Housing Insecurity Is Now A Concern In Addition To Food Insecurity
Being evicted or falling behind on rent takes a toll on the amount of sleep people get, a new study says — a hidden health issue with links to the pandemic. Housing Insecurity Is Now A Concern In Addition To Food Insecurity
Shams DaBaron, 51, has struggled with homelessness, he says, since he was 10 years old. On a bench in Harlem; on friends’ couches; in the New York City shelter system; next to the mother of his children; and since June, in the Lucerne Hotel on the Upper West Side — wherever he sleeps, it’s rarely uninterrupted.
Many nights, DaBaron has bad dreams, and many mornings, he wakes up feeling disoriented or lethargic. He’s physically safer in his private hotel room than in the shelter, he says, but just as restless.
He pushed to eliminate the Lucerne Hotel’s 3 a.m. welfare check, which kept him on edge, but he still gets a knock on his door every night at midnight, and is woken up for breakfast at around 6 a.m.
Usually, he’s been awake for an hour or so anyway. “For somebody that’s suffering from PTSD like me, or is a light sleeper, I stay up for the knock so I don’t get startled,” he said. “I feel that my physical health is compromised because of the lack of sleep.”
For DaBaron, who has channeled his waking energy into being an advocate for homeless New Yorkers after a life-threatening bout of Covid in late March, his housing troubles and his sleeping troubles feel closely connected.
And new research suggests that they are. A study by RAND Corporation published earlier this month shows that people who were unable to pay their rent or mortgage on time slept 22 minutes less a night than those who didn’t.
Those who were forced to move or evicted because they could not pay their rent or mortgage slept up to 32 minutes less.
The data comes from the California Socioeconomic Survey, a longitudinal study of more than 1,500 people from Alameda, Fresno, Los Angeles, Riverside, Sacramento and Stanislaus, who were receiving California welfare benefits.
Of that pool, selected using criteria developed by the California Department of Social Services with the original goal of understanding the effects of welfare on California children, around 1,000 agreed to participate in the full three-year study, answering a series of questions about their economic status and their physical and emotional wellbeing.
From 2015 to 2016, researchers collected baseline data; then, from 2016 to 2017, they asked people to quantify on average how much sleep they got in the previous month, and how they’d rate its quality. They asked again from 2017 to 2018, and looked at any changes in sleep among groups of people who’d slept around the same amount during the first two waves.
Controlling for a myriad of other factors that might impact sleep, like employment hours, debt and family structures, the researchers found that experiencing housing precarity between the second and third surveys was enough to shave precious minutes off each night.
“We’re talking about a pretty poor population that is similar across a whole host of characteristics,” said Robert Bozick, a senior fellow at the Kinder Institute for Urban Research at Rice University and a co-author of the research. “The only thing differentiating the groups is housing insecurity.”
RAND researchers didn’t study participants’ brains or use digital sleep monitoring, instead relying on self-reported times and a subjective rating system for whether they’d consider their sleep “good.” But its findings are novel, the researchers say.
Though they build on a body of work linking mental health, sleep quality and poverty, there has only been one similar study specifically isolating housing insecurity: recession-era research out of the Centers for Disease Control and Prevention, which found that in 2009, 37.7% of those who experienced housing insecurity in the past year had reported “insufficient” sleep, compared to only 21.6% of those who didn’t.
“I don’t know if part of my issue stems from just never feeling comfortable in my own space.”
Even a half hour of sleep deficit can snowball into longer-term physical and mental health problems. “What we know from sleep literature is that the effects of sleep are cumulative,” said Bozick. “Thirty-two minutes a night, one night, doesn’t seem like that big of a deal, but the cumulative pattern of poor sleep is where these really have their strongest effects.”
Being comfortable enough to sleep soundly depends in part on external factors — like heat, cooling, bedding, noise and privacy — that can be in short supply for those experiencing housing insecurity. As is the case with many poverty-related pressures, there are also mental health issues, including chronic stress and feelings of depression and “vigilance,” which can in turn disrupt sleep.
Eviction compounds those psychological symptoms with physical chaos, triggering frequent moves from location to location, into spaces where people have little control over the conditions and the quality of their surroundings.
That’s why sleeplessness continues to afflict DaBaron, even as his circumstances frequently change. “I don’t know if part of my issue stems from just never feeling comfortable in my own space,” he said.
While the study predates the Covid crisis, the pandemic has focused new attention on the links between housing instability, poor sleep and serious health problems.
Regularly getting less than six hours of sleep per night has been associated with obesity, hypertension, diabetes, having a stroke and dying prematurely, said Michelle Miller, who leads the University of Warwick’s Sleep, Health and Society Programme.
These physical risk factors have also become comorbidities with coronavirus. “Obesity, and diabetes have also been associated with an increased risk of poor Covid health outcomes,” Miller said in an email. Sleep also bolsters the immune system, and “obtaining sufficient sleep pre and post [Covid] vaccination is important for a good immune response.”
Taking melatonin, the sleep hormone, has been shown to stabilize the immune system and some scientists suggest it could minimize the odds of contracting a severe — or deadly — case of Covid. Other scientists, like Feixiong Cheng, a data analyst at the Cleveland Clinic, have hypothesized that it’s not just melatonin that eases symptoms, but sleep itself, The Atlantic reported.
Insomnia and brain fog are known symptoms of the coronavirus, both neurological responses to the virus itself, not just a side effect of the stress and isolation it has caused. (DaBaron reports that his sleep has been far more erratic since recovering from Covid.)
But as eviction filings rise, scattershot eviction bans approach their expiration date, the fear of falling behind on payments or losing housing entirely has reached pandemic proportions, too. That anxiety can take a toll on sleep and overall health, Bozick says, and it can only get worse if those threats are made real.
“There’s a potential reciprocal relationship here, that you’re experiencing stress because of the pandemic, which in turn, is shaping your daily environment in ways that compromise your immune system, that make you more susceptible to this illness,” said Bozick. “These economic and health stressors work in combination to compound one another.”
For those who have already lost housing, Covid has made getting a new place to live or finding employment harder.
And securing short-term lodging in hotels — a measure that was designed to prevent Covid outbreaks in congregate shelters or on the streets — has in some cases had the unintended consequence of disrupting the stability and control over a daily schedule that independence or companionship may have offered.
Even before the pandemic, and before she became homeless in 2019, Tracy Nuzzo often struggled to get enough sleep.
She worked as a flight attendant on private planes, so her body clock was always somewhat off, dealing with time-zone changes and jet lag.
She quit flying in 2010, she says, and settled down in New York City, working in restaurants and as a bartender.
But late in 2018, the roommates she was subletting an apartment with fell behind on their rent; rather than go to housing court or be evicted, she moved out. Living paycheck to paycheck, she couldn’t afford the first and last month’s rent plus security deposit for a new apartment.
“I started to feel like I was treading water,” she said. “The difference between me falling through the cracks and staying housed was probably 5 grand.”
By mid-April 2019, Nuzzo, who is 53, was sleeping on the streets, where she met a partner who made her feel protected through the night; together in East Harlem, she remembers sleeping deeply. But in October 2019, she was offered the opportunity to transition into stable housing and stay in a low-threshold shelter program called “Safe Haven,” in the South Bronx.
There, Nuzzo was paired with a roommate who was deemed high risk, meaning they were both woken up once an hour throughout the night. There was no lock on the door, and she was briefly separated from the two bunnies she cared for as pets.
“I might have gotten one or two uninterrupted hours in that time, but it wasn’t good quality sleep,” she said. “I ended up feeling more tired than when I went to bed.”
In August 2020, Nuzzo, like DaBaron, was moved into a private room, in an SRO hotel. But the anxieties and the insomnia continue. Isolated in a windowless room and unable to receive visitors, she fears contracting Covid in the bathroom she shares, and worries about ever getting another restaurant job or being able to afford her own apartment.
The path to stable housing she was promised has felt more like a setback. A therapist has prescribed her Klonopin, Trazadone and Ambien, but Nuzzo doesn’t want to get addicted, so she keeps her doses low.
“Sometimes I think I’m asking a lot of these pills,” she said. “Sometimes it works really, really well, and sometimes my mind is fighting it.”
For Lucky Few, Paris Debuts Public Housing In A Pricey Landmark
The 96 affordable units atop the renovated La Samaritaine department store offer world-class views in one the city’s priciest neighborhoods for about $500 a month.
The 96 new apartments unveiled in Paris this week might have the most stunning location of any public housing in the world. The development of new apartments, all intended for low- to medium-income tenants, is located in the newly renovated La Samaritaine department store, a massive Belle Époque landmark that opened in 1870 on a site overlooking the Seine, barely a few hundred yards from the center of Paris.
With generous proportions and balconies with views of the Eiffel Tower, the Sacre Coeur and the Louvre, such apartments would fetch multiple thousands of Euros in rent per month on the private market. But their new tenants are paying an average of 430 euros ($504 USD) in rent for a studio to an average of 929 euros for a three-bedroom unit.
The new housing development became possible because the department store has been undergoing reconstruction, freeing up space for extra units in an otherwise fully built-up, carefully preserved section of the city.
Antiquated and somewhat dilapidated, La Samaritaine first closed for renovation in 2005. After acquisition by LVMH — the luxury goods conglomerate whose chairman Bernard Arnault is currently listed as the world’s third-richest person — the store began a long, drawn-out renovation.
It finally reopened in June 2021, now forming a complex that also contains luxury hotel Le Cheval Blanc, offices and a kindergarten. Its main art deco façade remained intact, but the store’s back elevation was skinned of masonry and replaced by a controversial, undulating glass wall once likened to a shower curtain. The rebuild made the construction of lofty inner atriums possible, as well as the addition of new floors on top of the building, where the public housing is located.
Costing 23.7 million euros to construct, the new housing is part of an ongoing plan from the administration of Mayor Anne Hidalgo: not just to augment the number of affordable homes in the city, but also to prevent further social segregation between high- and low-income areas. The impetus for this drive does not come from Paris City Hall alone.
Since 2000, a national Urban Solidarity and Renewal law has stipulated that French cities whose housing stock does not consist of at least 20% public housing must pay a substantial levy. In 2025, this proportion will rise to 25%.
As Urban Institute researcher Yonah Freemark concluded in a recent report, the law has been effective in improving access to affordable housing across various French cities, and could serve as a model for the U.S. as well.
Paris is attempting to not just meet its percentage target but “rebalance the share of social housing,” as Paris Housing Commissioner Ian Brossat said, so that more public units become available in the city’s wealthier west. This drive has already produced some results.
As well as the 96 units at La Samaritaine, the city launched two new housing complexes in December 2020, one next to the Luxembourg Gardens and the other in the exclusive 16th arrondissement, on a site expropriated from the uncle of Syrian president Bashar al-Assad.
Resolving Paris’ affordability problems nonetheless remains a challenging goal. In December 2020, 260,000 people remained on Paris’ waiting list for public housing, while limited space for building means that the city’s cost per square meter for a new dwelling is higher than any other major city in Europe.
Given the level of need, the number of new public units appearing in pricier quarters of the city could be considered mostly symbolic. The public tenants moving into new apartments in La Samaritaine constitute a lucky handful.
That doesn’t stop them being delighted, however. One renter interviewed by Le Parisien admitted that when she first received her new apartment’s address, she assumed that — located as it is next to Paris’ City Hall — she’d been sent the address of the Paris public housing department’s head office by mistake.
Others have noted that their new homes’ location offered them not just secure, affordable housing but access to better schools and public amenities. The new housing may make only a tiny dent in Paris’ wider public housing needs, but it could help prevent the city’s heart from becoming the exclusive preserve of the wealthy.
For Many Families World-Wide, A Dream Home Is Out of Reach
Calls for action gain support, but policy makers are worried about existing homeowners and the global recovery.
The record-setting rise in home values during the pandemic is triggering fresh debates about housing affordability world-wide, as policy makers search for ways to rein in price appreciation without driving prices sharply lower or derailing the global economic recovery.
In cities from Austin to Dublin to Seoul, more families are finding it impossible to pay higher prices unleashed by a global property boom. Sydney house prices leapt by nearly $870 a day in the second quarter of the year, said real-estate firm Ray White. In the U.K., first-time buyers are paying on average 32% more than 12 months ago, according to Benham and Reeves, a real estate agency.
Many economists worry that as more people get stuck renting, or borrow more than they can afford, it could contribute to greater inequality in major cities that could take years to unwind and add to political polarization.
It could also lead to more pushback from first-home buyers and affordable housing advocates that forces governments to take more aggressive action. In Berlin, voters on Sunday backed a nonbinding referendum to nationalize large real estate groups with more than 3,000 apartments.
But many policy makers are wary of doing too much to control prices, for fear of harming existing owners who benefit from higher values. They also don’t want to undermine an economic recovery that is being driven in part by confidence among owners of homes and other assets.
Price increases have been a boon for many families. Rising home values typically spur more spending on furniture and other goods, benefiting the economy at large.
Recent events in China are a reminder of how tricky it can be to try to tame the market. Chinese leaders, worried that rising housing costs could trigger unrest and add risks to the financial system, have moved to curtail price increases and rein in borrowing.
Now, China Evergrande Group, a leading developer, is on the brink of collapse, and home sales are weakening, triggering fears of wider economic damage.
The affordability problem, however, isn’t going away in many economies. A combination of low interest rates, pandemic-era stimulus and changes in buying patterns as people work remotely are pushing prices higher.
That has prompted buyers’ complaints across North America, Europe and parts of Asia. Australian lawmakers recently opened an inquiry into housing affordability.
“It really shouldn’t be this hard,” said Herlander Pinto, a 32-year-old software engineer, who recently bought a house with his partner in a Toronto suburb farther from the city than they wanted. “We just had to hope that somebody with deep pockets didn’t come along and put in an outrageous bid.”
In Canada, New Zealand and Norway, the home price-to-income ratio—a measure of affordability that is house prices divided by disposable income—is at its highest level ever, according to data from the Organization for Economic Cooperation and Development. Elsewhere, including the U.S. and France, price-to-income ratios are climbing.
“In Auckland, anyone who’s owned a house for the last seven or eight years is now a millionaire,” said Ben Hickey, chief executive at mortgage broker HomeBoost Mortgages NZ, referring to New Zealand’s biggest city. “Then you’ve got the other half of Auckland who don’t own a house and are really wondering what they’re going to do.”
There are few worries about a 2008-style housing crash. Lending standards have tightened since then and many households have increased their savings during the pandemic.
Still, studies have shown that homeownership is key to building wealth. Affordability issues could hurt some families to move farther from work and impact educational opportunities for their children.
“We were worried about the affordability situation for many households before the last wave of house price increases, and this wave is really enormous,” said Boris Cournède, a senior economist at the OECD. “All the problems that were there before have essentially become more exacerbated.”
In the U.S., the Biden administration is working to boost new-home construction. Canada’s government pledged to spend billions of dollars to build 100,000 new homes for urban middle-class families. Netherlands cities will soon be able to designate neighborhoods where investors are no longer allowed to buy and rent out cheaper homes.
Other approaches include so-called macroprudential tools, like limiting the value of mortgage loans to more targeted measures such as financial assistance for first-time home buyers. Some countries have tried to make it harder for investors to buy multiple properties or limit the influence of foreign buyers.
But many policy makers say such tools, which can be costly, do little to hold back prices amid a tide of easy money. Some programs to boost homeownership can encourage buyers to take unnecessary risks that could harm them later, especially if home prices fall.
Other efforts, like changing land-use regulations to build higher-density housing in desirable neighborhoods, can be politically contentious given that homeowners often oppose developments that could lower their home values.
Some economists think it is best to leave the market alone, and that prices will level out. There are signs this may be happening in the U.S., where existing-home sales posted a 2% decline in August from July, in part because high prices are squeezing out some buyers.
Still, prices aren’t expected to fall significantly. Interest-rate increases over the next year could make mortgages more expensive.
The debate is especially fraught with central banks, whose decisions to keep interest rates low during the pandemic helped fuel the global boom. Many central banks want to avoid using interest rate policy to address housing costs. Doing so could slow economic growth and lead to fewer jobs and weaker wage gains.
Australia’s central bank, for example, has resisted raising rates despite surging home prices.
“Central banks’ primary objective should be the integrity of money and controlling inflation, and the more goals you give them, the greater the likelihood they get distracted from the central one,” said Neil Shearing, group chief economist at Capital Economics.
But when South Korea lifted its benchmark interest rate recently, policy makers said they were worried about property prices. New Zealand’s government earlier this year directed its central bank to consider housing prices in monetary-policy decisions.
Norway’s central bank increased its benchmark interest rate on Sept. 23 to 0.25%, and signaled more rate increases to come, saying the actions would counter financial imbalances by curbing house price inflation and credit growth.
Central bank Gov. Oystein Olsen said in an interview he had been surprised by the rate of house price growth during the pandemic, even though interest-rate cuts were expected to spur asset prices, and wanted to lean against rising household indebtedness.
Klaas Knot, who sits on the European Central Bank’s rate-setting committee as governor of the Dutch central bank, says higher home prices are creating major problems, particularly among younger generations, and potentially leading to more intergenerational wealth inequality.
“This is a serious side effect of our policy and it should be taken into account when assessing the proportionality of our actions,” he said.
Annualized price gains in the Netherlands are likely to peak at around 15% later this year, according to Oxford Economics. In Amsterdam, real-estate broker Jerry Wijnen said agents are receiving up to 10 offers per property.
Canada’s prices rose over 21% from a year ago, according to August data from the Canadian Real Estate Association. Polling showed housing affordability was a top voter concern in the recent election, which returned Prime Minister Justin Trudeau’s Liberals to power, though without a majority.
In Adelaide, Australia’s fifth-biggest city, 47-year-old Jo Alldis, who works in disability services for a government agency, and her partner searched for a house earlier this year. She says they probably could have bought something earlier, but waited to save more for their deposit.
Then prices started soaring. Looking to spend up to $360,000, Ms. Alldis and her partner put in offers on five properties but were outbid, with as many as 100 people at some open houses.
Now, Ms. Alldis plans to wait a year before resuming the search, hoping prices fall. She and her partner moved to a new rental property that is more expensive because rents have increased.
“The heartbreaking thing is, we were ready to go and that is when things just shifted,” she said. “We’re both on fairly good incomes, but even still, trying to get a decent house now is really out of the question for us.”
Buying A U.S. Home Will Take An Extra Year of Saving Up
Would-be homebuyers in the U.S. will have to save up for an extra year before taking the plunge, thanks to pandemic-era price gains.
For the typical American, it would take eight years of stashing away 10% of monthly income to build up enough for a 20% down payment — up from seven years before Covid-19 ignited a homebuying frenzy, according to a study by Tomo, a real estate startup.
For many renters hoping to become buyers, scraping together a down payment has always been a challenge. Now the hurdles have gotten higher as bidding wars for a tight supply of listings push prices ever further out of reach. The share of existing-home purchases by first-time buyers declined to 29% last month, the lowest level since 2019, the National Association of Realtors said last week.
The people who save for a down payment “are the people who can,” Skylar Olsen, principal economist at Tomo, said in an interview. “Folks who have a lot of rent burdens tend to save nothing, and there’s always a fairly sizable share of the population who have a pretty substantial rent burden.”
The areas with the highest years-to-save time lines are Los Angeles, with 19.2, San Francisco, with 17.9 and San Jose, with 18.2, according to the Tomo study.
In Seattle and New York, it would take 12.3 years and 11.9 years, respectively, to save for a down payment.
New York Rents Jump As Covid-19 Pandemic Discounts Fade
Landlords offered rare deals at buildings with roof decks and golf simulators. Now renters are facing steep increases.
The high-rise building Isabella Alvarez and her roommate found on Wall Street featured a rooftop terrace, a doorman and a basketball court. A two-bedroom apartment there was renting for about $3,500 a month. But during the pandemic, the landlord offered three months free, reducing the average monthly price to $2,600.
With her one-year lease expiring in October and the market heating up, the landlord raised the rent back to $3,500 without offering any month of free rent. “It’s thrown us for a loop because we really found our home here,” Ms. Alvarez said. She is now looking uptown for something more affordable.
Apartment tenants fled Manhattan in droves for cheaper or bigger spaces during the early months of the Covid-19 pandemic, driving up the vacancy rate from next to nothing to more than 11% by May of this year.
Those who stuck it out or moved to the borough were treated to some of the sweetest deals in the recent history of Manhattan real estate. Landlords served up months of free rent and other incentives just to keep their buildings partially occupied.
Some new lease signers seized on these offers to live for the first time in buildings with swimming pools, roof-deck grilling stations, golf simulators and doggy daycare services. Others took the opportunity to save money by moving to apartments that were cheaper than what they had before.
Now, many of those leases are expiring, and tenants are facing sticker shock. Those who want to keep their apartments with the latest amenities or located in stylish neighborhoods must absorb steep rent increases. The most ambitious landlords are attempting to raise rents by as much as 80%, according to Adjina Dekidjiev, a real-estate broker at Warburg Realty.
Bidding wars—usually confined to the for-sale housing market—are breaking out for rental units in some sought-after neighborhoods, real-estate brokers said.
“It’s a horrible time to be looking for an apartment right now,” said Kunal Khemlani, a broker at the Living New York firm.
The median rental price in Manhattan, including concessions, fell 22% on an annual basis in November of 2020, according to a report from brokerage Douglas Elliman and appraisal firm Miller Samuel Inc.
With more people returning to the city as they head back to the office and with colleges resuming in-person classes, pricing power has swung back to the landlords, according to renters and real-estate brokers. The median Manhattan monthly rent is up to $3,118, after bottoming out in November at $2,743, according to Miller Samuel.
David Schwartz, principal at real-estate investor Slate Property Group, said last summer and fall he had to offer tenants incentives like free rent and gift cards, and would sometimes pay for broker fees and moving expenses. “Whatever it took to keep buildings occupied, we did,” he said. But now that these leases are up for renewal, he stopped offering incentives in most cases.
“We just saw the rental market explode,” he said.
Some Manhattan renters who signed these cut-rate leases prepared themselves for the possibility of paying significantly more this year. Others figured if the pandemic’s fallout lingered, they might be able to renew at nearly the same price.
Joe Weinberg and his roommates seized on Covid-19 discounts to rent a four-bedroom apartment in a neighborhood near Columbia University. Mr. Weinberg said he had some reservations about the move.
But his roommates persuaded him to go along, pointing to the reduced rent and closer proximity to downtown than his previous neighborhood. They agreed to a one-year lease for $2,917 a month.
This year, the landlord wants $3,575. “It didn’t really hit me that they would be able to totally take away the discount they had given us,” said Mr. Weinberg, who wrote a letter to the building’s managers pleading they not increase the rent by 23% this fall. The landlord responded with one month free rent, he said.
In other boroughs, some renters have been through a similar experience. In Long Island City, Queens, film and video producer Mariana Avelino said she faced a $400 a month increase for the studio apartment she had rented at a discount last year.
She said she gave a counter offer, asking the landlord for one month of free rent. The company agreed to a half-month free concession, which Ms. Avelino said she was happy to take.
“Everything in this area is way more expensive and smaller compared to my current unit,” she said.
Still, there are signs of landlord overreach. In August, 11.1% of New York City rentals were advertised as discounted in some form, according to listings website StreetEasy. That is down from 31.2% a year ago. But it was up from 9.1% in July.
The slight rebound could mean that some landlords were too ambitious with their price increases this summer and have made adjustments, said StreetEasy economist Nancy Wu.
Manhattan renters had also been paying fewer rental broker fees during the pandemic. That, too, is eroding. Sixty-eight percent of rental listings on StreetEasy in September were advertised as “no fee,” down from 81% in April.
Tenants who signed a Manhattan lease in the summer or fall of 2020 and are now searching for an apartment need to manage their expectations, advised Corcoran Group broker Eric Shostak. He is aiding Ms. Alvarez and her roommate with the apartment search.
“It’s not going to be anything like what they had,” Mr. Shostak said.
Home-Price Growth Hit Record In July
Case-Shiller index rose 19.7%, the fourth consecutive month of record price appreciation, but the market could be starting to cool.
Home-price growth climbed to a new record in July as buyers continued to compete fiercely amid a shortage of homes for sale, but there are signs the market frenzy might be starting to ease.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 19.7% in the year that ended in July, up from an 18.7% annual rate the prior month. July marked the highest annual rate of price growth since the index began in 1987.
“The last several months have been extraordinary not only in the level of price gains but in the consistency of gains across the country,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.
July marked the fourth consecutive month of record price appreciation, he said.
‘The last several months have been extraordinary not only in the level of price gains but in the consistency of gains across the country.’
— Craig Lazzara of S&P Dow Jones Indices
But the data suggest the market could be starting to cool. Price growth slowed slightly in three of the 20 cities tracked by the index: Detroit, Cleveland and Washington, D.C.
“There are some hints that maybe things are starting to level off,” said Nancy Vanden Houten, an economist at Oxford Economics. “This has to stabilize at some point.”
The Case-Shiller 10-city index gained 19.1% over the year ended in July, compared with an 18.5% increase in June. The 20-city index rose 19.9%, after an annual gain of 19.1% in June.
Economists surveyed by The Wall Street Journal expected the 20-city index to gain 20.1%.
In a separate report Tuesday, the Conference Board said consumer confidence fell in September for the third straight month, as the spread of Covid-19 and inflation concerns weighed on households.
The consumer-confidence index fell to 109.3 in September from a revised 115.2 in August, according to the Conference Board. The share of respondents who said they planned to buy a house in the next six months fell for the third month in a row.
The number of homes for sale fell to record lows earlier this year and remains below typical levels, sparking bidding wars among buyers and pushing prices up rapidly
The Case-Shiller index, which measures repeat-sales data, reports on a two-month delay. In more recent weeks, the housing-market frenzy has slowed slightly, as some buyers have been priced out or taken a step back from the market.
The median existing-home sales price in August rose 14.9% from a year earlier to $356,700, the National Association of Realtors said earlier this month.
Home-price increases are outweighing the advantage of low mortgage rates. Households that bought homes in May are spending almost 21% of their income on monthly mortgage payments, above the average rate for the past decade, according to Realtor.com. News Corp, parent of The Wall Street Journal, operates Realtor.com.
“Demand remains quite high relative to just about any other period in history, which is what’s still driving higher-than-normal price increases,” said Danielle Hale, chief economist for Realtor.com. But “the affordability calculation is not as much of a no-brainer as it was.”
Phoenix had the fastest home-price growth in the country for the 26th straight month, at 32.4%, continuing its record streak in the top spot. San Diego posted the second-fastest growth, at 27.8%.
A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found a 19.2% increase in home prices in July from a year earlier.
Freddie Mac Finds ‘Pervasive’ Bias In Home Appraisal Industry
A new study augments a body of evidence that homes in Black and Latino neighborhoods are undervalued.
A study from the Federal Home Loan Mortgage Corporation, known as Freddie Mac, adds to a growing body of research that finds racism in the appraisal industry is undervaluing the homes of Black and Latino Americans compared to white-owned homes.
In an analysis of more than 12 million housing appraisals, Freddie Mac researchers found that “appraisal gaps seem pervasive” in lowering home value determinations in Black and Latino neighborhoods.
Other recent studies have shown that homes in Black neighborhoods are appraised at lower values than similar homes in white neighborhoods by as much as 23% on average, and that that appraisal gap is wider now than it was in the 1980s. These disparities have helped widen the wealth gap between Black and Latino families and white ones.
For years, the leading professional appraisal organizations have denied that racism is at work in the industry, and explained away news stories about it as the actions of a few individual appraisers. Only recently did appraisal industry leaders acknowledge that a problem exists, and have begun taking steps this year to investigate it.
The new Freddie Mac study shows a few places in the industry where it can be found. Examining housing appraisals from Jan. 1, 2015 to Dec. 31, 2021, researchers found:
* 12.5% of appraisals in majority-Black census tracts came in below the contract price of the houses they assessed compared to 7.4% of appraisals in white tracts. For appraisals in majority-Latino tracts, 15.4% were valued lower than the contract price. For both Black and Latino areas, the percentage of undervalued appraisals increased as the white population percentage decreased.
* The undervalued appraisals occurred more frequently in Black and Latino tracts even when taking structural and neighborhood characteristics into account.
* Racial gaps were found even when just looking at the race of the mortgage applicant as opposed to the neighborhoods the homes were in: 8.6% of Black applicants received appraisals lower than the contract price of the house, as did 9.5% of Latino applicants, compared to 6.5% of white applicants and 7.1% of applicants overall.
As for the idea that bias might only occur among a small number of appraisers, the study found when analyzing the appraisal reports of several thousand appraisers that the majority of them reported “statistically significant” racial gaps in their valuations.
The study’s authors wrote that they hadn’t identified a root cause for these gaps, but that they are testing alternative appraisal methods for more equitable outcomes.
Junia Howell, a sociology professor at the University of Illinois, Chicago, who’s conducted several studies on appraisal bias, says this study reinforces that the disparity is systemic.
“The question of: Is it just a few bad apples? Is it just a few appraisers that are creating this inequality? What [the study] shows is actually, no, it’s almost everyone,” says Howell. “Yes, individual bias is definitely affecting these things, but it’s actually a structural issue, across different appraisers who have different backgrounds, and in different counties. We’re seeing this inequality across the board, really demonstrating that it is deeply embedded in the ways and the methods of appraising.”
The Appraisal Institute, an international professional association representing the real estate appraiser profession, has only recently acknowledged that racial bias is an issue in appraisals after a change in leadership, though it still hasn’t fully committed to the idea that the bias is structural.
In response to the Freddie Mac study, AI President Rodman Schley said in a statement that “unconscious bias is real and exists in all industries.”
“Appraisal is one piece of a larger ecosystem, and appraisal groups are working alongside consumer groups, real estate brokers and agents, banks, government agencies, think tanks and others to explore where housing inequities may stem from and what combination of solutions should be considered,” Schley said.
Freddie Mac isn’t the only federal entity looking into this problem. Earlier this year, President Joe Biden announced the creation of an interagency task force to address home appraisal inequities.
That group, called the Property Appraisal and Valuation Equity task force, chaired by U.S. Department of Housing and Urban Development Secretary Marcia Fudge and Domestic Policy Council Director Susan Rice, will release a report in the months ahead detailing the “extent, causes and consequences” of appraisal discrimination and a policy roadmap to help root it out.
Appraisal bias complaints have increased tenfold since 2019, HUD’s Alanna McCargo said at a June event hosted by the Consumer Financial Protection Bureau. Freddie Mac is currently working with the Appraisal Institute on diversity initiatives to bring more people of color into the industry, which is 96.5% white, according to data from the U.S. Bureau of Labor Statistics.
Over the last 12 years, there has been a “20 to 25% decline” in the number of registered appraisers overall, according to Jim Park, executive director of the Appraisal Subcommittee, the federal oversight agency for appraisers.
“Not only is the profession faced with a lack of diversity, it is also faced with an aging population, declining numbers, and few new entrants, even as demand for appraisal services has been increasing,” Park said during a panel discussion at the June CFPB event. Referencing earlier research on bias in the industry, he added: “I find these allegations and revelations about the appraisal industry to be deeply disturbing.”
When Real Estate Agents Led The Fight Against Fair Housing
The new book Freedom to Discriminate argues that the real estate industry’s campaign to defend housing segregation still echoes in today’s politics.
In 1964, nine months after Martin Luther King Jr. gave his “I Have a Dream” speech on the steps of the Lincoln Memorial, a real estate broker and former newspaperman from Fresno, California, delivered a different kind of address. His crusade was part of a “great war” against fair housing laws.
As part of a wide-ranging public relations and political campaign, Lawrence “Spike” Wilson, president of the powerful California Real Estate Association (CREA), gave speeches, devised talking points and created messaging aimed squarely against the Rumford Act, a pioneering fair housing law passed in 1963 that sought to combat the discrimination Black residents faced from landlords and real estate agents.
CREA helped lead the statewide fight against the law and in support of Proposition 14, an amendment to repeal the Rumford Act and make it illegal to pass any future such legislation, as well as a national campaign to reposition real estate agents as fighters for free enterprise.
Invoking the right to certain freedoms — of association, choice, and vitally, private property rights — as well as references to patriotism and America’s promise, Wilson argued that private homeowners and real estate brokers were obliged to resist so-called “forced housing” and government overreach via anti-discrimination laws.
CREA took out full-page ads in California newspapers touting a “Bill of Rights” for property owners. (Among them: “The right to determine the acceptability and desirability of any prospective buyer of his property.”) It promised to “rescue the rights of the new ‘forgotten man’” — the American small property owner — against “militant minorities” asking for “special privileges.”
“We are involved in a great battle for liberty and freedom,” Wilson said in his broadside, which he dubbed “Gettysburg 1964.” “We have prepared a final resting place for the drive to destroy individual freedom.”
Does that language sound familiar? In Freedom to Discriminate, a new book that traces the role of the real estate profession in perpetuating U.S. housing segregation, author Gene Slater says there’s a reason the fight over California’s Prop 14, which passed in 1964, seems very contemporary.
The terms of that debate weren’t just influential to the modern housing discourse, with its pitched battles over NIMBYism, zoning, and “abolishing the suburbs.” They shaped decades of conservative thought and political positioning.
“The key idea of freedom here was the idea that there’s a single, narrow right, and you elevate it, you make it an absolute right,” says Slater, a longtime adviser for the affordable housing industry. “And when that’s something that’s absolute and can never be infringed upon, it means nobody else has rights.”
Freedom to Discriminate, his first book, takes a deep dive into the history of the real estate profession, from its emergence via local business associations at the dawn of the 20th century to the massive impact the real estate industry had on postwar housing and segregation.
Slater was given unique access to the records and correspondences of many different groups, including CREA, which changed its name to the California Association of Realtors in 1975.
He focuses on how the struggle for affordable housing in the civil rights era induced many real estate agents — who had long profited from and promoted segregated housing as a norm — to create a new way to describe what Slater calls “exclusive freedom.” That language has far outlived Proposition 14, which was struck down by the California Supreme Court in 1966 for violating the Equal Protection Clause.
The way that real estate industry leaders in California railed against fair housing laws more than 50 years ago, informed by the vision and vocabulary of Wilson, echoes in much of today’s conservative rhetoric.
Bloomberg CityLab talked to Slater about the progressive origins of real estate agents, how the industry helped spearhead the right-wing backlash to fair housing legislation, and why that debate is still going on today. The conversation has been edited and condensed.
What I found so fascinating about the debate over Proposition 14 in California was the way that the language they used to support that initiative, about protecting freedom by allowing people to discriminate, was such a carbon copy of some of the language I’ve heard politicians use my entire life.
This almost never gets mentioned in the context of the wider impact of [these real estate agent campaigns] on the conservative movement. I spent five pages in the introduction trying to explain why nobody is talking about this.
It was important to me to understand why those on the left in the civil rights movement ignore Prop 14 and say, “Well it’s sort of an aberration — that was racism that’s going away; eventually we triumph.” And on the right, the last thing they want is to give realtors the credit.
At the beginning of the book, when you discuss the formation of professional organizations for real estate brokers in the early 20th century, it seems like they coalesced on the idea that these groups, and actions like racial covenants and later redlining, were the way they could make the most money and keep the market humming. A very central tenet of that was maintaining segregation.
It was fascinating to realize that what the realtors came out of was progressivism. When you look at Prop 14, when you see their language and the way it’s been adapted, it sounds like these realtors are the ultimate populists.
But realtors never talked about freedom in the early years, because what they were all about was creating organizations, creating limitations on owners’ rights, and limiting what brokers could do and limiting who could be a broker. It was all about stability, organization, order and progress.
One way to think about it is that realtors became wedded to a system that they created. Nobody started with “Let’s segregate neighborhoods.” It was “Let’s sell houses.” And here’s a cool way to sell houses.
What’s interesting here is the notion of ethics. For realtors, the most fundamental rule was trying to root out fraud in real estate, and being a good fiduciary to their clients, the seller or the buyer, and get the best price. [Segregation] was violating both of those principles entirely.
There’s a story in the book of a realtor in New Haven, Connecticut, getting rid of a Black potential buyer, then taking an offer to sell a home for $1,000 less. Realtors were serving their own interest, which they identified with the reputation of the neighborhood.
They constantly talked about how ethical that made them, because they were turning down sales. They were turning down making money in the short run, but their view was always the long one.
You also point out that many cities were much less segregated before zoning laws and racial covenants — initiatives promoted by realtors. In Southern California cities, for example, Black, Mexican and Japanese-American populations were much more spread out in the early 1900s. Housing segregation can often seem, or be presented, as just a naturally occurring state of affairs that reflected the prejudices of residents.
It’s because there was no system to do it otherwise. It takes a cartel to control a rambunctious free market in which everybody wants to get the highest price for their home and purchase for the cheapest price.
To limit that racially took an enormous effort, one that transformed the country. In the case of Pasadena, I don’t know all the details, but before more explicit residential segregation, there were middle-class Blacks and domestic servants in the city. They didn’t live five miles away from work, just on the next block.
The language of the Proposition 14 battle and the campaign to pass it is the idea that I have the freedom to sell my home to whomever I want or don’t want. It’s this idea of control again, that realtors and covenants can control the neighborhood.
It smacks of the idea of that individual homeowners should be able to have a say in what happens to elsewhere in the neighborhood, which is embedded in a lot of today’s housing politics and debates.
It’s the right of the neighbors to control what happens next door. That’s what “freedom of association” was. It was not about individual rights at all, just the opposite. The freedom to zone. The notion becomes that “freedom” is a community’s freedom to exclude and to limit.
The link between these became, to me, maybe one of the key insights of writing this. What they were doing was using the language of libertarianism to mean the opposite — community conformity and insisting on tradition.
Despite the stereotype of the hippie, liberal ’60s, there was a big conservative backlash happening at the same time. When Proposition 14 was being debated, Martin Luther King, Jr. diverted his schedule to speak against it in California, because he recognized how damaging this language could be.
A key point here is, opponents didn’t know how to answer that language, so the response was to discount it: “This is racism by another name, so let’s call these people out as racists.
Let’s shame them, let’s attack them, let’s make people feel guilty about voting for this.” But when you make people feel guilty about what they’ve now come to see as their freedom, that’s a losing proposition. It’s only infuriating to people.
I think it’s important to say that ignoring that use of the language doesn’t work. It just feeds on itself, and it has been over the last 50 years. Basically, liberals have left the language of freedom to the right. That wasn’t the case in the early ’60s.
The left has stopped using that word and so you wind up, like in the last election, with constant references by the GOP and Trump supporters that “we are the only freedom-loving Americans,” that a vote for Trump is the only vote for freedom.
One of the things that does is it fundamentally frames the issue around freedom. That’s more important than democracy. That’s what you’re seeing in regards to Jan. 6.
To me, it’s important not to retreat from the use of freedom, but to pick it up and use it in an opposite way, and to understand exactly the techniques that are used and to call it out. One [side] means freedom isn’t for everybody.
When someone uses it that way, say, “That’s exclusive freedom. That’s freedom for some, and that’s not what we believe in. We believe in freedom for everybody.”
Even during the Prop 14 fight, many real estate professionals didn’t go along with CREA’s stance — there was a group called California Realtors for Fair Housing, for example. And today’s real estate industry groups and associations are more explicitly anti-segregation.
How do they recognize this history, as you lay it out in the book, since the massive role this profession played in perpetuating housing segregations isn’t as widely understood?
They changed the names of their organizations in the ’70s, and at an official level, they stand highly committed for fair housing, and they’ve done various efforts for that in terms of training programs and stuff. They say they acknowledge the past and learn from it. That’s the broad, official level.
But did you see that Newsday series [a 2019 investigative report that chronicled widespread discrimination in home buying in Long Island]? It’s a compelling account to the extent to which discrimination at a subtle level is still involved.
This happens in all sorts of ways, also with the banks turning down African Americans with the same credit. So it’s quiet discrimination at a sort of micro level. I’ve talked to people more informed about this area of housing and believe solving it involves more administrative power for the government, and significantly more funding for enforcement.
One of the key things would be if your real estate or appraisal license was on the line for this behavior. If that was the case, it brings change right away.
Based on his Prop 14 campaign and its wider cultural impact, Spike Wilson seems to have had a masterful use of language and figuring this stuff out. Who is this guy and how did he become such a prophet for the next 50 years of cultural battles?
I know that he was a newspaper editor first in Sacramento. He was a news guy. He thought in these terms; he wasn’t a real estate salesman to begin with. And then he goes to this meeting — there are slightly different accounts of it — but he goes to a meeting in the middle of the Depression to cover a local real estate board. And here are these realtors who have been decimated by the Depression.
I mean, sales are down by 80%. They were making more money selling insurance than property. He goes to one of these meetings, and they’re talking about how the spirit of American salesmanship is what’s going to get us out of the Depression. He comes away inspired by this meeting. That’s who this guy is.
He saw himself as a patriot. His great-grandfather signed the Declaration of Independence, and his mother was a Greek immigrant. I mean, I think this flowed out of him naturally, this language.
What he did was very relevant at the time. It’s 1963 and 1964, realtors are under attack, and they’re sort of trying to say, “Well, I can’t use this racist language; what the hell do I talk about?” So he denied discrimination exists. He gives them a language.
This was the key to him: It’s a language they can be proud of. They can stand up in a meeting and 2,000 realtors in Orange County can share that they unanimously adopted the Property Owners’ Bill of Rights.
First-Time Homebuyers Are Getting Crushed In A Cutthroat U.S. Market
With prices soaring, it’s never been so good to be a homeowner and so hard to become one.
In the pandemic-fueled housing frenzy, first-time buyers can’t compete.
Take Sarah and Koty Chapman, suburban Nashville restaurant workers in their 20s who started this year full of hope, with a baby on the way and plans for a house of their own.
They lost a dozen bidding wars for homes under $300,000 — up against mortgage borrowers with big down payments, telecommuters with out-of-state salaries and Wall Street investors skipping the line by paying cash. The Chapmans’ daughter was born in April and they’re stuck right where they started, in a rental. Determination has given way to resignation.
“Am I even going to be able to live in my own community?” said Sarah Chapman. “I don’t think it’s fair.”
Record price gains and fevered competition are crushing prospects for U.S. homeownership, a key driver of middle-class wealth. First-time buyers accounted for 29% of existing-home sales in August, the lowest share since January 2019 and below the five-year average of 32%, according to the National Association of Realtors.
The share of government-backed mortgages often used for purchases by young people has also plunged since the start of the pandemic.
It’s a stark example of America’s uneven economic recovery. Soaring real estate values have gifted homeowners with record equity, with an average increase of more than $50,000 per mortgage in the past year, according to CoreLogic.
But record-low borrowing costs, which should have made housing more affordable for young renters and minority groups historically left out of ownership, instead drove prices higher and pushed them even further behind.
“It’s extraordinarily hard to become a homeowner for a range of reasons, most significantly that prices have gone skyward,” said Mark Zandi, chief economist for Moody’s Analytics. “The next shoe to fall is higher mortgage rates. As soon as that happens — and it will — homes are going to be completely out of financial reach.”
In the latest sign of the market’s heat, a report Tuesday showed that prices for U.S. single-family homes surged 19.7% in July from a year earlier, the biggest jump in more than 30 years.
Financing is one of the key issues putting first-time buyers at a disadvantage. Sellers have their pick of offers and are choosing cash purchasers or mortgage borrowers with conventional financing who can waive inspections and make up the gap if the lender’s appraisal falls short.
Meanwhile, the share of purchase mortgages backed by the Federal Housing Administration — a key lending source for young people, low-income Americans and minorities — has dropped to the lowest level since at least 2012, according to data from the American Enterprise Institute. It fell to 18% in June from 23% in March 2020, when lockdowns began.
Lenders haven’t significantly toughened standards during the pandemic. Buyers with low credit scores and little savings can purchase a home with an FHA or government-backed veteran loan. But even now that housing demand has moved from unbelievably hot to merely hot, sellers are still far more likely to choose someone else.
“The most important factor isn’t whether or not you can get a mortgage, it’s whether or not you can win a bidding war,” said Danielle Hale, chief economist for listing site Realtor.com.
Before the Chapmans could even get in the ring, the pandemic almost knocked them out of the suburban Nashville housing market. In late March 2020, she lost her job as a server and he, as a chef. But they were back at work two months later and spent the rest of the year building up their credit scores by keeping up with bills and paying off debt.
Armed with an FHA mortgage, the couple made their first offer in January and lost. They got to work telling their story of hope in heartfelt letters to sellers, and still, only rejection. One house they would have financed with a $1,500-a-month mortgage was purchased instead by a landlord now renting it out for $1,900, Sarah Chapman said.
They decided to take a break after their daughter, Amelia, was born. Sarah Chapman is in college finishing her bachelor’s degree in social work, and hopes to get a master’s to build up her income.
“If the market crashes,” she said, “we’re going in.”
Local buyers are getting priced out in relatively affordable cities everywhere, from Charlotte, North Carolina, to Riverside, California, where bargain hunters in the age of remote work are piling in. Investors and second-home buyers are flooding into hot markets, accounting for 41% of all sales in Phoenix, 36% in Las Vegas and 34% in Tampa, Florida, according to John Burns Real Estate.
In Denver, where the median home price is approaching $600,000, affordable listings disappear fast.
A seller last spring got 12 offers on a four-bedroom home listed for $425,000. The highest bidder offered to pay $480,000 and Victoria Macaskill, broker for Denver Homes, said she advised the seller to take it even though the buyer had an FHA loan. Such borrowers are seen as risky because with lower incomes and minimum down payments of just 3.5%, their financing is more apt to fall apart.
The appraisal ordered by the lender on the Denver home came in well below the contract price and the deal collapsed. The seller relisted it and it sold in April for $485,000 to a buyer with conventional financing, Macaskill said.
Kyle McDevitt, a 29-year-old former Marine approved for a zero-down Department of Veterans Affairs mortgage, found a workaround.
He graduated last year with a computer-science degree and found a job in the aerospace industry in Denver. He put in 15 home offers, competing each time with more than 10 other bidders, he said.
Then he tried a new strategy to win a rigged game: transforming himself into a cash buyer. To do that, McDevitt used Accept.Inc., one of a new crop of mortgage startups that front money for purchases for borrowers they’ve underwritten, only completing the financing after the sale.
In June, he got into one last heated battle. His $445,000 offer was $25,000 short of the highest. But his was cash — helping him close the deal faster — and the top bidder had a mortgage.
“Without the ability to have that cash offer,” McDevitt said, “I’d probably still be looking.”
U.S. Rents Are Increasing At ‘Shocking’ Rates of More Than 10%
The pace of rent increases is heating up in the U.S.
Rent data for the past two months show no sign yet of the usual seasonal dip at this time of year, following peaks early in the summer, when many lease renewals come due.
A Zillow Group Inc. index based on the mean of listed rents rose 11.5% in August from a year earlier, with some cities in Florida, Georgia and Washington state seeing increases of more than 25%.
Prices To The Moon
U.S. August rents are up 11.5% from a year earlier, or almost $200.
“To have double digit rent growth over the course of a year and a half is a shocking level of growth, especially considering the vast majority of it has come in the last 9 months,” according to the Zumper National Rent report.
Since the start of the pandemic, the median rent for a two-bedroom apartment has soared 13.1% to $1,663, Zumper data show.
For the New York market, landlords are raising rent prices as much as 70% now that people are flooding back into the city as offices and entertainment venues open up. In July, the median asking rent surged to $3,000, compared with the pandemic low of $2,750 in January 2021, data from StreetEasy showed.
There are some signs that price growth may be easing, especially in cities that saw the largest gains. In Boise, Idaho, where prices have risen the most since the start of the pandemic, rents have dipped slightly this month compared with August in the Apartment List database.
Another indicator that rents may start to stabilize is the Apartment List vacancy index, which ticked up in August for the first time since last April. Still, rents continued to rise month over month in September — at a time of the year when they would normally decline, the company said in its monthly report.
Yardi, another company that tracks rents, found that national year-over-year rent growth was 10.3% in August, the first ever double-digit increase in its index. However, Yardi said, annual increases may be misleading in the many metropolitan areas that were at a low point a year ago, when people fled cities as Covid-19 spread.
In the longer run, even if rent growth cools in the next months, inflation is here to stay. The Dallas Federal Reserve predicts that the official rent index from the Bureau of Labor Statistics will increase to 6.9% by year-end 2023, which would be the highest in more than 30 years.
It’s not just rentals. Prices for single-family homes rose almost 20% in July from the prior year, the largest increase in more than 30 years. That’s pricing out many first-time home buyers, with that group accounting for only 29% of existing home sales in August, the lowest since January 2019.
The Human Cost of London’s Housing Crunch
The story of Davida Dawkins shows how London’s push to build more affordable housing may still not be enough for its most vulnerable residents.
When Davida Dawkins got her keys to Denby Court in 2017 she was thrilled. She finally had a roof over her head and would no longer be homeless.
The apartment was a one bedroom, but there was space for a bunk bed for her two boys and a bed for her. While hardly perfect, it was warm and dry and close to the boys’ school. She and neighbors who had come from similar circumstances quickly formed bonds and built their new life in south London.
Denby Court sits a mile from the U.K. Houses of Parliament on the Lambeth Walk — a street made famous by the 1930s hit musical “Me and My Girl,” a story about a working class gent who learns he is the heir to an Earldom.
For years, Denby, as it’s affectionately known, provided housing for the elderly, and then in 2016, it was declared unfit for that purpose. The local government, facing a growing homeless population, repurposed the site as housing for vulnerable families with 42 self-contained government-funded units.
But the plan was temporary. The first time that Dawkins and the other Denby residents learned that their homes were slated for demolition was in January 2021. A letter informed them they would be relocated, prompting Dawkins and her neighbors to lead a campaign to save the dilapidated property.
The effort failed, and now Dawkins is on a new mission to secure permanent housing elsewhere for her and the remaining tenants.
That’s because Denby’s demolition is part of a broader strategy to create more affordable housing across London to meet surging demand. And in the short term, that means that some people are being kicked out of the low-cost housing they already have. While Lambeth Council — the local government body that oversees housing — intends to find all current Denby residents new accommodations, there is little chance of securing a spot in one of the new Denby units.
At the end of 2020 there were 27,674 households on the waiting list for government-subsidized council housing in Lambeth. Of those, 2,895 households (with some 4,260 children) are currently being housed in temporary accommodation like Dawkins. Compared with 10 years ago that’s more than a 100% increase in households in temporary accommodation.
“The reason why we want to stay here is because we live in a beautiful compound, and we’ve lived here for over three years now,” Dawkins said. “We’ve all set up our schools and our support networks, and we don’t want to be moved on to another run-down temporary scheme.”
Denby is bordered by a number of London’s Opportunity Areas — brownfield sites with huge potential for housing and job creation — including Vauxhall Nine Elms Battersea, home to the new American Embassy, where the ambition is to create at least 20,000 homes and 25,000 jobs.
Here, trucks and tractors trundle beneath cranes and skyscrapers overlooking the Pleasure Gardens, once a playground for aristocrats where princes paraded with courtesans and Handel delighted with his latest compositions.
Homes for Lambeth, the developer working on plans for the Denby site, has agreed to make almost half of the new homes affordable to those on low incomes or receiving social security payments. The start of construction is targeted for January 2022, and the plan is to create 78 private units and 63 affordable ones.
Some of those will be rented out for an estimated 670 pounds to 790 pounds a month, based on the relative value and size of the property, and local income levels — though Dawkins says she has seen much higher rents listed for some of the new units.
For other apartments, households with an annual income below 90,000 pounds will be eligible to buy 25% of the property and pay rent on the rest.
This shared ownership structure is in place at a development in neighboring Brixton. There, a brand new 2-bedroom flat is valued at 550,000 pounds, and a deposit of of 137,500 pounds is needed to buy a 25% share.
On top of a monthly mortgage payment of 685 pounds, buyers would pay 945 pounds in rent and 122 pounds in service charge to cover building and grounds maintenance and insurance. In total the monthly estimated cost is 1,752 pounds, still too much for many London residents.
With the city’s population projected to increase by 70,000 people every year, reaching 10.8 million in 2041, the housing crunch is only expected to worsen unless more units become available. London Mayor Sadiq Khan has set a target for each borough to meet the demand and he wants 50% of all new homes built across London to be “genuinely affordable,” accessible to those with low or no income. In Lambeth, the requirement is to build 13,350 new homes in the next decade.
Outside of London, the picture isn’t much better, prompting the U.K. government to announce in September 2020 plans to invest 12 billion pounds in affordable housing over the next decade with an ambition to provide up to 180,000 new homes across the U.K..
Progress so far has been glacial with 57,644 affordable homes delivered in 2019-2020, an increase of 1% on the previous year. The National Housing Federation, which represents 800 social housing providers in the U.K., estimates that across the U.K. 145,000 affordable homes would need to be built each year to meet demand.
In the spring of 2021, there were no visible signs yet of the looming construction at Denby. The central courtyard was bursting with bright white blooms from four large cherry trees, and a group of children kicked a ball back and forth in the dappled sunlight. But the outward tranquility belied the reality of the lives of Dawkins and other residents who have made Denby home.
Dawkins says it’s been difficult to get Lambeth Council to maintain the buildings or the grounds, something she blames on the fact that the building has been slated to be razed and redeveloped. A rotted flower trough took years to fix, she said. The local government says it is not aware of repairs taking so long and that regular inspections take place and any defects have been dealt with.
Starting in July, Lambeth Council began moving residents to other housing with the ambition of having everyone rehoused by December 2021. Sixteen families have been rehoused in Lambeth and 11 outside of the area. Two have been given permanent council housing and the rest have moved into other temporary accommodation. There are 10 families left at Denby.
For Dawkins, the lack of secure housing has been a narrative through her life and one she tried to rewrite by doing a job she loved, helping others to afford their own homes. In 2006 she qualified to be a mortgage broker and had high hopes for a career in financial services.
At the time, she was living in private-rented accommodation, but when the landlord raised the rent three times in one year, she could no longer afford it and her mental health began to suffer. She had multiple breakdowns and had to give up the flat and her career. She is still not working professionally, spending much of her time on the Denby campaign.
While Dawkins waits to be offered alternative accommodation she is fearful the “cycle of deprivation,” as she calls it, will continue with her sons. She is desperate to stay in the area. In the years living here, her children have settled into a local school and she has formed a close network including social, medical and educational support.
She hopes she will be able to stay nearby, but although there are properties released weekly on the Council’s online housing portal, she says it’s a lottery getting a place high enough in the queue to get a viewing.
Council tenants — those who rely on government-subsidized housing — are graded based on their vulnerability and the waiting lists are long. According to a Freedom of Information request in 2020, the average wait time for those in Band A (those in emergency situations or with a very high level of need) was 9.71 years but they could have been in a lower priority band for many years already.
The next six months at Denby are critical. Residents are being rehoused, mostly into temporary accommodation, and work is due to start in January 2022. Dawkins says she is facing pressure to move and is lobbying Lambeth and her member of Parliament to make residents in temporary accommodation a priority for permanent housing. She says she will continue the fight for her and other residents to have adequate housing.
New York City Apartment Rentals Are Now As Scarce As Before The Pandemic
With the city coming back to life, eager renters are snapping up apartments despite price increases.
The market for New York City apartment rentals is burning hot again.
The number of rentals available in the five boroughs is now the lowest since the pandemic began, according to data from StreetEasy. In the week ending Sept. 26, there were 15,541 available apartments, compared with 16,649 at the beginning of March 2020.
That’s a huge decrease from the 48,753 open rentals in late September 2020, when inventory was at its peak and landlords were offering huge discounts to entice reluctant tenants.
Back In Town
The number of available rentals in New York is back to pre-pandemic levels.
“It’s a sign we’re getting to a recovery in the rentals market, which means people are moving back,” said Nancy Wu, an economist for StreetEasy. “It’s putting down some fears about people leaving the city permanently.”
The downside is a surge in prices and any kind of “pandemic deal” becoming a thing of the past. In fact, some New York landlords are hiking prices as much as 70%. For the U.S. overall, the average rent is 11.5% higher than a year ago, data from Zillow Group Inc. show.
The median rent for an apartment in New York has been rising since May and hit $2,700 in August. It’s still lower than the median of $2,995 in April 2020, but prices will likely continue to increase, according to Wu.
“I do expect this winter to be busier than what we usually see because people will be moving back the city and adding to the pool of demand,” she said.
Berliners Are Angry About Housing. And So Is Much of Europe
Soaring rents and out-of-reach prices have fueled property inequality.
During Europe’s deep Covid recession, millions of jobs were lost, incomes and livelihoods were destroyed and many feared for their financial future. Housing took a different path.
A boom in property prices widened the gulf between the haves and have nots, fed anger about housing inequality and accusations that property markets are broken, dysfunctional, unfair. While some have benefited from rising values, many are facing high rents, substandard buildings, or soaring prices that keep home ownership out of reach.
In Berlin last week, the frustration went up a notch. Voters backed a radical proposal to nationalize big landlords, a bid to get rents under control and fix a housing crisis in the city.
“We Berliners aren’t willing anymore to finance the profits of large corporations with our excessive rents,” said Jenny Stupka of the group behind the referendum.
The housing divide is often split along generational lines, with the young locked out of the market. The uneven economic fallout from the coronavirus pandemic further exposed the gap. While well-paid white-collar workers sheltered in their home offices, many of those in lower paid jobs and already struggling lost work and income.
At the same time, house prices rose faster than inflation in all 27 European Union countries in 2020, a trend not observed in at least two decades.
Since 2010, prices in the euro area have jumped more than 30%. Rents have risen 15% in the same period, putting additional financial pressure on many. The IMF International Monetary Fund has warned that it’s a “worrying trend” of inequality that’s only getting worse.
Across the continent, stories from wannabe buyers, renters and others capture the frustration.
In Berlin, the rental market in the once cheap capital was upended earlier this year when Germany’s constitutional court overturned a law that had set a cap. The move sparked protests and also the recent referendum to forcibly buy properties from big landlords.
Despite the result, it’s unclear whether the local government will follow through with the plan, which could lead to lengthy legal battles.
Marie Sakellariou, a 35-year-old single mother living in Berlin’s Neukoelln district, is among those directly affected by the end of the rent cap. Originally from Paris, she relocated six years for work. Initially, she says, the move gave her a level of financial freedom she would have never had back home.
But in April, her rent increased 300 euros overnight. She considered trading her 3-bedroom apartment for a smaller one to save, but it wouldn’t have made much of a difference so she stayed.
In Germany, where nearly 50% of households are tenants, an average person spends just over a quarter of their disposable income on housing. Sakellariou spends nearly half on rent now — at the expense of certain foods and her son’s swimming and music classes.
“Capitalism has failed so many of us,” she said. “Even I with a good, middle-income job am struggling, and there are many who are even worse off than me.”
Living At Home
Younger people are particularly vulnerable to precarious living arrangements, often being trapped in poorly remunerated, temporary jobs and less likely than the previous generation to call their home their own.
Greece, where unemployment still tops 15%, is an extreme example, with more than 62% of 25 to 34-year-olds living with their parents.
The share of young adults aged 18-34 living with their parents is highest in Greece and Croatia.
Those who do move out often have to pinch pennies to survive. Average housing costs are about 40% of disposable income, twice the EU average, and 37% are in arrears on mortgage, rent or utility bills.
Nelly Sotiriou, 36, still lives with her parents near Piraeus, the country’s main port. Health reasons recently forced her to quit a “relatively well-paid” job that earned her as much as 1,100 euros a month. It wasn’t enough though to afford a decent place to live. A home with new windows, nice floors and no mould on the walls would have cost 500-600 euros.
At the moment, Sotiriou is looking for a new job, but ultimately knows that moving out isn’t an option financially, even if living at home comes with its own price.
“I have limited choices when it comes to inviting people over and things I can do in the house,” she said. “But I’d rather stay here, than live alone just to pay for my rent and groceries and not be able to go out or travel.”
On the other side of the continent, Ireland is dealing with its own housing crisis, as well as the long-term scars of its 2008 housing crash.
Home ownership has slumped below 70% from almost 82% at one point during the Celtic Tiger years. A shortage of housing is fueling a fresh surge in prices, and higher rents mean tenants are spending more of their income, making it hard to save for a downpayment.
Carly Bailey, a local council member in south Dublin, and her husband are renting their home and have little prospect of ever being able to buy again. They got into difficulties repaying a mortgage around 2010 and worked with their lender until it sold their debt to a fund that bought soured loans.
With their mortgage under water, the Bailey’s agreed with their bank to sell their home on the understanding it wouldn’t pursue the couple for the remaining arrears. The fund thought differently, and ultimately Bailey applied for bankruptcy in 2018.
“I would rather have never had the house at all, than to have had a mortgage, have our own home, put so much into it and lose it,” she said.
Affordability is just one part of the housing story in some countries.
In Romania, one of the poorest countries in the bloc, overcrowding and inadequate heating are just two example of the hardships some people face. Most stunning though is that 14 years after joining the bloc, one in five Romanians still lack a toilet, bath or shower in their home. (Lithuania is next in the ranking with just under 9%.)
What’s commonplace almost everywhere in the world isn’t so normal in Romania: more than 21% have to get by without a toilet, shower or bath in their home, by far the highest share in the EU.
Mariana Nastase and her husband Marian have been waiting for years for the sewage system to reach their house in Ulmeni, a village near the Danube river about 40 miles southeast of Bucharest. They inherited the place from Marian’s parents when they passed away last year. Without it, they wouldn’t be able to get by.
Together they earn about 800 euros a month and have two teenage children to support. They’re in arrears with a loan they took out for repairs.
“We have no chance of a better life here. Both my husband and I work every day and we barely manage from one month to the other,” Mariana said. “We considered leaving the country for better salaries but we couldn’t leave our parents and our children behind.”
House prices have risen everywhere in the EU except Spain, Cyprus and Italy since the start of 2010. At 130%, Estonia has recorded the most staggering surge.
People in nearly all parts of the EU have seen steady increases since 2010, with Italy and Spain among the few exceptions. Estonia tops the list with a 130% surge.
Lauri Kool, a 41-year-old communications adviser in Tallinn, is a winner in the real estate game. He grew up in a Khrushchyovka — a low-cost, communist-style housing project that had only cold water, a toilet without a shower or bath in the kitchen and 30 square meters (322.92 square feet) for his family of four.
He was a teenager when the Soviet Union collapsed in 1991, and in his mid 30s when he bought his first 1-bedroom apartment on the outskirts of the capital for 42,000 euros ($49,239) in 2013.
Since then, he’s traded up twice, making a profit of more than 60% — excluding renovation costs — this spring before moving into a 176,000-euro, two-bedroom place in an up-and-coming residential neighborhood close to downtown.
He’s staying put, for now.
“Every home-buyer has probably thought that the last purchase is the final one — same for me,” he said. But then again — if the neighborhood develops as planned with restaurants, a park, new developments and bike paths to the center, “then it would be possible to also earn enough money from this sale to consider one more change of homes.”
Mortgage Payments Are Getting More And More Unaffordable
Record growth in home prices is erasing savings typically delivered by low interest rates.
House prices are rising at a record pace but incomes aren’t keeping up, which is making home ownership less and less affordable.
The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta. That is the most since November 2008, when the same outlays would eat up 34.2% of income.
Supercharged home prices in markets across the country are canceling out the impact of modestly higher incomes and historically low interest rates, two factors that typically make owning a home more affordable.
Prices rose at a record pace for the fourth consecutive month in July, driven by a shortage of houses for sale. Higher prices require buyers to take out larger loans, essentially signing them up to make larger mortgage payments each month for years.
The Atlanta Fed calculates affordability using a three-month average of median home prices from CoreLogic Inc. and median household incomes based on census data. In July, the latest month in the Atlanta Fed’s calculations, median home prices were $342,350, up 23% from the year before. Median incomes were $67,031, up 3%.
Declining affordability will have the biggest impact on buyers shopping for their first homes, who will have to sign up for larger monthly payments, buy less desirable homes or step back from the market altogether, economists said.
“It’s a lot more difficult for people to get their foot in the door of the housing market,” said Ralph McLaughlin, chief economist at Haus, a home-finance startup. “The question is whether it is an insurmountable hurdle or is it just that these households have to spend more of their monthly income on the mortgage.”
The dynamics were different in 2008, even if the effect—disarray in the housing market—was the same. Home prices were falling, and many Americans owed more on their homes than the homes were worth. What’s more, widespread job losses weighed on household income for years.
Christopher Ferreris and his wife, Danielle Ferreris, have been hoping to purchase a home in the Tampa, Fla., area for close to two years. They can afford about $1,600 in monthly payments, but every house they have seen requires monthly payments about 25% bigger than that.
“It’s almost like we’ve gotten into a holding pattern because of how difficult it is,” Mr. Ferreris said.
The typical value of a home in Tampa was $331,000 in August, up from $265,000 at the same time last year, according to Zillow.
The Ferrerises are doing everything they can think of to save money, and Mr. Ferreris started a side business last year buying and selling sports cards. He now counts on it for about $500 each month.
During the early months of the pandemic, homes became more affordable, according to the Atlanta Fed. Interest rates fell. And home prices, while still rising, weren’t accelerating at such a fast pace.
But then many families, after sitting on the sidelines for a few months, raced to buy homes, eager for more space or to move out of crowded cities. The fierce competition sent home prices soaring. Affordability began to decline.
At the start of 2021, Americans needed about 29% of their income to cover a mortgage, the Atlanta Fed estimated. That rose to about 32% by July. The Atlanta Fed includes principal, interest, taxes, insurance and related costs in mortgage payments.
“Any affordability that mortgage rates lended has pretty much been erased at this point,” said Daryl Fairweather, chief economist at real-estate brokerage Redfin.
Home buyers have noticed. About 63% of consumers surveyed in August believed it was a bad time to buy a house, according to Fannie Mae. That was up from 35% at the same time last year.
A Macarthur ‘Genius’ Grant Winner Traces The Housing Market’s Transition From Exclusion To ‘Predatory Inclusion’
An Asset For Some, But Debt For Others
Everywhere from politics to pop culture sends the message that owning a home is key to building wealth in America, but over the past several decades Black households — even when they own a home — have largely been shut out of that benefit.
That’s one of the many takeaways from the work of Keeanga-Yamahtta Taylor, a historian, writer, and professor of African-American studies at Princeton University and 2021 winner of a MacArthur Fellowship, commonly referred to as a “genius” grant.
“Property in white hands is valued more than property in Black hands,” Taylor, the author of “Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership,” told Vox last year. “So even when Black people own property, it still does not accrue in value in the same way or at the same rate. Instead, it often functions as a debt burden to African Americans.”
In honor of Taylor’s win and her work’s ties to the themes of this newsletter, I thought I’d dig into a topic that’s at the center of speaking and writing by Taylor and other scholars who study race, economics and finance: predatory inclusion.
The idea is that financial systems that once excluded Black Americans and other marginalized groups shifted to provide them access to assets they were once excluded from — a home, a loan, an education — but did so on predatory terms.
“A lot of the gains of the Civil Rights movement and the demands that people have placed on institutions for equity as well as inclusion have an unintended side effect,” said Louise Seamster, an assistant professor of sociology and African-American studies at the University of Iowa. “Systems that look like they’re giving people what they want but on terms that are turning out to have major catches or downsides.”
Taylor’s work highlights how this dynamic has played out in the housing market. Even when, in theory, a partnership between the government and the private sector aimed to expand homeownership among Black households in 1968, homeowners wound up being harmed, Taylor wrote in an excerpt of “Race for Profit” published in the New York Times in 2019.
The partnership allowed for different than typical mortgage terms, including tying the size of the mortgage payments to a buyer’s income instead of the value of the home they were purchasing. It also allowed for down payments of only $200. The private sector made the loans and the government paid them off in cases of default, laying the groundwork for fraud, Taylor wrote.
Investors would buy shoddy houses and quickly flip them, bankers would inflate appraisals and push to issue as many mortgages as possible — earning money on the closing costs and fees — which they would later bundle to resell, Taylor writes.
The result was the experience of people like Janice Johnson, a Philadelphia Black single mother who in 1970 bought her first house through the program and in short order faced wastewater in the home due to a sewage line break and a rat infestation, including in her son’s bed.
Predatory inclusion extends beyond housing. Seamster has studied how it plays out in higher education where access to college has expanded for women and students of color as the cost and debt required to complete degrees have grown. Other scholars have found that products billed as bringing the unbanked into the financial system often do so on predatory terms.
Predatory inclusion is “calling into question these assumptions that equity is going to come by people borrowing against their future, rather than through programs that are providing equal funding or even reparative funding to make up for past harms or disadvantage,” Seamster said.
What’s Driving The Huge U.S. Rent Spike?
Rent increases of 20% or more are making life difficult for low-income tenants in many cities, just as eviction bans and unemployment relief are running out.
Valley King Properties, a Phoenix-area apartment rental brokerage, proudly proclaims on its website that it can help anybody find an apartment, “no matter what your situation is.” But that promise is proving hard to live up to these days, says Eric Atencio, Valley King’s regional manager.
The red-hot rental market has made it impossible to place many would-be tenants with units moving off the shelf at record pace.
“Our company is busier than it’s ever been, and we’re seeing more qualified people than we ever have struggling to find where the availability is at,” said Atencio. He advises tenants to be ready to act; these days, shoppers who look around for the perfect place often lose out.
“From 9 in the morning to 5:30 at night, the phone never stops,” he said. “Business is good but it’s taxing. There are just so many people who come in whose needs can’t be met in a market like this. It’s a landlord’s market.”
The current spike in rents is most pronounced in places like the Phoenix metro area or Boise, where rents for two-bedroom apartments have climbed 15% and 21%, respectively, in the last year, per Zumper data. But those markets aren’t unique. It’s a nationwide phenomenon that’s having a significant impact on housing markets, affordability and access.
Every one of the nation’s 100 largest metro areas has seen month-over-month rent growth over the last five months, according to Apartment List economist Christopher Salviati — a phenomenon he’s never seen before. Data from Zillow shows a similar national increase, up an average of 11.5%, or $200, compared to last August.
“We’re seeing an unprecedented level of rent growth,” Salviati said. “Our national index shows rents up 12.4% year over year, after a pretty modest dip early last year due to the pandemic.”
Gilbert, Arizona, a suburb south of Phoenix, saw rent skyrocket 24% between March 2020 to September 2021, said Jeff Andrews, data journalist at Zumper. Metro areas that are primarily single-family suburbs, such as Orlando and Atlanta, are also seeing big spikes (21% and 15%, respectively).
“Home sales popped at the beginning of the pandemic because everybody went into the market all at once,” said Andrews. “The rental market is more of a slow matriculation. It takes a while for that backlog of renters to build up who should have cycled out of the market. It’s a combination of the housing market being insane, the cyclical nature of housing returning, and a lot of people who simply didn’t want to move during the pandemic, but now feel vaccinated and comfortable.”
The timing of this rent spike, in many ways, couldn’t be worse. Most local eviction moratoriums have expired, and expanded unemployment assistance from recent stimulus bills has dried up just as the price spike for homes has pushed more high-income buyers into the rental market, adding to the competition for scarce supply.
Landlords are raising rents, and those getting back into the housing market have been shocked by the sharp increases from just a year ago. Apartment List polls users when they register for the site, and the percentage of apartment seekers who have characterized their search as urgent has jumped 10% this year.
“We’re seeing people experiencing first-time homelessness, who six months ago were doing fine.”
Instability is rampant in the current rental market in Phoenix, said Alison Cook-Davis, associate director of research at Arizona State University’s Morrison Institute for Public Policy. Every open unit is flooded with multiple applications, and landlords are instituting annual rent increases in the hundreds of dollars.
“There are so many people in need of housing and no housing to be had,” said Cook-Davis. “Everyone is also really concerned about more people being severely cost burdened, maybe taking on additional jobs or having to do more with less. It causes a lot of stress on those individual families.”
The U.S. has long been behind on providing enough affordable housing options, said National Low Income Housing Coalition Vice President of Research Andrew Aurand, and the pandemic has exacerbated the problem further.
While the federal government allocated $46 billion in emergency rental assistance, that relief has been slow to arrive in many parts of the country. “It’s a crisis,” he said. “Housing instability has a lot of detrimental impacts on families.”
One of the more damaging aspects of the rent spike is that it limits the existing resources set aside to support low-income renters, says Deanna Watson, executive director of the Boise City/Ada County Housing Authorities. Her organization handles the housing choice vouchers program in the area, but only has enough to reach roughly 23% of those who need their help.
The organization has spent roughly $13 million in emergency rental assistance since the beginning of March, but once this temporary Covid-related relief is spent, it’s gone, and can’t help the underlying issues of a shortage of units and elevated rents.
Higher housing costs are pushing more people to or past the margins. An analysis of rental cost increases by Dwellsy found the cost of rent for Boise apartments in the 10% percentile of price, the most affordable, spiked 29%, more than the most expensive units.
“We’re seeing people experiencing first-time homelessness, who six months ago were doing fine,” said Watson.
Part of the issue is how the apartment market has shifted over the last decade. Today’s renters are impacted by the echo of the temporary but significant slowdown in new construction after the Great Recession. Those units, unbuilt due to a pause in construction, would have provided more slightly older and affordable options.
There are some positive developments on the horizon. House America, a recently announced federal initiative to fight homelessness, aims to boost the number of affordable units by by at least 20,000 via partnerships with state and local governments.
Multifamily construction is “robust” right now, says Whitney Airgood-Obrycki, a research associate at Harvard’s Joint Center for Housing Studies. The national pipeline of roughly 650,000 units is hitting levels last seen in the 1980s. But the issues that persisted before the pandemic have continued, meaning lower-income renters are the most likely to be impacted.
Much of the new building is focused on high-income renters, said Caitlin Walter, vice president of research at the National Multifamily Housing Council, an industry group. From 2004, when homeownership in the U.S. peaked, to 2019, half the growth in the nation’s renter population was households making over $75,000 a year.
“Workforce and naturally occurring affordable housing is what we need the most, and we couldn’t get that to pencil in before the rising cost of materials,” she said.
It’s difficult to predict what comes next, as well; the delta variant has inserted fresh uncertainty about the pandemic, and a long-anticipated eviction tsunami has still yet to materialize.
Salviati says that Apartment List data shows the vacancy rate slightly rising and growth rate slowing, so prices may stop accelerating at such a rapid clip, but there’s no indication prices will reverse, suggesting the affordability issues this rapid rent increase causes will be an ongoing concern.
“RealPage data from August shows the occupancy rates for their apartments passed 97% for the first time ever,” said Airgood-Obrycki. “It’s really unprecedented, and hard to know where we go next.”
Australia Tweaks Loan Buffers To Cool Red-Hot Housing Market
Australia’s banking regulator raised the minimum interest-rate buffer that lenders need to account for when assessing home-loan applications, citing growing risks to financial stability from a booming housing market.
The Australian Prudential Regulation Authority told lenders it expects them to assess new borrowers’ ability to meet loan repayments at an interest rate that is at least 3 percentage points above the loan product rate, according to a statement Wednesday. That’s up from the 2.5 percentage points commonly used by banks at present.
Property prices Down Under are soaring in response to ultra-low interest rates, a phenomenon seen across the developed world as central banks eased policy to support economies during the pandemic. The International Monetary Fund has urged Australia to introduce lending curbs, warning surging house prices raised issues about affordability and financial stability.
“This is in line with what we were expecting, albeit a bit sooner, and will help temper credit growth, especially to those that are more indebted and for investors as well,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada. “We would expect further macro pru measures if this fails to slow credit growth.”
Momentum for lending curbs has been building, with the central bank official tasked with overseeing financial stability setting out options in a speech last month, and the latest Council of Financial Regulators statement saying APRA plans to publish a paper on its framework for implementing macroprudential policy in the next couple of months. Treasurer Josh Frydenberg has also spoken out on the issue.
“In taking action, APRA is focused on ensuring the financial system remains safe, and that banks are lending to borrowers who can afford the level of debt they are taking on — both today and into the future,” according to the statement.
Financial regulators are grappling with how to contain surging credit and a red-hot property market without choking off the economy’s recovery. The Reserve Bank of Australia has said consistently it doesn’t expect to raise rates until 2024 at the earliest — leaving tighter lending rules as the only way to rein in the property market.
Matt Comyn, Chief Executive Officer of Commonwealth Bank of Australia, said the move would help take some heat out of the housing market. Shares of CBA, the country’s largest mortgage lender, slipped 2.3% as of 11:05 a.m. in Sydney, with rival lenders showing more muted moves.
“We think this further step will provide additional comfort for borrowers and is a prudent measure for lenders,” he said in an e-mailed statement Wednesday. “We will implement the changes this month and expect that it may be necessary to consider additional steps as lockdowns end and consumer confidence increases.”
The rapid house-price gains in Sydney and Melbourne have come despite protracted lockdowns, and as growing household debt raises financial stability issues. The RBA has ruled out tightening policy to cool asset prices — unlike South Korea, and as New Zealand’s central bank appears set to do at Wednesday’s meeting — focusing instead on pushing the economy to full employment.
Prices nationally have risen at more than 10-times the pace of wages, raising a major barrier to entry for first-home buyers and highlighting the downside to the RBA’s emergency stimulus. Australia already has one of the highest debt-to-income ratios in the developed world.
Data Friday showed prices climbed 17.6% in the first nine months of this year.
About one-in-five new loans are being approved at levels six-times borrowers’ incomes, a level viewed as higher risk. The RBA is worried that over-extended households will find themselves in a precarious position in the event of job losses or when rates eventually rise.
Australian banks’ average assessment to determine borrowing capacity is currently done at an upper interest rate of 5.4%, almost 2 percentage points lower than the 7.3% used two years ago.
In 2017, when prices were soaring, Australia’s banking regulator introduced restrictions so that home lenders had to limit interest-only loans — typically favored by investors — to 30% of total new residential mortgages. At the time, they were running close to 40%.
Builders Hunt For Alternatives To Materials In Short Supply
Swapping out materials to minimize delays in a hot housing market can add to costs.
Shortages of key construction materials are forcing some builders and contractors to turn to substitutes and hunt for alternative suppliers as they rush to meet high demand for new housing.
Construction companies are looking for replacements and new sources for everything from wood paneling to ceiling joists to pipes, saying that potentially higher costs and added complications to design and construction can be preferable to putting a project on hold for months while waiting for planned supplies.
Supply shortages stem from a series of supply-chain disruptions hitting industries around the world this year, from port congestion in Asia and the U.S. to labor shortages at factories. Heavy storms in Texas and Louisiana have also slowed production of some building materials, while semiconductor shortfalls have made appliances harder to secure.
Parker Young, president of Straub Construction in Shawnee, Kan., said he switched to different insulation materials after storms in Texas earlier this year made it difficult to get some types of petroleum-derived roof insulation boards, adding about $20,000 to costs for two apartment building projects. Waiting for the boards would have added six to nine months to the 14-month projects.
“It’s unprecedented,” Mr. Young said. “I’ve been in the industry for 30 years and never seen anything like this. I’ve learned more about refineries and resin plants than I ever care to know.”
The shortages and substitutions come as tight inventories of homes for sale in the U.S. appear to be crimping sales amid surging demand that began late last year.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the U.S., rose 19.7% in the year that ended in July, the highest annual rate of price growth since the index began in 1987.
With the housing market running hot, property owners and developers are often willing to pay more for some materials to avoid delays that could lead to missed rent payments or lost sales.
Prices and preferences are secondary to an item’s availability, said Kurt Yinger, a research analyst at investment bank D.A. Davidson & Co. “Builders and contractors are very open to trying a new product,” he said.
Sometimes there are few or no alternatives.
More than 90% of builders reported shortages of appliances, framing lumber and a type of engineered wood known as oriented strand board, according to a May survey by the National Association of Home Builders. Another 90% said they faced shortages of plywood, and 87% cited shortages of windows and doors.
“It used to be whack-a-mole, and you would whack one thing and the other one would pop up,” said Deepa Raghavan, a Wells Fargo & Co. analyst who focuses on the housing market. “This is like six of them coming out and you can only whack two at a time.”
Shark Tank’s Barbara Corcoran Says Most ‘Are Priced Out’ Of The Housing Market
Barbara Corcoran, the real-estate agent many Americans might dream of having, says home prices are climbing so fast that ordinary people can’t afford one and that’s unfair.
“Most people are priced out of the market,” said the co-founder of her eponymously named venture partnership in an interview on Bloomberg TV’s Surveillance Wednesday. “It just seems unfair to feel like you have to be a pro investor bidding up the prices.”
Corcoran is best known as a panelist and executive producer of Shark Tank, ABC’s reality show where professional investors assess small-business ventures. In 1973, she started the Corcoran Group real-estate brokerage in New York, which became one of the largest residential real estate companies in the area; she sold it in 2001.
“I’ve never seen an increase like” the pandemic-related surge in U.S. home prices, Corcoran said in the interview.
For example, U.S. home prices surged 19.7% in July, once again posting the biggest jump in more than 30 years, according to a Sept. 28 tally of the S&P CoreLogic Case-Shiller index of property values. This followed an 18.7% jump in June, and was the 14th straight month of accelerating price increases.
“The market has been going absolutely bonkers with no end in sight,” Corcoran said. “Everything is being sold in bidding wars. I’m just hoping that the prices cool down a bit because so many people are left out of the market.”
She doesn’t see ballooning home prices causing the same sort of financial chaos kicked off by a mortgage crisis more than a decade ago.
“It is not the same kind of market. Today’s market is fueled by individual buyers who want a better place to live,” Corcoran said. “When we had that dropoff, it was fueled by investors, house flippers, poor mortgages. It was a false market, with a false bottom, and it fell. We’re not going to have that now.”
U.K. House Prices Post Largest Monthly Increase Since 2007
U.K. house prices increased in September at the fastest pace in more than 14 years and healthy demand is set to persist despite the headwinds facing the economy, according to Halifax.
The average price of a home rose 1.7% to 267,587 pounds ($363,000) following a 0.8% gain in August, the mortgage lender said Thursday. The increase was the largest since February 2007 and pushed up the annual pace of growth to 7.4%..
The housing market has boomed since the summer of last year, boosted by a tax cut on property purchases and pandemic-driven demand for larger homes away from city centers with space to work from home.
The stamp-duty holiday was scaled back in July and ended altogether on September, but many of the factors supporting the market remain in place. They include a continuing “race for space,” cheap borrowing, a lack of homes for sale, savings accumulated during lockdowns and a robust jobs market.
Much may depend on how consumers weather the storms currently buffeting the economy, with inflation accelerating, government support for furloughed workers ending last month and a tax increase looming next year to pay for the National Health Service.
“Against a backdrop of rising pressures on the cost of living and impending increases in taxes, demand might be expected to soften in the months ahead, with some industry measures already indicating lower levels of buyer activity,” said Russell Galley, managing director at Halifax. “Nevertheless, low borrowing costs and improving labor market prospects for those already in employment are likely to continue to provide support.”
Over the course of the stamp-duty holiday, house prices rose by more than 12 times the initial savings from the tax break, Halifax said.
California’s Median Home Price Seen Topping $800,000 In New Peak
The median price for a home in California is set to jump north of $800,000 next year, adding to a long-simmering affordability crisis in the state.
The state, which has grappled for years with a shortage of affordable housing, will see prices rise 5.2% to a median of $834,000 in 2022, according to a forecast by the California Association of Realtors.
That comes after a surge of roughly 20% this year, and would push the median price for an existing single-family in California even further beyond the national average of about $357,000.
“Demand for homes will continue to outstrip available supply as the economy improves, resulting in higher home prices and slightly lower sales in 2022,” Jordan Levine, chief economist for the California Association of Realtors, said in a statement.
A shortage of homes to buy and rising mortgage rates mean that only 23% of households in California will be able to afford the median price, according to the report.
California is home to four of the five most expensive U.S. housing markets, led by the Silicon Valley metro area of San Jose, Sunnyvale and Santa Clara where the median price is $1.7 million.
The Tech That Slumlords Hate
Housing activists, officials and researchers are deploying new tools to empower tenants, spotlight negligent property owners and curb evictions in U.S. cities.
The first words on the sign — “VACANT PROPERTY” — posted on the front door of a boarded-up rowhouse in Baltimore’s Upton neighborhood may overstate the obvious: The two-story brick home, its front steps sandwiched between tall weeds and a pile of garbage, clearly hasn’t been inhabited for some time.
But the QR code sitting in the sign’s bottom right corner is a window to a trove of more expansive information about this building.
Scanning the pattern with a smartphone camera directs the user to a city web page linking to databases on property ownership, building permits, pending court cases and more. While this information is all publicly available, not everyone knows how to navigate these assorted city and state data portals.
The QR code signs are being installed by the city on its 17,000-plus properties with vacant building notices. It’s a practical evolution of a project that began as an artistic collaboration:
Back in 2013, Baltimore housing activist Carol Ott and a troupe of street artists launched an effort called Wall Hunters, painting murals on vacant buildings that were accompanied by QR codes that led users to information about the building’s owner on Ott’s blog, Baltimore Slumlord Watch.
Now, under the auspices of the city’s Department of Housing and Urban Development, the same QR-code powered mechanism is helping neighbors learn who owns the eyesores on their block, keep tabs on work in progress (or the lack thereof), and potentially get in touch with the property owners themselves.
“We’re talking about democratizing access to information,” said Brendan Schreiber, president of Schreiber Brothers Development, a firm that focuses on affordable housing in Baltimore. As a developer, he does have some mixed feelings about the signs — he worries that exposing small developers to potential scrutiny may deter them from undertaking projects.
But he appreciates that the program is working as intended by making it a lot easier for members of the public to figure out what’s going on with buildings in their community. “If you aren’t a professional or no one’s told you [about each website], it’s too much work. That’s the genius of the QR code program. It’s simple, it’s easy to understand and it can be effective.”
Several new tools are aiming to confront opaque systems that tend to benefit property owners at neighbors’ and tenants’ expense. Some, like Baltimore’s QR code program, boost transparency and help the public hold property owners and landlords accountable. Others are advocate-led projects that aim to shine a spotlight on serial evictors, ward off the long-dreaded eviction cliff of forced displacement, and help tenants weather the huge spike in rents affecting cities nationwide.
Think of this as the flip-side to the flurry of “proptech” innovation aimed at real estate investors and developers — from privately developed, high-level analytics and commercial databases like CoStar to Ring doorbells and cameras that can monitor tenants. To Erin McElroy of the San Francisco-based Anti-Eviction Mapping Project, which visualizes and tracks renter displacement in several cities, it’s high time that similar tools were widely available for tenants as well as real estate professionals.
“Really, we’re trying to balance the system, so to speak,” McElroy said.
Getting A Handle On Vacancy
An early example of such tech, somewhat clunkily named “blexting” — blight texting — emerged in Detroit in 2013 as a means of dealing with the vast number of vacant and abandoned homes in that city. Local software company Loveland Technologies (recently rebranded as Regrid) began gathering parcel data on vacants across the Motor City, which had just declared bankruptcy.
With entire blocks abandoned and properties left in chronic disrepair, Detroiters ranging from neighbors, to community groups and advocates, to real estate investors sought a tool that simply answered, “Who is the owner of that thing?” said Jerry Paffendorf, the company’s CEO.
They got much more. In 2013, the White House-supported Detroit Blight Elimination Task Force approached Loveland Technologies to help determine exactly how many properties had been abandoned.
The startup turned to the public: Through the Motor City Mapping project, it built a software platform, app and a detailed survey tree — covering various degrees of property condition, occupancy, current use and more — and hired 200 Detroiters to visit the city’s nearly 380,000 properties, take photos and log their conditions.
Redundancies helped to ensure whether a dwelling was or was not vacant, like cross-checking against datasets on active electricity, water or mail service. The Motor City Mapping database lived on a public site, where an entry could be corrected or updated.
“What it really presented was this super granular, genetic code of current land use and occupancy,” Paffendorf said.
It proved influential, and the effort got residents directly involved in what amounted to a reparative property census for a broken city.
The City of Detroit shortly thereafter absorbed Motor City Mapping’s data into its municipal IT functions, and used its findings to obtain resources from the federal Hardest Hit Fund, an Obama-era Treasury program that offers mortgage payment assistance and other aid to underwater homeowners.
Regrid has since undertaken property-surveying projects in high-poverty cities such as Cleveland and Flint, and the approach has been replicated by community groups in places like New Orleans.
Maps That Fight Back
In addition to helping cities gain a grasp of the vacancy problem and begin to hold slumlords accountable with penalties or property seizures, crowdsourced data has also proven useful for helping to address a long-building tax delinquency crisis.
Motor City Mapping created a foundational tool for organizations helping families threatened by eviction under Detroit’s infamous property tax foreclosure process, which seizes homes after two years of tax delinquency. Through its surveys, the project initially identified tens of thousands of homes that were occupied but due to be foreclosed upon and auctioned off, thereby displacing more residents.
Neighbor to Neighbor, a collaboration between Quicken Loans’ Rocket Community Fund, the United Community Housing Coalition and other organizations, now uses Regrid’s and Motor City Mapping’s process to connect with families. The idea is to “preemptively getting out to properties where … someone may lose probably the biggest asset in their life,” Paffendorf said.
A 2020 report summarizing Neighbor to Neighbor’s second full year of work noted canvassers visited nearly 60,000 tax-delinquent properties in Detroit, and were able to inform residents — roughly one-quarter of them tenants — about ways to avoid displacement or even acquire the home they are renting if it’s facing foreclosure auction.
Paffendorf said tech-driven solutions like Motor City Mapping alone are no “silver bullet” in confronting slumlords or inhumane systems. Big data can be held up “like a totem” and be used to produce reports or better inform city government, he said, but to directly protect tenants and neighbors, “you really need to have a motivated resource like housing advocates or counseling organizations that are trying to understand individual cases,” he said.
The grassroots-led Anti-Eviction Mapping Project has built its suite of tools off of that very philosophy. Erin McElroy helped found the cartography-as-advocacy project in San Francisco in 2013.
After the Great Recession, a wave of investment firms bought up rental properties using LLCs and LLPs, and “a central problem that we kept on coming up against was that tenants didn’t know who their landlords were,” McElroy said.
So, McElroy and other research-savvy colleagues decided to put those landlords’ names and evictions out in the open. In the Bay Area, they linked up with dozens of housing advocacy organizations and legal aid groups that fed them information on individual eviction cases and landlords. From the beginning, their team included web developers to build out their website and perform the data analysis needed for their maps.
Scrolling through the Anti-Eviction Mapping Project website today, a user can scan maps of properties owned by specific “Wall Street landlords” — real estate investment trusts such as Invitation Homes and American Homes 4 Rent that have bought thousands of properties in California in recent years — and get tips on how to research them.
The site also has info on serial evictors in the San Francisco and Los Angeles areas and New York City who operate under the guise of various LLCs. That’s all due to the connections between project volunteers and housing organizers, tenant communities and attorneys.
The project has also used its network to expand to new cities and roll out other tools. Its latest offering, started in 2019 and still in beta testing by a coalition of Bay Area community partners, lets a user look up an address or the associated LLC or LLP and displays all associated properties and shell companies.
They’ve even come up with an answer for proptech. While real estate industry players today have robust tools at their disposal, data about landlords’ use of those tools is hard to come by.
Landlord Tech Watch attempts to address that by sharing crowdsourced reports from all over the country about landlords who’ve deployed such technologies in their buildings. Its map includes a color-coded key of various technologies, such as facial recognition cameras and phone apps for rent collection, that tenants may view as privacy threats.
It’s a start in sharing information about the growing use of such technologies by landlords, McElroy noted, “because so many tenants don’t know about it” in the first place.
Bringing Data Into The Light
Just as some Baltimoreans may not need QR codes to learn who owns what, plenty of renters can navigate a web of shell companies and business documents to identify who their landlord really is.
“There’s a long history of tenants fighting back against corporate landlords and slumlords and serial evictors through their own research methods,” McElroy said. “We’re just trying to make it easier for tenants to gain access to data that is traditionally hard to piece together.”
Within a specific geography, like San Francisco’s Mission District, doing so can lay the groundwork for organizing renters against property owners using inhumane tactics — particularly during a pandemic, when many landlords managed to skirt local and nationwide eviction bans.
The need for such data-gathering projects — similar examples have popped up in Atlanta, Richmond, New York City and elsewhere — arises from a dearth of centralized statistics on landlords’ eviction practices.
“Evictions, up until some of these recent efforts, were very much one of those problems that was pretty hidden from view,” said Devin Rutan, a graduate researcher at Princeton University’s Eviction Lab, which developed its own nationwide tracker of evictions from 2000 through 2016 and more recently created a real-time tracker of Covid-era evictions.
While none of this information — the Eviction Lab’s or other projects’ — is uniform or guaranteed to be a complete picture, it has helped to create a sense of scale and urgency, project leaders say.
It can also shape public policy. Rutan noted the Eviction Lab assembled a 2016 ranking of the 10 large cities with the country’s worst eviction rates, with Virginia municipalities taking up half of the list. After two years of scrutiny and calls for reform, in early 2019 the state enacted a handful of laws aiming to reduce the likelihood of eviction for a renter.
As the Supreme Court lifted the federal moratorium for evictions at the end of August, leaving only a dwindling handful of local bans, Rutan said increasing public awareness about the eviction cliff can help draw attention to the cruelties and economic consequences of kicking renters out.
“Because processes like eviction occur in these really dark inaccessible corners of government, it lends landlords a lot of license to get away with things that are clearly outside the bounds of housing codes or landlord-tenant codes,” he said. “A solution to that — a way to start — is by bringing some of the basic numbers to light.”
What Tech Alone Can’t Do
While many of these tools have obvious transparency benefits, some present chances for problematic forces to take advantage. Schreiber, the Baltimore affordable housing developer, noted he’s already been contacted by someone who obtained his contact information from a QR code outside a vacant house he plans to revive in North Baltimore. It turned out to be an out-of-state investor, rather than a curious neighbor.
It’s an example of the absence of a purposeful link between the tech and its intended user, a relationship that Paffendorf, in Detroit, described as “the peanut butter and jelly of good data and good, high-touch humanity.”
Nneka N’namdi, a longtime systems engineer and the founder of the social and economic justice initiative Fight Blight Bmore, sees a chance to fulfill that recipe in Baltimore by going a step further.
The West Baltimore resident is currently developing a Fight Blight Bmore app that she said will place the same information found through the QR code signs — property ownership, permits, past violations, 311 complaints — alongside higher-level analytics like predicted appraisal value and sales of comparable properties.
The app, currently in development and due to be released in January, will collectively provide “a single view of a property,” she said.
N’Namdi supports the city’s QR code sign rollout — albeit with some criticisms, including of the relatively small size of the signs and their use of a manual-entry landing page — saying “it’ll make it easier” for people to learn.
But she says that a more detailed and thoughtfully designed app can do more, providing a similar quality and array of data made available on private real estate databases to community members. Her hope is that a fuller, better-researched picture can empower neighbors to plan to redevelop properties on their own, rather than watching outside developers come in.
“They don’t often have access to the data to support their vision,” she said. The focus of the tech “should be making Baltimore better, designing Baltimore for the people who are here.”
Is Now The Right Time To Sell Your Home? A Seller’s Guide
Even a surging property market is no guarantee of profit given closing costs, tax issues and other factors.
The red-hot housing market is sparking homeowners’ stress over whether now is the time to sell a house.
Home prices hit another record this summer. Housing inventory remains low, while potential buyers are duking it out in bidding wars.
Those looking to capitalize on the frenzy need to be careful and calculate several variables before making a decision. There are many ancillary costs that come with selling your home and significant tax issues that can erode profits. Moreover, a happy seller can quickly turn into a frustrated buyer if the next living place isn’t already set.
Len Kiefer, deputy chief economist at mortgage giant Freddie Mac, said a first step for homeowners is to calculate the “sunk costs’’ they incurred when they bought their house.
“If you purchase a home, there could be pretty substantial costs associated with that: transaction fees, taxes, closing costs, if you get a mortgage—these things all come with the cost of buying a home,” he said. “In general, the shorter your time in the home, the less time you have to make up for those costs.”
Closing costs typically average 2% to 5% of the loan amount, according to the Mortgage Bankers Association, but a lot depends on the borrower and the loan product. Freddie Mac estimates closing costs on a $356,700 home—the median home price as of August 2021, per the National Association of Realtors—could cost a homeowner more than $8,600.
Dave Schoen, a 56-year-old college preparatory tutor on New York’s Long Island, is among the group of Americans feeling pressure to sell.
He and his wife are fielding inquiries about selling the home they just bought three years ago. They said one investor offered them $200,000 more than what they paid.
So far, Mr. Schoen hasn’t sold. He is concerned about several things, including finding an affordable new home.
“It might be the time to make a move, but again, there’s a lot of uncertainty and we’re not really sure of the right move,” he said.
‘Make sure you’re taking into account everything you’re going to spend when you move.’
— Cynthia Meyer, financial planner
Those tempted to sell within a few years of purchase should also calculate what costs they will be able to recoup quickly, if at all, said Cynthia Meyer, financial planner and founder of Real Life Planning. Ms. Meyer said there are obvious outlays such as Realtor fees and other closing costs, which could eat into gains. Some buyers forget other costs, too, such as paying for new furnishings when moving into a house.
“Make sure you’re taking into account everything you’re going to spend when you move,” she said.
Ms. Meyer recommends curious homeowners tally the cost of the home purchase in one column, including down payment and home renovation. Then, in another column, add up the potential costs of selling the existing home: things including how much you would pay to move houses, Realtor fees, advertising, home staging and more.
If these things exceed the potential profit from selling your current home, you have some further thinking to do—or may need to spend more time in the home.
Keep the calculator out to sort tax issues, which housing specialists say are among the most common pitfalls for sellers. Different state and local tax rules, incomes and time lived in a home all can erode profit.
Many sellers are aware of the home-sellers’ tax exemption, which allows sellers to avoid or lower capital-gains taxes on home sales by exempting up to $500,000 of profit. Still, the exemption has many stipulations. For example, single tax filers must have owned and lived in the house for at least 24 months of the past five years.
In addition, a couple must have lived in the house for the same period, and at least one of the spouses must have owned it for 24 months of the past five years.
Meeting those requirements, and qualifying for the exemption, could mean waiting to sell, or trading off the potential gains offered by putting the house on the market.
Home prices in Austin have drastically increased since Chris Schorre, a marketing consultant, and his wife bought their home in Texas’s capital city 19 years ago.
Despite the housing boom in Mr. Schorre’s area and the near-constant interest in their home—“We get offers from investors, one every week, I would say,” he said—the couple said they aren’t considering selling soon. He said that is largely because the couple wouldn’t be able to find a similar home in their area in their budget.
Mr. Schorre also said he is looked into the “perplexing” tax issue and decided that in his own personal situation, the benefits of the home-sellers’ tax exemption would be partially offset by the capital gains they would then pay.
Those bent on selling should keep careful track of home-renovation costs and the paper proof for those upgrades, said Andrew Ragusa, chief executive and broker of REMI Realty in Plainview, N.Y.
“If you have the receipts for all the work you’ve done, bring that to your accountant and say ‘This is how much I spent on adding value,’” he said. “At that point, those expenses are written off.”
For those who haven’t already lined up a new place to live after selling, many will find that the same housing boom that raised the price of their current home has also raised the cost of a prospective next one.
Mr. Kiefer points out the calculation will be different for those considering selling investment properties or vacation homes, as they likely won’t have the problem of then finding a new primary residence.
Freddie Mac’s Mr. Kiefer cautions that owners should carefully assess whether it is more cost effective to buy or to rent, which they can compute on their own with the calculator tool on Freddie Mac’s website. Sellers who are nearing retirement, emptying the nest or otherwise considering downsizing may find additional incentive to move up their timelines, capture the gains sooner and rent for a few years, he said.
If a seller knows for certain that they will be in a certain place for an extended time—say 10 years—then there is more than enough time to recoup costs. The Mortgage Bankers Association recommends people consider staying in their primary homes for at least three to five years.
This means that even for homeowners with regrets, like those who recently bought houses sight unseen or impulsively moved to less-populated areas during the pandemic, may find it s most cost effective to stay put for the time being.
“When you do the calculation, that benefit starts to tip toward homeownership for that period,” Mr. Kiefer says.
New York’s Real Estate Tax Breaks Are Now A Rich-Kid Loophole
If you have a modest income but access to lots and lots of cash, New York City has an apartment ownership program that’s right up your alley. Even if it wasn’t meant for you at all.
The changes at the building in Brooklyn’s Williamsburg neighborhood began in 2009, when a guitar shop owner whose father was a renowned art appraiser purchased a four-bedroom apartment. His mom lent him the money.
Then came a writer who borrowed from her mother, a psychologist. A movie production manager and her partner, a photo director, bought their unit with a loan from her father, a physician in Maryland.
A flurry of additional purchases without mortgages followed, including by a Shakespearean actress whose father lives in a terraced penthouse overlooking Central Park and a fashion designer whose father is a gynecologist in California.
Similar colonies of young people with creative sensibilities and well-off parents have taken root in Williamsburg for years, but the gentrification of this particular six-story building on South 2nd Street had a surprising set of enablers: the taxpayers of New York. It’s one of about 1,000 properties across the city that receive a special property tax break created to make homeownership affordable for low-income people.
The building had income restrictions, and these buyers met them. At the same time, they had access to a lot of cash, which they used to score their units at well below market prices. Never mind their wealth or their parents’; the tax break doesn’t require any limit on assets or preclude gifts.
The children of America’s wealthy are quietly sewing up deals like this in some of New York’s most desirable neighborhoods, in buildings known as Housing Development Fund Corporation cooperatives, or HDFCs. These buildings were at one time in financial (and often physical) distress, and many are still shunned by conventional mortgage underwriters—hence the need for buyers to pay cash.
Many are no longer cheap, because the agreements that once limited resale prices have expired. But even at prices that can crest well above $1 million, they’re discounted to the market, because of the income limit on buyers and the lack of available financing in some cases. And the taxes can be remarkably low. On South 2nd Street, the owners enjoy annual property tax discounts of roughly 70%.
The tax break was designed to be simple—too simple, as it turns out. The program sets a maximum taxable value for every HDFC unit across the city. This year it’s $11,079, in a market where the median price for a home has risen to $770,000. Because of this system, half the aggregate tax benefit will go to the top 20% of eligible buildings by value.
Struggling buildings in poorer areas, meanwhile, will get no benefit at all. Their values are too low for the tax break to have any effect, and because of their HDFC status, they don’t get an abatement that most market-rate co-ops receive. Dozens have been foreclosed on in recent years for unpaid taxes.
In short, because of inadequate rules, poor design, and decades of lax oversight, these low-income tax subsidies are being scooped up by the well-to-do. “They’re just gaming the system,” says Penny Gurstein, an expert on affordable housing who directs the Housing Research Collaborative at the University of British Columbia. “This is now just being used as a playground for the rich.”
Across the U.S., studies have shown that local property tax systems, which raise more than $500 billion annually, are deeply unfair, favoring the wealthy and systematically applying higher effective tax rates to lower-valued properties. New York’s outcomes are among the most unequal. But even in a system shot through with inequalities, the exploitation of the HDFC program by affluent bargain hunters stands out.
HDFC sales are infrequent, and not all of them go for big-dollar prices. Nonetheless, it happens often enough that the city’s Department of Housing Preservation and Development acknowledges that “strong reforms are needed.” The agency made a run at that in 2016 but failed in the face of what a spokesman called “strong objections from many HDFC co-ops and their elected representatives.”
Since then, the most desirable HDFC apartments, swept along by the forces of the New York real estate market, have only drifted further beyond the reach of the people they were set up for.
“They’re just gaming the system. This is now just being used as a playground for the rich.”
An HDFC cooperative exists, per New York state law, “exclusively to develop a housing project for persons of low income.” That doesn’t stop some HDFC buildings from advertising how lax they are about enforcing income limits. Bloomberg Businessweek found dozens of listings dating to 2010 that failed to mention income restrictions for the building or plainly said there were none.
A four-bedroom unit at 238 W. 106th St. was listed this year for $1.85 million and advertised as having “no income restrictions,” despite city records showing it benefits from the exemption for low-income housing. The building’s HDFC status lowered its taxable value this year by $3.6 million and cuts its owners’ tax bill by more than $400,000.
A building manager at ABC Realty, which manages the building, told Bloomberg Businessweek she would inform the brokers that “they need to be compliant.”
When income limits are enforced, the rules can be as complex and unintuitive as everything else about New York City real estate. Depending on its governing documents, a building will set the limit by various methods. One looks like this: Take the annual common charges for the unit, plus the estimated annual utilities, and multiply that by six (or seven if the buyer’s family is big enough). Then add 6% of the seller’s original purchase price.
That’s your income ceiling. Some buildings keep it simpler—and perhaps get to a higher number—by using a percentage of the area median income, or AMI, for the New York metropolitan area. Buildings that are committed to low-income ownership might set the limit at 80% of AMI, which matches the city’s definition of low-income. But an HDFC can go as high as 165% of AMI. This year that translates to $137,940 for a single person and $196,845 for a family of four.
For buildings with high prices and tight income caps, gifting is just about the only way a qualified person can buy some of these apartments, especially if an all-cash deal is necessary. The upshot is that a child of well-to-do parents is something of a perfect buyer.
“They didn’t think about rich kids with a trust fund but who make 30 grand a year working for a nonprofit,” says Matt DeSilva, a real estate agent who specializes in HDFCs. “Because that wasn’t really happening when the program was created.” DeSilva has personal experience with an HDFC purchase.
When his mother lent him the money to buy into the building on South 2nd Street in early 2009, he was playing bass in a band and running his small guitar store.
He put 20% down from his savings, he says, and sought bank financing for the rest. But because of the 2008 mortgage crisis, he says, a lender that had approved the loan backed out. “In order to make this purchase happen, my parents did me a huge favor and took out a home equity loan in order to give us a loan in the form of a private mortgage,” DeSilva says.
Students at Columbia University and Brooklyn’s Pratt Institute appear frequently among HDFC buyers, as do young adults pursuing passion projects that might pay off someday but haven’t yet: DJing, fine art, influencing, music, modeling, fashion design. Others are future doctors and lawyers.
Buyers frequently list their parents’ addresses in upscale suburbs of Los Angeles, Pittsburgh, Baltimore, and other cities on purchasing documents. In extreme cases, cash buyers have ties to the wealthy and powerful. A son of British lord Simon Gavron bought an HDFC unit; a son of former Grumman Corp. Chairman John Bierwirth did, too.
Parents say HDFCs offer financial breathing room for creative children. Jessica Nacheman says a one-bedroom unit on the Upper West Side, purchased last year for $410,000 in cash, “was really kind of a godsend” for her daughter, a 2015 Bryn Mawr graduate and harpist who needed her own place to avoid disturbing roommates with rehearsals.
“She had been able to put some money aside, from gifts, etc., etc.,” says Nacheman, who’s worked as a lawyer for a division of Exxon Mobil Corp. and whose husband retired as a principal in an engineering firm.
“Now she can go forward with lower maintenance.” Maintenance is a unit’s share of the common costs for a building—staff, water, repair funds, and, significantly, real estate taxes.
The HDFC tax break is one reason the monthly maintenance for this apartment was advertised at just $598 at the time of the sale, perhaps half of what it might be in a market-rate building. “It’s really a great program,” Nacheman says.
Other parents are less eager to discuss it. “It was a one-time opportunity,” says Avraham Glattman, a real estate investor, in a brief conversation.
Glattman says that in 2016 his business partner, Pete Jacov, found two apartments in a building near Hudson Yards, on the West Side of Manhattan; a son of Glattman’s bought one, and a son of Jacov’s bought the other, for $220,000 apiece, in cash. Jacov hung up when reached by a reporter and didn’t respond to text messages. Both sons are pursuing careers in law.
There’s nothing illegal about taking advantage of rules that offer such obvious benefits for people with cash to burn. And a lot of people might say that if you can find an advantage in the ruthless New York real estate market, you should exploit it.
But these subsidized housing cooperatives were never intended to be a windfall for rich kids. They began as part of an historic transfer of wealth that made first-time homeowners of some of New York’s most economically vulnerable people.
In 1970s New York, the economy had collapsed, and slumlords had stopped making repairs on their buildings and paying property taxes. Eventually, officials seized the properties, making city government one of the largest landlords in town.
The buildings remained in disrepair, and the city couldn’t afford to fix them. Rather than return them to unscrupulous slumlords, city officials sold them to tenants, typically for $250 per unit.
The buildings were organized as cooperatives, then the dominant form of apartment ownership in New York. But the co-op boards they formed often lacked the expertise to manage the buildings’ finances or upkeep. Education programs offered by the city and affiliated nonprofits received mixed reviews.
“The training was very threadbare,” says Glory Ann Kerstein, who’s lived in her HDFC unit since 1982. Unpaid taxes, building code violations, and fines piled up.
Faced with the awkward prospect of seizing the very same properties again, city officials came up with a solution in 1989: a 40-year tax break that would help the cooperatives dig out of debt.
The benefit was structured as an absolute cap on the taxable value of each HDFC unit, set at $3,500 in the first year and climbing on a schedule. That means a four-bedroom in Upper Manhattan (like the one that sold last year for $2.1 million) is taxed the same amount as a one-bedroom in the Bronx. The tax break itself wasn’t made contingent on keeping prices affordable.
Some HDFC co-ops signed temporary agreements with the city that included price caps—tied to fixed schedules or complex formulas—but the agreements have been expiring over the years; they’re now in effect at fewer than 25% of HDFC buildings, according to the housing department. The agency says a small number of new cooperatives have been formed with stricter rules around income and assets.
The rise in prices is warping one of the few shields against New York’s exploding housing costs. For working people who made up the first generation of owners, including Black, Puerto Rican, and Dominican families, the buildings offered a chance at economic stability.
As a child, Sandy Baez emigrated from the Dominican Republic to live with his mother in an apartment building in Washington Heights, in northern Manhattan. The property’s absentee landlord had survived previous foreclosure waves, only for the city to seize his three-building complex starting in 1991, just before their arrival.
“It was infested with rats, there were holes in the bathroom ceilings, there was nobody to call for repairs,” Baez recalls. Still, “it was a big improvement from what we had in the Dominican Republic.”
It took more than a decade for the city to officially transfer the deed of the complex to its residents, 66 units for $16,500, in 2003. Over time the new owners pulled together to improve the property.
Because the taxable value of the apartments fell below the HDFC cap, the owners didn’t receive any tax relief until 2015—$230 per unit, while far wealthier buildings were reaping millions of dollars. Still, ownership offered tranquility and stability, and Baez and his siblings were able to attend college.
Only a handful of apartments in the complex have traded hands since the buildings became a cooperative, all for under $50,000. Baez would like to see his neighbors get more financial relief from the city, and he’s frustrated that he and they pay the same in tax as owners of wealthier buildings. But he supports the HDFC system. “Can the city do more?” he asks. “I think so. But I believe it works, 100%.”
“Can the city do more? I think so. But I believe it works, 100%.”
HDFC units can sell for 50% or less of what a comparable apartment might sell for, depending on factors like the financial and physical condition of the building. Because they are often such bargains, cheating on applications for them does occur, brokers say.
“They’ll hand you a tax return that they did on QuickBooks or Quicken or TurboTax,” says DeSilva, the guitar dealer-turned-real estate agent. He’s started asking for tax transcripts from the IRS.
For many buildings, the city doesn’t monitor sales. That leaves agents and the cooperatives to catch dishonest buyers, but they have incentives to see high-priced sales take place. Original owners from the 1980s and ’90s often experience the biggest wealth-creation event of their lives when their unit goes for a high six-figure price; it’s the equivalent of a retirement account.
The cooperatives benefit, too; most collect a so-called flip tax of about 30% of the profit when an apartment sells. Big-dollar transactions refill their coffers. (In conventional co-ops, the flip tax typically tops out at 3%.)
The city estimates 27% of HDFC cooperatives are experiencing some form of distress, with many still weighed down with debt or in need of major improvements.
For these buildings, it’s almost impossible to resist the transition from low-income owners to wealthier buyers. They need the flip-tax money.
Clara Meregildo knows how unsettling these pressures can be. At her seven-story prewar building about four blocks north of Central Park, seven units have traded for cash since 2018 at an average price of $339,000. The flip taxes have helped chip away at the building’s debt, but it still stands at close to $650,000. There are uncomfortable questions about the building’s future.
“I’m committed to keeping the building affordable,” says Meregildo, a human resources professional who bought a unit in 2007 and serves on the co-op’s board.
Fellow board member Jeremy Fenn-Smith, who bought in 2003, predicts it won’t be easy, thanks in part to the building’s present reliance on cash sales. People who are paying cash to get in now, he says, won’t be interested in limiting their resale options.
“The idea is that everybody has a three-bedroom, large unit close to the park; they’re not going to want to have caps on that. They’re certainly not low-income people. We have racial diversity, we have economic diversity. That will change. I think that’s inevitable.”
On the other side of the block, in a 24-unit HDFC building, recent sales have topped $1 million. Only three apartments are still held by original owners.
Thanks to the HDFC tax break, the entire property’s taxable value is $281,856. Bart Platteau, a Belgium-born jazz flutist who owns a unit in the building, says it doesn’t make sense for him and his new neighbors to be receiving a tax break for low-income housing. But he isn’t suggesting giving up something for nothing.
“Don’t give them the tax breaks, but let them be free, and let them be regular co-ops,” Platteau says.
That idea is gaining traction in HDFC buildings, in part because many owners believe their units’ value would spike if income caps were lifted. The New York State Office of the Attorney General isn’t encouraging the hope. In 2015 it issued guidance to local officials that says the law prohibits HDFC buildings from reorganizing as market-rate co-ops in most circumstances.
An interest group called the HDFC Coalition is attempting to fight that. John McBride, a leader of the group, says the organization believes most HDFC coops “want and need to remain incorporated as HDFCs so long as a sufficient tax break is in place to keep monthly housing costs affordable.”
At the same time, he said, the group insists on “maintaining our right to dissolve our HDFCs and convert to normal co-ops, if only to keep city government from taking over our private homes.”
He questions whether city officials who set HDFCs in motion really intended for them to be regulated in perpetuity, and says the larger policy goal was to transfer hundreds of often stressed and dubious buildings off the city’s books and into stable, private hands.
If the original HDFC owners hadn’t been willing to take them on, many of those buildings would have been abandoned, McBride contends. “HDFC shareholders saved these buildings, and these buildings belong to us and always will,” he wrote. “Period.”
The coalition wasn’t always so interested in laissez-faire principles. At its founding, in 1992, one of its leaders was Jordi Reyes-Montblanc, a West Harlem community activist who told the New York Times in 1998 that HDFCs are “intended to be the permanent homes for the self-supporting working poor and low- to moderate-income families.” The units “are not intended to be investment property or for market speculation,” he said.
Last year, Harvey Epstein, a State Assembly member for eastern Manhattan, drew the ire of the HDFC Coalition after crafting draft legislation that would create an HDFC ombudsman’s office, which the group saw as government overreach. He’s still working on a way to reform the law governing the co-ops, but he’s come around to seeing the inevitable trajectory the most expensive units are on:
“I’d rather let them go and make them pay full fare,” he says, meaning the co-ops would lose their property tax subsidy. “Units that are selling for $1 million now, it’s hard to re-regulate that back.”
Deregulating the most stable and expensive buildings could spell windfalls for those who’ve played the system artfully, the final move on their way to achieving unfettered price velocity. Epstein thinks state law can be amended to prevent the problem from spreading across other buildings.
If the system is left unchanged, it isn’t hard to envision a future in which gentrification fans out across more and more neighborhoods and their HDFC cooperatives. Hardly a surprising outcome in New York real estate, where the logic of the market wins more often than not. At least there’s a consolation prize: tidy nest eggs for exiting owners, as their homes and city are cleared for the affluent.
Soaring Home Prices Are Roiling Appraisals And Upending Sales
More properties are being valued below their agreed-upon sales prices, causing deals to collapse.
Jason and Talitha Brooks listed their house in Orange Park, Fla., in June at $320,000. After receiving multiple bids, the couple accepted an offer at $335,000. But the appraiser, hired by the buyer’s lender, valued the home at only $305,000. The Brookses and the buyer couldn’t agree on a new purchase price, and the deal fell through.
“This whole appraisal process, it’s just so subjective,” Mr. Brooks said.
An unusually high number of homes across the country are being appraised below their agreed-upon sales prices, causing a number of deals to collapse.
Home prices have soared in recent months. Buyers are frequently paying above asking price to win bidding wars, and appraisals haven’t always kept up with those rapid price increases. About 13% of appraisals came in below the contract price in August, according to housing-data provider CoreLogic.
That was down from a recent high of 19.7% in May but above 7.3% in January 2020, a rate CoreLogic said is more typical for the housing market.
“I don’t remember any time where the frequency of buyers being willing to pay so much more than the market data was this high,” said Shawn Telford, chief appraiser at CoreLogic.
The gulf between contract prices and appraised values highlights the risks to buyers in the current market, especially those stretching their budgets to win a bidding war. Mortgage lenders will typically lend only enough to cover the appraised value of a home.
So when an appraisal comes in below the contract price, the buyer has to make up the difference, renegotiate the price or let the deal fall through.
Many buyers are plunking down payments of just 5% to 10% because they need extra cash available in case the house is appraised below the sales price, said Nicole Dudley, a real-estate agent in the Phoenix area. Lower down payments require buyers to take on more debt and can make them less competitive in bidding wars.
Appraisers typically rely on factors like data from recent closed and pending sales when determining home values. Sales usually close a month or two after going under contract, meaning a home that sells in September often reflects a purchase decision made in July or August.
That lag can skew appraisals too low in a fast-moving market, some buyers say. Maria and Rich Mahon listed their three-bedroom house near Houston for $315,000 in July and accepted an offer at the asking price. Then the appraisal came back at $294,000, Mr. Mahon said.
The appraisal relied on data from spring home sales, which didn’t reflect the market by late summer, Mr. Mahon said. “That was super frustrating to me,” he said.
The Mahons renegotiated with the buyer and agreed on a $305,000 sales price, a delayed closing date and a lower agent commission. The sale closed Sept. 30.
Appraisers say they employ a rigorous approach to valuing a home that over time is more accurate than simply reflecting what a buyer offered during a bidding war. An unbiased appraisal can protect a buyer from overpaying for a property, said Joan Trice, president of the Collateral Risk Network, an organization that includes appraisers and lenders.
“In a frenzied market, it is harder to nail down what value is,” said Jonathan Miller, chief executive of appraisal firm Miller Samuel Inc. But, he added, “just because the appraiser doesn’t agree with the purchase price, whatever the reason, doesn’t mean they’re wrong.”
Still, appraisal issues were a top reason cited by real-estate agents in August for sales in contract going awry. A survey by the National Association of Realtors showed that 12% of contracts that were closed or terminated faced appraisal issues that month, up from 9% in August 2019, before the Covid-19 pandemic sparked a housing boom.
After the initial deal fell through, the Brookses in Orange Park relisted their house in August and accepted a new offer for $345,000. This time, Mr. Brooks wasn’t taking any chances.
He prepared an analysis of recent local sales that he thought were comparable to his home and presented them to the appraiser, and he gave the appraiser a tour of the house. The second appraisal came back higher than the first, and the sale closed last month.
Home sellers providing information to appraisers is within the rules and can be helpful, though appraisers aren’t required to take such information into account, Mr. Miller said. Following the subprime-mortgage crisis and housing crash, the federal government enacted rules meant to eliminate pressure by mortgage brokers on appraisers to match a desired price.
In recent months, during the height of the boom, many buyers waived their right to terminate a contract due to a low appraisal in an effort to make their offers stand out, which meant they were willing to pay cash to make up the difference.
This tactic is becoming slightly less common as the market is cooling. One-fourth of buyers waived their appraisal contingency in August, down from 29% in June, according to the NAR survey of agents.
Earlier this year, “we weren’t having to worry about appraisals, because people were willing to waive them,” said Jennifer Wauhob, a real-estate agent in Katy, Texas. “Now that they’re back on the table, we’re definitely feeling it.”
Millennials Team Up To Fulfill The Dream of Homeownership
Burdened by debt and facing soaring home prices, first-time home buyers are pooling their finances with partners, friends or roommates.
Six months into the pandemic, Veronica Vest was having a serious home-buying urge.
Ms. Vest, a 27-year-old project engineer, was tired of having to share a building with others, sick of paying rent and building no home equity—and dreaming of stretching her legs in her very own backyard.
She and her boyfriend made an appointment to view a three-bedroom home for sale in Portland, Ore., but, she says, they “freaked out and canceled it.” It was too expensive for them, and there was always the risk they could break up.
Then her friend Tara Takano, a 32-year-old sales-support lead, had a thought. “Me and you should buy it together lol,” she texted.
It was just a joke—until it wasn’t. The women had stable jobs, good credit scores and total trust in each other. Two months and several viewings later, they picked up the keys to a new house.
For millennials, many of whom are getting married later in life, swimming in student-loan debt and facing soaring home prices, homeownership can feel more like a fantasy than an achievable goal. So, some first-time home buyers are taking a more creative route to make it happen—by pooling their finances with partners, friends or roommates.
Since 2014, when millennials became the largest share of home buyers in the U.S., the number of home and condo sales across the country by co-buyers has soared. The number of co-buyers with different last names increased by 771% between 2014 and 2021, according to data from real-estate analytics firm Attom Data Solution.
The pandemic added fuel to that trend, according to data from the National Association of Realtors. Among all age groups during the early pandemic months—April to June 2020—11% of buyers purchased as an unmarried couple and 3% as “other” (essentially, roommates). Those numbers were up from 9% and 2%, respectively, in the previous year.
A desire for more working and breathing room coupled with high housing prices may have driven this upward trend, says Jessica Lautz, vice president of demographics and behavioral insights for NAR. “During the pandemic, people have been renting and they may have wanted more space,” Dr. Lautz says, “and so they looked at, perhaps, their roommate and decided, ‘Let’s go buy a home together.’ ”
Confidence In Friendship
That was the case for best friends Angel Nwachukwu and Samanta Simpson, both 27, who graduated from law school together in 2019. The women rented an apartment together in Harlem for about a year and a half and brainstormed how they could invest the money from their new salaries. They considered buying stocks and bonds, or even starting a business venture, before noticing how low interest rates were and thought—why not buy a house?
Reactions from friends and family weren’t entirely enthusiastic. They remember fielding questions like “Are you sure?” and “You’re really banking on this friendship?”
“I don’t think people really value friendship as much as me and Sam,” says Ms. Nwachukwu. “If I would do it with a fiancé, I would do it with my best friend.”
They joined the exodus of people leaving New York during the pandemic and purchased an airy townhouse in the heart of Washington, D.C. “I would not have been able to afford a house in D.C. proper by myself,” says Ms. Nwachukwu. “Now, every time I see a price, I can just cut it in half.”
There may also be cultural factors at play in the co-buying trend. Many millennials are putting off getting married and having children until later in life than previous generations, but not all of them want to live alone.
“A lot of them want to live in a communal setting, but they have enough money and they’re looking around at the increase in real-estate prices, and they want to get a foothold in this appreciating market,” says Andy Sirkin, a real-estate attorney specializing in co-ownership.
Mr. Sirkin, who has worked on tenancy-in-common and joint-tenancy agreements for co-buyers since 1985, says he has seen a surge of interest over the past five years. A decade ago, he got maybe five requests a year, he says. Now, Mr. Sirkin estimates, he receives closer to two to three inquiries each week.
A joint tenancy is more popular among unmarried couples or family members, because it allows owners to pass along their ownership rights to their co-owners in the event of their death. Tenancy-in-common agreements are more popular between friends and roommates who prefer their ownership to pass to their heirs rather than their co-owners.
Another option for groups who plan to rent the property or don’t use it as their primary residence is to form a limited-liability company (LLC), which can provide co-owners with protection from individual liability. But doing so can eliminate some tax benefits of homeownership, like mortgage-interest tax deductions.
Beyond deciding on an ownership agreement, there are other factors for co-buyers to consider, such as how to divide equity and mortgage payments.
Legal experts advise buyers to consult a real-estate attorney to help write a co-ownership agreement that covers every possible scenario, from job loss to marriage to personal fallouts. For example, who will hire the handyman if there is a plumbing issue?
Who is in charge of collecting and making the mortgage payments? If one co-owner moves away, will the other co-owners have an option to buy them out or will there be a forced sale of the home?
“It’s kind of like a marriage in that sense in that everybody has rose-colored glasses at the beginning, but later on when reality sets in, you’re going to need a way to terminate the relationship fairly,” says real-estate lawyer Jeffrey Davis.
In some agreements, a co-owner may be allowed to sell their shares to another buyer, so long as the other co-owners can vet and approve the new buyer.
Otherwise, owners may have the option to buy one another out or sell the property following a valuation. Typically, a holding period of three to five years is written into the agreement, during which a co-owner cannot sell their shares, says Mr. Sirkin.
For groups without agreements in place, or those who have not waived their right to partition in an agreement, any co-owner can force a sale of the property at any time. Without a proper exit strategy in place, says Mr. Sirkin, co-owners risk ending up in litigation.
“We have to assume that people’s lives will change,” he says. “You want to be able to drop back or fall back on this document, and you want that document to give you a solution.”
Ms. Nwachukwu and Ms. Simpson are both lawyers, capable of drafting and reviewing legal documents. They opted for a tenancy-in-common agreement with both their names on the deed, and chose to split every cost the down the middle.
Sealing The Deal
Ms. Takano and Ms. Vest, the buyers in Portland, drafted their own co-buying agreement based on a template they found online and the issues they learned about in a Portland Community College class on home buying.
Ultimately, though, co-buying comes down to more than just setting up a legal agreement. It’s just as important—and potentially difficult—to figure out who exactly does what day to day.
For Kate McCann, 29, and Carina Romano, 38, friends and former co-workers based in Philadelphia, plenty of unanticipated issues arose after they purchased a rustic vacation home on a 5-acre parcel of land in New York state’s Catskills region in 2017—from broken septic tanks to mysterious smells and creepy, winged visitors.
“I think resourcefulness is a big part of it,” says Ms. McCann, a real-estate agent. “Like, you need to find a bat exterminator, and there are literally none on the Internet, so what do you do?”
Delegation, conflict-resolution skills and aligned interests are three factors that groups of friends consistently mention as being vital to the co-buying process.
For their vacation and rental home in the Catskills, Ms. Romano, a photographer, largely handles inventory, repairs and contractors; Ms. McCann manages the Airbnb rental site; and the third co-owner handles bookkeeping, taxes and other financial matters.
The friends in Portland, Ms. Vest and Ms. Takano, have found it has been helpful to appoint a “czar of finance” that will alternate each year. The czar is in charge of making sure everything, from the mortgage to the internet bill, is paid each month.
The more challenging hurdle, says Ms. Vest, may be figuring out how to get her cat to get along with Ms. Takano’s dog.
“We’re all kind of learning together,” she says.
The Race To Build Ranch Homes
When it comes to creating a sliding scale for how people have reacted to the global pandemic, on one side, you could put adopting a rescue dog—on the other, more extreme side, you could put moving from an urban hub to a remote ranch, where the nearest Target is 90 miles away.
“Our primary home was in downtown, in Chicago’s Gold Coast, where we had lived for 12 years. We loved that everything was at our fingertips, and we’d spend a lot of time in New York and traveling internationally,” said Lori Hiltz, who decided to move with her husband to Steamboat Springs, Colorado, full time during the pandemic. “However, during the pandemic, there was nothing appealing anymore in Chicago, and we realized a mountain lifestyle would be ideal.”
Ms. Hiltz and her husband had previously purchased a mountain home in Steamboat Springs that they had used for ski trips, but they quickly realized that their vacation home wasn’t going to work as their forever home. So they’ve opted for something at Alpine Mountain Ranch & Club, a 1,216-acre community 10 minutes from the ski mountains and five minutes from the main town.
“There are just 63 total homesites, and each is around 5 acres, but not a lot had been built yet, so you really had to have a vision,” Ms. Hiltz said. “We first saw it in July 2020, purchased in October 2020, and our home should be complete by October 2022. The pandemic definitely influenced our timeline. Here we were, in the prime of our lives, healthy and wanting to do things outside, and we realized that the craziness of city life was just taking more out of us than we were getting back.”
The Hiltzes are hardly alone in their sentiments—and actions. Across the U.S., residential communities offering ranch life have boomed with buyer interest and sales, and the demand to build new ranch homes—loosely defined as anything occupying a significant amount of acreage in a somewhat remote setting—has accelerated at a crazed pace.
“In 2019, we had one sale at Alpine,” said Suzanne Schlicht, the community’s director of sales who has lived in Steamboat Springs for 30 years, the last three of which she’s spent working at Alpine. “In the second half of 2020, we had six sales, and in the first nine months of 2021, we’ve had 17 sales. Prices [which start at $1.75 million] have gone up too, rising 14.5% in 2021 above what they were in 2020, and they’ll likely only go up more next year.”
However, the determining factor for most buyers isn’t necessarily buying at the right time for value, it’s scarcity and the realization that life is short, and the time to enjoy a better life is now.
To that end, communities like Alpine have created their own building companies to expedite the process.
With labor shortages happening across the country, Alpine started its own construction arms around March 2020, which allows the company to contract workers to build eight homes at once, keeping workers employed full time and at a steady pace, reducing building times to just 18 to 24 months.
Three-hundred miles to the west, in Park City, Utah, Benloch Ranch has taken a different approach to creating custom homes for its residents. “We’ve created a proprietary system for building homes, where we do most of the construction off site and prefabricate a lot of the elements,” said the community’s developer, Jamie Mackay, 43. “We’ve already purchased the materials, so we’re staying in front of the supply chain, but we are also doing it in an eco-friendly way.”
Mr. Mackay cited the homes’ energy-efficient insulation. With a modern, glass-wall aesthetic defining most of the homes’ design, glass walls are made from double-pane thermal glass, with double-insulation on the roofs as well, which cuts heating and cooling bills in half. And, the building times are faster too.“Once a contract is signed, it takes homeowners about three weeks to design, and then eight to 14 months until they can move in, which is about 40% faster than it would typically take,” said Mr. Mackay.
The expedited process has certainly come in handy during Benloch’s now-fortuitous launch time.“I purchased the land, over 2,600 acres, three years ago, and it took about 18 months to get through the master plan and lay out the roads,” he said.
“Everything was on track before Covid. Then it hit, and we all held our breath for a minute. However, we launched in September 2020 and in our first 47 days sold 156 homes. Since then, we’ve sold an additional 600 lots and had more than $100 million in sales.”
Prices at Benloch start at $999,000 for a 2,500-square-foot home on one-eighth of an acre, but estate lots also offer homes on up to 3 acres of land. At build out, it will offer its 2,100 homeowners a comprehensive community complete with 20 miles of hiking and biking, cross-country skiing, a sledding hill, skeet shooting range, archery, ice skating pond, glamping facilities and more.
A New Lifestyle for Former Big-City Dwellers
Indeed, the open space of ranch life might be what sparks initial interest for potential buyers, but the tipping factor that has people deciding to abandon city life might be the amenities and the creation of a community.
At Driftwood Golf & Ranch Club, the new Discovery Land Company development on 800 acres about 25 miles southwest from Austin, Texas, homeowners have typical amenities Discovery Land has come to be known for—a Tom Fazio golf course, ample comfort stations, an outdoor activities program—but also an on-property vineyard, an organic farm, an activity barn for things like bowling and arts and crafts, a pool and lazy river, a pond stocked for fishing and access to a private members club in downtown Austin.
“We started sales here in 2018, and we had always seen interest in people wanting to live in a no [income] tax state, but by mid-summer 2020, we saw a huge influx in buyer interest brought on by the pandemic and the realization that you didn’t have to be in the office five days a week,” said Caleigh Bressler, director of marketing at Driftwood, where prices start at around $3 million.
Those still wanting the occasional taste of city life have the option of joining Driftwood Downtown, Discovery’s private members club in the heart of Austin, complete with three stories of bars, a rooftop lounge, golf simulator, and ample opportunities for social gatherings and networking. “Even when you take into account a bit of a slowdown in early 2020, our sales were up 230% in 2020 over 2019, and up an additional 160% from that in the first nine months of 2021,” Ms. Bressler said.
The combination of favorable taxes and ranch life also resonates at Snake River Sporting Club in Jackson, Wyoming. The 1,000-acre community technically first came to life in 2006, when the Tom Weiskopf –designed golf course opened, but didn’t build momentum until around 2016, when a new developer came in and gave it a second life.
The community consists of 14 estate lots each occupying 35 acres (priced from $4.5 million) and 62 residence lots ranging from 0.5 to 2 acres (priced from $1.3 million for a homesite or from $3.4 million for a 3,200-square-foot home). In 2019, just one Ranch Estate lot sold, but Snake River saw the sale of four such lots between the end of 2020 and early this year. It isn’t just sales that have taken off, but construction as well.
“We previously had two Ranch Estates and 15 Residences built, but now we have about 40 homes under construction here, all at once,” said Joe Amdor, Snake River’s executive vice president of real estate sales.
With so much of Jackson being spread out, the Snake River’s private membership club, which costs $150,000 to join, acts as a hub for locals to gather and create their own community. “We added nearly 80 new members in 2020, and almost 70 new members in the first nine months of 2021, for a total of 455 throughout the various categories,” said Mr. Amdor.
“Ranch life is an adjustment,” said Ms. Hiltz. “We’re 87 miles over a mountain pass from the nearest Target, and 90 miles—also over a mountain pass and in the opposite direction—from the nearest Costco, but instead of city rats, our animal encounters are with bears, moose, deer, and elk. But I’m still pinching myself at how special it is to get to live around nature like this.”
Off-Plan Condo Buyers Are Demanding A More Bespoke Experience, Designer Says
Katherine Newman, behind the interiors at Extell’s Brooklyn Point, discusses her blend of industrial and historical design references.
Katherine Newman, founder of Toronto-based design firm Katherine Newman Design, took on the huge task of designing 483 modern, minimal interiors of Brooklyn Point, a 720-foot-high, 68-floor condo that opened in 2020 in downtown Brooklyn, New York.
The take was a modern twist on Scandinavian modernism from the 1950s, Mid-century Modern and industrial chic. “The detailing in the metal materials, the wood, stone and glass, if you look at it in detail, it’s quite an endeavor of this scale,” Ms. Newman said.
Since founding her firm in 1991, Newman has worked on major design projects, from rural ranches to Victorian mansions and Miami villas, one of her most notable projects is designing residencies for One57 on Billionaire’s Row in Manhattan.
Since 2000, she has also been designing luxury furniture and lighting for Lona Design, a collection she created alongside architect Peter Cebulak, inspired by Danish furniture from the 1940s.
For Brooklyn Point, Newman used custom copper and nickel for kitchen and bathroom fixtures, and an option of either a light or dark palette for cabinetry finishes, alongside oak wood flooring.
She spent some time speaking to Mansion Global about chic minimalism, Mid-Century Modern design and her personal definition of luxury.
Mansion Global: Where did you begin designing for Brooklyn Point?
Katherine Newman: I think we took the feeling of Brooklyn which is something that straddles between art and utility, and created a more elevated aesthetic. It references that industrial aesthetic and craftsmanship and artistry but is infused with a certain elegance. The developer wanted a certain quality and polish. We paid attention to Brooklyn and what it expresses.
MG: How did you make sure it wasn’t too trendy? There’s some of that in Brooklyn.
KN: There’s a lot of that in Brooklyn. In all our projects, we’re interested in a timeless aesthetic. We don’t reject the historical. That tempers however we approach any project. There’s a lot of 1950s references, a 1950s palette, a certain traditionalism running through the space. We didn’t use any neotenic furniture. The building has a certain scale that requires a certain type of rigor. It couldn’t be all whimsy and freeform expression. It had to have discipline.
MG: Why was there a 1950s influence, and is it tied to Scandinavian design, at all?
KN: Yes. That whole vernacular is still based on historical orders. Modernism, but not rejecting the past. lots of beautiful joinery details and furniture. Unique, uniform shapes. Historical assembly. That’s what the whole building is about, in terms of context and finishes.
MG: What are some trends in interior design you’re seeing for fall, especially for condos?
KN: We’re not a trend-based firm, but through osmosis you can’t help but be influenced by what’s current. I think the amount of amenity spaces and level of finishes overall, proves that the high level of design in condos has been greatly elevated.
MG: Why did you use custom copper and nickel?
KN: We decided on the architectural metal being copper, such a hard material to work with. We wanted it to be warm and lend itself toward a neutral palette. The kitchen cabinets are white oak. There’s a variety of finishes. In terms of trends, it allows the purchaser to participate. There were two options—light and dark, transferable throughout the building, not stratified per floor.
MG: What’s your personal definition of luxury?
KN: On a human level, it’s good health and freedom. On a design level, it’s good design and quality materials that have longevity. Quality wood and stone materials, natural finishes are all luxurious, so is historical joinery. I love midcentury design, even a little earlier, where it’s still respecting the historical, not a complete departure. Not all mass-produced materials.
MG: What was the biggest challenge with this project?
KN: The biggest challenge was that every wall was clad with stain-grade metal or starphire glass material. There are a multitude of stan finishes and a lot of layering and three-dimensional elements. The approach, really, the level of bespoke design we do for residents on this level, we transfer to “en masse.”
Taking that level of complexity and applying it to a building of this size, just managing the finishing specification process was quite something. Normally, you’d have one metal material for every floor. We have 10 stained finishes that transfer from one room to another, different stone materials, that aspect of the project was quite something.
MG: How will this project set the tone for other luxury condos that come to Brooklyn?
KN: I think developers will have to take on a far more complex design process. It’s not an easy feat. That’s the outcome of producing buildings like this. Some are so complex, like in the lobby, the solar wall art panel, produced by an artist in Poland, is nothing that could be facilitated locally.
MG: It goes to show you luxury condos are not this cookie-cutter, white-box lifestyle?
KN: Definitely not. I don’t think so. Imagine if someone is looking to buy a residence in Brooklyn, and they’re at Brooklyn Point visiting a friend, you’d think that’s something they’d want for themselves. Right?
MG: What’s your favorite part of your own home, design wise?
KN: My living room. It’s a collection of designs collected by my grandmother. I’m an only grandchild. It’s filled with furniture she and I both collected, defining it as my own space, it’s me growing up and me now.
Residential Real Estate Returns To Earth, But Will Remain Strong
Residential real estate markets in the U.S. and abroad may be settling down from the frenzied pace of pandemic buying, but buyers waiting for significant slowdowns or price drops shouldn’t hold their breath, expert panelists said on the first day of Mansion Global’s Luxury Real Estate Conference on Tuesday.
“World city prime residential markets had the best first half of a year since 2016,” said Paul Tostevin, director for Savills World Research. “Seventy percent of cities monitored saw positive growth in the first half of this year.”
In cities as well as suburban and rural markets, the aftershocks of a wild 2020 are still very much being felt.
“To call this year unusual would be a major understatement,” said Danielle Hale, chief economist, Realtor.com. “In 2020, the housing market was off to a strong start, then the pandemic put it on ice for a couple of months, though we never saw home prices decline, only flatten. Then, as the economy opened back up, housing markets roared back to life and prices grew at double-digit paces.”
While 2021 has thus far been spared the wild ups and downs of the previous year, we’re still in the middle of an unusual market. As activity starts to normalize from the chaos of the past 18 months, below, some insights on what lies ahead from Tuesday’s panel discussions on residential real estate.
Cities Were Never Dead
While big cities—particularly those that rely heavily on foreign investment—unquestionably took a hit in the pandemic, some are already bouncing back stronger than ever.
“You really can’t go wrong with [investing in] New York,” said Vasiliki Yiannoulis-Riva, partner, Withersworldwide. “Even in an event like the pandemic where the market corrected for a bit, demand has soared, it’s through the roof.”
Similarly, in London, transaction volumes for properties above £5 million (US$6.7 million) were up 61% year over year, Mr. Tostevin said.
Meanwhile, smaller cities have also seen a significant influx of buyers seeking lower home prices and more space, while still prioritizing access to urban cultural amenities and a shorter commute to the office.
“Small cities have come out as places that can offer those things quite well,” Mr. Tostevin said. “They make it easy to nip into the office when needed, with cheaper living accommodations. We’ve seen that translate into price growth.”
For this reason, Ms. Yiannoulis-Riva said she is currently steering investors toward “places like Nashville, Austin [Texas], Atlanta, cities foreign investors don’t tend to think about, but are up and coming and vibrant because people are moving there for a higher quality of life.”
Markets May Normalize, But Don’t Call It A Bubble Burst
The breakneck growth of the past year has inevitably led to fears of a potential bubble. Though the pace of growth seen during the peak of the pandemic buying frenzy is not expected to continue, experts aren’t forecasting any precipitous drop in values, either.
“We do expect to see double-digit price growth continue throughout 2021 and into 2022,” said Molly Boesel, principal economist, CoreLogic. “There’s really short supply, and really high demand. Later in 2022 we do expect price growth to slow to about a 2% or 3% annual growth rate.”
Ms. Hale added, “The housing market has gone from frenzied to just hot, is how I would describe what happened in the last year.”
Rather than the speculation that fueled the run up in prices ahead of the 2007 housing market crash, “right now, we’re seeing fundamentals driving price appreciation,” said George Ratiu, senior economist and manager, Economic Research, Realtor.com.
“Tremendous demand, not enough supply, a decade of under-building.”
In addition to the chronic overall lack of supply, millennial buyers have entered the market full force, a trend that shows no signs of slowing down.
“In a five- or six- year span, 25 to 30 million millennials are turning 30 [and entering the sales market],” Mr. Ratiu said. “Builders are barely keeping pace, so we’ll have these dynamics with us for the short to medium term.”
Cities Might Be Back, But Aspen Real Estate Is Still Booming
The only thing slowing down its luxury tier, brokers say, is lack of supply.
If you go by the numbers, Aspen’s luxury real estate market didn’t have a great third quarter.
The average sales price in the top 10% of the market slid 4.6% from the same period in the preceding year, according to a report by appraiser Miller Samuel Inc.
Its entry price threshold—the number at which the top 10% of the market begins—fell 11.8%, from $17.35 million last year to $15.3 million in 2021. Average square footage, median sales price, and number of closed sales fell, too.
But the reality is very different. “To brokers on the ground, the market is moving about four times faster than normal,” says Jonathan Miller, president and chief executive officer of Miller Samuel. “The market compared to a year ago has slowed, but it’s still very fast compared to historic norms.”
Aspen brokers agree, with one exception: It’s not that demand has diminished, they say. It’s that the inventory necessary to meet demand simply isn’t available.
“It’s unlikely that 2021 is going to eclipse 2020,” says Jennifer Banner, an agent at Christie’s International Real Estate Aspen Snowmass. “What’s slowing things down is lack of inventory across the board.”
Brokers are literally “knocking on doors looking for sellers,” she says, and when something does come up, buyers jump.
“I listed a $12 million property 48 hours ago,” says Compass broker Steven Shane. “I received an offer—a very good one—this morning, and I have someone else who’s highly interested.”
Aspen’s ongoing appeal runs counter to the rebound in urban areas, where the market has come roaring back; earlier this month, Bloomberg reported that third-quarter apartment sales in Manhattan were the highest for any quarter since 1989. In theory, demand for one market should cannibalize from another, but it turns out the market is not a zero-sum game.
“It’s fascinating to see the legs this market has,” says Erik Berg, a broker with Engel and Völkers in Aspen. “People are just realizing: ‘I don’t need to be in NYC or San Francisco or Los Angeles 12 months out of the year.’”
And so, amid a hangover of people who are still part of the much-hyped “urban exodus” of high pandemic buyers, a group of second- or third-home buyers is suddenly reentering the market.
“The Covid panic is over,” says Lucy Nichols, a broker with Aspen Snowmass Sotheby’s International Realty. “That was just sheer terror; people were buying sight-unseen, and they just wanted out of wherever they were.”
Now though, Nichols continues, “what I saw a lot of this summer were friends and family members of people who’d moved here during Covid, who visited and were surprised by what they found.”
These weren’t necessarily people desperate for a lifestyle change, she says. They were just people who, with the flexibility of remote work and the liquidity of a few very profitable years, suddenly decided that Aspen was a viable place to spend time.
“The buyer pool,” she says, has “just gotten deeper and broader.”
A Shift In Priorities
The only thing that’s changed, brokers say, is that some buyers are looking further afield.
“There’s been a slight shift to people looking for more open space,” says Shane. “In the past, demand was weighted very much to the central core, the West End, and Red Mountain. Now there’s a slight move to the surrounding areas, which provide more acreage, open space, and privacy.”
This was a boon to the large estates and ranches that before Covid had sat on the market.
“It was very hard to sell a significant property 20 minutes from downtown. It would be on the market for at least two years,” says Nichols.
A year later, “I do sense people are now OK with living a little more densely,” she says, meaning the market could be slowly moving back.
Still, brokers caution againbst reading too much into recent trends.
People can only buy what’s for sale, and “with inventory down,” Banner says, “there just aren’t as many choices.”
Many House Hunters Are Choosing Diverse Neighborhoods That Reflect A Changing Population
Buyers say they want to avoid ‘cookie-cutter’ areas, but the focus exposes challenges to preserving communities and blending residents.
Jeff Travers recently moved into a $1.25 million top-floor condominium at the Brooks at Historic Walter Reed, a mixed-use development with townhome, condo and apartment buildings under construction on the site of the former Walter Reed Army Medical Center in Washington, D.C.
Mr. Travers, 52, liked the three-bedroom, 1,400-square-foot home for its 800-square-foot terrace with a view of historic buildings and a rolling lawn. But he also was drawn to the economically diverse neighborhood. Nearby is a building for homeless veterans and low-income seniors. The apartment complex next door includes affordable-housing units. His building, too, has condos sold below market price.
Mr. Travers, chief operating officer of a nonprofit group, moved to his new home from a single-family house in the nearby Chevy Chase neighborhood. “I don’t want to live in a cookie-cutter place anymore,” he said. “Here, there will be more of a mix, not everyone looking the same with their dog. I’m excited about being part of something different.”
Across the U.S., many home buyers and renters are seeking out economically, racially and culturally diverse communities. They include affluent buyers eschewing homogeneous neighborhoods.
In response, more developers, spurred by the increasing demand and the national debate on social and racial equity, are finding ways to put more-inclusive properties on the market, such as blending affordable units with market-rate homes, adding space for resident services and including neighborhoods in the planning.
At the same time, some developers and architects are addressing how to mitigate the negative effects of gentrification and the uprooting of established communities.
Studio One Eleven, a Long Beach, Calif.-based architecture firm that commits itself to what it describes as equitable practice, rejects any projects that directly displace existing residents from a neighborhood. One of its new buildings, the Pacific, was built on an old parking lot.
“Developers—for profit, market rate or mixed income—are thinking deeply about issues of social equity and doing the best they can to address some of these broader societal issues we’re all talking about,” said Rachel MacCleery, senior vice president at the Urban Land Institute in Washington, D.C., a nonprofit real-estate and land-use research group.
The market is catering to the changing U.S. population. The number of Americans identifying as multiracial has grown to 10.2% of the population, up from 2.9% in 2010, according to the August 2020 Census report. The rise reflects changing demographics but also a redesign of the Census.
Individual nonwhite population groups, including Asian, Black and Hispanic, all grew in number, while the white population shrank 8.6% since 2010.
Mixed marriages also are rising. In 2019, 11% of all married U.S. adults had a spouse who was a different race or ethnicity, according to the Pew Research Center, up from 3% in 1967. Mixed families, real-estate firms are betting, want mixed neighborhoods.
Of the 2,200 units going up around Mr. Travers’s penthouse, 400 are designated affordable. Some are reserved for households that earn 80% of area medium income, while others qualify at 50%. Mr. Travers put down a deposit in June 2019 after seeing a “Now Selling” sign one morning with his partner, Chris Tomko.
Mr. Tomko bought his own two-bedroom, 1,000-square-foot place for $750,000 just below Mr. Travers’s sixth-floor home. After Mr. Travers moved in with his 16-year-old twins, Neil and Emma, they invited family friends to watch Washington’s Fourth of July fireworks from the terrace. Mr. Travers said he wants his children to see the value in living around a mix of people.
Bethesda, Md.-based, Urban Atlantic is developing the site in a joint venture with Houston-based Hines and Washington-based Triden Development. Urban Atlantic managing partner Vicki Davis says the company is hoping to create a mixed-income community, where affluent and low-income residents live side by side, as they often do in cities.
In West Seattle, Robert Landis paid $290,000 in 2013 for a 1,400-square-foot, two-bedroom townhouse at High Point, a development with affordable and market-rate housing.
Designed by Seattle-based firm Mithun for the Seattle Housing Authority, it has a medical clinic and a public library. Mr. Landis, 68, owner of a web-development company, Capitol Media, enjoys the diversity of the neighborhood, which has many residents from East Africa. In 2015, he joined the board of the homeowners association to help foster a sense of community.
“Sustainability and social justice are very important to me,” he said. Still, Mr. Landis hasn’t met many of his neighbors. “It’s been a huge problem trying to outreach,” he added. “There are language barriers and cultural barriers.”
A year ago, Karalee Werning, 40, and her boyfriend, Ryan Hoover, 34, moved into a home at Sky Loft at the Pacific in Long Beach, where there are affordable units among her building’s 163 apartments. Among other criteria, eligibility for these units is determined by an income limit: 51% to 80% of area median income. The couple pays $4,200 a month for the 1,300-square-foot apartment.
Ms. Werning, a recent transplant from northern Virginia, said she is getting to know her neighbors. “Our building welcomes all shapes and sizes, colors, genders—or no gender—from all walks of life,” she said. “It’s a lovely place to come home to.”
Jonathan Rose, 69, president of a New York City-based real-estate firm that bears his name, said real estate can help solve environmental and social issues. His company creates what it calls “communities of opportunities,” or developments with space for community events and services, such as health screenings, exercise classes and after-school programs.
Jessica Davis, 29, lives in one such community, Squire Village, in Manchester, Conn., with her daughter Elina, 3. The affordable-housing complex includes a 7,000-square-foot community center and a garden.
Ms. Davis, a customer-service representative for Access Health Connecticut, pays $862 a month for her 742-square-foot one-bedroom. The market rate would be nearly double. “We’ve all been through a lot,” said Ms. Davis, who is Puerto Rican and Panamanian. “It’s not a mansion with a picket fence, but it’s home and they work to keep us in here.”
Projects with social benefits, real-estate companies say, have economic benefits, including government incentives such as tax rebates.
Meanwhile, many real-estate professionals hesitate to include social considerations in planning new projects. In a 2020 survey on Health and Social Equity in Real Estate by the Urban Land Institute, 42% of its members and other industry professionals surveyed said those practices add cost, while 38% said they lack the strategies to implement them and 36% cited limited time or capacity.
Mortgage Rates In The U.S. Jump To The Highest Level Since April
Mortgage rates in the U.S. climbed to a six-month high.
The average for a 30-year loan was 3.05%, up from 2.99% last week and the highest since early April, Freddie Mac data showed Thursday.
Rates tracked a jump in yields for 10-year Treasuries, which late last week reached the highest level since June. The Federal Reserve has signaled it’s preparing to taper its Covid-era bond purchases this year, a move that could further bump up borrowing costs.
“As inflationary pressure builds due to the ongoing pandemic and tightening monetary policy, we expect rates to continue a modest upswing,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rising rates would cut into purchasing power for potential homebuyers, who already are struggling to find properties they can afford. Competition for a tight supply of listings has driven up prices across the U.S.
Why Buying A Second or Even Third Home Is Becoming More Popular Than Ever
Low interest rates, pandemic-era savings and a hybrid-work revolution are making it more feasible for people to split their time.
In the Before Times, people had to make a choice: Squeeze into the chaos and energy of the city, or live large amidst the beauty and boredom of the countryside.
The pandemic led many to reevaluate this lifestyle choice, upending global housing markets. Prices skyrocketed and bidding wars abounded in the suburbs, while demand plummeted in many big cities. Now, those who can afford it want both.
In New York, one family is dividing their time between their Greenwich Village apartment and upstate home. About 800 miles west, a financial analyst is bouncing between his parents’ beach house on Lake Michigan in Long Beach, Indiana, and his boyfriend’s apartment in Chicago.
On the other side of the Atlantic, a real estate analyst is chasing a better work-life balance with his wife and kids by spending more days in their countryside home outside of Paris. A small business owner in Rome is renting out her apartment next to the Colosseum while spending time in her new house 40 minutes away in the Sabine Hills.
One London apartment owner is saving money by splitting his time between the capital and the Cotswolds, in the rolling hills of south-central England.
“Hybrid living is the catchphrase of the day,” said Leonard Steinberg, chief evangelist of real estate brokerage Compass Inc. “The perception is that if you have a second home, you have to be a billionaire, but what we’ve recognized especially in the past 18 months is that it’s possible to have a small apartment in the city and a small home outside the city.”
Low interest rates on home loans, pandemic-era savings and a hybrid-work revolution have made it more feasible for people, not just the ultra rich, to live a dual lifestyle. That fundamental change in where and how people live stands to infuse second-home markets, once reliant on weekenders and seasonal visitors, with greater demand for restaurants, retail and other amenities that make urban dwelling so appealing.
Already, about 19% of respondents in Knight Frank’s 2021 Global Buyer Survey said they moved since the start of the pandemic. And there may be more to come: 33% of respondents said they were more likely to buy a second home as a result of the pandemic, up from 26% the prior year.
“With the rise of remote working, second homes or ‘co-primaries’ are becoming a viable option for more buyers seeking a better work/life balance,” the report said.
For the people who can pull off hybrid living, it’s a financial and physical feat. But mental health professionals say the supposed luxury of double living may be a stressor in the long term. Having to juggle multiple rents or mortgages and frequently schlepping from place to place can be daunting.
“There’s the pressure you need to go there,” said Sharon Saline, a licensed clinical psychologist in Northampton, Massachusetts. “You’ve spent this part of your income or savings on the second home — you want to make sure you use it or get your money’s worth.”
Two of Everything
For Keri Cibelli, an environmental consultant in New York City, it wasn’t until the pandemic that she and her family began spending substantial time at their vacation home in Dutchess County, a trendy enclave along the Hudson River in upstate New York.
In March 2020, the family packed up and headed north, enrolling their kids in a local private school and extracurricular activities. But now Cibelli’s sons are back in school in the city, she goes into her office twice a week and her husband goes in every day, so the family is spending weekdays in their West Village apartment and returning upstate each weekend.
“It feels like we have two communities now,” she said. “The city first and foremost is where our jobs are, and we wanted to raise our kids in the city. The shift is just having both and exposing our kids to both.”
The boys are still enrolled in weekend sports leagues and piano lessons that they started in Dutchess County during the pandemic. And the family uses the two-hour drive back to the city on Sunday evenings to plan for the week ahead and catch up on podcasts like NPR’s “Wait Wait… Don’t Tell Me.”
Fortunately, the family’s pandemic escape was already in the budget. Cibelli and her husband purchased the three-bed, two-bath Dutchess County home for $475,000 five years ago — so they were already juggling two mortgages, $300 for trash and utilities upstate, a $500 car payment and a $500 monthly fee at the parking garage in the city.
The only added costs have been gas for all the extra driving, supplies to keep both homes stocked and a $175 price increase from the garage as demand skyrocketed.
“It’s a transition trying to manage both, but we’re doing it,” she said. “I do question it, but it’s worth it.”
Cibelli said she has “two of everything” for her kids and herself — clothes, toiletries. She’s even split up medication bottles.
That’s a key way to reduce stress tied to shuttling between two places, according to Frances Walfish, a family psychotherapist in private practice in Beverly Hills, California.
“One of the best ways to reduce anxiety about shifting and adjusting to and from the homes is to stock both homes with as much of the supplies you need — custodial supplies, toothpaste, toothbrush, clothing, shoes,” she said. “It’s easy to pick up your car keys, jump in the car and go.”
Best of Both
Hybrid living has led to cost-savings for some.
Amy Lentini, an American small business owner, was living full-time in an apartment next to the Colosseum in Rome before she decided to buy a house in the Sabine Hills. Initially envisaged as a summer spot to avoid the city heat, the house became a primary residence for her and her partner during the pandemic.
The 220-square-meter home required a lot of money and time at first: Lentini said she had to do renovations, buy furniture, deep clean, hire someone to maintain the 2-acre garden, and pay for a car and insurance.
So when an acquaintance inquired about renting out her Roman apartment every other month, “it was quite unexpected and a happy coincidence,” Lentini said. “If it wasn’t for the extra rent money, we would have to be much more aware of our spending.”
Now, Lentini is more committed to her home in the Sabine Hills.
“We don’t feel like urban dwellers anymore… It feels like we’re on vacation when we come back to Rome,” she said. “I see exhibitions, go to museums, go to lunch with my daughter, then I head back to the Sabine Hills for olive season.”
For 41 year-old Romain Picard, splitting his time between his Paris apartment and his house in the hinterland has given him more of a work-life balance. In addition to spending weekends at a cottage in Blévy in the Loire Valley with his wife and two kids, the senior tech manager will spend some weekdays working remotely. He finds he has better concentration, less stress and is overall more productive.
“Yes, we pay more for gas, but we’re comfortable financially and in the long term we know that this will have a positive impact on our health and mental well-being,” he said.
In the U.K., Knight Frank real estate agent Jonathan Bramwell found that by splitting time between his apartment in London and his girlfriend’s home in the Cotswolds, he’s spending less money now than when he was in the city everyday.
“Suddenly I’m not going to Pret twice a day,” he said, referring to the popular U.K. sandwich chain. But as more people are spending time in the countryside, those restaurants and bars are starting to charge London prices, he said.
The same principle applies to real estate. A 2020 study published in the Journal of the Geographical Institute Jovan Cvijic found that owners of second homes can contribute to increases in home prices and the overall cost of living in their communities. But there are also economic benefits like new jobs and more shopping options and recreational facilities.
“You have the best of both worlds,” said London-based Hamptons real estate agent William Neville Smith, who has observed a rise in the number of pieds-à-terre purchased in London. “There’s been a lot of talk of people buying in the countryside to get more space, but no one’s highlighted the fact that a lot of people also enjoy the buzz of living in a big city like London.”
Demand for apartments has increased globally in 2021, according to Knight Frank, as people look for larger places and pieds-à-terre to use as mid-week bases: 19% of survey respondents said they wanted to buy apartments this year, up from 12% last year. And of those looking to move within the next year, the most at 38% are looking at cities.
That’s the case for Megan Chan Meinero and Jodie Tassello, who recently took on a third home — this one in Manhattan.
During the pandemic, the couple lived primarily in a rented 1,000-square-foot cottage on the Hudson River in Nyack, New York, while spending their weekends in a Catskills home they bought in 2018. As the New York theater district began reopening, Meinero — a screenwriter and playwright — felt the city luring her in. Although they didn’t score a Covid deal, they couldn’t pass up the location.
“I had never lived in Manhattan, and I really wanted to,” she said. “It was kind of an impulsive move, but we found this apartment and we fell in love with it. I love that I can walk to a Broadway theater in 15 minutes.”
They’re far from alone. About 25% — or 874 — of new listings for sale in Manhattan in the second quarter of 2021 were billed as “pied-à-terre friendly,” a figure that’s stayed roughly consistent before and throughout the pandemic, according to data from real estate analytics firm UrbanDigs.
The couple’s one-bedroom, one-bathroom apartment in Hell’s Kitchen on 52th Street now serves as their primary home, with Tassello commuting to Rockland County near their Nyack home during the week to run her acupuncture practice.
They usually spend weekends in Nyack, and longer breaks or vacations in the Catskills — though they change it up based on how they’re feeling.
They declined to say how much they’re spending on the three places — two rents and one mortgage — but said that each of the three is under $5,000. “The city is the smallest and the most expensive, and the upstate house is the largest and the cheapest,” Meinero said.
They’ve invested in three of everything, from hairdryers to their dog’s medication, so they only carry a backpack with some clothes when they travel between homes. The couple acknowledged that having three homes sounds crazy and juggling the logistics can be tricky, but they enjoy having options.
“We kind of just go with things and figure them out,” Tassello said. “We just make the decisions that make us feel happy, and if something isn’t working out, we change lanes and go in a different direction.”
Financial analyst Sean Mulroy stayed in his parents’ beach house on Lake Michigan in Long Beach, Indiana during the pandemic and now splits his time between the vacation home and Chicago, where his boyfriend lives and his office is located.
“I’m able to sit on the beach and enjoy my weekends there, but I have my life in the city I don’t want to give up,” he said. Plus “my job is not going to be moving to Indiana,” Mulroy said. He typically goes into the office two or three days a week.
Mulroy previously had a one-bedroom condo in Chicago’s West Loop that was less than 1,000 square feet. He ended up selling it in May after realizing just how small it was. He bought a 2,000-square-foot apartment in the nearby Ukrainian Village but is waiting to move in. In the meantime, he stays at his boyfriend’s, but recognizes the inconveniences of double living.
“I live basically out of the trunk of my car,” he said. “It’s a bit embarrassing. Every time, I leave one house, I leave with a carry-on bag.”
He finds he has to pay extra on transportation compared to his previous lifestyle. Parking in the city is about $30 a day, along with the cost of gas. Plus, there’s the mental toll of having to plan out where he’s going to be when and what he needs to pack.
Perhaps the most significant strain is on his friendships.
“The biggest unintended consequence of the whole thing is that my friendships in the city feel more distant than they ever had,” he said. “I feel like I’m almost bullying people to come out and visit me in Indiana.”
It’s an understandable stressor.
“You get into your routine in place A, you know where things are, then suddenly you’re taken out of that routine,” said Saline, the psychologist. “You have to adjust. Given the amount of stress so many kids and adults have been under with Covid, there are changes people are making everyday. To add more changes to that could be overwhelming or not worth it.”
For some, having both is a win-win.
“When I’m in the city, I’m missing upstate and when I’m upstate, I’m missing the city,” said Cibelli. “I’m just so happy to have both.”
A Novel Pilot Brings Vertical Farms To Public Housing
Jersey City is trying a new approach to bring healthier eating to low-income communities: on-site indoor farms.
A public housing community in Jersey City received an unusual amenity earlier this month: an indoor farm that will produce 550 pounds of free leafy greens a year.
It’s the first of 10 aeroponic farms that will be installed across the city in a novel pilot program called Healthy Greens JC that aims to tackle food insecurity by merging technology, education and food access.
The program, which will provide a total of 19,000 pounds of free greens to eligible city residents in its first year, aims not just to bring healthier food options to low-income communities, but also to better educate residents about nutrition and healthy eating “as a starting point for a healthier Jersey City,” said Stacey Flanagan, Jersey City’s director of the Department of Health and Human Services.
Healthy Greens JC, which will add other farms at housing, education and community facilities across the city, is the nation’s first municipal vertical farming program, but other programs are bubbling up to pair affordable housing and farms.
Jersey City Mayor Steven Fulop first connected with the vertical farm company AeroFarms through the World Economic Forum’s Healthy Cities and Communities Initiative, which aims to facilitate partnerships between public and private stakeholders to foster healthier outcomes.
The city worked out a deal with the company to build and maintain the 10 indoor farms, which, like all the company’s farms, use water-efficient aeroponic technology to grow food indoors, and without using soil.
AeroFarms runs a commercial vertical farm in nearby Newark, New Jersey, which has the capacity to produce 2 million pounds of fresh greens annually to distribute across the country. When it opened in 2016, it was billed as the largest vertical farm in the world, with the potential to expand food production in urban areas by using space and resources more efficiently.
But despite its dominant presence in a city with high poverty rates and food insecurity, it was not reaching most Newark residents with its produce, which sell at organic prices. (AeroFarms has had some programs to donate greens or offer discounts at its farm stands in Newark.)
“The partnership with JCHA specifically allows us to see how we can bridge that last mile to increase access to healthy food and work closely with the community on creating a greater connection with their food and how it is grown,” said David Rosenberg, the cofounder and CEO of AeroFarms. “Longer term, we are looking to understand better how to scale to other communities.”
For the city, the program was a way to expand its own efforts on food insecurity and health, particularly for residents in public housing. At Curries Woods, the health services department has previously provided congregate meals to public housing residents and helped establish a farmers market as well as a resident-run food pantry.
The addition of a vertical farm will give residents an even closer connection to fresh food. The program follows the model of urban farms, which allow residents to interact with the growing process and, in the case of programs like Jersey City’s, produce food year-round. Proponents say the direct access to a farm can improve food security and community relations.
AeroFarms is currently building a farm at Marion Gardens, another public housing community. The city plans to rely on existing partnerships with the Jersey City Housing Authority and their ongoing relationships with groups like the Community Food Bank of New Jersey, Boys & Girls Club and Head Start to expand their reach and foster engagement with the farm.
“One of the things that’s really exciting is that Head Start has expressed interest in not only having the kids visit the farm but also integrating some of the greens into its meals,” said Vivian Brady-Phillips, the executive director of the Jersey City Housing Authority.
In addition to the public housing developments, units will be installed in the City Hall annex, two senior centers and a community center owned by the city. The city is also in talks with a public school, medical clinic and a university to solidify the locations of the last three units. Essentially, it’s targeting places with low food access and high propensity for poverty, says Flanagan.
Jersey City allotted $1 million from the city’s capital budget for AeroFarms to engineer and install the farms, and supply 3 years’ worth of seeds and support for the nine vertical farms across the city, which will each produce 500-600 pounds of greens a year.
One additional commercial-sized farm will produce more than 14,000 pounds of greens annually, which will be available for program members to pick up across the city and supplement the city’s existing food programs. One pound of greens contains approximately four servings, according to Flanagan.
“We will be doing nutrition education and other health workshops at the pickup location, and then every quarter, we host a large health fair where we invite more people to join the AeroFarms program,” Flanagan said. The Health and Human Services Department has weekly virtual and in-person workshops planned around the greens, including cooking classes to share recipes for greens, like watercress.
The city plans to do a study of the program to determine its success, in the hopes of potentially scaling the program and making it permanent.
“If you’re able to change the mindset by leveraging technology like we are trying to do, you end up getting into a place where people are more healthy,” said Fulop, the mayor. “Long-term costs around health are down because people are living better and healthier lifestyles.”
COLORADO SPRINGS, Colo.— Wildfire Evacuation Fears In Colorado Springs Halt Housing Development
Fast-growing cities in the West need more housing, but residents fear that crowded roads could lead to Paradise, Calif.-style disaster when fires hit.
A plan to build more housing in this fast-growing city has been put on hold because of another pressing concern: wildfire evacuation routes.
A citizens’ group in this community of about half a million has successfully lobbied the city council to halt development of the 2424 Garden of the Gods apartment project on grounds that it would overload already congested roads in case of wildfire.
In 2012, the Waldo Canyon Fire tore into the same neighborhood, destroying 346 homes and killing two as people trying to evacuate spent as long as two hours stuck in traffic.
“I just want to make sure I can get out,” said Dana Duggan, a resident who helped start the Westside Watch group earlier this year to push for a greater focus on evacuation scenarios, including computer modeling.
Developers trying to build more housing in fast-growing cities in the West are running into similar opposition. Worries about wildfire evacuation intensified after the Camp Fire destroyed Paradise, Calif., in 2018, killing 85 people—including some found in charred vehicles. An assessment afterward found three roads out of town were blocked, while traffic was backed up for miles on the fourth.
“Evacuation is the critical issue,” said Dr. Louise Comfort, a professor of public and international affairs at the University of Pittsburgh who has studied the issue. “If people try to get to a freeway, everybody else is trying that same road. This is something that honestly needs to be planned ahead of time.”
Colorado is building more homes in flammable wild land areas at the same time a drought fueled by climate change has greatly elevated the fire danger. The three largest wildfires in Colorado history took place in 2020. “We have to do a better job learning how to grow in a safe way, including fire [escape] corridors,” Gov. Jared Polis said.
Other communities in the West are similarly dealing with how to balance calls for more housing with wildfire concerns.
A California appeals court in August blocked a planned expansion of a resort near Lake Tahoe after agreeing with some environmentalists’ concerns, including that plans underestimated wildfire evacuation needs. An analysis was remanded to a lower court for further review. “We are disappointed in the decision but we will respect the process,” said Dee Byrne, president and chief operating officer of the Palisades Tahoe resort.
In Sedona, Ariz., a nearby wildfire in June prompted residents to petition officials in the resort town to, among other things, require analysis on the evacuation impact of new developments. City officials and other local officials have been meeting with the residents to discuss possible plans.
With a 36% increase in its population since 2000, Colorado Springs has sought to build enough housing to accommodate the new arrivals. Housing of all types is in short supply because of issues including long waits for permits and high costs, said Rachel Beck, a vice president for the Colorado Springs Chamber and Economic Development Corp.
Some of the new developments are near flammable wild lands. The city has responded with protection measures including passage of one of Colorado’s first mandatory evacuation ordinances. An evacuation study also was done in 2010 by a regional association.
“The plans we have drafted and implemented come from intensive studies and evaluation back as far as the early 2000s,” said Fire Marshal Brett Lacey.
The Garden of the Gods complex drew some citizens’ ire because it would be built near an intersection that officials say turned into a traffic bottleneck during the Waldo Canyon Fire. It prompted an exodus of about 30,000 people, scorched 18,000 acres and left an estimated $454 million in damages in 2012.
“It was just mass chaos,” said Bill Wysong, who spent a half-hour trying to drive 3 miles at one point. “You had people trying to drive in and trying to go out.”
Mr. Wysong, president of the Mountain Shadows Community Association, and other residents asked the city council to make sure there were adequate evacuation plans before approving a zoning change for the apartment project.
The developer, 2424 GOTG LLC, submitted a traffic study that showed the existing road system was adequate, and that the apartments would generate less new congestion than if developed under the existing industrial zoning.
Representatives of the developer didn’t return calls for comment.
The council approved the project on a first reading in May but on the second and final reading Aug. 24 reversed its decision after Mr. Wysong and others raised evacuation concerns. The developer filed an appeal that is pending in state district court.
“I am not antidevelopment; I’m pro-development,” said Scott Hente, a member of the planning commission and a retired home builder, who also voted against the project when it cleared his panel previously. “But I thought you had to weigh the benefits versus the risks. I thought it was not in the best interest of the community.”
This Florida City Is Where Rents Have Been Rising Most
For the first time since the start of the pandemic, single-family-home rents are increasing in every major metropolitan area nationwide, according to a CoreLogic report
The lack of housing inventory for home buyers is having major ripple effects in the rental market, as more Americans seek to renew leases to buy themselves more time for their home search.
Rents for single-family homes increased nationwide by 9.3% over the past year as of August, according to a new report released Tuesday by property data company CoreLogic. Comparatively, in August 2020, rents had only increased 2.2% on an annual basis.
Notably, August marked the first time since April 2020 that every major metropolitan area included in the report displayed an increase in rents.
“Consumers continue to relocate as they return to in-person work and school,” Molly Boesel, principal economist at CoreLogic, said in the report. “The ongoing preference toward more living space — and slim for-sale inventory — is forcing would-be buyers back into renting, putting significant strain on the single-family rental market.”
Boston was the last major metropolitan area to see rents turn positive following 14 months of declines. The shift was a reflection of the start of the school year, when college students and faculty returned to the city en masse as in-person classes resumed with the current semester at most educational institutions. (There are more than 70 colleges and universities in Boston, a city of fewer than 700,000 people.)
But Boston’s 1.5% rent growth was a far cry from the highest in the country. That honor, instead, went to Miami, where rents have increased by more than 21% over the past year. And it was the first time in nearly three years that Phoenix did not experience the largest rent growth in the country.
Miami’s surging rents are concurrent with a rebound in tourism as air travel has improved and cruises have resumed following the rollout of COVID-19 vaccines nationwide.
Phoenix did have the second highest rate of rent appreciation nationwide at 19.2%, followed by Las Vegas at 15.4.% Rounding out the top five were two Texas metro areas: Austin and Dallas.
The rise in rents has buoyed real-estate investment trusts that focus on single-family rentals, such as Invitation Homes and American Homes 4 Rent. Invitation and American Homes 4 Rent have seen their shares increase by more than 30% to date in 2021, compared with the roughly 20% rise in the S&P 500 over that same period.
What You Can Do About The Rising Cost Of Home Insurance
With lumber prices and other costs soaring, and natural disasters wreaking havoc across the U.S., insurers are boosting home-insurance premiums. But you may be able to spend money now to save money later.
The cost of insuring a home is on the rise, forcing Americans to make tough decisions about whether to cut back on coverage or make big changes to save their wallets.
The nationwide average annual premium for homeowners insurance is $1,398 today, as estimated by trade group Insurance Information Institute. The group says that from 2017 to 2020, premium rates were up 11.4% on average. That is higher than the nation’s 7.9% inflation rate during those years.
Premiums have further increased this year with an average rate increase in the third quarter of 6.6%, up from 4.8% in the second quarter, according to MarketScout, a firm that monitors insurance rates. The cost was up as much as 25% in parts of California and Florida, MarketScout says, and $20-million-plus homes with high wildfire exposure faced even higher increases.
The increase in home-insurance premiums is largely driven by many of the same factors that are putting other parts of Americans’ budgets under stress. Higher prices of building materials and other supply-chain disruptions, for example, have driven up repair and rebuilding costs for insurers.
Home insurers face other serious issues as well.
Insured damage in the U.S. from hurricanes, severe storms, wildfires and other catastrophes has tallied more than $370 billion in 2020 dollars since 2017, according to estimates by risk modelers and industry executives. Insurers are filing rate increases reflecting the increased volume of disaster claims they have been paying.
“I think a lot of people are going to feel increasingly stressed,” said Kevin Mahoney, a certified financial planner and founder and chief executive of Illumint, a financial advisory firm for young couples. “Let’s take a family that was already starting to feel the impacts of inflation in one way or another, and then they also fall into this category of people who are going to see their insurance premiums rise.”
Michael Klein, president of personal insurance at big insurer Travelers Cos., told analysts this week that home-insurance costs had run above the company’s expectations in the third quarter due to “a combination of labor and materials price increases.”
The company will “continue to seek price increases in response,” he said.
Travelers is the one of the first property insurers to report earnings each quarter, and its results are watched closely as a bellwether for others. Allstate Corp. flagged the inflation issue in its second-quarter earnings call back in August, with a senior executive saying that repair-cost increases were “hitting the homeowners’ side hard.” Allstate posts third-quarter results Nov. 3.
Lumber prices have been particularly volatile this year and are up 42% since September 2017. That is one of the most relevant benchmarks for home insurers’ repair costs, said Dale Porfilio, chief insurance officer at the Insurance Information Institute, known as Triple-I.
National averages don’t reflect the larger pain felt in the riskiest locations.
States where some homeowners got the steepest increases over the past 21 months include California, Colorado, Florida and Louisiana, where hurricanes and wildfires have struck, according to an analysis by the Triple-I for The Wall Street Journal, using data from S&P Global Market Intelligence. Regulators approved increases for some policyholders in those states averaging above 9% a year.
In addition, the government’s National Flood Insurance Program on Oct. 1 began to roll out a revamped pricing method for the policies that many homeowners rely on for flood coverage. It will decrease rates for about a quarter of the program’s policyholders but some homeowners face large increases.
Private-sector options are increasingly available as an alternative, thanks to improved risk-modeling techniques and other technology to identify risks that carriers are willing to underwrite. The good news for consumers is that these alternatives can cost less in some locations, and may offer broader coverage than the government policies.
As home-insurance premiums jump, many Americans are looking for ways to hold down costs. Often, insurers offer discounts for home improvements that mitigate damage, such as installing hurricane shutters and elevating utility systems.
In Melbourne Beach, Fla., Michael and Kathy Brohawn faced rapidly increasing premiums over three years, to $5,596 in 2019, on their 2,450-square-feet home.
They talked to their insurance agent, Shane Robinson, owner of agency Robinson Insurance Inc., in Indialantic, Fla., about ways to hold down the cost.
Last year, they installed a hurricane-resistant garage door, upgraded a couple windows not already at hurricane-strength level, and hired a licensed home inspector to document that their roof was tied down as per stringent building-code standards.
Those moves cost about $3,000—and the annual premium dropped by roughly that amount.
“We basically got all our money back in the first year,” Mr. Brohawn said.
Anna Weber, senior policy analyst at the Natural Resources Defense Council, said consumers can look to government-funded grant programs to help subsidize some projects. The federal flood-mitigation assistance program is targeted to people who have experienced multiple floods and can help households reduce the risk of future flooding, but mostly covers more costly refashioning, such as home elevation.
For lower-lift floodproofing, such as elevating outdoor HVAC equipment, Ms. Weber directs consumers to state and municipal programs. Residents should contact their local floodplain manager or hazard-mitigation officer to find out what’s available and what they might be eligible for, she said.
“Flood insurance doesn’t stop flooding,” she said. “It can be a really important safety net if your home is damaged in a flood, but you can have as much insurance as you want and it’s not actually preventing that damage.”
Angela Moore, an Orlando-based certified financial planner, said consumers should get into the habit of meeting with their insurance agent at least every one to three years, to review what is and isn’t covered in their policy. Homeowners facing increases might find fat that could be trimmed, she said.
“Sometimes these insurance policies are loaded,” she said. “So there may be an ability to eliminate some of those extra things and keep the coverage you might actually need.”
The rising premiums are just one in a series of financial difficulties that many Americans are struggling with, including higher costs for groceries, gas, heating bills, rent and more.
Mr. Mahoney, with Illumint, said that some clients remain hesitant to dip into their emergency savings more than a year into the pandemic. But in the instance of a substantial increase to a flood-insurance rate, Mr. Mahoney encourages consumers to forego that hesitance and tap their savings—in lieu of cheaper policy choices.
He said it’s better to pay for the increase while they consider long-term options, rather than cancel the policy.
“If the primary goal is maintaining your financial stability, at least in the near term, while you get your footing under you and figure out next steps, it’s OK to do that,” he said.
Why Americans And Britons Are Rushing To Buy Idyllic Homes In Italy
A range of tax incentives, relatively lower prices and the potential for working remotely is driving up demand from house hunters overseas.
Homes in Italian cities and the countryside have always held an allure for foreign buyers. Now the pandemic is supercharging demand from well-off Americans and Britons.
That’s because a range of tax incentives, relatively lower prices and the potential for working remotely has kindled their desire to buy second homes in Italy.
“There’s been a dramatic change in demand,” said Knight Frank agent Bill Thomson of the real estate market in Italy. His group recorded the highest increase in interest from Britons and Americans in recent times. “As a business, we’ll have the best year we’ve had in the last ten years,” he said.
Andy Isikoff, a 52-year-old investment manager in New York, and his wife bought a two-bedroom apartment in Rome during the pandemic without even seeing it in person. Constrained by travel restrictions but attracted by cheap prices, the father of two decided he could finally enjoy Italy — a country in which he’d spent time in his younger years.
“I think it will prove to be a good investment,” he said, “I’m a big Italophile, so I’ve always wanted to go back there.”
Italy is now the top location for North Americans and Britons to purchase a second home — outside their own home countries — according to a September 2021 Knight Frank survey. Relatively lower prices at a time when global housing markets are booming are helping Italy beat France and Spain — other countries favored for overseas second homes.
“People overall want to buy sunny, beautiful places around Europe. In Italy, they also get very cheap prices,” said Savills real estate analyst Jelena Cvjetkovic.
The average price of a property around Rieti, a city next to Rome, in September was 96,000 euros, according to data from real estate aggregator Idealista. In Pavia, near Milan, it cost 123,000 euros. By comparison in Santarem, near Lisbon, Portugal, a house costs 147,000 euros on average. In Spain’s Guadalajara near Madrid, it’s 147,300 euros.
Savills and Sotheby’s noted that they’ve sold more properties in the first eight months of 2021 in Italy than the whole of 2019, with Britons and Americans being their top clients.
Savills oversaw as many contracts in Italy this January-September period than it did for the whole of 2019. Sotheby’s sales grew 74% in the first eight months of the year compared to the same period in 2019.
Knight Frank recorded an 19% increase in the homes sold between April 2020 and March 2021 versus the same period two years prior, and 108% more than for the same period last year.
Tax incentives could be a contributor to the surge in demand, said Gianluca Mattarocci, a lecturer at the University of Rome Tor Vergata. There is no capital gains tax for non residents if they sell their houses more than five years after they bought it.
Transaction costs for buyers are lower in Italy than in Spain or Portugal, although they are higher than in France, according to the 2021 Knight Frank report. A “super-bonus” policy was also introduced this year to support house improvements, the government paying extra for renovations that increase homes’ energy efficiency levels.
A flat tax regime caps income tax at 100,000 euros a year, attracting rich expats looking to invest a lot of money in Italy, Knight Frank’s Bill Thomson said.
Knight Frank estimates that 683 people with more than $30 million in net worth have applied for residency under this tax policy between 2017 and 2019, most of them coming from the U.K., with a rising number of people applying from the U.S.
While traditionally Tuscany and Umbria are the most popular regions, real estate agents say they’ve seen an uptick in interest in the Lombardy region around Milan and also around Rome.
“During the pandemic Italian families were eager to sell off their secondary or third homes to get some extra cash,” said Mattarocci. “A lot of beautiful — if slightly neglected — properties came on the market all of a sudden,” he said.
La Dolce Vita
Washington DC-based Suzanne McDonnell has been looking to buy a house in Italy for the past year. Influenced by a friend who moved to Rome 35 years ago, the 65-year-old former teacher decided to move now that she can afford a spot in the sunny Roman countryside.
“I see how my friend’s lifestyle has changed since she started living in Italy. I want that too,” she said.
With a budget ranging from $40,000 to $100,000, she’s confident she can find a house about 25 minutes away from Rome, once she’s able to travel there in the coming months.
“I’ve got a few places lined up in November and December. The goal is to buy,” she said.
McDonnell says she’s investing more than her money — she wants the Italian life. She’s learning the language and studying Italian history. “It’s about more than buying a place, it’s about making a commitment,” she said.
For 64-year-old Briton David Hart, buying a house in the region simply was a good investment.
The former marketing executive of a gaming company owns an apartment in Rome, a house by the beach and a pied-a-terre in London. He said he decided to buy this last house in the Sabine hills, an hour away from Rome, “for storage.”
“Italy is a really good place to invest in. There’s effectively no capital gains tax after five years and inheritance tax is very low,” he said.
Home Prices Rise, And Single People Are Running Out Of Houses To Buy
With mortgage rates remaining low, plenty of singles are seeking homes. But the supply of entry-level housing is near a five-decade low.
Single people hoping to buy homes in the current housing market are short on options.
Solo people heading up their own households are a growing part of the population. The number of one-person households in the United States doubled in the last 40 years, rising to 36.1 million in 2020 from 18.2 million in 1980.
Of that group, 19% identify as members of the millennial generation, while another 19% belong to Gen X. About 39% of sole-person households identify as baby boomers and 3% as Gen Z.
With mortgage rates remaining low, plenty of singles are seeking homes. Often, they are scraping together down payments on their own, so they are looking for more affordable properties.
But, as the number of single people looking to put down roots is rising, the pool of available options is shrinking. The supply of entry-level housing, which Freddie Mac defines as homes up to 1,400 square feet, is near a five-decade low.
The result is bidding wars on properties, with some young people being cut out of the wealth growth that homeownership can bring. At the same time, older Americans hoping to downsize are now often stuck in their homes longer, adding to a broader supply shortage.
“We’re just not building that many [smaller homes], despite what you hear about ‘tiny homes’ and that sort of thing,” said Len Kiefer, deputy chief economist at Freddie Mac. “There’s not that much new supply coming online, so the existing supply—which is aging—is fiercely competed over.”
Faced with declining options, some single Americans are holding off on buying. Others are making major life changes to become homeowners.
Jonathan Morgan, a 34-year-old software engineer in Austin, Texas, has been renting a two-bedroom apartment, first with a roommate and more recently living alone with his dog.
Mr. Morgan says he has long wanted to own his own home, but he has grown dismayed hearing friends describe “horror stories” of trying to compete in Austin’s roaring housing market.
“I truly feel like I’ll never be able to catch up to the Austin market to buy a home, and working from home and owning my home is very important to me,” he said. “How much I’m able to save isn’t fast enough for how fast costs are rising.”
Rather than attempt a purchase in Austin, Mr. Morgan decided to make a bigger change: He’s soon moving to Grand Rapids, Mich., where he can still work remotely. According to data from the National Association of Realtors, the median home price in the Grand Rapids-Wyoming metropolitan area is $278,300. In the Austin-Round Rock area, the median home price is $515,100.
Working with a real estate agent in Grand Rapids, Mr. Morgan said he has seen multiple houses that fit his budget and his preferences: a multi-bedroom, single-family home with space for his dog and a home office.
For home purchases in September 2021, the median sales price for homes purchased by single buyers was $265,000, according to a data analysis from the Housing Center at the American Enterprise Institute. The overall national median home price hit $352,800 last month, according to NAR.
Andrew Ragusa, chief executive and broker of REMI Realty in Plainview, N.Y., has seen the single-buyer issue over the years in real estate. He is now hoping to buy as a single person himself.
Given the rise in prices, he said he would wait until the new year to buy, when he has processed a few more real-estate deals. He’s looking at single-family homes in the $700,000 range, allowing him some wiggle room, should prices continue to rise on Long Island.
Some buyers he has worked with are concerned about shouldering such a big financial responsibility on their own, he said. Others are waiting for a partner—or a group of friends—before committing to a 30-year mortgage.
Still, Mr. Ragusa, 36, said a large group of people young and old have been willing to put those concerns aside recently to capitalize on the low-rate environment.
“We need to make present-time decisions,” he said.
Young singles aren’t the only ones struggling to find properties.
Research from Freddie Mac found that more than a third of sole-person households are headed by members of the baby boomer generation.
“Many of them may have started out as dual-person households, but because of mortality, divorce or separation, they became sole-person households,” Mr. Kiefer said. “That means they’re not going out and buying a new house or a new condo, they’re living in their existing home and becoming a new sole-person household.”
Some of these older buyers are now hoping to downsize from a bigger family home to something smaller. They are finding their profit from the sale of their home won’t stretch as far as it did in years past, Mr. Kiefer said.
“The challenge with downsizing is you have to find something to downsize to,” said Mr. Kiefer.
As the size of new construction grows, single buyers will find themselves competing for fewer small-size houses, and they’ll be competing alongside first-time buyers, too, Mr. Kiefer said.
Mr. Morgan said moving to Grand Rapids from a more expensive market like Austin allowed him greater flexibility in his budget—he’s looking at homes around $300,000. He said he isn’t too concerned about being able to handle the financial responsibility on his own.
Many months of pandemic tumult have solidified his faith in his own resilience, he added.
“I honestly don’t have any concerns or fears about owning a house all by myself,” he said. “If s— hits the fan, I’ve been through enough in life to know I could rebound.”
The Cost Of Renting An Airbnb In The City Of London Is Soaring
Median price for a whole home in London’s financial district is now higher than pre-pandemic.
Bankers returning to the City of London are finding it costs a lot more to rent a place to stay on Airbnb.
The price of an entire home in the financial area soared 41% in the past six months to a median of 164 pounds ($226) a night. The increase is the biggest of any London district, according to Inside Airbnb, which collects data from listings on Airbnb Inc.’s website.
Companies have been pushing employees to return to the financial district a few days a week, sending the number of workers in the City to its highest since March of last year, when the government imposed a lockdown as Covid-19 spread.
While many of those returning opted to lease apartments, others rented short-term accommodation, giving more flexibility in case the government tells workers to work from home again.
With hospitalizations and deaths rising again, Prime Minister Boris Johnson warned last week that a difficult winter lies ahead due to the virus. Stricter rules would cost the economy more than 800 million pounds a week, Politico reported on Tuesday, citing government documents.
The City’s Back
Workers are returning in the highest numbers since the pandemic hit.
The Airbnb listing data is based on the median price for a whole apartment or house that’s available for 90 days or more on the website. Prices in the City are now 3% higher than they were in September 2019.
In Westminster, where hedge funds and private equity firms tend to be concentrated, the median price of an Airbnb rental rose 25% to 187 pounds from March 3 through Sept. 9, making it the most expensive place to rent in London.
Prices in the financial district are now above their pre-pandemic levels.
3-D Printed Houses Are Sprouting Near Austin As Demand For Homes Grows
Project would be biggest 3-D printed housing development in U.S.
A major home builder is teaming with a Texas startup to create a community of 100 3-D printed homes near Austin, gearing up for what would be by far the biggest development of this type of housing in the U.S.
Lennar Corp. and construction-technology firm Icon are poised to start building next year at a site in the Austin metro area, the companies said. While Icon and others have built 3-D printed housing before, this effort will test the technology’s ability to churn out homes and generate buyer demand on a much larger scale.
“We’re sort of graduating from singles and dozens of homes to hundreds of homes,” said Jason Ballard, Icon’s chief executive.
If 3-D printing succeeds at this more ambitious level, it could offer a response to America’s chronic shortage of homes for sale, especially in the affordable price range. Mortgage-finance company Freddie Mac estimated that the national deficit of single-family homes stood at 3.8 million units at the end of 2020.
Supply-chain backlogs during the pandemic have pinched home construction, while labor shortages have hampered production for years.
“Skilled tradesmen are a dying breed,” said Eric Feder, president of LenX, Lennar’s venture-capital and innovation unit. “So there have to be alternative building solutions to help with this labor deficit.”
The vast majority of newly built single-family homes in the U.S. are constructed on-site and framed in wood using traditional construction methods.
Icon’s 3-D printed houses use concrete framing instead. Its 15.5-foot-tall printers can build the exterior and interior wall system for a 2,000-square-foot, one-story house in a week, Mr. Ballard said. The printer squeezes out concrete in layers, like toothpaste out of a tube. The machines can print curved walls, allowing for more creative house designs, he added.
Lennar will complete the houses using traditional construction methods. The week it takes Icon to print a wall system is about the same amount of time it takes to frame and drywall a home using traditional construction methods, but Lennar said it hopes it can speed up that process in the future.
3-D printed homes can also be built more cheaply and with less waste compared with typical newly built houses, Icon says.
Icon requires only three workers on-site when printing a wall system, replacing as many as 6 to 12 framers and drywall installers needed for conventional construction, Lennar said.
Buyers shouldn’t necessarily count on a discount to the market’s going rate. Lennar hasn’t determined how the homes in the new community will be priced but they will be similar to other Lennar homes in the area, Mr. Feder said. The median home-sale price in the Austin metro area in September was $450,000, according to the Austin Board of Realtors.
Icon has already built 10 two-bedroom homes in Tabasco, Mexico, and seven one-bedroom tiny homes in Austin. Earlier this year, Icon built four single-family homes in Austin with developer 3Strands. Icon has raised $266 million in funding since its 2017 founding. Lennar and home builder D.R. Horton Inc. are both investors.
Trying to scale up 3-D printing technology brings new challenges. Icon’s projects have been permitted by local jurisdictions, but obtaining municipal approvals could be a challenge in new markets, since the technology is unfamiliar.
Consumers might also be skeptical of the concept and some might be put off by the look of 3-D printed homes. Icon’s homes, for example, have horizontal ridges in the exterior and some interior walls from the layered printing technique.
On the other hand, buyers are likely to be attracted to homes that are built with less waste, which should translate to cost savings, said Margaret Whelan, chief executive of Whelan Advisory, a boutique investment bank for the housing industry.
In the past, Icon’s houses have been priced at a modest discount to the market rate. Its four-home project in Austin with 3Strands was its first attempt to build two-story houses, using 3-D printing for the first-floor walls while the second floors were conventionally built.
A two-bedroom house in the development was priced at $450,000 and sold for $530,000, said Gary O’Dell, chief executive of 3Strands. A four-bedroom 3-D printed home, meanwhile, sold for nearly $800,000. The homes were priced slightly below comparable houses in the area, Mr. O’Dell said.
Other firms are also rushing to print out homes. Mighty Buildings, a construction-technology company in Oakland, Calif., said it plans to start construction on 3-D printed homes for a 15-lot community in California’s Coachella Valley next year.
Preliminary demand for the community has been so strong that Palari Inc., the developer, is planning to add more lots, said Palari CEO Basil Starr.
Patchogue, N.Y.-based SQ4D Inc. is currently building a 3-D printed home in Long Island that it sold to a local family for $360,000, above the $299,999 list price, said Kristen Henry, the company’s chief technology officer.
Home-buying demand has surged during the pandemic, as buyers took advantage of low mortgage-interest rates to find more space to work from home. Home-building activity has climbed in response, with single-family housing starts up 20.5% year to date, according to Commerce Department data.
“I think 2022 is going to be a year where we are going to see a renewed emphasis on innovation,” said Robert Dietz, chief economist at the National Association of Home Builders. “Any productivity gain, any innovation, will help add that additional supply.”
HK Aims To Build 16,000 Transitional Homes by Mid-2023
Hong Kong plans to build 16,000 so-called transitional homes by mid-2023, meeting 80% of a pledge made by Chief Executive Carrie Lam on housing supply, according to the South China Morning Post.
Secretary for Transport and Housing Frank Chan Fan announced the plan at a forum in the city on Saturday, according to the report. Transitional housing is government initiative to help low-income families living in poor conditions who have not been able to move into public housing. progress report
Last month in her annual policy address, Lam promised to increase supply by 20,000 units. Lam and local authorities have faced growing pressure from China to address the shortage, which Beijing blames for the discontent that led to widespread anti-government protests in 2019.
During her address, Lam proposed a slew of measures to boost the number of homes in the world’s most expensive residential market, including developing the northern most part of the city into a “metropolis”. At present, the average waiting time to get a public housing apartment is 5.8 years.
U.S. Mortgage Rates Plunge, Dipping Back Below 3% Once Again
U.S. mortgage rates are back below 3%.
The average for a 30-year loan was 2.98%, down from 3.09% last week, Freddie Mac said in a statement Thursday. It was the second straight decline and pushed rates to the lowest since Sept. 23.
Rates dropped this week along with yields for 10-year Treasuries, which dipped to 1.44% on Tuesday.
“Despite the re-acceleration of economic growth, the recent bond rally drove mortgage rates down for the second consecutive week,” said Sam Khater, chief economist at Freddie Mac.
Borrowing costs have been historically low since the pandemic rattled financial markets in 2020, fueling a housing rally that has sent home prices soaring.
Since dropping to 2.88% in late September, rates had been ticking up as investors prepared for the Federal Reserve to cut back on bond purchases. The tapering is expected to push up borrowing costs, but in the meantime, current homeowners have another opportunity to save money by refinancing.
“Mortgage rates are still lower than anything we’ve ever seen prior to August of 2020,” said Greg McBride, chief financial analyst at Bankrate.com. “With inflation at a 31-year high, there are millions of homeowners that can still refinance their mortgages and free up $150 to $200 per month to absorb the higher costs seen in other areas.”
Mortgage Rates Fall Below 3% Again — But Rising Prices Mean That Home Buyers Shouldn’t Expect Savings
The median home price increased in 99% of markets nationwide during the third quarter.
But as Khater cautioned, affordability concerns remain for home buyers. And that has everything to do with rising home prices.
The median sale price for single-family existing homes increased during the third quarter in 99% of the nearly 200 markets that the National Association of Realtors tracks through its quarterly Metropolitan Median Area Prices and Affordability Index. And in 78% of markets, home prices rose by double digits, percentagewise.
The top markets for price increases over the past year were Austin, Texas (up 33.5%), Naples, Fla. (up 32%), Boise, Idaho (up 31.5%), Ocala, Fla. (up 29.7%) and Punta Gorda, Fla. (up 27.5%).
Nationwide, the average monthly mortgage payment for 30-year loan on an existing single-family home that was financed with a 20% down payment was $1,214, up more than $150 from last year.
“For the third quarter — and for 2021 as a whole — home affordability declined for many potential buyers,” Lawrence Yun, chief economist for National Association of Realtors, said in the report. “While the higher prices made it extremely difficult for typical families to afford a home, in some cases the historically-low mortgage rates helped offset the asking price.”
However, Yun, like many other real-estate economists, expects mortgage rates will rise in the coming months and beyond. Higher rates, combined with a potential increase in the number of homes on the market, should slow the pace of home-price growth, he suggested.
U.S. Rent Hikes Are Spreading To Older Apartments
The biggest rent increases of the past year in the U.S. were mostly focused on higher-end properties. Now older buildings with lower-income tenants are catching up.
Rent growth in so-called Class B units outpaced that of Class A apartments from March to October, according to rental marketplace Zumper.
Class B buildings are generally older and more affordable. The rents are usually less volatile than for Class A apartments, whose rental prices collapsed in many urban areas last year as dwellers deserted city centers at the onset of the pandemic — and have since bounced back.
The new trend is making it tougher for lower-income households to afford their rents, and signals that the housing market is becoming even hotter. Renters who are priced out of more expensive apartments or homes are moving to Class B communities.
“We have seen dramatic and pronounced rent growth across the multifamily market that is just now catching up to the ‘scalding hot’ single-family housing market,” said Jason Morgan, principal at Morgan Properties, the second-largest owner of multifamily properties. “It comes down to supply and demand.”
Morgan said rent growth was 10% this year through September across the company’s 93,000 units. That’s up from 3.9% in the 12 months following the start of the Covid-19 crisis.
One driving factor is increasing wages for workers who help maintain the buildings, Morgan said. At the same time, typical, working-class renters of Class B properties also have benefited from nationwide gains in hourly wages.
Morgan anticipates that rents will continue to rise at above-average rates through the first half of next year — although he doesn’t expect that increases of 10% or more will become the norm in 2022 and 2023.
“Until the supply of new homes and new apartment buildings increases, we can anticipate price increases to be here to stay,” he said.
How Dodd-Frank Locks Out The Least Affluent Homebuyers
Rules intended to protect borrowers and rein in fees have drained the profit from small-dollar mortgage lending. Who suffers? People who are straining to start building wealth.
In Los Angeles, $80,000 is a 10% down payment on the county’s median priced home. In Winston-Salem, North Carolina, it buys a condominium or a fixer-upper in East Winston, the historically Black area east of Route 52.
Inexpensive properties like the ones in East Winston could serve as starter homes for people on their way up the housing ladder. They could provide a way to build family wealth from modest incomes. But they don’t.
About one in five U.S. homes are valued at $100,000 or less. And despite their low prices, they’ve gotten extremely hard to sell. When they move at all, these small-dollar properties tend to go for cash. Lenders increasingly won’t write mortgages for them.
“Over the last decade, origination for mortgage loans between $10,000 and $70,000 and between $70,000 and $150,000 has dropped by 38 percent and 26 percent, respectively, while origination for loans exceeding $150,000 rose by a staggering 65 percent,” reports a new study on small-dollar mortgages from the Center for the Study of Economic Mobility at Winston-Salem State University and the Future of Land and Housing program at the New America think tank.
The study is scheduled for release on Tuesday
The culprits behind the disappearance of small-dollar mortgages are lending restrictions enacted with good intentions and warped by economic blind spots.
Designed to protect borrowers and the financial system, the Dodd-Frank Act regulations passed in the wake of the 2008 financial crisis “increased the fixed costs and the per-loan costs of extending a mortgage,” says the study. The regulation-imposed costs made small-dollar mortgages a lousy proposition for lenders.
Compounding the problem, the Consumer Financial Protection Bureau then limited the fees that lenders could charge as closing costs. For profit-oriented lenders, small-dollar mortgages are no longer worth the trouble. At best, they squeeze out the tiniest of margins. At worst, they don’t even cover the fixed cost of processing the loan.
“If there was a law that said the per unit cost of Coca-Cola in a convenience store has to be exactly the same as at Costco, we would see all Coke disappear from convenience stores,” said economist Craig Richardson, who directs the Winston-Salem State center. “And then people would be mad at the convenience store.” Businesses that want to stay in business have to cover their fixed costs.
“We’ve made it more of a headache, and more expensive for people to buy a home at this first rung on the ladder,” Richardson said. “Agents really don’t want to deal with them, and banks don’t want to deal with them.”
He experienced the problem firsthand. He and his wife had been subsidizing their 23-year-old daughter’s apartment. When the rent topped $1,000 a month, they decided to invest in a $70,000 condo instead.
The couple had excellent credit and no problem with the down payment. But the mortgage broker refused them. “It’s not worth it,” the broker said. “We’re not doing anything under $100,000.”
The only way the Richardsons could get a loan for the inexpensive condo was to wrap it into a 10-year mortgage that also included their paid-off house. If they’d been a young couple with modest incomes, equally good credit, and enough savings to cover the down payment, they’d still be paying rent.
Killing off the small-dollar mortgage market has been an economic catastrophe in East Winston and other lower-income, often historically Black and Latino, neighborhoods. Would-be homeowners can’t buy and longtime homeowners can’t sell.
Despite population growth, the inflation-adjusted value of a house in East Winston has fallen from about $150,000 in 2007 to just under $64,000 today, using the Zillow Home Value index. (The nadir was $39,825 in 2014.)
Massive amounts of hard-won local wealth have been wiped out. “We calculated that in real terms, every $1,000 invested in property in East Winston in 1996 is now worth $430; by comparison, every $1,000 invested elsewhere in the county is now worth $1,290,” says the study.
The low-dollar houses that do sell mostly go to bargain-hunting investors paying cash rather than to would-be owner-occupants.
Eager to rein in mortgage lenders, legislators behind Dodd-Frank didn’t grasp what the law might mean for borrowers who would otherwise qualify for modest loans. Neither did the regulators at the CFPB. Rare is the policy maker who can even imagine a single-family home today selling for five digits.
People who live in low-dollar houses don’t walk the corridors of power. But their supposed representatives do.
We might call regulations that destroy the value of low-dollar homes “structural racism.” We might call them the law of unintended consequences at work. Or we might simply call them a scandal — and get to work rectifying the damage.
Renters Who Abandoned Their City Apartments During Covid Are Coming Home To A Crazy Leasing Market
Rents have skyrocketed in metropolitan areas that were hard hit by the pandemic exodus as people return to city life.
Like many urbanites, Omer and Mor Granit left their New York City home during the pandemic, giving up the lease on their Brooklyn apartment. In December 2020, they moved to a rental cabin in Evergreen, Colo., with their three daughters, Mr. Granit said, enjoying skiing and wildlife spotting. Still, eight months later, they were ready to come home.
“The lifestyle there is incredible,” said Mr. Granit of Colorado. “But our life is here.”
Moving back home wasn’t as easy as they had anticipated, however. Before they left, the family had been paying about $11,000 a month for a triplex in Carroll Gardens, said Mr. Granit, 45, co-founder of the co-working space Mixer. When they returned in August, they found that rents had jumped about 30% and they couldn’t find a comparable rental in any of their desired neighborhoods.
They started looking at homes for sale, too, but still came up empty-handed. At first they stayed in a Brooklyn hotel while searching for a new home, Mr. Granit said, but have since moved into an Airbnb near the girls’ school.
“We couldn’t find anything when we came back,” Mr. Granit said. “It’s just unbelievable what’s going on in the market right now. We left in a Covid market and came back in this hyper-crazy Brooklyn market.”
It turns out you can’t go home again. At least, that is the case for many of the Americans who left their homes in major metropolitan areas during the pandemic, relocating to the countryside for more living space and access to nature.
Now they are returning in droves as vaccines become more widespread, employers call their workers back to the office and schools reopen for in-person instruction. They are arriving to find bidding wars and skyrocketing prices in their former neighborhoods, where everyone now wants the same things: outdoor space, a home office, and move-in readiness.
“It’s been wild,” said New York City real-estate agent Jared Barnett of Compass.
Many large urban areas where rents cratered during the early months of the pandemic have now seen rents rebound to levels higher than they were before Covid, according to the Apartment List National Rent Report. In Seattle, for example, the median rent fell by 20.2% between March 2020 and January 2021, Apartment List found.
The median rent in the city in October was 15.4% higher than October 2020 and 1% above its March 2020 level. In New York, the median rent has shot up 18.9% between October 2020 and October 2021.
It is now 2.2% higher than it was just before Covid. In L.A., rents have increased 10.4% over the past year. Only a handful of large cities, such as San Francisco and Minneapolis, still have rents discounted from pre-pandemic levels, Apartment List found.
“Since the start of the year, vacancies have fallen very quickly,” said Igor Popov, chief economist at Apartment List. “The people that are coming back, they’re not finding a lot of available inventory.”
The sales market has shown similar patterns. In the second quarter of 2021, the number of home sales in Los Angeles more than doubled from the same period of last year, reaching the highest total tracked since 2004, Miller Samuel found, while the median sales price rose annually for the ninth consecutive quarter.
In Manhattan, the third quarter saw 4,523 home sales, the highest number in more than 30 years, according to Miller Samuel.
At the onset of the pandemic, “people from L.A. were trying to get out of L.A.,” often heading to Malibu or out of state, said Angel Kou, a Beverly Hills-based real-estate agent at the Agency. Now many have come back, he said, along with people from Canada and the Northeast seeking a warmer climate.
And due to Covid, many people who travel to L.A. for business now prefer to rent a house rather than stay in a hotel, especially if they are traveling with family, he said. As a result, desirable homes for rent in Beverly Hills are hard to come by. “They get snatched up pretty quickly,” he said. “You have to move fast.” Due to increased demand, he said, rents there have increased between 5% and 10%.
In New York, “the market has come a very long way in a year,” said real-estate agent Tal Alexander. In particular, rentals in desirable doorman buildings are scarce, pushing some would-be renters to buy instead. “We haven’t seen a rental market like this in who knows how long,” he said.
Sam Moritz, a real-estate agent at EXR in Brooklyn, said his clients—many returning New Yorkers who moved away during the pandemic—complain of a “frenzy” in the rental market. “A lot of people realized, ‘It was cool, I tried this, but I was living in New York for a reason,’ ” he said.
Mr. Moritz, 31, speaks from experience. With the New York rental market moribund during Covid, he gave up his Bushwick apartment in September 2020 and relocated to Salt Lake City, where he bought a car, rented an apartment with a view of the mountains, and started working in real estate.
“Things were going really well,” he recalled. “I had built a whole life for myself.” But he tried skiing with a friend and hated it. And it bothered him how quiet the city was. “It’s a very small, sleepy city,” he said. “I was used to the excitement of New York.”
After four months, he decided the experiment was over. “One day I was like, ‘I don’t want this. I want to get back as quickly as possible.’ ” He packed his bags, sublet his apartment on Craigslist and started driving east. After hitting a snowstorm midway through the trip, he sold the car and boarded a plane for New York City. “I was like, ‘get me out of this adventure, get me back to Bushwick,’ ” he said. He lost money on the car sale, he said, but felt it was worth it to get home as quickly as possible.
Thanks to Covid, nearly all those who are returning have similar priorities, agents said: They want access to the outdoors and spaces large enough to work from home. That means competition is fierce to rent or buy properties that have those attributes, and home seekers are willing to pay up for them.
“It’s a very tight market for big units,” said Alain Azaria of Sotheby’s International Realty, Mr. Granit’s real-estate agent. “Everybody wants more space, and everybody wants outdoor space.”
Last year, Kyle Forsyth sold his home in the Los Angeles suburb of Westlake Village and moved to Texas with his wife, Amy, and four children. He has family in Texas, he said, and “we’ve always toyed with the idea of living there.”
Plus, he expected California schools to remain remote for the year, while Texas schools were open for in-person learning. The couple’s mentality was, “let’s go try Texas,” said Mr. Forsyth, a real-estate adviser. “If we want to go back, we’ll go back and lease and figure out what’s what.”
Last year, Kyle Forsyth sold his home in the Los Angeles suburb of Westlake Village and moved to Texas with his wife, Amy, and four children. He has family in Texas, he said, and “we’ve always toyed with the idea of living there.” Plus, he expected California schools to remain remote for the year, while Texas schools were open for in-person learning.
The couple’s mentality was, “let’s go try Texas,” said Mr. Forsyth, a real-estate adviser. “If we want to go back, we’ll go back and lease and figure out what’s what.”
“The lease market when we came back was very hard,” said Mr. Forsyth, 48. “When things come up, people pounce. Some people pay the whole year in advance.” He estimated that rents are 10% to 15% higher than when they left.
They also found that landlords were doing extensive background checks due to the eviction restrictions in place. “The background check was very strenuous,” he said. “They are calling everyone—really checking.”
The family ended up staying at the Westlake Village Inn for almost a month while searching for a new home. The process took twice as long as he expected, Mr. Forsyth said.
Finally in September they found a house to rent for about $6,000 a month; the same property would have gone for about $5,000 per month pre-Covid, Mr. Forsyth said, and he suspects that his industry connections helped him secure the lease.
Returning home seekers looking for a deal should try under-construction buildings or homes in need of major renovations, real-estate agents said. “For new developments that are not going to be completed in the near future, you can go there and do some negotiating,” said Mr. Barnett.
Moreover, the rental market tends to slow down across the country as winter sets in, Mr. Popov said, so home seekers should get a bit of a reprieve over the next few months. Still, “for the renters that are still looking to move, the prices are high and vacancies are few and far between,” he said. “It’s not an easy market to be searching in right now.”
Homes Now Typically Sell In A Week, Forcing Buyers To Take Risks
Buyers are often waiving traditional safeguards in fast-moving market where median price has climbed.
American home buyers are having to pounce faster than ever to clinch a deal, forcing many of them to make snap decisions about what house to purchase and how much to pay.
Home sales between July 2020 and June 2021 sat on the market for a median period of only one week before going under contract, according to a survey released Thursday by the National Association of Realtors. That is down from three weeks a year earlier and marks a record low in data going back to 1989.
The rapid turnover helps explain how the number of homes sold rose to multiyear highs during the Covid-19 pandemic, even as the inventory of homes for sale remained stubbornly low.
The pandemic helped spark the biggest housing boom in more than a decade. Buyers that kept their jobs sought more space to work remotely and took advantage of low mortgage-interest rates. Many households also saved more during the pandemic and benefited from a rising stock market.
At the same time, supply has been constrained. Caution about showing homes during Covid-19, a reluctance among some owners to enter the competitive housing market and the ability to refinance at low rates kept many prospective sellers from listing their homes.
In such a fast-moving market, buyers have little time to commit to one of the biggest purchases of their lives and sometimes forego traditional safeguards. Many buyers have waived their rights to terminate a contract because of a low appraisal or unfavorable inspection to make their offers more competitive in a bidding war.
“There’s no plotting of where the Christmas tree will be and measuring for a couch in that scenario,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “You really are making that decision very fast.”
Leah and Ian Evison moved from St. Paul, Minn., to Seattle in January to be closer to their daughter and her family. When they started house hunting in Seattle, they learned that houses typically went off the market within days of being listed, and showings were often limited to 30 minutes each.
“It felt awful,” Ms. Evison said. “We wanted to move here so much that we were willing to do it, but it felt really ridiculous.”
After two unsuccessful offers, the Evisons bought a three-bedroom house in March following a bidding war.
Homes typically sell slightly below their listing price, but in the year ended in June the median sales price was the full asking price, the highest since NAR started tracking the data in 2002. The median sale price for that period was $305,000, up from $272,500 the prior year, NAR said.
In September, the markets where homes sold the fastest were Indianapolis; Denver; Grand Rapids, Mich.; Seattle and Tacoma, Wash., according to real-estate brokerage Redfin Corp.
Tools that enabled shoppers to tour houses remotely and schedule showings online also helped speed up the home-buying process in the past year, real-estate agents say. A large proportion of cash buyers, including investors, is also contributing to the market’s fast pace, they say.
The continued shortage of homes on the market means many buyers are stuck on the sidelines. About two-thirds of active buyers have been house-hunting for at least three months, according to a September survey from the National Association of Home Builders. About 45% of those shoppers said they hadn’t been successful because they kept getting outbid by other buyers.
The hot housing market has cooled slightly in recent months, as many buyers don’t want to move during the winter holidays. But real-estate agents say many homes are still selling quickly and with multiple offers. Active listings in the four weeks ended Oct. 31 fell 22% from a year earlier, according to Redfin.
“Instead of a house lasting three days on the market, it’s lasting seven days,” said Harold Torres, a real-estate agent in Orlando, Fla. For buyers, “negotiation and any type of wiggle room is not really there yet.”
Some buyers might also be eager to shop during the typically slow holiday season in hopes of facing less competition, said Mike Miedler, chief executive of Century 21 Real Estate LLC, a subsidiary of Realogy Holdings Corp.
“There’s so many folks out there who have been sidelined, and there’s definitely pent-up demand,” he said.
Anshul and Angharad Bhardwaj started house hunting in the Salt Lake City area in September 2020 and made more than 20 unsuccessful offers on homes, Mr. Bhardwaj said. They increased their budget and expanded their search area.
They made an offer on a house within an hour of touring it and were told it was already under contract, Mr. Bhardwaj said. They submitted a backup offer and ended up buying the house for $780,000 in February, after the initial offer fell through.
“It was an emotionally challenging time for both of us,” Mr. Bhardwaj said. But based on the house’s price appreciation since then, “I couldn’t have been able to buy my house had I waited for six more months,” he said. “I am happy I pulled the trigger.”
NAR polled about 5,800 people who bought primary homes in the year ended in June.
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.
How Apartments Can Bail Out The Struggling Office Market
Expanding rental options downtown will bring in new residents and help maintain the vitality of central business districts as more employees work from home.
The office market remains in the dumps. Downtown vacancy rates are the highest they’ve been since 1994. Many central business districts have now had seven straight quarters where more office space was vacated than was leased. In a world of more remote and flex work, office buildings are dealing with both too much supply and not enough demand. That’s where the red-hot apartment market comes in.
Building more apartments in urban centers — perhaps even converting some aging office towers into residential units — can help stabilize the office market by removing supply and creating new demand, a necessary pivot now that suburbanites are less likely to be willing to make lengthy commutes.
The problem facing office districts is worse than they appreciate. By the end of January, only half of New York City office workers are expected to be back on an average weekday, and that number isn’t expected to grow significantly over time.
Maybe eventually it gets to 60%, and maybe office tenants in the future rent more space per worker than they did in the past. But even in that scenario demand for office space would be down 20% to 30% compared with pre-pandemic levels.
That new baseline would create winners and losers. Trophy office buildings in the most vibrant parts of town will continue to do well, just as high-end malls have largely avoided the “death of malls” narrative that’s plagued much of that industry over the past decade. That still leaves a lot of questions for aging buildings in neighborhoods that didn’t have a lot of non-office activity before the pandemic.
Which is where the hot apartment market comes in. Rents have soared this year and vacancy rates have plunged as people look for new post-pandemic housing arrangements, in part due to the jump in wage growth for workers over the past year. So as urban land parcels wait to be developed, an apartment developer is more likely to buy the lot than an office developer.
Given the elevated office vacancy rates, this should at least prevent a glut of new supply hitting the market over the next few years.
Economics 101 would suggest converting some existing under-utilized office buildings to residential units, though in reality this has practical challenges given the difference in construction between the two types of buildings. Still, if such conversions can pass muster with real estate bean counters, it’s worth considering.
There’s more to the argument for building apartments instead of offices than the fact that there’s excess demand for one and excess supply for the other. The kind of person interested in living in a downtown apartment is probably more likely to want to work in an office building than someone who lives miles away in the suburbs.
When e-commerce reduced the amount of “commuter demand” for shopping in malls, some outlets responded by adding apartments and hotels on site to generate their own local demand. The same dynamic is happening in the office market now that many suburban workers have the option of working from home.
If you can’t count on suburbanites to make the trek to downtown office buildings, you need residents close by who have shorter commutes or can even walk to work.
We still have a few more months where office landlords can hope a flood of commuters will return to the office (once any winter wave of Covid-19 has passed). But it’s probably going to be more like a trickle, with “new normal” levels of commuting not being enough to make a lot of existing office properties viable as they exist today.
The necessity of building apartments in office-centric downtowns isn’t just about meeting the need for new housing — it will help ensure office districts avoid the kind of downward spiral that’s possible if something isn’t done to stabilize them.
Rents Rose 4.6% In The U.K. In The Third Quarter, The Fastest Pace In 13 Years
London, meanwhile, registered a 1.6% annual bump, the first increase in 16 months.
Rental prices are surging as people in the U.K. begin to return to life as they knew it before the Covid-19 pandemic.
The average rent in the U.K. rose 4.6% in the third quarter, compared to the same time last year, according to a report Tuesday from Zoopla. That marks the fastest growth in 13 years. Quarter over quarter, rent was up 3% across the country.
Rental growth is close to, or at 10-year highs in most regions across the U.K., except London and across Scotland, the data showed. In addition, demand remains higher than supply, with the number of available properties 43% below the five-year average.
That imbalance, as well as the continued return of workers and students to communities, is set to fuel growth next year, according to Gráinne Gilmore, Zoopla’s head of research.
“The structural undersupply of rental property across the U.K., amid higher levels of demand, will underpin rental growth in 2022,” she said in the report.
Broken down further, there was a 6% annual jump in rental prices across the country if London is excluded, according to the report. The capital saw a 1.6% annual rise, the first positive gain in 16 months, as well as a 4.7% quarterly jump.
“This continued surge in demand, especially in prime central London, is heavily impacting the supply of available properties to rent in the capital, Richard Davies, head of lettings at Chestertons, said in a statement. “As a result, rents have risen sharply and tenants now have a much more limited choice than they did last year.”
The South West of England saw the fastest rental growth, registering a 3.3% rise between June and September and a 9% annual jump in the third quarter, the report found. The coastal area has been a popular escape for those looking for more access to the water and nature, and is home to the district with the highest rate of annual rental growth—Purbeck, in Dorset, where rents increased 16.2% year over year.
Aside from London, Scotland had the lowest year-over-year price growth, 2.7%, according to the report.
The U.S. Government Plans To Back Much Higher Mortgages. It Could Actually Be A Blow To Buyers
Raising the conforming loan limit backed Freddie Mac and Fannie Mae may lead to higher prices due to increased competition.
The U.S. government’s plans to raise the cap for mortgages backed by Freddie Mac and Fannie Mae to close to $1 million in high-cost areas are meant to assist home buyers as prices continue to rise, but some warn that the move may not make much of a difference and could push prices even higher.
The conforming loan limit—or the maximum amount of a mortgage that Freddie Mac and Fannie Mae will guarantee or buy—is set to jump in 2022, The Wall Street Journal reported on Tuesday. For most areas, the limit is set to rise from $548,250 to $650,000, but in high-cost markets, such as New York City or the Bay Area in California, it would jump from $822,375 to just under $1 million.
The exact loan limits are set to be announced Nov. 30 by the Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae.
The median home price in the U.S. was $380,000 in October, up 8.6% compared to last year and up 21.8% compared to 2019, according to a report released last week by Realtor.com.
The increased limits mean more home buyers will have access to conventional loans, which typically have lower down payments and interest rates than the jumbo loans available for higher-priced properties.
“By increasing the conforming loan limit, I think that it’s going to open up more opportunities for buyers that have been shut out,” said Taso Tsakos, a managing partner at The Agency who is based in the East Bay/Sonoma County office in California. “It’s going to benefit home sellers, as well, because…if you have more buyers, then you’re going to create more demand, which benefits sellers and it stays a seller’s market.”
That increased demand will likely result in more competition and higher prices, according to Jonathan Miller, the CEO of the New York City-based appraisal firm Miller Samuel and the author of Douglas Elliman’s market reports for a number of top markets in the U.S.
The lower interest rates associated with conforming loans “may make asset prices higher by definition,” he said.
There’s also an ongoing supply issue in the U.S., Mr. Miller noted. If more potential buyers enter markets that already have an existing shortage of homes, it will further fuel rising prices.
“In the short-term, this will be helpful to people that are priced out. But in a short period of time, this is just another stimulus toward demand and the problem is supply,” Mr. Miller explained.
In high-cost markets—which number about 100 of the 3,000 counties in the U.S., according to the Federal Housing Finance Agency—the change may not make much of a difference.
Take Coronado, California, which includes the second-highest priced ZIP Code in San Diego County. There, the increased $1 million loan limit “will likely have very little impact on our market,” according to Scott Aurich of Pacific Sotheby’s International Realty.
“Our average sales price in 2021 year to date has been around $2.4 million, with the current average listing price being over $4.7 million,” he said in an email. “Even with low-interest rates, a lot of buyers are paying all cash or borrowing through private banking relationships.”
It’s a similar scenario in parts of South Florida, according to Leland Rykse with ONE Sotheby’s International Realty.
“Comparing statistics year-to-date, our single-family home market is up around 35% to 40%,” he said. “So, a 15% increase in the loan limits is not going to make a huge dent in that, but it will help certain segments out.”
In addition, competition is “already so tight” in South Florida that Mr. Rykse said he doesn’t think the increased loan limits will mean a hotter market.
“As it relates to the luxury market, it’s probably not going to have a tremendous impact,” he explained.
“Especially as you kind of move up in price points, we’re still seeing a lot of offers and deals go through that are cash or, even at that price point, they’re finding alternative methods of financing.”
Property Developer And Startup Join Forces To Boost Renters’ Credit Scores
Initiative is aimed at helping affordable-housing residents improve their scores.
A New York City developer and fintech company are ramping up an initiative to help tens of thousands of affordable-housing residents across the U.S. boost their credit scores.
Related Cos. is working with Esusu, a startup company that automates rental-payment reporting to the three major U.S. credit bureaus, allowing tenants who pay their monthly rent on time to establish credit histories and boost their scores.
The two companies launched the partnership about 18 months ago with around 19,000 units. They are now expanding rent reporting for tenants in more than 50,000 units of Related’s affordable-housing portfolio, from New York City to Miami and Chicago.
Landlords aren’t required to report rental-payment history to credit bureaus, and most don’t. Without this information, it is difficult for mortgage lenders to assess the credit quality of first-time home buyers, said David Dworkin, chief executive of the National Housing Conference, a nonprofit affordable-housing advocacy group.
“Your housing payments are the most consequential and predictive measurement of your ability to pay back your loan on time,” Mr. Dworkin said. Rental-payment reporting makes a significant difference in helping people get approved for a home loan, he added.
Esusu earlier this month unveiled a new initiative with Freddie Mac’s multifamily division to provide incentives and discounts to landlords that use the company’s rent-reporting technology. Fannie Mae, through a different initiative, recently started helping lenders factor in borrowers’ history of rent payments when weighing those applicants’ qualifications.
In Related’s pilot program across 19,000 units, it found that 71% of enrolled residents’ credit scores increased by an average of 32 points. Rent reporting also helped 2,300 renters who previously didn’t have credit scores establish financial identities, according to Esusu.
“It is an extraordinarily high percentage of people who are benefiting,” said Jeffrey Brodsky, vice chairman of Related Cos.
Esusu charges landlords $2 a month per unit to use the platform. Related will take advantage of discounts offered by the Freddie Mac partnership, Mr. Brodsky said. There is no cost to tenants.
Esusu reports only on-time rental payments and other positive data to credit bureaus to avoid double-penalizing people who miss payments, said co-founder Samir Goel. Going through the collections and eviction processes harms delinquent tenants’ credit scores.
Mr. Goel and his co-founder, Abbey Wemimo, started Esusu in 2018 and its rent-payment reporting technology is now used by landlords of more than two million rental units across the country.
The name of the company derives from Yoruba, a language spoken in Mr. Wemimo’s native Nigeria, and refers to the founders’ desire to grow their business by building community. Esusu has raised more than $14 million, including money from Serena Williams’s investment firm that focuses on startups founded by women and people of color.
The company is sharing a subset of its data with the Urban Institute, a nonprofit research group that is studying how rental-payment reporting affects credit scores. Researchers are particularly interested in determining how much the credit scores are affected, said Jung Hyun Choi, a senior research associate at Urban Institute.
“How the credit score is measured, it’s kind of like a black box,” Ms. Choi said.
Everything You Ever Wanted To Know About Those Sou-Sou Savings Clubs African And Caribbean Women Love
A brief history of the sou-sou money savings club and a breakdown of why African and Carribean women use them often.
If you are one of those people who just cannot get themselves to save money for a rainy day, a sou-sou may be just what you need to build up that little nest egg you have heard your girlfriends brag about.
A sou-sou (also spelled sou sou, su-su or susu) is an informal rotating savings club, where a group of people get together and contribute an equal amount of money into a fund weekly, bi-weekly or monthly. The total pool, also known as a hand, is then paid to one member of the club on a previously agreed-on schedule. The pool rotates until all members have received their share.
Here is how sou-sous work: The group elects a treasurer who will collect the members’ contributions. She will also create a payout roster, or members can request to receive their hand at any given date during the cycle. Everyone agrees on how much and how often they want to contribute.
If ten members are contributing $100 a week, each week a member will receive a $1,000 hand or cash lump sum. The cycle begins again after ten weeks. Any member who can afford it, can also double their contribution and get paid two hands in one cycle.
There is no interest to be collected, so you will always get out the exact amount that you put into the pot.
Sou-sou, which comes from the Yoruba term “esesu,” originated in West Africa, but is practiced in many African and Caribbean countries. Over the years, sou-sou has evolved, but the basic concept remains the same. Somalis call it “hagbad” or “ayuuto”; in Jamaica, it is known as a “partner”; in Guyana, a “box hand”; Haitians call it a “min”; and if you are Southern African, you may know it as “stokvel.”
The Yoruba esusu was transported over to the New World by African slaves and, while it is little known to African-Americans today, it is still popular among some African, Caribbean, Latino and Asian immigrant communities. Some use it to start businesses, others for big purchases, vacations, down payments on properties and cars and even to send their kids to college.
As old folks tell it, in the past, housewives who didn’t have an income and those in rural communities who had no access to traditional banks used sou-sous. The women would save a little bit of money from whatever their husbands gave them and put it in a sou-sou to be able to treat themselves when it was their turn to receive a hand.
This “under the mattress” method of saving may seem archaic for today’s society, but sou-sous can be a useful accountability tool if you do not have the discipline to save on your own. If you need a lump sum but cannot get a credit card or loan from a traditional financial institution due to a bad credit history, a sou-sou may also be your answer.
Since sou-sous are not regulated by any laws and can, therefore, be risky if someone untrustworthy joins, if you are considering joining one make sure it is with people that you know well and trust. Usually, sou-sou members are from the same family or a close-knit community.
There are no legal paperwork or credit checks involved when starting a sou-sou, all you have to protect you and your money is the familial trust between the members. So pick who you save with wisely.
South Florida And New York See Apartment Rents Surge More Than 30%
Apartment rents are soaring across the U.S., with South Florida in the lead. New York isn’t far behind.
In Miami, West Palm Beach and Fort Lauderdale, rents jumped 36% in October from a year earlier, while the New York City metro area — including Westchester County and parts of northern New Jersey — posted a 31% gain, according to a report by Redfin Corp.
The average increase in monthly rents nationwide was 13%, the highest growth rate in at least two years, Redfin said. Seattle; Portland, Oregon; and Austin, Texas, were also among metro areas that beat the U.S. average. Rents fell 4% in St. Louis, the only area with an annual decline.
“Skyrocketing rents in some of the most desirable cities suggest that there is an overall shortage of homes, and not just of homes for sale,” said Daryl Fairweather, chief economist at Redfin.
Rents have surged across the U.S. this year, stoking inflation fears. They’ve been rising fastest in Sun Belt cities such as Miami and Austin, where jobs and relatively low costs have pulled in transplants.
But New York and other coastal cities are making a comeback as more workers return to the office and colleges bring students back to campus.
“The recent increase in demand for rentals comes from people who want to lock in their lease now before prices rise even further out of reach,” Fairweather said.
The British Cathedral City of Winchester Is Drawing Homebuyers To Its Quaint Lifestyle
Average home prices in the city are 14 times the average salary there, the largest spread of any city in the United Kingdom.
For centuries, the pious have been drawn to the historic city of Winchester to worship at the ancient, gothic Winchester Cathedral. More recently, a different breed of pilgrim has been making the 65-mile trip south west from London.
Pre-pandemic, Winchester was considered a beautiful, but inconvenient, alternative to life in the British capital. Train services between the two cities take just over an hour. Many Londoners were simply not prepared to spend more than 10 hours a week on a train. Working from home has changed all that and Winchester has become a property powerhouse.
The price of prime property in Winchester, defined as the top 5% to 10% of the market, increased 12.3% between the third quarter of 2020 and the same period this year, according to research by estate agent Savills.
In August, Halifax, one of Britain’s biggest mortgage lenders, calculated that the average cost of a home in Winchester is $845,000, 14 times the city’s average salary of $60,400, the largest proportional gap between wages and house prices found anywhere in the UK.
Christine Armstrong, 47, and her husband, Chris Armstrong, 57, joined the pilgrimage to Winchester during last summer. Ms. Armstrong said they had always enjoyed London life with their three daughters Celia, 12, Vivienne, 9, and Lucy, 7, and their cockapoo, Monty. But their circumstances changed during the pandemic. Mr. Armstrong’s travel company closed due to Covid-19, while Mrs. Armstrong, a researcher and vlogger, says she only needs to be in London around two days a week.
“Our oldest daughter was very keen on sports, and we wanted to find her a school with a lot of sports facilities,” said Mrs. Armstrong. They selected Winchester for its proximity to family members in the south of England, and listed their 1980s townhouse in east London’s Isle of Dogs neighborhood. It is currently in the process of being sold for about $1.34 million.
In August 2021, they moved into a $2,680-a-month, three-bedroom townhouse in Winchester’s popular St Cross neighborhood, an area of quaint cottages and narrow streets that is a five-minute walk to the center of the city.
The plan is to buy a house once their London home’s sale is complete, but strong price appreciation means that even a seven-figure budget doesn’t go far in central Winchester. “Houses are astonishingly expensive,” said Mrs. Armstrong. “The house next door to us is for sale now, and it looks gorgeous, but it is on for £2 million,” or roughly $2.68 million.
This listing is far from an anomaly. In the Hyde neighborhood, another popular spot, Knight Frank is listing a 17th century, 8,155-square-foot house with seven bedrooms and five bathrooms for $4.56 million.
Before the pandemic, Bill Jarvis, managing director of the Winchester office of Winkworth estate agents, estimated that around 15% of his buyers were moving to the town from London. Since April 2020, that number has doubled.
“Working from home has opened people’s eyes to the fact that they maybe only have to be in London a day or two each week,” he said. “And, I suppose, doing lockdowns in a flat or a house with a small backyard wasn’t ideal for them either.” He said that Winchester was always a popular commuter city, but that the pandemic has cemented the trend.
Research from Knight Frank backs up this view. Between June 2020 and June 2021, the number of buyers viewing homes in Winchester increased by 111% compared with the five-year average, while the number of homes sold by the firm increased by 109%. The average luxury sale price, for properties listed at $938,000 and above, was $2.56 million.
Savills calculated that, citywide, the price of a house in Winchester stands at $859,000, according to Savills, up from $793,000 last year, representing an increase of about 8.34%. The market for houses has been far stronger than for apartments. The average price for apartments, said Savills, fell by 4% in the same period.
Buying agent Emma Seaton, a director of Prime Purchase, was an earlier adopter of the Winchester lifestyle. In 2018, she and her family left their three-bedroom terrace in Wandsworth, southwest London, and traded up to a five-bedroom house with an acre of gardens in Micheldever, one of the city’s satellite villages.
“I think that what people like about Winchester is that it has got the same history and heritage that London has got, the architecture is amazing, and the cathedral is truly mind blowing,” she said. “But you are also so close to incredible countryside and one of the best stretches of chalk stream fishing in the country, too, which is a big appeal to my North American buyers.”
So far the Armstrongs have found it easy settling into Winchester.
“I love it. It is a very easy place to live,” said Mrs. Armstrong. “It is a buzzing place, very friendly, and very accessible. We have made a lot of friends through the children’s activities. We had lived in our old area for 12 years and I do miss my friends and my network there, of course, and I have to travel a bit more, but other than that it has been a good move for us.”
For buyers, the key Winchester locations to get to know are St Cross, Fulflood, a neighborhood of mainly Victorian family houses close to the station, and Hyde, with its larger houses and proximity to the River Itchen. All three are within a 10-minute walk of the city center.
Mr. Jarvis said buyers need to budget at least $1.14 million to buy a four-bedroom Victorian house in any of these neighborhoods. Pre-pandemic, he said, this kind of property would typically sell for at least $1 million to $1.07 million. He feels that apartments have also increased in price, but only “by a few percent.”
There are also streets of historic houses right in the city center, where estate agent Belgarum is listing a three-bedroom, two-bathroom, 1,798-square-foot home within sight of two local landmarks, Winchester Cathedral and Winchester College, a high school founded in 1394. Its guide price is $1.27 million.
Toby Gullick, a senior negotiator at Knight Frank, said buyers are also interested in homes at the edge of Winchester, with 1 or 2 acres of grounds. “They want space, and to grow their own vegetables,” he said.
Buyers after a more rural home might be tempted by Fulling Mill, a converted water mill with 70 acres of fishing, woodland, and grazing land 2 miles out of the city. The four-bedroom, two-bathroom, 2,841-square-foot house, plus an adjacent four-bedroom cottage, is listed with Sotheby’s International Realty for offers over $5.36 million.
In July, the British Government began encouraging workers to return to their desks, but despite this, Mr. Gullick said the number of new buyers registering with him has continued to rise. “My problem is the shortage of stock,” he said.
“Unfortunately, people in Winchester don’t move house as often as I would like. If that continues, I can only imagine that prices will keep going up.”
Guide Price: $2.67 Million
A four-bedroom, two-bathroom townhouse within a converted military barracks built in the early 20th century and decommissioned in the 1980s. The house measures 2,202 square feet and has a small backyard. Agent: Savills.
Guide Price: $1.2 Million
This thatched cottage is in the village of Kings Worthy, 3 miles north of the center of Winchester. The cottage was built around 1580 and has four bedrooms and two bathrooms. It has a backyard with fruit trees and a vegetable patch. Agent: Jackson-Stops
Supply-Chain Woes Snarl Attempts To Tame House Prices
Rising costs of construction materials, labor shortages complicate efforts to cool some of the world’s hottest property markets.
Snarled supply chains and labor shortages are adding fuel to some of the world’s hottest property markets, complicating efforts by central banks and regulators to cool them down.
In Australia, shortages of materials and supply disruptions have contributed to the average price of newly built homes recently rising at its fastest rate in 21 years, according to the Australian Bureau of Statistics. In the U.K., a lack of subcontractors including carpenters and electricians is driving rapid increases in wages.
New Zealand’s government this month ordered its competition watchdog to examine the supply of building materials amid concerns about higher construction costs and housing affordability.
To protect profits, builders are passing on higher costs of materials such as steel and timber to their customers whenever possible, typically by charging more for newly built homes or renovation work. In doing so, they are adding support to property prices just as regulators worry markets are showing signs of becoming overheated against a backdrop of low interest rates.
More broadly, higher building costs are stoking inflation in countries wrestling with business closures related to Covid-19 restrictions, higher energy bills and port congestion. In New Zealand, the average price for the construction of a new house rose by 12% in the 12 months through September, according to government data, contributing to annual inflation rising at its fastest pace in a decade.
Lindsay Partridge, managing director of Australian building materials supplier Brickworks Ltd. , said shipping costs for bulk cement had risen fourfold in recent months, while the company almost ran out of manganese—used to color bricks—and had to switch suppliers even though that meant paying more.
“There’s only two suppliers, so if one hasn’t got it you go to the other. There’s no leverage,” he said, adding that Brickworks was passing on costs to customers as much as possible.
The risk is that central banks and regulators will move more aggressively to cool housing markets if prices remain stubbornly high, destabilizing the economic recovery from the Covid-19 pandemic in the process.
New Zealand’s central bank thinks home values have reached unsustainable levels, with one gauge pointing to price gains of more than 30% in the past year. On Wednesday, the Reserve Bank of New Zealand raised its benchmark interest rate to 0.75% from 0.50%, partly because of skyrocketing home prices.
Reserve Bank of Australia Gov. Philip Lowe this month said Australian interest rates are very unlikely to rise until 2023 at the earliest but that regulators could need to tighten borrowing tests again if growth in household debt continues to outpace wages growth. Capital Economics, a research firm, recently named Australia among countries where the risk of a housing crash is elevated.
Central banks appear confident they can rein in house prices using a mix of higher interest rates and other tools. “Members noted that higher mortgage interest rates, continued strong home building, tighter lending rules and changes in tax settings should all act to moderate house prices over the medium term,” the Reserve Bank of New Zealand said in minutes of this month’s policy meeting.
Still, rising materials costs and a shortage of laborers could make policy less effective if they force companies to slow or even stop construction projects, reducing future housing supply, said Shane Oliver, chief economist at AMP Ltd., an Australian wealth manager.
Australian home builder Tamawood Ltd. is one company turning down projects. Property demand is currently so strong that Tamawood could build twice as many homes if it had enough materials and labor, said Robert Lynch, the company’s chairman.
Mr. Lynch said the average cost of building materials such as timber and steel used by his company has risen by about 10% to 15% in the past eight months. Labor shortages have also worsened, with bricklayers charging as much for three days’ work as they previously had for a full week, he said.
“There are areas that we are finding it very difficult to get trades to go to,” Mr. Lynch said. “We’re curtailing any work in those areas and just easing back.”
Industry executives say prices of construction materials could stay high for at least a year, partly because it will take time for port logjams to clear. Flare-ups of Covid-19 cases also risk clogging up supply chains or spurring countries to tighten border controls again.
Australia this week said it would open its border to fully vaccinated skilled migrants from the start of December, while New Zealand expects to allow fully vaccinated foreign nationals to enter the country from the end of April. Australia’s Housing Industry Association, which represents home builders, doesn’t expect this will have much impact on the sector locally soon, given the scale of demand and because workers’ qualifications must meet local standards.
Also feeding a view that new home prices will stay high is the use of fixed-price contracts within the construction sector. To win a job, builders would agree to complete work for a defined cost and then absorb any increases in prices of items including plumbing supplies, windows and bricks along the way.
Industry executives worry that some builders could be forced to complete projects at a loss and that others could be bankrupted, adding to supply constraints.
Tim Lawless, research director with property data firm CoreLogic Inc., said there was little for the construction industry to do but wait for supply chains to unblock. He cited the example of timber, which has more than doubled in price over the past eight months.
“It takes a long time to grow trees,” he said.
Mortgage Costs Are Set To Go Up. Here’s What You Can Do
As speculation increases that the Bank of England will soon increase rates, some lenders have already upped borrowing costs. Financial advisers have a few tips.
The era of rock-bottom rates for British mortgages is coming to a close, with some lenders already increasing borrowing costs and others likely to follow on expectations that the Bank of England will hike interest rates in the weeks ahead.
Threats of pricier mortgage payments are playing on the minds of those with homes and those who want to buy them, as well as consumers who largely sat out the pandemic-era buying spree.
Chris Somers is one of them. The 37-year-old from London is in the midst of getting a divorce. As part of that process, he is trying to buy out his four-bedroom, semi-detached home from his wife. He’s secured a two-year fixed mortgage at a rate of 1.69%. But the divorce process is taking longer than he expected and he is watching both the clock and the Bank of England very closely.
“If I go past a certain date and the offer becomes no longer valid, I’ll have to reapply,” he said. “If the rate I applied for is no longer available, that’ll cost me quite a lot extra.”
Is there anything consumers can do to prepare for — or at least mitigate the effects of — rising mortgage costs? We asked financial experts across Britain for their best suggestions.
Should You Rush For A New Rate?
The strategy sounds smart: Lock in a low rate now before they start getting dearer. Consumers may be feeling like now is the prime moment to do just that. Many experts had expected the Bank of England to raise rates in early November. That didn’t happen, which has given borrowers whose rate terms are coming to an end more time to lock in low rates.
But before you start trying to switch, experts suggest making sure changing to a lower rate won’t actually end up costing you more than remaining on your current one. That could happen if your current deal has a high early repayment charge. These are penalties borrowers face for making changes before the end of their mortgage term.
“The rates would have to be very much lower than what the early repayment charges are,” said Lucinda Robinison of Boon Brokers in Suffolk. “In most cases, they’re not.”
How To Evaluate A Fixed vs Variable Mortgage
Fixed-rate mortgages have boomed in the UK over the past few years. Generally, they offer less flexibility than variable mortgages but give borrowers the certainty of a stable rate over a longer period of time. (Some lenders are even starting to offer ultra-long terms of up to 40 years.) Variable mortgages are more flexible, but also more sensitive to changes to banks’ borrowing costs, including the Bank Rate.
So To Insulate Yourself From A Rate Hike, Should You Opt For A Fixed?
Circumstances vary, but experts generally advise going for a fixed rate if you plan to stay in your home for the long term. You’ll avoid volatility as long as you don’t sell too soon or change rates.
That strategy sounded appealing to Jordan White, a 36-year-old living in London who is training to become a financial adviser. But after speaking with a mortgage broker, he opted for a variable.
“I want to sell my flat next year,” he said. “It removes any early repayment charges if I do sell within the next year, so it has given me a bit more flexibility.”
White’s rate is closely linked to the Bank’s, so he says he’s already budgeting for an increase. He estimates a hike could add around 40 pounds ($54) to his monthly expenses. It’s not monumental, but with inflation and higher energy bills, it’s something he says he wants to be prepared for.
The Perks (and Pitfalls) of Paying Too Much
One move borrowers might make now to benefit from low rates before they rise: overpayment.
To the uninitiated, it sounds like an unneeded onus. But paying more than you owe each month — particularly if you can direct it at the loan’s principal — can reduce both the amount you have to pay over the life of your loan and the duration of the loan. That could save you money in a high-rate future.
Some lenders prohibit or penalize early repayment. (Remember, they make money off your interest payments.) Making this choice also depends a lot upon your present circumstances.
Karen Noye, a mortgage specialist at wealth management firm Quilter, says overpaying makes sense for those who already have large-enough emergency funds and who don’t have too much other debt.
“It’s best to get rid of debt with the highest rate first,” she says. “If you make overpayments, make sure you check the terms so you don’t incur penalties. A majority of lenders allow 10% without an early repayment charge, you just want to be careful.”
First-Time Buyers Beware
Unfortunately it’s often younger, first-time buyers who are most sensitive to rate hikes. After scrambling to cobble together a deposit, there’s usually little wiggle room for increases to the monthly budget.
Financial advisers say aspiring homebuyers need to keep this top of mind. New buyers can fixate on mortgage costs, says Quilter’s Noye, but they also need to budget in all the other expenses of homeownership, too.
These might include insurance, utilities, maintenance, repairs and service charges. The mortgage alone might be affordable now, but a rate increase — coupled with increasing prices on all the extras in an inflationary environment — might make buying a home now just too expensive.
The Next Austin? How About Arkansas. Seriously
Home to corporate behemoth Walmart, a rising state university, and awash in philanthropy money, this Texas neighbor is home to a new crop of urban hotspots.
Ambitious young college graduates are looking for an affordable home base where they can build their families and careers.
Here’s A Place That May Not (Yet) Be On Their List: Arkansas.
For the past decade, coastal metros like New York and San Francisco dominated the landscape for the upwardly mobile, but the main story became how to cope with the high cost of living in those cities. One solution was to move into lower-cost neighborhoods, further pushing up rents and home prices.
Others moved to lower-cost metros that shared some of the characteristics of those high-cost places; Austin, Texas, was one of the biggest beneficiaries of that trend.
Thanks to the accumulated impact of all that migration — accelerated by lifestyle changes during the pandemic — Austin is no longer affordable, and arguably overpriced for what it offers.
That begs the question: Where should someone who’s been priced out of Austin look? I would argue the best candidate to be the next Austin is the up-and-coming region known as Northwest Arkansas.
This isn’t just throwing a dart at the map and arbitrarily calling something the next Austin. Northwest Arkansas has both idiosyncratic and macro factors that make it a logical heir to the role played by Austin for so long.
First, we should define what we’re talking about. Northwest Arkansas includes 4 of the 10 largest cities in the state: Fayetteville, home to the University of Arkansas; Bentonville, home to Walmart Inc.; and Springdale and Rogers.
The two key counties in the region are Benton and Washington, which comprise just 17.6% of the state’s population but accounted for more than 100% of the state’s net population growth in the 2010’s.
That’s not a misprint — Arkansas expanded by 95,600 people during the decade thanks to 105,800 residents added by Benton and Washington County. Of the 110 U.S. metro areas that have more than 500,000 people, the Fayetteville-Springdale-Rogers metro area was the fifth-fastest growing during that period.
The metro area, anchored by the state’s flagship public university and the largest corporation in the U.S. by revenues, is growing as fast as recent urban juggernauts such as Boise, Idaho, Raleigh, North Carolina and Orlando, Florida.
Northwestern Arkansas also benefits from the continued growth of Texas in the same way that Austin benefited from the growth of the economy in California. There’s intense competition from universities in neighboring states to raise their profile and fill seats by recruiting students from Texas, and more than 25% of the student body of the University of Arkansas hails from Texas.
Fayetteville is an 8-hour drive from Austin and a 5.5-hour drive from Dallas, so to the extent the Texas metros get too crowded or expensive for locals, northwest Arkansas already has a diaspora of Lone Star expats that should make it a sensible place to consider while remaining less than a day’s drive away from “home.”
If you’re asking, “What’s there to do in Northwest Arkansas?” you should know the region is being transformed by the wealth of the Waltons, Walmart’s founding family. The Crystal Bridges Museum of American Art opened a decade ago, funded by over $1 billion from Walmart heiress Alice Walton, and has become one of the country’s top museums.
It’s where the copy of the U.S. Constitution won at auction by Citadel founder Kenneth Griffin will be lent for public viewing.
Walmart, cognizant of the need to recruit more young talent to Arkansas, is transforming downtown Bentonville into a walkable, amenity-filled campus. The Razorback Regional Greenway — also funded in part with Walton family money — is a 37-mile hiking and biking trail dedicated in 2015 that connects to many community attractions.
The underlying driver in all this is that a lot of second-tier metro areas got a lot more expensive over the past two years and aren’t the bargains they used to be. New places will gain traction as metros like Austin and Boise struggle with their own affordability problems.
At the same time, the continued growth in Texas will slowly but surely create its own spillover dynamics to other metro areas, just as growth on the West Coast spilled over to Austin.
Northwest Arkansas might not be on the radar of many coastal people. but it’s the most likely candidate to be the prime beneficiary of these trends.
Your Questions And Comments Are Greatly Appreciated.
Monty H. & Carolyn A.
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