Bowling Green Buzz

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New articles posted every Monday, Wednesday, and Friday.

Sept. 5, 2016

Nope, Still Not a Bubble

Not a bubble

I’m almost sick of writing this, but every now and then it seems people need a reminder.

We are not experiencing, despite what some may say, a national real estate bubble.

First off, all real estate is local. So the very notion of a “national” bubble is somewhat sketchy. Yes, the real estate climate leading up to the financial crisis of 2007-08, was an event that largely affected the entire nation. But you have to imagine that entire nation being made up of individual markets.

Last time, there were very few, if any, individual markets that got swept up in all the fury. It started with a handful of markets, then spread as credit got easier and easier and speculation ran rampant.

And sure, in some markets home prices are appreciating at rates we saw around the last bubble. But in those markets, such as San Francisco, the main driver is high-paying jobs. That’s a fundamental factor – people moving in and making a lot of money. That’s going to increase demand for high-priced homes and drive high prices higher.

And if fundamentals are what’s driving prices upward, there is no reason to panic.

Last time around, as the American public’s appetite for real estate grew, so did lenders’ willingness to feed them. If you had a pulse, you could get a mortgage. One of the commonalities that every bubble has – stocks, commodities, real estate, you name it – is a widespread availability of funds and credit. Easy money means every Tom, Dick and Harry can get in on the action, whether they’re financially able to support it or not.

This time, credit isn’t so easy, as many would-be homeowners can attest. So not everyone CAN get in on the game this time, and there certainly seems to be no over-investment into mortgages that exceed the value of the homes they finance. That was another problem in the early part of this century.

The other important thing to note is that while, yes, residential building is at a nearly decade-long high, it was so down for so many years. The annualized rate of new homes in this country is somewhere around half of what it was in 2005 or 2006. There is much less speculation now, no builders who are doubling their money on properties in the time it takes to build them.

And that’s because the individual investor of today isn’t as speculative. Remember the condo markets in places like Miami right after the bubble burst? New construction was going for buy-one-get-one deals because the pace of building was built entirely on speculation, more specifically the constant flow of speculative investors.

But once bitten, twice shy, they say. Speculation gets people burnt, and people don’t touch the hot iron with as much eagerness the next time around. Besides, even if they wanted to, there’s no easy money that allows them to do it all that easily (see above).

Nobody should be surprised that home prices have escalated the way they have. After the crash, prices dropped so low that they basically had only one way to go. And guess what? The economy recovered. People got jobs. After years of being afraid to buy a home or not being able to afford it, pent-up demand was unleashed.

And when supply is low – and it is, for reasons on top of the aforementioned lack of new construction, too – and demand is high, what happens to prices? They rise. In many places, they have risen rapidly.

But that alone doesn’t a bubble make.

Over-investment makes a bubble. Speculation makes a bubble. Widespread public participation in the frenzy makes a bubble. Prices that exceed the fundamental value of what’s being sold make a bubble.

That’s not what’s going on. So, nope, this still isn’t a bubble.

Posted in Real Estate
Aug. 22, 2016

Nobody Knows What Rates Will Do

Fed meeting

If someone tells you they know that mortgage interest rates are going to rise after the Federal Reserve meets next month, they are lying.

Nobody, not even the Fed, knows what interest rates will do.

That’s what you can take from the recently released minutes of the Fed’s last meeting, at which they did not raise the federal funds rate. That’s the rate banks are charged to borrow the money they lend, which impacts the rates that they charge.

The decision to not raise the during the June meeting came with the same commentary all the other recent decisions following December’s decision to raise it from zero. That is the Fed saying “We’re not raising the rate now. But we might in the near future.”

“Or we might not.”

The minutes at the last meeting suggest there’s a split of sentiment on the board, with some voting members ready to raise rates and others saying “whoa, Nelly.” At some point the reins of this monetary manipulation have to come off, but every time you think you know when they might, nope, you’re still left to guess.

Just like everybody else. Including, apparently, the Fed itself.

Honestly, after two months of solid unemployment statistics – whether you think they’re measured accurately is another story for another time – I believed the Fed would put in a hike in September. Even with evidence that the economy did not grow as much in the first half of the year as some expected, I thought an upbeat jobs report would sway the Fed.

But what do I know? What does anyone know?

At some level, you have to believe some of these members are dying to dial that rate up even just a little, if for no other reason than to kind of see what happens. The markets are like a person whose broken legs have had him in a body cast forever, and he stands up and tries to walk for the first time in eight weeks.

That person’s gait might be awkward. The experience might be somewhat painful. He might stumble and have to catch himself.

But that walk eventually has to take place. You can keep a healing economy in the proverbial cast for only so long before it must come off.

Again, some of these people have to be looking at it this way. Which led me to believe low inflation and more jobs would foster a stronger mood for taking that cast off. Seeing the minutes, though, and the divide among the Fed members, I don’t think that sentiment is as strong as I thought it was only a couple of weeks ago.

And maybe it has something to do with the election. This is already maybe the craziest presidential election season I’ve ever been through. Typically, in presidential election years, the economy gets a little wonky as November draws nearer. Markets are volatile. The dollar roller-coasters. It’s quite possible the Fed doesn’t want to throw higher interest rates into the mix in the middle of all that, too.

So my revised guess is that after the election, the Fed will raise the rate at their December meeting.

Unless between now and then unemployment goes back up. Or the economy stops growing altogether. Or housing markets tighten further. Or oil prices somehow surge. Or Hilary becomes president. Or Trump does. Or … well, you get the picture.

Anything could happen between now and September’s meeting let alone December’s, which means I don’t have any idea if interest rates will rise even then.

Nobody does. 

Posted in Real Estate
Aug. 8, 2016

The Cycle of Low Inventory

 Low inventory cycle

Recent data show that the number of homes for sale in the United States is at its lowest level since before the global recession hit. The “inventory” of unsold homes on the market, has been estimated by the National Association of Realtors to be around a 4.6-month supply, meaning at the current rate of sales, it would take 4.6 months to sell them.

Now, what the NAR considers a “healthy” inventory of homes on the market is a six-month supply. You don’t have to be a genius to figure out, then, that what’s going on now would be called “unhealthy.”

And the reasons for it are numerous, and you can blame this or that – slow new home construction, underwater loans, etc. – for what have become seller’s markets in many cities across the country. But what’s not debatable is that as good as the words “seller’s market” sound to someone thinking of selling their home, the truth is that a heavily leaning market – buyer or seller – is usually not healthy for anybody.

And once inventory is low, it tends to stay low for a while. The cycle of low inventory can be quite a circular one.

Think about what’s necessary for a market’s inventory of homes to grow to, and stay at, a healthy level. Sellers. If you want homes on the market, people have to be willing to sell.

And as equity returned to homeowners after the foreclosure fallout, there seemed to be more willing sellers. People who were waiting until they could get out from underwater on loans, finally put their homes up for sale when they could. The thing is, when someone sells a home, they now need somewhere new to live.

And guess what? In an area where inventory is low, their options are fewer. The bidding war that they might have enjoyed as sellers isn’t quite a fun when you’re on the other side. And make no mistake, there are people who would like to sell their home but are not doing so, simply because they are worried about finding their next home. If you’re not willing to change markets, you’re at the mercy of the market conditions.

So what happens? Faced with the prospect of running into problems finding their next home, people sit tight. They wait. They don’t put their house on the market. And what that does is, obviously, keep even fewer homes off the market, keeping inventory continually low.

And this isn’t a problem everywhere. Sure, it’s very apparent in Silicon Valley or Phoenix, or Denver, where inventory is so tight that people who might want to sell a home can’t afford the “move-up” that many households make. I’ve written this before, but if you want to know the real reason behind first-time buyers’ number being low, it’s got a good deal to do with the people living in starter homes not being willing to sell to first-timers because they can’t touch the type of house that’s a step up.

If you bought a house for $100,000 in an area that has since taken off, maybe it’s worth $300,000 now. That means the $200,000 house that you’d normally consider moving up to is now selling for around $600,000. Even with $200,000 in equity to put down on the new home, you’re talking about having to qualify for a $400,000 mortgage. You have to earn a decent living to qualify for that amount.

And when giving the choice between making a lateral move – a new home but not a step up – or staying in the home you’re already in, well, what would you do? Exactly. Which is why areas with low inventory typically languish in low-inventory limbo for quite some time.

But markets do break out of the cycle eventually. Sales volume goes down as pent-up demand is fed, and that, in turn, means home prices that don’t rise as rapidly as they have been in some areas. For as much credence is given to first-time buyers, real estate is really more a trickle-down thing. As the top levels reach unaffordable levels, it’s the resulting lack of inventory that makes the next level down less available and, therefore, more pricey.

So while it might sound nice to sellers that they’re in sellers’ market, the reality is that you quickly turn buyer most of the time. And then you’re caught in the low-inventory cycle, which in the long run, isn’t good for anybody.

Posted in Real Estate
Aug. 2, 2016

Make Sure You Can Sleep at Night

Dog sleeping

Should I rent or buy? Should I pay off my mortgage early? Should I refinance? Should I buy as much house as I can afford?

These questions are asked over and over and over and over. They’re a bit tricky to answer because everyone’s situations are different. Renting vs. buying is not a one-size-fits-all proposition. You might read things like “The typical homebuyer is married, 33 years old, with 1.5 kids and blah, blah, blah,” but the truth is that there is no such thing as a typical home buyer.

Every buyer, every individual situation is unique. Really.

Should I buy a home? Yes, I should buy a home. Should you? Should your parents? Should Gwen from accounting? It all depends. The rent vs. buy question is the same for all of them, but the answer might be different for each of them. How can an either-or question have that many answers?

Well, when you’re dealing with so many truly individual situations, the answers usually go something like “But, IF…” or “Rent, BUT…”. Every answer has to come with some kind of qualifier. And that’s the case no matter who you are or where you are.

Except that there’s one way to answer that DOES apply the same to every single real estate question. At least all the “Should I…” questions. Here’s the ultra-valuable, always correct answer to all those questions:

Just make sure you can sleep at night.

That’s a more dramatic way of saying: “Do what you’re comfortable with.”

All the dollars-and-cents facts, wisdom or whatever that make buying vs. renting seem a no-brainer don’t mean a think if you’re constantly going to be worried about owning a home. Taking the $20,000 you have saved up and paying off the last couple of years of your mortgage could make total sense on paper, but if you’re going to lie awake in bed wondering what would become of that $20,000 had you invested it instead, it’s not worth it.

If you are thinking of selling your home because homes in your neighborhood are fetching ridiculous prices and you stand to make a bunch of money, but you love living there, you might regret selling for a long time. Dollars, you see, often look one way on paper but have a way of affecting your day-to-day life a little differently. We don’t live our lives on paper.

You can do all the math you want. Thinking of refinancing? Figure out how long you’re going to stay in the home. Do the calculations about how long it will take to recoup your up-front costs at a lower rate. Or figure how much more it will cost you each month to go from your 30-year loan to a 15-year. Is that worth it?

Financially, “worth it” means something different than “worth it” in the grand scheme of things. Your decisions have to fit into your life. If after all that math, you can answer “Yes” to the “Will I be able to sleep at night” question, meaning you’re comfortable with the outcome, then it’s the right move.

But if you can’t get comfortable with it now, it’s probably not going to get any easier. All the numbers can add up, but if you’re not comfortable, then it’s probably not the right move.

Of course, this applies to life in general, not just real estate. You have to be comfortable with the potential consequences of just about every decision you make if you want to live a low-stress life. It’s just that in real estate it’s a little different because so often we “run the numbers” and expect them to give answers that, mostly, are guides to a decision, NOT decision-makers.

People are the decision-makers. Sure, it appears on the surface that real estate decisions are about numbers. But real estate has always been much, much more about people.

And every one of those people is different. Not just their income levels, or credit scores or wants and needs in a home. But in their comfort levels, long-term concerns and psyches. Different people mean different answers, numbers be damned.

Just make sure you can sleep at night.

Posted in Life
July 26, 2016

More Important: Rates or Price

1980s house

Were you alive in 1980? Maybe you weren’t, but maybe your parents were. Ask them what they paid for a house back in those days.

Back then, in a lot of places in the United States, $100,000 was a lot of money for a home. Also back then, somebody taking out a loan to buy such a house probably landed a 30-year mortgage with an interest rate somewhere in the neighborhood of 18 percent, give or take.

A $100,000 home loan with an interest rate of 17 percent would cost a household $1,426 in principal and interest per month. These days, a $100,000 loan at a very attainable rate of 3.75 would equate to just $464 per month. That means that 36 years ago, the same home loan cost nearly $1,000 per month more. And that $1,426 was in 1980 dollars, so figuring inflation into the mix, the gap is even wider. In fact, it’s more a chasm than a gap.

For $1,426 per month today – again, forget inflation – you could finance $260,000 worth of home.

Which leads us to an important question, given today’s climate of rapidly rising home prices and near rock-bottom rates: What’s more important, a home’s price or the interest rate on a loan?

In terms of initial impact, qualifying for a mortgage doesn’t depend on either or. It depends solely on whether one can afford the monthly payment. It doesn’t matter if it’s a $100,000 house or a $200,000 house. If you can afford the monthly payment, you can qualify for the loan. In the example above – an exaggerated one, for sure – the lower rate makes the home much more affordable.

But in a different, more realistic, example, it can be almost as big. Let’s say you were looking for a home in 2007, when rates were around 7 percent for a 30-year, fixed-rate mortgage. If you qualified for a $100,000 loan then, your P-and-I would come out to about $667 on a $100,000 loan. Today, at the aforementioned 3.75 percent, and all other circumstances the same, you could qualify for a $144,000 loan.

I have always said that the most important factor in deciding to buy a home is whether you can afford it. And affording a home involves first and foremost the monthly payment. In those terms, it doesn’t matter which – a low purchase price or lower interest rate – allows you to afford the monthly payment.

But down payments also fall into the affordability category. Maybe you qualify for that $144,000 loan, but buying more house also means putting up more cash up front for a down payment. And down payments are determined by purchase price, not interest rates.

Let’s assume, for sake of simple math, that you’ve got a loan product with a 10-percent down payment. On that $100,000 loan you qualify for at 7 percent, that means a max purchase price of around $111,000. Your down payment would be around $10,000.

On that $144,000 loan you can get because rates are at 3.75 percent, 10-percent down would mean a purchase price of $160,000. That means that with a 10-percent down payment, you’re looking at a $111,000 home vs. a $160,000 home – not a small difference. The difference in the down payments, however, is $6,000 -- $10,000 vs. $16,000.

That means for an extra $6,000 up front, you can afford a home that costs $49,000 more. It’s nothing to sneeze at.

There’s never an exact, perfect time to buy a home if you’re simply looking to maximize your savings. You have to take into account your ability to afford it now and in the future. You have to take into account how long you’re planning on staying – and the longer you plan on staying, the more important the interest rate is relative to the down payment amount. You have to plan on repairs and maintenance, as well as your ability to maintain an emergency fund.

A higher down payment is one-time thing. A lower interest rate on a fixed-rate loan, is a monthly savings that lasts as long as 30 years.

Affordability is a personal situation. Banks can give you ratios and that sort of thing, but it’s up to you to determine what you are comfortable spending. In reality, for most people a $100,000 price vs. $120,000 isn’t as important as what it costs, in actual dollars, out of your wallet each and every month.

Posted in Real Estate
July 19, 2016

Use Your Platform

This isn’t most fun time to be an American. Politics are rife with divisiveness, and there are racial tensions unlike the U.S. has seen since, probably, the civil rights era of the 1960s.

A headline the other day in an esteemed, national publication read: “Is America on the Path to Ruin?” It was enough to make one stop and think about the downfall of other great societies of the past, such as Rome and Greece. Can this divisiveness bring us down?

Only if we let it.

No matter what you believe about protest groups, police, stupid internet hashtags or even what you believe about people of different races from you, you probably will agree that unless we all figure out a way to make peace with all our differences, the country isn’t going to become any better a place to live.

Minority groups aren’t going to do it. Police departments aren’t going to do it. Politicians aren’t going to do it. WE have to do it. Us. All of us.

That’s most likely what NBA stars LeBron James, Carmelo Anthony, Dwyane Wade and Chris Paul had on their minds when they opened the ESPN awards the other night by speaking about change in America. They argued against gun violence, racism, hate and divisiveness. And quite a bit of America, at least on social media, responded with one message:

“Stick to sports.”

That response made me think about Muhammad Ali, whose recent death, decades later, brought up ill will toward him, too, because he used his platform to protest the draft during the Vietnam war. A half-a-century later, the guy dies, and people still criticize him for that. Stick to sports.

Why is it that we discourage sports stars and other celebrities from speaking their minds on topics that are important? James, Wade and his friends are the best in the world at what they do. They get a lot of attention. So they know they have the ability to get a worthy message heard. Why do so many people resent that they use their platform?

If Bill Gates, Paul Allen, Mark Zuckerberg and Jeff Bezos stood on a stage and said the same thing, made a similar call to action, would people be saying “Stick to computers?” Heck, Bill Gates heads one of the largest charitable foundations in the world and DOES speak out on many social issues. Does anybody tell him “Stick to technology?”

I may or may not disagree with whoever says whatever, whenever, but I think that if you believe in something and have a platform to do something about it, you’d better use it. The whistleblower with a Twitter account. The anonymous caller to authorities reporting a crime. A small business owner with an e-newsletter. If believe something has to change, and you have the ability to affect change, you’d better speak up.

There are far too many people in this world who have no voice, no means of speaking up for what’s right for those who do have a platform not use it. There’s no justice in that. And this world is unjust enough.

I want people to speak up, even if I disagree with their position. So many problems this country has it has because things aren’t spoken about often enough. So if someone influential with a platform to use that influence merely gets people talking, dialogue started, then it’s necessary. We cannot and will not ever iron these things out if we do not talk about them.

And I don’t mean groups standing on opposite sides of the street shouting each other, throwing things, or, God forbid, shooting. I mean real, meaningful conversation that might be uncomfortable but is necessary if we ever hope to all get along. So if it’s going to take four famous millionaires who happen to play sports to kick it off, so be it. If we all did a little better job of starting the conversations that need to be had, of spreading the word that needs to be spread, maybe we wouldn’t have all the problems we have.

Use your platform.

Posted in Life
July 11, 2016

How to Interpret a San Francisco Slowdown

San Francisco

Before getting into how much the San Francisco housing market is slowing down and what that might mean, if anything, for other U.S. housing markets, it’s first important to understand just how much it heated up.

In the past four years, the median sales price for a home in San Francisco rose by 66 percent. That median sales price at the end of May, the latest month for which sales data were available, was $1.38 million.

In other words, if you bought a house in May of 2012 for $835,000 – then around the median price – it would have been worth $545,000 this past May. That’s a half-million dollars of net worth added in 48 months for owning a home. Not a bad investment.

But it would appear the brakes have been slammed on the price appreciation. In April and May of this year, prices rose only 2 percent from the same period last year. That figure was 23 percent for the same time period the year before that, obviously quite a difference.

So what does San Fran have to do with the rest of the country?

Well, there are some things that happened during the real estate bubble and its subsequent burst, as well as during the recovery that can give us some possible insight into markets across the country. As you know, all real estate is local – there really is no true “national” housing market – but it’s worth looking at history and trends that might let us predict where things are heading in multiple markets.

Heading into what became a mortgage crisis, there were certain cities that got “hot” the soonest, then went bust the soonest, fell the furthest, and/or came back the soonest once the recovery began. Sure, we see news stories about $1 homes in Detroit or the blight in Cleveland, but those are mostly markets that aren’t recovering as quickly because of population decline and job losses.

And those cities, while recovering the slowest, did not fall the soonest or the hardest when the clock struck midnight on the real estate bubble a decade ago.

Those were instead places like Phoenix, Las Vegas, Miami, San Jose, Calif., and, yep, San Francisco. The bubble burst in “sand and sun” markets much earlier than elsewhere. It took quite some time before the entire country was in the biggest housing downturn ever.

In fact, by the time things were hitting their price troughs in some markets, prices were already creeping back up in some areas of those markets. Those markets were the first where home values returned to their peak values. Those were the first to fall, the first to get up and the first to take off fast again.

And, just like when it all came crashing down, other markets are following.

So when we see the booming San Francisco market finally slowing down its crazy price-growth rate, see it actually drop off of Zillow’s top 20 “hottest” market list, it’s logical to expect other markets to follow. True, some markets never saw crazy 23-percent gains in a year the way San Fran did, but many during the recovery have enjoyed rapid rises. And now that the volatility in a formerly hot market like San Francisco is stabilizing a bit, we can expect price appreciation to cool off in other markets, too. 

I can’t really explain why, economic fundamentals-wise. I just know that the ups and downs, peaks and valleys of certain markets fell into definitive price trends faster than most other markets. That happened both on the way up the first time, on the way down, and on the way back up again.

It’s actually probably good for the people of San Francisco that prices seem to be cooling a bit. According to some data, only about 13 percent of the people there can afford a median sales price home. On different scales across the country, it’s not bad news either.

Sure, homeowners who enjoy double-digit equity gains each year help strengthen the overall economy. 

But so do buyers for whom housing becomes, and/or remains affordable.

So thanks, San Fran.

Posted in Real Estate
July 4, 2016

Does Brexit Affect U.S. Real Estate?

In case you haven’t heard, the Brits voted for their country to leave the European Union. Whether that really occurs might remain to be seen, but there’s no doubt the vote to exit the EU has already had a major impact on financial markets. As in, maybe wait a while before you look at your 401(k) values.

Obviously, the vote did a number in the currency markets – the British pound taking a beating and safe havens like the Yen benefitting. That’s awesome if you’re a currency trader who bet correctly, but what about the rest of us? What’s the answer to the question we really want to know…

“Does Brexit affect U.S. real estate?”

The answer is already yes. Well, sort of.

In case you’ve been living under a rock for the last few years, interest rates on home loans are low. They’ve been low. When we thought they were going to go higher, they stayed low. And after the Brexit vote, they went lower.

There was a statistic somebody came up with that showed that since the beginning of the year to now, rates have dropped low enough for a homebuyer to be able to afford a house with an 8-percent higher sales price. In other words, whatever your monthly payment was going to be on that $200,000 home you had your eye on in January, the same payment will get you a $216,000 home. It gives buyers some wiggle room.

And it was a crazy spring for home buying. Even though there were signs of the overall economy weakening, it was the strongest spring for home sales volume in a while. Lower rates only fuel the fire.

There will also likely be some international buyers who will turn to the U.S. for real estate investment as now it appears a safer play than in the U.K, or, maybe, anywhere in Europe. This in no way means the typical U.S. homebuyer is going to face any stiffer competition from foreign buyers. It’s likely to affect commercial real estate investment the most, and maybe super high-end homes.

That said, a stronger dollar could also turn off international buyers. It would be safe to say that “destination” markets – the sand and sun states – will not attract as many wealthy buyers from the U.K.

There’s also legitimate concern that the already-softening U.S. economy will become softer. There are American companies that will face adversity because they have operations in Europe. What happens when those companies start laying off workers? What happens when stagnant wage growth here at home gets even more gummed up because of the problems overseas?

It’s hard to predict the answers to those questions. What’s easy to see, however, is a U.S. housing recovery that has endured some other unusual economic adversities and still chugged along.

One area of more concrete concern might be the availability of credit. I’ve written before that rising mortgage interest rates might actually help more people buy homes, as banks tend to loosen the purse strings when lending money is profitable. When rates are actually going lower, nothing’s getting looser. At least not for purchase loans. Less-risky refinances are what banks turn to when the reward isn’t as great, so homeowners in a position to refinance are actually probably in a pretty good position now.

So to sum this all up:

  • Home sales are likely to continue strong, though price appreciation could slow as concerns for the overall economy produce fewer buyers.
  • Foreign investment in some high-demand areas will likely tail off, especially from investors in the U.K.
  • Lowered interest rates could tighten credit, although refinances should boom.
  • It remains to be seen how a U.K recession will affect U.S. companies. Worsening employment figures here always impact home sales.

So the answer to the original question, “Does Brexit affect U.S. home sales?” is probably yes. How soon and how much, as well as what, specifically, remains to be seen.

Posted in Home Ownership
June 28, 2016

Top Green Remodeling Trends for 2016

Remodeling isn’t just about making luxurious enhancements. At Modernize, we’re also invested in taking better care of the earth. Revamping your kitchen, adding personality to your walls, and making some futuristic roof additions—all with sustainability in mind—can transform your house into an environmentally-friendly oasis.

Bold paint colors

Bold Wall Colors

Changing the color of our walls is often the first thing most of us think of when we want to liven up a room—and for good reason. Painting is a simple and inexpensive change that transforms any living area. Sherwin-Williams has a gorgeous “color forecast” list for both 2016 and 2017 available, or you can check out the esteemed Pantone’s Color of the Year to get your inspiration underway.

After playing with different color choices, it’s time to consider the environmentally “green” aspect of paints. Scientists have discovered that indoor air is actually more polluted than outdoors. This is partially due to the ongoing toxins in house paint that continue to emit years after application. Volatile organic compounds, or VOCs, were once essential to high-quality paints. Luckily, low- and zero-VOCs are now widely available.

Zero-VOC paints have 5 grams/liter or less of harmful pollutants. (Adding a colorant can up this count to the still very low 10 grams/liter.) Low-VOCs contain 200 grams/liter or less of the unwanted chemicals and might still secrete an odor for a short amount of time. A list of compliant paints can be found here.

Kitchen

Focus on the Kitchen

After coloring the walls, turn your attention to the kitchen. Small changes can make your kitchen greener, such as adding in a recycling station and installing LED lighting. LEDs are known to use at least 75 percent less energy and last 25 times longer than incandescent bulbs, and they produce very little heat. Cool, bright lighting in the kitchen makes it easier to see while cooking and keeps it cooler when the oven is heating up the house.

For countertops, terrazzo tile is a confident and contemporary choice. This easy-to-clean surface is available in a variety of colors, all of which are made with recycled glass and stone from manufactures and post-consumer items like glass bottles and windshields. The colorful and/or plain variously-shaped glass pieces rest in concrete or a resin compound. Once you see how versatile and bold the surface is, you can even consider using it as a flooring material.

Solar panels

Installing Solar Panels  

You can take one giant step toward green remodeling by walking outside and moving your focus to the roof. Image your rooftop crowned with the ultimate indicator of a friend of the environment—solar panels. Many homeowners credit solar panels as helping them to become more cognizant of the energy they use, essentially remodeling their electricity mindset. There’s a financial incentive to converting to solar in many states, which can help to recoup your investment. For example, in Kentucky, residents can receive “an income tax credit worth $3 for every watt their system’s capacity is rated, with a $500 maximum incentive.”

Moving On

Updating your home can be an intimidating task, but it’s also rewardingly enjoyable! Taking the time to be more mindful about upgrades—from stunning walls, to a reformed kitchen, to special rooftop additions—will give you a home that’s not only stylish, but healthier for our environment, too. 

June 28, 2016

Dear First-Time Home Buyer

First-time homebuyer

Dear First-Time Home Buyer,

So you’re a renter. You’re part of the population that has grown so much since the financial crisis, after which homeownership rates dropped by around 7 percent across the United States.

That drop in ownership, combined with the coming of age of a large generation of Millennials, has helped increase the total number of renter households in the U.S. by about 8 million over the past 10 or so years. You probably know what that’s done to rental rates.

According to this survey you just filled out, you, like 3 of every 4 renters, wants to someday own your own home. “Wants” isn’t the same as “can,” of course, and like a lot of others in the “wants” category, you worry about affordability. In fact, it’s the No. 1 thing that stands in renters’ way.

And it’s no surprise. Even though mortgage interest rates are super-low, home prices themselves have climbed steadily in most places and skyrocketed in others. But prices and interest rates aren’t what’s causing the affordability problem for you.

Your problem, like many in the typical first-timer demographic, is centered much more around two very specific things:

1. Debt-to-income ratios

2. Down payments

I’m never going to be one of those people who blame the home-buying challenges of people like you solely on student-loan debt. I realize that a college degree is a near-guarantee of better income for a lifetime, and that for some jobs, it’s necessary. If your choice is between borrowing $50,000 for college to get a job paying $75,000 per year, or staying debt-free and working that $10-an-hour job at Kwik-e-Mart, you don’t have much of a choice. Actually, you can do the math to figure out how many years it will take of earning the two vastly different salaries to break even on the $50,000 debt.

But that debt shows up on your credit profile. If you’re trying to buy a home and your debt-to-income ratio (total monthly debt obligations divided by your monthly income) is higher than 36 percent, it’s going to be hard for you to get a home. That $250 per month might be the difference between looking at $100,000 homes and, say, $80,000. If you live in an area with no $80,000 homes, you’re out of luck.

Of course, you could pay down that debt faster, so that your DTI is lower. But every dollar you spend paying down that debt, along with paying that continuously rising rent of yours, keeps you from saving as much for a down payment. And without a down payment, you also can’t buy a home. Even 10-percent down on a $100,000 house is $10,000, and the measly $150 you put away each month will require five-and-a-half years to grow to that amount.

And maybe that’s not even the worst-case scenario. I think those in worse shape might be the ones who borrow all that money for college, then have to move to specific places because that’s where the jobs are. The problem is, where the jobs are are also the places with the highest housing costs. So while you move to get a job, and earn a good buck, you could also be netting less per month after figuring in rent.

And that leaves you with very little money to either pay down debt OR save for a down payment. Heck, there comes a point for many people in your situation where the monthly payments to own a home might be less than renting. But without a down payment, you can’t get to that point.

So what’s the answer? Well, if you really, truly want to be a homeowner, the brutal truth is this: You have to do that where you can afford it.

This might mean not moving to Houston or San Francisco or wherever the job that fits your degree is. It might mean staying in Indianapolis or Pittsburgh and making $15,000 a year less but renting a place that lets you save for a larger down payment and/or pay down that student debt. It might not be the thing you want to do, but if you REALLY want to own your own home, there are two things that have to be accomplished: Have a down payment, and qualify for a loan. That means paying down debt and saving your money.

If you can’t do those things because of how high your rent is now, you can stay there and stay a renter, or move somewhere where you can become the homeowner you want to be.

Sincerely,

The New Reality

Posted in Real Estate