Housing Finance Reform Time

housing finance reform
Mortgage process

Earlier this year, President Trump released a memorandum indicating the need to reform the current structure of housing finance.  Although some believe this initiative is a distraction, the reality is that housing finance reform has been in the government sights for years.  In fact, the current state of mortgage markets was only meant to be a temporary fix after the financial crisis of 2007

Housing finance reform has been a popular political subject for years.  Even before the financial crisis that resulted in the Great Recession, housing finance reform was front and center as a means to increase homeownership.  However, it wasn’t until after the financial crisis that touched off in late 2007 that Congress saw the need to make immediate major reforms to the mortgage industry.  Although a strategy was mapped out, not everyone agreed on the plan. 

One of the first steps taken by Congress was passing the bipartisan Housing and Economic Recovery Act of 2008 (HERA).  The purpose of HERA was to be a comprehensive attempt addressing the identified problems and concerns (at that time) that caused the financial crisis.  HERA created the Federal Housing Finance Agency (FHFA) to provide oversight of the Government Sponsored Entities (GSE).  Among the goals set by HERA was to “modernize” FHA and reduce Fannie and Freddie’s role in mortgage markets.  The fate of Fannie and Freddie has been debated ever since. 

The subsequent government takeover of Fannie and Freddie all but froze out any private participation in the mortgage markets.  A 2010 CBO report indicated that 90 percent of all mortgages were owned by Fannie Mae, Freddie Mac, and Ginnie Mae.  Some estimate government’s involvement has been much higher when including FHA and VA loans.   

Fast forward to March 27th 2019, when President Trump issued a memorandum on the urgency of housing finance reform.  Although the memorandum provides a rationale to change the system, the timing couldn’t be any more ideal (to help a seemingly plateaued housing market).  The President’s push for reform acknowledges the dominant role of the GSE in mortgage markets without much competition from the private sector.  The plan is to reduce taxpayer risk by expanding the private sector’s role.  Furthermore, the goal is to “modernize government housing programs, and make sustainable home ownership for American families [our] benchmark of success.”

On September 5th, the Treasury Department submitted its plan on housing finance reform.  The pan, as described by a Treasury press release (Treasury Department Submits Housing Reform Plan to President; treasury.gov)  “includes nearly 50 recommended legislative and administrative reforms to define a limited role for the Federal Government in the housing finance system, enhance taxpayer protections against future bailouts, and promote competition in the housing finance system.”

Although the result of HERA was a government monopolized housing finance industry, it was not the intention.  Housing finance reform means returning to a competitive market that includes the private sector.  However, it does not imply the end to government participation. Prior to the financial crisis, the competitive mortgage industry helped a record number of home buyers achieve homeownership.  Reforming housing finance markets is key in returning to a stable and reliable housing market across all sectors and price points.  Housing finance reform will increase homeownership opportunities for those who have struggled with the prospect of buying a home.  And of course, home sellers will benefit from increasing numbers of home buyers entering the housing market.

Original article is located at https://dankrell.com/blog/2019/10/07/housing-finance-reform-time/

By Dan Krell
Copyright© 2019

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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.

Renovate Your Home

renovate your home
Home improvements from the American Housing Survey (census.gov)

Once thought of as a supporting actor in the housing industry, home remodeling is poised to take the spotlight.  The growing fascination with home remodeling is generating new renovation trends and research. It’s time to renovate your home! If you aren’t yet thinking of remodeling your home, chances are that you will be planning a home improvement project in the next five years.

Plaut & Plaut’s conclusion to their study (Decisions to Renovate and to Move; Journal of Real Estate Research; 2010; vol. 32; p.461-484) states, “Housing renovation is an important component of housing supply, yet one often ignored both in empirical analysis and in policy discussions about housing.”  They point out that that renovating a home was becoming a “substitute for moving.”  A possible cause for the trend in 2010 was twofold.  First, many homes fell into disrepair during and after the Great Recession.  During that time, many home owners could not keep up with regular maintenance, let alone emergency repairs. And second, there was a lack of quality homes for sale immediately after the Great Recession.  As foreclosure and REO home sales subsided, many homes for sale showed signs of neglect through deferred maintenance. 

Renovate your home.

Fast forward to 2019, home sale inventory continues to be a major problem for the industry (and will likely continue into the next decade).  But home remodeling is picking up the slack to improve the nation’s home stock, as well as help increase quality home sale inventory.  However, industry experts are learning there are other reasons that home owners are remodeling instead of moving.  Trends that have been identified include seniors who are “aging in place,” and multigenerational homes. 

Although a recent Freddie Mac study identified seniors who are “aging in place” as a cause of the ongoing home sale inventory shortage, aging in place is also stimulating home remodeling!  Homeownership rates for seniors are much higher today than in past generations.  Instead of moving to retirement communities or stereotypical senior housing, older home owners are staying put and renovating their homes for comfort and style.

Multigenerational homes became popular again after the recession, when grandparents, parents and adult children pulled resources to live in one home.  The trend continues as aging parents are moving in with their children, and young adults are moving back into their parent’s homes.  Remodeling a home to accommodate several generations may require turning a basement into an apartment, adding a main level bedroom and bathroom, or possibly building an addition to the existing home.

Even home owners who decide to move are remodeling their homes.  According to NAR’s Remodeling Impact Report (nar.realtor), functionality and livability are the top reasons to renovate for a home sale.  Most home buyers want a turnkey home that is functional, comfortable and energy efficient.  Home sellers who improve their homes before selling typically sell faster and for more than those who sell their home “as-is.”

While “going green” has become a standard in home improvement, a Joint Center for Housing Studies of Harvard University (jchs.harvard.edu) publication “Healthy Home Remodeling: Consumer Trends and Contractor Preparedness” identifies healthy home remodeling as a growing trend.  Healthy home building practices are intended on maintaining the physical and emotional wellbeing of the home’s occupants by using healthier building materials, such as “low-VOC paints and formaldehyde-free woods.”

When planning to renovate your home, home improvement experts recommend: create a budget and stick to it; only hire licensed contractors; and make sure your improvements have permits.

Original article is located at https://dankrell.com/blog/2019/09/28/renovate-your-home

By Dan Krell
Copyright© 2019

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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.

Homeowners Insurance Check-Up

homeowners insurance
Protect from flooding (infographic from ready.gov)

Have you thought about your homeowners insurance lately?  Chances are that unless you’ve made a recent claim, you probably haven’t given it much consideration.  If you’re like most homeowners, you probably think that you homeowners policy is a “set-it and forget-it” item.  Maybe it’s time for a “homeowners insurance tune-up” to make sure you’re protected.

Unfortunately, most homeowners don’t really know too much about their homeowners policy until it’s needed.  And it’s only when they make a claim they are surprised to know about the limitations of their policy.  In fact, United Policy Holders (uphelp.org) states that about two-thirds of homes are underinsured by an average of eighteen percent! (United Policy Holders is a non-profit whose mission is to be a trustworthy and useful information resource and an effective voice for consumers of all types of insurance in all 50 states).  Besides the many underinsured homes, many homeowners are surprised to find out about policy exclusions when they make a claim. 

Although it may seem unfortunate, it’s not unusual for home buyers to underinsure their home at the time of the purchase to help save on their closing costs.  They either believe they will upgrade their policy at a later date, and/or believe that they will never have to make a claim.  This is especially true for first-time home buyers, who are most vulnerable and rely on their Realtor and loan officer for advice. 

To help homeowners understand and chose their policy coverage, the Maryland Insurance Administration publishes A Consumer Guide to Homeowners Insurance (insurance.maryland.gov).  First, understand the purpose of homeowners insurance is to help you recover from the financial effects of a loss that is covered by your policy.  Additionally, a homeowners policy may “help protect you if someone is hurt or has their property damaged because of something you do or if something that you own hurts someone else or damages their property.”

According to The Guide, there are a number of types of homeowners insurance.  To save money, many homeowners opt for a specific hazard policy that meets the requirements of their mortgage lender.  Nonetheless, they may not realize that their coverage is severely limited, and their home is underinsured.  However, there are broad coverage policies that are more comprehensive. 

The price of a homeowners policy is not fixed.  There are many considerations that go into the pricing.  For example, your insurance company will investigate if you have a history of making insurance claims.  They will also research your home’s claim history through a CLUE (comprehensive loss underwriting exchange) report or an equivalent.  Other considerations include (but not limited to) age and construction of your home, the access to and quality of local fire protection, amount of coverage, and deductible.

One way to possibly save on your homeowners insurance is to adjust your deductible.  A deductible is an out of pocket expense that is required from you when you make a claim.  Typically, the lower the deductible, the more expensive the policy. 

Take the time for a homeowners policy “checkup” with your insurance agent.  Review your coverage and make adjustments as needed to protect you and your home.  The Maryland Insurance Administration’s Consumer Guide recommends that your read the Declaration Page as well as your policy to make sure you have the coverage and amounts you requested.  Also, because your valuables coverage may be limited or excluded, you may need additional coverage or policies.  Also, consider purchasing a separate flood insurance policy.

Original article is located at https://dankrell.com/blog/2019/09/21/homeowners-insurance-check-up

By Dan Krell
Copyright© 2019

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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.

Autumn Home Selling

autumn home selling
Autumn home selling

What was once considered a winding down period for the year’s home sales, has become housing’s second wind.  Autumn is not only a time when the leaves start falling, but it also has become a target selling season for home sellers who miss the spring market.  Autumn home selling is also a second chance for those who could not sell their home earlier in the year.  In fact, the fall has become an active home selling season.

The general consensus for the autumn home selling phenomenon is that home sale inventory is low.  But the truth is that the fall tends to be when home sale inventory begins to decrease anyway.  Many home sellers who didn’t sell their home during the spring or summer will be pulling their homes off the market.  Sure, new listings are available during the fall, but not as many as there were in the spring.  Fall is a time for home buyers and sellers to strike while the iron is hot.  The combination of fewer listings along with serious home buyers and sellers makes the fall housing market a brisk selling time. 

This year, autumn home selling may be different.  Existing home sales have declined year-to-date (compared to last year).  The National Association of Realtors reported that as of June, existing home sales are about 2.2 percent behind last year’s sales.  Year-to-date Montgomery County home sales are 2.1 percent below last year’s sales.  This decline actually started last fall.  The home sale drop-off stifled what could have been a record year for 2018 home sales.

Autumn home selling

If you’re selling a home this fall keep an eye on neighborhood home sales.  Setting a reasonable list price will be key to getting your home sold.  Keep in mind that although home sale prices continue to climb, monthly appreciation is slowing.  The S&P CoreLogic Case-Shiller Home Price Index (spindices.com) reported a year-to-date nationwide 2.29 percent increase.  You get a sense of the magnitude of decelerating appreciation when compared to 2018’s increase of 4.55 percent, and 2017’s increase of 6.24 percent nationwide.  The year-to-date Montgomery County average home sale price is about $554,932, which is only an increase of 1.2 percent from the same time last year (MarketStats by ShowingTime). 

Over pricing your home can be a disastrous mistake during the fall market.  Don’t be greedy, and be prepared to adjust your pricing strategy.  There are many storms brewing that can easily scare home buyers.  If the list price is too high, you may end up with low ball offers because of a protracted time in the MLS. 

Although having less competition makes it a good time to sell your home, it can also be challenging.  Fall weather can be significantly different day to day.  Be prepared to adjust the thermostat.  Make sure your HVAC system gets a fall service so it will be ready for colder temps.   

Don’t forget to keep up with your home’s curb appeal.  Although you may want to get lazy about maintaining your lawn, don’t let it grow too high.  Also, remove excessive leaves from the ground too, as this can also diminish your home’s curb appeal.

Make accommodations for home buyers to visit your home.  Many home buyers will probably schedule tours after work, when it will be getting dark.  Open houses are still a good option for a fall home sale.  Turnout may be scant, but fall open house visitors are more likely to buy.

Original article is located at https://dankrell.com/blog/2019/09/15/autumn-home-selling/

By Dan Krell
Copyright© 2019

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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.

Home Buyer Beware

home buyer beware
Home buyer tips

Whether you admit it or not, buying a home is a stressful endeavor.  Even if you’ve purchased a home before, the process can be somewhat nerve-wracking and overwhelming.  Taking time out of your already busy schedule to search and visit homes, as well as applying for a mortgage can make life hectic.  So, who needs the added worry that that the home seller and/or listing agent is trying to hide something from you?  Home buyer beware.

Maryland requires the home seller to disclose any known latent defects, regardless if they are choosing the disclosure or disclaimer option. To be clear, the Maryland Real Estate Commission’s Residential Property Disclosure and Disclaimer Statement states that a seller must disclose “Material defects in real property or an improvement to real property that: (1) A purchaser would not reasonably be expected to ascertain or observe by a careful visual inspection of the real property; and (2) Would pose a direct threat to the health or safety of (purchaser and/or occupant).”  Regardless, there is still a “home buyer beware” atmosphere. 

How can you proceed confidently with your home purchase if there is a sense of distrust?  To counteract the home buyer beware phenomenon, focus on “trust and verify.”  The concept of trust and verify is about taking disclosures at face value and exercising due diligence.  To the best of your ability, confirm the accuracy of what is disclosed, as well as investigate any areas of concern.  Many items can be verified online, or by calling the locality where the house is located. 

Home buyer beware

Of course, you should always conduct a home inspection.  However, prior to hiring your home inspector, ask about their scope and limitations of the inspection.  Home inspectors are considered generalists, such that they are not typically an expert in any aspect of home construction, or the home’s structure and systems.  However, they are trained to identify potential common problems.  They will also recommend that you consult an expert for further information on anything that is outside the scope of the inspection.  And although home inspector licensing laws prescribes minimum inspection standards, there is no guarantee that everything will be inspected thoroughly beyond a visual inspection (e.g., chimney or pool).  Make sure your inspector meets your expectations so as to thoroughly inspect all systems of the home. 

If the home was expanded, verify that additions and/or modifications to the home were permitted by the local jurisdiction.  Unpermitted additions can create a number of issues, including having your lender deny your mortgage.  It’s not uncommon for additions/modified items (such as a deck, and even electrical improvements) in a home to go unpermitted.  This is usually because the home owner did it themselves, or hired a contractor who cut the corner of getting a permit.  The permitting process certifies that repairs/renovations comply with local building and zoning codes.  Making sure any addition or home expansion was permitted and passed final inspection gives peace of mind that the completed project meets local building health and safety standards.

Keeping home buyer beware in mind, due your due diligence. There are many other aspects of the home which can be verified, including (but not limited to) schools and zoning.  If you’re buying a home to go to a specific public school, verify that the house is within the school’s boundaries and if there are plans to redistrict.  If you plan to have an air-b&b in your home, make sure the house is appropriately zoned. You should also check zoning and the local planning office to make sure your potential building/addition plans are not restricted.

By Dan Krell
Copyright © 2019

Original located at https://dankrell.com/blog/2019/09/04/home-buyer-beware/

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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.