Lee Morof's Real Estate Blog

Nearly everyone has been impacted by the COVID-19 pandemic in some way. While many people are getting tired of being cooped up in their homes, the home improvement industry has actually been able to stay afloat. Furthermore, it is actually thriving. Because many people are trapped in their homes during the COVID-19 pandemic, many people are thinking about carrying out a home remodeling project. For those who are wondering about the prospects of such an undertaking, it is important to weigh the pros and cons. 

The Pros Of Home Remodeling During The COVID-19 Pandemic

There are a few benefits that people should note about remodeling during this time. They include:

• There is more time to plan out the project. With extra time, people can compare costs, take virtual tours of showrooms, and even check out some of the latest designs. 
• There are even some brick and mortar showrooms that are still open. While many people are nervous about venturing out during the COVID-19 pandemic, these showrooms are still maintaining proper social distancing measures to keep their staff and customers safe.
• Finally, there are also a handful of discounts available to those who are remodeling during this time. Because they are eager for business, they are often wiling to slash the prices to help someone get their project done.

These are some of the biggest benefits for people to note; however, there are also a few drawbacks as well.

The Cons Of Home Remodeling During The COVID-19 Pandemic

Some of the disadvantages of trying to start a home remodeling project during this time include:

• There might be a shortage of materials available to carry out the project. It might take time for companies to restock their inventory, delaying the start of the project.
• While some items are cheaper, others are more expensive because the supply has dried up.
• For those who might being a challenging financial situation during the pandemic, there is a risk of spending too much money as the project gets going.

For these reasons, it is important for everyone to carefully weigh the pros and cons of starting a home remodeling project during this time. While there are some attractive offers, everyone’s individual situation is different. People need to think about what is right for them.

Last week’s economic reports included monthly readings from Case-Shiller Home Price Indices, FHFA home prices, and readings on new and pending home sales. Weekly reports on mortgage rates and first-time jobless claims were also released.

Case-Shiller Home Price Indices: Home Price Growth Pace Increased In March

National home prices rose at a year-over-year pace of 4.50 percent in March from February’s reading of 4.20 percent. According to the Case-Shiller 20-City Home Price Index, home prices rose by 0.40 percent to a year-over-year growth rate of 3.90 percent.

The three cities reporting the highest rates of home price growth year-over-year were Phoenix, Arizona with 8.20 percent year-over-year growth; Seattle, Washington reported year-over-year home prices growth of 6.90 percent. Charlotte, North Carolina reported 5.80 percent home price growth.

Analysts said that Seattle home prices rose despite the Seattle metro area having a large outbreak of Covid-19 in the first weeks of the pandemic. April readings on home price growth are expected to dip into negative readings reflecting the spread of the coronavirus and its increasing impact.

17 of 19 cities reported in the 20-City Home Price Index for March had higher growth rates than in February; the Detroit metro area did not report data for the March 20-City Home Price Index.

The FHFA Home Price Index reported 5.90 percent year-over-year home price growth for March as compared to its February reading of 6.10 percent home price growth. FHFA reports on home sales connected with properties that have mortgages owned by Fannie Mae and Freddie Mac.

New Home Sales Increase in April as Pending Home Sales Fall

Sales of new homes rose in April although many areas were under stay-at-home orders related to the coronavirus pandemic. 623,000 new home sales were reported on a seasonally-adjusted annual basis as compared to the March reading of 619,000 sales of new homes. Pending home sales were -21.80 percent lower as compared to the March reading of -20.80 percent. Fewer pending home sales reflected impacts of the pandemic as government agencies issued stay-at-home orders and citizens faced financial uncertainty and health concerns.

Mortgage Rates, New Jobless Claims Fall

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages were nine basis points lower at an average rate of 3.13 percent. Rates for 15-year fixed-rate mortgages averaged eight basis points lower at 2.62 percent and rates for 5/1 adjustable rate mortgages averaged 3.13 percent and were four basis points lower. Discount points averaged 0.80 percent for 30-year fixed-rate mortgages and 0.70 percent for 15-year fixed-rate mortgages. Discount points averaged 0.40 percent for 5/1 adjustable rate mortgages.

New jobless claims were lower at 2.12 million claims filed as compared to the prior week’s reading of 2.45 million initial jobless claims filed. While fewer claims filed is good news, readings for initial jobless claims far exceeded typical numbers of new jobless claims filed before the pandemic.

What’s Ahead

This week’s scheduled economic reports include readings on construction spending and labor sector reports on public and private sector jobs and the national unemployment rate. Weekly reports on mortgage rates and new jobless claims will also be released.

Owning a home may be the American dream, but for many who are in a lower income bracket, finding a loan can become challenging. Thankfully, there are several loan programs that can work well for lower-income people considering homeownership. Here’s a closer look at some of these home loans designed to help people who have a low-to-moderate income find a way to buy a home.

FHA Home Loans

FHA home loans are loans backed by the Federal Housing Administration. Lenders are more likely to lend to “higher risk” borrowers through the FHA loan program because the loans have the FHA’s backing.

With the FHA loan, a borrower can have a credit rating as low as 500, as long as there is a reasonable explanation for it and a fairly high debt-to-income ratio. According to the U.S. Department of Housing and Urban Development, these loans require only a 3.5% down payment, which can come from gifts, and have less stringent requirements for credit rating or income.

USDA Rural Development Loans

If you are shopping for a home in a small town or suburban area, you may qualify for the USDA rural development loan program. Only those borrowers who make no more than 115% of the average median income in their area qualify for this loan program, according to the United States Department of Agriculture.

USDA loans require no down payment and the loan has no debt-to-income ratio maximum. It has a low PMI fee even for a zero-down loan, and fair interest rates. For those who live in areas that qualify, the USDA rural housing loan simply makes sense.

97% Loan-To-Value Purchase Loans

One of the biggest challenges for lower-income borrowers to overcome is the down payment, but the 97% loan-to-value loan makes that less of a concern. This program, which Fannie Mae and Freddie Mac have offered to help encourage more people to get loans, allows people to buy a home with just 3% as a down payment.

The 97% loan-to-value purchase loan is specifically for first-time buyers. Borrowers must not have owned a home within the last three years to apply.

This loan program offers fair interest rates and does not have stringent credit score requirements. Borrowers can use gift funds to pay for the 3% down payment if necessary.

As you can see, there are many home loans designed for lower-income borrowers. If you are looking to buy a home but worry you can’t afford it, consider one of these options.

Multigenerational housing is a growing trend that is propelled by the “graying of America.” This trend is the mirror image of children who become adults still living with their parents. Instead, with multigenerational housing, the adult children invite their parents to live with them. Many are seeking to buy larger homes to accommodate the needs of their young family, while also being able to live together with their parents.

Older Homeowners And Multigenerational Homes Are Increasing

The numbers are staggering. Realtor.com® reports that for the next 20 years, older adults, over the age of 65, will increase from 26% to 34% of total homeowners. The fastest-growing group of homeowners will be those over 80. These are the many millions of baby boomers who are getting older. By 2038, estimates are that there will over 17 million of these older homeowners, up from around 8 million in 2018.

Multigenerational housing, which is where the older adults live with their grown children or grandchildren, is already 20% of the older adult population in America. This represents about 10 million homes now. This number continues to rise. It will more than double in the next decades.

Benefits Of Multigenerational Housing

The main benefit of multigenerational housing is saving money. Assisted living and long-term care are really expensive. The national median cost for assisted living is $4,000 per month. A person can buy a very large home for that amount used for a mortgage payment.

Longtermcare.gov reports that the average cost in America for long-term care in nursing homes is $6,844 per month (semi-private room) and $7,698 per month (private room). These costs can be reduced substantially by hiring in-home nursing care and having older adults stay at home.

Disadvantages Of Multigenerational Housing

The main complaint is that it is very difficult for some children to have their parents live with them. Personality conflicts and control issues arise to cause challenges.

For those worried about these factors, who want to set up a multigenerational home, think deeply about choosing a livable home design and layout. Consider buying a townhouse duplex that has two separate living spaces and then connect them by installing a door in a shared, interior wall.

Non-Related Multigenerational Sharing

A new business opportunity is the matchmaking of multigenerational housing owners who are not related. This is a new home-buying trend that is similar to living with college roommates to share expenses.

Conclusion

Multigenerational housing is a growing trend in America because of its practicality. It will continue to increase. REALTORS® who specialize in this market niche will likely find it to be very rewarding.

If you are thinking about buying a new home and your parents might be able to live with you, ask them how they feel about the idea and have some fun shopping for houses together.

There are numerous steps involved in the process of buying a new home. It is important to go through the mortgage qualifying process before looking at dream houses. This gives people an idea of how big a house they can afford. Sometimes, individuals looking for a house might not get a loan that is big enough to cover their dream house. There are ways to qualify for a larger loan; however, one of the fastest methods is to use a co-signer.

What Is A Co-Signer?

A co-signer is someone who signs onto a potential home loan with the homebuyer. Essentially, the co-signer is saying that he or she is willing to be on the hook for the loan in the event that the primary homeowner is unable to make his or her mortgage payments.

This is a big commitment from the co-signer because he or she is exposing himself or herself on behalf of the primary borrower. On the other hand, the co-signer is also providing a vote of confidence on behalf of the primary borrower. Parents often act as co-signers for their children when they purchase their first home.

Vetting The Co-Signer

When someone is going through the home loan process, they are asked to produce tax returns, proof of income, credit reports, bank statements, and more. The co-signer is going to go through the same process. The bank wants to make sure the co-signer is actually adding something of value to the buying process.

The income and debt of the co-signer will be added to the primary borrower. Then, the two will be combined to be approved for a larger home loan. This can help someone purchase the home of his or her dreams.

An Important Note On The Co-Signer

If the co-signer goes to apply for a home loan or car loan in the future, the loan for which they co-signed will show up. This could limit the ability of the co-signer to qualify for a loan down the road. Even though having a co-signer can increase the size of the loan for the primary borrower, this is not without risk to the co-signer. Consider this carefully!

Last week’s economic news included readings from the National Association of Home Builders on housing market conditions and reports on housing starts and building permits issued.

Fed Chair Jerome Powell testified before Congress about the impact of Covid-19. Weekly reports on mortgage rates and first-time jobless claims were also released.

NAHB: Home Builder Confidence Improves in May

Home-builder confidence rose seven points in May to an index reading of 37; April’s reading of 30 was the lowest reading for the NAHB Housing Market Index since June 2012. Low mortgage rates and expectations that the worst of the Covid-19 pandemic had passed contributed to higher readings for builder confidence.

Component readings in the Housing Market Index were higher in May; builder confidence in current market conditions rose six points to 42.

Builder confidence in home sales within the next six months rose ten points to 46, and the reading for buyer traffic in new housing developments rose from 13 to 21. Readings below 50 are historically common for buyer traffic, but mandatory shelter-at-home rules kept more potential buyers away.

NAHB Housing Market Index readings above 50 indicate that most builders surveyed were positive about U.S. housing markets. Readings below 50 indicate that most builders surveyed were pessimistic about housing conditions.

Fed Chair Urges Congress to Help Pandemic Victims

Fed Chair Jerome Powell testified before Congress and said that those impacted by Covide-19 should receive as much assistance as possible. While Congress approved Federal Reserve Loans to mid-to-large businesses,  Mr. Powell reminded Congress that they must also do as much as possible to help low to moderate-income families and businesses and cited a Federal Reserve study that reported 40 percent of households making less than $40,000 lost a job within the first month of the pandemic.

Sales of Pre-Owned Homes, Housing Starts, and Building Permits Issued Fall in April

The Commerce reported lower readings for sales of pre-owned homes, housing starts, and building permits issued in April. Sales of previously owned homes fell to a seasonally-adjusted annual pace of 4.33 million sales as compared to the March reading of 5.27 million sales. 

Housing  Starts fell to an annual pace of  891,000 starts in April as compared to 1.276 million starts reported in March. The Commerce Department reported 1.074 million building permits issued on an annual basis; this reading was also lower than the March reading of 1.356 million permits issued but was higher than the expected reading of 996,000 permits issued.

Mortgage Rates Fall as New Jobless Claims Rise

Freddie Mac reported lower mortgage rates last week; the average rate for 30-year fixed-rate mortgages was four basis points lower at 3.24 percent. Rates for 15-year fixed-rate mortgages averaged 2.70 percent and were two basis points lower than for the prior week.

Rates for 5/1 adjustable rate mortgages averaged 3.17 percent and were four basis points lower. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.40 percent f04 5/1 adjustable rate mortgages.

New jobless claims reported by states fell to 2.44 million claims filed as compared to the prior week’s reading of 2.69 million initial claims filed.  The reading for state and federal jobless claims filed rose from 3.21 million to 3.30 million as applicants applied for additional jobless benefits offered through federal pandemic relief programs.

What’s Ahead

This week’s scheduled economic readings include Case-Shiller’s Home Price Indices, the FHFA Home Price Index, and data on new home sales. Monthly readings on inflation and consumer sentiment are scheduled along with weekly readings on mortgage rates and new jobless claims.

Without a doubt, the COVID-19 (coronavirus) pandemic has impacted every part of the economy. This is a dangerous virus and has left many parts of the country on lockdown orders to prevent it from spreading rapidly. The question many people are asking is how much the real estate is going to be impacted by the virus as well.

People Are Not Looking For Houses As Often

One of the biggest impacts of coronavirus is that some people simply aren’t out looking for houses. Stay at home orders and social distancing measures have prevented people from touring homes that they may be interested in buying and sellers postponing the listing of their home for sale.

In some parts of the country, the new listings available for homes have dropped drastically. This includes areas of the country that have been hit the hardest by the virus such as New York and California. Even web traffic to various real estate sites such as Zillow has dropped as well. Without a doubt, the rate of weekly mortgage applications has been impacted as well.

The Impact Of International Trade

In addition, for those who want to move, they might find a slowdown in international shipping and trade challenging. Many of the items that people need to furnish a home such as couches, tables, stoves, washers, dryers, ovens, and more are made overseas. Many home building materials are also manufactured and shipped from abroad. This creates a challenge for home builders and remodelers to effectively source the materials they need. It may take some time for the supply chain to reset and catch up with pent up demand.

The Response Of The Federal Government

Right now, those who currently own homes can find some relief from monthly mortgage payments if they are struggling financially. The government has put a moratorium in place on foreclosures. They have also told mortgage servicers to offer forebearance options for many mortgages.  While these grace measures will expire eventually, they may be helpful for the time being.

Looking Forward

The impact of COVID-19 on the nation’s real estate market is already apparent; however, the real question is how long the market is going to take to recover. The most recent report from National Association of Realtors states that 2020 is forecast for a 15% overall decline in the real estate industry. Many analysts believe that the real estate industry will be one of the fastest segments to recover across the country. Once the market does open up, the demand should increase quickly.  

Many millennials are reaching the age where they are thinking about buying homes for the first time. It turns out that many members of this generation are finding this process challenging. Even though the housing market is great for those looking to buy, surveys indicate that this generation also finds the process overwhelming.

Reports have been published showing that many millennials are planning to buy their first home in the next year, showing that owning property is still a strong part of the American dream. Furthermore, many millennials also know that this is a great time to buy. Why are millennials finding this process so challenging?

Student Loan Debt

One of the biggest reasons why millennials are having issues purchasing a home is student loan debt. When someone is looking for a home, any potential lender is going to take their existing debt into account. It is no secret that student loans are a major issue right now.

With numerous millennials saddled with student loan debt, this makes it hard to qualify for a mortgage. While other forms of debt are easier to pay back, student loan debt is not. Some millennials have student loan debt that looks like a mortgage. 

A Poor Understanding Of Costs

Even though millennials may look at their rent payments as a solid barometer for their mortgage payment, there are other costs that millennials need to consider. These include real estate taxes, HOA fees, homeowners’ insurance, and potential repairs. Therefore, they might need to reset their expectations.

Comparison Is A Dangerous Temptation

Finally, too many millennials are tempted by what they know. Many millennials end up moving back into their parents’ house after they finish school. The job market can be tough and they think this is a great way to save money. On the other hand, this also means they might end up looking for a house that is similar to their parents’. 

Many millennials have set the bar high for their first home. A property like their parents’ simply isn’t within the budget. An unwillingness to accept this makes it harder to find a home. On the other hand, there are affordable homes out there. Millennials simply need assistance to find them.

You might have gotten used to the flexibility of renting. You probably like not having to worry about repair costs and you likely enjoy the ability to pack up and move in short order. On the other hand, you are probably tired of throwing money away and are ready to build equity in a home. While the opportunity to become a homeowner is undeniably attractive, how do you know that you are ready to take on this responsibility? There are a few signs to note.

You Manage Your Debt Well

One of the most important factors any home lender is going to assess is your history of debt management. After all, the bank wants to know they are going to get their money back.

This is where your credit score is going to come into play. If you have a solid credit score, this is an indication of your ability to manage your debt. Some of the factors that will influence your credit score include prior credit cards, car loans, and even student loans. 

In addition, the bank is going to look at your debt to income ratio. If your ratio is relatively low, this increases your chances of qualifying for a home loan successfully.

You Have Saved For An Emergency Fund

In addition to having a good debt to income ratio, you also need to have an emergency fund set aside. The monthly mortgage payments, down payment, and home insurance premiums aren’t the only homeownership costs. You could also have repairs that arise down the line. This is where an emergency fund is essential. That way, if something goes wrong (which will happen at some point), you are ready. Many sources recommend having six months of living expenses put away in an emergency fund.

Purchasing A Home

These are two of the most important signs that you are ready to purchase a home. If you are tired of living in an apartment and are ready to put down roots, then consider taking out a loan on a house. This is a great way to invest in your future.

Owning a house comes with major responsibilities and one of the most important is routine maintenance. While many people like to skip routine maintenance in an effort to save money, the reality is that these routine maintenance is going to save people down the road. The reality is that maintenance is a homeowner’s first line of defense when it comes to protecting their most valuable investment, which is their home.

There are a few projects that may save homeowners thousands of dollars down the road.

Inspect The Plumbing Connections

It is easy to forget about the plumbing system because many people don’t even see their pipes until problems arise. The idea behind expecting the plumbing system is that problems can be spotted before they cause a house to flood. Some of the appliances that people need to think about include refrigerators, faucets, dishwashers, and washing machines. All of these devices have hoses that connect to the water supply.

If these hoses tart to crack, leaks can develop slowly. Eventually, this water is going to get behind the walls, causing mold to grow, and it may also get underneath the floors, causing them to warp. It is important for people to take a look at these pipes from time to time. If leaks are identified, they can be repaired.

Clean The Dryer Ducts And Vents

Many homeowners overlook their ductwork; however, people need to take the time open up their dryers and change their filters between every load. The vents that people use to remove lint from their clothes will clog up quickly. If the dryer is unable to suck air through this vent, it is going to have to work harder to dry the clothes. This is going to cause the dryer to overheat. It might even lead to a housefire. In order to prevent this from happening, homeowners should change their dryer lint filters after every load.

Routine Maintenance Is Critical

These are a few of the most important points that homeowners need to remember when it comes to routine maintenance. Homeowners need to have a regular schedule that they follow to ensure that none of these tasks are overlooked. It can prevent disaster from happening.