High Negative Equity Among Gen-Xers Causing Housing Gridlock
Author: Scott Morgan
August 26, 2014

Much has been said, and even more theorized, about why millennials are not buying homes at the same rate their generational predecessors bought when they were new-generation homebuyers themselves. Zillow, however, may have found a real answer in the fact that generation X and baby boomers are largely underwater.

According to Zillow’s latest Negative Equity Report, high negative equity among Gen-X homeowners is causing gridlock in the U.S. housing market.

Nearly 43 percent of homeowners between 35 and 49 are underwater on their mortgages. In contrast, only 15 percent of millennial homeowners (those between 20 and 34 years old) and 31 percent of baby boomers (50 to 64 years old) are underwater.

This storehouse of negative equity among the two older generations limits millennials from homeownership mainly because of the ripple effect created when underwater homeowners have trouble listing their properties for sale: baby boomers may not be able to find move-up buyers for their homes because Gen-Xers are stuck with troubled mortgages, Zillow reported. In turn, millennials can’t move into the more affordable starter homes currently occupied by Gen Xers. In other words, the very types of houses young first-time buyers would be most able to afford are not hitting the market, and millennials are increasingly getting priced out.

Zillow found that among all homes with a mortgage nationwide, 28 percent that are valued within the bottom third of home values were underwater in the second quarter. This compares to about 16 percent of homes in the middle tier and 9 percent in the top tier.

All ages combined, more than a third of homeowners with a mortgage are effectively underwater and unable to sell their homes for enough profit to comfortably, meet expenses related to selling, and afford a down payment on a new home, the report stated.

Zillow’s chief economist, Stan Humphries, said the recession is largely to blame, having most crippled the homes the majority of Gen-X bought.

“On the surface, the housing recession did not overtly impact millennials’ housing wealth to the degree it did Generation X and the Baby Boomers,” Humphries said. “Most millennials were likely too young to have purchased a home during the bubble years. But as this huge generation begins to consider buying homes, they’re entering a market still very much in recovery and far from anyone’s definition of normal.”

Because so many homes are stuck in negative equity or are effectively underwater, the inventory of homes for sale is severely constrained, Humphries said. This leads to increased competition for homes and the frank reality that many millennials are simply too young and too new to the workforce to have saved up significant money to compete with more established older buyers.

“The reality is, negative equity is part of the new normal,” Humphries said. “Finding creative solutions to keep homes affordable, available, and accessible to [millennials] will be critical going forward.”


Harvard’s 5 Financial Reasons to Buy a Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. He released a paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially.

New Formula Could Revamp Credit Scores Nationwide

Author: Tory Barringer
August 8, 20140

The company responsible for one of the most widely used measures of credit health is making changes to its current model that could boost credit scores nationwide.

In an announcement on Thursday, analytics and decision management firm FICO said its new credit model, FICO Score 9, “introduces a more nuanced way to assess consumer collection information,” resulting in greater precision for lenders measuring a borrower’s credit stability. The model will be available to lenders through the country’s various reporting agencies starting in the fall.

“FICO Score 9 uses a more refined treatment of consumers with a limited credit history and those with accounts at collection agencies, so that lenders can grow their credit and loan portfolios more confidently,” said Jim Wehmann, EVP for Scores at FICO.

The key difference in the new model is that strikes from medical collections will have a lower impact, reflecting the relatively low level of credit risk they represent. From just that change, the company expects the median FICO score will increase by 25 points among consumers whose only credit dents come from unpaid medical debts.

FICO isn’t alone in its push to reassess how medical debts are reflected on a borrower’s credit profile. In May, the Consumer Financial Protection Bureau (CFPB) released the results of a study finding that credit scores may underestimate creditworthiness by as much as 10 points for consumers owing on medical costs and by up to 22 points for consumers who have repaid their debt.

Often, consumers aren’t even aware their debt has been sent to collections, CFPB said.

Another change in the FICO Score 9 model is that it will also discount any overdue payments that have already been made, leaving only unpaid collections as a mark.

While the changes may have a significant impact on approval rates for credit cards and auto loans, the effects will be more subtle for borrowers and lenders in the mortgage space, says Greg McBride, chief financial analyst for personal finance website Bankrate.com.

“These changes are going to be a positive for consumers, but it’s not something that moves the goalposts,” McBride said in a phone call. “These changes aren’t going to take a consumer with bad credit and suddenly make them appear as if they have good credit.”

Rather, for consumers whose credit scores sit on the threshold between poor, adequate, or good, the expected boost could make a difference in terms of required down payments or interest rates.

The Score 9 model also promises to help lenders make decisions on consumers with little to no credit history—though McBride doesn’t expect to see an immediate impact in mortgage approvals for credit-lacking millennials.

However, if those young consumers have an easier time securing lines on smaller loans, however, that could balloon out into the mortgage space in the future.

Author: Cody Galuardi
August 5, 20140

Experts have surveyed the young generation again and again as to why they are staying with their parents, but now Fannie Mae has completed a survey of the parents they live with. As it turns out, more than half of them don’t mind their children living at home.

The National Housing Survey Topic Analysis segmented the millennial demographic into two ranges: the “younger” millennials aged 18 to 22, and the “older” crop aged 23 to 34. The results collected showed slight differences between the groups, but when asked if they would rather their children stay or move out, 68 percent of parents overall said “I prefer that they continue to live in my home.”

When asked why their children are staying home, the most common answer among parents of the younger crowd was that their children were saving money while still in school, representing 40 percent of responses.

The primary reason cited by 24 percent of parents for older millennials was “they do not have enough income to live in their own home,” a nod to the problems that this new group of adults face in relation to employment and low pay.

Other answers included the fact that the children were “not yet married,” which was chosen by 16 percent of older-group parents compared to 6 percent of younger-group parents; “we prefer to share the same house” (9 percent of parents among both groups); “they are saving money for the future” (more often selected by older-group parents at 11 percent); and “they are helping you to pay for the household expenses” (7 percent of older millennials compared to only 2 percent of the younger ones).

Among those millennials who stay with their parents because they are ill, the percentages were 2 percent for the younger segment and 3 percent for the older.

There were significant differences between the groups over how long parents expected their children to stay in their homes. Fifty-two percent of older-group parents believed their children would move out within two years compared to 38 percent of younger-group parents, while younger-crowd parents were almost equally likely to think their children are moving out within 2 to 5 years at 34 percent.

Almost a fifth of all parents for each age group thought their children would stay at home for five years or more.

Among those parents who responded that their children would be staying fewer than five years, 54 percent overall believed their children would rent their next residence compared to 28 percent who said their children would buy a home. About 5 percent believed their children would move out to live with someone else, but not pay for their housing in any way.

The conclusions drawn in the report state that parental preferences over living arrangements encourage millennials to stay at home and that the age of children has some effect on how willing parents are to keep them around. But given that financial reasons topped the lists in both age categories, it is likely that financial inability is keeping the newest generation of would-be homebuyers out of homes. The analysis concludes: Millennials “will start to form their own households once they feel confident about their financial situation and future prospects.”

Fun & Fabulous
The 10 Best Neighborhoods to be Your Own Top Chef
by Amy Musser | July 10, 2014 | 2 Comments

You don’t have to don a chef’s hat to be a master in the kitchen, whether you’re perfecting your grandmother’s bolognese or crafting a complex tasting menu for your next dinner party. These days, it’s easier than ever to emulate your favorite celebrity chefs, with cookbooks from TV personalities like Bobby Flay and Rachael Ray giving you the recipes you need to cook like a pro. The proliferation of cooking shows has served as an inspiration for home cooks everywhere, and chefs are singing the praises of fresh local food, urging home cooks to head to their local farmers markets.

With all this ado, it’s no surprise that the local food movement has hit the kitchen tiles running. In 2007 the word “locavore” was the Oxford word of the year, and the local food movement has only continued to grow. Since the early 1990s, the number of U.S. farmers markets more than quadrupled; the USDA reported 8,144 of them in 2013.That’s food for thought!

And while America’s home cooks have increasing access to quality ingredients to serve up gourmet delicacies in the comfort of their kitchens, Redfin wanted to find the 10 best neighborhoods to be your own top chef. To figure it out, Redfin data scientists searched through homes for sale on Redfin.com to find those with descriptions that mentioned food-friendly features such as gourmet kitchens, vegetable gardens and chicken coops. We only factored in homes that are within two miles of farmers markets and good grocery shopping options. We then partnered with the home cooking mecca Allrecipes, who crunched the numbers to find the most popular dishes for each of the top 10 neighborhoods that use both local and fresh ingredients. So sharpen your cooking knives and prepare to take a culinary tour of 10 neighborhoods where things are really cooking:

1. Downtown, San Jose, California

This neighborhood, which many refer to as the center of Silicon Valley, hosts a farmers market every Friday along San Pedro Street featuring fresh produce from more than 30 California-based growers. Some weeks, there is a “Cookin’ the Market” event during which chefs demonstrate how to use market produce and passers-by can sample the fare.

And you don’t have to look far to find a kitchen worthy of creating a culinary feast: 33 percent of homes here boast cooking and dining friendly features and amenities.

What’s cookin’ on Allrecipes: Shrimp Asopao, Butternut Squash Enchiladas, Panettone Bread Pudding with Spiced Orange Sauce
2. Stanton Park, Washington D.C.

Allrecipes_Spinach with Apples_WashingtonDC_1106852_originalStanton Park, an area in Capitol Hill, has been dramatically revitalized in the past decade, and much effort has been put into reestablishing the roots of the community. Those efforts have paid off: Residents say that you can’t walk through the area without running into a community picnic in the neighborhood park for which the area is named.

“Many of the old row homes have been renovated and feature large open kitchens and dining areas along with updated appliances, so it’s not surprising that 30 percent of homes on the market have great culinary features,” says Redfin agent Steve Centrella.

In addition, the neighborhood is mere blocks from Eastern Market, which has an open air farmers market every weekend and on Tuesdays. The market website includes a roster of the latest local growers so you can get to know the farmers.

What’s cookin’ on Allrecipes: Spinach with Apples and Pine Nuts, Singapore Noodles, Cinnamon Black Walnut Ice Cream
3. North Capitol Hill, Denver

Also referred to as Uptown, this neighborhood is on the east side of the city near the center of downtown. Situated just next to the Mo’Betta Green community market, residents of North Capitol Hill can pop over every weekend to sample local grub, attend a cooking class or listen to a DJ spin tunes while perusing the seasonal delights. In 2013, this farmers market was named the best farmers market in Denver by Westword Magazine.

In addition to an array of international grocery shopping options, homes are well-outfitted for cooking: 28 percent of homes on the market boast good cookin’ features.

What’s cookin’ on Allrecipes: Colorado Green Chili, Apple Gouda Quesadillas, Roasted Green Chili Stew
4. Lakeridge, Seattle

small samonchowderThis little-known area is situated among Seattle, Tukwila and Renton on a hill overlooking Lake Washington. “This little gem of a neighborhood has lots of charming mid-century modern homes with lovely details like arched doorways and triangular windows,” said Redfin agent Dan Mullins. “The homes also frequently have contemporary updates like large open kitchen and dining areas.”

Lakeridge has easy access to culinary shopping options in all three cities, including the Columbia City Farmers Market, and also has a high percentage of homes with great kitchen features (27 percent).

What’s cookin’ on Allrecipes: Mimi’s Smoked Salmon Chowder, Sunchoke and Sausage Soup, Panko-Breaded Fried Razor Clams
5. Mid-City, Los Angeles

Allrecipes_AhiPokeSalad_LA_659252_originalDespite being close to downtown, Mid-City is known for its somewhat suburban vibe. The neighborhood has a mix of home styles, from craftsmen style bungalows to modern and industrial condos. People flock to the area on the weekend for the Wellington Square Farmers Market.

If you are interested in farmers market history, venture out of Mid-City a few miles to the oldest farmers market in the country known as the Market. Back in 1934, farmers would park their trucks in a field to sell produce to the locals.

What’s cookin’ on Allrecipes: Ahi Poke Salad, Jap Chae Korean Glass Noodles, Killer Shrimp Soup
6. Canton, Baltimore

Nestled between the Fells Point and Highlandtown farmers markets, this neighborhood is situated along Baltimore’s outer harbor and features charming turn-of the-20th-century rowhouses, many of which have been renovated in the past decade. With 25 percent of homes on the market touting chef-friendly features, you may want to rethink your current career and start cookin’! (Hey, Julia Child didn’t start until she was 40.)

Redfin agent Rebecca Hall also notes that “the neighborhood is rich with culinary history and used to have canneries along Boston Street with oysters, peaches and tomatoes among other local foodstuffs in the early 1900s.”

What’s cookin’ on Allrecipes: Maryland Crab Soup, Pasta with Fresh Tomatoes and Corn, Shrimp and Sugar Snap Peas
7. East Atlanta, Atlanta

This charming neighborhood of East Atlanta Village, which is situated on the east side of Atlanta, features bungalows and craftsman-style homes with large yards, frequently filled with chicken coops and overflowing fruit and vegetable gardens. In this neighborhood, 21 percent of homes for sale boasted amenities fit for a chef.

The East Atlanta Farmers Market runs every Thursday evening from 4 to 8 p.m. You can check out their awesome array of local vendors here. The market also features weekly cooking demonstrations where you can learn how to cook local produce from a rotating roster of chefs.

What’s cookin’ on Allrecipes: Sweet Potato Souffle, Black Eyed Peas with Collard Greens, Turkey and Yam Tacos
8. North Center, Chicago

This northside Chicago neighborhood has a lot of old European charm, and a large portion of the homes date back to the late 19th and early 20th century. Many of these homes have been updated and 20 percent of homes currently on the market mention their gourmet cooking and dining features.

The North Center Town Square is a neighborhood meeting spot and hosts a weekly farmers market from May through September. Residents who prefer to grow their own veggies can join the Montrose Green Community Garden, which is one of many community gardens in Chicago started by the Peterson Garden Project.

“If you’d like to test out your green thumb on your own soil, many of the lots in North Center are wider than standard with larger backyards, allowing space for backyard vegetable gardening,” says Redfin agent Chris Chesne.

What’s cookin’ on Allrecipes: Hot Italian Giardiniera, Lamb Shank Vindaloo, Fusilli with Rapini, Garlic and Tomatoes
9. South Beach, San Francisco

Allrecipes_PersimmonPomegranateSalad_SanFran_1065978South Beach, otherwise known as SOMA (South of the Market) was once a desolate area full of dilapidated warehouses. In the early 2000s, the AT&T ballpark was built and the neighborhood has since seen a rapid revitalization, with scores of new condos and luxury lofts in the converted warehouses. That also means lots of newly built kitchens with all the latest and greatest gadgets: 18 percent of listings will make you feel like you’re on your very own episode of Top Chef.

Locals looking for fresh ingredients can stroll along the waterfront paths and head over to the Ferry Plaza Farmers Market, which is open three days a week year round. The market is funded by CUESA (Center for Urban Education about Sustainable Agriculture) and features weekly chefs cooking up fresh local seasonal bites.

What’s cookin’ on Allrecipes: Persimmon and Pomegranate Salad, Baked Butterfish Saratoga, Best Ciappino
10. Graduate Hospital, Philadelphia

This charming neighborhood is home to both Julian Abele Park Farmers Market and the South Street West Farmers Market. Walk down the streets of Graduate Hospital, also known as G-Ho or Southwest Center City, and you’ll find artfully painted storefronts and row homes from the early 20th century that have been remodeled to welcome the influx of residents drawn to the community feel.

On any given summer weekend, you’ll find a variety of outdoor activities, bars and restaurants in addition to farmers markets. Homes here boast great amenities for home cooks, too: 17 percent of listings on the market would be great places to try some chef shoes on for size!

What’s cookin’ on Allrecipes: Philadelphia Style Roast Pork Sandwiches, Arugula Salad with Citrus Vinaigrette, Jewish Apple Cake II

HUD, Real Estate Company Settle Allegations of Discrimination
Author: Colin RobinsJune 24, 20140

The U.S. Department of Housing and Urban Development (HUD) announced that Brotman Enterprise, LLC will pay $25,000 as part of an agreement resolving allegations of discrimination. The Philadelphia-area real estate company settled with HUD as part of a Conciliation Agreement.

The company was charged with discrimination after employees allegedly steered white testers posing as potential rental applications to neighborhoods they described as safer, while directing black testers to areas agents considered “rough.”

HUD noted in a release, “The Fair Housing Act makes it unlawful to discriminate in the terms, conditions, or privileges associated with the sale or rental of a dwelling on the basis of race, including steering potential renters or homebuyers to different neighborhoods.”

“Testing remains one of our most effective tools for exposing unlawful housing discrimination,” said Bryan Greene, HUD’s Acting Assistant Secretary for Fair Housing and Equal Opportunity. “HUD will continue to enforce the Fair Housing Act to ensure that no family has their housing options limited because of their race.”

HUD began to investigate Brotman Enterprise after the National Fair Housing Alliance (NFHA), a national fair housing organization that receives HUD funds to combat discrimination, filed a complaint with HUD. The complaint alleged that Brotman Enterprises was “unlawfully denying housing opportunities to African American homeseekers,” HUD said.

Specifically, the complaint alleged that agents from the company, based in Feasterville-Trevose, northeast of Philadelphia, steered black testers to one of its properties in a high-crime less desirable neighborhoods. Meanwhile, white testers were told about a different property in an area considered to be safer.

Under the terms of the Conciliation Agreement, Brotman Enterprises, LLC will pay the NFHA $25,000 in damages, get fair housing training for all of its leasing agents and managers, and establish a non-discrimination rental policy.

Author: Colin Robins May 30, 2014

Fannie Mae Expands HomePath for Short Sales Website

Fannie Mae announced the expansion of the HomePath for Short Sales website. The website serves as a communication tool to help real estate professionals complete short sales and resolve challenges with Fannie Mae.

The new expansion of functionality allows agents to contact Fannie Mae sooner in the short sale process in order to circumvent future problems. The website is available to any real estate professional working on a short sale involving a loan owned by Fannie Mae.

“This is an important step in continuing to build a strong relationship with the real estate community, which will ultimately contribute to the stabilization of neighborhoods,” said Tim McCallum, VP for Short Sales at Fannie Mae. “Allowing real estate professionals to negotiate an offer directly with Fannie Mae is the next step in streamlining the short sale process. Our goal is to provide transparency throughout these transactions and arrive at an agreement that benefits all parties involved.”

The expanded website has a few key benefits for real estate professionals. The new site allows agents to request list price guidance before listing a property, as well as viewing the status of submitted cases to Fannie Mae. Additionally, professionals can negotiate and receive first lien approvals on a short sales directly from Fannie Mae. The company notes the approval feature will be rolled out over the next few months through individual servicers.