Water Damage From Faulty Pipes a Rising Threat to U.S. Homes

Homes are increasingly flooding, not from weather-related events but from old pipes and valves, worn-out hoses on second-story washing machines, and faulty connections from appliances that use water, The Wall Street Journal reports.

The uptick has sparked an increase in extensive water damage to homes that has been reported to insurers. One in 50 homeowners filed a water damage claim each year between 2013 and 2017, according to Verisk Analytics’ ISO insurance analytics unit. Insurers have faced a $13 billion water damage bill from insuring homes.

Claims for water damage average about $10,000, according to the report.

“Wildfires, hurricanes, and tornadoes catch headlines, but the reality is that the number one kind of risk that the everyday consumer has is a water claim,” Jon-Michael Kowall, an executive at USAA in the property insurance business, told WSJ. “It is lurking in the house.”

Contributing to the rising risk, more homeowners are putting their laundry room upstairs. Leaks and water damage from these upper units can cause extensive damage as they move from the upper floors to the lower ones. Also, the rising number of aging homes with old pipes is causing damage to many homes.

Luxury homes aren’t immune to water damage from old or faulty pipes. An oceanfront property in Southern California had a 12-foot seawall around it to protect it from outside flooding, but a second-story toilet tank crack caused more than $1 million in water damages. The repairs—to the home’s oak floors, walls, artwork, home theater, and more—also took more than eight months to complete.

In a pilot program, USAA is having 6,000 policyholders test water-detecting sensors, which are devices to help spot potential water damage before it becomes more extensive. Also, AIG and some other insurers are offering premium credits for policyholders who use technology that can help detect water leaks.

Homeowners must realize that not every water damage bill will necessarily be covered by insurance. For example, standard homeowner policies exclude storm surges and river flooding from coverage. Also, most homeowners’ policies will cover “sudden and accidental” damage but not routine maintenance. As such, homeowners who have ignored a slow leak for months may find insurance denies their claim.

SOURCE: DAILY REAL ESTATE NEWS

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‘Bank of Mom and Dad’ Could Rank High as Mortgage Lender

Parents are increasingly helping their adult children buy their first home. In fact, a new study suggests that if families were considered a financial institution, the “Bank of Mom and Dad” would be the seventh largest mortgage lender in the country.

Parents and grandparents supported the nationwide purchase of $317 billion worth of property—1.2 million homes—last year, according to a newly released study from the Legal & General Group, a multinational financial services institution.

One in five of buyers received gifts or interest-free loans from family members, the study shows. The average amount buyers received from them was $39,000. The Pacific region saw the greatest share of young adults receiving financial help in buying; the Rocky Mountain region saw the lowest.

More than half—51 percent—of prospective home buyers under the age of 35 say they expect to have help from their family or friends when buying a home. And young adults who already have purchased a home say that without the gift from the “Bank of Mom and Dad,” they would have had to delay their home purchase for at least three years.

“For many, perhaps most,young adults, buying a house without help is an increasingly unattainable goal,” says Nigel Wilson, chief executive at Legal & General Group. But Wilson calls it a worrisome trend that so many young adults are relying on help from family and friends to buy a home.

For example, family and friends who provide financial assistance may be putting their own finances in jeopardy to do so. For example, they reported taking out a loan (15 percent), raiding their 401(k) savings (8 percent), downsizing their own home (6 percent), or coming out of retirement (3 percent), the study showed. The study authors warn that too many of the younger generation may be dependent on their parents and grandparents to buy a home, even if it comes at a financial strain to the gift giver.

The Bank of Mom and Dad “reflects, first and foremost, a housing market where significant problems remain in matching the supply and demand of different types of housing, most notably starter homes and affordable housing of all kinds,” Wilson says. “As the population changes and the millennial generation strives to join the homeowning democracy, new thinking is due on meeting the needs and aspirations of Americans.”

SOURCE: DAILY REAL ESTATE NEWS

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Deals Done in the Dark Persist in Spite of Disclosure Rules

Anonymous home deals continue among cash buyers in some luxury corridors, despite disclosure laws that have tried to end such transactions.

Three years ago, the federal government issued disclosure rules to crack down on anonymous cash buyers in luxury markets like Miami and New York City in an effort to sniff out money laundering using real estate. Title insurance companies were required to report the identity of the buyer in any residential transaction of $300,000 or more that involved a “shell company,” with a corporate name and without a mortgage. The U.S. Treasury Department has since extended that rule to 12 more metro areas, including Dallas, Chicago, and San Francisco.

However, a Wall Street Journal analysis of New York City shows the new law has had no real impact on luxury purchases. Eighty-four percent of condos costing $10 million or more were purchased using a corporate name, an increase from the 78.5 percent in the year the rules had gone into effect.

Initially, the new disclosure rules may have alarmed some buyers. But once the buyers understood their names and identifying information could still be kept confidential, they were no longer as worried, brokers say. Information on the buyer is turned over to the U.S. Treasury Department to be matched against a government database of suspicious financial activity. But it is not made public.

SOURCE: DAILY REAL ESTATE NEWS

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Could That Home Be Contaminated With Meth?

It could be a home buyer’s worst nightmare: They purchase a new property only to discover later it is contaminated with methamphetamine, which is linked to health problems and can be very costly to eliminate.

In more than half of states, home sellers are required to disclose whether to the best of their knowledge a property has ever been used as a meth lab. But many laws stop short of letting buyers know if meth was ever smoked inside the property, which can also cause problems.

When produced or smoked inside a home, meth can seep into the walls, carpets, and heating and cooling systems. Even slight traces of the drug can cause headaches, nausea, and childhood developmental issues.

Home buyers shouldn’t assume meth-contaminated homes are just foreclosures, either. Police have found drug labs in luxury single-family properties and luxury high-rise buildings as well.

It’s not easy to clean up a home after it has been contaminated with meth. “Think about [meth] as going into a house with heavy smokers,” Kirk Flippin, owner of Texas Decon in Seguin, Texas, which cleans up former meth homes, told realtor.com®. “Nicotine will adhere to the walls. That’s what methamphetamine does.”

How can a buyer detect meth? The U.S. Drug Enforcement Administration offers a drug lab registry of meth contamination properties, where law enforcement agencies have reported they found chemicals at these locales. But obviously not all properties where meth has ever been present will be on that list.

Signs that a property has seen meth use tend to be subtle. Experts say buyers should look for burns in the carpet or patches of dead grass outside. That could indicate where chemicals may have been dumped.

"[In] 95 percent of the places I've walked into, you'd never know," says Flippin. "I usually don't smell anything, I don't see anything."

SOURCE: DAILY REAL ESTATE NEWS

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Chinese Buyers Expand Their Reach In The US Housing Market

Chinese buyers have been the top foreign buyers in both units and dollar volume of residential housing for six years straight, according to the National Association of Realtors, and now they expanding to new, lower price tiers.

More middle-class Chinese buyers are searching for lower-priced homes and they are using mortgages much more often.

While California is still the favorite among Chinese buyers, they are moving into markets in Texas, Georgia and Florida.

Chinese consumers may have soured on some American products, like iPhones, but they have only sweetened on U.S. residential real estate.

They have been the top foreign buyers in both units and dollar volume of residential housing for six years straight, according to the National Association of Realtors, and now they expanding to new, lower price tiers.

Chinese consumers appear to be less interested in trade wars and more interested in bidding wars, according to San Francisco-based real estate agent Michi Olson, who just returned from an international real estate property show in Shanghai.

"The Chinese are basically politically agnostic," Olson said. "What I mean by that is even though there is a great tension between [the] U.S. government and Chinese, the Chinese citizen seems to be able to separate the political turmoil with the sound real estate investment."

Olson said the biggest difference this year is price point. Initially, it was wealthy Chinese buyers purchasing million-dollar properties, all in cash. Now more middle-class Chinese buyers are searching for lower-priced homes and they are using mortgages much more often.

"The Chinese people still see the United States as a safe harbor where they can take their assets and park their money not only for their money but also for the future of their children," Olson said.

Several lenders in the San Francisco area now specifically cater to Chinese buyers. The median price of a home sold to a Chinese buyer dropped from just under $530,000 in 2017 to $439,000 in 2018, according to the Realtors. And while California is still the favorite among Chinese buyers, they are now moving into markets in Texas, Georgia and Florida.

Laura Barnett sells real estate in the Dallas/Fort Worth area and sees healthy Chinese demand there. She said while most foreign buyers there still use cash, she is also seeing the shift to mortgages.

"It is difficult to get loan approval on foreign buyers unless they put 50 percent or more down on a home, but several lenders specialize in this market now, so it is getting easier," said Barnett of RE/MAX DFW Associates.

As technology jobs spread across the U.S., it seems more Chinese workers in the sector are starting to buy properties in new locations.

Olson has several Chinese clients whose children are already working at tech companies in California. Once they are settled, a parent will fly in from China with a down payment for a condo. That is happening now in other places.

For instance, Chinese buyers flocked to an open house in Long Island City in Queens, New York, just a week after Amazon announced it would open a new headquarters there.

SOURCE: DAILY REAL ESTATE NEWS

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How Long Does It Take to Pay Off a Net-Zero Home?

Net-zero homes—those that make as much energy as they put out—may cost more up front to build, but they can save homeowners money on their energy bills. Eventually, that savings adds up and the home can pay for itself, no matter where you live, a new study shows.

Net-zero energy homes usually are outfitted with rooftop solar panels, energy-efficient insulation, triple-pane windows, energy-savvy appliances, LED lighting, and smart thermostats. Builders will take the home’s design and natural lighting into account too, such as the position of windows and overhangs that could supply additional solar heating in the winter or shade in the summer months.

The Rocky Mountain Institute, a research nonprofit focusing on clean energy, looked at how long it takes for the savings on a net-zero home to cover the initial costs of a 2,200-square-foot home in the 30 largest U.S. cities. Here are the top cities where you can pay off a net-zero home in the fastest amount of time:

1. 1. San Francisco: 7.8 years 
2. 2. Detroit: 9.1 years
3. 3. Baltimore: 9.2 years
4. 4. Columbus, Ohio: 9.7 years
5. 5. New York: 10.1 years
6. 6. Phoenix: 10.7 years
7. 7. Jacksonville, Fla.: 10.9 years
8. 8. Los Angeles: 11 years
9. 9. Washington, D.C.: 11 years
10. 10. Chicago: 11.4 years
11. 11. Sacramento, Calif.: 11.7 years
12. 12. Indianapolis: 12.3 years
13. 13.  Portland, Ore.: 12.3 years
14. 14. Seattle: 12.4 years
15. 15. Dallas: 12.5 years
16. 16. Oakland, Calif.: 12.5 years
17. 17. Wichita, Kan.: 12.5 years

The costs of building net-zero homes can vary widely geographically. The biggest savings tend to be in locales with high electricity rates and older building codes, according to the Rocky Mountain Institute.

“Zero-energy homes are actually affordable,” Jacob Corvidae, principal at the Rocky Mountain Institute, told InsideClimate News. Corvidae stresses this it is important to note because consumers, builders, and policymakers may be reluctant to encourage net-zero building over perceptions that it isn’t affordable.

But even in places like Detroit—not known for its year-round sunshine that would make solar as attractive—net-zero homes can be paid off in less than a decade, one of the fastest regions in the country. A 2,200-square-foot net-zero energy home in Detroit would cost $19,753 more to build than the same house without any solar or standard efficiency. But that home's energy bill savings would be $2,508 in the first year. The solar and efficiency costs would pay for themselves in about 9 years, according to the Rocky Mountain Institute study.

Some of the nation’s largest home builders, like PulteGroup and Meritage Homes, are offering more net-zero energy options to consumers. Pearl Homes in Cortez, Fla., is building a zero-energy community that uses energy storage and electric vehicle chargers.

“We’re starting to see the tip of that iceberg, and when it really hits, it’s going to be huge,” says Ann Edminster, a consultant and architect who works with the Net-Zero Energy Coalition.

SOURCE: DAILY REAL ESTATE NEWS

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Airbnb to Begin Designing, Building New Homes

Airbnb is moving beyond helping people rent out space in their homes. Now it wants to start providing the actual houses, too. The company has announced plans for a new venture that will design and build homes, called “Backyard.” Airbnb co-founder Joe Gebbia describes it as “an endeavor to design and prototype new ways of building and sharing homes.”

Airbnb officials say they want to combine the use of smart-home tech and sophisticated manufacturing techniques—including those from prefabricated dwellings and green building materials—with their experience in the vacation rental industry to “reimagine the design of homes.” Gebbia told Fast Company he feels a moral imperative to ensure that new homes are designed well, and respond to changing owner and occupant needs.

Airbnb says it has created a team of industrial designers, architects, roboticists, mechanical and hardware engineers, policy experts and other professionals to move forward with the Backyard concept.

This is “an initiative to rethink the home,” Gebbia told Fast Company. “Homes are complex, and we’re taking a broad approach—not just designing one thing, but a system that can do many things.”

Airbnb has been vague about what exactly they’ll be building, but the spaces will be designed to be sharable, Gebbia says. The homes also will feature spaces that can be reconfigured to the occupants’ changing needs, Fast Company reports. The spaces also may support co-living arrangements.

The first Backyard test units are expected to become available as soon as the fall of 2019.

The new initiative will diversify Airbnb’s business. Airbnb, valued at an estimated $38 billion, has created a global network of more than 5 million homes for rent. “We’re interested in thoughtfully … doing something transformative, similar to what Airbnb did when it started,” Gebbia says.

SOURCE: DAILY REAL ESTATE NEWS

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More Homeowners Add ADUs, Other Improvements

Homeowners appear to be spending more on property improvements while waiting for the right time to sell. In October, expenditures on existing homes, including renovations, additions, and alterations, rose 2.9 percent year over year, according to a new report from BuildFax, a firm that provides property condition and history data.

Home prices are outpacing wage growth significantly, and along with rising mortgage rates, more homeowners are feeling stuck in place. “As a result, homeowners, unable to re-enter the housing market, are reinvesting in their existing properties,” says BuildFax CEO Holly Tachovsky. “Homeowners may feel unprepared to enter the housing market, but they are making larger investments in the health of their existing property.”

Home maintenance activity may signal the most active housing markets, according to BuildFax. Minnesota has seen some of the most significant maintenance activity over the past year, leading the nation in per capita maintenance volume since 2013. New listings in Minnesota have also fallen the past three years. But the average sales price of properties has risen more than 5 percent annually in that time, the report notes.

Some homeowners are adding accessory dwelling units, also known as granny flats—which are small living spaces designed to house a family member or renter. California has seen the most growth in ADU construction and maintenance. ADUs in the state have grown by nearly 54 percent so far in 2018 compared to a year ago. Oregon and Washington are also seeing a large uptick of ADUs.

SOURCE: DAILY REAL ESTATE NEWS

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Single Women Prop Up First-Time Buyer Segment

Lower affordability and continued inventory crunches aren’t sidelining single women home buyers, who, for the second consecutive year, account for 18 percent of all buyers, according to the National Association of REALTORS®’ 2018 Profile of Home Buyers and Sellers. Single women are the second most common buyer type behind married couples (63 percent), according to NAR’s report. Single men are the third most common buyer type, accounting for half the number of their female counterparts at 9 percent. However, single men tend to purchase pricier homes than single women—a median of $215,000 compared to $189,000, respectively.

Single women buyers, many of whom are first-timers, are proving a powerful force in the housing market. However, first-time buyers, who once dominated the buying pool, are a shrinking segment. The share of first-time buyers fell to a three-year low this year, according to NAR’s report. First-time buyers comprised 33 percent of the housing market this year, down from 34 percent last year. The number of first-time buyers has not gone above 40 percent since the first-time home buyer tax credit ended in 2010, NAR notes.

“With the lower end of the housing market—smaller, moderately priced homes—seeing the worst of the inventory shortage, first-time home buyers who want to enter the market are having difficulty finding a home they can afford,” says NAR Chief Economist Lawrence Yun. “Low inventory, rising interest rates, and student loan debt are all factors contributing to the suppression of first-time home buyers.”

However, Yun notes that existing-home sales data has shown in recent months that inventory is rising slowly on a year-over-year basis. That may “encourage more would-be buyers who were previously convinced they could not find a home to enter the market,” Yun says.

SOURCE: DAILY REAL ESTATE NEWS

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Sellers Brace for Stiffer Competition as Buyers Retreat

A shift is occurring in many housing markets. Affordability may be prompting more potential buyers to pause due to rising mortgage rates over the last few weeks, and home sellers are now facing more competition. Homeowners may no longer be able to expect the quick sale they’ve seen their neighbors get in the past.

The number of For Sale signs is starting to increase across the country. Unsold inventory is at a 4.4-month supply at the current sales pace. Inventories were at 1.88 million in September, up slightly from 1.86 million a year ago, according to the National Association of REALTORS®’ latest housing report, released Friday.

“There is a clear shift in the market with another month of rising inventory on a year-over-year basis, though seasonal factors are leading to a third straight month of declining inventory,” says Lawrence Yun, NAR’s chief economist. “Homes will take a bit longer to sell compared to the super-heated fast pace that we saw earlier this year.”

Existing-home sales declined in September, with all four major regions of the country seeing no gains in sales activity last month, according to NAR’s report. Total existing home sales—completed transactions for single-family homes, townhomes, condos, and co-ops—dropped 3.4 percent in September compared to August, and are now at a seasonally adjusted annual rate of 5.15 million. Sales are down 4.1 percent from a year ago.

“This is the lowest existing home sale level since November 2015,” says Yun. “Decades-high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”

The 30-year fixed-rate mortgage has jumped from an average of 3.99 percent in 2017 to an average of 4.63 percent in September. Freddie Mac reported this week that rates are averaging 4.85 percent.

“Rising interest rates coupled with increasing home prices are keeping first-time buyers out of the market, but consistent job gains could allow more Americans to enter the market with a steady and measurable rise in inventory,” Yun says.

Here’s a closer look at some key housing indicators from NAR’s latest report:

• Home prices: The median existing-home price for all housing types was $258,100 in September, a 4.2 percent increase compared to a year ago.
• Days on the market: Forty-seven percent of homes sold in September were on the market for less than a month. Properties stayed on the market an average of 32 days in September, down from 34 days a year ago.
• All-cash sales: All-cash transactions comprised 21 percent of real estate sales in September, up from 20 percent a year ago. Individual investors tend to make up the biggest bulk of cash sales. They purchased 13 percent of homes in September, down from 15 percent a year ago.
• Distressed sales: Foreclosures and short sales made up 3 percent of sales in September, which is the lowest since NAR began tracking such data in October 2008. Broken out, 2 percent of sales in September were foreclosures and 1 percent were short sales.

SOURCE: DAILY REAL ESTATE NEWS

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Amazon Partners With Builders to Put Alexa in New Homes

Amazon is partnering with homebuilders to bring its Alexa voice assistant to more new housing units as a standard smart-home feature. The online retailer recently announced it has partnered with Plant Prefab, a California-based company that uses sustainable materials to build prefabricated single-family and multifamily homes. The move comes after Amazon introduced more than a dozen Alexa-controlled smart-home devices, including a microwave oven and doorbell.

“Voice has emerged as a delightful technology in the home, and there are now more than 20,000 Alexa-compatible smart-home devices from 3,500 different brands,” Paul Bernard, director of the Alexa Fund, said in a statement. “We’re thrilled to support [Plant Prefab] as they make sustainable, connected homes more accessible to customers and developers.” Amazon also has partnered with Lennar, one of the nation’s largest homebuilders, to preinstall Alexa in all of the builder’s new homes.

Plant Prefab is trying to use automation to speed up construction projects and lower costs. The company says its prefab method cuts construction time in half and costs up to 10 percent to 25 percent less than a traditional home. “In the housing-crunched major cities like Los Angeles, New York, and San Francisco—along with areas like Silicon Valley—it takes too much time to build a home from groundbreaking to occupancy. And labor shortages, construction delays, and increased construction costs are exacerbating this trend even further, making homes increasingly less affordable,” says Plant Prefab CEO Steve Glenn.

Meanwhile, the smart-home market is seeing explosive growth in new technology products. It’s expected to grow to a $53 billion industry by 2022, according to Zion Market Research.

SOURCE: DAILY REAL ESTATE NEWS

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When Is it OK to Tap Home Equity?

As home prices continue to rise, homeowners are finding they’re sitting on record amounts of home equity. People have mostly been shy about tapping into that wealth—but a new survey Bankrate.com survey of 1,000 consumers shows they have plenty of reasons they may want to take out a loan to unlock it.

Consumers’ “growing penchant toward debt might make it tempting to tap into their home’s value,” says Greg McBride, Bankrate’s chief financial analyst.

Nearly three quarters of homeowners recently surveyed say that home improvements or repairs are an acceptable reason to access the equity they have in their homes. In fact, more than half of those surveyed say that is the best reason to apply for a cash-out refinance loan or home equity line of credit (HELOC).

Survey respondents also cited other reasons they’d be tempted to use their home equity, including to consolidate debt (44 percent); pay for tuition or other educational expenses (31 percent); keep up with regular household bills (15 percent); and make other investments (12 percent). Nine percent of homeowners say they believe it would be a good idea to use home equity to purchase big-ticket items, such as appliances and furniture.

People with lower incomes were more likely than those who earn more to say it’s OK to tap into home equity to meet ordinary expenses, the survey found. Meanwhile, millennials seem more willing to tap into home equity than older generations, the survey found. Twenty-two percent of millennial respondents say that borrowing from home equity to pay day-to-day bills is a viable option, compared with 12 percent of members of older generations.

Many households may be overstretched financially, which could heighten the temptation to borrow. Forty-four percent of Americans say they could not cover a $400 emergency expense out of pocket, according to a recent Federal Reserve report.

“With the sorry state of emergency savings and increasing levels of consumer debt in a rising interest rate environment, it’s a matter of ‘when’ not ‘if’ more homeowners turn to home equity to fund home improvements and repairs, or consolidate debt,” McBride noted in the survey’s report.

Using equity to pay for home improvements that increase the value of your home can help rebuild any of the equity taken out, McBride says. The new tax law, that went into effect this year also allows homeowners to deduct the interest they pay on home equity loans and HELOCs if the proceeds are used to finance improvements that add significant home value.

Still, financial experts recommend caution for homeowners who are thinking of borrowing against their home equity, especially because using your home as collateral for a loan means you could lose it if you are unable to repay the lender.

“For a disciplined homeowner, using home equity to consolidate debt at a lower interest rate can be a savvy way to cut interest costs and accelerate debt repayment,” McBride says. “But for undisciplined homeowners, it ties up an asset that is put at further risk of foreclosure while the temptation to run up high-cost debt all over again proves difficult to resist.”

SOURCE: DAILY REAL ESTATE NEWS

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3 Biggest Blockchain Myths Debunked

Despite its speed in verifying records and heightened online security, real estate professionals have been slow to adopt blockchain.

Natalia Karayaneva, CEO of Propy, a real estate marketplace that uses blockchain to facilitate transactions based in San Francisco, says there are a lot of misconceptions about the new technology. She’s debunking three perceived risks.

Myth 1: Blockchain isn’t as secure as we think.

Karayaneva says blockchains such as ethereum or bitcoin have never been hacked. The Decentralized Autonomous Organization (known as the DAO) and exchanges have been hacked, but the blockchain ledgers cannot be hacked because they will reject any record with altered data, she says.

Myth 2: Blockchain is a hotbed of illegal activity.

“Yes, criminals can use the blockchain for illegal activities. Criminals can also use highways to carry drugs, but no one is calling highways ‘hotbeds of illegal activity,’ because regular people use them to perform legal, necessary tasks,” Karayaneva says. “In the same way, the use of blockchain for legitimate purposes renders it irreplaceable.”

Myth 3: Blockchain is simply for trading cryptocurrency.

Because blockchains prevent errors in record-keeping and accelerate transactions by eliminating third-party verifications, Karayaneva says that the technology can enhance nearly any industry.

SOURCE: DAILY REAL ESTATE NEWS

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