Regulators ease flood-insurance rules for mortgage holders

Regulators ease flood-insurance rules for mortgage holders

 
WASHINGTON – Feb. 12, 2019 – A new regulation allows more homeowners with a mortgage to use private flood insurance coverage rather than only the national flood program.
On Jan. 25, federal banking regulators released a final regulation clarifying lender acceptance of private flood insurance; an unofficial copy of the rule is posted online. The regulation will soon appear in the Federal Register, and it goes into effect on July 1, 2019.
The new regulation generally requires lenders to accept private flood insurance policies that meet a strict statutory definition. Prior to the announcement, the National Flood Insurance Program (NFIP) was the gold-standard for lenders and not all lenders accepted private coverage.
The final regulation implements Section 239 of the Biggert-Waters Flood Insurance Reform Act of 2012 and:
  • Adopts the same definition of private flood insurance as the statute; this definition has been a source of confusion, particularly for smaller lenders.
  • Provides a compliance aid for lenders to determine whether a private policy meets the definition and must be accepted in satisfaction of federal flood insurance requirements.
  • Clarifies that lenders also have broad discretion to accept private policies that don't meet the strict definition if the policy provides sufficient protection of the mortgage loan consistent with safety and soundness requirements.
The National Association of Realtors® (NAR) has been working with a broad coalition to make it easier for lenders to accept private flood insurance, which often offers better coverage at a lower cost than NFIP. The coalition's latest regulatory comment letter is posted online.
According to NAR, this new regulation includes "some important clarifications and compliance aid for lenders," but says it will continue to work with lawmakers to address some issues not covered by the new rules.
Continuous coverage still a concern
One issue not covered by the new rule is continuous coverage. One of NFIP's considerations when determining an individual homeowner's rate is whether or not they've had a gap in their flood insurance coverage. Since NFIP does not officially recognize private flood policies, it considers anyone who leaves the program uninsured even if they had a private policy.
This might be a problem for current Florida homeowners who choose to leave NFIP and go with a private flood policy that costs less. Should that policy's cost rise later, perhaps because it had a teaser rate for the first year, the homeowner could find it more expensive to return to NFIP. Since NFIP considered them uninsured, their earlier lower-cost, grandfathered insurance rate could rise significantly.
The continuous coverage issue is a "separate regulatory matter and another top priority," NAR says.
© 2019 Florida Realtors®  

Fla. PSC says it won’t regulate Tesla’s solar leases

Fla. PSC says it won’t regulate Tesla’s solar leases

 
TALLAHASSEE, Fla. – Feb. 11, 2019 – The Florida Public Service Commission (PSC) issued a declaratory statement that affirms Tesla, LLC (Tesla) can offer residential solar equipment leases in Florida with fears that it will be regulated as if it's a utility.
The declaration removes a cloud hanging over Tesla's solar-power expansion in Florida, and those homeowners considering the energy-efficient upgrade. As a result, more homes could be sporting solar panels as the company kicks expansion plans into high gear.
PSC rules allow leasing of renewable energy equipment as long as it doesn't involve selling electricity to customers, although they can benefit from net metering with their utilities. In its declaratory statement, the PSC found that:
  • Tesla's residential solar equipment lease, through Tesla's SolarLease, does not constitute a sale of electricity
  • Offering its solar equipment lease to Florida consumers will not cause Tesla to be a public utility under Florida law
  • The residential solar equipment lease will not subject Tesla or its customer lessees to PSC regulations
PSC rules have long allowed leasing of renewable energy equipment, as long as the lessor is not effectively selling electricity to the customer. Homeowners can purchase or lease equipment to generate electricity for personal use and also benefit from interconnection and net metering with their local utility.
In its decision, PSC commissioners agreed for the third time in the past year that a solar equipment lease is not a retail sale of electricity. In 2018, the PSC issued similar declaratory statements for Sunrun Inc., and Vivint Solar Developer Inc.
PSC approval isn't required for a company to lease solar equipment to Florida residents.
"While today's declaration is limited to the facts in Tesla's petition, companies operating under the same facts can rely upon this declaration as well," says PSC Chairman Art Graham.
© 2019 Florida Realtors®

The fight over beach access – past, present and future

The fight over beach access – past, present and future

 
WALTON COUNTY, Fla. – Feb. 11, 2019 – For years wealthy Walton County beach property owners have found ways to build big homes or sprawling condominiums on sand-covered lots that gave them an unimpeded view of the Gulf of Mexico.
Some, like massive Sandestin, obtained what is known as Development of Regional Impact status, with permitting that included ownership of all the beach behind its entire complex.
Others, including former Arkansas governor and presidential candidate Mike Huckabee, would follow up on their home purchase by hiring an attorney to obtain "quiet title," a court judgment extending their property lines from the toe of the dune where their house had been built to the mean high water line – effectively the Gulf itself.
Today, 64 percent, or 16.4 miles of Walton County's nearly 26 miles of coastline is considered private property. That compares to about 5.4 percent, or 1.38 miles of county-owned beach.
These figures haven't fluctuated much in several years, but the mood of the county and its residents has, particularly following last year's passage of controversial House Bill 631, which made coastal property rights a priority for homeowners and beachgoers alike, and resulted in a long hot summer of squabbling about them.
The battle is far from over. The Walton County Commission unanimously decreed in December that it wants to make all of the county's beaches accessible to the public and has requested a Circuit Court declaration that customary use exists on the dry sand areas behind 1,194 private beachfront properties.
Customary use relies on the argument that the county's beaches have been open and accessible to everyone since mankind first began using them. Under that premise, they should remain open to the public regardless of what is written on a property deed.
"Ownership of the dirt, and the fact that a plat line or a survey line was drawn to the mean high water line, is irrelevant from our perspective," said David Theriaque, the attorney who will represent Walton County in its customary use effort. "Customary use is not dependent on where somebody draws a line."
If the county gets its declaration, it could re-establish a customary use ordinance that was wiped out last year when Gov. Rick Scott signed HB 631 into law.
A group of attorneys has lined up to represent the private property owners.
How did we get here?
Attorney Dana Matthews, whose clients include Sandestin, said that for years no one had trouble with the public traversing the beach on their property. Beachgoers mostly respected the private resorts' status and homeowners didn't put up signs or fencing to keep people off their land.
Ed and Delanie Goodwin of Fort Panic in South Walton might have been the first to try to erect privacy fencing along the beach using poles and plastic chains, claiming they were tired of people behaving badly in their backyard.
"Most owner problems come with the bad eggs," Matthews said.
After the county ordered the fencing removed, the Goodwins sued and won, and the impetus to create a county customary use ordinance to force owners to open their beaches was born.
From Matthews' perspective, the county's stance on customary use has forced the owners' hands, and HB 631 has freed them to post no trespassing signs and order passers-by to traverse their property only in wet sand areas. Some have hired security guards and several have demanded the county cease all public works activity on their sections of beach.
"Anybody that owns private property on the beach is coming to lawyers asking, 'What do we do to protect ourselves from a claim of customary use or some other easement near the mean high water line?' " Matthews said. "It's a funny balance the private property owners find themselves in now. All of a sudden you've changed the rules of engagement."
Quiet title
On Aug. 23, 2012, Huckabee and his wife, Janet, along with their good friend and next door neighbor David Haak, obtained "fee simple ownership" to property "lying adjacent and to the south of their lot to the mean high water line of the Gulf of Mexico."
Quiet title was granted through a summary judgment issued by acting Walton County Judge David Green. The ruling actually gave the beach behind the Huckabees' 10,000-square-foot house on Blue Mountain Beach Road to the Angus B. Wiles Trust.
The trust was headed by Huckabee accountant Bryan S. Jeffrey. The Huckabees would take over management of it the following December.
While perhaps cloaked in greater secrecy than others, the Huckabees' transaction was hardly the only instance in which homeowners on Blue Mountain Beach Road asked for and received quiet title from the original southern border of their home to the mean high tide line.
The Northwest Florida Daily News found 13 lots in the same subdivision that had secured title declarations in the five years before the Huckabees did and seven others who have done so since.
To obtain the title declaration, Huckabee and his neighbors were required to pay a $400 filing fee and $3 for every summons issued to resolve the matter, according to Walton County Clerk of Courts Alex Alford.
And while Huckabee has said more than once that he pays exorbitant property taxes to live where he does, he pays no more to own down to the mean high water line than he did before he secured title to that slab of beach.
Beach property, while fine for recreation, holds no taxable value because it can't be built on. The value, Matthews said, is in the having.
"That's your beach. You own to the mean high water line. People pay crazy prices for that," he said.
Matthews assisted residents in the Beach Highlands community in their 2015 effort to obtain quiet title to the mean high water line. He said he has found historic precedent that proves property owners are entitled to possess the dry sand between their homes and the Gulf.
He has sifted through property records dating almost to 1842 – the year Florida became a state – to find the first land surveys conducted in Walton County.
What he's discovered, Matthews said, is the property lines along the county's coastline have been drawn to the mean high water mark since the federal government owned the land in the 1800s, and Department of the Interior documents from 100 years later verify the finding.
"Government patent lines were used to lay out the land in this part of the state, and all of the land on the beach in Walton County were patent lots," Matthews said. "The government patent maps show all the property sold by the government was sold to the mean high water line."
In the Beach Highland case, Matthews said, the subdivision's developer drew lot lines that actually stopped before they reached the beach proper, then labeled the area between the lots and the Gulf as simply "beach" on the development map.
"We found the original developer had never conveyed title to the beach. It was pretty evident to me that the developer intended the beach to be available for the homeowners, so I filed for quiet title," he said.
"In Blue Mountain Beach, the developers planned something, except the developer gave the beach to all the owners within the plat. The owners would have the right to use the beach but not the public. The other owners can use that beach," Matthews added. "When it comes to platting your property and saying how you use it, that right belongs to the owner."
Customary use
Theriaque, representing the county in its fight for the customary use declaration, said property lines established in 1845, or in 2012, are meaningless under his interpretation of land use law.
"(County-hired historian) Dr. James Miller researched all the way back to 2000 B.C.," he said, and has built a case that the public has used Walton County's beaches since that time.
The question Theriaque said will ultimately have to be answered by the Circuit Court is whether "there has been a historical pattern of use on the beach that satisfies the criteria for customary use." Florida's Supreme Court defines the criteria as a public use that has been ancient, reasonable, without interruption, and free from dispute.
It is undisputed that what the county intends to do is encumber land that is owned by private entities in some locations, Theriaque said.
"Our position is that before folks started purchasing property that the property, the dirt, was already encumbered with the doctrine of customary use and it gives them (property owners and beachgoers) co-equal rights. One right doesn't trump the other," he said. "But it's separate from ownership, and that's why we also dispute (the other side's) contention that this is a taking."
Homeowners and their lawyers "can't allege something has been taken when the owner of that property never had the right to (prevent access) in the first place because of the doctrine of customary use," Theriaque said.
"The legal ownership question to me is really a non-factor, because everybody concedes we are applying customary use to privately owned lands. We wouldn't be having the dispute if we weren't applying it to privately owned lands," he said.
Although the legal definition of fee simple ownership states such ownership is the "most complete," Theriaque said that obtaining fee simple possession of property through quiet title is not a defense against customary use doctrine.
"Quiet title goes to who owns the dirt, customary use goes to who has the right to use the dirt for recreational purposes and doesn't dispute the private ownership," he said. "Quiet title converts something public to private, and then you have the dispute about whether the privately owned property is subject to the customary recreational use."
Horrible, unintended consequences
Should Walton County prevail and all of its beaches be declared public through customary use, Matthews said he envisions "horrible unintended consequences."
"What will happen to the value of that property when customary use becomes law?" he asked. "The land we can't do anything with now, what if we can't even recreate on it without sharing it with the public?
He said under a customary use doctrine, property owners might have no control over what happens on their property, and even conceivably be held liable if someone gets hurt while recreating on their property.
And why, Matthews asked, does the county want to drag the Developments of Regional Impact into the customary use battle.
"They're the biggest ad valorem taxpayers," he said. "We wouldn't have the services we do without them."
© 2019 the Northwest Florida Daily News (Fort Walton Beach, Fla.), Tom McLaughlin

Tax reform nixed some popular business tax breaks

Tax reform nixed some popular business tax breaks

 
NEW YORK (AP) – Feb. 7, 2019 – As small business owners compile their income tax returns, they may have an unpleasant surprise – some popular business deductions have disappeared or been reduced under the new tax law.
While the law gave small business owners new tax breaks including a 20 percent deduction in income for many sole proprietors, partners and owners of S corporations, Congress took back deductions for entertainment expenses, employee transit benefits and what are called net operating loss carrybacks. It also put ceilings on interest deductions for some businesses. Accountants and tax attorneys suspect small business clients will especially miss the break for entertaining clients and customers.
"I think they're going to be shocked at how much more they didn't get as a deduction," says Joseph Perry, a certified public accountant with Marcum in Melville, New York.
A look at the disappearing deductions:
Interest
There is now a limit on how much interest businesses can deduct on their loans and credit lines. While the smallest businesses, those with up to $25 million in average annual revenue over the previous three years, have no ceiling on the interest they can deduct, there are many small businesses above that threshold that are being affected. IRS regulations limit the deduction to 30 percent of a company's adjusted taxable income plus its interest income, if it has any. A motor vehicle dealer can also deduct its borrowing costs for the vehicles it buys and then sells – what's known as floor plan financing interest.
But interest expenses that are above the limit can be carried over and deducted the next year; they will count toward that year's ceiling.
Real property businesses, including landlords, developers and real estate managers and brokers, can choose to be exempt from the deduction if they follow rules on depreciation of their property.
Entertainment
Owners who take customers to sporting events or the theater or treat them to a round of golf will have to foot the entire bill for those activities. The new law has done away with the entertainment deduction for businesses. Many owners use entertainment as a key part of building and maintaining relationships with clients.
But owners can still deduct the cost of taking a client out for breakfast, lunch or dinner; half the amount spent for a business meal is deductible. The IRS also says owners can buy food for a customer at an entertainment event as long as the food is paid for separately. In a notice about meals and entertainment expenses issued in October, the agency used hot dogs at a baseball game as an example. The food is deductible; the tickets are not.
Owners can also deduct 100 percent of the cost of food at parties or picnics for employees.
While the loss of the entertainment deduction may discourage some owners from treating customers to tickets or a golf game, others will decide that paying for entertainment is a worthwhile investment in their companies' future because of the goodwill it creates. That's good business sense, says Ken Rubin, a CPA with Rubin Brown in St. Louis.
"Normally, our general statement is, don't let tax considerations drive the business decisions," Rubin says. Or, as tax advisers sometimes tell their clients: Don't let the tax tail wag the dog.
Employee expenses
The law also eliminated the deduction owners could take for subsidizing their employees' commuting costs. Similar to their decisions about entertainment expenses, owners must decide whether they want to continue giving employees money toward their mass transit fares or parking tabs; given the tight labor market, owners might want to continue providing the benefits to make their companies better able to compete for talented workers. And taking the benefit away could be a morale-buster, says Leon Dutkiewicz, a CPA with Citrin Cooperman in Philadelphia.
"When you run the math, you're going to lose more in goodwill than you would from losing the deduction," he says.
Employees also lost a popular deduction – for job-related expenses like the cost of tools, uniforms and publications related to their work. Owners who want to give their staffers a break might want to take on those expenses and deduct the costs.
Net operating losses
Businesses that lose money no longer have the ability to "carry back" their losses to offset earnings in previous years and get refunds on taxes they paid. The law does allow companies to carry losses forward to an unlimited number of future years, helping them reduce taxes during profitable times.
Although the absence of carrybacks takes away some flexibility for businesses, it isn't likely to be an issue for companies in a strong economy when businesses are doing well, Rubin says. It can, however, be an issue for companies like restaurants and retailers.
"It's a bigger deal for cyclical-type businesses that will make money one year, lose money the next," Rubin says.
AP Logo Copyright © 2019 The Associated Press, Joyce M. Rosenberg. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  

Buying a home before age 35 worth it now – and later

Buying a home before age 35 worth it now – and later

 
NEW YORK – Feb. 4, 2019 – Nicole Christianson, a 26-year-old sales rep, was tired of writing big checks for tiny apartments. And she wanted to do more with her cash than stash it in a savings account.
One night, she and her husband Thure, 28, took a look at their newly combined finances and uncovered a pleasant surprise: Together, they had saved enough for a 5 percent down payment on the affordable fixer-upper right across the street from their Milwaukee apartment. They closed in December 2017, and Nicole Christianson says they're happy to finally be "making something that's ours."
Millennials' homeownership goals
Many in Christianson's age group are chasing that feeling. Eighty-two percent of young adults say owning a home is a priority, according to NerdWallet's 2018 Home Buyer Report. If they can make it happen, most will be first-time homebuyers, but that 'if' looms large.
Millennials (those born from 1981 to 1997) are buying houses at lower rates than when previous generations were the same age, and it's not hard to see why. Saving up for a down payment and qualifying for a mortgage can feel like pipe dreams for young adults grappling with student debt, underemployment and high rent costs.
Still, millennials are an optimistic lot, and research shows there are big rewards in store for those who find a way to buy their first home sooner rather than later.
How buying young can pay off later
Of today's older adults, those who bought their first home from ages 25 to 34 accumulated the most housing wealth by their 60s – a median of around $150,000, according to a report by the Urban Institute, a nonprofit research organization.
In contrast, the median housing wealth for those in their early 60s who bought later (ages 35 to 44), was about half as much, at $76,000. Homeowners who bought after they were 45 had about $44,000 in housing wealth by their 60s.
"Housing wealth" is another term for equity, which is the difference between the home's market value and an owner's mortgage balance. Equity becomes profit when a home is sold or refinanced, and it's more likely to grow the longer one owns the home.
The takeaway for millennials? Buy a home as early as you can feasibly do so, says Laurie Goodman, vice president of housing finance policy at the Urban Institute.
Paying rent to yourself is a top perk of homeownership, Goodman says. "It's also forced savings in the sense that you're paying down a mortgage each month. Yes, you could put away the same amount of money in a savings plan, but people don't."
Thinking about homeownership as part of retirement planning is important for millennials, says Jung Hyun Choi, a research associate at the Urban Institute.
"People are living longer and job stability has declined," she says. These circumstances make housing wealth even more essential.
Loans and programs that boost affordability
Certain mortgage options can reduce the upfront costs of buying a home, allowing younger borrowers to qualify with far less than the traditional 20 percent down payment.
"We wanted to go with a VA lender," says Marissa Avila, 33, a self-employed small-business consultant in Norfolk, Virginia. Her husband Greg, 36, is in the Navy, so they were eligible for a loan guaranteed by the Department of Veterans Affairs. The VA loan helped the Avilas buy their colonial-style house with no down payment.
Low down payment loans aren't just for borrowers in uniform: Some conventional loans require just 3 percent down, the minimum for a Federal Housing Administration mortgage is 3.5 percent and eligible borrowers can get a Department of Agriculture, or USDA, loan with nothing down.
Goodman recommends first-time homebuyers investigate down payment assistance programs. State housing agencies often offer mortgage, down payment and closing-cost assistance. These programs may allow millennials to buy a home sooner than if they try to build savings, she says.
Talking to a lender can be a good first step if you're not sure that you're ready, Avila says.
"The worst that someone is going to say is 'No, you need to save a little bit more money,' and then you know where you stand," she says. "It's so much easier once you finally start that conversation."

Zillow spends $1M trying to improve its ‘Zestimates’

Zillow spends $1M trying to improve its ‘Zestimates’

 
SEATTLE – Feb. 4, 2019 – Zillow's estimate of a home's value, called the Zestimate, can be powerful: Some homeowners track them like a stock, and when it gets to a certain point, they may decide to sell. Home shoppers gauge the estimate against the list price of a home. Others use it just to gawk at their neighbor's home values.
But it's far from perfect: In Seattle, the Zestimate is off by a median of 4.7 percent compared to the actual sale price, according to the company – a $35,000 difference on the typical house. Real-estate brokers have long complained that the numbers give sellers, in particular, a distorted view of their home's true worth.
Now the Zestimate, that little number that appears at the top of every home's Zillow page and updates daily, is in line to get more accurate.
On Wednesday, the Seattle-based company awarded a $1 million prize to the winners of a public contest to improve its algorithm. The winning team, three guys from Raleigh, Toronto and Morocco who teamed up despite never having met in person, came up with a way to beat Zillow's own data scientists to a better estimate.
The contest started a year and a half ago with 3,800 teams from 91 countries and was narrowed down to 100 finalists last year. The teams were given seven years' worth of data on a sample of millions of homes across the country, and were tested to see how closely their estimated values for each home matched up with the actual sale prices of homes that sold in the ensuing months.
Jordan Meyer, the American on the winning team, reduced his workload at his day job as CTO of an analytics company and poured about six hours a day into the contest, communicating with his teammates, Moroccan computer science professor Chahhou Mohamed and Canadian artificial intelligence startup founder Nima Shahbazi, on the messaging application Slack.
Meyer started by finding every data source he could – the exact longitude and latitude of houses could be used to determine the proximity to streets and therefore determine noise near the house. Slight differences in distance from a body of water could influence a home price by thousands of dollars. In the end each home had hundreds of different data points.
But the strategy that set them apart was trying wildly different algorithms and merging the ones that worked together to get the best blended average.
"It was extremely hard," Meyer said in an interview. He called the process "relentless experimentation" and echoed Shahbazi, who said in a statement: "For every idea that worked, there were a hundred that didn't work. But we kept going."
Zillow has slowly improved its Zestimate from a median error rate of 14 percent when it started in 2006 to 5.7 percent when the contest began in mid-2017. It's now down to 4.5 percent nationally (it's higher in some cities and lower in others), and once the winners' tweaks to the algorithm are incorporated, the company expects the error rate to dip to about 4 percent.
"We're happy with the progress we're making." said Stan Humphries, Zillow's chief analytics officer. "You're going to get some way off. We do 115 million of these every day," referring to the number of homes on Zillow with a Zestimate, "so yes, we get concerned when we're off, and we're committed to making them even more accurate. This is an important number. The implications of getting it right are really important."
Humans are still better than machines
Homes nationally sell on average for about 2 percent less than the list price set by brokers, according to data from Redfin. Brokers have access to information that an algorithm often doesn't – the Zestimate relies on publicly available data and voluntary input from homeowners, which can give an incomplete picture of a house.
"There are way too many factors for a certain algorithm to work," said Sam Mansour, a managing broker with John L. Scott in Lynnwood. He said he constantly has to battle with clients who cling to their Zestimate. "I've been to homes and people say 'my Zestimate is worth X amount,' and I'm like, 'no, no.'"
He said he's also heard of homeowners who use their Zestimate, and the company's one-year forecast of their home value, to justify how much they'd like to borrow against their home. (Zestimates aren't used in official proceedings, like a home appraisal or a home-equity loan.)
Mansour said the biggest factor a computer can't track is the emotional appeal of a home, which can vary wildly from buyer to buyer and is a primary driver in how much people offer. And certain attributes that get plugged into algorithms are going to be weighed differently by various buyers – a large lot might appeal to some, but to others, it just means extra yard work.
Sometimes Zillow is really off – the median error rate of 4.5 percent nationally means half of home values are wrong by more than 4.5 percent.
Zillow says about 1 in 8 Zestimates winds up being wrong by at least 20 percent. That includes the 2016 home sale made by Zillow CEO Spencer Rascoff – who sold his Seattle home for 40 percent less than his Zestimate. In some counties where public data isn't great or there aren't many homes, Zestimates don't exist, or the median error rate can be above 10 percent.
Zillow is the most-clicked real estate site in the nation and was the first to offer a home-value estimator, but these days other websites like Redfin and realtor.com also offer their own home-value estimates.
The winners of the prize agreed to split their $1 million share evenly. As for what Meyer will do with his cut?
"I'll be investing in real estate for sure," he said.
© 2019 The Seattle Times, Mike Rosenberg. Distributed by Tribune Content Agency, LLC.

Fed agencies propose private flood insurance fix

Fed agencies propose private flood insurance fix

 
WASHINGTON – Jan. 31, 2019 – The National Flood Insurance Program (NFIP) is in trouble. Thanks in part to a multitude of national disasters, the program has paid out far more money than it's taken in by way of premiums but hopes of a federal fix through legislation has been delayed so far. Instead, Congress has authorized a series of short-term delays rather than tackling a broader reform package.
A move by the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency late last week could be the first step in attacking the problem from a different direction, though.
The rule proposal would make private flood insurance more available in flood zones, but it's not official yet – it still needs three other federal regulators, including the Federal Reserve, to sign off on it. It also doesn't tackle all the important issues for homeowners and buyers.
"It appears that regulators are attempting to adopt, by rule, a portion of what was contained in an earlier bill (Ross-Murphy)," says Trey Goldman, Florida Realtors® legislative counsel in the Office of Public Policy. "Under this proposal, banks must recognize and accept private flood coverage. But the bill's 'continuous coverage' language is just as important to homeowners, and the proposed regulations really don't address that. Without continuous coverage, policyholders who leave the NFIP and later come back could be subject to a full risk rate instead of their previous subsidized rate."
Under the FDIC/Comptroller proposal, lenders would have to accept private flood insurance policies if they offer coverage at least as comprehensive as NFIP. Lenders would also have an option to accept private flood insurance policies that don't offer as much coverage as NFIP, which the insurance industry and others want.
Still, any increase in private policy acceptance by lenders offers a ray of hope for homeowners and buyers, in part because a private policy often costs less.
"This ruling has the potential to open up the private insurance market," Michael Barry, a spokesman at the industry-funded Insurance Information Institute told The Wall Street Journal.
Federal law doesn't generally recognize private flood policies. Owners who leave NFIP and return – perhaps because their new cheaper coverage suddenly becomes more expensive later – can lose their grandfathered status under "continuous coverage" if they return to NFIP. If that happens, they often find themselves stuck with two bad choices: Stick with their current private policy that now has a higher premium or return to NFIP and also pay a higher premium because their coverage is no longer subsidized.
Another problem: Some lenders will accept private flood insurance coverage but some do not. For the latter, a homebuyer only has two choices – take out NFIP coverage or find another lender.
Ideally, Congress will address the "continuous coverage" risk when it updates NFIP, which now expires on May 31, 2019.
Source: The Wall Street Journal, Lalita Clozel

First Time Home Buyer Programs in Florida - US News and World Report Article

Breaking into homeownership can be difficult. Hurdles such as affordability, credit history and market prices keep many people from achieving their goal of owning a house. Fortunately for Floridians, federal and state programs and mortgage products are aimed at first-time homebuyers to help ease the burden and make homeownership possible and lasting, especially as homeownership rates decline throughout the state.
The Florida homeownership rate is 64.4 percent as of the third quarter of 2018, according to the U.S. Census Bureau, while the average for all 50 states is 66.2 percent. Looking at homeownership in Florida before the recession, however, tells a much different story. In the first quarter of 2005, homeownership in the state was at a whopping 73.2 percent, the highest point up until present day and nearly three percent above the national average at the time.
Homeownership in Florida has fallen in the last decade, but that shouldn’t scare eager homebuyers from pursuing their American dream. In fact, there are many programs to help people achieve homeownership sooner rather than later.
In most cases, first-time homebuyerprograms apply to more people than the title may imply, including those who have never owned a home, people never owned a home on their own and wish to be the sole owner of a property and others who lost their home to foreclosure three or more years ago.
First-time homebuyer programs come in many different varieties, including:
  • Home loan programs.
  • Financial support targeting aid outside the mortgage.
  • Buyer education courses and workshops.
Your path to homeownership may involve qualifying for one or more program options, which are aimed at helping people overcome the costly hurdles of buying a home and maintaining it. Read on for details to help you find the first-time homebuyer program that’s right for you.

Mortgage Programs

There are, of course, nationwide homebuyer programs available to Florida residents, including Federal Housing Administration loan options for first-time homebuyers, U.S. Department of Veterans Affairs loans and other national programs. Florida residents can also explore options from bank lenders and credit unions that offer first-time homebuyer programs.
The Florida Housing Finance Corporation, often referred to as Florida Housing, is a statewide organization originally formed by the state legislature to help provide a wide range of affordable housing options for Florida residents. While individual counties or cities may offer first-time homebuyer programs specific to locals, the majority of statewide programs originate with Florida Housing. Here are the options available throughout the state of Florida:

Florida First Government Loan Program – Military Heroes Program

“Florida Housing’s programs provide assistance to eligible homebuyers by offering low-cost, 30-year, fixed-rate mortgages together with down payment and closing cost assistance,” says Taylore Maxey, press secretary for the Florida Housing Finance Corporation. Under the Government Loan Program, mortgages issued include federal programs such as FHA loans, VA loans and U.S. Department of Agriculture Rural Development loans. An additional, Florida-specific option under this program is the Military Heroes Program, which helps honorably discharged veterans and active military benefit from a lower interest rate on their first mortgage.

Florida HFA Preferred Conventional Loan Program

For borrowers who qualify for a conventional 30-year, fixed-rate loan, the HFA Preferred loan program provides the chance to benefit from lower mortgage insurance costs if they put down less than 20 percent. Maxey explains the program uses a Fannie Mae-developed loan product geared toward state housing finance agencies. Rather than helping with the down payment or mortgage costs, this program focuses on lessening the blow mortgage insurance may have on a homeowner’s monthly costs. For eligible borrowers, this program can be transformed into the HFA Preferred 3% PLUS Conventional Loan Program, an enhanced version of the original program that provides additional assistance, by including an HFA Preferred Grant of up to 4 percent of the purchase of the house to go toward the down payment or closing costs.

Florida Assist Program

This down payment assistance program functions as a second mortgage, providing borrowers with a zero percent deferred payment loan of $7,500. The borrower repays upon sale of the property, refinancing of the first (and primary) mortgage, at the end of the first mortgage’s term or if the homeowner no longer considers the property his or her primary residence.

Homebuyer Loan Program

This second mortgage program provides as much as $10,000 to eligible homebuyers. With a 3 percent fixed rate, the total loan amount is paid monthly over 15 years.

Mortgage Credit Certificate Program

Rather than targeting the mortgage itself, this program provides qualified first-time homebuyers with a federal tax credit of up to $2,000 annually for as long as they claim the property as their primary residence, pay mortgage interest and have a tax liability. Federal tax law limits deductions of state and local income, sales and property taxes up to $10,000. If a homeowner has property taxes that push the tax deduction limit beyond $10,000, the MCC Program can help offset the amount.

State Housing Initiatives Partnership program

This program doesn't fund homebuyers directly from Florida Housing but is a partnership with local governments throughout the state to encourage and create more affordable housing. “The program was designed to serve very low, low and moderate income families. Depending on your income, you could be eligible for home repair or replacement, down payment assistance, rental housing assistance and other affordable housing assistance,” Maxey wrote in an email.
While the program covers new construction, rehabilitation, financing, acquisition and down payment assistance for all types of housing, a minimum of 65 percent of the SHIP’s funds are allocated toward homeownership actions.

Other Financial Programs

While they may not directly target the mortgage itself, other financially focused programs can ease the burden of a down payment, closing costs or even the market price of a home.

HFA Preferred Grant

The HFA Preferred Grant provides down payment or closing cost assistance to qualified homebuyers by providing up to 3 or 4 percent of the home’s purchase price. Serving as a grant rather than a loan, this statewide program doesn’t have to be repaid for the assistance it provides. Eligible borrowers make up to 140 percent of the area median income, typically based on either county or metropolitan statistical area. As the Florida HFA Preferred 3% PLUS Conventional Loan Program, the grant is combined with low mortgage insurance as well.

Infill Housing Program

Some cities or counties in Florida have established infill housing programs, which are focused on helping people achieve homeownership while also maintaining long-term affordable housing options. Miami-Dade County’s Infill Housing Program, for example, offers affordable home purchases to first-time homebuyers that fall under very low-income, low-income and moderate-income rates. Very low income, in Miami-Dade county, does not exceed 50 percent of the area median income, which the county's website notes is $52,300, while low income is 80 percent and moderate income is between 80 and 140 percent of the median area income. The income limits for each group are also based on family size. The goal of the program is to help residents achieve homeownership at an affordable cost relative to their income. Additionally, when a homebuyer makes a purchase through the Infill Housing Program, she agrees to a 20-year control period where the house must be sold to another qualified buyer through the same program, ensuring affordable housing can continue to exist. After 20 years, however, the property can be sold at market rate.

Education Courses and Workshops

While most first-time homebuyers need at least some financing to be able to purchase property, mortgage assistance isn’t the only way you can benefit from a program.
Many down payment assistance programs require proof of completion of a first-time homebuyer class or workshop, and fortunately these are available throughout Florida. You can typically find first-time homebuyer classes through:
Homebuyer education courses typically provide a certificate upon completion and cover budgeting, money management, how to find and apply for a mortgage, shopping for a home and the steps leading up to closing.
Counseling agencies typically offer one-on-one assistance to help with preparing a budget, determining how credit will affect your mortgage rate and finding a program that fits your situation and needs. The City of Tampa Office of Housing and Community Development, for example, provides post-purchase counseling that includes individual guidance to help people stay on top of mortgage payments, home maintenance and community involvement.
While the classes are often geared toward first-time homebuyers, housing counseling agencies are available to anyone looking for guidance on their home, whether it’s about making a purchase, trouble making payments or how to protect the investment.
https://realestate.usnews.com/real-estate/articles/first-time-homebuyer-programs-for-florida-residents
Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com

Remodeling Magazine releases 2019 Cost vs. Value Report

Remodeling Magazine releases 2019 Cost vs. Value Report

 
WASHINGTON, D.C. – Jan. 23, 2019 – Remodeling Magazine released its 32nd annual Cost vs. Value Report, which compares the cost of popular remodeling projects to how much the investment will improve a home's resale value.
The 2019 report surveyed more than 3,200 real estate professionals about returns for 22 projects in 136 U.S. markets, an increase from 100 markets last year. The full report is posted online.
For all projects, the overall cost-to-value ratio is 66.1 percent, which is slightly ahead of last year but well below the decade-high of 71.2 percent in 2014.
As in prior years, there are significant variations in different regions. The average payback nationwide for the 22 projects in the 2019 Cost vs. Value report ranges from a high of 123.8 percent for a garage door replacement in the Pacific region, to a low of 45.0 percent for an upscale master suite addition in the mid-Atlantic region.
"With the increasing costs of building materials and labor, we urge remodelers to think like real-estate professionals first," says Clayton DeKorne, editor-in-chief of Remodeling Magazine. "When you adjust your focus to think like a broker first, you can dull clients' No. 1 pain point – cost – with a discussion of the amount that can be recouped, then go on to show them how to think like a remodeler by raising their understanding and appreciation of the total value, not just resale value, of a home."
Due in large part to sharp increases in material costs, the percentage of costs recouped at sale time is trending downward for all the replacement projects. Material costs tend to comprise a greater proportion of replacement projects compared with larger indoor remodels, however, which have a higher percentage of labor costs.
2019 top 10 projects by percentage of cost recouped
  1. Garage door replacement (97.5%)
  2. 2Manufactured stone veneer (94.9%)
  3. Mid-range minor kitchen remodel (80.5%)
  4. Wood deck addition (75.6%)
  5. Siding replacement (75.6%)
  6. Steel entry door replacement (74.9%)
  7. Vinyl window replacement (73.4%)
  8. Fiberglass grand entrance (71.9%)
  9. Wood window replacement (70.8%)
  10. Composite deck addition (69.1%)
Highlights from 2019 report
1. Rising materials costs impact rates of returnWhile the overall changes are modest, the latest Cost vs. Value report reflects the robust market the remodeling industry has enjoyed over the past year. But costs have correspondingly increased, and in some cases, significantly so. These increases are likely due to the tariffs that have roiled commodity markets, which have led to a slight downturn in the percentage of costs recouped for some projects; but overall, returns are up slightly compared to last year.
2. Curb appeal projects continue to provide the highest returns
Nine out of the top 10 high-return projects are exterior replacement – or high curb appeal – projects. The three exterior projects with the highest recoup on investment are garage door replacement (97.5%), manufactured stone veneer installation (94.9%), and a wood deck addition (75.6%). Siding replacement and window projects also provided high returns, with the highest recouping interior project being a minor kitchen remodel (80.5%).
3. New for 2019
Two new projects were added to the 2019 Cost vs. Value Report. The first is a roofing replacement job that adds standing-seam metal roofing. Compared with asphalt shingles, metal roofing costs significantly more but brings with it much greater durability. The second project is a revamp of the universal design bathroom, which was first introduced to Cost vs. Value in 2017. While the overall dimensions and features of the current project are comparable, the finishes and mechanicals – including tiled walls and shower, humidity-controlled ventilation and radiant-heat floors – are more consistent with an upscale project than the previous specs allowed.
4. Think like a broker
The reason for high returns on exterior projects, and especially façade facelifts, stems from the valuations set by the real estate community. "Curb appeal" and "first impressions" are central to a real estate professional's estimation of resale value. Granted, a home's exterior will only persuade potential buyers to see more, and first impressions can vary from one individual to the next. But the impact these impressions make is critical in setting the stage for what a buyer is willing to pay for a home.
© 2019 Florida Realtors®

Home remodeling projects owners most regret

Home remodeling projects owners most regret

 
NEW YORK – Jan. 18, 2019 – Remodeling isn’t as easy as it looks on TV, but many owners don’t realize it until they tackle a job on their own.

Nearly two-thirds of homeowners who’ve attempted a do-it-yourself house project say they regret not calling in an expert on at least one of their projects, according to a new survey from ImproveNet of about 2,000 Americans.
But the “save money” motivation is a big driver. On average, homeowners hoped to save at least 60 percent in costs by bypassing a professional and trying to do it themselves, the survey found. A separate study by the National Association of Realtors® shows a bigger attraction to DIY (do it yourself) home projects, particularly among younger generations.
On average, homeowners surveyed by ImproveNet attempted eight DIY house projects – but about a third admitted to later hiring a professional to redo the job.
“We’ve seen people take on a lot more than they could deal with,” says Joanne Theunissen, the remodeling chair of the National Association of Home Builders. “Be cautious. If it looks easy on TV, understand it’s not.”
The project that homeowners say they most regret attempting themselves is installing floor tiles, particularly in the master bath, according to the survey. Getting ceramic tile level and grouted correctly can be very tricky and require many thorough steps, Theunissen says.
Fifty-five percent of DIYers say their projects took longer to complete than they expected, and more than half said their project was physically more difficult than they anticipated. Fifty-five percent also said their finished project didn’t look as good as they had hoped – and about 8 percent said their homes were damaged because of their DIY attempts.
The top 10 most regretted DIY home improvement projects, according to ImproveNet, are:
  1. Installing floor tiles
  2. Replacing a ceiling
  3. Refinishing hardwood floors
  4. Installing carpets
  5. Finishing the basement
  6. Installing hardwood floors
  7. Refinishing cabinetry
  8. Installing sprinklers
  9. Installing showers and baths
  10. Painting home interiors
Source: “Study: The Home Improvement Projects You’ll Regret,” Improvenet.com (2019) and “The Home Improvement Projects DIYers Regret the Most—You’ll Never Guess No. 1,” realtor.com® (Jan. 8, 2019)

87,000 Fla. homeowners dropped by property insurers in 3Q

87,000 Fla. homeowners dropped by property insurers in 3Q

 
TALLAHASSEE, Fla. – Dec. 10, 2018 – Between hurricanes and a hullabaloo over water claims, home insurers dropped the policies of more than 87,000 Floridians in the third quarter of 2018 alone, state records show.
The stakes for household budgets run high in the nation's most expensive property insurance market, but it's no simple shopping chore as big national companies have largely pulled back and left the field to smaller, state-based insurers. As another hurricane season ends, it's one more reason for consumers to arm themselves with knowledge about their options in the updated Palm Beach Post Insurance Explorer. The online guide offers multiple financial-strength ratings and complaint information analyzed by the newspaper for more than 100 property insurers serving the state.
"I don't know anything about these companies," said homeowner Matt Wolfe in Palm Beach Gardens. Two Florida-based companies have dropped him since he filed his first claim in 17 years last year, involving water damage from a washing-machine mishap, he said.
He said he is paying more than he ever has with the state's last-resort insurer, Citizens Property Insurance Corp. Citizens has proposed an 8 percent premium increase for 2019, postponing final action until a meeting this month.
The newspaper's guide is "useful because it provided a lot of information on companies I otherwise would not have known anything about," he said.
The guide provides information helpful across the state, not just one region, said Apopka insurance agency owner Dexter Chase. "I use the Explorer all the time and refer my clients there so they don't have to take my word for it when reviewing a company," Chase said this year. "It's a great tool."
In no state is shopping around more important. Florida ranks No. 1 in home insurance costs with an average premium of more than $2,000, nearly double the U.S. average. Plenty of folks near the coast pay double or triple that, or more.
Florida's three largest counties rank dead last in a home insurance affordability index from the Florida Chamber Foundation's TheFloridaScorecard.org, with partner companies Milliman and Rating Dynamics.
The index compares average premiums to household income. Miami-Dade Co. ranked least affordable at No. 67. Broward County followed at 66 and Palm Beach County at 65. On the west coast, Sarasota County checks in near the middle at No. 31, Hillsborough close by at 38 and Pinellas on the pricier end at No. 58. Polk County ranks No. 22. Duval County in the state's northeastern end ranks a relatively affordable No. 8.
The most affordable county for home insurance? Sumter County, near the state's center.
Hurricanes including Irma and Michael have generated more than $15 billion in claims between them in Florida in the past two seasons. But the end of the 2018 hurricane season, Nov. 30, did not shut down all the headaches.
Citizens officials also cite "the impact of skyrocketing non-weather-related water loss claims in South Florida."
That means plumbing leaks, roof problems and other claims not directly tied to storms. Citizens and other insurers say the costs of such claims are increasingly inflated by lawsuits and assignment of insurance benefits (AOB) to contractors, public adjusters and attorneys, who in turn shoot back that insurers are unfairly denying or underpaying claims.
Insurers want state legislators this spring to change rules they say make it too easy to go to court for bigger payouts, but that fight has resulted in a stalemate for more than half a dozen years.
Meanwhile, consumers are left to sort out their options. In tens of thousands of cases, their policies have not been renewed, either because the insurer dropped them or the customer chose to move on, sometimes after rate hikes or claims tussles.
Half of the state's top 10 property insurers served fewer customers at the start of October than they did a year earlier, state records show. The churn gets more intense in insurance hot spots. In Palm Beach County, eight of the top 10 insurers shed customers in that period.
Statewide, Florida's largest insurer, Universal Property & Casualty Insurance Co. of Fort Lauderdale, gained a net 24,000 customers to more than 636,000 over a year, but it did not renew the policies of more than 16,000 customers in the third quarter of 2018, records show.
The No. 2 insurer, Citizens, trimmed down to about 438,000 customers from 452,0000.
Within Palm Beach County's market, People's Trust Insurance Co. of Deerfield Beach, for example, served more than 10,000 customers a year ago but fewer than 8,000 by Oct. 1 of this year.
That's creating opportunities for other, sometimes smaller companies to move up. Olympus Insurance Co. of Palm Beach Gardens ranked 20th in Palm Beach County market share with about 6,700 customers at the end of 2017's third quarter, but climbed to No. 12 with more than 9,700 a year later, according the records with the Florida Office of Insurance Regulation.
For consumers, the challenge can be taking the measure of insurers who don't necessarily come with familiar brand names, big advertising budgets or their own set of exclusive agents.
Subject to approval by state regulators, Citizens has been considering a raise in the average cost of its standard HO3 homeowner's policy to about $2,800 statewide in 2019. The projected increase would push the average annual policy cost to more than $3,000 in Palm Beach County and nearly $4,000 in Monroe County.
That's why consumers need all the information they can get. More than a few homeowners might be able to sympathize with how Wolfe felt after two insurers dropped him: "Angry and a little bit panicked."
Copyright © 2018 The Palm Beach Post (West Palm Beach, Fla.), Charles Elmore. Distributed by Tribune Content Agency, LLC.

Average homeowner gained $12K in equity in 3Q

Average homeowner gained $12K in equity in 3Q

 
NEW YORK – Dec. 10, 2018 – Homeowners are still finding plenty of equity in their homes, but the gains are slowing. The average homeowner gained $12,400 in home equity between the third quarter of 2017 and the third quarter of 2018, according to CoreLogic's latest Home Equity Report. However, that's lower than the more than $16,000 year-over-year gain in equity reported in the second quarter, CoreLogic notes. The report found that homeowners with a mortgage saw their equity rise by 9.4 percent over the past year.
The average Florida homeowner also saw a gain in 3Q 2018, but it lagged the overall U.S. average a bit at $10,000.
"On average, homeowners saw their equity increase again this quarter, but not nearly as much as in previous quarters," says Frank Nothaft, CoreLogic's chief economist. "The lower year-over-year gain reflects the slowing in appreciation."
Still, nearly every state posted an increase in equity among homeowners in the third quarter. Western states saw the most significant increases in the third quarter, according to the report. For example, California homeowners recorded an average gain of about $36,500 in home equity in the third quarter; Nevada homeowners saw a $32,600 uptick.
Source: CoreLogic

Should buyers try to pay off the mortgage before retiring?

Should buyers try to pay off the mortgage before retiring?

 
NEW YORK – Nov. 13, 2018 – Most people would be better off not having mortgages in retirement. Relatively few will get any tax benefit from this debt, and the payments can get more difficult to manage on fixed incomes.
But retiring a mortgage before you retire isn't always possible. Financial planners recommend creating a Plan B to ensure you don't wind up house rich and cash poor.
Why a mortgage-free retirement is usually best
Mortgage interest is technically tax deductible, but taxpayers must itemize to get the break – and fewer will, now that Congress has nearly doubled the standard deduction. Congress' Joint Committee on Taxation estimates 13.8 million households will benefit from the mortgage interest deduction this year, compared to more than 32 million last year.
Even before tax reform, people approaching retirement often got less benefit from their mortgages over time as payments switched from being mostly interest to being mostly principal.
To cover mortgage payments, retirees frequently have to withdraw more from their retirement funds than they would if the mortgage were paid off. Those withdrawals typically trigger more taxes, while reducing the pool of money that retirees have to live on.
That's why many financial planners recommend their clients pay down mortgages while still working so that they're debt-free when they retire.
Increasingly, though, people retire owing money on their homes. Thirty-five percent of households headed by people ages 65 to 74 have a mortgage, according to the Federal Reserve's Survey of Consumer Finances. So do 23 percent of those 75 and older. In 1989, the proportions were 21 percent and 6 percent, respectively.
But rushing to pay off those mortgages may not be a good idea, either.
Don't make yourself poorer
Some people have enough money in savings, investments or retirement funds to pay off their loans. But many would have to take a sizeable chunk of those assets, which could leave them short of cash for emergencies or future living expenses.
"While there are certainly psychological benefits related to being mortgage-free, financially, it is one of the last places I would direct a client to pay off early," says certified financial planner Michael Ciccone of Summit, New Jersey.
Such big withdrawals also can shove people into much higher tax brackets and trigger whopping tax bills. When a client is wealthy enough to pay off a mortgage and wants to do so, CFP Chris Chen of Waltham, Massachusetts, still recommends spreading the payments over time to keep the taxes down.
Often, though, people in the best position to pay off mortgages may decide not to do so because they can get a better return on their money elsewhere, planners say. Also, they're often the ones affluent enough to have big mortgages that still qualify for tax deductions.
"Mortgages many times have cheap interest rates that are deductible and thus may not be worth paying off if your portfolio after taxes can outpace it," says CFP Scott A. Bishop of Houston.
When a payoff isn't possible, minimize the mortgage
For many in retirement, paying off the house simply isn't possible.
"The best case 'wishful thinking' scenario is that they'll have a cash windfall via an inheritance or the like that can be used to pay off the debt," says CFP Rebecca L. Kennedy of Denver.
In pricey Los Angeles, CFP David Rae suggests mortgage-burdened clients refinance before they retire to lower their payments. (Refinancing is generally easier before retirement than after.)
"Refinancing can spread your remaining mortgage balance out over 30 years, greatly reducing the portion of your budget it eats up," says Rae, whose office is in West Hollywood.
Those who have substantial equity built up in their homes could consider a reverse mortgage, planners say. These loans can be used to pay off the existing mortgage, but no payments are required and the reverse mortgage doesn't have to be paid off until the owner sells, moves out or dies.
Another solution: downsize to eliminate or at least reduce mortgage debt. CFP Kristin C. Sullivan, also of Denver, encourages her clients to consider this option.
"Don't fool yourself that your grown kids will be back visiting all the time," Sullivan says. "Certainly don't keep enough space and comfort for them to move back in with you!"

When is it OK to tap home equity?

When is it OK to tap home equity?

 
NEW YORK – Sept. 21, 2018 – As a result of rising home values, many homeowners find that they're sitting on a record amount of home equity that they could access by refinancing or taking out a second mortgage. However, people have been shy about tapping into that wealth, in part because the home prices decreases during the recession that left many owners underwater.
However, a new survey from Bankrate.com of 1,000 consumers shows that homeowners have plenty of legitimate reasons to take out a loan to unlock it.
Consumers' "growing penchant toward debt might make it tempting to tap into their home's value," says Greg McBride, Bankrate's chief financial analyst.
Nearly three quarters of homeowners recently surveyed say that home improvements or repairs are an acceptable reason to access the equity they have in their homes. In fact, more than half of those surveyed say that is the best reason to apply for a cash-out refinance loan or home equity line of credit (HELOC).
Survey respondents cited other reasons they'd be tempted to use their home equity, including to consolidate debt (44 percent);
  • Pay for tuition or other educational expenses (31 percent)
  • Keep up with regular household bills (15 percent)
  • Make other investments (12 percent)
  • Big purchases (9 percent believe it would be a good idea to use home equity to purchase big-ticket items, such as appliances and furniture)
People with lower incomes were more likely than higher earners to say it's OK to tap into home equity to meet ordinary expenses, the survey found; and millennials seem more willing to tap into home equity than older generations: 22 percent of millennial respondents say that borrowing from home equity to pay day-to-day bills is a viable option, compared with 12 percent of members of older generations.
Even homeowners with doubts about tapping in their home equity may be tempted to do so. Many households are overstretched financially, which could heighten the temptation to borrow. According to a recent Federal Reserve report, 44 percent of Americans say they could not cover a $400 emergency expense out of pocket.
"With the sorry state of emergency savings and increasing levels of consumer debt in a rising interest-rate environment, it's a matter of 'when' not 'if' more homeowners turn to home equity to fund home improvements and repairs, or consolidate debt," McBride noted in the survey's report.
Using equity to pay for home improvements that increase the value of your home can help rebuild any of the equity taken out, McBride says. The new tax law that went into effect this year also allows homeowners to deduct the interest they pay on home equity loans and HELOCs if the proceeds are used to finance improvements that add significant home value.
Still, financial experts recommend caution for homeowners thinking about borrowing against their home equity, especially because using a home as collateral means they could lose it if they're unable to repay the lender.
"For a disciplined homeowner, using home equity to consolidate debt at a lower interest rate can be a savvy way to cut interest costs and accelerate debt repayment," McBride says. "But for undisciplined homeowners, it ties up an asset that is put at further risk of foreclosure while the temptation to run up high-cost debt all over again proves difficult to resist."
Source: "Renovations Best Reason to Tap Home Equity, Homeowners Say," Bankrate.com (Sept. 19, 2018)
© Copyright 2018 INFORMATION INC., Bethesda, MD (301) 215-4688

Devastating hurricanes have a few beneficial side effects

Devastating hurricanes have a few beneficial side effects

 
NEW YORK – Sept. 21, 2018 – Hurricanes impose huge losses of wealth and initially slow regional economies, but over time they can be a tonic that creates more prosperous communities. After Florence, resort areas along the coast and thriving commercial areas inland are likely to rebuild quickly, but poorer, rural inland communities may be left to languish.
Initial estimates of the destruction from the storm range of $17 billion to $22 billion but may go much higher. The sums paid out to homeowners will only be a fraction of losses because many homeowners' policies do not include flood coverage and often contain high deductibles for hurricane damage.
As hurricanes go, Florence could be among the 10 most costly to hit the United States but won't be near the top of the list. When Katrina hit New Orleans in 2005, the figure was $161 billion, and last year, Maria hit Puerto Rico and Harvey trounced Texas with losses of $90 billion and $125 billion.
Florence's path includes valuable beach homes, hotels and attractions, and inland activities vital to the national economy – Boeing, Daimler and Volvo factories halted production ahead of the storm.
Hurricanes hitting those areas provide opportunities to start over and replace with larger and more modern facilities. After Hugo (1989) and more recent storms hit the Outer Banks, smaller beach homes on large plots were replaced by structures with more bedrooms, baths and attractive kitchens that could more comfortably accommodate large families and command higher rents. Insurance settlements permitted owners of aging restaurants and amusements to reinvest in more attractive businesses.
This increased the value of the shoreline and nearby shopping malls and other businesses. It permitted owners who were inadequately insured to more easily borrow to rebuild or recoup some of their losses by selling land at better prices.
Seventy percent of the flood damage imposed by Harvey, which hit Texas last year, was not insured. Many homeowners took their chances with the weather and got burned, or were not aware that ordinary homeowners' policies often don't cover flooding. Many moderate-income families and smaller businesses are struggling and may never find the money to rebuild.
In some rural areas, far from coveted beachfront and big employers, the values of property and homes were well below the regional and national averages before the storm. Those communities may never adequately recover – land values, if anything, will lag further and permanently.
It seems homeowners and businesses buy insurance immediately after a hurricane, become complacent as storm memories fade and then get caught when disaster strikes again. Communities hit by Florence are ripe for a repeat of such tragic situations.
The National Flood Insurance program has about 134,000 policies in place in North Carolina – less than 15 percent of residences and down 3.6 percent from 2013.
Economic impact less than thought
Storms temporarily depress regional economies but not as much as folks think – a lot of activity gets shifted around. Folks evacuated, factories closed and movie theaters lost a lot of patronage ahead of Florence, but inland shelters hired staff, fleeing evacuees purchased gas and groceries, hardware stores did a robust business in sandbags, emergency pumps and the like, and livestock producers piled up on feed and fuel to keep their animals safe in barns.
When the storm passes, lost production at aircraft and auto factories will be made up and the rebuilding of homes and commercial establishments will have profound multiplier effects for the local economy.
On net, storms tend to subtract from GDP in the early months and add to it in later months – leaving the economy, on balance, with few overall effects after a year.
We are poorer – property and wealth are destroyed. Payouts from insurance companies reduce shareholder value. Uninsured property owners in more attractive locations may get a lift in land values, but those gains do not fully compensate for ruined residential and commercial structures.
Those who plan ahead – buy enough of the right insurance and don't build on the shore or flood plains unless their business interests absolutely require – generally recover. Investors from outside the region get opportunities to bring in new capital to improve local economies.
Those that take their chances with the weather lose. They get saddled with bigger mortgages or too little money to rebuild and broken lives.
Copyright © 2018 News World Communications, Inc.; Peter Morici is a professor at the Smith School of Business, University of Maryland, and former chief economist at the U.S. International Trade Commission.

Most vacation buyers want income – not family getaways

Most vacation buyers want income – not family getaways

 
AUSTIN, Texas – Sept. 17, 2018 – The international market for second homes changed significantly over the past ten years. Buyers now prioritize rental income over purchasing exclusively for their own use, according to a new international survey – Spotlight: Second Homes – Global Trends in Ownership and Renting – from real estate adviser Savills and HomeAway.
In the 1970s, nine out of 10 owners kept their second homes to themselves. Even as recently as 2000, eight out of 10 owners never rented their properties to travelers. A period of rapid change now finds that more than two-thirds of owners rent their second homes for at least part of the year to cover some or all of their ownership costs.
For the first time, owners' primary motivation for ownership is rental income potential, which has overtaken family getaways as the initial use for a second home.
"In a low-interest rate environment, investors are seeking out income-generating assets," says Paul Tostevin, associate director, Savills world research. "Today's second-home buyers want properties to work for them financially, and they are increasingly looking not just to cover costs but to turn a profit."
The credit-fueled boom of the early 2000s and online expansion of the travel industry triggered rapid growth in the market for additional vacation homes across the U.S. and Europe. Low-cost airlines opened new destination choices overseas. British buyers became particularly active in second-home acquisition overseas.
When the global financial crisis hit, national housing markets contracted and demand for second homes fell. The market retreated to prime, established locations, led by wealthy, capital-rich individuals with little or no reliance on borrowing. While growth resumed in recent years, however, the sector looks very different, with smaller and cheaper properties leading the market and buyers attuned to the potential for income.
Traveler demands have also changed. With more travelers using online marketplaces for short-term rental accommodation, the market has become much more accessible for owners to rent their properties, even beyond the traditional family holiday at the beach or ski slopes.
"Global tourism continues to grow, with international tourist arrivals up by seven percent last year to a record 1.3 billion. At the same time, the rapid expansion of online vacation home platforms … opens the market to new target groups and makes it much easier for owners to make their properties income-producing," adds Tostevin.
Based on the survey sample, the average price of a property purchased last year stood at $291,000 – 37 percent less than a decade ago. Just over a third (34 percent) of properties bought were condos, up from a quarter over the last 10 years, reflecting the changing nature of the second-home market.
A third of all owners cover costs with rental income, and another third make a profit. The average gross yield across the sample stands at 6.4 percent, or 3.9 percent after costs, but excludes taxes.
In the U.S., Florida is top of the list for ownership, accounting for 14 percent of second homes, followed by California (7 percent) and North Carolina (4 percent). Americans are the primary international investors of vacation homes in neighboring Mexico and Canada.
Seventy percent of U.S. owners completely cover the cost of ownership with rental income.
British second-home buyers shop more widely than all other nationalities represented in the survey, with only 24 percent of second homes located in the UK. France accounts for 19 percent of properties owned and Spain 16 percent, while the top three location choices by international owners are The Algarve (5 percent), Costa del Sol (4 percent) and Costa Blanca (4 percent).
Similarly, only a quarter of Dutch-owned second homes are in the Netherlands. Across all other nationalities represented in the survey a majority own second homes in their own country. A very clear majority of French (86 percent) and American (85 percent) owners favor their home turf.
The Spanish, Italian and Portuguese – all countries favored by vacationers – strongly favor their own countries, with less than 5 percent of their additional homes bought overseas.


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