New Year’s home resolution (infographic from lightstream.com)
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.
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.
Mortgage interest deduction (infographic from keepingcurrentmatters.com)
The mortgage interest deduction seems to be the everyone’s lovable fiscal scapegoat. The mortgage interest deduction was almost abolished in 2010 as a means of increasing revenue after the recession. And then again in 2012 it’s elimination was considered to increase revenue lost through sequestration. This time the mortgage interest deduction is in Congress’ sights as a means of tax reform.
The mortgage interest deduction is a remnant of consumer interest deductions that were allowed when income tax was first collected. It wasn’t until the 1980’s when most consumer interest deductions, such as credit card and auto loan interest, were eliminated (to reduce budget deficits after a deep recession). The mortgage interest deduction survived in a limited form, which implemented a cap on the amount of an individual’s deductions.
The mortgage interest deduction is again embattled. Reporting by AP’s Marcy Gordon reveals the divide in eradicating the MID (GOP eyes popular tax breaks to finance overhaul; apnews.com, September 18, 2017). The MID is viewed by some as a middle-class mainstay that is a political hot potato. While others see the MIS as an antiquated subsidy that can be removed as part of a major tax plan. However, the likelihood of totally abolishing the MID is slim because of the political fallout. More likely to occur is something akin to what happened in the 1980’s, which was a narrowed version that limited deductions. Speaker of the House, Paul Ryan hinted that the current $1million cap could be further reduced, by saying “We could change that limit — I suppose.”
Over the decades, the mortgage interest deduction has been criticized by some as poor economic policy. Those who argue against the mortgage interest deduction claim that it doesn’t increase homeownership. They also claim that the MID is a subsidy that artificially inflates home prices, and is used mostly by the wealthy. Additionally, the enticement of receiving a MID at the end of the year is used to encourage home buyers to buy homes that they really can’t afford. A recent study by Jonathon Gruber (known to many as the architect of Obamacare), et al, produced results that mimics the assertions of the mortgage interest deduction critics’ (Do People Respond to the Mortgage Interest Deduction? Quasi-Experimental Evidence from Denmark; National Bureau of Economic Research, Inc; Working Paper 23600, July 2017).
Proponents of the mortgage interest deduction, such as the National Association of Realtors, and the National Association of Home Builders, claim that the MID encourages homeownership and makes it affordable for many.
As a witness in the September 13th Senate Finance Committee Hearing on Individual Tax Reform, Iona Harris (chair of NAR’s Federal Taxation Committee) testified that limiting or abolishing the mortgage interest deduction could actually have the unintended consequence of increasing taxes on millions of “middle class homeowners,” while “putting the value of their homes at risk.”
Ms. Harris stated:
“…it is estimated that American homeowners already pay well over 80 percent of all federal income taxes… 53 percent of individuals claiming the itemized deduction for real estate taxes in 2014 earned less than $100,000.”
And recapped the outcome of the 1980’s mortgage interest deduction reduction:
“…When Congress last undertook major tax reform in 1986, it eliminated or significantly changed a large swath of tax provisions, including major real estate provisions, in order to lower rates, only to increase those rates just five years later in 1991…Most of the eliminated tax provisions never returned and in the case of real estate, a major recession followed.”
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.
Homeownership and the American Dream (from SolomonMcCown.com and bulldogreporter.com)
Homeownership wasn’t always part of the American Dream. The American Dream originated as a concept about increasing one’s quality of life, which was well established before the Country’s independence from Britain. John Kenneth White and Sandra L. Hanson discussed the history of the American Dream in the introduction to their edited collection “The American Dream in the 21st Century” (2011; Temple University Press). They describe the American Dream as being fundamental to the Declaration of Independence. But the, the idiom “American Dream” was not in our lexicon until the twentieth century. Although James Truslow Adams has been credited for the phrase “American Dream;” White and Hanson attribute its first use to Walter Lippmann, who used it in his 1914 book “Drift and Mastery.” Adams’ 1931 work “The Epic of America” was the first widely accepted promotion of the phrase “American Dream.”
Homeownership most likely became a part of the American Dream as the middle class developed and rose in economic prominence. However, it probably wasn’t until the 1930’s when homeownership and American Dream were associated; when the Federal Housing Authority was established to make owning a home affordable. Before the FHA, buying a home meant signing up for a short term mortgage with a high down payment; which made renting the only option for most.
Homeownership can also be gauged by the health of the middle class. As the Amercican middle class fares, so does homeownership. This is evident from the effects of a recession; when the middle class takes the brunt of an economic downturn, homeowner rates typically suffer as a result.
Homeownership Rates (from census.gov)
Homeownership rates have steadily decreased from a peak approaching 70 percent just before the housing crash, to the current rate of 63.5 percent (census.gov). From the Census October 27th press release:
“National vacancy rates in the third quarter 2016 were 6.8 percent for rental housing and 1.8 percent for homeowner housing. The rental vacancy rate of 6.8 percent was 0.5 percentage points (+/-0.4 percentage points) lower than the rate in the third quarter 2015 and not statistically different from the rate in the second quarter 2016. The homeowner vacancy rate of 1.8 percent was not statistically different from the third quarter 2015 or second quarter 2016 rates.
The homeownership rate of 63.5 percent was not statistically different from the rate in the third quarter 2015 (63.7 percent) and 0.6 percentage points (+/-0.4 percentage points) higher than the rate in the second quarter 2016.”
The decline has been attributed to shrinking middle class, changing demographics, and the residual economic malaise of the Great Recession. Although the declining homeownership rate seems as if it is a recent phenomenon, it’s actually cyclical. Anthony DePalma reported for the New York Times about the declining homeownership rate in the post-recession climate of the 1980’s (IN THE NATION; Why Owning a Home Is the American Dream; nytimes.com; September 11, 1988).
The recent research of the future of homeownership by Spader, McCue, and Herbert projected three scenarios (Homeowner Households and the U.S. Homeownership Rate: Tenure Projections for 2015-2035; Joint Center for Housing Studies of Harvard; working paper, 2016). The low scenario is that homeownership rates continue to decline to a rate of 60.6 percent through the year 2020. The high scenario is that homeownership rates will once again increase through the year 2025 and peak around 65 percent. However, they also provide for a scenario where homeownership rates stabilize and maintain at current levels:
“The base scenario, which holds homeownership rates constant at their 2015 levels, shows that projected changes in the demographic composition of U.S. households by age, race/ethnicity, and family type will largely offset one another, affecting the homeownership rate only minimally through 2035. Under this scenario, projected household growth will add 8.9 million homeowner households and 4.7 million renter households by 2025, and 15.7 million homeowner households and 9.4 million renter households by 2035. Alternatively, the low and high scenarios produce a range for the national homeownership rate of 60.7 percent to 64.8 percent by 2035, resulting in different levels of growth in homeowner and renter households.”
They concede that the trajectory of homeownership is complex, stating:
“… the homeownership rate’s actual trajectory will depend on how quickly the foreclosure backlog clears, how many foreclosed households reenter homeownership, and whether young households’ slowed rates of homeownership entry persist in future years. Additionally, any major changes in the broader economy, housing finance system, or households’ attitudes toward homeownership may also influence future homeownership rates to the extent that they alter households’ demand or access to homeownership…”
Home owners are more inclined to maintain their homes and neighborhoods, as well as being invested in protecting their home and community; which may account for lower incidences of reported crime. Besides stabilizing communities, many of these benefits may also account for positively affecting home values.
The benefits of homeownership have been well documented and discussed by Research Economist Selma Hepp for the National Association of Realtors®:
“In addition to tangible financial benefits, research has shown that homeownership brings substantial social benefits for families, communities, and the country as a whole. Because of these societal benefits, policy makers have promoted homeownership through a number of channels. Homeownership has been an essential element of the American Dream for decades and continues to be so even today. Some of the documented social benefits include:
Increased charitable activity
Civic participation in both local community and national issues (including voting)
Greater awareness of the political process
Higher incidence of membership in voluntary organizations and church attendance
Greater social capital generated
Greater attachment to the neighborhood and neighbors
Lower teen pregnancy by children’s living in owned homes
Higher student test scores by children’s living in owned homes
Higher rate of high school graduation thereby higher earnings
Children more likely to participate in organized activities and have less television screen time
Homeowners take on a greater responsibility such as home maintenance and acquiring the financial skills to handle mortgage payments and those skills transfer to their children
Lower teenage delinquencies
General increase in positive outlook to life
Homeowners reported higher life satisfaction, higher self-esteem, happiness, and higher perceived control over their lives
Better health outcomes, better physical and psychological health
Tremendous wealth gains for homeowners under normal housing market conditions (outside of the terrible bubble/bust housing years)
Homeowners not only experience a significant increase in housing satisfaction, but also obtain a higher satisfaction even in the same home in which they resided as renters
Family financial situation and housing tenure during childhood and adulthood, impacted one’s self-rated health (in particular, the socioeconomic disadvantaged indicated by not being able to save any money or not owning or purchasing a home are less likely to self-rate their health as excellent or very good).
Less likely to become crime victims
Homeowners better maintain their homes, and high quality structures also raise mental health -renter-occupied housing appreciates less than owner-occupied housing
Housing prices are higher in high-ownership neighborhoods
Maintenance behavior of individual homeowners is influenced by those of their neighbors”
As the American Dream continues to evolve, so does the goal for homeownership. Although many have not been recently swayed by benefits, the cycle may once again reveal the true value of homeownership.
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.
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.
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.
The holiday season is about spending time with family and enjoying each other’s company. But as a consequence of the Great Recession, some family members (including adult children) have made “family time” a year round thing by moving in. Whether it’s a child moving back with parents after college, or maybe family who suffered a financial hardship; having accommodating family can be a blessing. However, as the economy slowly improves, the post-recession family nesting trend is changing and many are (re)establishing their own homes.
Some people are taking advantage of an improving housing market to create one of the recent housing trends – purchasing an investment property to “house” family members. Although the benefits of purchasing an investment property and having family live there may not be obvious, some realize that it can be mutually beneficial. Having a trusty and inherently loyal family member live in the rental property can mean a regular rent check, as well as ensure that the home is maintained. As with any investment property – the longer you own it, the greater potential for long term equity.
Some are banking on recent rising home values and taking out a home equity line to purchase investment homes, although some are fortunate to have the assets to pay cash. However, many rely on financing the property, which requires a hefty down payment (typically 20%) as well as an interest rate slightly higher than that of the owner-occupant mortgage you might have on your own home. And although buying an investment property to house family members sounds as if it is a no-brainer to get them out of your own house; due diligence is required to determine if this is advantageous for you, as well as consulting with your tax preparer about tax benefits and/or consequences.
If buying the investment property is not an option, you may be able to help family qualify for a mortgage of their own. Although FHA mortgages are typically common among first time home buyers and/or buyers who need a low down payment loan; FHA has been the go-to program for helping family buy a home –especially when the home buyer falls short of qualifying on their own because of a lack of employment history, assets, and qualifying income. Although Fannie Mae, Freddie Mac and VA permits co-borrowers who are not intending to live in the home to co-sign for family; FHA has additional features that may make the loan more attractive. Besides allowing family to gift the borrower’s down payment, FHA may allow alternate credit sources to be substituted when the borrower has insufficient established traditional credit.
Although “co-signing” as a non-occupying co-borrower might help your child or some other family member become a home owner, it should not be taken lightly. You have to consider that even though you do not intend to live in the house or make the mortgage payments, you are signing the mortgage note. Not only could you be held responsible if payments are not made, your credit may even be dinged even if payments are late.
Although there are benefits to having extended family live together, you might be thinking of helping them start their own household. Before making any decisions, do your due diligence. And talk to several lenders, as with any mortgage loan program – underwriting varies from lender to lender and guidelines typically change without notice.
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.
