Builders Hampered by Soaring Regulatory Costs

The average cost to comply with regulations for new-home construction has climbed nearly 30 percent in just five years, according to the National Association of Home Builders. These costs include everything from new construction codes and storm-water discharge permits to local impact fees. The jump in regulatory costs has grown at about the same rate as the average price for a new home.

“It really makes it hard to satisfy the lower end of the market, which is a lot of first-time buyers,” Paul Emrath, the NAHB’s vice president for survey and housing policy research, told The Wall Street Journal.

Also, local infrastructure impact fees have risen by 45 percent, on average, since 2005 in 37 major home-building markets nationwide, according to a separate study by Zelman & Associates, a housing research firm.

Source: “Home Builders Say They Are Squeezed by Rising Compliance Costs,” The Wall Street Journal (May 7, 2016)

Starter Homes May Be Coming Back, After All!

Good news for first-time buyers: more starter homes are on the way. A recent analysis by BUILDER online shows the number of homebuilders offering entry-level housing rose 25 percent last year.

Since the recession, the number of new entry-level homes plummeted. BUILDER online even declared the starter home “nearly extinct” last year. However, BUILDER’s analysis of the 2016 Builder 100/Next Builder list points out an increasing number of builders are devoting at least 50 percent of their business to building entry-level homes.

Still, “the re-entry of the entry-level buyer has begun, but this group’s next moves will be gradual,” says Metrostudy’s Brad Hunter about young buyers’ emergence into the housing market. “Income challenges remain, and there are still relatively few new house developments who target this group.”

Source: “Builder 100: Entry Level Makes a Comeback,” BUILDER (April 27, 2016)

Could Renters Get a Tax Deduction Soon?

A new bill hopes to provide some relief to renters who are faced with skyrocketing rental costs – by giving them a tax break.

If approved, the bill would allow renters to deduct what they pay for rent from their federal taxes.

Rep. Alan Grayson, a Democrat from Florida — who introduced the bill — cites the following example: Average taxpayers paying about $1,500 a month – or $18,000 a year – could possibly save $4,500 annually through the deduction if they fall in the 25 percent tax bracket.

“It could help renters who are looking to become home owners, because it will lower their housing costs,” says Linda Couch, senior vice president for policy at the National Low Income Housing Coalition. “That savings could be put toward a down payment.”

Source: “Move Over, Home Owners – Renters Could Get Tax Breaks Too,” realtor.com® (March 2, 2016)

HUD Adds Housing Funding to End Homelessness

The Department of Housing and Urban Development (HUD) is allocating $48.9 billion in funding and $11.3 billion in new mandatory spending over the next decade to focus on ending homelessness and helping more Americans move into affordable housing.

HUD says it’s extending its former pledge to have the “first-ever federal strategic plan to prevent and end homelessness.” HUD is expanding the availability of a rapid rehousing program and Housing Choice Vouchers to help more families move out of homelessness more quickly and into permanent housing.

But HUD says it still has a lot more work to do. In January, an annual one-night count of homelessness nationwide, found more than 64,000 families still did not have homes – that includes more than 123,000 children.

Source: “HUD Budget Targets Ending Homelessness Among Families,” National Mortgage News (Feb. 9, 2016)

Mortgage Giants Urged to Ease Up on Credit-Scores

The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to explore “alternate” credit-score models and the credit history of the loans they back. The move is part of several efforts by FHFA to ease tight mortgage standards and help more potential buyers qualify for financing.

FHFA Director Mel Watt has said expanding credit access is an important goal in 2015, but it needs to be balanced against the risk of loan losses. FHFA is the regulator of Fannie Mae and Freddie Mac; the two companies, which were brought under government conservatorship in 2008, purchase more than half of the new mortgages in the U.S. and then package them into securities.

Qualifying for financing has been a big hurdle that has sidelined many potential buyers from the housing market in recent years. REALTORS® continue to cite their clients’ financing struggles in qualifying for a mortgage as one of the top causes of derailing transactions, according to the latest REALTOR® Confidence Index, reflecting responses of more than 1,800 REALTORS® about their transactions in November.

At the end of 2014, FHFA made moves to expand credit availability, including offering loans through Fannie and Freddie that require down payments as low as 3 percent. FHFA also has ordered the GSEs to begin paying into the affordable housing fund, allocating millions of dollars a year to allow states and other government agencies to build low-income rental housing or rehab existing housing in an effort to increase affordability.

Source: “Fannie, Freddie Must Study ‘Alternate’ Credit Scoring: Regulator,” Reuters (Jan. 14, 2015) and “Fannie and Freddie Directed to Aid Underserved Borrowers in 2015,” Bloomberg (Jan. 14, 2015)

“Low-income Renters Struggle” to Find Affordable Housing!

A study by the National Low Income Housing Coalition has found that for every 100 families considered “extremely low income,” there are only 30 affordable units available to rent nationwide. “Extremely low income” renters are considered those who earn less than 30 percent of the median income in the metro area which they live. 

The NLIHC has called for more affordable rentals to meet the growing demands of low-income families. It will be interesting to see what happens! Please provide comments?  

The number of extremely low income renters has grown in recent years. In 2010, the number swelled to 9.8 million — nearly a quarter of all renters nationwide.  

“What we’ve seen is a decline in the home ownership rate since 2008, and we’ve seen rent being pushed up,” pushing rent out of each for more low income people, says Sheila Crowley, NHLIHC chief executive. (For nearly a quarter of all renters nationwide)  

The problem appears to be the most evident where the largest gaps exist between the rich and poor, such as in states like Arizona, California, Florida, Michigan, Nevada and Oregon according to the study. Our “Northern California” region is near the top!

“There’s no doubt that there’s a gap, and it’s significant, and it’s getting worse,” said Becky Koepnick, an adviser to HUD Secretary Shaun Donovan. (As many of us know)

Source: “Lowest-Income Renters Left Behind in Housing Crisis,” The Wall Street Journal (Feb. 15, 2012)

HUD Housing Program Under Fire

Several federal lawmakers are pushing Congress to launch an investigation into the Department of Housing and Urban Development’s HOME affordable housing program, a home construction program aimed at aiding low-income families.

A bipartisan group of Congressional leaders claim that HUD’s HOME program has faced constant yearlong delays on housing projects that have postponed hundreds of affordable homes from being completed. The program receives $2 billion a year to help local housing agencies build and renovate affordable homes across the country.

Full article and source at: “Members of Congress Call for Probe of HUD’s HOME Affordable-Housing program,” The Washington Post (May 17, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

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HUD Offers Grants to Remove Home Hazards

The U.S. Department of Housing and Urban Development announced it will offer several grants to help remove housing-related health hazards — such as lead-based paint removal — from low-income homes.

“These grants are critical for states, counties, and cities who are on the front lines of protecting our children from lead hazards and other residential hazards,” says Jon Gant, director of the Office of Healthy Homes and Lead Hazard Control. “We look forward to communities applying for these grants so that they can help make older housing safer and healthier for children.”

HUD is making the grants available through its Lead-Based Paint Hazard Control, Lead Hazard Reduction Demonstration, Healthy Homes Production, and Asthma Interventions in Public and Assisted Multifamily Housing Grant Programs.

The application deadline for all of the grants above is June 9, 2011. For more information, visit www.grants.gov or www.hud.gov.

Source: “HUD to Offer Grants to Fix Housing-Related Health Hazards,” RISMedia (April 13, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

 

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“Pending Home Sales” Continue Recovery

Pending home sales rose again in November, with the broad trend over the past five months indicating a gradual recovery into 2011, according to the NATIONAL ASSOCIATION OF REALTORS ® .

The Pending Home Sales Index, a forward-looking indicator, rose 3.5 percent to 92.2 based on contracts signed in November from a downwardly revised 89.1 in October. The index is 5.0 percent below a reading of 97.0 in November 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. “In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” he said. “But further gains are needed to reach normal levels of sales activity.” 

Complete article at: http://www.realtor.org/RMODaily.nsf/pages/News2010123001?OpenDocument

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Strong Rebound in Pending Home Sales!

Pending home sales jumped in October, showing a positive uptrend since bottoming in June.

The Pending Home Sales Index, a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.

Last October, first-time buyers were motivated to make offers before the initial contract deadline for the tax credit last November. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. Lawrence Yun, National Association of Realtors chief economist, said excellent housing affordability conditions are drawing home buyers. “It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011,” he said.

“More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery,” Yun said. Recent loan performance data from Fannie Mae and Freddie Mac clearly demonstrates very low default rates on recently originated mortgages, much lower that the vintages of 2002 and 2003 before the housing boom.
The PHSI in the Northeast jumped 19.6 percent to 71.3 in October but is 27.3 percent below the tax credit peak in October 2009. In the Midwest the index surged 27.3 percent in October to 81.7 but is 24.8 percent below a year ago. Pending home sales in the South rose 7.1 percent to an index of 93.8 but are 18.4 percent below October 2009. In the West the index slipped 0.4 percent to 104.3 and is 15.6 percent below a year ago.

Near term, Yun expects home sales will continue to climb from their cyclical low this past summer. “Even so, we now have some consumer concerns regarding the mortgage interest deduction, an important component in housing affordability,” he said. “Preliminary results of a new survey show nearly three out of four home owners and two out of three renters consider the mortgage interest deduction to be extremely or very important to them. Home owners already pay between 80 and 90 percent of all federal income taxes and additional tax burden would hurt them and the economic recovery, so we have a reasonable hope that it will not be changed.”

Source: National Association of Realtors – NAR

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