More Deals Falling Through After Appraisal

Though the appraisal process can be waived, and it’s not all that infrequent — about 25% of transactions, as of August — when the appraiser disagrees with the buyer and seller on a home’s value, things can get awkward. For all-cash offers, the appraiser’s opinion doesn’t have any direct effects, though it can still influence the buyer or seller’s decision to stick with the deal or not. But for contracts involving a loan, the lender frequently will only lend up to an amount based on the home’s appraised value, even if the buyer offers more than that. And quickly rising prices make appraisal values frequently lower than the asking price, while many buyers are actually offering over the asking price.

Appraisers’ inability to keep up with a fast-paced market is slowing down many transactions. Buyers want to buy quickly, but appraisals take time. More disastrously, deals are forced into renegotiation when buyers find the appraisal is too low for them to qualify for a loan for the amount they expected. This results in 23% of deals being delayed after the appraisal process. About half of these delayed deals end up completely falling through.

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More: https://magazine.realtor/daily-news/2021/10/11/low-appraisals-stall-23-of-home-sales

Four Inexpensive Storage Strategies

The best way to save money on storage is by utilizing space as efficiently as possible. In some cases, there may be small storage spaces already in your home that aren’t explicitly designed for that purpose, but work just as well. Alternatively, it’s possible that storage areas that are built for that purpose could benefit from a more efficient structure at minimal additional cost.

Every house has a bedroom, or at least a space where you put your bed. In your bed is on a frame, there’s going to be a bit of space under it. That space isn’t an inescapable void where errant socks and jewelry are lost forever. It’s a spot to put a few small boxes. If your home has multiple stories, there’s usually some space underneath the stairs. It may even already look like a storage area, but if it doesn’t, feel free to add a shelf or cabinet.

Your existing cabinets can also be made to use space better. Tilting drawers have two functions: they can conform to a space’s shape while manifesting a slightly different shape while in use, and they can be detached from the cabinet to utilize more of the open space. This method is often used for storing trash bins or creating hanging racks that sit horizontally when not needed. Another way to maximize your space’s shape is to use sliding drawers in narrow spaces where one couldn’t put a cabinet, or even inside a cabinet for extra surface area.

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Many Joint Owners Don’t Share a Last Name

In recent years, co-buying has skyrocketed. This refers to a situation in which a home is purchased jointly by multiple owners. And nowadays, more and more of them don’t share a last name, with this value jumping by 771% since 2014. Of course, there could be multiple reasons for not sharing a name, and they could even be married, but chances are they’re not.

Buying your first home is not easy in the current economic climate. Millennials, who make up the largest chunk of prospective homeowners, have inherited astronomical home prices, crippling student debt, a weak job market, and negligible wage growth. Most can’t afford a home on their own — so they ask their friends or roommates to co-buy a house with them. The percent of co-buyers identifying as neither a married nor unmarried couple is only 3%, but that’s still up from two years ago when it was only 2%. The percent of unmarried couples co-buying also went up from 9% to 11%, as Millennials as a generation are also tending to marry later or not at all, whether for financial or personal reasons.

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More: https://magazine.realtor/daily-news/2021/10/12/co-buying-has-skyrocketed-in-last-7-years

Investments in US at Risk From China’s Economic Struggles

Real estate investment in China is a big business, and one of the biggest investors is a company called Evergrande. The problem is that Evergrande has quite a bit of debt and is rather close to defaulting. The company certainly doesn’t control a majority of the Chinese real estate market, but it’s significant enough to put a dent in consumer confidence if it goes under.

This is merely a symptom of the actual problem with China’s real estate investment market. The truth is that China’s population has been falling dramatically in recent years, but investors haven’t scaled back their investments. This has led to a significant overabundance of supply, as well as compounding investor debt.

Why is this important for the US? Well, a large number of our foreign investors are from China, especially in the commercial sector but also in residential. Chinese investment in US real estate has been slowing already, but it’s high enough that a market crash in China would definitely have aftershocks in the US real estate market. Fortunately, because our market actually has the opposite problem as China — too little supply — investors bailing out and selling could just open up more opportunities for buyers.

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More: https://journal.firsttuesday.us/chinas-looming-real-estate-crisis-casts-a-shadow-here-in-california-too/80252/

2022 Market Projections

Next year is expected to be a bit calmer than this year was. An estimated 439,800 sales are projected for this year by the end of the year, but the model predicts only 416,800 for 2022, a 5.2% decrease. It had increased 6.8% in 2021 from 2020. House prices will still be going up, albeit at a much slower rate. The median home price will have increased over 20% this year. It’s only expected to increase about 5% next year. This will also mean a 3% decrease in housing affordability, from 26% to 23%. The forecast assumes that the pandemic situation can be kept under control, primarily focusing on low supply during a recovering market. 2022’s market is likely to be better for prospective homebuyers who were pushed out due to heavy competition. Those who already couldn’t afford to buy still won’t have much luck, but the slowing rate of price growth is hopeful for them.

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More: https://www.car.org/aboutus/mediacenter/newsreleases/2021releases/2022housingforecast

There’s No Need to Dread Unpacking

For some people, the worst part about moving is unpacking everything once you’ve moved in. Often it’s not actually everything; some boxes frequently end up never reopened and simply sitting in storage. But it doesn’t have to be that way. There are smart ways to unpack that can help you keep organized and reduce the time and stress.

Come up with a good labelling scheme for your boxes. Don’t just throw stuff in a box and figure out what’s in it later. The best way to do this is to organize by room — know ahead of time where you’re planning to put your items, and put the boxes in their appropriate rooms before even opening any of them. The first boxes you should open are the ones with your storage units and organizers, if your items weren’t already packed inside of them. Now, remember those boxes you’re just planning to shove into storage unopened? Maybe those are seasonal decorations, in which case that’s not an issue. But maybe you don’t actually need those items. You may have brought them with you, but that doesn’t mean you’re forced to keep them. Consider donating unneeded items to save storage space and reduce clutter.

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Home Equity Gains Are a Buffer Against Foreclosure

The foreclosure moratorium is over now, putting many homeowners at risk. However, unlike the previous recession, homeowners actually have options this time around. Home prices are high, rather than low, meaning home equity has also increased. This will allow many homeowners to sell their homes instead of being foreclosed on.

The average annual gain in equity this year was $51,500, the highest point in the past 11 years. It’s also five times the value last year. Another important statistic is negative equity, which CoreLogic started tracking in 2009. Fewer homes than ever since the statistic has been tracked have negative equity, at only 2.3%. At the state level, Louisiana is somewhat struggling at 7.8% negative equity share. Among metros, Chicago has the highest negative equity share at 5.2%, but also the second lowest amount of negative equity — meaning more people have lost money than average, but those who have haven’t lost very much. Conversely, San Francisco has the lowest negative equity share at 0.6%, but the highest amount of negative equity.

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More: https://www.corelogic.com/intelligence/strong-home-equity-gains-in-2021-lower-foreclosure-risk/

Renters Overtake Homeowners in Suburbs

Homeownership has been a mainstay in suburban areas, where the typical house is a single-family residence or possibly a duplex. Residents in these areas have tended to be middle- or high-income earners. All of this is starting to change as the demographic is switching to Millennials and Gen Z homeowners. The majority of residents in suburbs are now renters, unable to afford to purchase a home.

Millennials and older Gen Z people inherited the effects of the Great Recession, which delayed their careers and consequently their ability to own a home. This also compounded with student debt, since Millennials are a highly educated generation. All the while, prices are increasing but wage growth is stagnant. While some of these people recovered somewhat since the Great Recession, others were still trying to get back on their feet or were just entering the job market when the 2020 recession hit. Most of Gen Z is still not old enough to own a home, so it’s unclear whether this would extend to them as well.

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More: https://journal.firsttuesday.us/californias-suburbs-flip-as-millennials-and-gen-zs-become-majority-renters/

Cryptocurrency Has Reached the Real Estate Market

Cryptocurrency has been around for a bit now and is in widespread use, with its major appeal being how difficult it is to counterfeit or manipulate. It’s usually used to make smaller payments, such as purchasing software or electronics. But as with physical money, cryptocurrency can be used for payments of any magnitude. That includes thinks like home purchases or mortgage payments.

If you’re unfamiliar with cryptocurrency, you may think that because it’s generally used for smaller payments, it must take a lot to be able to afford a house. That’s not exactly true. One popular cryptocurrency, Bitcoin, is actually worth $43,000 per coin currently — most payments are made in mere fractions of coins. The value of cryptocurrency does fluctuate wildly, but the trend has been generally upwards in the past few years, albeit at a declining rate of increase.

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More: https://journal.firsttuesday.us/the-future-of-cryptocurrency-in-real-estate-transactions/80084/

DIY or Call a Professional?

Some people are rather handy around the house and like to do repair or patch jobs themselves. Or maybe you’d prefer not to have to do it yourself, but money is tight. Whatever your reasons, there are some things you really should call a professional for, if you don’t have experience in that field yourself. If you can’t decide whether you want to try it yourself or not, the bottom like is that structural work and potentially dangerous work should be done by a trained professional, but cosmetic work or simple repairs you can do yourself.

For most people, applying a fresh coat of paint to interior walls or cabinets is not a difficult task, and you may even have leftover paint in storage from when it was originally painted. Exterior walls, however, generally require specialized tools and can have safety concerns. Some plumbing jobs can be done yourself, such as small parts replacement, but leave the pipework and repairing major leaks to an actual plumber. Electrical systems and carpentry are potentially dangerous and should always be handled by a professional.

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C.A.R.’s New Educational Campaign Aimed at Latinx Homebuyers

The California Association of REALTORS® (C.A.R.) has launched a new website,  www.BringYourFamilyHome.com. This page will provide information to prospective homebuyers, especially aimed at first-time homebuyers, about financial literacy, credit scores, steps in the process, and how to contact agents. And C.A.R. hopes to address a long-standing issue by presenting the page in both English and Spanish.

California has a significant Latinx population, and many of them believe they aren’t able to afford a home. While certainly some of them don’t have enough income for the high prices in California, a significant number have misconceptions about what they can and can’t afford. 85% of Latinx prospective homebuyers still see owning a home as a big part of the American Dream, and the majority of those haven’t given up on it. But four out of five aren’t aware that they qualify for mortgage loans. 25% of Latinx people that are renting actually don’t need to because they can already afford to purchase, but don’t realize that and aren’t aware of the process. By providing educational materials in Spanish, C.A.R. hopes to help many more Latinx households achieve homeownership.

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More: https://www.car.org/aboutus/mediacenter/newsreleases/2021releases/hispanicadcamp

Wildfires Causing Property Insurance Costs to Skyrocket

Property insurance is not legally mandated; however, it is a requirement in order to qualify for the majority of mortgage loans. But with wildfires increasing in frequency in California, higher risk means higher insurance premiums for anyone living in a fire-prone area.

Some people can’t even qualify to renew their insurance because they can’t afford it. Since their lenders still require it, that just means they’ll pay even more for coverage under the Fair Access to Insurance Requirements (FAIR) plan. FAIR is a California state insurance program that anyone in a high-risk area qualifies for. Unfortunately, it’s usually even more expensive and generally provides weaker coverage.

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More: https://californianewstimes.com/california-wildfires-ignite-an-insurance-crisis-press-telegram/520475/

Smart Fridge Features You May Like

Smart home technology has been around for a bit by now, but smart refrigerators are still a relatively recent addition. They can also be rather pricy. These two factors combined mean most people don’t have one. You may not actually know what features they have. Here are a few things it can do for you.

Smart fridges can connect to phone and television service. They have a built-in display that can be used to watch TV or videos, as well as audio services to play music or give reminders, such as alarms or notifications that the fridge is low on ice. Handy tools include a digital notebook, recipe lookup, and shopping checklists. There’s plenty that a smart fridge can do for you without you even opening the door.

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End of Forbearance Plans Could Swing the Market

With the foreclosure moratorium ending, the only thing keeping many homeowners in their homes is a forbearance plan. Once those end, the effects on the market could be drastic. The good thing is that it’s easy to predict when that will happen, since forbearance plans have a designated end date. Many of them have already ended in the past two months, but we will continue to see more ending throughout the rest of the year.

One of the effects of a large increase in foreclosures or forced sales is plain to see, and that is an increase in inventory. With inventory being so low right now, one could be forgiven for thinking that’s what the market needs. But it most certainly is not. Let’s take a look at the reasons demand is so high right now: low interest rates, and the fear-of-missing-out (FOMO) mentality that buyers have when inventory is low. Interest rates are going back up now, so that’s no longer an incentive to buy. If inventory increases drastically, FOMO won’t be a factor either. Foreclosures and forced sales will remove all incentive to purchase while increasing inventory considerably, causing a full swing in the market. But that’s not all. People living in foreclosed-on homes aren’t just statistics; they are actual people, and their increased economic struggles will only make it more difficult to reach a recovery point in the recession.

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More: https://journal.firsttuesday.us/how-1-5-million-homeowners-exiting-forbearance-will-impact-inventory/79744/

How the New Zoning Laws May Impact Your Neighborhood

Gov. Gavin Newsom recently signed two housing bills into law, SB 9 and SB 10. SB 9 modifies areas zoned for 1 unit to also allow duplexes. However, it isn’t without restrictions — it also limits the construction that would convert a single home into a duplex to homes that have not been rented out in the past 3 years, and only allows 25% of the external walls to be demolished if it is a conversion and not a new construction. SB 10 is aimed at helping local governments to streamline processes for allowing up to ten units on lots formerly zoned for SFRs, but only if the lot is over 8000 square feet.

One region in which these bills were highly contentious is Long Beach, which has 59,803 single-family lots. But the laws aren’t likely to change things as much as people think, especially SB 10. Only 4,609 are eligible for the provisions under SB 10, due to the lot size restriction. Moreover, the City of Long Beach is under no obligation to allow up to ten units at all — the bill merely streamlines the approval process, should they choose to. A significantly larger number of units could be affected by SB 9, but city officials expect that between 17000 and 28000 units would be ineligible due to the rental restrictions, and there’s no guarantee that the eligible units would be converted. In addition, ADUs are already allowed, and the biggest difference between an SFR-plus-ADU combination and a duplex is the size of the units.

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More: https://lbpost.com/news/the-governor-signed-2-controversial-housing-bills-heres-what-it-means-for-long-beach

Mistakes to Avoid Before a Home Purchase

There are a plethora of articles about what to do before buying a home, especially for first-time homebuyers. But has anyone ever told you what you shouldn’t do? Of course, some of these are just a different way of writing the same things you’ve heard before. But others are advice you may not have been provided.

The biggest mistake to avoid is financing a big-cost item, such as a car, immediately before looking to get a home loan. Lenders will see that, and they’ll know you’ve just taken out a loan and will have debts to pay. That doesn’t look good for your credit score or your debt-to-income ratio. Similarly, avoid maxing out your credit card debt, even if it’s on many smaller items. It doesn’t even matter if your limit is low; what lenders look at is the percentage of your limit that is used. Another thing that may make lenders look more closely is a change of jobs. If you’ve simply moved from one company to another in the same occupation, you’re fine. But if you switched career paths or lost your job entirely, that looks like instability. All this advice continues to be relevant throughout the purchasing process — don’t make any big financial decisions until the transaction has closed.

Some other mistakes relate more specifically to real estate and not simple economic decisions. Many buyers neglect to get a preapproval before they start looking, thinking it’s a long process that they don’t want to get involved in before they find something. Yes, it does take time, but if you wait, that house you found may not be available anymore by the time the process is finished. Not only is this something sellers look for, preapproval will help you figure out what you can afford. It makes the search a lot easier if done ahead of time. Don’t try to expedite the process by just going to the first lender you find, though. The rates quoted in the news are always averages. Not every lender is going to have the same rates, and the rate isn’t the same for every situation. And contrary to popular belief, your personal bank doesn’t owe you the best rates just for being their customer. Once you know what you can afford, figure out how much your down payment is going to be. Don’t make the mistake of thinking it has to be 20% or more. That is frequently a good idea, since it avoids private mortgage insurance, but it’s still possible that paying the PMI and putting less down is a better financial decision for you. Plus, it’s almost never a good idea to put off buying solely because you can’t afford to put down 20%.

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More: https://themortgagereports.com/84659/what-not-to-do-before-buying-a-house

Competition Starting to Soften

The 2021 housing market has experienced heavy competition from buyers, with most sellers receiving multiple high-priced offers. The peak was back in April, with nearly three-quarters — 74.3% — of listings generating at least two offers. While the numbers have been dropping off, with July’s percentage at 62.1%, it wasn’t until August that it fell just slightly below the prior year’s percentage for the month, at 58.8%.

The percentage is still over half, but that’s generally pretty normal. The current numbers are to be expected as far as seasonal variation. What’s even more indicative of a return to normality is the drop in number of offers and speed of sale. Agents are noticing decreases from 25-30 offers to 5-7 offers. In addition, a bit fewer offers are above asking price.

That’s just national averages, though. There are still some highly competitive markets, and the most competitive ones are actually becoming more so. 8 of the 10 most competitive markets actually had an increase in bidding wars between July and August.

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More: https://www.marketwatch.com/story/a-lot-of-buyers-have-had-enough-bidding-wars-for-homes-falls-to-lowest-level-since-2020-11631550977

Not All Basements Are Created Equal

A significant number of homes don’t have a basement at all, but there are more distinctions than simply whether or not there is one. There are actually three different methods of basement construction, and which method is used could affect durability and maintenance requirements. The three types of construction are concrete, block masonry, and precast panels.

Concrete basements are the most common and certainly have some advantages over the other types, but also have some disadvantages. Concrete basements are the most resilient, so are very unlikely to cave in. They are also fireproof. Though they are water resistant, they’re not entirely waterproof so it’s important to maintain the humidity levels and check for mold or mildew. A concrete basement will improve a home’s property value.

The least expensive type of construction is block masonry, composed of connected cinder blocks or masonry units. Unfortunately, that also means it has the fewest advantages. One thing it definitely has going for it is that it’s by far the most waterproof construction. Block masonry is still highly resilient, but for full durability it needs to be reinforced with steel rebar.

Precast panel basements, actually made in another location before being transported to the construction site, share some qualities of both the other types. Like block masonry, precast panels are waterproof, but like concrete basements, they require maintenance to stay that way. Precast panel basements can be susceptible to pest infestations, but this can be prevented with boric acid treatment. Fortunately, the individual panels don’t have any issues with resilience; it’s only the joints that need to be maintained.

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Don’t Skip Out on Title Insurance

Title insurance is one of those additional costs of purchasing a home that, unlike many other fees, is actually optional. Most people don’t want to deal with additional fees and ignore title insurance. That’s not necessarily a good idea. If you can afford to pay the fee, it’s a good investment.

There aren’t very many options available for homebuyer protection, and title insurance is one of the best. Title insurers have the best access to records and most experience detecting problems of any form of homeowner protection. Fraud is on the rise in the electronic age, and title insurance protects the homeowner from both fraudulent claims and losses. You may also not realize that title insurance, unlike most forms of insurance, is just a one-time charge. You won’t be saddled with monthly or annual payments.

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Today’s Housing Bubble Will Likely Deflate — Not Pop

There are many similarities and also many differences between the current recession and the Great Recession of 2008. Two of the core similarities — and the ones that define a housing bubble — are that prices are accelerating faster than purchasing power, and that there are changes in consumer values. While legislation and shifting values have addressed some of the issues that contributed to the Great Recession, most notably subprime lending, ultimately the crisis was a relatively natural economic response to the events that triggered it and followed a normal boom-bust-rebound cycle. The 2020 recession is somewhat of a reflection of this, though the specifics differ. The economy was already headed towards a natural downturn in the cycle, but the process was sped up by the COVID pandemic.

That’s where the similarities end, though. While nearly everything is ultimately tied to the economy in some way, it’s the pandemic, more so than economic conditions, that prompted valuation changes. Preference for larger homes and home entertainment, rather than homes closer to work and out-of-home entertainment, will probably continue as long as work-from-home remains a common practice, which will likely last a while. It’s true that people are leaving large cities and moving to cheaper areas, but this is more so out of necessity than desire. Peoples’ tastes have actually become more expensive, even if their wallet isn’t any larger. An economic downturn wouldn’t prompt this behavior. The only reason this isn’t currently sustainable is that the market hasn’t recovered yet. Once it does, probably around 2024-2025, it’s likely that the bubble will slowly deflate rather than explode.

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More: https://journal.firsttuesday.us/shifting-fundamentals-what-2008-can-teach-agents-about-2021/79690/