How to Get Approved for a Home Improvement Loan

Whether you're building an addition, completely remodeling or just finishing your basement, a home improvement loan can help add value and comfort to your home. There are a variety of loan options available that we detail later in this article, but before you explore those, there are four steps you should take to ensure that you'll get the money you need:

1. Understand Your Credit History
With any type of loan, a higher credit score will give you better terms for your loan. But if you have a low credit score, that doesn't mean a home improvement loan is out of reach. There are government loans, private lenders and co-signing opportunities that may be available to you.

2. Evaluate Your Equity
Home improvement loans are largely dependent on the homeowner's equity, since this becomes collateral for the loan.

Even if you have a decent amount of equity, you will need to prove that you're capable of paying your debts plus the added debt of the home renovation loan. The final terms of your loan agreement will be determined by your ability to pay back the loan on time.

3. Get an Appraisal
The lender needs to know the overall value of your home before agreeing to certain loan terms. Not every lender will require an appraisal of your home, but it helps to be prepared in case it's requested.

4. Estimate Your Project Cost
Before you apply for a loan, you should establish a baseline of estimates from professional contractors to determine how much your home improvement project could potentially cost. This will give you a good idea of how much you'll need to borrow. Seeking out contractors for estimates will prepare you for what your project could entail. For example, you might be unaware that there's mold in your walls which is something you'll definitely need to take care of - and this will add to the amount you'll need to borrow.

While you're figuring out the cost of your project, be sure to request estimates from several contractors so you can shop around for the best price.

What Are Your Home Improvement Loan Options?
After you've completed the above four steps, you'll be ready to look into your loan options:

Home Equity Line of Credit
With a home equity line of credit, you're able to withdraw money as you need it during a time limit that the lender has specified. Much like a credit card, as you pay some of the balance off, your credit will revolve and you can start to withdraw again.

This line of credit can have fluctuating rates that can be higher than the rate you'd get on a fixed-rate loan, making them more risky. But there is more flexibility with a home equity line of credit than a fixed-rate loan.

Home Construction Loans
When it comes to home construction loans, lenders need to place a lot of trust in the builder, meaning they are usually very cautious about giving out these loans. If things go wrong, the lender could quickly realize they've made a bad investment.

Because of the risk for the lender, there are precise qualifications for this type of loan, including:

• Proof of good credit and financial health
• A comprehensive list of project details (floor plans, materials, etc.)
• An estimated home value from an appraiser
• A large down payment - usually 20-25 percent
• Working with a builder that's approved by the lender

Home Equity Loans
A borrower uses the equity of their home as collateral under a home equity loan. The value of your property will need to be determined by a licensed appraiser, and this will determine the loan amount you are eligible to receive.

Usually this requires good credit and can end up being more costly than other loan options since additional fees associated with the appraisal, originator, title and closing process can come up.

FHA 203(k) Loans
The federal government backs FHA 203(k) loans, which were established with the intention of revitalizing struggling neighborhoods. Under this loan, borrowers can purchase a property with the cost of repairs and upgrades included. The required down payment is as low as 3.5 percent in most instances.

Make sure to follow the above steps and do your research on loan types as you're planning to renovate your home!

Avoiding Fraud: Key Practices in Real Estate

Whether by compromised data, cracked passwords or phishing, real estate is a target for cyber criminals. More and more, homebuyers and sellers-and the practitioners who serve them-are reporting theft via wire fraud, in which criminals access emails, learn of a pending transaction, and then message phony wiring instructions to victims. Bogus DocuSign emails, emails with illegitimate referrals and ransomware are also on the rise. 

Being a victim of wire fraud can be devastating - the funds are almost always irretrievable once sent. And aside from making off with money, criminals can filch personally identifiable information, or PII, through any or a combination of schemes. 

So how can you protect yourself when buying a home? 

1. Being aware that you may be a target is key to protecting yourself from fraud. By educating yourself on the danger, you're much more likely to identify suspicious activities and changes to procedure that are utilized by hackers.                                               
2. Be sure that you clearly understand the wiring instructions for your transaction, and ensure that you're getting that information from a verified source. Title and settlement companies should send you instructions on your wire transfer through a secured service, not just through an email. Many will also have their standard procedures posted on their website. Make a phone call to a number that's listed on the title or settlement agency's website to speak with a real person to verify the information. Don't just call the number listed at the bottom of the written instructions - that information could be bogus too.                                                                                                                                                      
3. If something seems wrong or fishy, it probably is. If you are sent a message requesting a partial payment, notifying you in a change in the deadline for your transfer, or detailing a new procedure for your wire transfer, don't do anything without talking to your agent. Last minutes changes are a big red flags.

By Suzanne De Vita

Couples able to afford more homes than singles:

A couple with a combined household income of $80,800 could afford 82% of all US homes and would be able to save their down payment in just 5 years.

But for singles, its another story. 

An analysis from Zillow calculates that less than half of all US homes are affordable for a single buyer based on a median household income of $34,500.  And since they don't have the help of a spouse, it could take up to 11 years to save up enough for a standard down payment.

"Nearly two-thirds of Americans agree that buying a home is a central part of living the American Dream, but for unmarried or un-partnered Americans, that dream is increasingly out of reach," said Zillow senior economist Aaron Terrazas. "Single buyers typically have more limited budgets, which means they are likely competing for lower-priced homes that are in high demand. Having two incomes allows buyers to compete in higher priced tiers where competition is not as stiff."

Source: Zilllow.com

Millennials Search for Unconventional Down Payment Funds, but at What Cost?

Rising home prices are standing in the way of millennials who want to buy their first home; however, these challenges are being overcome via some unconventional methods. Millennials are getting creative and finding sources for their down payment by any means necessary. But are these methods hurting the millennial generation financially?

Borrowing from family: Sure, gifted money doesn't sound bad. But what if the families don't have the cash to give? Instead, buyers are asking that their parents' home be refinanced, using the home equity as a way to fund their own home purchase.

Of course, this can be beneficial in multiple-offer situations to get a competitive edge with an all-cash offer, but borrowing from a relative can go south fast. Not being able to pay a bank back can have repercussions like lowering a credit score, but missed payments to a relative can damage familial relations. Is it worth the risk?

Crowdfunding: There are new crowdfunding platforms being introduced every year, and more of them are tapping into the real estate industry. This can be a great way to amass gifted money from friends and family, but not everyone may see it that way. Instead of crowdfunding for their honeymoon, newlyweds are asking their wedding guests to donate toward their first home.

This method can get complicated in the lending world. Buyers will need to look into gifting regulations before accepting any gifted money. 

By Liz Dominguez

Pending Home Sales Better than Expected:

Pending Home Sales in November (signed purchase contracts that are not yet closed) were much stronger than expected (+0.2% vs market expectations of -0.5%) on a month-over-month basis.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2 percent to 109.5 in November from 109.3 in October. With last month’s increase, the index remains at its highest reading since June (110.0), and is now 0.8 percent above a year ago.

Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”

“The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid home buying demand next year, while also putting additional pressure on inventory levels and affordability,” said Yun.

Source: National Association of Realtors

Home Builder Optimism at Highest Level Since 1999:

Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders Housing Market Index (HMI) which is the highest reported level since July 1999, over 18 years ago.

“Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

“The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” said NAHB Chief Economist Robert Dietz. “With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components registered gains in December. The component measuring buyer traffic jumped eight points to 58, the index gauging current sales conditions rose four points to 81 and the index charting sales expectations in the next six months increased three points to 79.

Looking at the three-month moving averages for regional HMI scores, the Midwest climbed six points to 69, the South rose three points to 72, the West increased two points to 79 and Northeast inched up a single point to 54.

Source: NAHB

How to Make an Open Floor Plan Work for You

Once a trend, open floor plans have become a staple of most modern homes. An open floor plan generally means the living room, kitchen, and dining room are combined into a large space or great room. Before taking a hammer to all interior walls, it's important to know the structure of your home, as well as the benefits and ways you can accomplish an open concept.

Benefits of an Open Floor Plan

Space
Small, cluttered homes can be transformed into airy, more breathable spaces by knocking down a few dividing walls. A demolition project may seem daunting, but the average cost is just over $3,000. Just be sure to have a professional take a look before wielding a sledgehammer. Hiring a structural engineer will cost you about $500, but you'll save yourself the headache of rebuilds, fines, or structural problems.

Natural Light
Without walls blocking the windows, natural light is able to stream in your home, making the open space seem even larger and more airy. Along with knocking down walls, you can bring natural light into your home by connecting the outdoors to your home's interior with large patio doors. On average, you can install glass doors for about $1,600. 


Inclusivity
It's right there in the title: an open floor plan means more openness and inclusivity in your home. When you're preparing dinner in the kitchen, for example, you won't be closed off from the rest of the house. This is great for both entertaining and every day. When you're entertaining, you can still be a part of the party, even while preparing food and drinks. And as an everyday solution, you're able to keep an eye on children, pets, or—let's be honest—the TV, while still going about your daily tasks. 

3 Reasons Your Smaller House Can Sell for More Than Ever Before

It can seem like having a small home is a liability. After all, there's a certain feeling that home buyers are always looking for something bigger and better. But that trends has shifted over the last few years. Smaller homes are beginning to sell faster than many of their larger competitors. Here are three reasons why. 

Area Over Square Footage. Buyers have also become incredibly conscious about the areas in which they live. With some buyers now targeting hip new areas, they are willing to put aside some of their size concerns in order to get into the hottest neighborhoods. These trends are especially true among younger buyers who don't plan on having large families; they now know that they can get a good space near everything they loved without having to travel.

Bigger Means More Costs. Since the housing market crash in 2008, the way that people buy homes has changed and buyers are considering factors other than square footage in order to make a smart investment. Many buyers consider lower maintenance costs an important asset in a property. This, in turn, allows owners of smaller homes to be more competitive than their larger neighbors, especially when selling to investors.

Minimalism is In. Quite a bit of what's been discussed goes back to a single, overriding trend among younger buyers: minimalism. There are many who now see having a smaller, nicer home as a lifestyle statement. These are the same kinds of buyers who would have paid top dollar for a larger space years ago, but are now following current trends. 

Pending Home Sales Best Since June:

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October. The index is now at its highest reading since June (110.0).

Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month's solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although home builders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR's 2017 Profile of Home Buyers and Sellers – released last month – revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

“Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 1999¹,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”

With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

Source: National Association of Realtors

Housing Market Update

We keep hearing concerns that tight existing home inventories and rising prices will shrink sales, but the latest data lays those worries to rest. October Existing Home Sales increased 2.0%, to a 5.48 million annual rate. Sales grew in every major region, with single family homes leading the way, although condos/coops went up a bit too. Yes, sales are down (less than 1%) versus a year ago, but we're still seeing the effects of Hurricanes Harvey and Irma, which sidelined home buyers. Once we start getting reports not colored by these storms, many expect an upward sales trend.

Nearly half the homes sold In October were on the market less than a month, indicating demand is there. This is put to increasing incomes, a strengthening economy, near historically low mortgage rates and a growing appetite for home ownership. Freddie Mac's November 2017 Outlook expects this to be the best year for housing in a decade, with 6.13 million homes sold and 1.2 million housing starts. Their chief economist said, "construction will gradually pick up, helping to supply more homes in inventory-starved markets." The Fed's latest data reveals home equity hit $13.9 trillion in mid-2017, an all-time high.

The Housing Market Update

New Home Sales Hit 10 Year High, Average Sales Price above $400K for First Time Ever:

The U.S. Census Bureau and the Department of Housing and Urban Development reported that New Home Sales for October hit a 10  year high with 685K units which beat out expectations of 620K.  This was a 6.2% monthly gain over September.

Sales Price
The median sales price of new houses sold in October 2017 was $312,800. The average sales price was $400,200 which is the first time on record that the average sales prices topped $400,000.

Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of October was 282,000. This represents a supply of 4.9 months at the current sales rate.

The Northeast is the standout sales region for the second month - up 30 percent to 56,000. Year-on-year sales in the Northeast are up 65 percent. The Midwest also was strong, up 18 percent in October for a yearly gain of 16.2 percent.  These are very strong metrics as it shows strong sales were not due a temporary demand spike related to the hurricanes in the South.

The biggest contributor in size to the month's sales is the West, up 6.4 percent to 167,000 for a yearly 14.0 percent gain. The South, which did not show any effect from the heavy hurricane season, rose 1.3 percent in October for a year-on-year increase of 14.0 percent.

Source: U.S. Census Bureau

'Inelastic' Inventory: It's Fate

Affordability is a complex web. Home prices, incomes and mortgage rates all factor in. Land use limitations also play a role—but not as large and unchanging a role as location overall, according to a recent analysis by Freddie Mac.

Home builders often cite compliance costs related to land use and zoning as a factor—expenditures that, over the last 30 years, have pushed home prices into unaffordable terrain. A rollback in regulations, however—which constituents and policymakers have suggested—could be ineffective in markets where home-building is physically impossible, Freddie Mac's latest Insight shows.

"A thought experiment can illustrate the impact of regulatory relief and the limits on that relief in a city that also is constrained by geography," says Sean Becketti, chief economist at Freddie Mac. "Imagine that San Francisco's land use regulations were relaxed significantly. The ensuing reduction in house values would encourage migration to San Francisco, but the city's geographic constraints guarantee that housing would still be inelastically supplied despite the reduction in regulation."

Analysts determined that even when applying Kansas City's relatively loose regulations, home prices in San Francisco would be as much as three times higher than the national median because of its constraints geographically. Builders, in other words, would still have scarce options.

"Inelastic" inventory, the analysts found—even with ideal conditions in land use and zoning, and demand—equals stifled supply. 

4 Reasons Why Bamboo Is Taking Home Decor by Storm

Homeowners are often looking for home improvement options that strike the right balance between affordability, functionality, aesthetics and eco-friendliness. Bamboo has been marketed as something of a panacea—a kind of wonder wood that checks all the boxes. Designers, contractors and consumers have all taken note, as bamboo has made its way into homes as flooring, walls, window treatments, furniture and more. Here are the properties that are making this popular material a go-to green choice for interior design materials,

Affordability
Bamboo is a readily available wood…except for the fact that bamboo isn't a wood at all, but a grass! Therein lies the secret to bamboo's ascendant success as a housing material: It grows like a weed because it essentially is one. At a maximum of three feet per day, it is, in fact, the fastest growing plant on Earth.

Versatility
Just the one word "bamboo" doesn't do justice to the range of looks the material offers. It can vary greatly in shades and textures, making it a versatile option for decorators and designers.

Durability
Whether natural or man made, few materials can match bamboo's physical properties pound for pound. Because bamboo grows in wet, tropical climates, it is well-suited to resisting rain and wind. In fact, this unassuming reed beats out hardwood, brick and concrete alike in terms of compression strength, while rivaling steel in tensile strength.

Sustainability
As a growing number of homeowners look for eco-friendly materials in their decor, perhaps no single factor has contributed to bamboo's modern vogue in interior design more than its sustainability. As it is a grass rather than a tree, it can grow to a harvestable size (often over 100 feet) in a matter of months. This is in stark contrast to the years of water, fertilizer and pesticide required by other timber woods. 

Single Female First Time Home Buyers Increase to 2011 Levels:

The National Association of Realtors® 2017 Profile of Home Buyers and Sellers, which also identified numerous current consumer and housing trends, including: mounting student debt balances and smaller down payments; increases in single female and trade-up buyers; the growing occurrence of buyers paying the list price or higher; and the fact that nearly all respondents use a real estate agent to buy or sell a home, which kept for-sale-by-owner transactions at an all-time low of 8 percent for the third straight year.  Here are some key highlights from the report:

Single females make up larger share of sales:
Solid job prospects, higher incomes and improving credit conditions translated to continued momentum in the growing share of single female buyers. At 18 percent (matches highest since 2011), single women were the second most common household buyer type behind married couples (65 percent). Furthermore, single women purchased slightly more expensive homes than single men despite earning less. The overall share of single male buyers (7 percent) remained below unmarried couples (8 percent) for the second straight year.

Age of first-timers stays flat; climbs to new survey high for repeat buyers:

For the second straight year, the median age of first-time buyers was 32 years old. First-time buyers had a higher household income ($75,000) than a year ago ($72,000) and purchased a slightly smaller home (1,640-square-feet; 1,650-square-feet in 2016) that was more expensive ($190,000; $182,500 in 2016). Fewer first-time buyers purchased a home in an urban area (17 percent; 20 percent in 2016).

The age of repeat buyers increased to an all-time survey high this year (54 years old; 52 years old in 2016) as older households, perhaps with plans to stay in the workforce longer but with an eye towards retirement, felt more comfortable about buying. Overall, repeat buyers had roughly the same household income than last year ($97,500; $98,000 in 2016) and purchased a 2,000-square-foot home (unchanged from last year) costing $266,500 ($250,000 in 2016).

Nearly all buyers choose a single-family home in a suburban location:

A majority of buyers continue to choose a home in a suburb, small town or rural area (85 percent) as opposed to an urban one (13 percent; 14 percent in 2016). Eighty-three percent of buyers purchased a detached single-family home, which for the third straight year remains the highest share since 2004 (87 percent). Purchases of multi-family homes, including townhouses and condos, were at 11 percent.

Supply scarcity leads to increase in buyers paying list price or higher:

Underscoring the supply and demand imbalances prevalent in many parts of the country, 42 percent of buyers paid the list price or higher for their home, which is up from a year ago (40 percent) and a new survey high since tracking began in 2007. Buyers in the West were the most likely (51 percent) to pay at or above list price.

Source: Realor.org 

How Many Hours do Americans Need to Work to Pay their Mortgage?:

The visualization uses data from the U.S. Census for household income and Zillow for median home listing price, while calculating mortgage payments based on a standard 30-year term.

With about 170 hours in a normal work month, the worst is in New York City and Los Angeles, where at least 65% of income is going towards housing.

But in a city like Memphis, TN it takes only 18.4 hours of work a month to pay down the average mortgage. That’s equal to only about 10% of monthly household income.

The red bars represent places where you have to work the most hours to keep the roof over your head. In cities like New York, Los Angeles, Miami, and San Francisco, you put in more than 100 hours to make enough money just to pay for housing. That’s longer than two-and-a-half weeks, meaning well over 50% of your take-home pay! Not surprisingly, unaffordable places are all located on the either coastline. In fact, 8 of the 10 most expensive places are all located in California

Home Sellers Are Making Bank in Today's Market

Home sellers are making bank in today's market, realizing an average profit of 24.1 percent, or $39,900, in 2016, according to a recent study.

Sellers on the West Coast—where home prices have skyrocketed since the recession—saw higher returns. Sellers in Oakland, California took home the highest profits at 78 percent, or $235,000.

Duration is key. The average seller turning a $39,900 profit, the analysis shows, held on to their home for seven years and five months. The average seller in Oakland hung on to their home for seven years and three months.

The top 10 markets: 

City Median Years Owned Dollar Gain on Sale Annual Dollar Gain on Sale Percent Gain on Sale Oakland, CA 7 years, 3 months $235,000 $33,913 78.0% Portland, OR 9 years, 1 month $145,026 $16,714 64.7% San Jose, CA 9 years, 8 months $271,150 $30,562 56.5% Denver, CO 7 years, 7 months $119,500 $18,162 56.0% Los Angeles, CA 9 years, 8 months $200,000 $23,200 53.7% Sacramento, CA 6 years, 11 months $82,500 $12,000 53.6% Seattle, WA 9 years, 2 months $185,000 $20,840 53.1% Philadelphia, PA 7 years, 11 months $40,225 $4,194 51.7% New Orleans, LA 8 years, 7 months $81,000 $10,475 51.5% Boston, MA 7 years, 10 months $182,500 $25,036 49.6%

"The housing market can change a lot in 10 years, and you see that reflected in this top 10 list," says economist Dr. Svenja Gudell. "Buying a home is one of the biggest financial decisions people will make in their lifetime, and it really paid off for sellers in these cities. Every city on this list has been growing extremely fast over the past decade, with the majority passing peak home value hit during the housing bubble."

The ability to amass wealth over the long term makes real estate the No. 1 investment for most Americans, despite proven results from stocks and other vehicles.

"It's extremely difficult to time the market, but if you're a longtime homeowner in one of these cities, you could potentially see a great return on your investment," Gudell says. 

Home Purchaser's Sentiment Matches All-Time High:

The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 0.3 points in September to 88.3, matching the all-time high set in June.

The rise can be attributed to increases in three of the six HPSI components. The good time to buy component rose the most month-over-month, with the net share increasing 10 percentage points compared to August. Renter respondents, in particular, buoyed the net good time to buy component, showing a substantial upward change in optimism in September. The net share who reported that now is a good time to sell a home rose 2 percentage points in September and is now up 23 percentage points compared to the same period last year.

Meanwhile, the net share who said home prices will go up in the next 12 months fell 8 percentage points. Even so, respondents continue to cite high home prices as the most important reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down decreased 2 percentage points. Americans also expressed a slightly increased sense of job security, with the net share who say they are not concerned about losing their job increasing 1 percentage point. Finally, the net share of consumers who reported that their income is significantly higher than it was 12 months ago fell by 1 percentage point.

“The biggest driver for the increase in the HPSI is the rebound in the good time to buy sentiment, which outweighed the largest drag—a sizable reduction in the net share of consumers expecting home prices to rise over the next year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Duncan also said that the “details in the survey showed a meaningful pickup in the good time to buy component, especially from the renter respondents. Additionally, perceptions of easing inventory helped boost the net share saying that now is a good time to buy, which is consistent with less bullish home price appreciation sentiment during the month. Overall, we believe that the devastating impacts of the hurricanes will likely weigh on home sales in coming months, posing downside risks for our forecast, which already calls for only a modest gain in home sales this year.”

You can read the official release from Fannie Mae here.

What’s Feeding the Affordability Perception?

Affording a mortgage payment is possible for many prospective homeowners. Why then, by all accounts, is unaffordability plaguing the market?

Researchers at Freddie Mac offered several answers to that question in its latest Insight, the first one being perception. Home buyers struggling to find reasonably-priced listings perceive the housing market in general as unaffordable — a reasonable conclusion, if their only options to date have been out-of-reach stock. 

Secondly, the high likelihood for competition (i.e., bidding wars) is off-putting, both for first-time homebuyers and for sellers re-entering the ma

rket. The latter's hesitation is notably tamping down already tight inventory.

"Thanks to very low mortgage rates, monthly mortgage payments are affordable for the average household despite currently high house prices," says Sean Becketti, chief economist at Freddie Mac. "Nevertheless, hurdles to home ownership arise from the difficulty of finding a house. The supply of homes for sale is very tight, especially starter homes, and underwriting requirements are more rigorous than they were in the past."

Would-be homeowners are also not confident about their prospects because their incomes have stayed relatively flat compared to home prices. Incomes have grown by an average 2.4 percent annually since 2012; home prices, however, have grown an average 6 percent.

"Many potential first-time borrowers are stymied by variable employment and income histories and the challenge of accruing a down payment while simultaneously paying down their student loans," Becketti says. "In fact, a high level of household debt, particularly student debt, poses perhaps the largest obstacle to first-time homebuyers."

Homeownership — stripped down to just the mortgage payment — is affordable, the researchers concluded, but challenged by barriers that play a hefty role in the home-buying process. Perception, after all, is reality.

Source: Freddie Mac 

The Housing Market Update

The Mortgage Bankers Association of America along with HUD and FHFA are all working together to offer financial relief to homeowners with mortgages.

Currently the affected area is limited to damaged caused by Harvey, however with an even powerful "Irma" on the way, there could be many more states added to the "disaster area" list:

The following forms of relief are available to people in impacted counties (Aransas, Atascosa, Austin, Bee, Bexar, Brazoria, Brazos, Caidwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Refugio, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties.)

Foreclosure Relief.  HUD is granting a 90-day moratorium on foreclosures and foreclosure forbearance on Federal Housing Administration (FHA)-insured home mortgages located within the geographic boundaries of the disaster area.  A borrower can also qualify for foreclosure relief if he or she is a household member of someone who is deceased, missing or injured directly due to the disaster, or if his or her financial ability to pay mortgage debt was directly or substantially affected by  the disaster.  Separately, VA, Freddie Mac and Fannie have all announced a 90-day moratorium on Foreclosures.

Mortgage Insurance.   HUD’s Section 203(h) program provides FHA insurance to disaster victims who have lost their homes, enabling them to finance the purchase or rehabilitation of a home. Borrowers working with participating FHA-approved lenders may be eligible for 100% financing.  Additionally, HUD’s Section 203(k) loan program enables the purchase, refinance, and rehabilitation of a home that has been lost or damaged.

Wells Fargo, the nation's largest mortgage lender, said Monday that it was suspending all negative reporting to credit bureaus, collection calls and foreclosure procedures against customers in the impacted communities at least through the end of September.

Fannie and Freddie have also announced a Disaster Relief Forbearance Plan where homeowners do not have to make any mortgage payments during the forbearance period without any negative impact to their mortgage or credit rating.  Homeowners can request a second or extended forbearance term if they need it.

In order to get a forbearance, you must first contact your mortgage servicer. You can visit the MBAA.org website here for a contact list ofmortgage servicers.

Another scheme for storm water taxes gathers steam in Sacramento

Another scheme for storm water taxes gathers steam in Sacramento: Susan Shelley

By Susan Shelley, LA Daily News

Posted: 08/22/17, 9:14 PM PDT - Click to read this column on the Daily News website

Money is no object when you’re spending somebody else’s.

If those words haven’t yet replaced “Eureka” as the official state motto of California, they soon will. The Legislature is back in session.

The chairs were barely warm when lawmakers advanced yet another sneak attack on property owners. This time it’s a gut-and-amend bill to allow the Los Angeles County Flood Control District to levy special taxes for stormwater management projects.

Created in 1915, the L.A. County Flood Control District provides flood control and water quality services to 85 cities and the unincorporated county area. Assembly Bill 1180 would give the district a new method to raise revenue, or, as the analysis prepared for the Senate Governance and Finance Committee put it, “yet another way for the District to exact monies from taxpayers.”

If AB 1180 becomes law, it’s likely that the flood control district would put a new parcel tax on the 2018 ballot for voter approval.

The bill is currently in the state Senate. It has already passed in the Assembly, except that when the bill was in the Assembly it was about tires, not taxes. When AB 1180 arrived in the Senate, it was gutted like a fish and stuffed with an entirely new bill to allow the L.A. County Flood Control District to levy special taxes. If the bill is passed by the Senate, it will return to the Assembly for a vote to approve the “amended” version.

How much could property owners pay if a parcel tax for stormwater projects is approved?

The San Gabriel Valley Council of Governments estimated that the cost per parcel to comply with the most recent stormwater regulations could be as much as $1,400 per parcel per year. The total cost for L.A. County’s compliance is estimated at $20 billion. Local governments that don’t comply face fines of up to $250,000 per day.

You might expect that any requirement that triggered such enormous costs would have been debated and passed by elected officials, but you’d be wrong about that. The regulations were created by the Los Angeles Regional Water Control Board, in cooperation with the State Water Resources Control Board and the federal Environmental Protection Agency, as part of the implementation of the 1972 Clean Water Act.

The Clean Water Act allows the federal government to regulate “the waters of the United States,” which had traditionally been defined as navigable waters. Over the decades, regulators expanded the definition to include “waters” in storm drains, ditches and even temporary ponds that only appeared during rainy seasons.

President Donald Trump has directed the EPA to go back to the traditional definition of “waters of the U.S.,” but California is ignoring him. The Los Angeles Regional Water Control Board is hanging on to the ghostly mandate that storm drain and flood-control systems must clean the water to drinking water standards in order to comply with the Clean Water Act.

And somebody has to come up with $20 billion to do it.

Stormwater regulations are enforced through a permitting system. L.A. County’s MS4 (municipal separate storm sewer system) permit has uniquely tough requirements, adopted in late 2012.

If you were buying a new dishwasher, and there was one for $400 that would get the dishes clean, and another one for $20 billion that would get the dishes a little cleaner, which one would you buy?

Suppose there was a fine of $250,000 per day for not buying the one that costs $20 billion.

You probably still wouldn’t buy the $20 billion dishwasher, because you probably don’t have $20 billion.

Neither does the L.A. County Flood Control District, or the county, or the 84 cities that have to comply with this permit. That’s why they’re all looking for a way to get you to pay hundreds or thousands of dollars per year in new taxes.

Sen. Bob Hertzberg’s SB 231 would make it possible for local governments to raise taxes for stormwater projects without voter approval, simply by redefining “sewer” to include stormwater. Unless a majority of property owners filed a protest in time, the huge new charge would just show up on property tax bills.

Wouldn’t it make more sense to demand a full review of the MS4 permit to see if it meets any reasonable standard of cost-effectiveness and feasibility?

This would be a good time to call the L.A. County Board of Supervisors (213-974-1411) and your representatives in the state Senate and Assembly (http://findyourrep.legislature.ca.gov) and ask them that question.