A look at Biden’s first 100 days and his impact on housing

A tax credit for first-time homeowners was one of his key campaign promises

With Friday marking 100 days since President Joe Biden took office, HousingWire reviewed the actions he’s taken on housing during that time — including yesterday’s announcement of a $1.8 trillion spending plan that would eliminate a “special real estate tax break” for certain investors.

As a candidate, Biden proposed a $600 billion housing plan aimed at improving affordability, ending discrimination, protecting consumers and improving energy efficiency. Of special note, the former vice president also said he would introduce a $15,000 tax credit for first-time homebuyers, build millions of units of affordable housing and cap payments for certain renters.

Here’s what he’s done so far.

The first-time homebuyer tax credit is now a bill

One of the key planks of candidate Biden’s housing platform was the idea of a first-time homebuyer tax credit. On April 26, United States Rep. Earl Blumenauer, D-Ore., and Rep. Jimmy Panetta, D-Calif., introduced new legislation called the “First-Time Homebuyer Act.” The bill would provide a tax credit for first-time homebuyers of up to 10% of the home purchase price, or $15,000. In order to be eligible for the full credit, potential buyers must not have owned or purchased a home within the past three years.

The program is targeted to low- and middle-income earners making no more than 160% of the area median income, and the home’s purchase price must be no more than 110% of the area median purchase price. Borrowers could claim the credit for primary residences purchased after Dec. 31, 2020. The house has to be a primary residence for at least four years, or borrowers would face taxes to recover a portion of the credit.

Several weeks ago, a separate bill was introduced to bolster homeownership among those who experienced systemic housing discrimination. The down-payment assistance bill would provide $25,000 to first-time homebuyers, but only those who are also first-generation homebuyers and economically disadvantaged. David Dworkin, president of the National Housing Conference, told HousingWire that multigenerational homeownership is a “quintessential component of why and how people become homeowners.”

The American Families Plan and 1031s

In his first joint address to Congress on Wednesday, Biden unveiled plans for his $1.8 trillion American Families Plan, which focuses on federal investment in education, child care and paid family leave. It’s essentially his second-half plan to boost the country’s economy, following his $1.9 trillion American Rescue Plan he signed into law last month.

Part of the American Families Plan is the elimination of 1031 exchanges in cases where the gains are more than $500,000. A 1031 exchange allows real estate investors to defer capital gains taxes by funneling the proceeds from a sold property into a new one.

The elimination of this program for high-income investors could cause them to hold on to properties for longer that they ever have before — and may have the effect of decreasing supply and demand.

To offset costs for the American Families Plan, the Biden administration wants to raise the corporate tax rate from 21% to 28%, which, when combined with measures designed to stop offshoring of profits, would fund the entire plan within 15 years, according to the White House.

The tax hike would essentially roll back tax cuts from former President Donald Trump’s 2017 bill, which capped the amount of state and local taxes (SALT) that could be deducted from federal income taxes at $10,000.

COVID-19 response

Biden was, of course, elected during the height of the COVID-19 pandemic, as millions struggled to pay their mortgages or rent. He quickly moved to extend the federal eviction and foreclosure moratoriums — twice — and distributed through Congress $27 billion in emergency housing vouchers and rent relief. 

American Rescue Plan or Infrastructure Plan

Biden has made a point to focus on rebuilding the country from the pandemic, but he’s also been pushing for the rehabilitation of affordable housing. Part of the $2 trillion American Rescue plan calls for the construction of 500,000 homes for low- and middle-income buyers, while also allocating $40 billion for the country’s public housing system.

(Housing Wire)

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Older Millennials Are Making This Huge Housing Mistake

Overspending on housing is a trap many older millennials fall into.

Housing is the typical American's largest monthly expense -- but it's a cost that should still be kept in check. As a general rule, it's a good idea to keep housing costs at or below 30% of your take-home pay. Doing so should, in theory, free up enough money for other expenses and keep debt out of the picture.

For renters, that 30% is pretty simple to calculate -- it's the cost of rent. For homeowners, that 30% includes a monthly mortgage payment, property taxes, and homeowners insurance.

But older millennials may be having a hard time staying within these guidelines. According to a recent survey conducted by The Harris Poll on behalf of CNBC Make It, the average older millennial (ages 33 to 40) spends a median amount of $1,200 a month on housing costs. But workers in that age group only take home about $3,200 a month. This means the typical older millennial is spending more than the recommended 30% of income on housing -- and is risking serious debt in the process.

Are you overspending on housing?

Let's be clear -- in some markets (like New York City and San Francisco), it's pretty much impossible to keep housing costs to 30% or less of your income. But in many parts of the country, it is doable, and if you live in one of those areas, you'd be wise to stick to the 30% rule.

If you overspend on housing month after month, you could risk falling behind on other financial goals, like saving for retirement. You might also put yourself at risk of racking up debt if you need to charge other expenses on a credit card.

That's why you may need to reconsider your housing situation if you're spending well above the recommended 30% of your income. If you're a renter, you can look at downsizing or moving neighborhoods once your lease expires. Though you'll spend some money to transport your belongings from one home to the next, you may be able to do so relatively cheaply -- especially if you don't have a ton of furniture and have a couple of friends with pickup trucks who can help you out.

If you own a home, shedding your housing costs is a lot more complicated. One option may be to appeal your property taxes if you feel your home is overvalued. Each year, you'll get an assessment notice telling you what your property is worth. Your property tax bill is calculated by taking your home's assessed value and multiplying it by your local tax rate. If you can lower that assessment, your tax bill should shrink. You can also try shopping around for a better deal on homeowners insurance.

Finally, you can see if refinancing your mortgage will save you money. If you can lower the interest rate on your home loan by a decent amount, it could result in smaller monthly payments -- and more money left over to cover your other bills.

If you're currently in the market to buy a home, you have a solid opportunity to avoid falling into the trap so many older millennials have landed in. To get started, you can use a mortgage calculator to figure out how much house you can afford without exceeding that 30% threshold. Though there are some exceptions to the 30% rule, for the most part, it's a good guide to follow. If you manage to keep your housing costs low from the start, you can avoid some of the financial problems so many of your peers have likely already faced.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.

Follow the Motley Fool for more information like this.

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Young Adults' Relocations Are Reshaping Political Geography

Young adults are leaving states such as New York and California for new destinations including Colorado, Florida and Texas

The millennial generation’s choosing of where to live has reshaped the country's political geography over the past decade. They've left New York and California and settled in places less likely to be settings for TV sitcoms about 20-something urbanites, including Denver, Houston and Orlando, Florida. Drawn by jobs and overlooked cultural amenities, they've helped add new craft breweries, condominiums and liberal voters to these once more-conservative places.

The U.S. Census Bureau this coming week is expected to formally tally this change by releasing its count of population shifts in the once-a-decade reallocation of congressional seats. It's is expected to lead to the Sun Belt gaining seats at the expense of states in the north.

Most projections have Texas gaining three seats, Florida two and Arizona, Colorado, Montana, North Carolina and Oregon one each. Expected to lose seats are Alabama, Illinois, Michigan, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, West Virginia — and California.

The relocations have reshuffled politics. Once solidly conservative places such as Texas have seen increasingly large islands of liberalism sprout in their cities, driven by the migration of younger adults, who lean Democratic. Since 2010, the 20-34-year-old population has increased by 24% in San Antonio, 22% in Austin and 19% in Houston, according to an Associated Press analysis of American Community Survey data. In November's election, two states that also saw sharp growth in young people in their largest cities — Arizona and Georgia — flipped Democratic in the presidential contest.

These demographic winners are almost all in the Sun Belt, but climate is not the only thing they have in common.

“These places are growing not just because they're warmer, it's because that's where the jobs are and young people are moving there," said Ryan Wiechelt, a geography professor at the University of Wisconsin-Eau Claire.

There are other drivers of population growth, such as immigration from overseas and childbirths. But as foreign immigration tapered off during the decade, then plummeted during the pandemic, internal relocations have become an increasingly big factor in how the country is re-sorting itself, demographers say.

Places with jobs have long attracted transplants, but this shift has been different because housing prices have risen so much in previous job clusters — Boston, New York and Silicon Valley, for example — that cost of living has become more of a factor in relocations, said Daryl Fairweather, chief economist for Redfin.

“Since the last housing crisis, young millennials have had to move to places with really strong job markets,” Fairweather said. “Now, during the pandemic I think that is changing — you don't have to move to San Francisco if you want a job in tech.”

Plenty of young people still move to traditional destinations such as New York and California to start careers, experts say. They just leave them relatively quickly now, with a wider variety of alternative job centers to choose from. “Every year these places attract a lot of young people, but they lose more,” William Frey, a demographer at the Brookings Institute, said of traditional, coastal job magnets, joking that his own hometown of Washington, D.C. “rents” young people.

Instead, places with both cheaper housing, growing economies and recreational amenities have become popular. Colorado was the third most popular place for young adults to relocate to since 2015, gaining more than 20,000 new young adults from elsewhere each year, according to Frey's analysis of early census data. The state has boomed over the past decade as its libertarian lifestyle, outdoor attractions and growing knowledge-based economy have drawn young people from across the country.

As a result, Denver's skyline is regularly pockmarked with construction cranes. Apartment complexes are springing up from parking lots. For when those renters want to have children and buy homes, waves of new suburban subdivisions are emerging in the shadow of the Front Range of the Rocky Mountains.

As mostly college-educated transplants have relocated to Denver and its satellite communities, Colorado has gone from being a solidly Republican state to a competitive swing state to a solidly Democratic one. It's a pattern that some political experts expect could be replicated in other states importing loads of young people, even traditionally conservative Texas.

Sydney Kramer is typical of many new Colorado arrivals. The 23-year-old moved to the university town of Boulder in January to begin graduate studies in atmospheric and oceanic sciences. She could have stayed in Miami, a natural location for someone of her interests and where she finished her undergraduate studies. But Kramer was depressed by Florida's anti-science turn under Republican state control.

“The government and policy hasn't necessarily caught up there yet,” Kramer said of Florida, noting that state regulations barred the use of the term “climate change” in some official documents under the previous governor. “Everybody here has a high level of education, is really educated about climate change.”

“This,” she said of Boulder, with its wealth of environmental and forecasting organizations, “is just a really great place to be for my industry.”

A New Jersey native who did not want to deal with New York City's high rents, Kramer has been impressed by how her new neighbors talk excitedly about hiking, camping and skiing and at the combination of outdoor activities and urban amenities the area offers. “It's a really wonderful place to be for everything you get for the cost of living,” she said.

Visit ABC for more.

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Apartment Rents are On the Rise

Covid-19 vaccine rollout, higher employment bring more people back into cities looking to rent

Americans are paying more to rent homes again, ending a stretch during the pandemic when they enjoyed flat or falling rental prices and widespread landlord concessions.

Federal government stimulus payments and expanding payrolls are boosting savings, enabling building managers to lift rent prices on apartments and houses nationwide. A record-low inventory of homes for sale also leaves more people renting.

Median asking rent rose 1.1% on an annual basis in March to $1,463 a month across the country’s 50 largest markets, according to a report from Realtor.com. That marked the first month where the pace of rent growth had increased since last summer, the report showed.

The Covid-19 vaccine rollout and rising employment are prompting more people to move back into cities and look for apartments to rent, which is helping landlords fill their empty apartments with fewer, if any, freebies.

Landlords in much of the country had cut asking rents during the pandemic. Many also offered concessions—from one or two months of free rent to American Express gift cards—to keep tenants in their buildings during Covid-19. Many renters, especially in large cities, stopped renewing their leases. They left to buy homes, or if they lost jobs, to move in with friends or family. Before the pandemic, landlords had enjoyed years of uninterrupted rent increases.

Rising rents add to the mounting evidence that the economy is rapidly gaining strength. Analysts are forecasting that the U.S. economy could grow around 7% in 2021, which would be one of its strongest years in decades.

Higher rents could play a role in an anticipated rise in inflation, unleashed by waves of stimulus checks, low borrowing rates and pent-up demand after months when the pandemic damped consumer spending. Rent accounts for about one-third of the consumer-price index, which economists expect to tick higher in the months ahead.

“The key question is how long does it stick around?” said Danielle Hale, chief economist at Realtor.com. News Corp, which owns The Wall Street Journal, also operates Realtor.com.

Rent increases could further strain the one in six American tenants who are in debt because of missed rent payments.

Real-estate investors believe the rental market is primed for another period of price growth, comparable to the years that followed the financial crisis, when effective rents outpaced inflation. In some markets, like Nashville and Denver, they increased more than 10% for multiple years, said Matthew Lawton, an executive in the capital-markets division at brokerage JLL.

“History is going to repeat itself,” he said.

The hottest home-sales market in 15 years is also expected to prop up rents. As more people are priced out of the for-sale market, they will flock to the only other option: renting.

“A lot of these markets with rent increases are also markets that have pretty substantial home-price increases,” Ms. Hale said.

Rent increases now span the income spectrum and blanket much of the country. In upscale suburban areas outside large cities, like Greenwich, Conn., near New York City, a big factor is that home prices are up and there is very little inventory left in town to buy.

“It’s creating opportunities on the rental side,” said Greenwich real-estate developer Eric Schwartz, whose firm is preparing to offer rental units in a new 59-apartment complex in Greenwich. He said he has received more than 500 inquiries.

Owners of middle-income apartment buildings in places like Tampa, Fla., and Chicago, said they are raising rents after months of discounts. Some landlords had problems collecting rent from tenants who lost work last year and vacancy rates rose above 15% at their buildings, rare before the pandemic.

“We’re raising rents, even on current residents, maybe 3% from the end of last year,” said Karlin Conklin, an executive at property-investment company Investors Management Group. “And brand-new people are coming in the door.”

Asking rents in traditionally lower-cost, midsize cities like New Orleans, Memphis, Tenn., and Richmond, Va., are up, too. They have risen 10% or more in the past year, according to Realtor.com.

Even in New York City and San Francisco—where rents tumbled by double-digit percentages last year over 2019—there are signs of a turnaround. San Francisco rent rose 3.4% in March over the month prior, according to listings website ApartmentList, the largest monthly rental increase in the city since the pandemic began. And in Manhattan, though there is conflicting data, some reports point to the beginning of a recovery, with rental prices rising modestly since the fall and high vacancy rates slowly starting to reverse, too.

“For a certain time, it seemed like it didn’t matter what you gave [in terms of concessions], the demand just wasn’t there,” said Robert Nelson, a New York apartment landlord. Now, he says he has experienced a jump in new leases across his building portfolio this spring.

In areas where rents were most heavily discounted, it could take years before rents are back to pre-pandemic levels. More new apartment buildings are also expected to open this year than did last, and that additional supply could damp rent growth in certain markets, analysts say.

But more workers returning to offices could boost rents further, and already has in certain cities. “The places that are reopening most quickly, like Florida and Texas…that’s where the demand is the strongest,” said Greg Willett, chief economist at rental-property software firm RealPage Inc.

Get the full story at Wall Street Journal.

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6 Mortgage Terms People Get Confused By the Most - And What They Actually Mean

Unless you’re a real estate pro, many common mortgage terms may be lost on you, which can make buying a home or applying for a refinance frustrating.

That’s especially true if you find yourself saying, “LOL what?” every time your lender uses common mortgage terminology like 1003, LTV, and DTI. Don’t worry, though, you’re not alone in your confusion. According to the lenders I spoke with, these are the terms their borrowers have the most trouble with. 

Debt to Income Ratio (DTI) 

One term that’s important — yet often misunderstood — in the mortgage application process is debt-to-income ratio, according to Keosha Burns, executive director and the senior advisor for community and affordable lending at JPMorgan Chase. “A person’s debt-to-income ratio (DTI) reflects their total debt due each month against their monthly gross income,” or your income before taxes are taken out, she says. “In addition to your credit score, lenders use DTI to help determine how much a prospective borrower may qualify for.” Burns says that most loan programs require between a 40 to 50 percent DTI.  

The Deed vs. the Note

These two important mortgage documents are needed to complete every mortgage transaction. “The Deed is signed by the people who will own the property (the buyers), and it states if there is a mortgage or not,” explains Ericka York, senior loan officer with Fairway Independent Mortgage. The Note, on the other hand, lays out the terms of the mortgage (and actually has nothing to do with the deed). “It is the promise to pay back the loan amount and the terms of said loan,” York says.

Loan-to-Value (LTV) Ratio

You may have heard the term loan-to-value (or LTV) tossed around when discussing your loan amount. An LTV ratio is a way for lenders to turn the difference between your current loan amount and the value of your property into a percentage. “For example, a loan amount of $150,000 for a home valued at $200,000 would have an LTV ratio of 75 percent,” explains Burns. 

The Annual Percentage Rate (APR) vs. the Interest Rate

While APR and interest rates sound similar (they both deal with a rate, after all) the figures they represent are quite different, according to York. “The interest rate is what the principal balance of the loan is paid back at,” she says. It’s how your monthly mortgage payment is determined. An annual percentage rate, on the other hand, takes into account the interest paid over the course of the loan, plus closing costs and other fees. Then, over time, your APR shows you what your principal loan is truly costing you if you keep the loan with its original terms, York says. If you’re shopping lenders, comparing the APR can be a good way to see where you’ll get the better deal. 

The 1003

York says you should think of your 1003, which is your loan application form, as the story of you. “Think about when an underwriter who has never met you looks at your file for the first time; the 1003 tells the story of job, credit, and residence history,” she says. “It is the very start, and most important, part of a loan.” Without that detailed application information, things could pop up later that could slow down your mortgage application — or halt the process altogether.

Private Mortgage Insurance (PMI)

Unlike homeowners insurance, not every mortgage applicant will have to deal with Private Mortgage Insurance. That’s because PMI is only required on loans where borrowers put less than 20 percent down. “It is a monthly charge that protects the lender in case of loan default,” York says.

Keep reading here.

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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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