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March 22, 2018November 23, 2021

Negative equity stats likely erroneous

Before the Great Recession, there was the foreclosure crisis of 2007. That was the year that the housing bubble popped and home negative equity soared. Many home owners negotiated with their lenders to keep their homes, while others lost their homes to foreclosure. The Mortgage Forgiveness Debt Relief Act of 2007 was one of the first measures to assist distressed homeowners during the financial crisis. The Act initially was to end in 2009 but has been extended annually. The Act was recently retroactively extended for 2017.

The purpose of the Act was to address tax liabilities that distressed homeowners faced when they tried to save their homes. Because debt forgiveness is typically considered taxable income, a mortgage balance reduction via mortgage modification or short sale would have resulted in a tax bill to a homeowner who was already experiencing a financial hardship.

Recent home equity gains in the housing market should help many home sellers who would have otherwise needed a short sale. Highlights from CoreLogic’s Q4 2017 Home Equity Report (corelogic.com) indicated that about 4.9 percent of mortgaged homes have negative equity (which is a huge improvement from the almost 31 percent reported in 2012 by Zillow’s Negative Equity Report). Additionally, CoreLogic reported that the national average of home equity gained by homeowners over the past year was in excess of $15,000. However, there is disparity in home equity growth by region.

Dr. Frank Nothaft, chief economist for CoreLogic stated:

“Home-price growth has been the primary driver of home-equity wealth creation. The CoreLogic Home Price Index grew 6.2 percent during 2017, the largest calendar-year increase since 2013. Likewise, the average growth in home equity was more than $15,000 during 2017, the most in four years. Because wealth gains spur additional consumer purchases, the rise in home-equity wealth during 2017 should add more than $50 billion to U.S. consumption spending over the next two to three years.”

The National Association of Realtors testified on March 14th to the U.S. House Ways and Means Subcommittee hearing on “Post Tax Reform Evaluation of Recently Expired Tax Provisions” to make the Mortgage Forgiveness Debt Relief Act permanent. In his testimony, Realtor Barry Grooms discussed the plight of many homeowners who are surprised to find that they are upside-down on their mortgage despite national home price gains.

Grooms made an argument why the Mortgage Forgiveness Debt Relief Act should be permanent. The Act has been retroactively extended each year in recent years leaving many short sellers “sweating it out” until the end of the year. Part of the decision-making process for a short sale is a potential tax liability. Many home sellers take the chance that the Act will be renewed retroactively. But others do not want to take the chance of incurring a large tax liability.

Negative equity statistics are likely to be erroneous. The number of homes with negative equity is probably under-represented due to deferred maintenance.

Yes, home prices have significantly increased, which has grown home equity. But the statistics for home equity assume that all homes are worth “retail value.” The retail value of a home is the full price a home can sell. In today’s market the home must be in better-than-average to excellent condition to sell for retail value. We don’t know the real value of any home until it’s sold.

In his testimony, Grooms touched upon a number of issues why homeowners are selling for less than they owe. However, not addressed by Groom is the number one reason why homeowners are under-water and why many home sellers need to sell via short sale. Property condition. The property condition crisis was highlighted in a February 2013 article by the Harvard Joint Center of Housing Studies entitled “The Return of Substandard Housing.” The lack of updates and/or deferred maintenance in a home can significantly decrease its value.

By Dan Krell
Copyright © 2018

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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.

January 18, 2018September 14, 2019

In the unlikely event of nuclear war

Preparedness can mitigate personal disaster in case of nuclear war — Preparedness can mitigate personal disaster in case of nuclear blast (infographic from cdc.gov)

“While a nuclear detonation is unlikely, it would have devastating results and there would be limited time to take critical protection steps. Despite the fear surrounding such an event, planning and preparation can lessen deaths and illness…” This was the introduction to a highly anticipated Centers for Disease Control (cdc.gov) Grand Rounds on the health response to a nuclear detonation. Unfortunately, the January 16^th topic “Public Health Response to a Nuclear Detonation” was shelved to discuss the current flu epidemic. Home owners want to know how to protect their homes and family in the unlikely event of nuclear war.

Living just outside Washington DC, it feels as if the anxiety for such as disaster has increased in recent months. Many of you might wonder if there is anything you can do to save your homes and your families in the event of a nuclear war. Like other potential disasters, preparedness can help mitigate personal disaster.

I had the opportunity to correspond with the Outreach Coordinator for Montgomery County Office of Emergency Management and Homeland Security, Joe Corona, CEM. When asked if the county has a plan in case of a nuclear war, he stated “We’ve taken a look at what we would need during the unlikely scenario of a nuclear attack (i.e. plume modeling, evacuation planning, public messaging, recovery planning, etc.), and applied them to multiple situations, so that in the unlikely event of a nuclear attack, we’re able to look at the priorities and provide the most effective response that we can.”

Corona described the Montgomery County’s Emergency Operation Plan as an “all hazards framework” that is able to prepare, respond and recover from an incident “regardless of the type of event.” He added, “Our focus is responding to community needs effectively regardless of the event, and to be able to quickly increase or direct resources in order to provide the maximum benefit to the community, with life safety always being the number one priority.”

In this unlikely scenario, what can you do to protect your home and family?

Prepare by creating a plan, and building an emergency kit. Corona suggests tapping resources from agencies such as Ready.gov, The American Red Cross, Department of Homeland Security, Environmental Protection Agency, etc. to help you with your plan. He recommends that you think about areas in your home that provide the best shielding from outdoor elements, and to “take steps now to prepare to shelter in place for longer periods of times.” Corona suggests that you prepare at least three days of emergency supplies. However, in the unlikely case of nuclear war, you probably need to plan for “longer periods.”

Ready.gov (ready.gov/nuclear-blast) provides information on what to do before, during and after a nuclear blast. Preparedness recommendations include building an emergency kit, make a family emergency plan, as well as identifying any designated fallout shelters in your community, and/or make a list of potential shelters near home, work and school. “During periods of heightened threat,” you should have at least a two week emergency supply.

Corona recommends staying informed through Alert Montgomery (alert.montgomerycountymd.gov), noting that your chance for survival increases if you can act quickly. “Alert Montgomery is the official emergency communications service for Montgomery County, MD. During a major crisis, emergency or severe weather event, Montgomery County officials can send event updates, warnings and instructions directly to you on any of your devices.“

Check your homeowners or renter’s insurance coverage. He stated, “In our responses, those who have insurance require so much less of the limited government resources and have tremendously more options through ‘loss of use’ provisions to seek alternate accommodations. Photographing pre-conditions, keeping policy info in your go kit [emergency kit], and notifying the insurance company early after events go a long way to promoting recovery for the individual and recouping any losses.”

The Montgomery County OEMHS is a rich source of information on preparedness for disasters, including the unlikely event of a nuclear war. Their outreach personnel can answer your questions about staying informed, making a plan, building an emergency kit, as well as getting involved in the community (www.montgomerycountymd.gov/OEMHS/hazards/tech/radiological.html).

By Dan Krell
Copyright© 2018

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January 6, 2018November 23, 2021

Keeping New Year’s home resolution

Your home is an extension of your persona. The condition of your home impacts how you feel. So, what better way to start the new year than making a New Year’s home resolution to improving your living space?

There is disagreement about the need for and impact of New Year’s resolutions. Many believe that making a conscious and purposeful declaration to better your life can get you on the right path. However, many mental health professionals believe that making resolutions can be a set up for failure and disappointment if your expectations are too high.

Making a New Year’s home resolution can be achievable if you make it sensible and meaningful. Decide on the goal and make a plan detailing how you will accomplish it. Ask yourself how the project will improve your life. Sensory prompts, such as a picture of a clutter free family room or a carpet sample, can help you stay focused on the goal and keep you motivated. You don’t have to go it alone either. Consider hiring a professional. If you decide to go the Do-It-Yourself route, make it a bonding opportunity by enlisting friends and/or family to assist you.

Whether you hire a professional or not, you need a plan on how you will actualize your home project. It’s good to be ambitious with your New Year’s home resolution, but don’t fall into the trap deciding the project can be completed in one or two days. Instead, be realistic. After all, your daily routine is probably busy, if not hectic. Decide on how much time you can realistically devote to the project, and put in on your calendar.

Whatever your New Year’s home resolution is, start with one room. If need be, break the room down in sections to help organize where in the room you will begin and where to go next. Collect and organize the materials you need for the project before you begin. The greatest distraction from achieving your resolution is a trip to the store for extra supplies.

The most likely number one New Year’s resolution for the home is decluttering. This makes sense because we all lead busy lives and collect stuff throughout the year. But reducing the clutter in your home doesn’t only improve its appearance, it can also make you more comfortable. Decluttering may also give a boost to your mental health. Consider consulting with a professional organizer to help plan the project.

A home makeover is another popular New Year’s resolution project. Fresh and new is always in. Whether it’s painting a room or two, or installing new flooring, giving your home a new look can improve its appearance. A new look can also affect how we feel. Choose your color scheme carefully, because various colors elicit different responses. For example, a blue-grays may seem relaxing, while reds are invigorating and exciting.

Catching up on deferred maintenance seems to be the New Year’s resolution that can get overwhelming. Despite our best intentions, we all have put off some repair or regular upkeep at one time or another. But repairs and maintenance are not static. Meaning that over time, issues can get worse, and neglected systems can break down. Instead of putting off repairs and maintenance, consider hiring a licensed contractor.

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November 30, 2017December 1, 2017

Home remodeling to stay or sell

The Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University predicts expanded growth of home remodeling and renovations through most of 2018. That’s a good indication that the economy has picked up and the many homes that fell in disrepair after the Great recession are getting the much-needed attention to extend their functionality.

It wasn’t that long ago when Kermit Baker wrote about a crisis of the declining housing stock due to extensive deferred maintenance (The Return of Substandard Housing; housingperspectives.blogspot.com; February 27, 2013). The article written for the Joint Center for Housing Studies of Harvard University highlighted the considerable reduction of home maintenance as measured by home owner “maintenance spending” during the Great Recession. This seemed to be a low point for the country’s housing stock. The 28 percent decrease in maintenance spending between 2007 and 2011 essentially nullified the renovation spending during the housing boom.

Home remodeling activity Q3-2017 (graph from jchs.harvard.edu)

The Remodeling Futures Program releases a quarterly data for Leading Indicator of Remodeling Activity (LIRA). The LIRA is a “a short-term outlook of national home improvement and repair spending to owner-occupied homes.” The most recent data indicates that home remodeling and repair spending will escalate from the fourth quarter of 2017 into the third quarter of 2018, estimating an increase from 6.3 percent to 7.7 percent. The significant increase in home improvement spending is attributed to a strengthening economy, home equity gains, and low home re-sale inventory. Chris Herbert, Managing Director of the Joint Center for Housing Studies is optimistic about maintenance spending. Herbert said:

“Recent strengthening of the US economy, tight for-sale housing inventories, and healthy home equity gains are all working to boost home improvement activity…Over the coming year, owners are projected to spend in excess of $330 billion on home upgrades and replacements, as well as routine maintenance.“

The current LIRA data doesn’t include the effects of recent hurricanes. It is expected that those recent disasters will significantly increase the anticipated projected maintenance spending.

Home owners really have no choice but to spend on renovations, remodeling and repairs, especially if they are planning on selling their home. Most home buyers want a turnkey home, where the home is fresh and new and offers minimal maintenance during the first year of ownership. The desire for a turnkey home is probably why new home sales are at a ten-year high. This week, the US Census Bureau (census.gov) released new home sale data that indicates a month-over-month increase of 6.2 percent, and a year-over-year increase of 18.7 percent! To compete with other re-sales and new homes, home sellers must factor in the cost of home renovations.

There are many home owners who still can’t afford to move. The fact that many are still priced out of the move-up market has been a major issue holding back the housing market. This phenomenon is also responsible for continued low home re-sale inventories. As a result, many home owners are staying in their homes much longer than anticipated. The National Association of Realtors indicated in the Home Buyer and Seller Generational Trends Report 2017 (nar.realtor) that home buyers anticipate staying in a home about twelve years. This is an increase of about five years compared to a decade ago.

Although many home owners still can’t move, they are deciding to do home “make overs.” The make overs will give their homes a fresh look, that typically include new floors and paint schemes. Additionally, kitchen and bathroom renovations modernize the home. However, home owners needing more room, are opting to expand their homes to give them larger spaces. Some home owners are going beyond the basics and creating different spaces by moving walls.

Regardless of your reasons for home renovations and repairs, home improvement experts recommend to create a budget and stick to it, and always hire licensed contractors.

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November 10, 2017

Winter ready home

After several years of brutal winter weather, we were given a reprieve of mild weather last year. The warm weather trend has moved into the fall with some balmy days. But you shouldn’t become complacent thinking that winter weather is a long way off. Yes, it’s the time of year to take stock in your home and prepare for winter. Is your home winter ready?

Of course, at the center of your winter ready home is the comfort your heating system delivers. Regardless of the type of heating system you have, have a licensed a licensed professional inspect your home’s furnace. The inspection can identify any issues that can cause your furnace to be inefficient and/or fail. The inspection can also root out potential safety issues, such as carbon monoxide buildup. If the system does not need to be repaired or replaced, the HVAC professional will tune the furnace to optimize the its performance.

Another thought for being winter ready is the fireplace. Unfortunately, many homeowners overlook fireplace and chimney maintenance. However, putting off fireplace and chimney maintenance can become a safety issue. Wood burning fireplaces should be cleaned, inspected, and repaired if necessary. Gas fireplaces require a licensed technician to inspect the pilot and electronics in the firebox. Both wood and gas fireplaces require flue and chimney maintenance. Creosote buildup can combust and cause a chimney fire. Birds and other animals or debris can lodge in the chimney and prevent proper venting. Defective fireplaces or improperly vented fireplaces can produce excess carbon monoxide in your home, which can be deadly.

You’re not winter ready unless you’re prepared for emergencies. Test the smoke and carbon monoxide detectors in your home, replace them if necessary. If your heating system and/or fireplace burns liquid, solid, or gas fuel, then you need to have carbon monoxide detectors installed. Carbon monoxide is invisible, odorless and tasteless and prolonged exposure can result in brain damage and death. Experts recommend installing carbon monoxide detectors throughout the home, primarily near bedrooms.

Hose bibs are often ignored because many people don’t use them, or are not aware of how to maintain them. However, hose bibs that are not winter ready are probably the number one source of winter pipe leaks. If not winterized properly, the pipes leading to the hose bibs can freeze and expand. This expansion can cause the pipe to burst, creating an unwanted winter leak. If you’ve never winterized the hose bibs, or are not sure how, contact a licensed plumber. Attempting to operate pipe valves that have been idle or not operated in a while can create or exacerbate an undetected leak.

Make sure your home’s roof system is winter ready. Have a licensed professional inspect your home’s roof. If shingles are not secure, melting and freezing snow can create ice dams. Ice dams can lift and dislodge shingles allowing water to penetrate your home. Water penetration from ice dams can cause damage to your home’s interior. Besides damaging ceilings, water penetration can also damage walls and windows.

While your roof is being checked out, inspect the roof flashing, gutters and downspouts. Roof flashing is often ignored, however is as important as shingles. Roof flashing is used to transition from shingles (or other roofing) to other materials (such as brick, metal or PVC). The flashing prevents water to leak between the roof and chimney or vent pipes.

Clean and repair clogged gutters and blocked downspouts. Poorly maintained gutters and downspouts won’t allow for proper drainage of water from snow and rain. Improper drainage can allow water to penetrate the foundation, creating structural and mold issues.

Preparing for winter will reduce the probability of having surprises. Being winter ready will allow you to enjoy the winter months in your own winter wonderland.

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