Northwestern Mutual dedicates $3 million to help residents in Milwaukee’s underserved communities achieve homeowner status The company and its local partners are helping Milwaukee residents secure financial stability through affordable housing efforts MILWAUKEE, June 20, 2023 /PRNewswire/ — Despite gains in education and earnings, the racial wealth gap remains a deep issue in America. According … [Read more…]
When you step foot in Salisbury, MD, you’ll be captivated by its picturesque downtown, lined with charming boutiques, cozy cafes, and inviting restaurants. Stroll along the scenic Riverwalk, and enjoy the stunning views of the Wicomico River. Or explore the stunning beaches of the Eastern Shore; you’ll surely find something to love in this town. However, with any place, there can be drawbacks to living there. If you need help determining if Salisbury, MD is a good place to live, Redfin has you covered. So whether you’re searching for apartments for rent in Salisbury or homes for sale, read on for the ten pros and cons of living in Salisbury, MD.
Salisbury offers affordable housing costs, making it an attractive destination for individuals and families seeking a more budget-friendly lifestyle. Housing in Salisbury is generally cheaper than in larger metropolitan areas, with various options from apartments to single-family homes at reasonable prices. The median sale price is $245,000, down 2% from the year prior and well below the national median of $407,415. Apartments in Salisbury are also on the affordable end, with a two-bedroom averaging for $1,549. So if you are looking for a city that fits within your budget, Salisbury is a city to check out.
Positioned within a few hours’ drive, Baltimore, Washington D.C., and Philadelphia are all within reach. Around a 2.5-hour drive, you’ll find yourself in Baltimore, known for its vibrant Inner Harbor, historic sites, and renowned sports teams, providing a great small getaway. Salisbury’s proximity to Washington D.C., the nation’s capital is around the same distance as Baltimore. D.C. offers numerous world-class museums and iconic landmarks you can easily check out over the weekend. And if you drive a bit further south, you’ll discover Philadelphia, known for its rich history, vibrant arts scene, and diverse culinary options. This proximity allows Salisbury residents to easily access the cultural, educational, and professional opportunities these significant cities offer while still enjoying the relaxed atmosphere and community-oriented lifestyle that Salisbury provides.
Salisbury boasts easy access to breathtaking coastal scenery, making it a haven for nature lovers and outdoor enthusiasts. Located on the Eastern Shore of Maryland, the city is close to the stunning Chesapeake Bay and the Atlantic Ocean. Just a short drive away, residents can explore scenic coastal areas such as Ocean City, Assateague Island, and Chincoteague Island. These destinations offer pristine beaches, dunes, and tranquil marshlands, perfect for leisurely walks, sunbathing, birdwatching, and horseback riding.
Living in Salisbury presents abundant outdoor recreational opportunities, ensuring that residents can enjoy an active and adventurous lifestyle. The region is home to numerous parks, nature reserves, and hiking trails, allowing outdoor enthusiasts to immerse themselves in the beauty of the surrounding landscapes. Pemberton Historical Park, with its scenic trails and diverse wildlife, offers hiking, birdwatching, and photography opportunities. Additionally, the Wicomico River and nearby Chesapeake Bay provide excellent opportunities for boating, fishing, and water sports such as kayaking and paddleboarding.
The city is home to numerous art galleries, theaters, and performance venues. They showcase the talent and creativity of local artists and performers throughout the year. The Salisbury Art Space exhibits diverse artworks, fostering an appreciation for visual arts in the community. The Salisbury Symphony Orchestra enchants audiences with its captivating performances. At the same time, the Wicomico Civic Center hosts a variety of concerts, comedy shows, and live events that cater to different tastes and interests.
During the summer, temperatures can rise to 86 degrees Fahrenheit. Accompanied by high humidity, that can make the weather feel even hotter and more uncomfortable. The combination of heat and humidity may pose challenges for outdoor activities and make spending time outdoors less enjoyable for those who prefer milder climates. Additionally, the high humidity levels can contribute to feelings of stickiness and make it more difficult to find relief from the heat. That said, residents can find ways to adapt to the weather, such as seeking shade, heatproof your home, and staying hydrated.
Salisbury is known to have limited public transportation options, which can be considered a drawback for some residents. The city’s public transportation infrastructure, such as bus systems or trains, may be less extensive than larger metropolitan areas. This limited public transportation can pose challenges for individuals who rely on public transit for daily commuting or prefer to avoid driving. It may require residents to own a car or rely on alternative modes of transportation, which can add to the cost of living and potentially contribute to traffic congestion during peak travel times.
The city’s job market is relatively smaller compared to larger metropolitan areas, which can result in a more competitive landscape for jobseekers. The range of industries and career paths available may be more limited, particularly in specialized fields. This can make it challenging for individuals seeking employment that aligns with their professional aspirations or expertise. However, it’s worth noting that the job market can vary depending on individual skills, qualifications, and the industry one is pursuing.
Located along the Eastern Shore of Maryland and close to the coast, Salisbury is susceptible to severe weather events. Hurricanes and tropical storms can bring heavy rainfall, strong winds, and the risk of flooding, posing a threat to property, infrastructure, and personal safety. These natural occurrences may lead to disruptions in daily life, and the need to take precautionary measures to safeguard one’s home.
Salisbury is only known for the Delmarva Shorebirds, part of the Carolina League for baseball. This limited professional presence can diminish the excitement and camaraderie that come with supporting local sports teams and enjoying the electric atmosphere of a stadium or arena.
Whether Salisbury, MD, is a good place to live depends on individual preferences, priorities, and lifestyle choices. The city offers several advantages, including affordable housing costs, access to beautiful coastal scenery, and proximity to major cities. However, it is essential to consider potential downsides, such as limited job market opportunities, hot and humid summers, and limited public transportation options, to name a few. Weighing the pros and cons of living in Salisbury will help determine if you want to make this city your home.
Source: redfin.com
When Robert submitted this, he advised, “File this under the ‘long and tedious but important’ category. It might need pictures of cats.” So, once again, J.D. has obliged with photos of one of his cats.
Want to have more money and pay less in taxes? It’s easy! Just call this number and send in your three easy payments of — no, wait. Actually, all you have to do is learn a little about asset location. No, not asset allocation — asset location: deciding which assets should go in which accounts. A recent surge of Roth assets, thanks to the increasing availability of the Roth 401(k) and the wave of conversions that occurred last year, makes this a particularly timely topic.
To understand asset location, you need to remember that most investors have accounts that receive different tax treatment, such as the following:
Studies have shown that making the right choices about which investments belong in which accounts can increase an investor’s after-tax wealth by 15% to 20% over a lifetime. So what are those “right choices”? They can be summed up by five basic rules.
If you hold these investments outside of a traditional IRA or 401(k), the interest is fully taxable at ordinary income rates. You essentially hand over a good portion of the return each year to Uncle Sam and Sister State, leaving less to grow through the years.
Some bonds have their own built-in tax advantages. Treasuries are exempt from state and local taxes, and municipal bonds can be exempt from all taxes — federal, state, and local. If you place muni bonds in a traditional IRA, however, you lose the tax advantages.
Unless you live in a state with high taxes, it likely still makes sense for you to hold your Treasuries in your tax-deferred account, especially if you’re years away from retirement. However, it rarely makes sense to buy municipal bonds in your tax-advantaged retirement accounts. The only exception is if you’re buying bonds that are trading below par value (the price at which they were originally issued) and you expect the price to rise, leading to a capital gain. While the interest from government-issued bonds might have tax benefits, a capital gain — for example, the $100 profit you made if you bought the bond at $850 and sold it later for $950 — is fully taxable if held outside of an IRA or 401(k).
Let’s say two investors put $50,000 in the exact same stock and hold it for a decade. The stock doesn’t pay a dividend and earns an average of 8% annually. Investor A holds the stock in his traditional IRA, and Investor B holds it in her taxable brokerage account. A decade later, here’s the value of each account and the taxes each investor has paid through the years (at this point, they haven’t sold the stock yet):
Surprise! The values of the investments and the taxes paid (i.e., none) are exactly the same, even though Investor B held the stock in a “taxable” account. That’s because when you buy and hold stocks, especially ones that pay little to no dividends, you have built-in tax deferral.
But what happens when these investors sell their stocks to spend the proceeds in retirement? Assuming they’re both in the 25% tax bracket, Investor A will have to pay a 25% tax rate on everything he withdraws from the IRA, whereas Investor B will pay just a 15% long-term capital gains rate — and only on the profit. If they each liquidated the investment and withdrew the cash from the accounts:
As if more after-tax wealth weren’t enough, there are other benefits to holding equities in your taxable account:
While all these benefits sound good, the tax efficiency of holding equities in a taxable account relies on your buying and holding for years and keeping dividends to a minimum. What do you do for high-yielding stocks or those you trade more frequently? Read on!
When it comes to deciding what to put in this tax-free account, keep two principles in mind:
Given those two principles, the ideal investments for your Roth are those that have the greatest return potential, especially if they’re tax-inefficient. Historically, small-cap value stocks have posted the highest returns, and because of their generally higher turnover and higher dividends, the mutual funds that invest in that sector are among the most tax-inefficient — so these would be good candidates for a Roth. You could also use the account for any other active-trading strategies or real estate investment trusts, which pay a high yield but have dividends that aren’t eligible for the lower qualified-dividend tax rate.
Also note that Roth assets are the best kind for your heirs to inherit, since they’ll also enjoy tax-free growth. If leaving a legacy is important to you, then the Roth has an investment time horizon that extends beyond your lifetime; thus, it can theoretically hold riskier assets.
Once you retire, if you plan to invest in high-yield stocks for the income, it makes sense to hold them outside of a tax-deferred account to take advantage of the lower tax rate on qualified dividends. It’s less important where you hold the bonds that produce interest you plan on spending, since that interest will be taxed as ordinary income no matter what (muni bonds excepted).
Smart asset location also means you’ll pay fewer taxes. The higher your taxable income, the less likely you are to qualify for certain tax breaks. Also, once you begin receiving Social Security, the more you earn, the more likely your benefits will be taxed, and the more likely you’ll pay higher Medicare premiums.
So while paying attention to your asset location won’t double your portfolio overnight, it will pay off for decades to come — perhaps even after you’ve headed off to the Antiques Roadshow beyond the pearly gates.
Here’s a quick summary of which investments to keep in which accounts:
Note: This article uses current federal tax rates, which will continue through 2012. Tax law will certainly be different a few years from now, but I think it’s a good bet that some current principles — such as long-term capital gains rates will be lower than ordinary income rates, and that municipal bonds will have tax advantages — will continue.
Source: getrichslowly.org
Surging interest rates and home price appreciation made March one of the most challenging months for prospective homebuyers looking to make purchases, according to a recent report.
Annual home price gains saw 19.9% annual appreciation in March, down from an upwardly revised 20.1% in February, which was the first month to see price growth greater than 20%, according to Black Knight’s monthly mortgage monitor report. While the annual home price growth reflects a slowdown in March after accelerating for the previous four months, home prices are up about 6% nationwide year-to-date and the 30-year mortgage interest rate of 5.11% as of April 21 continued to propel a lack of affordable homes.
“As measured by the share of median income required to make the principal and interest payment on the average-priced home bought with 20% down, U.S. housing was the least affordable ever back in July 2006 when it took 34.1% to make that P&I payment,” Ben Graboske, president of Black Knight Data & Analytics, said in a statement.
“As of April 21, that payment-to-income ratio has now climbed all the way to 32.5%, within just 1.6 percentage points of the prior record,” Graboske added.
A rate increase of 50 more basis points or a 5% increase in home prices would push affordability to its worst level on record, according to the report. Since the start of 2022, rates have gone up 200 basis points and housing prices have surged 5.9%.
Adjustable-rate mortgages, which typically have lower interest rates than fixed-rate mortgages, have become an attractive option for borrowers in a challenging housing market. The spread between 30-year and ARM offerings is the widest it’s been since 2014 and within 20 basis points of an all-time high.
How lenders can continue to serve borrowers despite housing affordability challenges
Potential borrowers who’ve been priced out of the housing market need to be able to compete with an increasingly growing share of cash buyers and investors who are beating them in bidding wars.
The ARM share of purchase rate locks by volume spiked from 2.5% in December to about 8% in March – the highest share since 2017. As of mid-April, applications for ARM mortgages jumped to 8.5% of total mortgage applications, the highest level since 2019, according to the Mortgage Bankers Association.
About 95% of the 100 largest markets are now less affordable than their long term benchmarks from 1995 to 2003, up from just 6% at the start of the pandemic. Markets in a third of the country are now the least affordable they’ve ever been.
Source: housingwire.com
There are numerous types of stocks, categorized by company characteristics, size, region, sector, and more. Equipped with an understanding of different stock types, an investor can start building a diversified portfolio. Though all stocks can experience volatility and potentially lose value, holding a mix of different types of shares can mitigate the risk of being too heavily invested in any one category.
A stock represents a percentage of ownership in a publicly traded company. So essentially, investors can own small pieces or “shares” of companies.
Generating returns via the stock market can usually happen in one of two ways. First, the value of the stock can increase over time, something known as capital appreciation. The second is through dividend payments, where companies make cash payouts periodically to all owners of that company’s stock. Some people make investments based on a company’s ability to pay consistent dividends, or “income.” Utility and telephone companies often fit into this bucket.
When you own a stock, you hold equity (or ownership) in that company. That’s why stocks are sometimes referred to as equities. Each individual share represents an equal proportion of ownership. Owners of stocks are often referred to as stockholders or shareholders.
Here are some of the ways different stocks are categorized:
Common stock represents shares of ownership in a corporation. When an investor receives common shares, they are typically also granted voting rights to the company and can participate in shareholder voting processes — usually one vote for each share.
Preferred stocks make regular dividend payments, but holders of preferred shares often have zero or limited voting rights. If a company becomes financially insolvent however, preferred stockholders have a claim on assets before common shareholders do.
Exchange-traded funds (ETFs) group multiple securities into a single share. For instance, a stock ETF will hold numerous companies, while a bond ETF can hold many individual bonds, whether it’s a collection of Treasurys or high-yield debt. ETFs are popular because of the cheap, instant diversification they offer.
Initial Public Offerings (IPOs) is the process of a private company listing and debuting on a public stock exchange. Investors can buy IPO shares on their first day of trading.
Special Purpose Acquisition Companies (SPACs) are shell companies that go public on the stock exchange, and then try to find a private operating business to purchase.
Real Estate Investment Trusts (REITs) are companies that own and operate real estate, usually focusing on one type of property, such as warehouses, hotels or office buildings. There are pros & cons to investing in REITs. For example, one pro is that they tend to pay consistent dividends. Cons include sensitivity to interest rates, and taxed dividends.
The sizes of stocks are classified by the market capitalization of the company’s publicly traded stock. Market cap is calculated by multiplying the stock price by the total number of outstanding shares.
Generally speaking, larger companies tend to be older, more established, and have greater international exposure — so a higher percentage of a large-cap company’s revenue comes from overseas. Meanwhile, smaller-cap stocks tend to be newer, less established and more domestically oriented. Smaller-cap companies can be riskier but also offer more growth potential.
While the market-caps that determine which companies are small or large can shift, here’s a breakdown that gives some rough parameters.
Micro-Cap: $50 million to $300 million
Small-Cap: $300 million to $2 billion
Mid-Cap: $2 billion to $10 billion
Large-Cap: $10 billion or higher
Mega-Cap: $200 billion or higher
Stocks are also sometimes classified by styles of investing. These categories often have to do with how that company makes money and how the stock is valued. You may often hear this associated when discussing value vs growth stocks.
Value stocks are stocks that are considered to be trading below their actual worth. Investors hope that by buying companies that are priced below their “true” value, they can profit as the gap narrows over time.
Growth stocks are companies that are growing at a fast pace or those that are expected to continue growing at a faster rate than other stocks or competitors. Investors can encounter higher valuations in growth investing.
Additionally, stocks are often grouped by the industry that that company works within. According to the Global Industry Classification Standard (GICS), there are 11 recognized sectors, with numerous industries within those sectors. They include (but are not limited to):
Energy: Energy equipment and services, oil, gas, and consumable fuels
Materials: Chemicals, construction materials, containers and packaging, metals and mining
Industrials: Aerospace and defense, building products, machinery, construction and engineering, electrical equipment, industrial conglomerates
Consumer Discretionary: Automobiles, automobile components, household durables, leisure products
Consumer Staples: Food products, beverage, tobacco, household products
Health Care: Health care equipment and services, pharmaceuticals, biotechnology, life sciences
Financials: Banks, insurance, consumer finance, capital markets, financial services
Information Technology: IT services, software, communications equipment
Communication Services: Diversified telecommunication services, media, entertainment
Utilities: Electric utilities, gas utilities, water utilities, independent power and renewable electricity producers
Real Estate: Real estate management and development, various REITs (retail, residential, office, etc.)
Different overseas stocks can be classified by the country or region in which they’re headquartered, even if the company’s operations are global. Individuals looking to invest in international stocks have found that they can do so easily with ETFs, which hold numerous foreign companies within a single share.
Regions that are commonly used in the world of stock investing are:
EAFE is an acronym which stands for Europe, Australasia, and the Far East. Investors may see this used when making investment choices, as the MSCI EAFE is a common index used for international stock funds. These countries are all “developed” nations, which means they have established financial markets, stable political climates, and mature economies.
Emerging-market stocks, which stocks with companies based out of countries whose economies are described as developing. Brazil, Russia, Mexico, China, and India are just a few emerging markets. Emerging markets may be riskier to invest in but may pose an opportunity for high rates of growth.
There are numerous types of stocks on the market, and it can be important for investors to understand the differences between them. The stock market can be volatile and prone to dramatic declines, but in order to shield themselves from the risks, investors often create diversified portfolios by stocking their holdings through various different stock types.
Diversification is easier to do if an investor understands the different types of stocks that exist in the U.S. equity market. From mega-cap stocks to ETFs to emerging-market companies, there are a myriad of investing opportunities in the equity market.
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Source: sofi.com
For the fifth consecutive month, pending home sales declined in March from February, down 1.2%, signaling a potential return to “much calmer” conditions, according to the National Association of Realtors.
Only the northeast region saw an increase in pending sales in March from February, according to an NAR news release based off data from its pending home sales index. But compared to the prior year, “pending sales fell for the 10th consecutive month, by 8.2%, with pending sales down across all regions.”
Lawrence Yun, chief economist for the NAR, said the dip in contract signings suggests “multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions.”
He also expects higher mortgage rates to remain a key factor affecting home sales.
Yun forecasts the 30-year fixed mortgage rate will reach 5.3% by the fourth quarter, resulting in a 2022 mortgage rate average of 4.9%. The average mortgage rate should jump to 5.4% by 2023, Yun said.
“As it stands, the sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity,” Yun said. “The aspiration to purchase a home remains, but the financial capacity has become a major limiting factor.”
Mortgage servicers: If you’re not obsessed with customer service, you’re falling behind
To take full advantage of the current market conditions, lenders and servicers must obsess over customer service.
Yun additionally expects inflation will average 8.2% for the year, “although it will start to moderate to 5.5% in the second half of this year.” As of March the higher mortgage rates and sustained price appreciation has resulted in a year-over-year increase of 31% in mortgage payments – although major Sun Belt metros such as Tampa, Phoenix and Las Vegas have seen increases closer to 50% year-over-year.
Despite that, Yun said: “Overall existing-home sales this year look to be down 9% from the heated pace of last year. Home prices are in no danger of decline on a nationwide basis, but the price gains will steadily decelerate such that the median home price in 2022 will likely be up 8% from last year.”
Renters will face similar increases, which Yun says could prompt some renters to explore ownership – although the increasing mortgage rates may price them out.
“Fast-rising rents will encourage renters to consider buying a home, though higher mortgage rates will present challenges,” Yun said. “Strong rent growth nonetheless will lead to a boom in multifamily housing starts, with more than 20% growth this year.”
Even as home inventory remains low, Yun also expects single-family homebuilders to take a cautionary approach, resulting only in a modest “boost to construction of less than 5%.”
Source: housingwire.com
The Federal Reserve’s decision Wednesday to raise its key interest rate to the highest level in 17 years could drive mortgage rates, currently at 6.4 percent for a 30-year fixed mortgage, still higher.
Mortgage rates have more than doubled since the Fed’s first rate hike in March 2022, and the average monthly mortgage payment for a “typical” home has risen 50 percent over that period, according to data from Zillow, which estimates the value of a typical home based on an average of homes in the middle 30 percent.
Overall mortgage costs rise based on a number of factors, including home price appreciation — which has been dramatic since the onset of the pandemic. But mortgage rates also rose last year at the fastest clip in 40 years.
The combination of more costly homes and higher rates has led to dramatically higher monthly mortgage payments, pricing many would-be buyers out of the market.
The rate increase Wednesday “will play some role in changing mortgage costs, but it probably isn’t the sole factor,” said Jeff Tucker, senior economist at Zillow. “The market has expected the Fed to hike rates today for a while, but a lot of the movement we’ll see in long rates depends on expectations about future pausing, cutting, and inflation — not to mention the ongoing negotiations over the debt ceiling.”
Source: politico.com
With mortgage rates currently at 7.04%, many first-time homebuyers – typically millennials – will be forced to continue to rent.
But the U.S. housing market is not a monolith, so today we’re going to look at some markets where affordability is within the normal renter’s reach.
In a study published this week, First American economist Ksenia Potapov analyzed the share of homes that are affordable to the median renter in any given market. She defined an affordable market as one in which the median renter can afford 50% or more of the homes for sale based on the renter’s household income, the prevailing 30-year mortgage rate, and the assumption that one-third of pre-tax income is used for a mortgage with a 5% down payment.
Here’s what she found:
There are only four markets in the U.S. in which the median renter in that market could afford half or more of the homes – Buffalo (59%), Pittsburgh (56%), Detroit (54%) and Cleveland (54%).
Meanwhile, the least affordable markets were Los Angeles (1%), San Diego (2%), San Francisco (2%), Salt Lake City (4%), and San Jose, Calif. (4%). The California cities are stalwarts on lists such as these, but Salt Lake City — which attracted tech workers during the pandemic — is a new entrant.
“Pre-pandemic, Salt Lake City was an affordable market that fell in the middle of the pack out of the top 50 U.S. markets,” Potapov wrote. “However, rapid house price appreciation during the pandemic dragged Salt Lake City near the bottom of the affordability list. In the fourth quarter of 2019, the median renter could afford 69% of the homes for sale in Salt Lake City. Now, the median renter can only afford 4% of homes.”
According to data from Altos Research, the median home price listed in Salt Lake City last week climbed to $785,000, up from about $540,000 in the fourth quarter of 2019.
California markets like the ones listed above already face a number of challenges, but news over the weekend could make it even more challenging for buyers. Last week we talked about the cost of flood insurance going up by over 200% for some homeowners in the Southeast as both the federal government and private insurers determine how to price the soaring cost of climate risk, or abandon insuring them altogether.
Well, State Farm last week announced that it would halt home insurance sales in California. State Farm is the nation’s largest car and home insurer by premium volume. The insurance giant said it “made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” Existing home-insurance policyholders won’t be affected, though this is clearly not a positive development for the state.
You might remember that a year ago, AIG notified 9,000 wealthy clients that it wouldn’t renew home insurance policies in California. The change was part of a plan by AIG to stop selling home policies in California through a unit regulated by the state’s insurance department. Policyholders were instead directed to another unit, where policies could cost three-to-five times higher than what clients paid under the old plan, with less-generous coverage to boot.
California has experienced record wildfires in the past six years. The state experienced eight of the largest fires in U.S. history and three of the top five deadliest fires.
I am not sure if we should even get into the reconstruction costs in California, which are so high they are almost beyond belief.
What does this all mean for Californians? For starters, I expect that other insurance companies are going to follow suit and availability is going to be a serious problem for homeowners and prove a problem for buyers and sellers alike. As is true in Florida, California has an insurer of last resort — FAIR Plan — for wildfires, but homeowners will still need significant wrap-around coverage. The premiums are quite high under FAIR, too and they cover the dwelling at actual cash value versus replacement cost value.
Cali LOs and agents: Have you had any deals held up because of home insurance issues? Let me know at [email protected]
In our weekly DataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]
Source: housingwire.com
You may have seen the videos on TikTok promising something that sounds too good to be true: Free cash from the state of California to help you buy your first home. The good news is, that program actually exists! The bad news is, it’s already out of money.
The California Housing Finance Agency launched the California Dream for All Shared Appreciation loan program two weeks ago, offering qualified first-time buyers up to 20% of the purchase price of a house or condominium. The help was available only to households whose earnings were below CalHFA’s income limit, which is $180,000 in Los Angeles County and $235,000 in Orange County.
State lawmakers had set aside $500 million for the program as part of the 2022-23 budget. But a looming fiscal shortfall led Gov. Gavin Newsom to propose a 40% cut, so when CalHFA launched the program late last month, it was allocated only $300 million and expected to assist about 2,300 home buyers.
On Friday, the CalHFA website announced that all the funds “have been reserved.” If you’re not already in the pipeline for a loan, you’re out of luck — at least for now.
More funds will be available to the program at some point, said Kathy Phillips, CalHFA’s director of communications. “However, we cannot predict whether that will be in the coming months with an additional allocation [from the state budget], or in the coming years as repayments of these original loans come back to be recycled to help additional households,” Phillips said.
She emphasized, “The program was designed to recycle [money for loans]; however, that will not begin until these loans are repaid.”
To be alerted when the program starts up again, sign up for CalHFA updates on the agency’s website.
The program was unusual in terms of both its structure and the type of loan issued.
The loan, which can be used for a down payment and closing costs, is structured as a second mortgage, which means it isn’t repaid month by month. Nor does it accrue interest the way an ordinary loan does. Instead, when the mortgage is refinanced or the house is sold again, the borrower pays back the original amount of the loan plus 20% of the increase in the home’s value.
If the home is ultimately sold for the same amount it was purchased for or less, the buyer won’t need to pay the additional 20%.
With this type of loan, the effective interest rate is equal to the average annual increase in the home’s value. That’s been about 5% in California over the long term, but the increase varies widely on a year-to-year basis, according to the CalHFA.
“For example, in 2008, real estate values plunged by 35%,” the agency stated. “Conversely, real estate values spiked nearly 40% between 2020 and 2021.”
There is a cap on the amount of the appreciation owed. No matter how much the home increases in value, the borrower will need to pay at most 2.5 times the original loan amount.
To receive a loan, borrowers must complete a home buyer education and counseling course (there are options for online and in-person classes on the CalHFA site) and a free online course specifically for shared appreciation loans.
The other unusual feature is that the program is designed to replenish itself. The loans are “revolving,” which means that when a borrower repays the loan, the money can be loaned again to a new borrower.
CalHFA doesn’t make the loans directly; instead, they are made through private lenders authorized by the state.
Jon Healey, senior editor for the Utility Journalism Team, contributed to this report.
About The Times Utility Journalism Team
This article is from The Times’ Utility Journalism Team. Our mission is to be essential to the lives of Southern Californians by publishing information that solves problems, answers questions and helps with decision making. We serve audiences in and around Los Angeles — including current Times subscribers and diverse communities that haven’t historically had their needs met by our coverage.
How can we be useful to you and your community? Email utility (at) latimes.com or one of our journalists: Matt Ballinger, Jon Healey, Ada Tseng, Jessica Roy and Karen Garcia.
Source: latimes.com
Real estate can be a great investment if you take the time to educate yourself about the process and the best ways to get great returns. However, most people who are interested in buying rental properties or real estate as an investment never do so. People who don’t take the time to learn about investing in rental properties are missing out on a great opportunity. I own 11 rental properties that bring in approximately $5,000 a month in cash flow after all my expenses, including mortgage payments.
One thing I would have done differently is investing in real estate much sooner. I bought my first rental property when I was 31 and I am now 35. The great thing about rentals is the longer you own them, the better investment they become. Plus, when you are young you have more flexibility in life, fewer commitments, and can take more risk. If you wait too long to start investing, family, work, and life make it hard to learn about and buy rental properties.
What’s Ahead:
I love comparing rental properties to the stock market, because the stock market is the investment vehicle we are all taught to use. Whether it is individual stocks, mutual funds, index funds, or REITs, we are told the best way to save and invest is to put our money in the market. The problem with investing in the stock market is we are depending solely on stocks to increase in value. Retirement calculators are based on the stock market. They make us guess when we will die to determine how much we should save. We run out of money if we live too long or save too much money if we die to soon.
Some people invest in real estate for appreciation, but smart investors invest for cash flow.
Cash flow is the money you make from rental properties every month after all expenses are paid. The great thing about cash flow is it increases over time without ever eating away at your principal investment. It is like a stock where the dividend is so high that you never have to worry about the stock increasing in value to make great returns.
Cash flow will also increase over time because rents will go up with inflation while your mortgage payments stay the same. Eventually, you will pay off your loan and your cash flow will increase significantly.
On my rentals, I am seeing 20% cash on cash returns, which is not always easy to do, but possible depending on your location and amount of money you have to invest. Those returns do not include the tax advantages of rentals, equity pay down and possible appreciation which all increase your ROI. Here is a great article on how to calculate cash flow properly.
One way to make money on rental properties is to invest using sites like Roofstock. Roofstock is an online marketplace for real estate investing that charges half of the fees of traditional agents. The site makes it ridiculously easy to filter and search for properties in your price range.
Most banks will require an investor to put at least 20% down on a rental property.
That is a lot of money to most people, especially when you consider a property may need repairs, you have to pay closing costs and you want to have money in reserve in case something goes wrong. It can easily take 30% or more of the purchase price in cash to comfortably purchase a rental property.
If you buy a home as an owner occupant you can put no money down with certain loans (USDA, VA) and almost certainly buy a home with 5% down. You can’t rent out a home that you buy as an owner occupant right away, but you can rent it out after you have lived in the home a certain amount of time (usually one year).
There are some things to know about buying a multi-family property that you plan to live in. Most lenders require an owner occupant to live in a house for 12 months to satisfy the owner-occupancy requirement. That means you can buy a rental property as an owner-occupant, live there for 12 months and then rent the home out. If you are ambitious you can keep repeating this process every year although you will most likely only be able to use the no money down option once.
You can also buy a multifamily property that is between one and four units and live in one of the units to qualify as an owner occupant. After you have lived in the unit for 12 months, you can rent out the entire building and repeat the process.
When you are younger, it is much easier to move into a house that you want to make a rental property. When you have a family it is tough convincing your spouse and kids that you need to move every year and into a house that may not be up to their standards.
One of the easiest ways to enter the real estate market is to do so as an investor. Today, there are many platforms that crowdsource the investment process. These platforms choose a group of expertly-vetted properties and have investors contribute to a collective pool, with each investor sharing in the reward.
You don’t have to be an accredited investor with Fundrise, and you can get started on real estate investing with only $10. Fundrise loans money to commercial real estate buyers, then bundles those loans, offering them as investments through its platform.
DiversyFund is yet another investing platform that allows you to invest in real estate without purchasing a property. The company offers investment funds of private market assets including real estate, and investors can start with as little as $500. They also feature zero management fees and a commitment to helping investors of all income levels grow their wealth, making it a great option for investors in their twenties.
CrowdStreet has two major options for real estate investors: choose and manage your own portfolio or let their team of real estate investment experts do the work for you. Either way, you join other investors in funding commercial real estate projects, each of which is carefully vetted by market experts. Minimum investment requirements vary from one project to the next, but you can choose the opportunities that best fit your finances.
Streitwise is another excellent starter real estate investment opportunity. There’s only a $5,000 minimum for private real estate investments, and its most recent dividend was 8.4%. Note that Streitwise isn’t a crowdsourcing platform. Instead, you’re individually investing in a real estate investment trust (REIT), which operates similarly to a mutual fund by grouping investments together and having investors buy-in. What sets Streitwise apart is that it allows you to fund your investment using cryptocurrencies like Bitcoin and Ethereum. Once you’ve signed up on the website, you can download the app to use on your iOS devices
This is a testimonial in partnership with Fundrise. We earn a commission from partner links on MoneyUnder30. All opinions are our own.
It is not easy to find rental properties that will generate the returns I get, but I am not an aberration either. Many investors get higher returns than I do, but they have put in a lot of time and effort learning their market, learning about real estate, and learning about rental properties. The older you get, the less time you have with more job commitments, more family commitments, and more hobbies you discover. There is less time to learn about real estate, your market, and how to make money in this business the older you get (unless you get to retirement age).
I also fix and flip about 10-15 homes every year so I specialize in getting great deals on real estate. I buy most of my deals off the MLS even with rising prices and a lot of competition.
Here are a few tips on getting great deals:
There are definitely some risks and work involved with owning rental properties. The biggest mistake I see investors make is buying for appreciation with negative cash flow. It is great if my houses appreciates, but I love the cash flow. With cash flow, I have money in my pocket that I can use to buy more properties, invest somewhere else, or spend on something fun. If you have negative cash flow, there is a great chance things will end badly for the investor.
The problem with negative cash flow is most investors underestimate the money they will have to spend on their rental properties. There is also no guarantee prices will rise or when they will rise. Given enough time real estate will probably appreciate, but it could also go down in value before that happens. How long can you continue to pay money into a property every month? Eventually, people run out of money and are forced to sell, sometimes for less than they bought a property for. If you have positive cash flow, you won’t have to sell and you won’t want to sell, because it is putting money in your pocket.
Another issue that people forget about is maintenance. You have to budget for maintenance items every month. I figure 10% to 20% of my monthly rents will go to maintenance, depending on the age and condition of a property. If you don’t account for maintenance you may not make any money on your rentals.
On my rentals my average mortgage payments range from $400 to $600 including taxes and insurance and my rents range from $1,100 to $1,500 a month. After accounting for possible maintenance and vacancies my cash flow is about $500 a month.
It takes time to manage a rental property as well. You will have to find tenants, create a lease, account for expenses and income properly and make sure everyone pays on time. You could also hire a property manager to do all this for you for about 8% to 10% of the monthly rents, but you have to budget for that expense as well.
Rental properties can be an awesome investment that allows you to retire early. It is not a get rich quick scheme and it is not easy to do. Real estate investing takes time, flexibility, and ambition to make it work well. The sooner you get started, the easier it will be and the better off you will be later in life.
Source: moneyunder30.com