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Odd Parcels: Immigrants, Love, Alexa

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 16th, 2018

While the immigration debate rages in Washington, it needs to be pointed out that any new restrictions are likely to impact the new-home sector in a “bigly” way.

Homebuilders are already dealing with a labor shortage, perhaps the No. 1 issue they face -- over and above rising material prices and a lack of buildable home sites. If new immigration is curtailed, and if immigrants already here are deported, the labor problem will be exacerbated greatly.

The result: New houses won’t be built as quickly as they are today, and they may not be built as well, either. If builders have to pay more to find the workers they need to put up their houses, which they most assuredly will, the end product is likely to be even more expensive.

According to the Census Bureau, immigrants now account for almost 1 in 4 workers in the construction field. That’s the highest share ever recorded by the Bureau’s American Community Survey (ACS).

In some states, builders’ reliance on foreign-born workers is even more pronounced. In California and the District of Columbia, 42 percent of the construction workforce comes from abroad. In Texas, it’s 41 percent; in New York and Nevada, 37 percent.

In Georgia, Virginia and Maryland, immigrants account for close to 30 percent of the construction labor force. Interestingly, while immigrants comprise less than 16 percent of the labor force in Virginia, their share in construction exceeds 29 percent. Similarly, in Georgia, less than 14 percent of the labor force is foreign-born, but the share of immigrants in the construction labor force is twice that.

Even though the share of immigrants in construction is now at its highest since the ACS was fully implemented in 2004, and their number exceeds 2.5 million, this is still almost 200,000 fewer than in 2007, according to the National Association of Home Builders (NAHB).

The flow of new immigrants into the construction workforce is also significantly slower than it was in the housing boom years. Fewer than 60,000 new immigrants entered the construction industry in 2015. By comparison, over 130,000 were joining the construction labor force annually in 2004 and 2005.

The rising share of immigrants in construction, says NAHB economist Natalia Siniavskaia, is attributable to “a slow, delayed and reluctant post-recession return of native-born workers.”

Close to 1.7 million native-born workers left the construction labor force during the housing downturn, and the vast majority had not returned to the business as of 2016. That year, the number of native-born workers remained 16 percent below the cyclical high reached a decade earlier.

Homebuyers: Write all the love letters you want to sellers, to try to persuade them you’re the right buyer for their home. But leave your heart-wrenching missive out of the package of documents to give to your lender.

That’s the word from Rob Spinosa, a loan adviser with Supreme Lending in Mill Valley, California, who says some letters contain not-so-flattering information about the house that you probably don’t want underwriters to know. Such as these three examples:

-- “The repairs in the downstairs kitchen don’t concern us. John is good with his hands, and we plan to fix this upon moving in.”

-- “We realize that the home has some deferred maintenance, but we find it charming and are ready for the challenge.”

-- “The termite damage in the report is trivial, in our opinion ... we still love the house!”

Spinosa says he has nothing against love letters per se. He and his wife wrote one themselves when they made an offer on a home. But he and his colleagues remove them from the loan package when they notice them.

Still, he says, “it only takes one oversight from me or anyone on my team before a love letter that may say something (like the above) finds its way in front of an underwriter.”

Lending is not like it used to be, when any applicant who could fog a mirror could get a mortgage. Today, it’s full-bore, full-documentation underwriting. And as Spinosa cautions, “what’s been seen cannot be unseen.”

So go ahead and woo your seller, just don’t let the lender in on the love-fest. Otherwise, you could get the equivalent of a Dear John letter from the lender -- one that says something like, “We’ve found another borrower to love.”

“Alexa, make my mortgage payment.”

Yes, Quicken Loans, the nation’s largest online lender, has developed technology that allows its clients to ask Amazon’s Alexa to make a monthly payment by a secure voice command.

By asking Alexa, clients also can review nearly all account details, such as their current loan balance and payment due dates, and listen to Alexa deliver current interest rates for all of Quicken’s mortgage programs.

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Mortgage Payments Likely to Keep Zooming

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 9th, 2018

It’s the age-old chicken-or-egg story of the housing market: Should you buy that home now, while interest rates are still fairly low? Or wait for rising prices to moderate?

Of course, there are many factors that will go into your decision. But here’s one you probably haven’t considered, and it has real “buy now” implications: Mortgage payments zoomed last year and are likely to rise even higher this year, continuing a trend that has persisted for the past six years.

CoreLogic, a data analytics company that has been tracking mortgage payments for the past generation, says that while home prices may be up 6 percent through August of last year, the average mortgage payment went up 10.1 percent during the corresponding period. And for 2018, the typical home loan payment is likely to rise by more than 11 percent.

That’s a good bit more than most of us have been seeing in yearly raises, if we get them at all.

CoreLogic’s “typical mortgage payment” (TMP) is a mortgage rate-adjusted monthly payment based on each month’s median home sale price in the United States. It tends to move up or down based on factors such as mortgage rates and size of down payments.

Their TMP can help buyers judge affordability, according to CoreLogic’s Andrew LePage, “because it shows the monthly amount a borrower would have to qualify for in order to get a mortgage to buy the median priced home.”

Of the four components of a mortgage payment -- often compartmentalized as PITI, for principal, interest, taxes and insurance -- the TMP measures only the principal and interest payments. It assumes a 20 percent down payment, the amount necessary to avoid having to pay for private mortgage insurance (PMI), and a 30-year, fixed-rate loan. Of course, many homebuyers put less than 20 percent down and must purchase PMI, which can add several hundred dollars more to their monthly house payment.

The typical mortgage payment was higher than today’s TMP before the Great Recession, which stands to reason, as home prices climbed to unsustainable highs before the markets crashed in 2008. Back in June 2006, before things started to go south, the typical monthly payment was $1,250. That fell to a low of $546 in February 2012, and has risen steadily since then to $816 as of August of last year. That comes to about a 50 percent increase over five years, or about 10 percent a year.

Of course, in 2006, the average mortgage rate was a lot higher: 6.7 percent, compared to 3.9 percent last August. And the inflation-adjusted median sales price was higher, too: $243,000, compared with $217,000 last year.

In addition to last year’s 10 percent jump in the TMP, CoreLogic is predicting that the typical payment is projected to rise by 11.3 percent this year, to $908.

“Real disposable income is projected to rise 3.6 percent over the same period, meaning this year’s buyers would see a larger chunk of their incomes devoted to mortgage payments,” says LePage.

That makes for a good argument to buy that home now. But there’s an inventory problem, with many potential sellers on the fence about whether to sell or not.

According to down payment protection firm ValueInsured, sellers are hesitating to sell now because of the high price they feel they will have to pay for their next homes. The firm conducted a survey of about 1,000 American homeowners, and many of those who say they want to sell -- either to upgrade or downsize -- are having second thoughts.

“Homeowners, in many cases, are eager to sell but don’t want to become buyers,” says Joe Melendez, chief executive of ValueInsured.

So even though it’s a seller’s market due to low inventory, some owners are thinking of renting their houses rather than selling. Either that, or they are considering passing their homes on to a family member. Even millennials are taking a wait-and-see attitude because of uncertainty over job changes.

Here’s what the numbers look like, according to the ValueInsured survey:

-- 72 percent say they are concerned with timing the real estate market.

-- 63 percent say now is a good time for them to sell, but not to buy, due to high home prices.

-- 61 percent are “waiting until prices to buy are better to make a move.”

About 26 percent of potential sellers “say they second-guess their desire to sell because they don’t want to pay brokers’ fees, new mortgage closing costs, capital gains taxes and other associated expenses, as it would weaken their buying power for their next home,” says the firm.

There’s no doubt that many housing markets are currently overvalued: According to a recent CoreLogic report, 48 of the nation’s top 50 markets are overvalued.

According to Melendez, “These homeowners have experienced a lot of home-value volatility and see more uncertainties looming -- tax reform, for example. By hesitating, these homeowners are actually controlling the market on both sides. Reassuring these individuals is the key to unlocking inventory.”

He adds, “selling and buying are always fraught with worrying about timing the market, and life events don’t always cooperate.”

Taking the longer view may be helpful for both would-be buyers and sellers, he says. “Eventually, younger people move for jobs and empty-nesters need to leave their five-bedroom homes.”

-- Freelance writer Mark Fogarty contributed to this report.

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Sometimes, the Animals Come With the House

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 2nd, 2018

When there is a dispute between buyer and seller over what stays with the house and what goes, it’s usually over a prized bathroom mirror, a beautiful sconce in the hallway or some ornate, custom curtain rods.

The rule of conveyances is fairly simple: If it is attached to the house, it is considered a fixture and it stays for the next owner. If it isn’t attached, the sellers can take it with them when they move out. In other words, you can take the curtains, but not the rods.

But what if the issue involves animals? Now it gets sticky. Obviously, the dog or cat or other critter isn’t part of the property, and normally the sellers will take their pets when they leave. But not always.

Last fall, agent Jeff Dowler of Solutions Real Estate in Carlsbad, California, asked a seller if the peacocks wandering around his spacious backyard would be part of the transaction.

“The lot was large, about one acre, and the seller met us at the property to let us in,” Dowler said in a post on real estate site ActiveRain. “The buyers were out strolling the property, and out of curiosity, I asked, ‘Do the peacocks convey?’”

The seller was adamant: “Yes, they are staying,” he said.

As it turns out, peacocks are protected in several parts of the country, allowed to roam freely. So they had to stay, whether the buyer liked it or not.

Francine Viola, an agent with Evergreen Olympic Realty in Washington, once had to write up a contract that stated the chickens in the coop would stay. If that wasn’t enough, the buyer also wanted the seller to replace any chickens that passed away prior to closing.

“Thankfully the chickens lived,” she said.

Ducks were part of a deal that New Hampshire agent Scott Godzyk once worked on. The buyer wanted the ducks in the property’s small pond to convey. Luckily, the sellers agreed. It seemed the husband, who fed them daily, didn’t want them to be disturbed from their man-made habitat.

Fish or fowl, there can be problems. Twice, Dana Cottingame of Coldwell Banker in Dallas ran into situations with koi in a pond. In Texas, she learned, koi convey just as though they were attached to the house. The moral here: If you don’t want to be bothered feeding fish, don’t buy a house with them -- at least in the Lone Star State.

In Florida, Winifred Smith of RE/MAX Advance Realty says she heard of an issue with the number of koi that would convey with a certain home. The larger koi are apparently “quite expensive, so the buyer made the seller pay to replace a couple” that had gone to the great pond in the sky.

Things don’t always work out when a pet is involved. One odd request reported by Goodson Realty in Bonne Terre, Missouri, came from a buyer who fell in love with the seller’s dog and wrote him into the contract. “My sellers did not accept” the offer, recalls the agent.

And sometimes the problem is big -- really big, as in the case of the three 400-lb. potbellied pigs that greeted Anna Kruchten of the Phoenix Property Shoppe when showing her client an upscale luxury home. The listing agent hadn’t mentioned a thing about the porkers, even when Krutchen spoke with him directly.

The seller’s agent probably thought the presence of pigs was better left unsaid. Otherwise, nobody would want to visit the place. And as you might expect, Kruchten says, “my client was aghast.”

Neither Gayle Rich-Boxman of Fishhawk Lake Real Estate in Birkenfeld, Oregon, or RE/MAX agents Pat and Ed Okenica in Lake Oconee, Georgia, have had any problems with live animals. But they have had issues with taxidermy and telephones.

Rich-Boxman had to remove a moose head on New Year’s Day a few years back, because the sellers thought it was a fixture and left it -- “and weren’t coming back” for it. The buyers didn’t want the “sad old head leering at them,” she recalls, so she hired workers to remove it.

The Okenicas, meanwhile, had buyers who insisted the sellers leave their phone, shaped like a mallard duck, or they would walk away from the deal. “There’s always something that pops up in a transaction that you least expect,” they posted.

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