August 22, 2019

Airbnb short-term vacation rentals are taking over Sedona, Ariz., and residents are not pleased about it. In Sedona, 20% of the housing inventory is being offered on Airbnb.

Unlike recent moves by larger cities to limit Airbnbs, the state of Arizona has taken the opposite approach. It recently passed what’s known as “the Airbnb bill,” which was described as a way for homeowners to make extra money by renting out spare bedrooms in their homes.

Now, residents say the bill was too friendly toward short-term rentals and went too far by not capping the number of Airbnbs. Residents complain of investors swooping into neighborhoods and snatching up multiple homes that they can rent out to short-term renters. Residents argue that these vacation renters are driving up housing costs and changing neighborhood dynamics. An estimated 1,000 homes—or 20% of the city’s housing stock—is now being used as short-term vacation rentals, the Arizona Republic reports.

“We never anticipated that somebody would go into a neighborhood, purchase a home, and turn it into a mini-hotel,” Rep. Bob Thorpe, R-Flagstaff, acknowledged to concerned residents at a recent city meeting in Sedona.

With housing costs outpacing the rest of the country, a group of Sedona city residents called on lawmakers to put caps on the number of rentals to soften some of the impact.

Lawmakers across the country have targeted short-term rentals in recent months. Massachusetts recently passed a law to extend the state’s current 5.7% hotel tax to the majority of short-term rentals. That could jump to an additional 9% if an owner rents out two more units in the same community. Also, New York City has issued a subpoena to Airbnb to demand that it turn over the listing data in the city’s move to add greater checks and balances on landlords who may be illegally renting out apartments.

August 15, 2019

The National Association of REALTORS®, after reviewing the Department of Housing and Urban Development’s new condominium financing rules, says the guidance affords property owners greater flexibility in the qualification process for loans insured by the Federal Housing Administration. Lenders will be able to issue FHA loans for single condo units, and buildings with a greater number of investor-owned units or greater percentage of commercial space can qualify for FHA financing, among other changes HUD released Wednesday. NAR expects the new rules, which will go into effect Oct. 15, to revive a condo market that has been stifled since the Great Recession.

NAR says the new condo rules, which will help more would-be buyers access affordable housing, satisfy many of the changes the association has backed for more than a decade. Specifically, the new rules will:

  • Extend FHA certifications on condo developments from two years to three years, with an additional six-month grace period to meet requirements. This will alleviate some of the cost and time burdens on condominium associations that intend to maintain FHA approval. Condo associations also may continue submitting updated recertification packages, rather than the full certification package each time. The National Association of REALTORS® expects the change to prompt more condominium properties to apply for FHA eligibility, making more affordable housing more accessible.
  • Allow for single-unit mortgage approvals—often known as spot approvals—that will enable FHA insurance of individual condo units, even if the entire property does not have FHA approval. The condo building in which the FHA buyer wants to purchase must meet certain requirements: The property must have at least five units, a limited concentration of FHA-insured units, at least 50% owner-occupancy, and a maximum of 35% commercial space.
  • Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building. While the current owner-occupancy requirement is 50%, HUD may approve an owner-occupancy level as low as 35% for older properties with less than 10% of units in arrears. Individual investors can purchase no more than 10% of units in a property with more than 20 units and no more than one unit in properties with less than 20 units.

FHA approvals for condos prior to these changes have been heavily restricted. For example, the National Association of REALTORS® pointed to data earlier this year showing that in Florida’s Miami-Dade County, there were 5,683 condo projects—but only seven had FHA approval. NAR sent out an all-member email about the new condo rules Wednesday morning.

“It goes without saying that condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” NAR President John Smaby said in a statement. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The association’s most recent existing-home sales report, released in July, showed that sales of condos and co-ops dropped 6.5% year over year. Further, with more than 8.7 million condo units nationwide, only 17,792 FHA condo loans were originated in the past year. Down payments for single-family homes also have grown significantly more expensive in recent years in the absence of widely accessible FHA condo financing, NAR argues.

FHA restricted its condo approval process in 2009, which limited the number of properties that could receive FHA loans. In 2016, it moved to lift several of those restrictions, but the proposed rules were never finalized.

August 19, 2019

Ray Hartley, owner of Intrepid Wildlife Services in Westchester County, N.Y., uses the company tagline “Your castle shouldn’t be a zoo.”

Hartley recently recounted to The Wall Street Journal the many calls he receives from homeowners about animal invaders, from squirrels and skunks in pools to bats in the bedroom. “We can deal with pesky seagulls on the beach,” Hartley told the Journal. “But when it comes to raccoons in our chimney, chipmunks in our yard, and bats in our bedroom, we human beings are helpless—especially in this era of ‘Uber-Insta-On-Demand’ everything. Why would we handle a snake in our garage when we don’t even hand-select our own groceries?”

More professional “critter gitters,” as the Journal referred to them, are emerging to remove wildlife from homes. “The industry has grown exponentially,” says Mike Tucker, who runs a business in Minneapolis to remove household pests. “It’s urbanization. We’ve made it more hospitable for animals. Sleeping under a porch is cozier than sleeping under a rock. We put out our bird feeders. We house them, we feed them, and then we complain about them.”

As developers target uninhabited areas for building, humans and wildlife are having more interactions. “People are used to having a pool guy and a landscape guy. Now they need a raccoon guy,” Tucker told the Journal.

These pest removal companies don’t just remove critters but also seal up entry points and install devices, such as chimney caps, to help prevent animal invasions. Hartley says that recently, he has been fielding a lot of calls about woodchucks, which are known for tearing up lawns and damaging foundations. Squirrel complaints have been a growing part of his business, too.

Hartley says he gets up to 300 calls per month for animal removal. In the winter, calls commonly regard skunks; in the spring, it’s often about squirrels; in summer, it’s about bats; and in the fall, raccoons.

Source:
“Taming the Beast in Your Basement,” The Wall Street Journal (Aug. 14, 2019)

Some would-be home buyers may be able to afford the monthly payments of a mortgage, but they can’t scrape up enough money for the down payment. More than 2,500 government assistance programs nationwide are offering help, and more buyers are taking advantage of the aid.

More than 13% of borrowers who used Federal Housing Administration mortgages in the first three months of this year used government assistance for their down payment, up from 8.6% five years prior, according to recently published FHA data. The number of government assistance programs has doubled between 2013 to 2016.

Kason Wallace, a real estate professional in the Chicago area, told The Wall Street Journal that about 90% of her clients ask about assistance for their down payment. “It has definitely increased,” she says. “People are now more aware.”

Several federal, state, and local programs operate through housing finance agencies and nonprofits, and the programs are structured in many different ways. In general, the programs usually offer a cash amount to qualified buyers, and structure these as a second loan. Some programs will forgive the loan amount after a certain period of time, but others may require a repayment. Borrowers who use the programs may also be charged an above-market interest rate on the mortgage.

For buyers who are using these programs, they often have a small amount or nothing invested in the down payment of their house purchase. That has some housing analysts concerned, who say that gives buyers less incentive to keep up with their payments. Government data does show that those who used government down payment assistance for FHA loans tended to be neglectful at a higher rate than those who didn’t use them.

“Someone who can’t come up with a down payment is far more likely to be living paycheck to paycheck,” John Burns, founder of John Burns Real Estate Consulting in Irvine, Calif., told WSJ.

The FHA tightened standards on some of its programs earlier this year. That move could jeopardize some down payment programs altogether. One such program in jeopardy is called the Chenoa Fund, which has captured news headlines in recent weeks. The program is operated through a mortgage corporation owned by the Paiute Tribe of Utah. The fund has sued the U.S. Department of Housing and Urban Development over its newly issued down payment assistance rules for FHA mortgages. In response, HUD has delayed the implementation until July.

Source:
Home Buyers Get Government Help With Down Payments,” The Wall Street Journal (June 16, 2019)

August 16, 2019
Mortgage rates for 30, 15, ARM. Full information at http://www.freddiemac.com/pmms/

© REALTOR® MAGAZINE

The 30-year fixed-rate mortgage continued to hover near historical lows this week, lowering borrowing costs for home buyers and refinancing homeowners. Freddie Mac reported that the 30-year fixed-rate mortgage averaged 3.60% this week, unchanged from last week’s average.

“The sound and fury of the financial markets continue to warn of an impending recession; however, the silver lining is mortgage demand reached a three-year high this week,” says Sam Khater, Freddie Mac’s chief economist. “The decline in mortgage rates over the last month is causing a spike in refinancing activity—as homeowners currently have $2 trillion in conventional mortgage loans that are in the money—which will help support consumer balance sheets and increase household cash flow. On top of that, purchase demand is up 7% from a year ago.”

  • 30-year fixed-rate mortgages: averaged 3.60%, with an average 0.5 point, unchanged from last week’s average. Last year at this time, 30-year rates averaged 4.53%.
  • 15-year fixed-rate mortgages: averaged 3.07%, with an average 0.5 point, rising from last week’s 3.05% average. A year ago, 15-year rates averaged 4.01%.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.35%, with an average 0.3 point, falling from last week’s 3.36% average. A year ago, 5-year ARMs averaged 3.87%.
Source:

City ordinances and homeowners associations present many guidelines your clients must follow. Homeowners can face fines for violating rules and laws, such as not obtaining the proper permit for a remodeling project or not performing regular upkeep on a property. MSN recently highlighted several surprising things that homeowners also can get in trouble for, including:

Obstructed address number. Your clients should make sure their landscaping isn’t hiding the address numbers on their homes. “Obstructed address numbers are a violation of code compliance because the fire, police, and ambulance personnel need to be able to identify your home in case of an emergency,” MSN reports.

Missing or loose handrails on stairs or decks. These aren’t just for decoration; they’re meant for safety, too. Homeowners can get fined for having outdoor steps that have an unsecured handrail or none at all. The city could fine the owner until they have it fixed.

Trees that block the street. Large, overgrown trees can become a nuisance if they intrude into drivers’ line of sight on the street, creating a safety hazard. City laws vary on this, but in Austin, Texas, homeowners are required to trim trees so that there is at least 14 feet of clearance over the curb line.

Placing garbage out too early. Several cities and homeowners associations police when homeowners can put their trash can and recycling bins out on the curb for trash day. Too early? You can get fined. For example, in Hallandale Beach, Fla., homeowners who place their bins out on the curb before 6 p.m. the day prior can get a fine.

Source:

June 17, 2019

Quicken Loans has agreed to pay $32.5 million to settle claims that the lending giant resold faulty mortgages to the Federal Housing Administration. After the announcement of the agreement Friday, the lawsuit was dismissed by a federal judge.

In the lawsuit, the federal government accused Quicken Loans of not properly vetting FHA-insured loans by verifying borrowers’ income. Quicken Loans also allegedly used improper appraisals to issue larger mortgages, according to the lawsuit. Since the loans were insured by the FHA, Quicken Loans was paid even if the borrower defaulted.

Quicken Loans officials have denied any wrongdoing. The company did “nothing wrong” except pay for losses involving “human error,” Vice Chairman Bill Emerson told the Detroit Free Press. “Resolution is the right term, not settlement,” Emerson said, adding that the error was a 0.02% rate on some $108 billion in FHA-related lending since 2007.

Quicken Loans is one of the nation’s largest FHA lenders and will continue to remain in the FHA program.

“All parties fully understand the important role the FHA program plays in helping middle-class Americans access home financing, and this resolution allows the parties to move ahead together with that mission and to ensure their future relationship,” former federal judge Gerald Rosen, who was involved in mediation in the case, said in a statement. “The parties worked diligently and in good faith to mediate for a solution to resolve their differences and to put the dispute behind them.”

Source:
Quicken Loans to Pay $32.5M to Settle Lawsuit Over Bad Loans,” Associated Press (June 14, 2019) and “Quicken Loans to Pay $32.5 Million to Resolve Mortgage Suit,” Detroit Free Press (June 14, 2019)

June 18, 2019

The right home improvements could help shave energy bills by up to 35% or unlock up to $627 in annual savings, according to the U.S. Department of Energy.

Steve Chalk, who recently retired from his work at the department, told CNBC that a home energy assessment can help determine what the best savings projects are for a homeowner to take on. Home energy audits cost about $400, but the price greatly depends on the type of residence and its location.

“You could easily have payback for that [assessment] in a couple of years,” Chalk says. “You’re not only saving money in the long term, but your house is more comfortable, and your air quality can be better.”

Some of the big items that are sending energy costs higher in many homes: proper insulation, incandescent lighting, or air conditioners that aren’t the correct size.

Chalk says one of the most common mistakes he sees is that many homeowners have an air conditioning system that is too large. Therefore, it does not run as long as smaller ones, Chalk says. “[That] might sound energy-efficient, but it’s not,” he says.

Sealing up air leaks in heating and air conditioning ducts or crawl spaces can also offer energy savings, Chalk says.

Even small changes can add up, too. For example, switching from incandescent lighting to LEDs can increase a home energy efficiency by about 85% alone, he says. Programmable thermostats and power strips can also help save on bills.

Some cities offer incentives to help offset energy efficiency and renewable energy upgrades. Check the Database of State Incentives for Renewables & Efficiency website to search for incentives by state.

Living on a beach is the dream to many homeowners. But for many, the high cost keeps them from ever making it a reality.

However, you don’t need seven figures in your bank balance to buy in some beach towns. Realtor.com®’s research team analyzed the nation’s largest metro areas with the highest share of listings with keywords such as “beach,” “beachfront,” and “ocean.” They also factored in the number of water activities for their rankings. The beach towns were then ranked based on their median prices from May 2018 to April 2019.

The cities topping realtor.com®’s list as the most affordable beach towns to buy in this year are:

1. Jacksonville, N.C.

  • Median list price: $198,846

2. Aberdeen, Wash.

  • Median list price: $229,564

3. Atlantic City, N.J.

  • Median list price: $241,655

4. Myrtle Beach, S.C.

  • Median list price: $245,233

5. Palm Bay, Fla.

  • Median list price: $269,393

6. Port St. Lucie, Fla.

  • Median list price: $279,696

7. Virginia Beach, Va.

  • Median list price: $284,873

View the full list at realtor.com®.

Source:

The rising cost of building materials are leaving many homeowners in disaster-prone areas underinsured, warns a new study from CoreLogic. The increased costs are not being factored into insurance coverage, which means homeowners could be left with devastating losses and a huge cleanup bill.

The costs of labor and materials have increased significantly over the past two years, the study notes. Further, the risks from natural disasters including floods, wildfires, and hurricanes are also increasing. In 2018, there were 14 natural disasters in the U.S., from record-setting wildfires in California to costly hurricanes in Florida, that totaled $91 billion in reconstruction, according to the National Oceanic and Atmospheric Administration. “The financial impact of not updating reconstruction costs for two years is significant,” according to CoreLogic’s report. “If a catastrophic event were to affect only 5% of homes and cause just 30% storm surge damage to those 5% of properties, the reconstruction cost undervaluation is approximately $205 million.”

Insurers are rushing to recalculate coverage on homes that may be impacted by natural disasters, CNBC reports. In one study, CoreLogic researchers identified 110,000 Southern California properties that were in “very high” to “extreme” risk of wildfires. Costs are “significantly higher”—5.6% more–than they were two years ago because of higher labor and building material costs. Given the higher reconstruction costs, if just 1% of the homes at risk were completely destroyed in a wildfire, the undervaluation would be $25 million from insurance coverage not being current, the CoreLogic study shows.

CoreLogic’s study identified about 1.1 million properties at “very high” to “extreme” risk of loss from a storm surge in coastal hurricane-prone areas along the Northeast Atlantic and Gulf Coast regions. Factoring in recent building costs, reconstruction of at-risk properties in Florida is estimated at $240 billion.

Many inland metros at risk of floods and tornadoes face insurance obstacles, too. For example, Oklahoma averages about 56 tornadoes per year. About 1.3 million properties with $257 billion in reconstruction costs are at “very high” or “extreme” risk of damage. “If insurance on these homes is not valued at current cost levels, which have increased 6.6% over the past two years, homeowners could be left with huge losses,” CNBC reports. “If one tornado caused 20% damage to just 1% of the homes deemed at very high risk, the reconstruction coverage would fall short by approximately $34 million.”

In the event of a disaster, homeowners who lack adequate coverage are more likely to default on their mortgages, researchers note. If that becomes a wide-scale issue, some regions could see home values plummet as many homeowners fall underwater on their loans. “Underinsurance issues can cause financial devastation for property owners, artificially low coverage limits for insurance carriers, and increased loan delinquencies,” Amy Gromowski, senior analytics leader at CoreLogic, told CNBC. “Homeowners who experience natural hazard events, such as the California wildfires, are often struck by personal and financial devastation, and many aren’t able to rebuild their homes, which prolongs the region’s recovery and often causes homeowners to default on their mortgages.”