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Larger, Bolder Kitchens On the Way

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | October 20th, 2017

Buyers of new homes will soon be seeing larger model home kitchens with darker, bolder colors, especially when it comes to their appliances.

According to a study by Houzz, a leading platform for home renovation and design, the “great room” feel of the kitchen will soon be even greater. The study covered some 2,700 homeowners who are either planning a kitchen makeover, recently completed one, or are in the middle of one.

But those are remodels. This brings up a legitimate question: What does a remodeled kitchen have to do with a brand-new one? The answer: Builders pay attention to survey findings like these so they can stay up-to-date on kitchen trends and remain ahead of the curve.

One trend? Black stainless steel. According to trade publication Builder, black stainless is the hot new color, with more and more range and refrigerator manufacturers adding the finish to their lines. KitchenAid was the first to introduce the finish more than a year ago, and now Electrolux, Kenmore, LG and others are following.

Black stainless steel is said to be so versatile that it goes with almost any other finish, design style and color. Whether you opt for a modern farmhouse look, a contemporary commercial feel or something more traditional, the finish works.

“Black stainless steel appliances have a modern, neutral tone,” Miranda Valentino of Electrolux told the magazine. “This means they mix and match well with both bright, vibrant colors and dark, muted accents, and can easily blend into existing design styles.”

LG spokeswoman Taryn Brucia told Builder that the finish “elevates the traditional stainless steel look with a satin-smooth, warm and sophisticated finish for both a modern and timeless aesthetic that pairs beautifully with any kitchen style. Its sleek finish elevates the versatility and sophistication of kitchen appliances.”

Houzz found that millennials, in particular, gravitate toward black stainless steel, with 9 percent of respondents age 25-34 choosing the finish. That’s three percentage points higher than the 55-and-older group. And more and more builders are looking to break into that younger demographic.

Another trend new buyers are likely to see is more pantry space -- sometime much more. Elizabeth Hagie of the Maryland-based Builders Design calls them “Super Pantries,” and they can be customized to fit any buyer’s lifestyle and budget.

Much like the trend of larger showers a decade or so ago, reports Hagie, this trend is popular with builders because it permits them to showcase additional cabinet or shelving options. And buyers seem to be gravitating toward upgrading the pantry in order to keep a clean, welcoming look in the entire kitchen.

In some cases, the traditional pantry is simply larger, allowing the owner to store extra snacks and perhaps a beverage fridge. But in others, it can occupy an entire room, often hidden behind a kitchen wall, that permits the owner to hide the giant countertop mixer, coffeemaker and other small appliances.

Says Hagie: “As the kitchen continues to be the entertainment hub of the home, this customizable space is a trend that will only grow in the years to come.”

Looking into the future, the Consumer Technology Association estimates that by 2022, a typical new home could contain a startling 500 smart devices. The CTA’s chief economist, Shawn DuBravac, thinks the adoption of broadband and Wi-Fi technology is akin to the adoption of electricity and indoor plumbing years ago.

Companies are cooking up some wild devices, and the kitchen is the hotspot. At a Berlin trade show recently, Grundig unveiled a marble “hob.” Using projection technology, an ordinary induction hob is transformed into an intuitive work surface, allowing users to completely control appliances from a single surface point.

Samsung’s family hub refrigerator is a sophisticated multitasker. Its Wi-Fi-enabled touchscreen lets you manage and purchase groceries, pin photos on an HD screen on the exterior door, and post, share and update calendars. Three interior cameras snap photos every time the door is opened and closed so users can remotely see inside.

High-tech isn’t limited to large appliances, either. Take the Egg Minder, which wirelessly connects to your phone to tell you how many eggs you have on hand and when they start to go bad. Or the GeniCan, a trash can add-on with a sensor that reads the bar codes of items when you throw them away, then adds them to a grocery list.

Meanwhile, Paris-based designer Arik Levy has partnered with Spanish surface manufacturer Compac to create a marblelike kitchen that is stain- and scratch-resistant. Called Mineral Gravity, the conceptual kitchen is made from a synthetic material that resembles marble, but is much more durable.

“Everything’s better than natural stone,” Levy told Dezeen, a London-based design magazine. “This is unbreakable and unscratchable and nonporous. Marble will break and it will scratch. If you spill a glass of wine on marble, you can say goodbye to your table.”

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‘Duty to Serve’ Helps Borrowers

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | October 13th, 2017

Federal mortgage agencies Fannie Mae and Freddie Mac have long been tasked by Congress with serving areas that don’t get much attention from the private sector. And that could help you get a home loan.

Suppose you live in an underserved rural area -- Appalachia, say, or the Mississippi Delta -- or you are in the market for manufactured housing. Getting a home loan in both of those scenarios should be a little easier starting Jan. 1.

That’s the date the two giant funders of mortgage lenders have to start implementing their congressionally mandated Duty to Serve Underserved Markets plans, an idea that goes back to the start of the recovery from the mortgage market implosion of 2008.

Fannie’s and Freddie’s regulatory group, the Federal Housing Finance Agency (FHFA), started to implement “duty to serve” ideas in response to Congress’ 2008 Housing and Economic Recovery Act. But the agencies weren’t required to finalize their plans until this year, or to implement them until next year.

The new, formalized plans focus on three main areas: manufactured housing, rural housing and affordable housing preservation. Why do these companies have a “duty” to serve these areas?

“Numerous areas of the country will continue to experience housing challenges for years to come,” according to Danny Gardner, Freddie Mac’s vice president of single-family affordable housing.

Actually, Freddie and Fannie don’t work with consumers directly. You can’t apply to them for a mortgage. But they do fund the lenders that will make you a mortgage, and their reach is vast.

After a lender closes on a home loan with you, it sells it to Fannie and Freddie. Instead of waiting for you to pay it back a month at a time for 30 years, your lender gets its cash back the same day your loan is sold in what’s called a secondary market transaction. They can then use that money to make another mortgage to someone else.

In short, Freddie and Fannie are the straws that stir the mortgage cocktail. If they say they are willing to fund something -- or if Congress directs them to -- lenders will start to line up, hat in hand. And consumers are the ones who benefit. It’s said that over the years, Fannie/Freddie-funded mortgages have saved consumers an average of a quarter of one percent on their interest rates.

As part of Freddie Mac’s plan, Gardner claims his company “will seek to work to increase loan purchases in the underserved markets mentioned, develop new offerings, conduct market research, build technical skills for industry participants, and expand homebuyer education, community engagement and local outreach.”

If your loan falls in one or more of the duty to serve categories, lenders are going to be putting more spin on the ball very soon. And, like students bringing apples to teachers to gin up favorable impressions, the agencies can choose to go above and beyond.

“Certain impactful activities, including activities that promote residential economic diversity in an underserved market, are eligible for Duty to Serve extra credit,” says the FHFA.

Take manufactured housing. This is a murky area of the lending universe, because sometimes these loans are mortgages, and sometimes they are not. If the home is anchored to a permanent foundation and counted as “real” property (as in real estate), they may get mortgages that can benefit from favorable interest-rate pricing through Fannie and Freddie.

If the home can be moved, as with trailers, they are considered personal property and, in the past, have gotten “chattel” loans, which are often far more expensive than mortgages. Soon, those chattel loans will be eligible for sale to Fannie and Freddie, as will loans for manufactured housing communities. That could make those types of loans less expensive.

In the rural housing market, the duty to serve applies to middle Appalachia, the Lower Mississippi Delta, and a couple of other poorly served regions or groups or people, including agricultural workers, American Indian reservations and the “colonias” that dot the U.S.-Mexican border.

The third area, affordable housing preservation, applies to sustaining low- and moderate-income housing supplied by such federal programs as HUD Section 8 and the Low-Income Housing Tax Credit.

Though there are differences between Fannie Mae and Freddie Mac, Freddie’s plan gives you a good snapshot of the kinds of things both of them plan to do through the year 2020.

Gardner says Freddie will be “working with mortgage originators and other professionals in these communities to help more American families with their housing needs by developing and expanding solutions to some of society’s most persistent housing problems.”

Manufactured housing, for one thing. There is a lot of it. Gardner points out that in 2010, 17 million people lived in nearly 7 million manufactured units in America.

For “real” property, Freddie plans to “work with lenders to increase Freddie’s Mac’s purchases of loans in this important market.” And for “personal” property, Freddie plans to “initiate a chattel pilot offering” and “develop homebuyer education to support chattel financing.”

That’s important, because 80 percent of manufactured housing loans are chattel, so mortgages have not been a big part of that market.

Rural areas are a significant part of the country’s land base, Gardner says. And the problems there are many, not only with affordability but also with “persistent poverty, declining employment opportunities and limited access to financial services.” Freddie will seek to increase financing and homeowner education in these areas.

As for affordable housing sustainability, “Freddie Mac’s efforts to preserve affordable single-family options will focus on two fronts: energy-efficient home improvements and shared-equity programs.” Freddie plans to study both to bring some standardization to highly fragmented markets.

Ultimately, Freddie’s efforts will be to “bring liquidity, stability and affordability to these underserved but deserving markets.” So early next year, start asking your local realty agent and lender if you can get in on the action.

-- Freelance writer Mark Fogarty contributed to this report.

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The Forgotten Costs of Homebuying

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | October 6th, 2017

There’s no doubt that buying a house is an expensive proposition. Anybody who goes into the process thinking otherwise is in for a rude awakening.

Even if the house is a bargain, you’re still paying big bucks -- likely the biggest purchase of your life. And if you’re not paying cash, the interest can run into the tens or even hundreds of thousands of dollars over the life of the loan.

Then there are those heady closing costs, which run anywhere from 3 percent to 5 percent of the price of the house. These are charges like the recording fees and document stamps that local governments charge every time the house changes hands, plus those pesky lender charges for services such as appraisals and land surveys.

Next comes another round of what many describe as “hidden expenses.” They’re considered hidden because buyers tend to focus on the sticker price of the house -- or perhaps even the monthly mortgage payment -- and forget about other recurring costs until they get to the closing table or a month or two later.

These costs include property taxes, homeowner’s insurance, flood insurance, homeowner’s association fees and, of course, utilities. According to Zillow, these can add up to $9,000 annually to your household budget.

But wait! You’re not done yet. You still have your moving expenses to think about. It costs more to hire a moving company than rent a van; consider offering a case of beer to your buddies in exchange for helping with the move.

Either way, though, you’ll absorb some costs that most people don’t think about until they have to. And while you’re at it, don’t forget to budget for setting up your utilities: water, power, cable, internet and more. Many utilities require first-timers to put up big deposits to open accounts.

Now you’ll have to turn your new house into a home. And according to new research from the National Association of Home Builders (NAHB), that means another round of spending for appliances, furnishings and alterations and repairs. If you are building a new house, figure on spending $10,601 in your first year of ownership on these items. If moving into an existing house, you’ll lay out a little less: $8,212. (This compares to only $4,122 spent annually on appliances, furnishings, etc. by people who are not moving at all.)

The NAHB came up with these numbers by perusing data from the Department of Labor Statistics’ consumer expenditure survey.

Not surprisingly, buyers of new houses outspend those buying existing houses when it comes to furnishings. They spend five times more money on things like living room chairs and tables, and nine times more on dining room and kitchen furniture.

Window coverings are another big spending category. And here, new-house buyers shell out four times more than existing homebuyers. But the most expensive item is a sofa, for which new-house buyers spend 60 percent more than existing-house buyers.

But what is puzzling is that new-house buyers also outspend others when it comes to appliances, and spend almost as much on alterations and repairs. Don’t most new houses come with appliances already installed? And doesn’t “new” suggest that no alterations or repairs are necessary, since the house has never been occupied?

For the most part, yes, according to a survey by the Housing Innovation Research Labs, which found that virtually all new homes come with cooking stoves, ranges or ovens. But two-thirds of the houses built in 2015, the latest year for which data is available, had no washers or dryers, and 36 percent had no fridge.

Another head-scratcher is that existing-house buyers shell out only $250 more on repairs and alterations during the first year of ownership than new-house buyers.

As it turns out, buyers of new homes tend to spend their money outside, on things like landscaping, a new driveway or walk, or fences. On the other hand, existing-house buyers put their cash into kitchen and bath remodeling, new heating and air conditioning systems, security systems and flooring -- all items new buyers rarely spend a dime on in that first year.

Meanwhile, a separate study published by the National Bureau of Economic Research (NBER) puts another twist on the homebuyer spending spree. It says buyers -- both new and existing -- burn through “only” $5,000 on top of the purchase price to turn their newfound abodes into their own personalized residences.

This study analyzed spending by 70,000 households from 2001 to 2013, as well as building permits for some 9 million properties. That the study period included the most recent recession, when such spending dropped off the table, accounts, in part, for the roughly $5,000 difference between the NAHB study and that of NBER researchers Efraim Benmelech, Adam Guren and Brian Melzer. But there is no further explanation.

Another interesting point in the NBER study: Homebuyers started to increase their furnishings and renovation spending three months before closing. It peaked during the first month afterward, and started to decline slowly as time went by.

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