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Homeownership

What are G-fees and why does the gov’t want to raise and take them?

(HOMEOWNERSHIP) Trade groups are banning together to push politicians to not raise G-fees to cover their own ancillary budget, It really would only restrict home buyers.

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g-fees raised by government

As many Americans know, our national budget has a yearly deficit. These deficits have placed many lawmakers into situations that resemble a not so comfortable space in between a rock and a hard place. This results in many discussions over the budget each year, and in some cases, a government shut down until a path is chosen for the country. On March 6, 2020, 33 organizations sent a letter to multiple lawmakers that could have significant impacts on the decisions of the housing market for not only fiscal year 2021 but over 10 years later.

The topic of the letter focused around “g-fees”, or also known as guarantee fees within the “GSEs” (Fannie Mae and Freddie Mac). These g-fees, “cover projected credit losses from borrower defaults over the lifetime of the loans, administrative costs, and a return on capital” according to the Federal Housing Finance Agency.

When these g-fees are hoisted up, like in 2011 to fund a two-month payroll tax relief period, it raises the cost of homeownership nationwide for 10 years. The letter gives the example of a “10 basis points [raised] in g-fees amounts to an additional $5,100 in mortgage payments on the average GSE loan amount of $255,000.” In short, homeowners or those looking to get a mortgage loan would almost instantly see an increase in how much they would pay if g-fees were raised.

Besides laying out the details of how g-fees function, the letter also focused on this cohort’s logical objection for not raising g-fees. These organizations stated they “firmly believe that g-fees should only be used as originally intended: as a critical risk management tool to protect against potential mortgage credit losses.” and not used to fund non-housing related programs and becoming the nation’s “piggy bank”.

If you are a homeowner, or can be impacted by mortgages in any situation, it might be time to start saving or speak up. This is a current issue as the president’s proposed budget for fiscal year 2021 suggests using g-fees again to help fund loses in the budget.

These are the organizations who are asking for this reconsideration through their letter:

American Bankers Association
American Escrow Association
American Land Title Association
Asian Real Estate Association of America
Center for Responsible Lending
Community Associations Institute
Council for Affordable and Rural Housing
Credit Union National Association
District of Columbia Association of REALTORS
Enterprise Community Partners, Inc.
Housing Policy Council
Independent Community Bankers of America
Institute of Real Estate Management
Leading Builders of America
Manufactured Housing Institute
Mortgage Bankers Association
National Apartment Association
National Association of Federally-Insured Credit Unions
National Association of Home Builders
National Association of Housing Cooperatives
National Association of Real Estate Brokers (NAREB)
National Association of REALTORS®
National Community Reinvestment Coalition (NCRC)
National Community Stabilization Trust
National Council of State Housing Agencies
National Fair Housing Alliance
National Housing Conference
National Housing Resource Center
National Multifamily Housing Council
National NeighborWorks Association
The Community Mortgage Lenders of America
The Realty Alliance U.S. Mortgage Insurers

Staff Writer, Kaiden Gray has experience in product management, strategic planning for non-profits, and can get through a series in a week on Netflix. He has traveled to over 20 countries, and when he's not in between flights, he's busy learning about the mysteries of the universe.

Homeownership

Remodeling projects like these increase a home’s value the most

(HOMEOWNERSHIP) Knowing which remodeling projects to tackle when a home is being put on the market can save a lot of wasted effort and money.

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remodeling

If you’re looking to help your clients to identify which projects to tackle before putting their home on the market, look no further: the National Association of Realtors surveyed thousands of real estate agents, industry professionals, and consumers on interior and exterior house remodeling projects, and these are the best projects for upping a home’s value before listing it on the market, ranked on the most value and cost recovery a homeowner can get.

  • Refinishing hardwood floors. Start from the bottom to earn top dollar. Refinishing floors transform a home from worn-out and aging to vibrant and inviting, and only costs about $2500 according to the National Association of the Remodeling Industry (NARI). The project also increases a home’s value by that same amount, meaning a homeowner can recover 100 percent of the costs. Pretty sweet deal.
  • Upgrading insulation. Because it’s what’s inside that counts. This project costs about $2100 based on NARI Remodeler’s estimate and increases a home’s value by $2000 according to Realtors surveyed. That’s a 95% cost recovery.
  • Adding new wood floors. If you don’t have wood floors to refinish, add them in! This costs about $5,500 according to NARI Remodelers, and the increased sales value is $5000. A homeowner can recover 91% of costs from a new wood floor addition.
  • Replacing HVAC system. A new HVAC system adds energy efficiency and refreshes the entire home, and NARI Remodelers estimate doing so costs $7000. The increased value for sellers is $5000 according to NAR REALTORS, meaning an easy breezy 71% cost recovery for homeowners.
  • Converting a basement into a living area. Not only is this cost and space-efficient, it’s also undeniably trendy. A basement makeover costs about $36,000 according to NARI Remodelers estimate and increases value for sellers by $25,000 according to Realtors surveyed. That comes out to a cost recovery of 69%.

Which projects are the most costly?

In case you’re curious, these are some of the most expensive remodeling projects:

  • New master suite. More like master $uite – this costs about $112,500 with a cost recovery of 53%. 
  • Converting an attic into a living area. Cute idea, but also a $65,000 one with a 61% cost recovery. One might say the price is through the roof.
  • Complete kitchen renovation. This project costs an estimated $60,000 with a 67% cost recovery. Even more if you want to throw in a brick oven, and you probably do.
  • New bathroom. With an estimated cost of $50,000 and a 52% cost recovery, make sure you aren’t flushing money down the drain with your bathroom addition!

These trends change over the years, so make sure your knowledge is up to date locally since we all know local trends trump national. Hopefully today you’ve garnered some ammo to help clients better understand how to improve their home’s value!

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Homeownership

Marriage is happening later in the US and the reason is not what you think

(HOMEOWNERSHIP) It’s seemingly later and later that Americans are getting married. You may have ideas as to why, but the reasoning is not what you think.

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marriage move in

As we know, homeownership is a cornerstone of American family life. Homes provide long-term financial stability as a major investment for homeowners. Furthermore, they also provide a strong environment in which to raise a family; so many of us have fond memories of running around our backyards or cozying up in the family room. So, it stands to reason that homeownership and marriage are tied together; many couples will buy a home soon before or soon after marriage.

With all that said, some of the following statistics may be alarming, as it points to a trend that may play into the delay of homeownership.

Lots of data gathered over the past few years shows Americans are marrying later and later, if at all, according to a report from The Guardian. Today, Half of American adults are married, compared to 75% in 1960. The disparities are mostly consistent with class divisions.

Per the Guardian article, “26% of poor adults are married, compared with 51% in 1990.” That same study found 39% of the modern working class of adults are married, but that number was 57% in the 90s.

Education is closely tied with financial status, so an education disparity is also present. Today, 50% of adults with a high school are married; that rate was over 60% 25 years ago.

As the Guardian puts it, “Young people are increasingly seeing marriage as a “capstone” rather than a “cornerstone” event, a crowning achievement once other goals have been reached, rather than a launchpad for adulthood.”

That achievement is financial stability, and many more Americans are feeling a financial crunch.

There’s data to back this up, too. For example, a poll found “nearly half of never-married adults with incomes under 30k say being financially insecure is a major reason” behind their lack of marital commitment to a partner.

Part of a steady income is a steady job, and past Pew Research found 78 of never-married women wanted a future partner to have a steady job.

A decline in manufacturing jobs is contributing to this as well, per some economic research on the subject, which may help to explain how the steepest drops in marriage rates come from the lower and middle class.

It’s not unreasonable to speculate that major living costs factor into that decision as well. For example, with real estate prices going up around the country, especially in major cities with strong job markets, the capstone that is owning a home is pushed farther away from the average American.

If marriage and homeownership are so closely tied together, the delay of one may also contribute to a delay in the other.

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Homeownership

How buyers are competing in a tight housing market

(HOMEOWNERSHIP) It’s a seller’s market with housing supply at an all-time low. Here’s what buyers are doing to increase their chances of buying a home.

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family in their living room with moving boxes during the competitive housing market

Home inventory is at an all-time low in most places around the country. Most people believe that the COVID-19 pandemic is responsible. Families are staying put in their homes, rather than looking for a new place to live. Sellers and realtors are winning in this highly competitive market, making us wonder how buyers are faring.

Cash is king

According to the NAR, cash sales are up by an average of 21%. Buyers are hoping that cash makes their offer more attractive. Closing without a loan has a lot of benefits to the seller. The sale is more likely to close, as it isn’t dependent on a loan. Plus, there are fewer costs involved in the closing. Since 2013, cash sales haven’t been trending upward, so this is an interesting turn for sellers. Buyers who make cash offers reduce the risk of getting rejected by the seller.

Buyers making larger down payments

Sellers also benefit when buyers make a 20% down payment or more. A higher down payment increases the chance of getting a loan. According to the NAR, almost 50% of buyers are making a down payment of at least 20%, which is up from 40% of buyers in 2011. Buyers avoid mortgage insurance premiums, which makes it a win-win for everyone.

Buyers aren’t even offering or negotiating

The third way buyers are coping in this market is to back off and not even make an offer when they know a home already has competition. Why get your hopes up, only to have them dashed when you can’t negotiate?

Will supply return?

The good news is that the housing supply outlook is on the increase. As vaccinations roll out and people feel safer to show their home, more homes should come on the market. Housing permits are up, too. This should help even out the market and give buyers a better chance to find a home.

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