Singles are facing more than 10 years of saving, assuming they make a 20 percent down payment on a median-priced property, an analysis by Zillow reveals. “Nearly two-thirds of Americans agree that buying a home is a central part of living the American Dream, but for unmarried or un-partnered Americans, that dream is increasingly out of reach,” says Aaron Terrazas, senior economist at Zillow. Having two incomes allows buyers to compete in higher-priced tiers where competition is not as stiff.” The challenge is intensified in markets with rising values, the report shows. Couples face 14 years of saving in San Jose, Calif.—already a haul—but for singles, that span stretches over 30 years. In San Francisco, Calif., couples can amass enough for 20 percent down in 12.6 years, but singles have a longer road, at 27.8 years. A handful of markets are more realistic for singles: Indianapolis, Ind. (7.5 years of saving); Cleveland, Ohio, and Detroit, Mich. (8 years); and St. Louis, Mo., and Pittsburgh, Pa. (8.1 years). Across the largest metros: Analysts assumed buyers are portioning off 10 percent of their income each year to savings. According to 2016 Census data, annual earnings were a median $80,800 for couples and $34,500 for singles. For more information, please visit www.zillow.com.
Borrowers who have conventional mortgages are the most likely to pay on time, while borrowers with loans backed by the Federal Housing Administration tend to pay late nearly three times more often. (Still, 91 percent of FHA borrowers pay on time.) FHA borrowers tend to have lower credit scores, higher debt-to-income ratios, and lower down payments. But the FHA delinquency rate of 8.65 percent is still a big improvement over a decade ago, when it was about 14 percent. Why are more Americans paying their mortgages on time? For one, more homeowners now have greater equity in their homes. Also, stricter federal underwriting rules since 2010 have limited who can get a mortgage. Fannie Mae and Freddie Mac require borrowers to have an average FICO credit score near 750, which is much higher than they required before the financial crisis. However, “if the lending industry begins to relax underwriting standards in any significant way to dig deeper into the pool of riskier credit applicants to plump up their volume of home-purchase mortgages, it’s inevitable that delinquencies will rise,” writes Ken Harney, a syndicated real estate columnist for The Washington Post. The FHA also has posted a decrease in average credit scores and is now approving debt-to-income ratios well above 50 percent.
There are many unsubstantiated theories about what is happening with home prices. From those who are worried that prices are falling (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion. However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase. It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below). Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should. Members: Sign in now to set up your Personalized Posts & start sharing today!
When it comes time to sell, you’ll be glad for all the money you put into it. As a result, many sellers are looking for ways to avoid paying the agent commission. Historically, consumers have relied on agents to help determine a fair market value for their property and help market their home to buyers. So, most consumers can already determine an accurate selling price. Related: Attention, Real Estate Agents: Stop Worrying About Job Disruption and Start Investing NOW Online brokers like SimpleShowing charge a fixed fee of $5,000 to list the home on the MLS, which includes professional photos and help with things like negotiation. “The best option is to come out of the gate priced right.” Understanding the market and being willing to market your property effectively is the best strategy for saving yourself 100 percent of the agent commission rate. “MLS Only” Listing The general standard rate for real estate agents is between five and seven percent of the purchase price of the home. However, some real estate agents, known as discount agents or “MLS only” agents, offer a lower percentage for their services. “There are plenty of great discount real estate agents out there. It will also help you to test the agent’s competency so that even though you’re getting a discounted rate, you’ll be able to get a great house for your money as well.
No one likes to overpay for a purchase, and this is particularly true when buying a home. And if you have kids or plan to spend a lot of time outdoors, it's a fine feature to splurge on. "Homes closer to major commerce centers cost quite a bit more than homes in outlying or suburban areas," says real estate agent Jamie Klingman at Boutiquerealtyflorida.com. Look for homes just outside the district to save on purchase price and property taxes. A single-story house when you're fine with stairs In many locations, homes all on the same level command a higher dollar value because the boomer generation prefers them when downsizing, says Jen Nelson, an agent in Phoenix. Since a purchase price directly reflects things like size, why overpay for bedrooms or media rooms you won't use—and have to heat, cool, furnish, and clean? But such premium upgrades and add-ons will send a purchase price north, so you'd better make sure you use whatever you buy, often. Make no mistake, those fees are for amenities—think a gym or lounge—so if you don't plan to take advantage of these features, you're squandering your money. "But you never want to buy the most expensive home in the neighborhood," says Vosburgh. While it might be fun to know your casa is the area’s castle, having the top comp in a neighborhood may become an issue when it comes time to sell.
After dealing with Section 8 for almost 20 years, we can attest that it’s not nearly as bad as the gurus make it out to be. The Bad News Section 8 requires a lot of work—specifically, you have to deal with Section 8 applicants who never seem to understand the program, even after being on it for years. The Upside If you can handle the paperwork and have a good followup reminder system, the extra time and effort can pay off, with government payments coming in like clockwork. If you screen the applicants correctly, you can also avoid some of the pitfalls associated with Section 8. For the record, the (most important) “right question” is, “What is the HUD-determined Fair Market Rent (FMR) for a unit with ‘X’ bedrooms in my area?” The answers are available here—if the applicant wants to pay more than the FMR, they’ll have to make up the difference, and either way, they’ll pay 30% of their monthly income as rent, with Section 8 paying the difference between that amount and the FMR. But because Section 8 only covers 70% of the TCH up to $911, the most it can contribute is $638, meaning that regardless of their income, the tenant must pay the remaining $393. Filling out the forms and waiting for them to call you back is the easy part—the hard part is dealing with the Housing Quality Standards (HQS) inspections that happen every year. Here’s the short version: All windows must be present and undamaged; ground floor windows must have working locks. The floor, walls, and ceilings must not have any serious defects such as would indicate structural problems or present a danger to the tenants. What’s more, these inspections happen whether the property has a tenant in it or not, and the inspectors don’t particularly care if a particular problem was caused by the tenant or not—you still have to deal with it, and fast.
These are followed by tips for making the right investment if you do decide to buy in a less desirable area. 7 Points to Consider Before Investing in Challenging Neighborhoods 1. If your goal is fix and flip, you might be able to invest in a riskier neighborhood, provided you can get in and out quickly and you and your contractors are comfortable spending time in the neighborhood. If you buy in a challenging neighborhood, you will likely have Section 8 in your tenant pool. That said, the items that need fixing are usually items that we would end up fixing anyway, so it is debatable as to whether these expenses are really “extra.” Tip: Do not let a Section 8 tenant move into a property before it passes inspection. If you can buy a property in a challenging neighborhood free and clear but would need to borrow to buy in a Class A or B neighborhood, the deal may make good sense if it meets your other requirements. If you are building a long-term rental portfolio or focusing on a high volume of fix and flips, consider that you can buy more properties in challenging neighborhoods than if you focus on more desirable neighborhoods. 6 Tips for Those Investing in Challenging Neighborhoods 1. Especially if you are buying in a higher crime area, make sure your improvements include security features. Have you had a good or bad experience investing in a challenging neighborhood?
I love investors, because like myself, they tend to nerd out over spreadsheets and let the numbers do the talking. Because that’s a pretty awesome place to be financially, I meet a lot of aspiring investors who want to be in that world. Below I’ll break down some indicators that you’re not ready, plus some ways to help you become more prepared for the investing world. You Have Not Read a Single Book on Investing I know some people might push back and say they listen to podcasts or contribute to BiggerPockets forums, but I say having read at least one book on investing is important. But, reviewing your finances will give you a good idea of whether or not your lifestyle reflects your goal. But it doesn’t sound like a good way to prepare for an investment. You Haven’t Talked to a Lender Yet Assuming you aren’t planning on paying all cash (and you likely shouldn’t, because paying all cash means you are buying one property instead of leveraging your money for multiple properties), you should talk to a lender. The metric I use for my two rental properties in Denver is cash flow, because I value having someone else pay my mortgage on a property that is appreciating fast. You Have Unrealistic Expectations About Your Market “I want a multiplex for $250k within two miles of downtown Denver,” and/or “Looking for off market properties that fit 1 percent rule, prefer 2 percent.” I get emails like this all the time, and while I understand where this comes from, and I admire the optimism, it needs to coincide with reality. Actionable Advice for Getting Started, Discover the 10 Most Lucrative Real Estate Niches, Learn how to get started with or without money, Explore Real-Life Strategies for Building Wealth, And a LOT more Sign up below to download the eBook for FREE today!
Such incentives are growing more common, according to a new report from Livability. The various metros are hoping to attract new residents to relocate and help them revitalize their economies. Cities are coming with abundant offers too, from paying off student loans to handing out free plots of land. The free lots average 80 feet by 120 feet. New residents can use the land to build a conventional or modular home. New Haven, Conn.: New Haven offers up to $80,000 in incentives for new homeowners, including $30,000 for energy saving home upgrades; $10,000 in interest-free loans for first-time buyers to use as a down payment; and $40,000 for college tuition to any in-state college for kids who graduate from New Haven public schools. Baltimore: The Buying Into Baltimore program offers $5,000 to those relocating anywhere in the city. For those who also work in the city, they’ll throw in another $5,000 toward a first home. Harmony, Minn.: The city is offering up to $12,000 in cash for new residents who decide to build a home there. Hamilton, Ohio: The Ohio metro is offering up to $5,000 to new residents toward their student loans.
In the meantime, what are local governments and municipalities doing to prepare for an acceleration of Opportunity Zone investments? Under its guidance, 30 cities to date have drafted Investment Prospectuses, clearly outlining their preparations for OZ impact. “We are helping cities highlight assets, partnerships and investible projects and businesses that will directly help the communities and families to whom the legislation was targeted,” says Aaron Thomas, Accelerator for America’s Director of Economic Development and Opportunity Zones. Getty By having cities draw up Investment Prospectuses, Thomas explains, “We’re saying, ‘If you’re going to put capital into these communities, here are the communities that are ready, and these are the things the community actually wants to do.' During the first quarter of 2019, Maryland Governor Larry Hogan and his administration created an OZ Task Force that just held its first of many-planned regional summits to “align Opportunity Zone goals with state and local economic and cultural priorities,” According to a statement by Lt. Gov. Boyd K. Rutherford. Workforce development grants and technology investments are being put into place, and millions of dollars have been allocated by the State of Maryland to support various aspects of OZ revitalization, from affordable housing construction to demolition funding of dilapidated structures. All of these examples should give communities and residents reason to be hopeful that good change is coming: that jobs will be created and that necessary investments will materialize. And yet, some cities still aren’t on board with Opportunity Zones. Says Aaron Thomas of Accelerator for America, “The potential downsides are precisely why it’s important that the people and organizations already living and working within Opportunity Zones lead the way in improving these communities.” When private capital and communities work closely together, the best outcomes are the likely result.