Assisted Living Boss Pleads Guilty in $3.6M Mortgage Scam

A Texas assisted living facility’s owner has pleaded guilty to defrauding the U.S. Department of Housing and Urban Development and will pay restitution, according to the Department of Justice. So reports McKnight’s Senior Living.

Acting U.S. Attorney Nicholas Ganjei said that clinical psychologist Rafael Otero and his son, Antonio Otero, “exploited a HUD-insured mortgage program designed to provide affordable housing for those suffering from diseases like Alzheimer’s.”

The Oteros allegedly bilked U.S. taxpayers to the tune of $3.6 million.

Read the full article from McKnight’s Senior Living.

Source: themortgageleader.com

Can you use a 203k loan for an investment property?

203k loans for investors: A special use case

The FHA 203k rehab loan can be an affordable way to buy or refinance a home and refurbish it with a single loan. 

This might make the 203k loan attractive to investors and fix-and-flippers. But there’s a catch.

These mortgages are limited to ‘primary residences,’ meaning the borrower has to live in the home full time. So they’ll only work for specific types of investment properties. 

But there are ways to legally and ethically use a 203k loan for rentals and investments. Here’s how.

Verify your 203k loan eligibility (Feb 23rd, 2021)


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FHA 203k loan for investment properties

There’s only one legitimate way to use a 203k loan for an investment property. You can buy and renovate — or construct or convert — a multifamily (2-4 unit) building and live in one of the units.

FHA allows borrowers to purchase 2-, 3-, and 4-unit properties and renovate them using the 203k loan.

To fulfill FHA’s residency condition, you’ll need to occupy one of the units yourself as your primary residence for at least 12 months.

You can rent out the other unit(s), and even use the rental income to cover your monthly mortgage payments.

Benefits of the FHA 203k loan for investors

While this might not be your first idea of an investment property, it can be a foot in the door for first-time investors who want to test out owning and renting properties.

It’s also worth noting that since you’d be buying the property as a primary residence, you get access to lower interest rates.

This means you’d have lower monthly payments and pay less interest overall compared to someone with a ‘true’ investment property mortgage.

Drawbacks

The main downside to this strategy is that you yourself need to occupy one of the units for at least one year.

After 12 months, you could rent out the unit that you live in and move on to purchase other real estate.

But FHA is not for serial investors. Once you use one FHA loan, you likely can’t get another one. You’ll have to secure other financing if you move out and buy again.

Also, keep in mind that you will be living side by side with your future tenants for those 12 months — some may consider this a downside while others won’t mind.

Another downside: FHA loans come with pricey mortgage insurance premiums (MIP) which borrowers are normally stuck with until they sell or refinance into a different loan program.

So there’s a lot to consider before going the 203k investment property route.

But for the right borrower, this could be a great strategy to finance and renovate their own home and a few rental units at the same time.

Verify your 203k loan eligibility (Feb 23rd, 2021)

Can I use a 203k loan if I already own the home?

If you already bought your home, you can use a 203k rehab loan to refinance your current mortgage. This opens up another back door for investors.

You could potentially use the 203k loan to refinance your current home, make renovations, then move after one year and rent the house out as an investment property.

FHA allows you to rent out a home you still own with an FHA loan, as long as:

  • You fulfilled the one-year occupancy requirement
  • You moved for a legitimate reason, like a work relocation or upsizing to a bigger house for a growing family

This would only work for refinancing a home you currently live in and plan to keep occupying for at least a year after the loan closes.

If you already moved and kept your previous home as a rental property, you would not be able to use the 203k rehab loan since the home is no longer your primary residence.

How does the lender know if it’s my primary residence?

Some people make good livings by buying fixer-uppers and then selling them after rehab — aka “flipping” them.

A few might be tempted to take advantage of the 203k program by lying about their intention to live in the home. After all, how can the FHA prove in court what your intentions were when you made the application?

The main argument against this strategy is that lying on a mortgage application can be a felony that could see you in federal court.

Even an email to a contractor mentioning that you don’t intend to live there or other indication of your plans could show up in the court case.

And, repeat FHA buying would not be a viable long-term strategy.

FHA only allows borrowers to have one active FHA loan at a time, except in rare circumstances (for instance, if your work required you to relocate and you needed to buy another home near your new job).

In other words, borrowers cannot move once a year and continue financing new homes with FHA loans.

If you see yourself as an entrepreneur with a rosy future in real estate investing, set yourself up for success by choosing a legitimate financing option that keeps your options open in the long run.

Check your investment property loan options (Feb 23rd, 2021)

About the FHA 203k rehab loan

The 203k rehabilitation loan is backed by the Federal Housing Administration (FHA), an arm of the U.S. Department of Housing and Urban Development.

This mortgage program lets you buy a rundown home — a fixer-upper — and then renovate it using a single loan that covers the purchase price and cost of repairs.

If that involves demolishing the existing structure down to the foundations and rebuilding, that’s fine under 203k loan rules, too.

203k renovation loans are only for necessary repairs to improve the structure or livability of the home. So the funds can’t be used to add luxuries like tennis courts or swimming pools.

And there’s one more important rule: You cannot do the construction or remodeling work yourself. The 203k loan requires you to hire a reputable, licensed contractor, unless you are one yourself and you work full-time as a contractor.

Limited vs. Standard 203k mortgage

There are two flavors of the 203k program: the “Limited 203k mortgage” and the “Standard 203k.”

The Limited 203k used to be called the “Streamline 203k.” As its new name implies, this version is more restrictive about the amount you can spend and the types of work you can do. But it’s also less complicated, hence its former “streamline” moniker.

The maximum repair budget for a Limited 203k loan is around $31,000 ($35,000 officially, but there are mandatory reserve accounts that eat into that sum). And you can’t make any structural renovations to the home.

On the plus side, these loans require much less paperwork and hassle.

The Limited 203k loan is typically best for current homeowners who want to make cosmetic repairs or renovations. It works a bit like a cash-out refinance, except you must spend the money on the home improvements you’ve listed.

A “Standard 203k loan,” by contrast, allows much higher budgets and would be better for home buyers purchasing serious fixer-uppers that need structural repairs.

FHA loan requirements

The basic requirements for 203k loans are similar to those for other FHA mortgages:

  • A 3.5% down payment — Based on your purchase price and rehab budget combined, subject to an independent appraisal
  • Minimum 580 credit score — It may be possible to dip below 580 if you have a 10% or higher down payment
  • Debt-to-income ratio of 43% or less — No more than 43% of your gross monthly income can normally be eaten up by housing costs, existing debt payments, and other inescapable monthly obligations such as child support

Although the FHA sets these minimum requirements, you’ll be borrowing from a private lender. And they’re free to impose their own standards.

For example, some mortgage lenders require a credit score of 620 or 640 for an FHA loan. If one lender has set the bar too high for you, shop around for other, more lenient ones.

Verify your FHA 203k loan eligibility (Feb 23rd, 2021)

What repairs can you do with a 203k loan?

The FHA is putting up taxpayers’ money to guarantee part of your mortgage. So it’s not in the business of writing loans for luxury upgrades.

There are strict rules about the types of home renovations you can do and the amount of money you can borrow.

In fact, the total amount you can borrow for your home purchase and renovation costs is governed by current FHA loan limits, which vary depending on local home prices.

You can find the loan limit where you wish to buy using this lookup tool.

Maximum rehabilitation loan budgets

We already mentioned that a Limited 203k loan gives you a cap of around $31,000 on your rehab budget.

A Standard 203k lets you have as big a rehab budget as you want, capped only by your local loan limit minus the home’s purchase price.

Your total loan amount can be up to 110% of the property’s future value when complete.

But an appraiser will pore over your plans to make sure the final value of the home — after your projects are completed — will match the amount FHA is lending you.

What you can spend your rehab budget on

The Limited 203k is mostly intended for refreshing a home that’s a bit tired. So you can do things like:

  • Replacing flooring and carpeting
  • Installing or replacing an HVAC system
  • Remodeling a kitchen or bathroom
  • Fixing anything that’s unsafe
  • Making the home more energy-efficient

But you can’t use the money to do structural work, such as moving loadbearing walls or adding rooms.

The Standard 203k is very different.

You can do all the above and almost everything else, including serious construction work. Heck, you can even move the house to a different site if you get the FHA to approve your plans.

The 203k loan process

Limited 203k loans are pretty straightforward. Indeed, they’re easier than most to qualify for and set up.

But a Standard 203k isn’t like that. It may be your best path to your dream home. But there will be some extra hoops to jump through compared to a traditional mortgage.

Here’s the basic process to apply for and close an FHA 203k loan.

  1. Find your best lender — You can save thousands just by comparison shopping among multiple lenders. They aren’t all the same! Make sure the ones you consider offer FHA 203k loans and are experienced in delivering them. You’ll want a lender familiar with the specifics of 203k loans to make sure the process goes smoothly
  2. Get pre-approved — Pre-approval shows you your exact budget as well as your future interest rate. And you’ll get a chance to resolve any issues that arise in your application
  3. Find the home you want — This is the fun bit. But download the Maximum Mortgage Worksheet PDF from HUD’s website because that will help you assess whether your plans are affordable
  4. Find a 203k consultant — A 203k loan consultant will visit the home site, inspect the building, and then prepare a document outlining the project’s scope and specifications, along with a detailed cost breakdown for each of the repair tasks. He or she also prepares lender packages and contractor bid packages, along with draw request forms for stage payments
  5. Find a licensed contractor — Some lenders maintain lists of approved contractors. And your consultant may help you find a reputable one. Make sure candidates have proven records for projects similar to yours and are familiar with FHA 203k jobs. Many contractors add serious delays to 203k approval because they can’t seem to complete the paperwork correctly
  6. Have the home and project appraised — The lender will set this up for you
  7. Begin work — Once the appraisal is approved, the lender should let you close. And your contractor can then begin work, drawing on funds in an escrow account

Limited 203k loans require the borrower to live in the home while repairs are completed. So if it’s a new home purchase, you’ll have to move in within 60 days, which is the norm for FHA loans.

Standard 203k loans, on the other hand, might include structural repairs that render the home unlivable while construction is going on. In this case, the home buyer is not required to move in right away.

Rehab loan alternatives for investment properties

FHA 203k loans aren’t the only way to buy and renovate a home with one loan. Fannie Mae’s HomeStyle Renovation and Freddie Mac’s CHOICERenovation products can do much the same thing.

Since the HomeStyle and CHOICERenovation loans are conventional mortgage loans, they won’t charge for private mortgage insurance (PMI) if you put at least 20% down. This can save home buyers a lot of money on their monthly mortgage payments.

However, like the 203k loan, these programs are only available for primary residences.

If you’re buying a ‘true’ investment property — meaning you won’t live in one of the units yourself — these loans aren’t an option.

But investors have other renovation loans to choose from.

Traditionally, you would buy a home with a mortgage and then borrow separately — perhaps with a home equity line of credit or home equity loan — to make improvements. Then you could potentially refinance both loans into one later on.

Another option is using a cash-out refinance on your investment property or primary residence and putting the cashed-out funds toward repairs or upgrades.

Of course, all these types of loans require you to have enough equity built up to cover the cost of repairs.

And if you choose to draw from the equity in an existing investment property, you’ll pay higher interest rates.

But the upside is that there are no rules about how the funds can be spent. So if luxury upgrades are on your agenda, this could be the way to go.

Explore all your options

FHA 203k loans are only available to a select group of investors: Those who will buy a multi-unit property and live in one unit themselves.

For real estate investors looking to fix-and-flip or build a large portfolio of investment properties, an FHA loan isn’t the right answer. But there are plenty of other financing options out there.

Be sure to explore all your loan options before buying or renovating a home. Choosing the right program and lender can help you achieve your goals and save money on your project.

Verify your new rate (Feb 23rd, 2021)

Compare top lenders

Source: themortgagereports.com

Black Homeowners Charged Higher Mortgage Rates Than White Counterparts With Similar Incomes – ValuePenguin

Inequality is also prevalent in mortgage refinancing

The U.S. housing market continues to see historically low mortgage interest rates and rising home prices, locking many out of finding affordable real estate. Another challenge? The mortgage rate disparities between Black and white homeowners.

When compared with white homeowners with similar incomes, Black homeowners have first mortgages — the loan used to buy or refinance a home — with higher interest rates, according to a new analysis from Harvard University’s Joint Center for Housing Studies (JCHS). What’s more, white homeowners with a significantly lower income than Black homeowners also have lower interest rates.

Lending discrimination lingers in mortgage market

The analysis, authored by JCHS research analyst Raheem Hanifa, found that although mortgage rates drop as incomes rise, race can impact the rate attached to a borrower’s home loan. The median interest rate for a Black homeowner with a household income of at least $100,000 was 4.169%, while a white homeowner with the same income had a median rate of 3.946%, a 22-basis-point discount.

The largest disparity exists between Black and white homeowners earning a household income between $30,000 and $45,000. Black homeowners with this level of household income had a median interest rate of 4.506%, while the rate for white homeowners was 29 basis points lower, at 4.213%.

Not all refinances are created equal

A mortgage refinance can help you snag a lower mortgage rate and monthly payment, cash out some of your available equity or get rid of your mortgage sooner. But, according to JCHS’ analysis, Black homeowners are not reaping the same level of refi benefits as white homeowners.

While the analysis found that Black homeowners were able to refinance into a mortgage with a rate that was 22 basis points lower than their old rate, that was still 20 basis points higher than rates for white homeowners who refinanced. Additionally, refinance rates for Black homeowners were similar to those of white homeowners who didn’t go through the refi process.

Remember to shop around

Your mortgage interest rate affects your loan affordability and several factors are used to calculate that rate, including, but not limited to:

  • Your credit score
  • Your down payment amount
  • Your loan type
  • Your repayment term

A higher credit score can help you get a better interest rate. Generally speaking, mortgage borrowers with credit scores of 740 or higher may be eligible for the lowest available mortgage rates. A larger down payment can also drop your rate because it reduces your lender’s risk by shrinking the loan amount you’ll need to buy your home.

Mortgages with shorter terms tend to have lower interest rates. For example, the typical 15-year fixed-rate mortgage has an average 2.21% rate, while the average 30-year fixed-rate loan has a 2.81% mortgage rate, according to Freddie Mac’s latest Primary Mortgage Market Survey.

Rates also vary by mortgage lender, which is why it’s crucial to shop around. Identify three to five lenders and reach out for price quotes. Pay attention to and compare interest rate and closing costs estimates; you may end up saving thousands over your loan’s lifetime.

Still, if you believe you’re experiencing lending discrimination, consider filing a complaint online with the Consumer Financial Protection Bureau or by reaching out to your state’s attorney general.

Methodology: The Joint Center for Housing Studies of Harvard University’s report analyzed 2019 data from the U.S. Census Bureau’s American Housing Survey. The analysis was published in February 2021.

Source: valuepenguin.com

Cheaper rent in San Francisco? For some Oakland tenants, the city across the Bay is more affordable now

Even on a foggy San Francisco morning, the view from Scott Simmons’ 25th-floor apartment stretches from downtown to Golden Gate Park. The home of the 42-year-old tech worker is also spacious for a one-bedroom, featuring hardwood floors, new appliances and granite countertops.

A year ago, when he was sharing a two-bedroom place with his brother, Simmons couldn’t have imagined living in an apartment like this one. But last fall, when Simmons heard about big rent declines during the COVID-19 pandemic, he discovered he could get way more for his money in the heart of San Francisco than in the neighborhood where he was doubling up in Oakland.

“It’s bananas,” Simmons said. “I never thought I was going to be someone who was going to have a nice view. It’s a luxury.”

Since March, when government stay-at-home orders began emptying downtowns of workers and shoppers, the average rent for a one-bedroom apartment in San Francisco has dropped nearly 30%, the largest decrease in the country. The tech capital has hundreds of thousands of employees well positioned to work remotely, and they have. Outside the city.

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The pandemic’s toll on San Francisco has created a scenario long unthinkable in the Bay Area. For some renters — mostly middle- and upper-income earners — it’s now more affordable to live in the famously expensive city than in its bluer-collar neighbor, Oakland.

Scott Simmons at his one bedroom apartment balcony overlooking City Hall and other buildings in San Francisco

Scott Simmons, a manager of information technology security, at his one-bedroom high-rise apartment at Fox Plaza in San Francisco. Simmons moved in November from Oakland to the high-rise, where he pays $2,800 per month in rent. City Hall is seen in the background.

(Gary Coronado/Los Angeles Times)

“If you would have told 15-year-old me that 15, 16 years down the road that Oakland was going to become more expensive it would have been literally shocking,” said Amar Saini, 32, an Oakland native who moved into a 12-story apartment building near the Bay Bridge this month to save money. “I just don’t believe it.”

San Francisco, even as rents decrease, remains the nation’s costliest big city. A one-bedroom apartment still typically rents for almost $2,000 a month, putting it far out of reach for many residents. But the steep drop in prices has surprised real estate watchers for both its depth and scale. Even landlords in tony neighborhoods like Pacific Heights and Russian Hill, who once were charging $4,000 a month for one-bedroom apartments, are lowering their prices and offering incentives like months of free rent to get tenants in the door.

The rent declines are a direct result of the pandemic. More than half the city’s employees are able to work remotely, according to the Bay Area Council Economic Institute, and tech firms like Twitter and Salesforce — the city’s largest private employer with more than 9,000 workers — have said employees can stay away from the office even after the pandemic ends.

Additionally, the pandemic has closed restaurants, bars and museums, while putting a premium on locales that offer people more space to work or their kids to attend school virtually. For San Francisco, a dense city that long has had some of the nation’s highest rents, all the changes have taken away many of the amenities that make city life vibrant. Data from the U.S. Postal Service show that 56,000 more people requested address changes out of San Francisco in 2020 than those moving in.

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“Every man, woman and their dog is saying there’s no point living in downtown San Francisco if you’re not going into work,” said Nicholas Bloom, an economics professor at Stanford University who is studying remote work during the pandemic.

California Street in downtown San Francisco with buildings and cars but no cable cars on its tracks.

The San Francisco cable car system is not operating along California Street downtown, shown in February.

(Gary Coronado/Los Angeles Times)

The stillness of once-bustling San Francisco neighborhoods can be jarring. In Union Square on a recent weekday, a handful of masked pedestrians and homeless residents roamed silently amid hotel lobbies, restaurants and luxury stores largely empty of customers. Closed businesses along Market Street, one of the city’s main commercial boulevards, were boarded up with plywood. Shops that remained open had signs displaying reduced hours.

A year ago, only about 1% of the units managed by members of the San Francisco Apartment Assn., the city’s largest landlord group, were vacant, said Janan New, its executive director. Now, she said, nearly a quarter are empty.

At a new, upscale apartment building across from Twitter’s headquarters on Market Street, the sales office is offering up to three months of free rent. If that’s not enough incentive, new arrivals can also get a year of free cable and internet, several personal training and massage sessions or have the landlord donate $1,000 to a local charity on the tenant’s behalf.

Such efforts to attract middle- and upper-income residents reflect the pandemic’s uneven economic impact. White-collar employees who are able to work from home have been far less affected than lower-income workers in service and hospitality industries.

Maria Marin and her family sit on a bed.

Maria Marin, 35, and husband Francisco Rodriguez, with daughters Vanessa Rodriguez, 9, Tiffany Rodriguez, 11, and Keily Rodriguez, 30 months, at an apartment they share with extended family near San Francisco’s Portero Hill neighborhood in February.

(Gary Coronado/Los Angeles Times)

Maria Marin and her husband, Francisco Rodriguez, were once able to crowd into a one-bedroom apartment near Bayview with their three young daughters. But after the pandemic hit, Marin lost her job as a housecleaner, and then her husband got COVID-19 and lost his warehouse job.

Unable to pay the $2,000 monthly rent, the family moved in with Marin’s mother near Potrero Hill. Ten people now share the three-bedroom home while Marin and her husband seek employment.

“In my situation, it’s not true that the rent is down,” said Marin, 35. “They ask you to make two or three times the rent to qualify for an apartment. And when you don’t have it, they hang up the phone.”

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Rents have decreased in Oakland as well with the average one-bedroom now going for $1,625, according to Apartment List. But the 18% gap between Oakland and San Francisco prices is the narrowest since the real estate firm began tracking rents in 2017.

Before his move, Simmons enjoyed living in Oakland’s Uptown, a walkable community not far from the Fox Theater, and first looked for a new place around there.

But he found nicer apartments in San Francisco, and living there meant he could ditch his car. Simmons signed a lease for $2,800 a month in a 29-story building also across the street from Twitter. The landlord gave him $2,000 in debit cards as a bonus.

“I like walking places. I like meeting people. I like the busyness,” Simmons said. “This is the life I want.”

Soon after last spring’s stay-at-home orders went into effect, Armand Domalewski and his girlfriend decided to leave their roommates and look for an apartment together. They searched around Oakland’s Lake Merritt in the hopes of living near open space.

“Then we looked in San Francisco,” said Domalewski, 31, a data analyst. “Not only were the prices lower than I ever expected, they kept getting lower.”

The couple found a bright, second-floor apartment on a narrow, red brick street near Duboce Triangle for just under $3,000. “I walked in and said, ‘There’s a dishwasher, my God,’” he said.

A few months into their lease, another tenant in their building moved out and they got a call from their landlord. Domalewski feared the worst.

“You’re so conditioned to think, ‘Oh, my God, am I getting evicted?’” he said. “And then she was like, ‘I’m unilaterally lowering your rent.’ And we’re like, ‘This is crazy.’”

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Rents have even become affordable for recent college graduates.

Sarah Abdeshahian sits on the window sill of her apartment.

Sarah Abdeshahian, 22, a recent graduate of UC Berkeley, at her one-bedroom apartment in San Francisco’s Nob Hill neighborhood in February.

(Gary Coronado/Los Angeles Times)

A few months after graduating from UC Berkeley, Sarah Abdeshahian got a job as an organizer with the Tenderloin Housing Clinic in San Francisco. She was astounded to be able to find her own one-bedroom apartment near the top of Nob Hill for $1,900 a month, a price that had been reduced by $400.

“The idea of an entire apartment to myself is an insane luxury to me,” said Abdeshahian, 22. “I thought of San Francisco as a place where only wealthy tech people could live, not someone working at a nonprofit just out of college.”

Even though rents have plummeted, they could bounce back. Tenants with long memories plan ahead.

Simmons said he could have moved into a newer apartment complex for the same money.

But he opted for an older building. It came with rent control.

Source: latimes.com

U.S. existing-home sales unexpectedly rise to three-month high

Sales of previously owned U.S. homes unexpectedly rose to a three-month high in January as Americans sought to take advantage of ultra-low mortgage rates that have powered the boom in housing.

Contract closings increased 0.6% from the prior month to an annualized 6.69 million, after a downwardly revised 6.65 million in December, according to National Association of Realtors data released Friday. The median forecast in a Bloomberg survey of economists called for a 6.6 million rate in January.

Low borrowing costs paired with a desire for single-family homes with more space during the pandemic has propelled demand, even as other parts of the economy lag. Sales of existing homes last year were the strongest since 2006. Still, prices are rising, inventory is limited and expectations of higher mortgage rates may weigh on buyer demand going forward.

“We have to get more inventory,” Lawrence Yun, NAR’s chief economist, said on a call with reporters. “Sales could be even higher,” if more homes were put on the market, he said.

Single-family homes with rooftop solar panels and backyard pools are seen in this aerial photograph taken over a Lennar Corp. development in San Diego, California.

Bing Guan/Bloomberg

While low mortgage rates have helped make buying a home more affordable, prices are soaring. The median selling price increased 14.1% from a year earlier to $303,900 in January, a record for the month.

Properties remained on the market for 21 days in January, compared with 43 days in the same month last year.

There were a record-low 1.04 million homes for sale last month, down 25.7% from a year earlier. At the current pace, it would take 1.9 months to sell all the homes on the market, down from 3.1 months in January of last year. Realtors see anything below five months of supply as a sign of a tight market.

Recent data also suggest the housing market will remain a bright spot for months to come. While home-construction declined in January for the first time in five months, permits to build single-family houses rose at the fastest pace since 2006. The number of one-family dwellings authorized but not yet started increased to the highest in more than 13 years.

Source: nationalmortgagenews.com

COVID accelerated migration trends, but is it sustainable?

Even Norman Rockwell couldn’t put a rosier cast to New Hartford, Connecticut, in mid-autumn. On the far western outskirts of the Hartford metropolitan area, the town’s converted brick mill buildings are now occupied by restaurants that sell and serve locally grown produce and locally made artisanal cheese. A river – the Farmington – really does run through the town, shallow and sparkling, punctuated by occasional fly-fisherman. Bridges arch over the river from stands of yellow-leafed birches to groves of flaming maples.

It’s exactly the kind of place that’s attracting pandemic-panicked New Yorkers who, drawing a circle of two hours’ train travel from Manhattan, figure they can set up parallel lives in the country and city. 

The COVID-19 crowds that are now seeking fresh air and socially distanced living are looking beyond what is considered more traditional second-home destinations to small towns that have struggled to catch the updraft of the broadband revolution. As city dwellers scatter, enough of them are landing in the semi-rural spots to potentially realign the very definition of economic development, land use and the consequent cascade of broad band investment, municipal services, taxation and local spending priorities. 

“The economy is moving faster than the population,” said Mark Lautman, an economic development consultant who has helped local organizations in New Mexico and elsewhere forge partnerships that serve residents and employers.

In the past, economic development was defined by incentives for buildings and infrastructure with the aim of winning and keeping employers with substantial numbers of workers. 

The COVID-19 pandemic has accelerated a longer-term trend of separating talent from location. Economic development leaders are just starting to realize the profound implications of a distributed workforce on their local economies, workforce development, housing and real estate markets, he said. 

“If you don’t have qualified workers, you can’t grow your economy,” Lautman said. “And all of a sudden, the cost of place of operation is zero. States throw massive resources at site-based economic development but remote economic development needs a fraction of that.”  

Investors are already moving money into place to catch the coattails of COVID-catalyzed change. 

Collin Gutman, managing partner of SaaS Ventures, a Washington, DC-based venture capital firm that works specifically with young companies in smaller metropolitan areas far from Silicon Valley, said that the pandemic has propelled high tech companies to redefine where and how they look for talent.

“Previously there had been a perception that these types of businesses could only get critical mass of talent in San Francisco or Boston,” he said. “That perception has changed very quickly in the past 12 months. We’ve seen an outflow to places like Louisville, Lexington, Nashville and people buying second homes in rural counties.”

Daniel Jeram is New Hartford’s First Selectman, the top official of the 7,000- resident town. He said he hasn’t seen anything quite like this year’s real estate sales burst.  

“The game is on and it has been for months,” Jeram said. “You can tell from the license plates driving around town.” 

He isn’t kidding. Regional market reports from the Greater Hartford Association of Realtors released at the end of 2020 show that year-over-year, pending single-family home sales rose 49.9%, days on market dropped by 32.1% and the median home sale price rose 13.3% to $280,500. 

Maintaining the growth

With young families pouring in, New Hartford’s challenge is how to keep them, especially as support for enhanced broadband has been under discussion for years, with little progress, Jeram said. New Hartford is on the eastern edge of a subregion of northwestern Connecticut and southwestern Massachusetts that suffers from weak cell coverage and tepid broadband. 

“We’re okay,” said Jeram, of New Hartford’s cable service, “but that is an ongoing debate that state and local leaders are struggling with, because cost to get broadband in is extremely high. Everyone knows it’s the wave of the future, but how will we pay for it?”

Rista Malanca is trying to figure that out. She is director of economic development for neighboring Torrington, where broadband somewhat peters out. 

“We’re attractive and affordable for a lot of people, but how do we keep them engaged, so they center their lives here, and spend their money here?” Malanca said. 

Powerful broadband paves the digital way for not just telecommuting and remote collaboration, but also for telehealth, remote education for children and adults and a host of other services that frame the new hybrid of a sophisticated information economy invisibly driving growth.  

Consultants with McKinsey project that 22% of companies expect to hire more remote freelance workers in the foreseeable future. Before the COVID-19 pandemic reordered the American workforce in March 2020, only 4.9% of full-time U.S. workers telecommuted from their homes. By the end of June, 42% of the workforce was home-based, and workforce researchers expect that the dramatic shift is largely permanent. FlexJobs, a Boulder, Colorado-based employment site that serves both individuals and employers, projects that capturing work-life balance and reducing commuting stress are top priorities for people who want to move and either bring their jobs with them or find remote work.

Changing lifestyle

Professionals who bring high-paying jobs with them also transplant demand for higher-end dining, grocery, local entertainment and home renovation and maintenance services, said Shaun Greer, vice president of sales and marketing at Vacasa, a Portland, Oregon, company that provides property management services to more than 21,000 vacation homes in North America. 

Unlike short-term renters, professionals relocating for a full-fledged second hub where they can work and attend school remotely, need functional and municipal services largely different from tourist demands. 

“If this trend continues, it will affect municipal budgets,” Greer said. “Most of these communities are restricted in some way, such as [their level of] power or utilities. If this growth continues they’ll have to put in a lot more infrastructure to keep up.”

New Hartford could take a cue from The Peoples Rural Telephone Cooperative in McKee, Kentucky, population 800. 

In 2007, the cooperative, formed in 1950 and serving two rural Kentucky counties, decided to go all in on broadband, related Keith Gabbard, who has been the cooperative’s CEO for the past 25 years. Patching together about $50 million from federal, state and local sources, the service committed to bringing broadband to every home in its service area. 

“Since 2014, we’ve had gigabit service to every home and business,” Gabbard said. “Once we got it built, we realized, ‘what do we do with it?’ We had to become more economic-development minded.”

Gabbard took on the role of one-man employment liaison, workforce training advocate, lobbyist to state legislators and public relations cheerleader, relentlessly promoting the cooperative’s ready, willing and connected workforce at conferences. Working relationships with national workforce development agencies and platforms – including FlexJobs – produced a stream of inquiries from American companies seeking to bring operations back to the U.S. from overseas, and looking to expand domestically. 

“It’s been amazing,” Gabbard said. “In the last five years we’ve had 1,100 teleworks jobs created. People move here because of the internet and we’re seeing even more of that because of the pandemic.” 

McKee still lacks a Starbucks, but it is making inroads with establishing a healthcare clinic that will pivot on telemedicine. And, Gabbard has even drawn local Amish into the high-speed loop as the cooperative hires their construction crews to expand into neighboring counties. 

Communities that were a step ahead are both riding the first crest of post-COVID change while demonstrating the importance of close collaboration among regional economic, workforce and housing development authorities, investors and the private sector.

Broadband brought jobs to northwest New Mexico in 2017 and has anchored the local economy even as the COVID-19 pandemic has rolled from crisis to chronic. Shelly Fausett runs the SoloWorks program in the area, which advocates for workforce development and related supports, and which helps employers find and hire connected workers. SoloWorks had just moved to a new a co-working space to build capacity for distributed teams but the health care crisis kept workers home…and working. 

“Right now in customer service, there are more jobs than people,” Fausett said. 

The 2020 COVID-19 pandemic simply accelerated long-term trends toward remote work, annihilating embedded cultural resistance and rapidly realigning work processes to support sustained collaboration and productivity from any location, said Brie Weiler Reynolds, the in-house career development coach for FlexJobs. 

Remote work surged for both staffers who have always had the capability to work from home and among the current and aspiring self-employed who immediately seized the opportunity to redesign their careers around the location and lifestyle they had always craved. In March, the FlexJobs platform received a 50% increase of inquiries and applications from workers, she said. 

Companies and employment agencies – private and government-run – that already collaborated with local economic development and workforce training programs had a big head start on those that had in place only traditional programs, Weiler Reynolds said. Cross-functional workforce development programs that “combine broadband outreach with remote work training and company partnerships and that partner with FlexJobs to find the actual jobs, are serving people who already live in their areas and are hiring specifically from economic groups hard-hit by the tourism and hospitality industries.”

Workforce housing that is designed around and for home-based work will ensure lower paying, broadband-dependent jobs, such as customer service, highly skilled software developers and managers cut a very different profile, SaaS Ventures’ Gutman said. They are “six-figure Millennials” who expect, if not big-city culture and amenities, at the very least, transportation services that can quickly deliver the big city to the rural doorsteps of spacious houses with dedicated home offices. 

And, the ability to quickly get to major cities will be a key plank of rural economic development, especially as patterns of post-pandemic life emerge, he said. High-tech transplants want lots of fresh-air recreational amenities but also want to take just one connector flight to a major air hub. 

“It could be that saving the regional airport is your key to economic prosperity,” Gutman said. 

COVID redefines tourism economies

The return on remote work-equipped workforce housing is short and sweet for communities long tied to cyclical tourism economies. A solid base of long-term second-home owners is already redefining tourism economies, Greer said, extending the 2020 season well into autumn, and thus continuing demand for cleaning, maintenance, renovation and some municipal services and activities. 

“What we’re excited about is that this change means we keep more of our seasonal employees, hopefully longer,” he said, adding that a greater number of staycation homeowners could permanently stabilize tourist-town employment, municipal and local business cash flow and demand for broadband and other services.

The pandemic has proven the possibilities and powerful potential of a distributed workforce and, by extension, distributed economic development, said one longtime broadband researcher and advocate. 

“The pandemic could yield a lasting legacy if municipalities, counties and states forge regional alliances for economic development, and use their combined power to rapidly build universal broadband, align tax policies and regulatory incentives to encourage private and public expansion of broadband to connect all American citizens,” said Rouzbeh Yassini, executive director of the Broadband Center of Excellence at the University of New Hampshire in Durham, New Hampshire. “States need to relinquish counterproductive strategies focusing on stealing businesses from each other and combine forces. That’s the only way that many small towns and rural areas will gain critical mass to justify private investment in 5G, both through wired (cable and phone) and wireless services. 

“If you get five or six state governments together, and get regional connectivity vision established, they’ll improve the economic value of that entire region for web-based daily services and for mapping, driverless cars and gain scale for recruiting residents, farmers and business,” Yassini said, citing the cascade of connected services that could support remote working, aging in place and other life-enhancing functions. 

Lautman, the economic development consultant, detects a rapid realignment of the definition of economic development with state and local resources to support distributed workforces. Hybrid strategies that blend satellite nodes for regional managers and occasional team meetings are a natural evolution of the urban model of co-working spaces, he said. The pandemic has also elevated the importance of health care, childcare and related services as essential to workforce stability and productivity. 

As professionals and corporate leaders become acclimated to working from their second homes, they might become influential advocates for their industries to pivot to distributed workforce development, potentially bringing economic development authorities and broadband providers with them.  

“To create an environment that incentivizes and supports remote work, if I were a local economic development executive, I’d be at my state legislature asking for the same incentives to build houses with home offices that they give to industrial developers,” Lautman said. “Now we have a residential real estate platform for economic development.” 

Source: housingwire.com

Intense Demand and Low Mortgage Rates Drive Home Values to Record Highs – PRNewswire

Monthly appreciation of home values in January matched recent record highs, while annual growth is higher than any time since 2006. Home sales are moving briskly, with homes typically staying on the market for 18 days as of mid-January before the seller has accepted an offer from a buyer — 28 days faster than in 2020 and 2019. For-sale inventory declined again in January, and now stands 26.3% below levels from a year ago.

The Zillow Home Value Index (ZHVI) rose to $269,039 in January, up 1.1% month over month, matching December’s all-time record for monthly growth in data reaching back to 1996. Annual home value appreciation was 9.1% — the largest annual growth recorded since June 2006, before the Great Recession.

“Homebuying demand has pushed the pedal to the metal for price appreciation this winter,” said Jeff Tucker, senior economist at Zillow. “Normally we’d be talking about the spring selling season ramping up, but it looks more like last summer’s selling season simply never ended. Buyers eager to secure more space and lock in today’s rock-bottom interest rates are having to move quickly and aggressively to win out in this competitive market.”

Home values rose in all 50 of the largest U.S. metros, with the most drastic yearly growth in Phoenix (17.1%), San Jose (14.2%) and Austin (13.7%). The slowest growth — a relative term in this case — was seen in San Francisco (5.3%), Chicago (6.7%), and San Antonio (6.7%). 

A few major demand drivers are keeping competition high and the market hot through the customarily cool winter. For one, a wave of millennials are now entering their peak home-buying years. The number of Americans aged 25-34 was 12% higher in July 2020 than July 2010, according to Census estimates — an increase of approximately 4.9 million people. 

Another is mortgage rates, which averaged 2.74% for a standard 30-year fixed in January — up slightly from a historic low of 2.68% in December. These rates are making monthly mortgage payments more affordable as a percentage of income, even when considering rising prices. 

The COVID-19 pandemic and widespread changes to work-from-home policies have also pushed many to reconsider what they want and need in their living space, and where it should be. 

Looking forward, Zillow economists expect home values to grow 10.1% in the next 12 months. The Zillow forecast for existing home sales has been revised up since December, driven by improved pending sales volumes and home purchase applications. Existing home sales are expected to reach 7 million in 2021, 24.8% more than in 2020. 

While home prices are rising quickly, rents are relatively stagnant. The Zillow Observed Rent Index (ZORI) was $1,721 in January, just 0.5%, or $9, higher than in January 2020 and up 0.3% month over month. 

Rents in many expensive, coastal metros are currently much lower than a year ago — down 9.2% in San Francisco, 8.8% in New York, 7.2% in San Jose, and 6.3% in Boston. Many Sun Belt and Midwest metro areas, on the other hand, saw solid rent growth. Phoenix led the largest 35 metro areas with 8.4% annual rent growth, followed by Sacramento (7.6%) and Indianapolis (6.9%).

Metropolitan Area*

Zillow Home Value Index, January 2021

ZHVI – YoY Change, January 2021

Zillow Observed Rent Index, January 2021

ZORI – YoY Change, January 2021

United States

$269,039

9.1%

$1,721

0.5%

New York, NY

$516,732

7.7%

$2,465

-8.8%

Los Angeles-Long Beach-Anaheim, CA

$748,532

9.6%

$2,542

-0.8%

Chicago, IL

$259,459

6.7%

$1,614

-2.9%

Dallas-Fort Worth, TX

$273,348

7.9%

$1,555

2.0%

Philadelphia, PA

$277,775

10.6%

$1,578

2.3%

Houston, TX

$231,195

7.0%

$1,464

0.4%

Washington, DC

$475,850

8.6%

$2,006

-3.4%

Miami-Fort Lauderdale, FL

$323,431

7.7%

$1,913

2.1%

Atlanta, GA

$264,565

9.7%

$1,602

5.7%

Boston, MA

$539,592

9.4%

$2,277

-6.3%

San Francisco, CA

$1,178,615

5.3%

$2,876

-9.2%

Detroit, MI

$198,979

10.3%

$1,293

6.1%

Riverside, CA

$433,226

11.7%



Phoenix, AZ

$335,975

17.1%

$1,572

8.4%

Seattle, WA

$594,223

12.8%

$1,866

-5.5%

Minneapolis-St Paul, MN

$320,438

8.6%

$1,543

0.8%

San Diego, CA

$689,361

13.5%

$2,383

4.3%

St. Louis, MO

$197,073

9.0%

$1,093

3.8%

Tampa, FL

$257,499

12.8%

$1,589

6.6%

Baltimore, MD

$319,175

8.2%

$1,646

2.2%

Denver, CO

$488,746

9.0%

$1,709

0.1%

Pittsburgh, PA

$178,282

10.4%

$1,177

1.2%

Portland, OR

$458,486

9.7%

$1,649

1.2%

Charlotte, NC

$265,397

10.9%

$1,514

3.1%

Sacramento, CA

$478,817

11.3%

$1,916

7.6%

San Antonio, TX

$222,816

6.7%

$1,330

2.5%

Orlando, FL

$276,168

7.5%

$1,594

2.2%

Cincinnati, OH

$208,352

12.0%

$1,259

5.5%

Cleveland, OH

$176,069

11.1%

$1,121

3.7%

Kansas City, MO

$227,059

10.6%

$1,193

5.0%

Las Vegas, NV

$315,966

8.0%

$1,493

6.7%

Columbus, OH

$234,276

10.8%

$1,278

5.2%

Indianapolis, IN

$204,141

11.3%

$1,262

6.9%

San Jose, CA

$1,314,799

14.2%

$2,892

-7.2%

Austin, TX

$384,446

13.7%

$1,511

-1.2%

Virginia Beach, VA

$264,060

8.3%

$1,376

6.1%

Nashville, TN

$304,571

8.9%

$1,595

1.9%

Providence, RI

$357,761

12.0%

$1,603

8.2%

Milwaukee, WI

$219,381

12.1%

$1,169

2.7%

Jacksonville, FL

$252,678

9.4%

$1,370

5.6%

Memphis, TN

$174,063

11.3%

$1,337

10.0%

Oklahoma City, OK

$170,138

7.5%

$1,098

3.9%

Louisville-Jefferson County, KY

$197,548

8.7%

$1,044

4.7%

Hartford, CT

$260,546

9.5%

$1,353

5.0%

Richmond, VA

$268,405

8.4%

$1,294

4.8%

New Orleans, LA

$224,193

7.9%

$1,290

3.8%

Buffalo, NY

$193,583

11.4%

$1,124

5.3%

Raleigh, NC

$307,481

8.8%

$1,503

2.6%

Birmingham, AL

$188,327

9.8%

$1,129

5.5%

Salt Lake City, UT

$436,390

13.7%

$1,408

3.3%

*Table ordered by market size 

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life’s next chapter. 

As the most-visited real estate website in the U.S., Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers® buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans™, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.  

Zillow Group’s affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). 

SOURCE Zillow

Related Links

https://www.zillow.com

Source: prnewswire.com