funds. The law mandates insurance companies offer coverage for moderate damage caused by sinkholes, such as cracked walls and sunken floors, and requires policyholders to document repairs.

In Virginia, a new law shortens the period in which a locality providing water or sewer service can discontinue the service for nonpayment—down to 30 days from 60. A similar new law in Virginia allows a locality providing water or sewer service to place a lien on a property in the amount of the number of months of nonpayment, versus up to three months under a previous statute.

Another new law in Virginia makes a litany of changes to existing legislation (the Property Owners’ Association Act and the Condominium Act), with provisions that:

  • Eliminate the requirement that an association retain a copy of the lease for a rented unit (it may, however, require the names of the tenant(s), authorized occupants and authorized agents, and vehicle information);
  • Prohibit a unit owners’ association from conditioning or prohibiting the rental of a unit, making an assessment, or imposing a rental fee or any other fee except as expressly provided for in law;
  • Prohibit associations from evicting tenants or requiring power of attorney to evict tenants, and prohibit associations from requiring power of attorney from landlords who are represented by an agent and present a property management agreement or equivalent document;
  • Prohibit associations from requiring use of their lease or addendum, unless association bylaws require that their addendum be attached; and
  • Provide that the unit owner may designate a licensed broker to act as the owner’s authorized representative with respect to any lease.

For more information on real estate-related legislation that went into effect this summer, contact your local or regional association of REALTORS® or your county or state representative’s office.

Dealing With An Underwater Mortgage

Back during the real estate bust, we fell behind on our mortgage and worked with our lender to get a loan modification. The lender added the delinquent amount to the end of the mortgage. Now, almost 10 years later, we have retired and are looking to relocate to a smaller house. Although our home’s value has increased, we still are “underwater” on the mortgage due to the modification. We contacted our bank, but we were told that there was no help for our fairly unique situation. There’s nothing we can do?

Your bank’s representative gave you bad information. Your situation is far from unique. You can wait it out or try to complete a short sale. In a short sale, your lender will agree to accept less than it is owed and will release you from the mortgage.

Your house has regained most of the value it lost when the bubble burst. In a few more years, as long as values continue to rise, you no longer will be underwater. You could stay in your home and possibly refinance or move to a new home and rent this one. However, being a landlord is not for everyone. Consider whether you are willing to deal with a tenant and all that goes with that.

I think a better option would be to try for the short sale. You’ll need to list your property with a real estate agent and sign a contract with a buyer at market price. Then you apply to your lender for a short sale by filling out paperwork that is similar to the loan modification process. You’ll have to follow up consistently with the lender until the deal is approved.

Many people completed short sales during the housing collapse, and many complained that the process took too long and was fraught with bureaucracy. This still would take substantial time and effort, though it shouldn’t be as hard now that fewer people are seeking short sales. And it almost certainly would be faster than waiting out an underwater mortgage.