Is Upzoning the Solution?

Can zoning be the answer to solving housing shortages and increasing affordability?  Many city planners and politicians think so.  Although many localities are still considering upzoning ordinances, some have already implemented upzoning amendments that allow increased resident density.  The immediate effect is likely to be felt by the addition of housing.  However, it’s unclear how and if the additional units will relieve housing prices.  Opponents voice concern over potential long-term effects of upzoning in single-family neighborhoods. 

What is Upzoning?

upzoning
Local Real Estate (infographic from nar.realtor)

A brief description of zoning is given by the National Association of Realtors (nar.realtor) as “laws that affect land use, lot size, building heights, density, setbacks, and other aspects of property use.”  Zoning ordinances go back to the early twentieth century as a way to efficiently grow a city while protecting residential neighborhoods from industrial and commercial influences. 

Research conducted by G. Donald Jud in 1980 suggests that the absence of zoning (or loose zoning) decreases property value (The Effects of Zoning on Single-Family Residential Property Values: Charlotte, North Carolina; Land Economics; vol.56, no.2, p. 142-154).  His study concludes that residential property owners pay a premium for uniformly in land use.  Jud writes “One of the principal purposes of municipal zoning ordinances is to protect property owners from the deleterious external effects that may arise when incompatible land uses exist within the same neighborhood.”  However, he also states that in the absence of zoning protection, other mechanisms are created, such as neighborhood covenants (e.g. HOA, or civic association).

Herbert S. Swan wrote in 1949 (Economic and Social Aspects of Zoning and City Planning; The American Journal of Economics and Sociology; Vol.9, No.1, p.45-56) that efficient city planning and zoning ordinances can only be measured by their adaption to current conditions.  He stated, “Only as they meet basic requirements of present population, and the emerging needs of prospective population, can they be said to serve a community in full measure.” 

Swan’s words ring true today, as local governments look to zoning to address housing shortages and affordability.  “Upzoning” is the current trend to “meet the emerging needs of the population” to alleviate housing issues.  The city of Minneapolis and state of Oregon have already implemented new zoning that essentially eliminates single-family land use in turn for increased density.  And the trend is spreading throughout the country.  While some localities have gone to the extreme to essential ban single-family development, others are loosening zoning to allow auxiliary dwelling units (ADU).  The Virginia legislature is currently considering statewide upzoning legislation. 

Earlier this year, the Montgomery County Council loosened zoning requirements for ADUs.  Zoning Text Amendment 19-01 becomes effective December 31st 2019.  The passed amendment has additional background information, including a brief description of opposition views from residents.  Some of the concerns of increased density in single-family neighborhoods included overcrowding in schools and decreased availability of parking. Additionally, there is concern that car-choked streets could impede emergency vehicles.  Environmental concerns included uncontrolled water runoff from increased number and size of ADUs.  Opponents to the amendment also voiced concern with “the inability of the County to enforce any regulations.”

Montgomery County’s “loosened” zoning amendment is meant to increased density in single-family zoned neighborhoods.  In light of resident concerns, the Council allowed direct input from the Montgomery County Planning Board to increase the supply of accessory dwelling units in the county, “while also working to minimize any negative impacts on residential neighborhoods.” 

Original article is published at https://dankrell.com/blog/2020/02/03/is-upzoning-the-solution/

By Dan Krell
Copyright© 2020

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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.

More Homes for Buyers?

more homes for buyers
Strength of the housing market

If you’ve been following the housing market, you know that housing experts have been declaring a home sale inventory shortage since 2013.  In NAR’s November 27th Pending Home Sales Index release, NAR chief economist Lawrence Yun partly blamed October’s 1.7 percent decline to “inadequate levels of inventory across the country.”  He stated “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.” Essentially, there needs to be more homes for buyers.

However, if reporting holds true, the home sale shortage may be ending soon.  The most recent housing permits report indicates that more new homes will be built, while media attention to a “silver tsunami” suggest more homes for buyers will hit the market.

October’s increased housing permits suggest an increase in new homes to be built next year.  According to a recent report, housing permits reached a post-recession high (Housing Permits Surge to Postrecession High; magazine.realtor; November 20, 2019).  Although permits are just an estimate for future construction, it is nonetheless relevant because, like pending home sales, it gives a hint of the potential for future home sales.  Single family permits reached 1.46 million units during October, which is an increase of about 5 percent.  October was the second-best month for housing starts this year.

Lawrence Yun, NAR chief economist, stated, “At 1.46 million units on an annualized basis, housing permits are nearly to the level needed for the country over the long haul.  Since new-home construction kicks off the chain reaction of people trading up and trading down by buying new and selling their existing homes, more housing inventory will surely show up in the market next year.” 

Robert Dietz, the National Association of Homebuilders chief economist, commented about demand for new homes, “The increase in buyer demand is also being driven by lower mortgage rates, which has been helping to lift the pace of single-family permits since April. Solid wage growth, healthy employment gains, and an increase in household formations are also contributing to the steady rise in home production.”

What about existing homes?  According to Zillow Research, there will be about twenty million additional existing homes that will be for sale through the mid-2030’s (The Silver Tsunami: Which Areas will be Flooded with Homes once Boomers Start Leaving Them; Zillow.com; Nov. 22, 2019).  These home owners are 60 years-old or older, and will eventually sell their home because of health, retirement, relocation, and death.  There will be regional differences depending on the number of senior home owners.  Zillow indicates that the Tampa and Tucson markets are likely to be affected most.

The “silver tsunami” is not a new concept.  It was postulated in a 2012 NAR article The Boomer Effect.  The article surmised that since Baby Boomers began turning 65 on January 1, 2011, there would more homes for buyers and that the inventory would overwhelm the market.  However, we are still waiting for the tsunami. As it turned out, the post-recession economy significantly changed, as did attitudes toward housing.  Multi-generational households increased, and seniors are aging in place.

Will the anticipated increased number of new and existing homes to be sold provide the boost to home sales numbers?  Maybe, if the added inventory is attractive to home buyers.  It has been clear that home buyers will opt for value in a turn-key home.  Home sellers need to keep in mind that home buyers are looking for affordable quality homes.

Original article is published at https://dankrell.com/blog/2019/12/20/more-homes-for-buyers/

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.

Housing Market 2020

housing market 2020
Real estate market (infographic from keepingcurrentmatters.com)

After the unexpected slowdown of existing home sales last fall, most real estate agents had optimism for the 2019 spring market.  However, many were surprised by the early spring reporting of mixed housing data (when all indicators should have been positive).  Although national stats for spring seemed to be pushing upward, some regional markets didn’t perform as expected (Mid-Atlantic home sales declined at the beginning of the spring).  What’s in store for housing market 2020?

Many experts cited a number of factors were to blame for the decrease in sales.  Industry experts agreed that the lack of quality homes for sale was a top concern.  In hindsight, last fall’s home sale slowdown into spring may just have been an aberration.  But it may also have been an indicator that correctly predicting the housing market is increasingly difficult and subject to local factors.  Nonetheless, economists have predictions for housing market 2020 .

At this year’s NAR’s 2019 Realtors Conference & Expo (Housing Experts Discuss 2020 Outlook, Housing Innovation at Realtors’ Expo; nar.realtor; November 9, 2019), we heard opposing views about the economic outlook and the housing market 2020 .  First, it’s not unusual to hear NAR’s chief economist Lawrence Yun to speak of the housing market optimistically.  Although he doesn’t expect a recession next year, he does caution that global economics could impact the US such that it could hamper growth.  Yun stated a common assessment by economists, which is that home sale inventory is low.  He stated “The U.S. is in need of more new housing…This is an incentive for builders to start more construction. If they do, I think we will have at least 12 consecutive years of economic expansion.

Contrasting Yun’s economic assessment, Kenneth T. Rosen, chairman of the Rosen Consulting Group, expressed a risk of a recession due to economic trade and politics.  However, Rosen conceded that as long as the job market continues to remain strong, the US economy will likely remain robust. 

Speaking of jobs and home sale inventory, a recent market assessment by Ralph McLaughlin of CoreLogic (Homeownership Rate Jumps on the Tail of Low Mortgage Rates; corelogic.com; October 29, 2019) indicated that the recent jump in the homeownership rate is an indicator that there is an “upward” trend in home buyer demand.  The 1.4 million new home owners in 2019 is a taken as a positive sign that buyer demand remains high, and is expected to drive the housing market in 2020.  However, just like earlier this year, low home sale inventory and “underbuilding” could damper next year’s home sales stats.   

So, demand for housing will be strong next year, but what about home prices…

Molly Boesel of CoreLogic reported on home sale price growth and expectations for the housing market 2020 (Home Price Growth Regains Momentum; corelogic.com; November 5, 2019).  September’s 3.5 percent CoreLogic’s Home Price Index (HPI) increased slightly from August, which continues the six-month increase of home price growth.  The steady increase in national home prices indicate a “regained momentum.”  CoreLogic forecasts national home prices to increase 5.6 percent for September 2020.

The S&P Case Shiller Home price Index (spindices.com) corresponds with current national home price growth with a 3.2 percent September index, which is higher than August’s 3.1 percent index.  However, future home price growth may depend on regional shifts in home sales and job opportunities.  Seattle and Las Vegas dropped out of the top four cities, as it was noted the “hot housing markets” are now in the southeast markets of Charlotte, Tampa, and Atlanta. 

Original article is published at https://dankrell.com/blog/2019/12/05/housing-market-2020/

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.

Holiday Home Selling

holiday home selling
Home staging during the holidays (infgraphic from nar.realtor).

Conventional real estate wisdom used to be that timing the market was the key to listing your home for sale.  Most home sellers tried to aim for the spring and early summer months to sell their homes.  In fact, June continues to be when most settlements occur.  However, selling strategies have changed over the last few years such that home sellers are confidently listing in the fall.  Many also hold nothing back to sell during the winter months.  But how about holiday home selling?

The holiday season is typically when the real estate industry slows to a crawl.  But it doesn’t mean that the housing market is closed!  Consider that there were 658 Montgomery County MLS listed homes that went under contract since the beginning of November.  This confirms that active home buyers are constantly searching for homes, and will certainly visit houses that are available during the holiday season.  The only obstacle for home buyers (and your home sale) is severe weather.  

Holiday home selling is not for everyone. If you have not yet listed your home for sale, you may consider waiting to list after Thanksgiving.  Or you may just decide to wait until the new year.  Your listing strategy should be based on your lifestyle.  Although the holiday season is often synonymous with joy and good cheer, many experience increased stress during this time.  If the holidays are a hectic time for you, the thought of the additional stress of selling your home may sway you to waiting the holidays out.  Keep in mind that, like any other time of the year, you still have to prepare your home for sale (which includes decluttering, repairs and staging).

If your home is already listed for sale, you have some choices.  It used to be the rule that if your home was still on the market approaching Thanksgiving that the listing would be pulled from the MLS until spring.  And as of the November 1st, 181 county homes have been pulled off the MLS.  You may decide to do the same. 

But keeping your home on the market during the holiday season is no longer taboo.  As I mentioned earlier, conventional wisdom is passé.  Some home sellers see an opportunity to sell during the holiday season as many homes come of the market.  Consider that since November 1st, there were 444 new MLS listings.  There are also another 46 homes currently listed as “coming soon.”

Obviously, if your home is vacant it’s easy to show.  However, you should still visit the home weekly to make sure it is clean and shows well.  But if you’re selling the home where you reside during the holiday season, you may want to think about showings and staging.  Talk to your agent about requiring home buyer appointments to view the home so you don’t have inopportune surprise visitors.  This will give you the flexibility and emotional space to have your home show its best while you enjoy the holidays.

What about holiday decorations and holiday home selling staging?  According to Melissa Dittmann Tracey, writing for the NAR blog (Should You Stage Homes for the Holidays?; nar.realtor; December 19, 2011), most real estate professionals tell their clients to stage with “holiday-spirit and glow.”  Although thirty-seven percent of professionals indicated that they advised holiday staging without religious decorations, twenty-eight percent advised their clients to also include their religious decorations.  Only eight percent of professionals surveyed advised to do generic staging without any holiday decorations.

Original article is published at https://dankrell.com/blog/2019/11/28/holiday-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.

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.