Aug 3, 2021

More Affordable Housing

There is a housing crisis in the United States and I am not just talking about the homeless living in tents in many cities.  We are short 5 million housing units to meet demand.  In other words, supply is not keeping up with demand, which is the reason that home prices are going through the roof.  The only way to get there is higher density housing in the suburbs.  It is not uncommon to see high rise apartment and condo buildings in some major cities where land is scarce.  And, while we don't need 20 story buildings in the suburbs, it is likely that we do need to see 4 - 6 story buildings on available land. 

Further, excess commercial property needs to be torn down and redeveloped into housing.  This will mean rezoning to include multi use residential; but using the land differently is essential to filling our nation's housing needs.  Clearly, when apartments are built whether for all age groups or 55 or older some number of apartments must be set aside for government subsided housing to provide for more affordable living.  This approach would be far more preferable to building government projects that often turn into slums 10 or more years later.  

As a country, we have to rethink housing to create more affordable housing.  The key is land use.  Getting more units on less land with parks and other amenities nearby.  This also means getting rid of burdensome regulations that can add up to 30% to building cost.  We see the impact in places like California where home prices are extremely high thanks to land values and regulations that add to costs.  

We need 5 million more affordable housing units in the United States.  With some creative approaches we can get there; but business as usual is not working.  

Aug 2, 2021

Removing Private Mortgage Insurance On Your Loan (PMI)

Home buyers who purchased a home with less than 20% down likely were required by the lender to have Private Mortgage Insurance on your loan often referred to as PMI.  This will increase your monthly house payment sometimes by a few hundred dollars a month.  The good news is that there are ways to get rid of it.  First, it goes away automatically, once you are half way through the mortgage provided you are up to date on your payments, but that could take years.

More likely, one of two other ways are more probable.  If your home has appreciated in value in the last five years, which is likely given the escalating real estate markets, you can do one of two things.  You can refinance your loan perhaps today at a lower interest rate assuming you now have more equity in the home.  Or, you can go to the lender with an appraisal to prove the higher value and request that they remove the PMI from your loan. 

First, just Zillow your home to get an idea of its current value.  If there has been significant appreciation, which in many cases may have occurred, choose the best option for you.  Since it cost money to refinance your loan, unless current mortgage interest rates are 1% or more below what you are paying now and you plan on staying in your home for 5 years or more, the best option may just be to have your current lender remove the PMI if you qualify.  PMI can be eliminated.  Take the first opportunity to get rid of it to lower your monthly payments.    

Aug 1, 2021

Bacon Lovers - Time To Fight Back

Since there is nothing better than the smell of bacon cooking on a stove in the morning probably in most homes in the country, all should know that bacon is under attack.  A new law in California, surprise, surprise requires that Pig farmers house pigs in bigger pens, basically 4 square feet bigger to give Pigs more room to spread out.  Get the pun.  So instead of 20 square feet 24 square feet.  Supposedly, the extra 4 square feet is more humane.  Let's remember, these pigs are being raised for food not pets.  

Since Pig farmers based in California cannot supply the 250 million pounds of bacon consumed in California each year, most of the bacon needed will come from Iowa and other states.  I say the hell with California.  Don't take my bacon away. This means that Pig farmers would have to make a major investment to supply California with bacon.  Even if they choose to do so, which is questionable, they can't meet the time frame.  So, not only will bacon be 30% more expensive in California going forward, we could all end up paying more.  This is a national disaster.  The reality is we can't live without bacon.  

It is time for bacon lovers to fight back.  Contact your members of Congress to demand national bacon laws.  Since federal laws overrule state laws, if the Feds keep the same standards in place,  the California law, which makes little sense, will be null and void.   4 square feet is just 2 feet by 2 feet bigger.  I doubt the Pigs can tell the difference.  We just can't have a bacon shortage in our country.  It would be a national emergency.  

Jul 30, 2021

An Interest Only Mortgage Can Be A Great Option

Most people don't realize that during the first 30 years of a fully amortized mortgage, very little money is actually going to pay off the principal.  During the first 10 years, most of the payment is interest only, however, the payment is higher than would otherwise be the case if it was actually an interest only loan.  So for some people living in real estate markets where homes tend to appreciate, it might make more sense just to get an interest only loan to get the lowest payment possible to invest the money in the stock market, 401K's or other investments, or perhaps to pay for things like child care.  If the home appreciates at just 3% a year, the homeowner will be growing equity in the home anyway even though nothing is going to pay off the principal. 

Certainly for people who will only be in the home for 10 years or less, for whatever reason, an interest only loan could make perfect sense provided homes in the area tend to go up in value over time.   Yes, you will owe the original loan amount whenever you sell, but if the home goes up in value, you paid a much lower payment for the time period allowing you to grow savings elsewhere or to cover other family needed expenses. 

Consult a good accountant to see what might be best for you based on your personal circumstances.  In many instances an interest only mortgage loan could be cheaper than paying rent.  If that is the case, home ownership is always the best option.   

Jul 29, 2021

Slight Uptick in Home Inventory in June

The number of homes in the US on the market was still 37.5% less in June, 2021 than in June 2020, which has led to skyrocketing home prices in many markets.  Clearly, there is more demand than supply so that the national median sale price actually rose from $320,000 in April to $336,000 in June.  The good news however, is that inventory across the country rose by 1.9%, which means at least there was a few more homes for sale than months before.  

This is not much of an uptick unless it becomes a trend.  The fact is that the country is short 5 million housing units, which in particular is a killer for first time home buyers that tend to drive markets.  In fact, first time home buyers have been driven out of the market because they just could not compete with either all cash buyers, or buyers able to put 20% or more down to purchase a home.  And, of course, since many homes have been selling in bidding wars above list price, first time home buyers with low down payments just could not compete.  So, they have been forced to continue paying rising rents until the markets cool down. 

I suspect it will take two or three years for demand and supply to equalize.  It may not be a buyer's market for a while, which would take a downturn caused by much higher mortgage interest rates, but at least there may be more inventory to choose from, which should moderate prices.  The last year has been one of the most interesting in decades in the real estate market.  To say it has been a seller's market is an understatement.  

Jul 27, 2021

High Crime Rates Negatively Impact Property Values

Aside from the threat to life, high crime rates impact property values.  Clearly, given a choice people would not want to buy a home in a neighborhood, or city with a high crime rate.   Fewer buyers means lower prices.   As as a result of some calls to defund the police, which is irrational, we are seeing a crime wave across the country.  Robberies, assaults and murder rates are way up in some of the largest cities in the nation.  

Regardless of your politics, it is time to call on elected leaders of both political parties to take action.  We need more cops on the street and they must be empowered to do their jobs.  This does not mean police brutality or use of force that is unnecessary; but given the criticism cops have faced, they are standing back rather than making arrests.  

This can't be allowed to continue because the murder rate in the United States is sky rocketing in many urban areas.  Also, dumb laws need to be eliminated.  California does not prosecute theft under a $1,000 in goods.  So thieves are going into stores with large plastic bags to steal up to the dollar limit.  Some stores in various areas are closing because the theft is unstainable.  In addition, some jurisdictions release criminals with no bail.  So crooks and murderers are back on the street the next day after an arrest.  This has to stop.

All Neighborhoods should have Neighborhood Watch to assist the cops with preventing crime.  High crime should be everyone's concern.  Aside from the threats to personal safety, it is costing people money.  Theft results in higher prices.  And high crime rates absolutely impact property values.  

Jul 26, 2021

Trading Commuting Time For Bigger Homes At Lower Prices

Years ago, when I was first married, we bought our first home in California 40 miles away from our work.  We were able to buy a large home at half the cost it would have been just 20 miles closer to work.  The end result was a 90 minute commute in bumper to bumper traffic, which we did for 8 years.  It was miserable.  During the winter, I left my home in the dark and I came home in the dark.  I did not see our home during daylight hours except on weekends.  We did not know how miserable it really was until we no longer had to do it with a job transfer, when we bought our second home.  

This is a common story.  There are many people around the world who commute 60 - 90 minutes or more each way to go to work whether driving, or taking public transportation usually trains in those regions that have them.  At least on the train you can read or nap.  The question is whether the trade off of buying a bigger home at a lower price is really worth it.  Certainly, for people with families that need more space, it may be the only option.  However, there is no doubt that it impacts quality of life.  

That is why when Covid hit and many people were given the option of working from home, they jumped on it.  So much so that now that they have been able to work from home, many are fighting going back to the office.  A lot of this has to do with commuting time, which in many cities is 60 - 90 minutes each way.  Fighting bumper to bumper traffic is stressful.  Certainly, after we moved and my commute fell to 30 minutes each way, I knew I would never take a job again that required long commuting distances.  

So when considering a home purchase, factor in both the cost of commuting in terms of time and money.  Just maybe it makes more sense to buy a smaller home closer into work if you are still required to go into the office.  The best of all worlds is the ability to work from home because then you can live virtually anywhere in the country.