Rent Price Hikes Are Getting Smaller

Renters may finally be getting some relief. Apartment rents are not increasing as much as they have in the last few years.

None of the major metro areas studied had seen annual rent growth of more than 10 percent. Rents rose 2.2 percent, on average, in the U.S. over the 12 months that ended in the third quarter, according to Yardi Matrix. That marks the slowest rate of increase in rental prices since April 2011.

“We don’t believe it’s time to turn out the lights on the expansion in the multifamily sector,” Yardi notes. “Job growth and social and demographic trends foretell strong demand for the next few years.”

The markets where rents increased the most quickly in 2016 have slowed down by the most in 2017, according to data from Axiometrics. Sacramento still has the strongest rent growth in the U.S., but apartment rents grew by 6.9 percent over the 12 months that ended in the third quarter of 2017. For comparison, a year ago rents rose by nearly 12 percent in that time frame.

Many of the markets that saw home prices plunge by the most during the housing crash are seeing some of the highest rent upticks still.

“Because of the oversupply of housing, some of the hottest markets in the last real estate cycle took the longest to recover,” says Jay Denton, senior vice president of Axiometrics.

Another former housing crash city—Las Vegas—saw the second fastest growth in apartment rents, in which rents increased by 5.8 percent over the 12 months that ended in the third quarter of 2017.

“Las Vegas had a longer, deeper downturn than the rest of the real estate market,” says Denton. “It is just a different place in its real estate cycle. Other markets have had a lot of construction.”

Other markets that saw rents grow quickly that were also considered former “crash cities,” included Orlando, Fla., which was number three on the list with average apartment growth at 4.8 percent; San Diego at number five with rent growth of 4.5 percent; and Jacksonville, Fla., at number six with a 4.4 percent rent growth.

SOURCE: DAILY REAL ESTATE NEWS 

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The ‘Bonus Room’ Makes a Comeback

Home builders and designers say demand is increasing for more flexible living spaces, giving rise once again to “bonus” or “multipurpose” rooms, The Wall Street Journal reports. Such rooms offer extra square footage for owners to create a space that fits their lifestyle. Baby boomers, for example, are showing interest in bonus rooms that could potentially serve as a first-floor master bedroom or suite.

Out of the 20 top-selling floor plans on Houseplans.com, 13 include bonus rooms, according to the site. However, only 14 percent of all plans the site offers contain such rooms. They are usually located off the entry hallway near the main living space and a bathroom. The location makes it easy to transform the space into an extra bedroom, if needed. Bonus rooms also may be located above the garage. Homeowners use these extra spaces for anything from an in-law suite to a home theater.

Some designers say real estate professionals shouldn’t label bonus rooms with a specific purpose when showing a home to their clients. Let buyers imagine for themselves how they'd use the room; this can also make the listing more appealing to them. “When you name it ‘dining room,’ they will always see it as a dining room; they will never get it out of their mind,” says Mark Mathis, co-owner of Hattiesburg, Miss.-based design firm House Plan Gallery. “We have found that labeling this type of area as ‘flex space’ on our floor plans best allows home buyers to decide how a particular space can be used to fit their specific family’s needs.”

SOURCE: DAILY REAL ESTATE NEWS

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Childless Households Shape Real Estate Trends

The fertility rate in the U.S. has dropped to the lowest level on record, and with fewer households having children, consumers’ real estate needs are changing.

In 2015, slightly more than 70 percent of households had no children living at home, a three-percentage-point increase from 2011, according to the Census Bureau’s American Housing Survey. Broken out by age group, those ages 25 to 29 and 35 to 44 who didn’t have children in their household rose by more than 5 percent in that time period, the survey shows. The number of 30- to 34-year-olds without children increased by 4 percent.

The trend in people delaying marriage and having fewer children stands to have an impact on housing over the long term, Lawrence Yun, chief economist for the National Association of REALTORS®, told The Washington Post. “The fact that we’re having smaller-size families, I think, naturally means the demand for smaller-size housing would get greater interest than before,” Yun says.

Robert Dietz, chief economist for the National Association of Home Builders, told the Post that, in general, home buyers tend to seek properties that offer 800 square feet of space per person in the household. About 90 percent of buyers with children younger than 18 purchased a detached single-family house, according to NAR’s 2016 Profile of Home Buyers and Sellers. However, 79 percent of buyers without children also purchased such a property. Childless buyers tend to gravitate toward urban areas and prefer townhouses and condos, according to NAR’s report.

“We’re seeing this trend in many metro markets, so clearly there is a consumer desire and preference for wanting to move closer to the city,” Yun says. “That’s generally associated also with smaller-sized homes because those big McMansions that are being built are typically out in the more distant suburbs where the land is plentiful.” Further, buyers without children say friends, family, shopping, and entertainment influence their neighborhood choices the most, according to NAR.

Dietz says that while single-family housing starts are growing, they are lower than expected, partially because of household formations. Changing demographics will have an influence on what builders build, he says. “In certain markets where you’re going to have an increase in the number of childless households, that does mean that maybe townhouse construction is a greater option than, say, 3,000-square-foot single-family detached homes.”

SOURCE: DAILY REAL ESTATE NEWS

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Climate Change to Trigger Housing Crisis?

Coastal flooding, wildfires, and extreme weather events are posing an increasing risk to real estate. Last week’s Hurricane Harvey will likely go down as one of the costliest hurricanes in U.S. history with projections, so far, coming in at $10 billion to $20 billion in damages. Texas homeowners are left picking up the pieces from record levels of flooding.

The threats of weather-related disasters continues to grow. Freddie Mac’s chief economist last year wrote that an increase in coastal flooding and storm surges will eventually worsen to the point that homeowners, unable to sell flooded properties, will abandon their homes and mortgages. That could trigger a housing crisis, he wrote.

The government has spent $357 billion on disaster recovery in the last 10 years, according to Insurance Journal. The second highest payout on record was in 2016.

The home insurance market is seeing costs rise, and it’s projected to get worse. Over the next 15 years, the U.S. could see higher sea levels and storm surges that could increase the annual cost of coastal storms along the Eastern Seaboard and Gulf of Mexico by up to $35 billion, according to a 2014 analysis by Risky Business.

Flooding poses the biggest threats as the costliest type of natural disaster in the U.S. The National Flood Insurance Program was created to help alleviate the expenses from private insurers, but now the NFIP faces a looming expiration date.

The NFIP has a Sept. 30 deadline for Congress’ reauthorization. The NFIP helps to pay for and provide policies for millions of properties in at-risk flood areas across the country. The program is currently $24.6 billion in debt.

If Congress lets the NFIP lapse, the Federal Emergency Management Agency won’t be allowed to sell or renew flood insurance policies, pay existing claims, or start any mapping or management activities to create accurate assessments of risk, Curbed.com reports.
Carlos Gutierrez, a real estate pro with Florida’s Gutierrez Group in Miami Beach, says the NFIP program is “a key part of the equation in Florida real estate,” as well as in other coastal regions and areas at risk of flooding. Ninety-three percent of the buildings in Miami Beach are located in a Special Flood Hazard Area, which means they are required to have flood insurance for federally backed mortgages.

“We’re depending on the NFIP program,” Gutierrez told Curbed.com. “It could really hurt our industry if it isn’t renewed, and could cause thousands of home sales not to happen.”

SOURCE: DAILY REAL ESTATE NEWS

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2 Major Reasons Why Inventory Is So Low

Inventory of available homes on the market is the lowest it’s been in two decades, but the reasons may surprise you. Two of the likely culprits are baby boomers and homeowners who are simply satisfied with their home, according to realtor.com®’s Housing Shortage Study. 

Baby boomers are showing a desire to age in place in their current homes, and their refusal to sell is creating a clog in the market, according to the study. Eighty-five percent of baby boomers surveyed say they are not planning to sell their home in the next year. That means 33 million properties—many of which are urban condos or suburban single-family homes—will stay off the market. Many of those properties would be popular choices for millennials, a generation still largely waiting in the wings to break into home ownership. 

“Boomers, indeed, hold the key to those homes the market desperately needs, both in the urban condo and the detached suburban home segment,” says realtor.com® chief economist Danielle Hale. “But with a strong economy and rising home prices, there’s really no reason for established homeowners to sell in the short term. Although downsizing might be on the minds of boomers, they face the same inventory shortages and price increases plaguing millennials.”

Furthermore, 63 percent of respondents to the survey indicate that their current home meets the needs of their family. They cite low interest rates (16 percent), recently purchasing their home (15 percent), and needing to make home improvements and low property taxes (each at 13 percent) as reasons not to sell. “Life events drive real estate transactions,” Hale says. “When the majority of homeowners feel their family’s needs are being met by their current home, there is nothing compelling to them to put their home on the market.”

There may be hope that more starter homes will hit the market soon. Possibly offsetting the low supply of starter homes, which is down 17 percent year over year, 60 percent of respondents to realtor.com®’s survey who did say they plan to sell in the next year are millennials who want to move to a larger home or one with nicer features.

“The housing shortage forced many first-time home buyers to consider smaller homes and condos as a way to literally get their foot in the door,” says Hale. “Our survey data reveals that we may see more of these homes hitting the market in the next year, but whether these owners actually list will depend on whether they can find another home.”

SOURCE: DAILY REAL ESTATE NEWS

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Walkable Areas Are Getting More Competition

Older Americans are placing a higher value on living in walkable urban centers, according to a new survey of 1,000 respondents nationwide about their living preferences

A majority of respondents surveyed by A Place for Mom, a national referral service, said it was “very important” or “somewhat important” to live in a walkable neighborhood. They also sought neighborhoods with low crime and those that are close to family.

“It’s time to abandon the idea that only millennials and Generation X care about walkability and the services available in dense urban neighborhoods,” says Charlie Severn, head of marketing at A Place for Mom. “These results show a growing set of senior housing consumers also find these neighborhoods desirable. It’s a trend that should be top of mind among developers.”

The survey authors say it’s important for developers to consider creating multigenerational communities in suburban centers that place an emphasis on walkability. Walkability ranked high regardless of income level in the survey. Walkability ranked highest for those under 70 years old who were seeking senior apartments.

The message needs to change, says Bill Pettit, president of R.D. Merrill Co., a parent company of Merrill Gardens, which develops senior living centers. He says many developers had assumed that seniors preferred a more rural or suburban location.

“We were creating these islands of old age where you’re surrounded by your peers and you lose that intergenerational connectivity,” Pettit says. “We found we were spending a disproportionate period of time busing our seniors to other places to generate that intergenerational connectivity.”

Pettit says his company is changing its strategy. It is now focusing on developing senior living centers in urban areas with high walkability scores.

“When you can walk to shopping, or cross the street to a park, and that park is filled with children and families, I think it gives you a kind of lift that sitting and playing bingo during the day doesn’t give you,” he says. 

SOURCE: DAILY REAL ESTATE NEWS

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Underwater Homeowners Are Drying Up

As home prices rise, fewer homeowners are underwater, or owing more on their mortgage than their home is currently worth. In the first quarter of 2017, 350,000 borrowers regained equity, which dropped the total number of underwater owners to 1.8 million, according to the latest Mortgage Monitor Report from Black Knight Financial Services, a real estate data firm.

The population of underwater homeowners has dropped by nearly 1 million borrowers since last year. This marks the first time the underwater population has dropped below 2 million since 2006.

“The steady upward trajectory of home prices continues to improve the equity positions of many homeowners,” says Ben Graboske, Black Knight Data & Analytics executive vice president. “This is plainly visible in the number of borrowers who are underwater on their mortgages. ... Over the past year, we’ve seen a 35 percent decline in the total underwater population, with a 16 percent decline in that population over the first three months of 2017 alone.”

Negative equity has become more concentrated among a particular class of homeowner, Graboske notes. Nearly half of the remaining underwater borrowers live in the lowest 20 percent of homes in their markets.

“While the nation as a whole now has a negative equity rate of just 3.6 percent, among owners in that lowest price tier, it’s over 8 percent,” Graboske says. “In fact, these lowest-price-tier properties are more than twice as likely to be underwater as those in the next price tier up, and 6.5 times more likely to be underwater than those living in the top 20 percent of the market. This is the highest differential we’ve seen between high and low price tiers since we began tracking in 2005.”

Overall, fewer underwater homeowners in the U.S. has made the number of owners with equity zoom to record highs. More than 40 million Americans have “tappable equity” available in their homes, the largest population on record, according to Black Knight. Tappable equity is considered to be borrowers with at least 20 percent of equity in their homes.

“This is the largest this population has ever been,” Graboske says. “If home prices continue to rise at or near their current rate of appreciation, tappable equity will likely hit record highs by this summer.”

Graboske notes that more than half of the nation’s tappable equity is centered in the 10 largest metro areas. California, for example, contains nearly 40 percent of available equity.

“While the growth in tappable equity is obviously good news for both homeowners and lenders alike, it does represent some risk as well,” Graboske notes. “Investors in mortgages and mortgage servicing rights—as well as others with a stake in the broader mortgage market—need to be prepared to account for a higher share of equity-driven prepayment risk, as well as an increased chance of borrowers adding on second liens that primary loan servicers and investors may not be aware of.”

SOURCE: DAILY REAL ESTATE NEWS

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Report: Owners Most at Risk of Home Improvement Scams

Home improvement projects present the biggest opportunity for scammers to take advantage of homeowners, according to the Better Business Bureau’s Risk Index. Victims of home improvement scams lost an average of $1,400 from shady contractors, painters, and other repairmen, according to the BBB’s analysis.

The analysis found that such scams pose the highest risk to homeowners based on three criteria: exposure (how likely consumers are to be exposed to the scam), susceptibility (how likely they are to lose money), and monetary loss (how much money they stand to lose). For example, victims may be conned out of money by receiving a lowball bid from a contractor who then later demands more money to finish the project. A contractor also may use someone else’s license to take money and leave without ever completing the project.

Realtor.com® offers the following tips to avoid becoming a victim of a home improvement scam: 

Verify the contractor’s license, insurance, and at least three references. “Don’t be afraid to ask for their license numbers upfront,” says Cedric Stewart, a real estate professional at Keller Williams Realty in Washington, D.C. “Some states have online databases where you can check the license status.”

Ensure the contractor is an active member of a reputable industry organization. Contractors affiliated with the National Association of the Remodeling Industry or the National Kitchen and Bath Association are more trustworthy professionals, suggests Jonathan Weinberg, CEO of Builder Prime, a software service for contractors. “This is another indication that the contractor you are hiring is reputable, as they will need to pass a level of scrutiny and pledge to observe a code of ethics in order to be a member of one of these organizations,” he says.

Check the contractor’s reputation online. “Do they have a good website and active social media? That’s a good sign,” says Sam Medicraft, a former general contractor. “Most scammers want to disappear, so they leave as few traces online as possible.”

SOURCE: DAILY REAL ESTATE NEWS

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Zero-Down Loans Making a Comeback

Your buyers may soon be able to bring less to closing. They were blamed for precipitating the housing crisis years ago, but major lenders are giving no- and low-down payment loans another shot.

Several major lenders are reportedly offering loans with just 1 percent down. Navy Federal, the nation’s largest credit union, offers its members zero-down mortgages in amounts up to $1 million. NASA Federal Credit Union markets zero-down mortgages as well. Quicken Loans, the third highest volume lender, offers 1 percent down payment options, as does United Wholesale Mortgage. And the Department of Veterans Affairs has offered zero-down loans to eligible borrowers for many years.

Also, Movement Mortgage, a large national lender, has introduced a financing option that provides eligible first-time buyers with a nonrepayable grant of up to 3 percent. As such, applicants can qualify for a 97 percent loan-to-value ratio conventional mortgage, which is basically zero from the buyers and 3 percent from Movement. For example, on a $300,000 home purchase, a borrower could invest zero personal funds with Movement providing $9,000 down. The loan also allows sellers to contribute toward the buyer’s closing costs.

So far, the delinquency rates on these low- to zero-down payment loans have been minimal, according to lenders. Quicken Loans says its 1 percent down loans have a delinquency rate of less than a one-quarter of 1 percent. United Wholesale Mortgages told The Washington Post that it has had zero delinquencies from the borrowers on its 1-percent down loan since debuting it last summer.

For Movement’s new loan product, the lender will originate the loans and then sell them to Fannie Mae, which remains under federal conservatorship. Fannie officials released the following a statement: “(We’re) committed to working with our customers to increase affordable, sustainable lending to creditworthy borrowers. We continue to work with a number of lenders to launch test-and-learn that require 97 percent loan-to-value ratio for all loans we acquire.” They add that there “is no commitment beyond the pilots," which are “focused on reaching more low- to-moderate income borrowers through responsible yet creative solutions.”

During the housing crisis, zero-down loans were among the biggest losses for lenders, investors, and borrowers. However, housing experts say the latest versions are different from years ago. Applicants must now demonstrate an ability to repay what’s owed. They also must have stellar credit histories and scores, and lenders require a lot more documentation to prove borrowers are in good standing. Also, many of the programs are charging higher interest rates. For example, Movement’s rate for its zero-down payment option in mid-June was 4.5 percent to 4.625 percent, compared with 4 percent for its standard fixed-rate mortgages.

Some critics say that the borrowers who really could benefit from such options aren’t able to qualify for them. Paul Skeens, president of Colonial Mortgage Corp. in Waldorf, Md., told The Washington Post that “it seems like people without excellent credit scores and three months of [bank] reserves don’t qualify.”

SOURCE: DAILY REAL ESTATE NEWS

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How Immigration Policies Can Make or Break Real Estate

The shifting ideology from globalism to nationalism in the U.S. and other countries may threaten the health of the international real estate market in the long run, experts said during the Global Alliances Forum at the REALTORS® Legislative Meetings & Trade Expo. But it may be a while before the effects are felt.

So far, not even President Donald Trump’s travel ban—a veritable crackdown on immigration into the U.S. from Muslim-majority countries in the Middle East, which was struck down in federal court—has appeared to tamp down foreign interest in U.S. real estate, said Lawrence Yun, chief economist of the National Association of REALTORS®. However, NAR is watching closely whether Trump’s overall immigration policies will have a negative impact on foreign investment in the future.

“There’s a focus on anti-globalism right now in country after country,” Yun said. “The Brexit vote can be partially explained by that phenomenon. But even though there’s this movement, we are still seeing a general rise in foreign purchases of U.S. real estate.” He teased NAR’s next Profile of International Home Buying Activity report, due out later this summer, by saying there was a “large jump” in recent immigrants and foreigners purchasing vacation and investment properties in the U.S. last year.

Trade is also a hot-button issue with potentially expansive ramifications for the foreign-buyer market. Trump has promised to renegotiate America’s trade deals with several major import countries, which could restrict foreign buyers’ investment power in the U.S. if there are too many restrictions, said Scott Tatlock, executive director for China and Mongolia at the Commerce Department. But Tatlock cited Trump’s recent deal to open avenues for meat imports, among other products, from China as promising sign. Keeping that  relationship  strong would continue to benefit foreign real estate investment in the U.S., he said.

Chinese buyers, who are particularly driving the international market, are continuing to find U.S. real estate to be a safe investment, Yun noted. “In China, the government can take over a property at any time, so people feel more secure in the U.S.” Yun added that NAR’s upcoming report will show a greater geographical spread of home purchases by foreigners than in the past.  He singled out Tampa, Fla., and college towns in Indiana as hot up-and-coming markets.

Still, Trump’s stance on immigration is making policy watchers nervous about the future of some programs aimed at boosting foreign investment, said Russell Riggs, senior regulatory representative for NAR. For example, the EB-5 Immigrant Investor Program, which offers a path to citizenship for foreign investors, recently was reauthorized through Sept. 30—but its future beyond that is unclear, Riggs said. Since 2003, the program has helped add $3.1 billion in foreign cash to the U.S. economy, he noted. “We have a lot of work to do to secure this program’s future,” he said. “We don’t want to see it go away.”

SOURCE: DAILY REAL ESTATE NEWS

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Vacant Listings Can Be Vandal Magnets

A vacant home can easily become the target of thieves or vandals, and the damage they leave behind can be big and expensive.

Denise Supplee of SnapLandlord.com recalls an incident when she was helping a client sell a vacant home and the property was ransacked by thieves who wanted the copper tubing on the pipes.

“They ripped it all out and then there was water damage,” Supplee says. “And because no one really visited that home, the water damage became a mold issue. You know how we knew there was an issue? Because I paid the bills for this property, and I noticed a ridiculously high water bill.”

An alarm system and weekly checks of the property may be crucial to help avoid such disasters or break-ins.

"Owners of vacant homes have more affordable options today than they did 10 years ago, with the advent of smart-home security systems," says Brian Davis, a real estate expert and cofounder of SparkRental.com. "Smart cameras can be triggered by motion or sound detectors, and alert the owner. Smart-home security systems often now also detect air quality changes and other potential threats to property."

Installing timed lighting around a property at night can also help deter burglars.

Many aspects can make vacant homes be tempting targets for burglars, Davis says. “The copper in the pipes alone is valuable, and then [in luxury homes] there are the top-of-the-line appliances that many high-end homes boast. And those are just the fixtures that burglars can be reasonably certain are present. Who knows what other juicy targets of opportunity they’ll discover?

SOURCE: DAILY REAL ESTATE NEWS

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Will Tax Changes Benefit Homeowners and Investors?

As the White House shifts its focus to tax reform, analysts are examining who will benefit from the proposal announced Wednesday afternoon. The New York Times reported yesterday that this week’s stock market surge could be attributed to President Donald Trump’s call to cut the corporate tax rate to 15 percent, from 35 percent. However, the article goes on to note that optimism on Wall Street doesn’t always translate to growth on Main Street.

“We have to distinguish between pro-profit and pro-growth policies,” Diane Swonk, an independent economist in Chicago, told The New York Times. “A pro-profit approach increases the share of the pie going to corporate earnings and shareholders. Pro-growth policies increase the size of the pie.”

Treasury Secretary Steven Mnuchin told reporters today the plan will eliminate all personal tax deductions other than the mortgage interest deduction and those that encourage charitable giving. However, by increasing the standard deduction the plan will effectively nullify the benefits of the MID for the vast majority of filers, something strongly opposed by the National Association of REALTORS®.

That’s why NAR will be following the progress of tax reform as it becomes more concrete in the hands of Congress, with a specific concentration on how it may impact homeowners, property investors, and real estate practitioners. “REALTORS® support tax reform, and it’s encouraging to see leaders in Washington doing their part to get there,” says NAR President William E. Brown, adding that “as with all things, the devil is in the details.”

While the association appreciates the benefits American taxpayers could reap under sound reform and a simpler tax code, Brown says anything that includes damage to the economic benefits of housing and real estate investment is a nonstarter. He notes that while housing accounts for more than 16 percent of the gross domestic product and more than $3 trillion in investment, American homeowners already pay between 80 and 90 percent of U.S. federal income taxes. Brown added that the MID and state and local tax deductions make homeownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities.

“Those tax incentives are at risk in the tax plan released today. Current homeowners could very well see their home’s value plummet and their equity evaporate, while prospective home buyers will see that dream pushed further out of reach," Brown says. "While we appreciate the administration’s stated commitment to protecting homeownership, this plan does anything but.”

SOURCE: DAILY REAL ESTATE NEWS

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BONUS#2: Lifetime notary service (in office)

BONUS#3: Financial Impact Analysis

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