affordable housing Archives - Real Estate News and Commentary

July 26, 2018December 13, 2022

Affordable housing

It’s no secret that housing is expensive. Home prices are relentlessly marching forward, making it more difficult for first-time home buyers to purchase a home. One of the contributing factors is the low inventory of homes for sale. The deficiency of homes on the market is limiting options and stoking competition among determined home buyers, many of whom are willing to offer slightly more than then their cohorts. All this puts upward pressure on home prices and impacting affordable housing.

Having enough for a down payment and closing costs is a hurdle for many first-time home buyers. Home buying programs exist to help home ownership more affordable for home buyers. The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants. In Montgomery County, the Housing Opportunities Commission of Montgomery County (hocmc.org) offers several down payment assistance options, including the House Keys 4 Employees program for many Montgomery County Employees. Of course, you must meet eligibility, so check with your lender and/or mortgage program.

Affordable housing is not only an issue for home buyers. It’s also an issue for renters. According to the US Census Bureau’s American Community Survey five-year estimates results (census.gov), the median rent in the US increased about $21. That does not sound life changing, however, it is the result of an analysis of nationwide monthly rents. Results of the Survey indicated that, “Of the 382 metropolitan areas in the United States, the median gross rent in 156 areas did not change between 2007 to 2011 and 2012 to 2016…” However, “Of the 219 that did change, increases outnumbered decreases four to one with 175 increases and 44 decreases.”

Some areas had a decrease in rent, while others faced increases. Among some of the areas with top increases include Andrews TX and McKenzie County ND, where monthly rents increased an average of $352 and $397 respectively.

The Census Bureau recent survey on rent concludes that “gross rents are on the rise.” Other Census data indicates that 2017 had the lowest percentage of renters move since 1988. The combination of fewer available rentals and increased rents are making it difficult to find an affordable rental.

Although “affordable housing” has been tossed about like a football, it wasn’t until Mary Schwartz and Ellen Wilson’s (US Census Bureau) analysis of the 2006 American Community Survey that really gave it meaning (Who Can Afford To Live in a Home?: A look at data from the 2006 American Community Survey; census.gov). The analysis revealed the percentage of income that is spent towards housing.

The report indicated that forty-six percent of renters spend 30 percent or more of their income on housing costs. Compare that to home owners: thirty-seven percent of owners with mortgages and sixteen percent of owners without spent 30 percent or more of their income on housing. Schwartz and Wilson came up with the “30 percent standard,” and discussed that thirty percent or more of income spent on housing is considered a “housing-cost burden.”

Addressing affordable housing for renters, Representative Joe Crowley introduced H.R.3670 – Rent Relief Act of 2017 to help renters with their housing-cost burden. The credit would only be available for taxpayers whose gross income is less than $125,000. The bill allows for a refundable tax credit when rent exceeds 30 percent of the individual’s gross income for the taxable year. Depending on the renter’s gross income, the amount of the credit could range from 10 to 100 percent of the excess (above 30 percent). One caveat is that if the tenant’s rent exceeds 150 percent of the fair market rent for that specific residence, the excess above 150 percent won’t be included for the purpose of determining the amount of the credit. Government-subsidized renters would be able to claim a credit equal to 1/12 of the rent paid by the taxpayer. Although the bill was last heard in the House Committee on Ways and Means, at the time of this article, it is being prepared by Senator Kamala Harris to be introduced in the Senate.

Maryland offers tax credits for some renters, check with the Maryland Consumer Rights Coalition (marylandtaxcredit.com) for qualifying information.

By Dan Krell
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/07/26/affordable-housing/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

July 30, 2017August 13, 2017

How to find your affordable home

The latest headline for the Case-Shiller Home Price Index boasts, “hits all-time high for sixth consecutive month” (us.spindices.com). The data for May’s S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index revealed a 5.6 percent year-over-year increase for the US Census divisions. However, the month-over-month Case Shiller composite indices decreased about 0.1 percent. Seattle, Portland, and Denver continue to lead in home price growth with double digit gains. The Washington DC region posted a 1.0 percent gain in May and a modest annual increase of 3.6 percent year-over-year. The bottom line is that homes are becoming more expensive. And as a home buyer, you want to know how to buy an affordable home.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, provided analysis of this week’s release suggesting that the continued climb of home prices is a manifestation of the housing market, and not necessarily reflective of the economy. He stated:

“Home prices continue to climb and outpace both inflation and wages…Housing is not repeating the bubble period of 2000-2006: price increases vary across the country unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging. The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

Rising home prices are impacting the housing market and making it difficult to find an affordable home. The latest National Association of Realtors Housing Affordability Index (nar.realtor) indicates that buying a home is less affordable compared to the same time last year, which decreased from 161.2 to 158.8. Additionally, the median sales price for a single family home jumped 4.6 percent.

Even though home prices continue to climb, the good news for home buyers is that mortgage rates are still relatively low. According to last week’s Freddie Mac Mortgage Rate Survey (freddiemac.com), the 30-year fixed rate mortgage dropped from 4.03 percent to 3.96 percent. Although slightly higher from the same time last year (3.45 percent), historically low interest rates help make a home purchase affordable.

Although wages are not increasing on the same pace as home prices, home buyers are benefiting from low mortgage rates. However, a concern that is echoed throughout the industry is the continued low inventory of homes for sale. The low inventory of homes, specifically turn-key homes, is a factor in increasing home prices and making it harder to find an affordable home.

If you’re a home buyer and are frustrated with the competition, think outside of the box. It’s true the best looking and well priced homes are receiving multiple offers and sell quickly. The competitive atmosphere is pushing home prices higher. However, keeping an open mind could help you to not only cope with the current market, but also help you find your next home.

One way home buyers are finding their affordable home is by renovating a distressed home. Homes that languish on the market and are in need of repair or renovation may be a “diamond in the rough.” Renovation loans, such as the FHA 203k or Fannie Mae’s HomeSyle loan can make the process easier and affordable. Renovation loans are designed to help buy and renovate a home. There are a various renovation loan programs, so having a long conversation with a qualified renovation loan specialist can help you decide which program is best for you.

Be prepared and line up your licensed contractors. Renovation loans require documentation and plans from your licensed contractor. Most of these programs will provide funding in stages. However, there are a few renovation loan programs that are “streamlined” and designed for less expensive renovations. Check with your lender for qualifications, loan limits and requirements.

Additionally, you don;t have to look in the MLS to find your affordable home. Work with an experienced agent who has the savvy to find homes for sale that are not currently listed for sale. These may include (but not limited to) for sale by owners, expired listings, and auctions.

Home owners who did not have luck selling their homes earlier in the year may be open to selling to you. Your agent can find and contact home owners who have recently taken their homes off of the MLS.

Look for homes that are “For Sale by Owner.” It used to be hard to find the FSBO, and you would have to drive through neighborhoods to look for the “For Sale by Owner” signs. But of course the internet has made it easier to find the FSBO. They are listed in the MLS by listing placement services. They are also posted online on “for-sale-by-owner” sites, as well as Zillow, Trulia, or Craigslist.

Neighborhood listservs and internet groups are a great way to fnon-MLS homes for find FSBO’s. But you have to be a resident of the neighborhood, or know someone who is a resident to get access to the listserv.

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March 10, 2016December 13, 2022

Housing and presidential election

Another presidential election, and there will most likely be very little discussion and debate about housing policy. During the 2012 presidential election, housing seemed to take a back seat as the real estate market was still emerging from a foreclosure crisis and recession just four years earlier. Fast forward to today and homeownership is hovering near a 30-year low. Homeownership is out of reach to many due to tightened mortgage qualifying and increasing home prices; while Americans’ incomes are being squeezed by rising rents.

Enter Ron Terwilliger. A successful real estate developer and philanthropist, Terwilliger launched the J. Ronald Terwilliger Foundation for Housing America’s Families in 2014. The organization’s mission is to “…recalibrate federal housing policy to more effectively address our nation’s critical affordable housing challenges and to meet the housing needs of future generations.”

Giving the keynote address at The Affordable Housing Developers Summit in Chicago, Terwilliger described an evolving “silent housing crisis.” He proclaimed that “A legacy of the great recession, the rental affordability crisis is often overlooked by policymakers, ignored by the media, and underestimated, at best, by the general public.” And although affordable housing is a bi-partisan issue, he stated that candidates don’t talk about the issue (housingfinance.com).

So it should come as no surprise that the J. Ronald Terwilliger Foundation for Housing America’s Families and the Bipartisan Policy Center hosted a housing summit this past October. Speaking at the summit were a number of presidential candidates, policy makers, current and former Senators, a former HUD Secretary, local officials, and industry leaders and experts. Unfortunately, the presidential candidates that are still in the race, did not participate. The summit was held in New Hampshire, where housing costs for 36% of residents is more than 30% of their gross income; and median rents have increased 50% since 2000 (housingwire.com).

The housing summit seemed to inspire realtor.com chief economist Jonathan Smoke, who shortly afterward penned a statement declaring his candidacy for president as leader of the “Housing Party” (As President, I’ll Make American Housing Great Again—Really; realtor.com; October 21, 2015). Smoke believes that housing should be first on the national agenda stating, “The market won’t solve all of our housing problems on its own. And our government seems incapable of working together to find solutions that can help…” Laying out a detailed platform, Smoke proclaims that a vote for him would “…build our way to a stronger economy and more affordable housing for the middle class—a better America for all of us.” He said that he would work toward getting a home for every family.

But it may be that housing policy is a bit more complicated than just proclaiming “homes for everyone.” In a frank analysis of housing policy, Daniel Hertz laid out what seems to be diametrically opposed positions: policy should keep housing affordable so as not to price people out of the market; and policy should protect house values, because homes are an investment and wealth building vehicle (American Housing Policy’s Two Basic Ideas Pull Cities in Opposite Directions; theatlantic.com; October 14, 2015).

Hertz believes that these seemingly opposite policy positions can be “reconciled” by offering a wide variety of housing types for a broad range of incomes. Additionally, he discussed how local privately developed affordable housing programs (such as Montgomery County’s Workforce Housing and MPDU programs) is one avenue to a comprehensive housing policy.

By Dan Krell
Copyright © 2016

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January 22, 2015July 5, 2019

Affordable housing redux

Statistics and indices have indicated that buying a home has become more affordable in recent years. In fact, the October 2014 Trulia Rent vs. Buy Index indicated that buying a home was 38% cheaper than renting (trulia.com). Additionally, the S&P/Case-Shiller National Home Price Index released December 30th indicated that average home prices for the 10-City and 20-City Composites are at “autumn 2004 levels” (housingviews.com). However, while interest rates continue to be favorable along with an expanding inventory that offers more choices, obstacles remain to home ownership.

Unlike the high home prices that drove affordable housing concerns in the past, many would-be home buyers today face income and savings challenges. Statistics suggest that many do not earn enough to qualify for a home purchase and/or have not saved enough for a down payment and closing costs. The latest report (Q2 2014) of the Maryland Association of Realtors® First-time Homebuyer Affordability Index revealed a decrease in home affordability from 84.1% to 75.7%; which indicates that Maryland first time home buyers had 75% of the income required “to purchase a typical starter home” (mdrealtor.org).

More importantly, a survey conducted by the Consumer Federation of America (7th Annual Savings Survey Reveals Persistence of Financial Challenges Facing Most Americans; February 24, 2014, consumerfed.org), revealed that “most Americans are meeting their immediate financial needs but are worse off than several years ago.” And, “… that, despite the economic recovery, most Americans continue to face significant personal savings challenges….” Stephen Brobeck, Executive Director of the Consumer Federation of America and a founder of America Saves, was quoted to say: “Only about one-third of Americans are living within their means and think they are prepared for the longterm financial future. One-third are living within their means but are often not prepared for this longterm future. And one-third are struggling to live within their means.”

With an eye to address housing affordability, the President reduced the FHA annual mortgage insurance premium (MIP). Increases in FHA’s MIP in recent years have helped offset losses from the foreclosure crisis; and inadvertently made mortgages more expensive. And although the recent MIP reduction helps more home buyers qualify, critics claim it increases FHA’s risk and exposure to future foreclosure losses. According to Zillow (How Much Can You Save with Lower FHA Annual Mortgage Insurance Premiums?; January 7,2015, zillow.com), a home buyer who has a 3.5% down payment on a 30 year mortgage of $175,000 can save about $818 per year (about $68 per month).

For those who have not saved enough for a down payment and closing costs, State and local initiatives offer down payment assistance and low interest rate mortgage programs. The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants. Locally, the Housing Opportunities Commission of Montgomery County (hocmc.org) offers several down payment assistance options, including the House Keys 4 Employees program for many Montgomery County Employees. These programs have restrictions; you should check with each program for qualification and eligibility requirements.

The Montgomery County Department of Housing and Community Affairs (montgomerycountymd.gov/DHCA) offers additional affordable housing options: The Moderately Priced Dwelling Unit (MPDU) Program offers affordably priced homes to first-time home buyers who meet the program’s eligibility; and the Work Force Housing Program promotes “the construction of housing that will be affordable to households with incomes at or below 120% of the area-wide median.”

By Dan Krell
© 2015

March 16, 2007October 5, 2019

A Look Ahead to Affordable Housing

As the local real estate market has cooled over the last few months, many home buyers continue to wait for additional cooling. The Maryland Association of Realtors (mdrealtor.org) reported that home sales in Montgomery County for total units sold decreased over the last six months as compared to the same time in 2005. Although sales decreased, the average home price increased about 1.5% during the same time period; that is until December. December 2006 recorded a decrease in the average home price in Montgomery County of about 5.3% as compared to the same time in 2005.

Whether December’s statistic is an aberration or the start of a trend, the fact is that many home buyers continue to be squeezed due to the lack of affordable housing. Additionally, many home owners are being squeezed as well as home maintenance costs continue to rise.

The Maryland Association of Realtors has been keeping a record of affordability in the form of the Maryland First Time Homebuyer Affordability Index (MDHAI) since 2000. The index is a monthly indicator of the affordability of a starter home for prospective Maryland first time home buyers. The index and affordability have a positive correlation. The highest level the index reached was 80.1 in 2001, which meant that the average home buyer had 80.1% of the income needed to purchase a home. Since then, the index has decreased to 66.8, 61.9, and 53.2 in 2003, 2004, and 2005 respectively. The October 2006 index was 44.9, which was an improvement of the last six months.

Although the regional economic outlook for next decade is strong, other factors threaten housing affordability. A study conducted by the by the Maryland Association of Realtors entitled “the Future of Housing” cites rising interest rates, population growth, housing appreciation, moderate income growth, rising real estate taxes, and rising energy costs as obstacles to affordable housing.

It is clear that affordable housing is and will continue to be a regional issue. Although, federal, state and local government resources exist for home buyers and home owners in need of financial assistance, non governmental resources are being created to assist those in need as well as to assist with policy and research.

The Maryland Association of Realtors has created several initiatives to educate consumers about affordable housing resources. The Maryland Association of Realtors Housing Affordability in Maryland website (marhousingaffordability.org) provides research, statistics, and resources. The MD Home Programs website (mdhomeprograms.com) provides home buyers the appropriate resources and education to assist in the purchasing process. The League of Maryland Home Owners (leagueofmarylandhomeowners.com) is a coalition of home owners and prospective home buyers advocating for solutions to the affordable housing dilemma.

Although affordable housing is not one of the top legislative topics for the new Maryland legislature, it continues to be one of the top areas of concern. The Maryland League of Homeowners has an open letter to Governor Elect O’Malley and other state representatives that outlines recommendations for housing affordability which include several business and personal tax incentives, statewide coordination of resources, and additional funding for workforce housing.
If you are concerned with the future of affordable and workforce housing, you are encouraged to go the Maryland League of Homeowners website (above) and sign the open letter to our elected state representatives.

By Dan Krell
Copyright © 2007

This column is not intended to provide nor should it be relied upon for legal and financial advice.