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Homeownership

3D-printed homes that are up to code, coming soon to America

(REAL ESTATE) The first ever 3D-printed home has been created that is up to code in America – it’s affordable, and could crush the elitist tiny home movement.

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This is America – you know it’s not cheap to build a house these days. In fact, HomeAdvisor reports that the current U.S. national average cost to build a home comes in at just under $300,000, or about $150/square foot for a 2,000-square-foot home.

Sadly, this price is out of reach for many Americans’ budgets, so what are those with limited funds supposed to do?

One answer in recent years has been the tiny/manufactured/prefab house industry, a trend toward homes with smaller footprints with roots in the minimalist and green-building movements. But this option is not without its obstacles, often pertaining to jurisdictions not keeping up with the code and zoning issues surrounding these smaller, sometimes off-grid homes.

And another issue has popped up: Some of these so-called “tiny” homes are still relatively quite expensive per square foot and can take a long time to build (for those going the custom route). In fact, many believe that tiny homes have become a badge of honor for elitists.

These limitations and obstacles seem to have left a wide-open hole in the market for fast-built, low-cost homes that could eventually be built on a mass scale. Enter ICON, a construction technologies company based in Austin, Texas, whose website says it is “leading the way into the future of human shelter and homebuilding using 3D printing and other scientific and technological breakthroughs.”

The company announced last year that it has built the first permitted, 3D-printed house on site in the United States.

The 350-square-foot home was created in approximately 48 hours of total printing time and for around $10,000 (printed portion only). ICON predicts that the production version of its printer, which they named the Vulcan, will be able to print a single-story, 600-800 square foot home in under 24 hours for less than $4,000.

But you won’t be able to buy your own 3D-printed home from ICON quite yet. The company currently isn’t working with individuals, choosing to focus on its partnership with the nonprofit New Story. Together, they plan to tackle housing shortages around the world. In fact, the Austin house serves as a prototype for the work they plan to do.

While there is some (understable) criticism of the tiny home movement — mostly due to the more elitist, ridiculously expensive trends making waves in the industry — what ICON is doing seems like a major step in the right direction.

Staff Writer, Krystal Hagan holds a bachelor of journalism from the University of Texas at Austin. She lives the full-time RV life just outside Austin, Texas, with her musician partner, three dogs, and a six-toed cat. In her free time, she binges TV shows, brandishes her otherwise useless pop-culture knowledge at trivia nights, and tries to become BFFs with every animal she meets.

Homeownership

Homeownership dreams suddenly abandoned by many millennials – why?

(REAL ESTATE) A perfect storm has arrived in the American housing market, and it’s not just a global pandemic that has dramatically shifted plans.

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Millennials, a generation often bemoaned for their comparatively nomadic tendencies as far as housing is concerned, looked for a while to be settling down in a more traditional sense. Now, in the wake of a pandemic and talk of a housing bubble, nearly two-thirds of those who were formerly interested in homeownership are changing their minds.

According to a Legal & General study, nearly half (47%) of millennials reported that COVID “negatively affected” their home-buying plans, with a whopping 61% of millennials who had saved for a down payment deciding to cancel or postpone the process.

The study also shows that 12% of millennials who were interested in homeownership “completely abandoned their home owning plans,” having been entirely disheartened by things like home scarcity, atrociously high bidding wars, and rapidly increasing cost of living in urban spaces.

That last criterion was also a damaging factor for many. Legal & General quotes millennial participants, one of whom laments being “priced out of my community, my county, to make way for the rich and for overpaid tech workers who are running us out of town and out of the state.”

Others referenced things like heavily politicized policies that “[drove] up the cost of living,” debts in a post-COVID relief society, wage stagnation, and the general dissonance of enjoyable activities and locations being almost entirely inaccessible to middle-class workers who cannot afford to live in the city.

But Legal & General points out that COVID-19 resulted in “aggravating existing housing trends, rather than generating a new pattern of trends”, signifying something many already knew – that millennials are reluctant to purchase what feels like a permanent investment in a world framed by extreme precarity.

“Our generation has had many setbacks to home ownership between the stock market crash and the pandemic, student loan crisis, the cost of living going up much faster than
the rate of salary increases…” says one participant in Legal & General’s study. “…it has been extremely difficult to even be in a position to save money.”

With almost 70% of millennials admitting that COVID and other related factors changed the way that they think about their future (specifically regarding where they might want to live) it seems like this generation is, once again, experiencing a profound setback to the plan espoused as the norm by prior generations.

However, the seeming exodus from densely populated areas to smaller, more suburban areas (seen toward the beginning of the pandemic) along with some pockets of resistance to wage stagnation in the last year does inspire some hope for a paradigm shift.

As the world reckons with the devastating effects of the pandemic and the rebuilding to follow, it is very possible that millennials will once again find their footing and once again plan on homeownership.

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Homeownership

What the real estate industry must do now to drive equity in housing

(REAL ESTATE) While some folks remain complacent, and others digest the causes, these industry experts are focused on what actions will improve equity in housing.

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A difficult discussion has finally come to light in America regarding inequities in our systems. DEI (diversity, equity, and inclusion) efforts are being made in corporate environments, typically stemming from leadership and executed by HR departments as a way of improving work cultures to attract top talent.

Yet independent real estate practitioners don’t always know exactly what their specific role in housing can be when it comes to DEI. The National Association of Realtors (NAR) updated their Code of Ethics to include barring anyone from membership who uses harassing or hate speech (online or offline) toward any protected class. That’s progress. But more can be done.

At the NAR 2021 iOi Summit, NAR CEO, Bob Goldberg moderated the first panel that kicked off the event and set the tone, entitled “Can Tech Drive Fairness & Equity in Housing?”

Surprisingly, the panel didn’t focus exclusively on what types of inequities persist (as has become standard at many conferences), rather what actions can be taken to remedy them – a point Goldberg repeatedly brought the topic back to. Actions.

Panelist Melissa Koide, FinRegLab Founder and CEO noted that there are up to 60 million Americans who are “insufficiently able to be credit risk assessed,” a concept known as credit invisibility, which disproportionately impacts consumers of color. Obviously credit is the mechanism used to underwrite all loans, especially mortgages, so improving this process is critical to equity in housing.

Goldberg asked, “Technology drives all aspects of the homeownership process and the rental process. How can we make invisible credit visible?”

Koide noted that people can be brought into eligibility by evaluating other indicators of financial stability like bank account data. In other words, during the pandemic when folks received federal aid, did someone pay down their credit card debt, or did they prioritize their rent or mortgage payments?

It sounds idealistic, despite Fannie Mae recently announcing that rental history payments (by identifying bank account data) to qualify more buyers without repeating the ridiculous no-doc loans that played a large role in the housing crash in 2008.

But it’s already being put into play – Koide says several large banks are already implementing pilot programs to look at this kind of banking data to determine who they can extend credit to in the pool of credit invisible. And it’s not new – over a decade ago, CoreLogic began putting their massive data collection efforts to work by implementing an alternative credit scoring model. Yet many folks remain credit invisible.

With organizations slowly improving how they serve the credit invisible, panelist Bryan Greene, VP of Policy Advocate at NAR said that looking to bank records to raise credit visibility has “a very positive domino effect,” wherein newly qualified consumers may get credit on more favorable loans at lower rates which he notes will lower their debt burdens.

Panelist Lisa Rice, President and CEO at the National Fair Housing Alliance (NFHA) points to redlining and disinvestment as creators of expanding credit deserts where mainstream lending products are not available (even banking), noting that 30% of African American and Latino consumers in America are credit invisible as a result.

“It doesn’t mean they’re not credit worthy,” Rice said, “it’s that they’re using forms of credit not reported to credit repositories.” She notes that predators like payday lenders have come in to fill that gap.

In addition to addressing the credit invisible to improve equity in housing, Goldberg asked how to get people to pay attention to the algorithmic fairness that “obviously must be taken into account to make it fair for under-served communities.”

Rice asserted that a tremendous obstacle is that regulators have not come up with a definition for algorithmic fairness, despite “a lot of brilliant minds grappling with how to define that fairness.” Although we can test for fairness, we can recognize what is not fair, we’re “in a state of purgatory where we are comfortable with finding alternatives that are less discriminatory then utilizing and employing those less discriminatory alternatives into the marketplace.”

Greene added that algorithmic testing has been around for at least 60 years and involves a scenario where “two people with comparable housing profiles seek a housing opportunity and present the same information about their financial circumstances and evaluate the results,” which is used to spot discrimination in housing, a practice the Supreme Court has validated as the method for testing fairness. We simply move that practice to the technology space to indicate algorithmic fairness.

The challenge, Greene notes, is that “algorithms might not take into account other things that determine creditworthiness. Systems don’t take into account all aspects of creditworthiness.”

Implicit bias is part of the human condition, and Rice importantly points out that this bias is embedded into the data we use. “Our Tech Equity Initiative is toying with ways of de-biasing tech, extricating the bias embedded in the data that is looking to generate despair in the outcomes.”

“Garbage in, garbage out” is a common phrase in tech, indicating that if bad data is input, the output can’t be good. For example, some want to take humans out of the parole process, using AI to make those decisions without human biases. But the data it would use to make those decisions is historical data which obviously is rife with human error. It simply cannot be fairly done with current data.

So if tech can’t create fairness, nor can humans, what is the answer? The two must be married.

Greene illustrates this concept by noting human appraisers are still necessary to review automated valuations, especially to check for those biases. He states, “We hear of these situations where there’s a biracial couple and when a black spouse is home, [there is a] lower appreciation, if the white spouse is home, [it’s] higher. To have a system to check and make sure people have considered all appropriate variables could be helpful.”

Goldberg asked what policy changes need to be put into place.

Rice contends that “deep expertise” required to craft policy exists primarily in the private market, so “technology has outpaced the policies and the policymakers.” Algorithmic fairness will persist until the people writing laws actually understand the subject matter.

Koide upholds that being able to explain the algorithms is essential, that transparency around data privacy is crucial, and that using alternative financial data in underwriting is what must now happen. “It’s not the sexy stuff,” she affirmed, “but it’s foundational as to how we’ll overcome the historical disparities.”

Goldberg closed by asking what attendees (tech leaders in the real estate vertical) can do to address this challenge.

Greene said, “Continue to question assumptions about how people live and what makes people creditworthy,” adding that it is critical to “test and validate” to make sure practices are fair and representative.

Koide urged real estate tech to support research by sharing data with organizations like hers, or with people in academia. “It’s critical to how we’ll get this right and get traction.”

“Lead with equity,” Rice said. “We got to this place because we lead with inequity deliberately and purposely. So we have to deliberately lead with equity.”

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Homeownership

Rental history will soon help folks qualify for a mortgage

(REAL ESTATE) Historically, rental history has not been reported to credit bureaus which doesn’t help anyone with obtaining a mortgage. Soon, that all changes.

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Mortgage papers held in hands with a pen, being handed to the other hands.

Effective September 18, more renters may qualify for a mortgage under Fannie Mae’s updated underwriting process. The rules have changed to incorporate consumers’ rent payments to better serve the “credit invisible” of America who are historically under-served by traditional lending products.

Fannie Mae’s Desktop Underwriter® will automatically identify recurring rent payments based on banking data to improve mortgage eligibility.

It’s estimated that about 17% of previously rejected applicants could now be approved for a mortgage, simply due to their rental history.

Hugh R. Frater, Chief Executive Officer of Fannie Mae said that this is “but one important step in correcting the housing inequities of the past, creating a more inclusive mortgage credit evaluation process going forward, and encouraging the housing system to develop new ways of safely assessing and determining mortgage eligibility in order to fairly serve all potential homeowners.”

Rent payments will only positively impact eligibility.

Although Fannie Mae does not handle loans simply backs them, applicants can be pre-approved through their process to private lenders. Credit history is one of the most important factors in getting approved for a mortgage, but less than 5% of renters have their rent history on their credit report.

Fannie Mae is changing this to expand opportunities for under-served consumers. Even more importantly, the rent payment history will only be used to improve eligibility. Missed payments or inconsistent history will not negatively affect a person’s ability to qualify for a loan.

However, consumers will need to have a digital history of making payments, whether to the property management company through their payment portal or by check or another digital solution.

Rental history directly relates to paying your mortgage on time.

Lenders want their mortgage payments to be on time. That’s the simplified bottom line.

Rent is one of the biggest expenses in any renter’s budget, but it rarely gets reported to the credit bureau without a third party reporting tool like CoreLogic’s RentTrack. This move by Fannie Mae will help level the playing field for renters who are responsible borrowers.

Welcome to the 21st century, Fannie Mae (and America).

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