Sep 08

A good article on the current try at zero-down mortgages.

Why “zero-down” mortgages are gaining ground
https://www.axios.com/2022/09/08/banks-mortgages-zero-down-payment?

Details: Bank of America’s “zero down payment” loans are a bit of a misnomer. They do technically require a down payment, but the bank is offering grants of as much as $15,000 to cover it.

So buyers don’t have to come up with the down payment, but they are not borrowing the entire cost of the home, and they wind up holding some measure of equity right off the bat.
That’s distinct from the zero-down loans that, along with questionable underwriting standards, helped make such a mess in the run-up to the Great Recession.

It is great that more folks have the opportunity to buy homes and create equity and stability. However, for these programs to achieve what they set out to, they cannot facilitate the purchase and then leave the new homeowner to fend for themselves, but instead also provide resources for the buyer’s future success.

A significant problem with these first-time buyer programs is they focus on the sale and do not offer ongoing support for the buyers, many of whom are generational renters. When something needs repair, even if you broke it, call the landlord or the city. Problems with neighbors, move. Financial issues, stretch out rent payments as far as you can. Landlords in lower-income neighborhoods are often the unwilling lender, the financial rubberband.

A prime example: Around 2006 or 07, one of our long-term, great renters bought a home. A couple of years later, she was in our lobby crying, ‘Would we rent to her again?’ Child Protective Services threatened to take her kids because one of them mentioned to their teacher that they had not had hot water in months. The former tenant told me she called Blau Plumbing to fix it. They told her the water heater was bad and needed replacing at $900, which she could not afford. I sent one of my maintenance guys out. The water heater was maybe five years old, in good shape, and needed a $6 thermo coupling.

A well-designed program would have had a helpline that the new homeowners could call for advice.

Aug 09

Maybe this falls under the heading of “No Good Deed Goes Unpunished” Sounds like the property owner had kept the rent well below market for years, and now is being attacked for bringing it close to market rate.

Her Rent Is Going Up $700 A Month Because Her Landlord Claims That’s What The Apartment Is Worth

Unfortunately, Grace’s case is not uncommon. According to Rentec Direct, “Most landlords do not regularly raise their rent to match the cost of owning and maintaining a property,” the site explained.

What ends up happening is after 5 years at a steady rental rate, the owner will realize that a rent increase is necessary to keep up with increasing property taxes, maintenance, and market rates.”

Stories like this lead to calls for rent control. If owners kept their rents at market rate instead of large increases, there would be less conflict.  However, most owners, including myself, are reluctant to raise the rents of existing renters.

Jul 13

With inflation according to the Wall Street Journal: “…last month’s consumer-price index increased 5.4% from a year ago, the highest 12-month rate since August 2008.

I was in this business in the late 70s and early 80s, where inflation reached 13.3% YoY. In October 1981 a 30 year fixed FHA mortgage for a primary residence was 18.45% APR. Crazy stuff. Real unemployment was 10.8% in 1982.

For those who are unfamiliar with inflation, here is a neat little article that explains it in an interesting manner.
https://finmasters.com/how-inflation-works/

Jump down to the “Who Benefits…” section to see opportunities and dangers. (Spoiler alert – owners of leveraged physical assets with fixed rate debt typically do well)

Aug 23

Bold highlights are mine:

https://www.zillow.com/research/zillow-weekly-market-report-27151/

 

Previous Zillow research found that this recession’s wave of layoffs disproportionately affected renters, and now the unemployed are having even more trouble paying their bills. The National Multifamily Housing Council’s rent payment tracker showed a two-percentage point increase in the share of renters who had not paid August rent as of August 13, compared to the same time in 2019. While many renters are currently covered by eviction moratoria, very few can expect rent forgiveness or extensions on the same scale, or structured similarly, to the forbearance policies that have protected homeowners. Consequently, many renters are moving out and looking for other shelter when unable to pay rent. Millions of young adults, predominantly 18-25 year-olds, moved back in with their parents or grandparents this spring. And as detailed above, many of the most financially secure renters in the Millennial generation are taking advantage of low mortgage rates to jump into homeownership. 

Aug 07

I encourage everyone to download and read the following published research paper

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3641859

“Our research shows that in order to keep rental housing affordable and sustainable for low-income families, lawmakers have to walk a fine line in determining what will benefit the tenant and what may ultimately be detrimental to them,” Shen said. “On the surface, strict landlord regulation sounds good for tenants, but our paper points out, the solution isn’t that simple. The research suggests that conventional thinking on the issue of more regulation may have the opposite effect on tenants.”

“Though advocating for tenant rights seems noble and the right thing to do, the resulting consequences could have a devastating impact on this vulnerable population,” Shen said.

“Our research indicates that if landlords aren’t allowed to evict, rent will likely increase to compensate for their losses. The housing supply would diminish, though the demand would still exist. These landlords may choose alternative investments if owning property is no longer feasible. A reduced housing supply would mean less competition, which would drive up the cost of rent for everyone.

Apr 21

The Minnesota congresswoman’s proposal to cancel rents and mortgages during the coronavirus pandemic is both wildly impractical and constitutionally dubious.

And this is why we need to work together as an industry.

Small landlords are often independent and segmented, allowing us ot fall victim to these things.

What can you do? Join a real estate investor group, in fact join a few of them.

Apr 17

In a funny/sad story, strippers are pushing as hard or harder for member benefits as our industry:

Strip clubs and lobbyists sue for stimulus dollars  – CNN

Feb 25

On its surface the article is about homelessness in Seattle, but it outlines many of the challenges we will face in coming years such as rent control and programs favoring public housing over private.

https://www.city-journal.org/seattle-homelessness

You may ask, for example, what is wrong with supporting public housing?  
Public housing would be great if it provided housing to those who are often “unrentable” in the private market such as those with serial evictions, recent or serious criminal convictions, addiction issues, poor housekeepers, sex offenders, etc. 

Yet public housing screening policies often exclude those difficult to house populations, while directly completing with private sector owners, taking the best tenants due to their incentivized rents.  So we are ultimately competing with our own tax dollars working against us. 

Feb 20

An amazing story of the lead up to the housing bubble

http://www.workingre.com/interview-appraiser-who-brought-down-countrywide/

Among the many firms and individuals who acted irresponsibly, and maybe criminally, perhaps none did so with such flair and recklessness as Countrywide Financial.  Before its rescue-sale to Bank of America (BOA), Countrywide was the largest mortgage lender in the United States.

Dec 03

From Rebecca Knox at Brew City REI Club

********Brew City: If you are concerned about the MPS referendum suggesting a SIGNIFICANT PROPERTY TAX INCREASE 64-128% and want to relay your thoughts on this, the LAST MEETING with the task force will be at 5:30 p.m. at Bradley Tech High School, 700 S. 4th St, Dec. 10.
********

All of the meetings will be open to the public. The panel is expected to make a recommendation to the school board in December 🤨😲 This is the last meeting they are having.

We spoke to District 4 elected MPS board member, Annie Woodward and she said there are a lot of agendas going on and encourages everyone to share their opinions.

The current conversation across our industry is Evictions.

What will happen to tenants who are already near failing, when tax bills force widespread rent increases?

What will happen when rental owners, who are already operating on slim margins, cannot find tenants that can pay the increased rents that mirror the increased taxes.

What will happen to homeowners who are barely keeping up with expenses today?

If property taxes double, which is the mean predicted increase, Milwaukee, and Milwaukee alone, could easily see a foreclosure/failure rate comparable to 2008.

Owners in the rest of the metro will be unaffected, making rentals and homes there more valuable and desirable, furthering the exodus from, and the decline of, the City of Milwaukee.

The Journal reported just two weeks ago of the harm caused by 28% of City workers leaving the city for the burbs.

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