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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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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.

March 4, 2016November 23, 2021

Decluttering for a home sale and mental health

Spring is around the corner, and for many it is the time to get a home ready for sale. Decluttering is a key component of preparing a home sale; while it is the core of “spring cleaning” for the rest of us.

Besides being the beginning of the path to selling your home, researcher and writer Deane Alban stated that decluttering is also the “gateway to taking better care of other aspects of life.” She asserted that the human brain is “wired to respond positively to order;” and there are health benefits to clutter-free spaces; which promotes feeling “calm and energized” (Declutter Your Life for Less Stress, Better Mental Health; bebrainfit.com).

When it comes to clutter, we are not the same. There are degrees to the amount and types of clutter we collect. And for many, getting motivated to declutter is a challenge; severe clutter collections could be considered hoarding by some. Dr. Robert London, a psychiatrist specializing in behavior modification, wrote about his professional contemplation of the relationship between clutter, hoarding and obsessive compulsive personality disorder. After consulting with a Professional Organizer, he concluded that many can benefit from their much needed service of guidance in “letting go” and getting organized (Decluttering — Is it Therapy?; Organization professionals perform a valuable and, yes, therapeutic service; psychologytoday.com; November 5, 2010.).

Besides the psychological aspects that make us hold-on to “stuff,” one roadblock to decluttering is a common misconception that the goal is to have an immaculate home; which can make some feel anxious and/or overwhelmed (especially if the home sale is due to a negative life event). Instead, an underlying principle to decluttering is about creating an organized and spacious feel to a room. Another misconception is that you throw out everything you don’t need or want in your home; however, you have control over what items get thrown out, recycled, donated, or kept in storage.

One strategy to encourage your decluttering efforts is to plan. Rather than trying to complete the job in one weekend, try decluttering one room (or even one part of a room) per day; and for some, it may be as little as removing one or two items per day.

When going through each room, decide which items are necessities and which items need to go. You will undoubtedly come across many items that you decide are not necessary to keep out for everyone to see, yet they are personal or sentimental – these items can be stored. The items you decide that you no longer need or want can be donated, disposed of, or you might even decide to have a yard sale!

Of course, we are all busy; and finding time to declutter can be another obstacle to overcome. To help relieve the pressure, consider delegating responsibilities to family members. Consulting with professionals to guide your planning could save time as well. Some professionals even recommend a “decluttering party” as a way to ease the time crunch while making it fun.

Decluttering a home may feel as if it an exhausting task, but it doesn’t have to be; especially if you have a realistic plan. If you need help with your decluttering, you can check with your Realtor® (if you are planning a home sale) and/or you can consult with a Professional Organizer. The National Association of Professional Organizers (napo.net) maintains a national directory of Professional Organizers.

By Dan Krell
Copyright © 2016

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February 25, 2016November 23, 2021

What’s the controversy with laminate flooring?

Since my last installment of How your Home is Making You Sick, the Centers for Disease Control and Prevention (CDC) has released and revised their analysis of certain types of Chinese laminate flooring. The initial release was found to have used an incorrect value for ceiling height, which calculated airborne concentration estimates about “3 times lower than they should have been.”

The increased interest in health concerns over certain types of Chinese laminate flooring was due in part to an exposé by CBS’ 60 Minutes (which aired March 1^st, 2015) that investigated California home owners’ claims that certain types of laminate flooring sold by Lumber Liquidators was making them sick. The investigation alleged that the Chinese laminate flooring sold by Lumber Liquidators did not meet California Air Resources Board standards for formaldehyde emissions in wood flooring. Lumber Liquidators questioned the testing methodology and results (Lumber Liquidators; cbcnews.com; August 16^th, 2015).

In a May 2015 press release, Lumber Liquidators stated that “Initial results of the indoor air quality testing program for certain laminate flooring customers – conducted by independent, accredited laboratories – indicate that over 97% of customers’ homes were within the protective guidelines established by the World Health Organization for formaldehyde levels in indoor air.” However, sales of the products in question were discontinued; and company has offered air quality test kits for those who have purchased laminate flooring from the company.

reduceformaldehyde — from “Laminate Flooring Test Results – Health Issues and Solutions” (cdc.gov)

Since the 60 Minutes exposé, the US Consumer Product Safety Commission (CSPC) tested samples of Chinese laminate flooring and along with the CDC issued “Laminate Flooring Test Results – Health Issues and Solutions”. The consumer handout states that formaldehyde is found in many home products; and levels typically decrease after 2 years of installation. Recommendations in reducing health risks are also listed (cdc.gov/nceh/laminateflooring/docs/nceh-atsdr_laminate-flooring.pdf).

The February 10^th CDC press release initial reported analysis conducted by the Agency for Toxic Substances and Disease Registry (ATSDR) and the Centers for Disease Control and Prevention’s (CDC) National Center for Environmental Health (NCEH) of the CSPC data “…found that formaldehyde levels observed in select laminate wood flooring products could cause short-term irritation for people in general and in some cases exacerbate asthma. The risk of cancer associated with long-term exposure to the observed formaldehyde levels is considered extremely small…” (ATSDR and CDC Analysis Finds Possible Health Effects Associated with Formaldehyde in Select Laminate Flooring; cdc.gov).

However, a correction to the analysis was made several days later indicated that that although “the final results are not yet available,” the estimated conclusions are to be close to these: Exposure to the range of modeled levels of formaldehyde in indoor air could cause increased symptoms and other respiratory issues for people with asthma and COPD; Exposure to the lowest modeled levels of formaldehyde could result in eye, nose, and throat irritation for anyone; and The estimated risk of cancer is 6-30 cases per 100,000 people (increased from the initial “Low risk of cancer” 2-9 cases per 100,000 people). The CDC cautions that these revised results are “very conservative” and “the calculated risk is likely lower than our modeled estimate.”

Even though the results are revised, the CDC states that their recommendations will likely remain the same – “we strongly stress taking steps to reduce exposures, which should alleviate respiratory and eye, nose and throat irritation.”

By Dan Krell
Copyright © 2016

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February 17, 2016July 13, 2019

Is a negative mortgage rate program in your future?

Five months ago I told you about the possibility of negative interest rates. Since then a lot has happened around the world (besides confirming the existence of gravitational waves): the Fed raised the target rate a quarter of a point in December; many are increasingly questioning the viability of the global economy; analysts point to geopolitics as a concern for economic stability; and Japan is the latest country to implement negative interest rates.

An increasing number of economists and financial experts have since openly discussed the specter of negative interest rates here in the U.S, as volatility in financial markets and global economies have many concerned. Such concerns may have prompted Senator Bob Corker (R-TN) to pose this question about negative interest rates to Fed Chair Janet Yellen during her testimony in the February 11th hearing “Semiannual Monetary Report to Congress” (banking.senate.gov); “…people are beginning to observe that the Fed is out of ammunition, unless you decide to go to negative rates…I’m not proposing this, I’m just observing what’s happening around the world and what’s happening here in our own country. I think people are waking up and realizing that the Fed has no real ammunition left…”

Even though the Fed recently raised the target rate from being near zero after almost seven years, the Fed anticipates future increases. However, Dr. Yellen stated in the past that negative interest rates are “not off the table” if the economy falters. This was reiterated (more or less) during her February 11^th testimony. Interestingly, Dr. Yellen revealed that the Fed considered negative interest rates back in 2010, but felt that negative interest rates would not have worked well to “foster accommodation” (increase money supply to the markets) at that time. Additionally, Dr. Yellen stated that “…we are looking at them again because we want to be prepared in the event we needed to add accommodation…” However, she also stated that the evaluation is not complete as it is not certain if negative interest rates would work well in the U.S.

Negative interest rates may seem like a good idea to stimulate bank lending; but Christopher Swann’s recent CNBC commentary (The consequences of negative interest rates; cnbc.com; February 16, 2016) indicates there are also unintended consequences. Lending, as a result, could tighten because of bank losses and subsequent liquidity issues. Consumers would bear the brunt of the losses as banks would increase fees. As banks try to recoup losses, depositors will be charged for savings; which may prompt consumers to move their money out of banks. Swann points out how Swiss and Danish banks have “…hiked borrowing costs for homeowners since negative rates were introduced.”

A CNN-Money report shed light on European banks and negative interest rate mortgage programs (The crazy world of negative rates: Banks pay your mortgage for you? money.cnn.com, April 22, 2015). Luca Bertalot, Secretary General of the European Mortgage Federation, stated that “We are in uncharted waters.” He went on to describe how banks dealt with the dilemma of negative interest rates, “…they [Spain’s Bankinter’s] could not pay interest to borrowers, but instead reduced the principal for some customers.”

Housing would undoubtedly boom in a negative interest rate environment. However, rather than paying consumers to borrow, a mortgage’s principal would be reduced over time. Rather than creating a bubble, long term negative mortgage rate programs could possibly devalue real estate; and change how we view it as an asset.

By Dan Krell
Copyright © 2016

Original published at https://dankrell.com/blog/2016/02/17/is-a-negative-mortgage-rate-program-in-your-future/

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February 11, 2016July 8, 2019

Build a case to make your lowball offer bulletproof

The process of making an offer to buy a home is fairly straightforward, provided that you don’t have competition from other buyers. The offer basically conveys the price you want to pay, and which inspections you want to conduct. Once the documents and addenda are completed, your agent will present the offer to the listing agent, who in turn presents it to the seller. The seller can accept, reject, or counter your offer.

Of course, the best scenario is that the seller accepts your offer without any counter to price and terms. However, if your offer is below list price, chances are that the seller will counter your price. And if your offer is significantly lower than list, the seller may reject the offer outright.

Since the great recession, an increasing number of homes for sale have serious issues due to deferred maintenance. It’s routine for homes in need of repair and/or a total renovation to receive low ball offers. Real estate investors typically don’t attach emotion to their offers, and as such making low offers on property is business as usual. But if you’re like the average home buyer, you may shy away from making a low ball offer fearing being rejected.

You can increase your chances of engaging the seller in working out a deal by packaging your offer correctly. The conventional wisdom is to make a “cash” offer that is non-contingent. The reasoning is that the owner would be more apt to take your lower offer knowing they don’t have to wait for a lender to approve your loan or worry about appraised value; or hassle with negotiating home inspection repairs.

This approach typically works in a buyer’s market, especially when home prices are declining (as we experienced from 2008 to 2010). However, this tactic may fall flat in today’s market for a number of reasons, including strong year-over-year home price gains, low listing inventory, and increased home buyer competition. Being confronted about their home’s value is a tough pill for a home seller to swallow, especially when they see other homes selling for more. Notwithstanding the seller’s ability to accurately interpret housing data; many sellers have high sale price expectations regardless of their homes’ condition, and rationalize a higher asking price – even when not justified.

Another reason this tactic has lost its effectiveness is that the enticement of a “cash” offer has lost its impact when in actuality it’s all about the sale price. Whether the sale is all cash or financed, the primary concern to the seller is the amount of money they net in the sale.

Non-contingent offers don’t go far enough when making a low offer on a home; you also need to build a case to help the seller understand the rationale of your offer. Have your agent comprehensively analyze the neighborhood market and include the analysis in your offer. The analysis should be detailed and point out differences that add and negate value to the comps and the subject property. Your offer should also include a detailed estimate on repairs and updates (from a licensed contractor).

Making the seller aware of the differences between their home and neighborhood comps, as well as educating them on the costs associated with repairs and updates goes a long way in getting a seller to better understand the value of their home, and moves you closer to making the deal.

By Dan Krell
Copyright © 2016

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