Fannie Mae Just Increased What You Can Borrow

Government-sponsored mortgage giant Fannie Mae will raise its debt-to-income limit from 45 percent to 50 percent on July 29, 2017. This would increase the pool of approvable borrowers for home sellers, and allow homebuyers to spend more.

The decision came on the heels of a study that concluded higher DTI ratios don’t increase the rate of mortgage default. Fannie Mae researchers examined over 15 years of data from borrowers with DTI ratios between 45 and 50 percent. They found that many of these borrowers had good credit and were not likely to default.

This change is a big deal, because according to the Washington Post, a too-high DTI is the most common cause of mortgage denial.

Your debt-to-income ratio compares your gross (before tax) monthly income to your total monthly debt payments on all debt accounts. Accounts include auto financing, credit cards, and student loans, plus the projected payment for the new mortgage.

How DTI Affects Your Loan Amount
If you earn $4,000 a month, previous guidelines allowed you to have total payments of $1,800 per month. If you had accounts totaling $700, your housing expense, including mortgage principal, interest, taxes and insurance (PITI) couldn’t exceed $1,100 per month.

After July 29, you’d be able to have payments totaling half of your gross income. If you earn $4,000 a month, you can have bills and housing payments up to $2,000 a month. If your other payments equal $700, you could qualify for a PITI of up to $1,300 a month.

How Much More Can You Borrow?
The new change will let some applicants with DTI ratios over 45 percent borrow more. How much more? That depends on your income and monthly debt.

You can see how allowing higher DTIs would increase what people can borrow. The borrower in the example above, earning $4,000 a month, can spend up to $1,100 a month for housing. Under new guidelines, the borrower can spend up to $1,300 a month.

Assuming that taxes and insurance come to $250 a month, this homebuyer can pay $850 a month for PITI under the old guidelines, and $1,050 under the new ones.

At a four percent mortgage rates, you could borrow $178,000 under the old rule. And $220,000 under the new one. That’s a loan amount over 20 percent higher!

Who Qualifies For Larger Loans?
To qualify for a mortgage with high debt-to-income ratios, you’ll need a strong application. That usually means a substantial down payment, or really great credit scores. Another plus is having savings after you close on your loan — enough to make several months’ mortgage payment if your income stops temporarily.

You’ll know if you qualify in seconds, once your loan officer or broker submits your file for automated underwriting.

That’s the beauty of Fannie Mae’s Desktop Underwriter software. You can get a decision quickly. In addition, your lender can run the program again and again. You can try out several scenarios until you find a way to get approved.

What Are Today’s Mortgage Rates?
Current mortgage rates edged up slightly after James Comey testified and the White House didn’t burn down. Political and economic uncertainty in Europe has been affecting interest rates here, but investors have remained optimistic about US markets.

Stocks ended yesterday with mixed results, changes that you’d not expect to warrant a major change in mortgage rates.




Fannie Mae announces new programs to break through student loan roadblock

Cash-out refinance, new debt-to-income calculations spur homeownership

Confirming what sources told HousingWire yesterday, Fannie Mae this morning announced a significant expansion of its student loan cash-out refinance program and introduced new policies to help borrowers with student loan debt get qualified for mortgage loans.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, vice president of customer solutions at Fannie Mae. “These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.”

The level of student debt in the U.S. has spiraled over the last decade to $1.4 trillion, effectively locking out millions of potential homebuyers from the market. The new Fannie Mae programs address specific roadblocks that these borrowers face, providing a jump-start to a whole generation of homebuyers.

Fannie Mae’s new solutions include:

  • Student loan cash-out refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
  • Debt paid by others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
  • Student debt payment calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.

The new student loan cash-out refinance option expands a program Fannie Mae rolled out with SoFi in November. Lawless said the overwhelmingly positive reaction to that program convinced Fannie Mae to broaden its scope.

“We were really testing market reception and we got a lot of interest from consumers and a lot form interest from lenders who wanted to have access to this same type of program. The market reception was such that we were really confident this was needed,” Lawless said.

Fannie Mae created the new programs to help counter the stifling effect student debt was having on the housing market, Lawless said. Many potential borrowers have been unable to get past the debt-to-income threshold to buy their first house, while parents who helped pay for education have also been hit.

“We arrived at these product ideas after seeing the size of student loan debt, which is $1.4 trillion. But there’s another number to pay attention to — $8 trillion in home equity,” Lawless said. “There is enough housing equity in California alone to pay off the student debt of the entire nation. We wanted to find a way to unlock that equity.”

The cash-out refinance allows homeowners to pay off not only their own student debt, but any debt they took on for their kids’ education.

“By tapping into their equity, parents could directly free up the next generation of homeowners,” Lawless said. 

And the change in the debt-to-income calculation is going to be a huge benefit to the industry, Lawless said.

“We spent a lot of time with our customers, who are lenders, hearing their frustrations and looking for new opportunities,” he said. “The biggest challenge today is being able to qualify people with student debt for mortgage loans. It’s exciting to make it easier for lenders and help more people become homeowners.” 


Credit: HOUSINGWIRE – Sarah Wheeler

Real estate regulators crack down on individual agent, team branding

California Real Estate Commission warns agents pretending to be brokers

Key Takeaways
State agency cautions agents not to represent themselves as “independent” and reminds brokers to supervise agent advertising.

California’s real estate regulator appears to be getting fed up with agents who mislead consumers into believing they are brokers — and with the brokers that support the practice — and it’s not alone.

What constitutes misleading consumers? It could be as simple as an agent using a fictitious business name ending in “Real Estate” or an agent branding him- or herself as an “independent” real estate professional.

In March, the California Bureau of Real Estate (CalBRE) issued a licensee alert warning that agents who violate these laws — and brokers who let their agents engage in such activities — risk significant fines, license revocations and even criminal prosecution.

Other states are also contending with the gray area of agent branding, and this latest advisory indicates that the issue will continue to be a regulatory focus in the Golden State and beyond.

This year, a South Carolina bill banning the use of “real estate,” “realty” and related terms in agent team names went into effect, while a bill that makes many real estate signs prominently featuring agents (rather than the brokerage) illegal in Michigan was signed by the governor in January.

In general these regulations are designed to protect consumers from getting duped into thinking agents or teams are brokerages, but other stakeholders say these types of rules represent a nationwide push by traditional brokerages to curb the growth of teams and argue that they stifle the personal touch that an agent’s individual branding can convey.

Massachusetts-based broker-owner Gary Rogers, however, expressed his understanding of such legal boundaries: “I do see a lot of illegal signs promoting a team brand and little and sometimes zero mention of the office they work for,” he commented in a related real estate industry Facebook thread.

“Sometimes there’s only one agent on that team, which cracks me up.”

What’s the context for California?

The alert from CalBRE was “supplemental” — it was preceded by a similar September 2015 alert penned by California Real Estate Commissioner Wayne Bell.

Wayne Bell
The second alert was also authored by Bell, along with Special Investigator Mark Tutera, and made clear that the agency was not happy to have to repeat itself by pointing to continued “bad practices” identified in the original alert.

“CalBRE has taken notice of the use by some real estate salespersons of names and designations (and attendant Internet and marketing materials) that suggest to the public — and mislead consumers into falsely believing — that such salespersons are real estate brokers,” the alert said.

They explained that under California’s two-tired licensing system, “real estate salespersons cannot provide — or advertise that they can provide — real estate services independently of their responsible brokers.” Salespersons must also be affiliated with and “reasonably supervised by … a responsible broker in order to engage in real estate licensed activities in California. The law provides no exceptions.”

Supervision includes broker review of the advertising used by the broker’s agents, they added.

Where agents can go wrong

CalBRE specifically outlined two unlawful scenarios the agency said it had seen repeatedly. The first is that an agent, say John Doe, uses a fictitious business name such as “Doe Real Estate” that would lead consumers to incorrectly believe that the business is run by a real estate broker.

“Doe advertises using that business name, and the advertisements are connected to, or accompanied by, a webpage and other materials that extol the virtues of Doe Real Estate,” CalBRE said.

“The public would not think that Doe is a salesperson who must be supervised by another, and would most certainly conclude that Doe Real Estate is a real estate broker or brokerage. And the above practices are unlawful.”

Secondly, many agents continue to brand and identify themselves as “independent” real estate practitioners and practice and advertise as such, the agency said.

Unless those agents are operating as teams and in compliance with state laws governing teams, representing themselves as independent is also unlawful, the agency added.

Teams must disclose the name of the responsible broker, and the team name must include the surname and license number of at least one of the licensee members of the team and use the terms “team”, “group” or associates,” according to CalBRE.

Team names cannot include terms that would lead consumers to believe that the team offers brokerage services independent of a broker, including terms such as “real estate broker,” “real estate brokerage,” “broker,” or “brokerage.”

Industry reactions across states

A petition against the Michigan bill, which requires the brokerage name to appear as 100 percent of the size of an agent’s name on any and all advertising, has gained over 1,000 signatures.

“This law actually decreases competition by putting more emphasis on the broker and less on the agent,” Jackson, Michigan-based Realtor Tim Creech commented on the petition.

“All agents are 1099 self employed and creating brand and image is critical in building our personal identity. This law is unfair and serves no purpose other than creating larger companies controlling business and hurting small business.”

Shaun Simpson, a Realtor from the Midwest, noted on a Facebook thread that Ohio also has an equal prominence rule, but in practice, the regulation isn’t clear cut.

“It is very difficult to define and many violate it,” Simpson wrote. “With DBAs (doing business as) and the like as well as logos, not many have a good understanding. I think equal is difficult for signage and it ends [up] making the signs look more confusing.”

In Tennessee, a bill revised in January requires that all advertising clearly show the brokerage’s firm name and telephone number.

Nashville-based Kathryn Royster of Houselens indicated that the disruption such laws bring to agents’ business is temporary. “It caused some significant but one-time headaches for a number of our customers who had to redo their business cards, signs, etc.,” she noted.


Disciplinary Advisory to Real Estate Salespersons Who Mislead Consumers into Falsely Believing that They are Brokers

In September 2015, the California Bureau of Real Estate (CalBRE) issued an advisory which was captioned “Disciplinary Warning to Real Estate Salespersons Who Act, Conduct Themselves, and/or Advertise as ‘Independent’ Real Estate Professionals — and a Simultaneous Caution to Brokers Who Allow or Support Such Practices”.  


Licensees of CalBRE are well advised to review that prior advisory since we continue to see some of the same bad practices identified in that writing.

This discipline “advisory” is being issued as a supplement to that prior warning since CalBRE has taken notice of the use by some real estate salespersons of names and designations (and attendant Internet and marketing materials) that suggest to the public – and mislead consumers into falsely believing – that such salespersons are real estate brokers.

A scenario that we have repeatedly seen is the use by a salesperson (who for this illustration we will identify as John Doe) of a fictitious business name that would lead members of the public to incorrectly believe that the business is operated and managed by a real estate broker. In this example, salesperson Doe conducts business using the name Doe Real Estate.  Doe advertises using that business name, and the advertisements are connected to, or accompanied by, a webpage and other materials that extol the virtues of Doe Real Estate.  The public would not think that Doe is a salesperson who must be supervised by another, and would most certainly conclude that Doe Real Estate is a real estate broker or brokerage.  And the above practices are unlawful.

In addition to the above, many salespersons continue to brand and identify themselves as “independent” real estate practitioners, and they practice and advertise as such.  Unless those salespersons are operating as “teams”, in full compliance with the California laws and rules pertaining to teams (e.g., the disclosure of I.D numbers and the name of responsible broker, and the surname of at least one of the licensee members of the team along with the use of the terms “team”, “group” or associates” with regard to the team), that is unlawful as well.

Further, and depending on the specific language employed with respect to the name(s) and designation(s) used by the real estate salespersons, there might be a violation of the law relative to the use of fictitious names.  Please see the prior guidance given by CalBRE on the proper use and licensing of fictitious names.

As was also stated in the prior warning, under California law, with its two-tiered licensing system, real estate salespersons cannot provide – or advertise that they can provide – real estate services independently of their responsible brokers. 

Likewise, salespersons must be associated or affiliated with, and be reasonably supervised by (which supervision includes broker review of the advertising used by the broker’s salesperson or salespersons pursuant to Commissioner’s Regulation 2725(e)) a responsible broker in order to engage in real estate licensed activities in California.  The law provides no exceptions.

CalBRE will take appropriate disciplinary action (including the imposition of significant fines, and  – where appropriate – the revocation of licensure) against real estate salespersons who engage in the unlawful activities discussed above, and against real estate brokers who permit their salespersons to engage in such activities.


By Wayne S. Bell, California Real Estate Commissioner and

Mark Tutera, Special Investigator

Mega-mansions in this L.A. suburb used to sell to Chinese buyers in days. Now they’re sitting empty for months

The mansion on Fallen Leaf Road in the secluded Upper Rancho neighborhood of Arcadia has all the trappings a wealthy buyer from China could want: a crystal chandelier in the entryway, marble floors, a home theater outfitted with a dozen reclining leather chairs and, naturally, a fortuitous eight bedrooms and eight bathrooms.

At $9.8 million, the recently built property is a relative bargain. A similar-sized home in Beijing would cost twice as much.


Other real estate agents in the area report luxury homes geared toward Chinese buyers taking up to half a year to unload.

“All agents are crying that the money isn’t coming,” said Sanne Lee, an agent for A + Realty & Mortgage in Rowland Heights.

At the same time, high-end home seekers who plan to take out loans now have a fighting chance as they compete against a smaller pool of cash buyers.

The turnaround in activity, industry officials say, is directly linked to policies in China.

The San Gabriel Valley, long the destination of Chinese home buyers looking to provide their families a better living environment as well as safeguard their wealth in American assets, is feeling the effects of Beijing’s crackdown on capital flight.

Chinese citizens, wary of a faltering economy, have been pouring money abroad, fueling a buying spree of overseas assets in recent years that has pumped up property values from London to Los Angeles.

Though Chinese policymakers generally favor diversifying the country’s wealth into foreign holdings, they were unprepared for the magnitude and speed of the outflows. In order to invest overseas, Chinese citizens must dip into the country’s foreign exchange reserves. Those reserves peaked at $4 trillion in 2014 but have since dwindled by a staggering $1 trillion.

That has left the nation’s cache of foreign currency at its lowest level in almost six years — troubling a government in Beijing that needs the money to stabilize its currency and maintain good standing with the International Monetary Fund.

To defend against capital flight, Chinese regulators allow citizens to take out only $50,000 a year. But that’s been largely ignored and circumvented, often by asking dozens of friends and family to exercise their quota on someone else’s behalf. 

“It’s like ants moving rice,” said Helen Chen Martson, a San Gabriel Valley real estate agent for Keller Williams.

The deluge in Chinese money made it exceedingly hard for local buyers to compete. 

It took Yeling Tsai, a doctor with a private practice in Alhambra, three years to buy a house after looking all over the San Gabriel Valley. He and his wife grew deflated after attending crowded open houses in Arcadia and San Marino, where Mandarin-speaking competition almost always made all-cash offers. The couple had five bids rejected.

“It was really frustrating,” said Tsai, 44, a Taiwanese immigrant who ended up paying $200,000 over asking price for a $1.5-million home in South Pasadena. “I think I make a good living. But even being a doctor, I couldn’t afford some of these houses because people were buying them like Starbucks coffees.”

But starting in 2015, Chinese banks began scrutinizing requests for foreign currency to ensure transactions were being used for legal business purposes. Regulators also increased their enforcement efforts given the many creative ways money is siphoned out — be it by forging trade invoices, smuggling jewelry and luxury watches out or even faking legal disputes to get cash into the hands of overseas lawyers.   

Then on Dec. 31, China’s State Administration of Foreign Exchange, which swaps Chinese yuan for dollars, issued some of its strictest guidelines yet. Customers now have to pledge not to invest in foreign property and provide a detailed account of how foreign funds will be used. They also prohibited customers from taking foreign currency out for someone else.

The rules could have broad implications around the world for any city exposed to Chinese real estate investment such as Vancouver, Sydney and more recently, Seattle.  

Few, of course, are as exposed as Southern California, where Chinese home buyers have expanded their reach beyond the San Gabriel Valley in the last decade to Orange and Riverside counties.

“Chinese policymakers realize that, without significant capital controls, the foreign reserves will continue depleting,” said William Yu, an economist at UCLA. “But those controls mean the Southern California real estate market, especially for luxury homes, will be less active because that money is stuck in China.”

Even before the new guidelines, signs were pointing to a slowdown in the kind of exuberant Chinese buying activity that sparked a frenzy in the San Gabriel Valley three years ago.

Cash purchases of homes — a loose proxy for wealthy Chinese buyers because they tend to pay in full — fell to 344 in Arcadia last year from 461 in 2014, according to real estate data firm CoreLogic. 

In San Marino, cash sales stood at 86 last year, down from 103 in 2014. And in Alhambra, cash purchases have fallen from their peak of 208 in 2015 to 130 in 2016.

All told, cash sales in the San Gabriel Valley declined 17% between 2014 and 2016. In L.A. County, cash sales fell 12% over the same period.

The declines come even though all home sales grew by 5.7% in the San Gabriel Valley and 6.9% in L.A. County during that time.

Median home prices have dropped in Arcadia to $930,000 at the end of last year from about $1.1 million at the start of 2015. In San Marino, the median price for a home was $2.5 million as recently as the second quarter of last year before tapering to $2.2 million by the fourth quarter.

The slowdown isn’t necessarily a bad thing, said Ann Sung, founder of Chateau Group, a luxury developer headquartered in Arcadia, who believes the pace of sales in 2014 was unsustainable.

“Cash sales in two weeks with 15-day escrows is abnormal,” Sung said. “People were buying blindly. The market is now normalizing.”

The drop in cash sales has also allowed more traditional home buyers with loans to crack into exclusive markets such as San Marino, local agents say.

“Domestic buyers can now purchase here and not get blown out of the water” by Chinese money, said Brent Chang, who works alongside his mother, Linda Chang, a real estate agent in San Marino since the 1970s.

The duo say the slowdown in buyers from China began at the end of 2014. Houses that used to get 15 offers now get about half that. Prospective Chinese buyers have recently asked for six-month escrow periods rather than the usual 30 days to accumulate funds. The hope is that their all-cash offers are enough to entice sellers to wait.

Those long waits are also taking place in Arcadia, a city of 60,000 (60% of whom are Asian) that  epitomizes the Chinese mansionization phenomenon.

Across the city, 1940s ranch-style homes were sold, torn down and replaced with hulking, multimillion-dollar European-style mansions designed by a handful of Chinese American firms. The emergence of the new properties became so divisive, the City Council introduced regulations last year limiting the size of new homes. 

“We ended up with a bunch of homes purchased with no one living in them,” said former Arcadia Mayor Mickey Segal, echoing concerns that some of the properties were merely intended for investment to the detriment of the community.

Today, agents say the city is left with a surplus of luxury properties whose sellers could face pressure to reduce prices. One agent said her client had to drop his asking price for a property in Arcadia last summer to $8.3 million from $10 million because it drew no interest for three months. 

Chou, the agent for the Fallen Leaf Road mansion, is more optimistic. It’s only a matter of time, she said, before Chinese buyers overcome the new capital controls in the perpetual cat-and-mouse game with regulators. The desire to invest abroad is an unstoppable force as many Chinese with means worry about their country’s slowing economy, weakening currency and oversaturated real estate market. 

Moreover, her clients feel an obligation to relocate their spouses and children to the U.S. for better educational opportunities and to escape the pollution that envelopes much of China. 

“Rich people,” said Chou, an immigrant from Taiwan who has lived in Arcadia for more than 30 years, “will always find a way to get their money out.”


Courtesy: David Pierson  LA Times

Remodel or replace? Top 10 ROI opportunities in popular home improvement projects

  • ‘Greige’ (subtle yet powerful) improvements pay off the best.
  • This year’s report reflects continued optimism for the housing market.
  • Replacements beat remodels and exteriors beat interiors.
The 2017 Cost vs. Value report by Remodeling magazine documents the national and regional costs and ROI (return on investment) for 29 popular home improvement projects.

Overall, these 29 improvements paid back 64.3 cents on the dollar in resale value.

What that says to the homeowner is that spending money to sell a home requires research.

The goal of improvements from a seller’s standpoint is to attract buyers and achieve top dollar on a listing. But finding the balance between updates and return isn’t that simple.

In a seller’s market, spending (significant amounts of) money on improvements for resale may not translate to added value. As the tide turns to a buyer’s market in the next year or so, agents will need to carefully track ROI numbers to advise sellers.

Those surveyed about the return on remodeling projects were licensed agents, so Remodeling Editor-in-Chief Craig Webb says the report is a reflection of confidence in the industry:

“I think that this year’s Cost vs. Value report actually reflects the general optimism that both remodelers and Realtors have about the state of the housing economy. We are building more and more homes, slowly in this country, but that’s rising. Remodeling activity is as active as it’s ever been in history. And so, consequently, the prospects are good for everyone involved in the process: the consumer, the remodeler, the Realtor.”

Remodeling 2017 Cost vs Value Report. Graphic by Maci Hass, Redefy

Why the top 10 doesn’t matter

National numbers don’t really mean anything to the individual homeowner.

Improvements that pay off (or not) depend on the same three factors that affect home prices: location, location, location.

Agents should drill down to regional or city numbers in this study to find more applicable ROI numbers.

“There’s variation by projects and variations by the cities,” Webb explained. “Sometimes it’s labor and sometimes it’s the perception of Realtors.”

That being said, there are some interesting national trends that may impact homeowners locally. Note that these projects are broken down into mid-range and upscale categories to account for building materials and finishes.

Subtle changes pay off

The No. 1 trend in this year’s numbers is that the subtle changes make for the biggest return on investment.

Remodeling compared these minor improvements to painting with “greige” — the popular mix of gray and beige that’s a subtle but wildly popular color this year.

The two highest percentage returns nationally came from low-ticket improvements under $2,000: attic insulation came in no. 1 at 107.7 percent, followed by entry door replacement (steel) at 90.7 percent.

Look outside first

Projects that spoke to curb appeal had overall larger returns than improvements inside the home.

Garage doors garnered 76.9 percent ROI for mid-range and 85 percent for upscale replacements.

Entry door replacements in both mid-range and upscale (fiberglass) received greater than 77 percent ROI.

Windows at both levels gained at least 73 percent ROI. Siding was also a winner at 76.4 percent.

The bronze medalist in the top 10 is stone veneer — because it’s become so authentic-looking for a fraction of the cost of the real stuff.

Replacements win

Projects that involved a total replacement — such as windows and doors — scored high among the real estate professionals surveyed.

The takeaway for homeowners is that a broken or seriously outdated door should probably be replaced, even if the return is not 100 percent.

The same goes for old single-pane windows. This speaks to curb appeal as well as the first impression of a well-maintained home.

Biggest losers

Year over year, the trends show that mid-range and upscale additions (except decks) saw less than 62-percent returns overall.

This doesn’t make one of these projects a “loser,” per se, if it makes life in your home better. Just don’t expect to make big money here.

There are two reasons to add on regardless of return.

First, the homeowner simply needed more room well before they were prepared to sell.

Second, the home was disproportionate to those around it (for example, a one-bath in a neighborhood full of two- and three-bath homes).

The biggest low-return project was a $12,860 backup power generator at 54 percent ROI. (It seems there are few believers in the Zombie Apocalypse.)

The second-runner-up loser is a $51,935 backyard patio at 54.9 percent ROI; the project includes 20×20 flagstone patio, sliding door, stone-veneer-surround outdoor kitchen, a gas-powered firepit, pergola and lighting. (Perhaps the lack of hot tub for that spend was the deciding factor.)

Surprise! (Not surprised)

If you were to guess what buyers want, I’d put money down that most people would say updated kitchens and bathrooms.

What’s surprising here is that a minor kitchen remodel at $20,830 could make the Top 10, but a minor bathroom remodel, which cost $18,546, had a surprisingly low 64.8 percent return.

A closer look reveals that in the kitchen, the cabinets were simply refaced, but all the appliances were replaced with stainless, energy-efficient models.

In the bathrooms, the replacements were pretty standard fare.

Both the bathroom and kitchen remodels with spends over $50,000 returned less than 65 percent (not surprised). Because these rooms are highly personal, spending a lot on one specific style could actually turn off buyers.

New trend: Multi-generational living

One new project that didn’t make the Top 10 but may become a growing attraction is a “universal design bathroom.” This bathroom includes such features as a walk-in shower, support bars and a wheelchair-accessible sink.

“Baby boomers are getting older and they’ve decided, for the most part, that they don’t want to move,” said Webb.  “That means that they’ve asked themselves ‘Well, what does it take to live here?’ and ‘What do we want to do to change?’ Sometimes it’s putting the bedroom on the first floor, or putting in a walk-in shower.”

Pew Research census analysis showed that 60.6 million people are living with multiple generations under one roof, the highest percentage since 1960.

It’s not unreasonable to speculate that the rising cost of housing and care will see more boomers and Gen-Xers bringing aging parents into their homes; at the same time, millennial children loaded with student loan debt are moving back in to save for their own homes.

Getting what you paid for

Although all but one project on this Cost vs. Value report showed a profit-generating ROI, you could argue that not updating key rooms such as bathrooms, kitchens and front exteriors produces a greater negative result. How many buyers wants a “handyman special”?

As housing prices start to dip, this will come into play even more.

It’s a difficult lose-lose for some sellers who can’t afford significant updates but need to make money on their house. They’ll need some expert guidance to make strategic and cost-effective choices.

Best ROI by region

Regional patterns have remained the same year over year. The nation’s hottest market is the Pacific region, with overall returns at 78.2 percent and 10 projects with at least 90 percent ROI.

Conversely, slow markets in the Midwest brought in the lowest overall returns at 54.9 percent and no paybacks over 80 cents on the dollar.

“If you go to San Francisco, 21 of the 29 projects have a return over 100 percent,” Webb said.

“But if you go to Indianapolis, or the entire states of Wisconsin, Michigan, Iowa, Illinois, Nebraska and Kansas, there’s not a single project over 100 percent. However, all 29 projects returned over 100 percent in at least one region of the country.”

Chris Rediger is the co-founder and president of Redefy Real Estate. Learn more about Chris and Redefy on Twitter or Facebook.

Email Chris Rediger.




 Would you like to receive up to $3,000 toward an earthquake retrofit of your house? The Earthquake Brace + Bolt (EBB) program provides homeowners up to $3,000 to strengthen their foundation and lessen the potential for earthquake damage.

Many homeowners will decide to hire a contractor to do the retrofit work instead of doing it themselves. A typical retrofit may cost between $3,000 and $7,000 depending on the location and size of the house, contractor fees, and the amount of materials and work involved. If the homeowner is an experienced do-it-yourselfer, a retrofit can cost less than $3,000.

The EBB program relies on adherence to the California Building Code, Appendix Chapter A3. Chapter A3 is a statewide building code that sets prescriptive standards for seismic retrofits of existing residential buildings.

Chapter A3 allows:

  1. the building department to approve the retrofit for a house with a 4-foot or shorter cripple wall, without requiring plans prepared by a registered design professional (architect or engineer).
  2. retrofits for houses with cripple walls higher than 4-feet with plans prepared by a registered design professional.

Surrounding the crawl space under the first floor, many houses have a short wood framed wall (“cripple wall“) that needs to be strengthened to prevent the house from sliding or toppling off of its foundation during an earthquake. Strengthening involves adding anchor bolts and plywood bracing in the crawl space.

More information on qualifying retrofits.




EBB is limited to funding residential retrofit expenses in the crawl space that:

  • Bolt: add anchor bolts and sill plates in the crawl space to improve the connection between the wood framing of the house and its concrete foundation to help keep the house from sliding.
  • Brace: strengthen the cripple walls in the crawl space with plywood will help keep the house from toppling off of the foundation during an earthquake. Strengthening cripple walls enables them to function as shear members, significantly protecting the house from collapsing.
  • Strap and Brace the Water Heater: properly strap and brace the water heater to reduce the likelihood of water and fire damage, and to protect the water supply.

Houses that meet Chapter A3 specifications are typically:

  • wood-framed construction built before 1979
  • built on a level or low slope
  • constructed with a 4-foot (or less) cripple wall under the first floor OR
  • constructed with a cripple wall between 4 feet and 7 feet (requires an engineered solution) 
  • have a raised foundation




Homeowners will be notified via email if they have been selected or if they are on the wait list. Selected homeowners will receive detailed information and next steps for participation in EBB. To register, scroll back to the top of the page and click the “Register” button to begin the process.



 Registration is no longer open. Once registration is reopened, Homeowners interested in participating in EBB must:

  • Own a house located in a designated ZIP Code
  • Create an online account and complete registration as a homeowner
  • Only one registration per house
  • Ensure your house is eligible by answering all qualification questions and reviewing the Program Rules.
    • Your house must have less than a four-foot cripple wall to use a prescriptive plan set
    • If your house has a cripple wall between 4-feet and 7-feet you must use an engineered solution. 



When Registration is closed participating homeowners will be selected through a random drawing.

Homeowners will be notified via email if they have been selected or if they are on the wait list. Selected homeowners will receive detailed information and next steps for participation in EBB.

9 reasons folks move to California


Want to know why California feels so crowded?

Last year, 514,000 people moved here from other states, according to new data from the U.S. Census Bureau. That’s on top of 334,000 who came from foreign lands. It’s an influx that explains everything from crowded freeways and malls to pricey homes and apartments.


inRead invented by Teads

Gosh, this rush to the Golden State might even make you say “thanks” to the 644,000 neighbors who chose to move to another state in 2015.

Too much time is spent pondering California’s challenges and worrying why some folks decide to leave. You realize that California’s often-cited “net domestic outmigration“ (exits vs. move-ins) of 130,000 last year is roughly equal to just three people for every 1,000 Californians?

How does economic and demographic data show what draws folks to California? I filled my trusty spreadsheet with data from the census, U.S. Department of Housing and Urban Development, National Oceanic and Atmospheric Administration and Trulia.

First, I created a ranking of states by their relative per capita movement to or from California from the new census migration data. That gave me a yardstick of where the California’s fan club resides (New Jersey likes us the most by this math) and what states were most uninterested in living here (Idaho doesn’t care for us!)

Then I compared the Golden State’s business and population patterns for the 10 “fan club” states California draws best from — New Jersey followed by Alaska, Alabama, Delaware, Connecticut, New York, Illinois, Maine, Indiana and Massachusetts — vs. the 10 “uninterested” states where we do most poorly with relocation: Idaho then North Dakota, South Dakota, Nevada, Montana, West Virginia, Iowa, Utah, Oregon and Arkansas.

Here’s how California matches up to other states and what’s so appealing about the Golden State:


Sunshine sells. California’s average 59 degrees is the 13th warmest temperature among all states and certainly looks toasty to folks, considering relocation from our 10 fan club states (average 50 degrees) or the chillier 10 most uninterested states (average 48 degrees).


We’re pretty dense and many folks like that. Fan club state residents are used to “big” with an average population of 9.8 million, more than quadruple the 2.2 million average population in the 10 states from which California (population 39 million) draws least.


The Golden State loves ethnic and racial diversity, with 61 percent of the population made up of various minorities. That’s closer to the demographics of fan club states (35 percent minority) than the 10 most uninterested states (20 percent minority).


California’s job market looks very appealing to folks from fan club states. The state’s job count has risen 13.6 percent since the recession ended. That’s almost double the pace of an average 6.9 percent growth in 10 fan club states. One reason we don’t draw from 10 most uninterested states? Their average 10.5 percent job gains.


California offers many employment opportunities in professions requiring serious schooling. That’s a reason why 30 percent of our state’s residents have at least a bachelor’s degree. Fan club states are a good match with an average 29 percent of their residents similarly educated vs. 24 percent in those 10 uninterested states.


Fan club states pay well, with an average annual household income of $74,000. In fact, relocation may not always pencil to the penny as the Golden State’s typical income is $73,000. But that beats the $63,000 paid in those 10 uninterested states.


House costs are a challenge to anyone considering a move to California, but at least transplants from fan-club states are used to higher home prices. Averaging listing price early this month in those 10 states was $343,000 vs. $266,000 in the uninterested states. Of course, that gap may not prepare many folks for California’s $630,000 typical price tag.


Another Golden State burden: the rent. But again, new residents from the fan club know the pain of being a tenant, averaging monthly rents for a two-bedroom unit of $1,130 in the old home state vs. $794 in those uninterested states. But almost everyone gulps when it comes to the cost of a common California rental: $1,487 a month.


This month, our political persuasion is really relevant. Much like California’s presidential vote, seven of the 10 states in the fan club went for the losing Democrat in the White House race. The uninterested states? Eight of 10 supported president-elect Donald Trump.


By Jonathan Lansner,

AR: Home Sales Remain Elevated, Pressure Mounts On Buyers

NAR: Pending Home Sales Index suggests rising home prices into 2017

Pending Home Sales Index Shows Summer Increase

Home buyers are out in force, buying up homes just as fast as they come on-market — and it’s making it harder to find good deals in housing.

According to the National Association of REALTORS®, the August 2016 Pending Home Sales Index posted above its benchmark value of 100 for the 28th straight month.

A home sale is “pending” once it’s under contract between a buyer and a seller.

It’s not surprising that contract signings remain high. With today’s mortgage rates lingering near 3.5%; and with rents rising and lenders loosening mortgage guidelines, today’s housing market favors home buyers in a big way.

Low- and no-down payments remain popular, and new programs such as the HomeReady™ mortgage make it even easier to get mortgage-qualified.

Given today’s market conditions, the best deals in housing may be the ones you find today. By this time next year, home prices and interest rates may be higher — and so might your rent.

Click to see today’s rates (Sep 29th, 2016)

Pending Home Sales Index: A Different Indicator Type

The Pending Home Sales Index (PHSI) is a monthly report, published by the National Association of Realtors® (NAR). It measures homes under contract, and not yet closed.

The Pending Home Sales Index is different from most housing market metrics.

Unlike traditional metrics which measure how housing performed in the past, the Pending Home Sales Index forecasts how housing will perform in the future.

The Pending Home Sales Index is forward-looking.

The index tallies U.S. homes recently under contract to project future, closed home sales. This is possible because the National Association of REALTORS® knows that 80% of homes under contract “close” within 2 months of contract.

In August, the Pending Home Sales Index read 108.5 — down from July’s reading, but marking the index’s 28th straight month above its baseline reading of 100.

Beating the baseline is a big deal.

When the Pending Home Sales Index crosses 100, it’s an indication that U.S. homes are going to contract at a faster pace than during 2001, the first year in which the index was published.

2001 is generally considered a good year for U.S. housing. The current market, then, by comparison, is exceptional.

Results for the Pending Home Sales Index, mixed by region:

  • Northeast Region : +5.9% from the year prior
  • Midwest Region : -1.7% from the year prior
  • South Region : -1.5% from the year prior
  • West Region : -0.6% from the year prior

For today’s renters, it’s an excellent time to consider buying a home.

Click to see today’s rates (Sep 29th, 2016)

Two Popular Loan Types That Help Buyers

Today’s housing market is getting a nice boost from more home buyers who are getting mortgage-approved.

According to a recent report from loan software company Ellie Mae, about 3-in-4 home purchase loan applications were approved and “closed” in July. This means the applicant successfully completed the loan process and purchased a home.

In 2014, only sixty percent of applications made it to closing.

Two major loan programs contributed to the high numbers: conventional and FHA.

FHA loans

The same report showed that buyers used FHA for nearly a quarter of all home purchases.

FHA is even more popular among younger home buyers. A related Ellie Mae study showed that loan applicants born between 1980 and 1999 use an FHA loan 37 percent of the time.

First-time home buyers and repeat buyers alike gravitate toward FHA because of its flexibility. It requires just 3.5 percent down and accommodates buyers who have credit scores down to 580.

One of the lesser-known facts about FHA is that home buyers can use it as a 100% loan, if they can secure a downpayment gift. The program allows the applicant to cover the entire downpayment and closing cost amount with a gift.

FHA requires modest mortgage insurance premiums (MIP) that total about $70 per month for every $100,000 borrowed. FHA MIP cost does not rise with lower credit scores, as does conventional mortgage insurance.

Applicants with a credit score below 660 may find that FHA yields a cheaper monthly payment. And, home buyers can cancel their FHA mortgage insurance premium via a refinance when their home gains adequate equity.

Conventional loans

conventional loan is one that is approved to guidelines set forth by mortgage agencies Fannie Mae and Freddie Mac.

This loan type makes up 64 percent of the market according to Ellie Mae.

Conventional mortgages do not require a 20 percent downpayment, as many home buyers assume. Buyers can put as little as three percent down with the Conventional 97 program or the newer HomeReadyTM loan.

Buyers with larger down payments often choose an 80/10/10 piggyback loan. The home buyer opens a primary mortgage for 80 percent of the purchase price, a ten percent second mortgage, the puts ten percent down.

This loan structure allows the buyer to avoid private mortgage insurance (PMI) while making a reduced downpayment.

Conventional loans are the first choice among many home buyers because they come with low rates and can beat FHA in monthly cost for well-qualified applicants.

What Are Today’s Mortgage Rates?

Across the country, homes are going to contract quickly. Demand from buyers is huge and, because of today’s low rates and rising rents, the pool of potential buyers has stayed strong.

Take a look at today’s real mortgage rates. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.

Show Me Today’s Rates (Sep 29th, 2016)

NAHB: Housing Market Hasn’t Been This Hot In 11 Years

NAHB Housing Market Index 2016-09

Builders Say Strong Market Will Stay On Course

Home builders feel terrific about the future U.S. housing.

With today’s mortgage rates ultra-low and U.S. rents rising, home builders are planning for another strong finish to the year for housing, and a fantastic start to 2017.

Market confidence among the nation’s builders is at decade-best levels.

As measured by the National Association of Home Builders’ Housing Market Index (HMI), home builder sentiment reads 65 out of 100, which is a “confident” figure.

It’s the strongest reading in nearly a year, and certain components of the index exceed confidence levels of 11 years ago.

Builders are excited about the 2017 housing market — and for good reason.

The combination of the lowest mortgage rates in at least 3 years, the rising cost of rent, plus an abundance of loans for buyers with less than 20% down have changed today’s math of “Should I rent or should I buy?”.

Home builders plan to sell more than 650,000 new homes this year, and buyers could usher in even higher demand next year.

The best “deals” in new construction housing may be the ones you find today.

Click to see today’s rates (Sep 20th, 2016)

Why Everyday Home Buyers Follow NAHB’S Housing Market Index

Once monthly, the National Association of Home Builders (NAHB) surveys its members on current housing market conditions; and their outlook for the housing market’s future.

The results are compiled into the Housing Market Index.

Informally, the report is called the “home builder sentiment survey” and it reflects home builder attitudes about the nation’s single-family, new construction housing market.

The index is one of the most anticipated reports published each month, because it provides clues to housing market health six-to-twelve months in advance.

Home builders gather real-time, “on the ground” data as they observe buyer foot traffic and actual sales in their day-to-day business. They recognize trends long before economists.

For instance, a home builder sees rising interest in its homes. Potential buyers visit model homes and sign contracts to buy.

In response, the builder obtains new building permits and breaks ground on new developments. Conversely, it will hold off on new projects if foot traffic wanes.

Without the Housing Market Index, economists would likely only have access to data around building permits and homes on which construction has begun. But that data is a lagging indicator of what happened in the market months prior.

This report, though, is one of the earliest indicators of the home market.

The forward-looking report is important to economists, but can be valuable to the everyday home buyer, too.

Many buyers today feel they have “missed out” on future home appreciation, now that house values have risen steadily since 2012. They feel demand for homes will drop and, in turn, prices will cool off.

Home builders would beg to differ.

Today, builder sentiment reads a staggering 65, well surpassing the range of around 60 for the past fifteen months.

The report signals renewed strength in the housing market.

The HMI has not hit a reading of 65 since October 2015. Prior to that, the index stretches back ten years without a higher “score.”

In the NAHB Housing Market Index, 50 is the inflection point in the index between “good” conditions and “poor” ones; and September’s reading marks the twenty-seventh straight month in which the HMI has logged north of 50.

Buoyed by low mortgage rates and big demand from buyers, home builders believe today’s housing market is solidly in positive territory.

Home buyers who have been on the sidelines should consider entering. September’s HMI indicates the market will be strong in 2017, and perhaps beyond.

Click to see today’s rates (Sep 20th, 2016)

Builders Correctly Forecasted The 2016 Market

The NAHB Housing Market Index is a composite survey. It’s results are based on three distinct questions posed to home builder trade group members.

Each question polls a separate facet of a home builder’s business.

The monthly readings, as reported by the home builder trade group:

  • Current home sales activity : Reading of 71 (+6 from one month ago)
  • Home sales activity for the next six months : Reading of 71 (+5 from one month ago)
  • Buyer foot traffic : Reading of 48 (+4 from one month ago)

The housing market is strong on all fronts. Especially telling is the future sales component of the index. Builders stated the highest reading since nearly a year ago.

In October 2015, builders took the pulse of the market and stated the 2016 market would see continued strength.

They were right.

Now, builders are calling for fast home sales (meaning higher prices) next year. Home buyers should consider the effect of higher prices — and potential mortgage rate increases — on their plans. They can be on the winning side of rising values.

Buyers may not know specifically what a mortgage is, they do know that their rents are rising and that buying a home could be better than renting into 2017.

So long as the math buying over renting, builders will continue to have optimism for the future of U.S. housing.

Ultra-High Demand For Homes In The West

As with everything in real estate, location matters.

Home buyer demand is strong across the U.S., but western states are faring the best, as home builders see it.

  • Northeast: HMI reading of 43 (+1 from one month ago)
  • Midwest: HMI reading of 56 (+3 from one month ago)
  • South: HMI reading of 68 (+4 from one month ago)
  • West: HMI reading of 82 (+14 from one month ago)

If builders across the U.S. are confident, those in the West are all but certain about the next six-to-twelve months.

That’s good news for builders, but home buyers could face challenges. Bidding wars and above-list-price offers could be the rule, not the exception.

And free home upgrades will be all but off the table.

Still, new homes could be worth the effort. Homes that are newly built often come with warranties that protect the homeowner against expensive defects. New homes occasionally need repairs, just like older ones, and it’s rarely a “bad” idea to receive a warranty if one is offered.

Home buyers in western states can still find value in new homes, despite high competition. As rents rise, buyers are locking in housing costs by purchasing new and used homes in every region of the country.