Month: July 2021

How to Spot Neighborhoods on the Rise

If you’re looking for a place that is affordable yet in a nice neighborhood, look no further than neighborhoods that are up and coming. The process of gentrification significantly increases an area’s desirability, but unfortunately also significantly raises prices. Areas that have just begun this process, though, are probably still inexpensive.

There are a few things you can look at to determine which neighborhoods are in this category. Two of them involve correlations with hard data that you can access from professionals. The city’s municipal office can provide information about building and renovation permits. A high degree of activity in either of these, but especially renovation permits, implies that the neighborhood is about to become more expensive — but isn’t yet. The other statistic to look for is days on market. Slowly dwindling days on market is a precursor to a highly desirable neighborhood. If this is information you’re interested in, just call or email us, since as your real estate agents, we can help you track it so you can grab the best deals before it’s too late.

The third way to find blossoming neighborhoods may take a wider social network, since it’s not easy to just find the data. This way is to figure out where the young, creative types are going. Young adults and all types of artists generally have lower income and will be looking in cheaper areas, but also seek out trends and will want to know what areas are becoming more popular. In addition, creativity gives neighborhoods a type of personality that strongly attracts multiple kinds of buyers.

Photo by Avi Naim on Unsplash

Recession Declared Over, But We’re Not Out of the Woods Yet

The National Bureau of Economic Research (NBER), a private non-profit economic research institution well known for researching recessions, has declared that the 2020 recession is over. In fact, it ended quite a while ago, and only lasted two months, the shortest recession in history. NBER defines the start of a recession as the month following a peak in economic activity, and the end of a recession as the month at the bottom of economic activity. In this case, those months were March 2020 and April 2020 respectively. The delay in declaration is because it generally takes several months to figure out whether a recession is truly over or not, since there can be ups and downs in between the peak and trough. With this declaration, another downturn would officially be considered a separate recession.

So what does this mean? Well, it doesn’t mean the economy is healthy again. It just means we’re past the worst of it, and are in the recovery stage after the recession. We’ve been in recovery for quite some time, and will continue to be. It’s important to note that while the start of the pandemic and the start of the recession occurred at approximately the same time, they aren’t codependent. Rather, the pandemic was merely an exacerbating factor in a recession that was already approaching. Many of the effects, both psychological and government mandated, of the combined scare of a simultaneous recession and pandemic are still lingering and slowing down the recovery. The major factor keeping us back is lack of recovery in the job market.

Photo by Erik Mclean on Unsplash

More: https://journal.firsttuesday.us/the-2020-recession-was-the-shortest-ever-but-its-effects-continue-in-the-housing-market/78835/

Investors Are Getting Back in the Game

Most of the time, investors look to buy when the market is down and sell when it’s up. This is actually quite useful for the health of the real estate market as a whole, since it makes up the majority of transactions during weak economies, even if it does primarily benefit the already wealthy.

However, that’s not what has happened in this situation. When the pandemic hit, investors were not immediately able to purchase and didn’t have a strong sense of where the market was headed, so investment dropped off dramatically. Prices actually continued to rise throughout the pandemic and even now, meaning there was never a low point for investors to take advantage of. They’re realizing that now, and starting to invest again, expecting prices to continue to go up.

While it’s not a huge cause for concern yet, this is problematic for people intending to buy homes to live in. Investors generally don’t live in the homes they invest in, yet frequently win out during heavy competition due to high cash volume. They’re also not serving the same purpose they do during down markets, since demand is already high. The most problematic type of investor is a flipper, who generates no value or utility at all, merely making a profit off of a home being temporarily vacant.

Photo by Sven Kucinic on Unsplash

More: https://journal.firsttuesday.us/investors-are-diving-back-into-real-estate/78847/

Don’t Skimp on Listing Photography

The first thing anyone is going to see when looking at a listing is the photos. People aren’t going to be interested if there are no photos. But that doesn’t mean you can just take snaps with your phone’s camera and toss them up there, even with some editing. The fact of the matter is that no one is going to come see your property if it looks terrible in the photos. In addition, while there are plenty of photography tricks to improve the appearance, no one is going to buy your property if it looks significantly different from the photos.

That’s where professional photography comes in. Professional photographers know how to manipulate not the photographs themselves, but the camera settings and lenses, angles, lighting, and even which aspects of your home to highlight. None of these are making false promises. Rather a professional will find the best way to make the truth of what your home is stand out to buyers. Good panoramic shots require a specific type of lens. The colors of your home influence what time of day and which flash settings will provide the best lighting. Pros will seek out intricate details and unique features that make your home stand out from the competition.

Photo by Damir Babacic on Unsplash

Plan Proposed to Aid Black Prospective Homeowners

Even though racial discrimination against homeowners was banned in 1968, the homeownership gap between White and Black households in the US is actually higher now than it was before the ban. Between 1960 and today, the gap has increased by 4% and sits at 31% nationwide, and 27% in California.

In order to address this issue, the Black Homeownership Collaborative has drafted a plan that they hope will bring homeownership to 300,000 more Black households by 2030. Their 7-point plan was approved by the Mortgage Bankers Association. The focal points are homeownership counseling and education, down payment assistance, affordable construction, improved credit and lending opportunities, increased civil and consumer rights, sustainability of homeownership, and marketing and outreach towards Black communities. Similar proposals are also in the works for Latinx communities, which make up a significant percentage of California’s population.

Photo by Eric Froehling on Unsplash

More: https://journal.firsttuesday.us/7-steps-to-close-the-black-white-homeownership-gap/78555/

Urban Exodus Began Long Before Pandemic

The recent strong shift away from urban centers and towards more rural areas is thought to be a direct response to the increased popularity of the work-from-home model, brought on by the pandemic lockdowns. However, even though this is certainly a factor in the urban exodus, it’s not a new phenomenon. As early as 2010, people were starting to move away from urban areas towards suburban and rural areas. Being able to work from home simply accelerated the existing trend.

Why does the trend exist, though? Well, the statistics alone can’t give us a a certain answer, but we can speculate. It’s possible to conclude that people are liking the idea of living in a rural area. But that’s not necessarily the case. It’s important to note that the data holds true exclusively for mortgaged home purchases. This means that people who have excess cash lying around aren’t at all interested in rural living. In effect, this means that, quite possibly, no one is. Rural areas are generally less desirable, and because of this, are also generally cheaper. Buyers who need to take out a mortgage are looking within their budget, not necessarily for their dream home in their dream destination.

Photo by Timothy Eberly on Unsplash

More: https://journal.firsttuesday.us/mortgaged-homebuyers-prefer-rural-setting-to-city-life/78562/

FHFA to Remove Pandemic Refinance Fee

The FHFA established a new refinance fee at the end of 2020 called the Adverse Market Refinance Fee, which was designed to cover projected losses during the pandemic. But they’ve now said that their losses were not severe and that the market was not as adverse as they expected. Only 2% of single-family loans remain in forbearance. So, this fee is going to be removed come August 1st. The FHFA hopes this encourages more buyers to take advantage of low rates.

Photo by Visual Stories || Micheile on Unsplash

More: https://magazine.realtor/daily-news/2021/07/19/fhfa-tosses-extra-refinance-fee-for-fannie-freddie-loans

Young Adults Who Kept Jobs Invest in Homeownership

Due to prices rising at a rate far exceeding wage growth, many believe that most of those in younger generations — Millennials and Gen Z — will probably never be able to afford homeownership and will be renting forever. While this is certainly true of some of them, some young adults are hoping to disprove this. The pandemic came with a lot of job losses, but for those who were able to retain their positions, their decreased spending during lockdowns meant increased savings.

And many of them are using their savings very smartly — as a down payment on a home. In a 1200 person survey of young adults, 83% said they had increased their savings during the pandemic. 59% of those with extra cash intend to put some of it towards a down payment. 64% plan to spend it on everyday expenses. The total is greater than 100% because some percentage of them plan to do both.

Young adults don’t necessarily know how to purchase a home, though, especially since many of them are first-time homebuyers. The survey also asked how respondents are making their decisions and who has influenced those decisions. The biggest factor was parents, with 71% asking their parents for advice. 61% asked friends and half asked their siblings. Over a quarter stretched further for help, asking grandparents or even taking advice from celebrities.

Photo by Konstantin Evdokimov on Unsplash

More: https://realtybiznews.com/armed-with-savings-from-the-pandemic-young-adults-eye-homeownership/98763138/

Latinx Homeownership Growing, Despite Setbacks

The Latinx population has long suffered and continues to suffer discrimination in the real estate industry, from the general population and industry professionals alike. Deep-seated systemic injustices also play a major role, with Latinx households frequently having lower income and lower credit scores. Now, in a hot market, they’re also facing heavy competition.

Despite these hardships, they actually account for over half of homeownership growth in the past decade, and the number is expected to reach 70% for the period from 2020 to 2040. After the 2008 financial crisis, the Latinx population took a huge hit, but now it has rebounded. What’s causing the scales to tip in favor of Latinx populations? We could say it’s their stereotypical strong work ethic, but experts point to their age. The average age of the Latinx population in the US is 29 years, 14 years below the national average. This places them squarely in the prime age for first-time homebuyers, which are currently a large segment of homebuyers.

Photo by National Cancer Institute on Unsplash

More: https://www.nbcnews.com/news/latino/future-home-ownership-latino-rcna1280

Planning Your Investment Purchase

It’s pretty obvious that when you’re looking for a home for yourself, you’ll want to do plenty of research and scrutinize all the details. But when people are making investment purchases, their bottom line is often the only thing they look at. That’s not a good practice — there is definitely research to be done before deciding how to invest.

First you’ll want to decide whether or not this actually is just an investment property, or there’s a possibility you’ll want to live there in the future. If you have long-term plans, you’ll certainly want to consider much more about the property than your bottom line. Multi-family residences are generally higher income, assuming all or most units are rented out, but most people would prefer to live in a single-family residence.

Even monetary considerations don’t stop at the buying and subsequent renting of the property. Make sure that any necessary repairs are within your budget. Whether your plans are short or long term is also important here; it may be okay to take a loss early if the rental income over time is going to make up for it in the future, but you don’t want to buy a fixer if you want to see an immediate return on investment. The bottom line also doesn’t tell you whether you are going to get an income at all. If no one wants to rent in the area where you’re buying, it’s going to remain vacant. Look at crime rates and school ratings for the area. Crime rates are especially important, since even if you manage to get a tenant in a high crime area, you don’t want to suffer the losses even if you aren’t the one living there.

Photo by Gabrielle Henderson on Unsplash

Solar Sail Scout Ready for Launch

NASA has set the date for their Near-Earth Asteroid (NEA) Scout to this November, when it will launch along with the Artemis I test flight mission. The NEA Scout is a small craft with solar-powered sails, the first of its kind to be released outside of Earth’s orbit. If the mission goes well, it’s a good sign for an expected 2025 mission named Solar Cruiser, with a much larger solar sail. The NEA Scout is outfitted with a high-powered camera and its pictures are expected to provide valuable information about a certain class of asteroids. But it will take two years for the NEA Scout to reach its destination, even though it’s only a small asteroid near Earth.

Photo by Johannes Plenio on Unsplash

More: https://www.jpl.nasa.gov/news/nasa-solar-sail-asteroid-mission-readies-for-launch-on-artemis-i

Proof of Fire Buffer Zone Required for Some California Homes

In response to increasing frequency of wildfires in California, the state wants to make sure residences are in compliance with fire safety law. Existing state law already requires what is called defensible space, which is a buffer zone between flammable plant material and any structure on the property. Now, sellers are going to be required to provide proof of compliance with this law if their property meets certain conditions. This applies if the property is a condominium, common interest development, or manufactured home, is zoned residential 1 through 4, or is located in a high or very high fire hazard severity zone.

Photo by Hans Isaacson on Unsplash

Are Homeownership Subsidies the Answer?

California is proposing a plan to start the “California Dream Fund,” which is intended to allow the state to subsidize purchases by first-time homebuyers without any tax increases. They hope to achieve this by allowing investors to use their money to subsidize the purchase, in exchange for an equivalent share of ownership. This will be limited to 45% to prevent the investors from owning a majority share.

The plan is still in the works, but there are already a few criticisms. Currently, there is no indication of who is liable if the property goes into default. Is it only the buyer? Do the investors have a stake, since they have an ownership share? Is the state liable since they’re the ones providing the subsidy program? Perhaps these questions will be answered later, but if the answer is simply as existing law, the program is no different from a state matchmaking program between investors and prospective homebuyers. Furthermore, subsidizing home purchases does nothing to address the real problem — the fact that home prices are so exorbitantly high in the first place that the plan is being discussed to begin with. Subsidies will increase demand, but demand is already high; it’s the low supply that needs to be addressed.

Photo by Andre Taissin on Unsplash

More: https://journal.firsttuesday.us/proposed-plan-seeks-to-subsidize-nearly-half-the-price-of-a-first-home/78445/

Cities Will Soon Need a Plan to Process Organic Waste

A 2016 state law requiring organic waste to be processed separately from inorganic waste goes into effect at the start of 2022. However, even with the six year forewarning, cities still aren’t necessarily equipped to handle the change. Some cities, such as Carson, have processing plants allowing them to convert food waste into methane for use as renewable fuel, with fertilizer as a byproduct. But food waste isn’t the only type of organic waste, and the Carson facility can’t process other kinds.

Processing infrastructure isn’t the only issue, either. The cities’ sanitation departments will also need to change the way they collect. That’s easier said than done. The new law didn’t provide any additional funding, and Long Beach can really only afford to provide one additional bin to each household, so they’ll need to put all of their organic waste in the same bin. That means it’s going to need to be either resorted later, or processed at a facility that can process all types of organic waste. Some of the costs are probably going to come in the form of increases to collection bills for residents.

Photo by ADIGUN AMPA on Unsplash

More: https://lbpost.com/news/trash-smoothies-could-be-future-sources-of-fuel-but-cities-first-need-a-plan-to-process-organic-waste

Rent Control Is Actually Harmful to Tenants

Rent control exists in many cities in California, and was designed to keep rent prices low so that more tenants can afford to rent there. And it does keep prices low — as long as no one is looking to rent there. The problem is that rent control is only in effect during the tenant’s residency; as soon as the tenant leaves, the landlord can increase the price to reflect current market values. This means that even if a new prospective renter is looking in a rent controlled neighborhood, they’re still looking at current market rates.

There’s also another reason it doesn’t help renters much, and may actually harm them. And it’s merely the fact that landlords are aware of the above aspect of rent control and readily use it to their advantage. While rent control laws often do also include some form of eviction protection, they don’t outright prevent evictions, and in many cases renters aren’t able to afford to sue their landlords if they were wrongly evicted. This means that in many cases landlords can simply choose to evict their current tenant if they want to increase the rent price, or if they can’t find believable cause to evict, just stop maintaining the property until the tenant doesn’t find the situation livable anymore. Without rent control, prices steadily go up, but landlords don’t resort as frequently to devious methods to raise the price.

Photo by Sasun Bughdaryan on Unsplash

More: https://journal.firsttuesday.us/the-votes-are-in-rent-control-doesnt-provide-low-income-housing/78431/

Housing Problems to Blame for California Exodus

California was once a dream destination in the US, and probably still is for some people unable to afford it. But as for the people already living here, they’re leaving at a higher rate than people are coming in. What’s happening? Is California simply not living up to its expectations? What about the state do people not like?

There’s a theory that it’s California’s high tax rates that are pushing people out to nearby states such as Texas, Washington, and Arizona. But this is a misconception — it’s not that people don’t want to live in California, it’s that they can’t. The median home price in California has increased by 300% since the 1970s, even adjusting for inflation. Meanwhile, incomes have increased only 33% in the same time period. People who have been living here happily for years or even decades can no longer afford to do so, and are moving to less expensive states. California desperately needs more affordable housing or a wage overhaul if it wants to reverse its negative domestic migration numbers.

Photo by Claudia Altamimi on Unsplash

More: https://journal.firsttuesday.us/californias-problem-isnt-taxes-its-housing/78336/

Federal, California Eviction Moratoriums Both Extended

The eviction moratorium for federally backed mortgages was set to expire at the end of last month, but on June 24th, it was extended through July 31st. California has even gone above and beyond the CDC recommendations, extending the state residential moratorium through September 30th. With a third of renters in California feeling they were likely be evicted in July or August, and an additional 6% being quite sure of it, something needed to be done. 10% of California renters are still behind on their payments, and over a fifth of them had little to no confidence in their ability to make their July payment.

Photo by Hugo Delauney on Unsplash

More: https://journal.firsttuesday.us/cdc-extends-eviction-moratorium-until-july-31-2021/78292/

When Should Retirees Pay Off Their Mortgage?

When people retire, there’s a temptation for them to want to pay off their mortgage as soon as possible. After all, it’s a repeating cost that people simply don’t want to have to deal with. However, that’s not necessarily the best financial choice. Depending where the money is coming from, it may actually be less expensive to keep making payments. That said, there’s definitely something to be said for reducing the stress that comes with overhead payments, even if you sacrifice some income.

Sometimes the decision is relatively simple. If you have excess money lying around not being invested, such as in a checking account, you probably want to pay off your mortgage. This is because checking accounts typically don’t earn much interest if any at all, so the interest rate on a mortgage is guaranteed to be higher — the longer you wait, the more you lose. This also applies to any other funds that are being invested at a lower interest rate than the mortgage. Of course, this assumes you don’t need large sums of cash in the near future for some other reason.

Checking account withdrawals also aren’t taxable, unlike funds from certain retirement accounts. The interest rate comparison may not work out for retirement accounts. Even if it does work out, the withdrawal tax may make it less economically viable, especially if it pushes you into a higher tax bracket.

Photo by Nick Fewings on Unsplash

More: https://www.cnbc.com/2021/06/10/a-mortgage-in-retirement-how-to-decide-whether-to-pay-off-that-debt.html

Should I Move or Refinance?

If you’re looking to take advantage of interest rates while they are still low, you have two options. You can either buy a new house, or refinance to get a lower rate. Both options can have pros and cons, and which will benefit you more will depend on a few factors.

Refinancing can be a good option under either of two conditions. The first is high equity. If you have a lot of equity in your home, refinancing allows you to access it for a temporary boost in available funds. The second is shortening the length of a loan. If you can get a shorter term loan at a lower interest rate than you currently have, that’s usually an incredible deal. Of course, whether you’re actually saving money or not in the long term depends how much you’ve already put into your current loan.

Moving is a good option if you have something in mind for the type of home you want. Low interest rates enable you to purchase a more expensive home without necessarily increasing your mortgage payment by much, if at all, and it could even be lower. This is especially the case if you are actually looking to downsize — your mortgage payment would almost certainly drop. If you were already planning to buy, it’s still a good time, even with mortgage rates starting to climb back up.

Photo by Vladislav Babienko on Unsplash

Keep Space in Mind When Downsizing

Recent economic hardships are causing some people to downsize, especially if they’re also moving into urban areas, where living space is at a premium. Most of the time, people who are moving out simply put all their furniture and belongings in a moving van, and figure out where to put it later. People living in a house that’s appropriately sized for them generally don’t use the entirety of their home’s space, but that doesn’t necessarily mean they’ll have enough space to bring everything when downsizing.

Some of your furniture may have to go. If your new condo or apartment doesn’t have a dedicated living room, you probably don’t need both your couches. Going down one bedroom because your kid has moved out? Get rid of the extra bed. You don’t need to just leave them there, though — you can donate them, give them to a friend, sell them, or even just hold them in a storage unit.

Speaking of storage, a smaller home absolutely is not going to have as much storage space. You need room for items such as towels, bedsheets, clothing, and dishes. In your old home, these may have all gone in your closet and dresser. But maybe your new closet is smaller, and perhaps your old dresser doesn’t actually fit in the new space. Think about investing in compact storage containers and utilizing space efficiently, such as by storing containers under your bed.

Photo by Markus Spiske on Unsplash