Coronavirus in Your Apartment Community: How To Stay Safe

Learn how Apartment Guide is responding to coronavirus and taking steps to help renters and property managers during this challenging time.

There has been a flood of information online about how to keep yourself safe from being exposed to or contracting novel coronavirus disease (COVID-19) as it spreads across the world and the nation.

Preventing coronavirus in your apartment

The U.S. Centers for Disease Control and Prevention has offered a number of reference articles and official statements on how to best protect yourself and your family.

But for apartment dwellers, those with common spaces, mailbox clusters, lobbies, trash chutes and a plethora of door handles, keeping safe and practicing prevention habits is a bit more difficult. From your own personal hygiene to how to manage your apartment to what to expect from your landlord, here are all the tips, suggestions and instructions straight from the CDC just for renters and apartment tenants.

1. Wash your hands often

Wash your hands after you touch another person or a common surface. Wash your hands before and after you touch or prepare food. Wash your hands after using the restroom. Wash your hands after you cough, sneeze or blow your nose. Wash your hands when you get home from being out.

Wash by covering all surfaces of your hands and rubbing them together until they feel dry. When you wash, rub with soap and water for at least 20 seconds. Experts have recommended singing “Happy Birthday” twice. If you’re tired of that, try other songs with 20-second choruses like:

  • “Take on Me” by A-ha
  • “Jolene” by Dolly Parton
  • “Raspberry Beret” by Prince
  • “Truth Hurts” by Lizzo
  • “Stayin’ Alive” by the Bee Gees (like that CPR scene from “The Office”)

If soap and water are not available, disinfect your hands by utilizing a 60 to 95 percent alcohol hand sanitizer and following the listed instructions.

washing handswashing hands

2. Avoid close contact with people who are sick

This seems obvious. But since you never know who is sick, minimize contact in general, as well. Spread out on the bus or subway or in line. Touch elbows instead of shaking hands or fist-bumping, or politely decline to touch at all. Try to avoid touching common surfaces others touch in public places and in your apartment building or common areas as best you can. Don’t share food or drinks.

3. Avoid touching your face

No matter how hard you try, you’re going to touch unsanitary surfaces or people. To prevent infecting yourself, do your best to refrain from touching your eyes, nose or mouth, as these are the main entry points for disease.

4. Cover your mouth

If you must cough or sneeze, cover your mouth with a tissue, then throw the tissue into a trash can that has a closed cover. The same goes for blowing your nose. If you don’t have a tissue, cough or sneeze into your upper sleeve like you’re doing “The Dab,” not into your hands.

5. Wear a face mask

The CDC is now encouraging people to wear face masks when they go into public areas. Since everyone is home right now, you should treat all common spaces in your apartment complex as a public place. If you can’t find a face mask, consider DIYing a no-sew face mask with items you might already have in your apartment.

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6. Clean and disinfect

Keep your apartment neat, clean and organized to maintain a healthy environment. Clean regularly and sanitize often using items like Lysol spray and Clorox wipes on “high touch” surfaces including countertops, tabletops, doorknobs, nightstands, bathroom fixtures, toilets, refrigerator handles, kitchen faucets, light switches, TV remotes, cell phones, computer keyboards and tablets.

7. Stock up but don’t hoard

While unlikely, it’s possible you may wind up quarantined in your apartment, or even just sick and self-quarantining. For that scenario, which shouldn’t last longer than two weeks, you should stock up (but not hoard) a few basic items:

  • Non-perishable items like canned meat, fish, beans, soups, broths and stews, fruits and vegetables, and canned or powdered milk
  • Ready to serve items like peanut butter, jelly, crackers, nuts, trail mix, dried fruits and granola bars
  • Baby food and pet food
  • Bottled water, fruit juices and fluids like Pedialyte or Gatorade
  • Toothpaste, toilet paper, tissues, feminine supplies, diapers, laundry detergent and disinfectant
  • Hand sanitizer that’s minimum 60 percent alcohol, over-the-counter cold and flu medicines and any refills of prescriptions

flu maskflu mask

Coronavirus protection in your apartment building or community

When you live in a public space like an apartment building or complex, protections from coronavirus become more communal. Precautions are no different than the CDC encourages you to take in your own home, but the difference is you don’t have control of everything that happens.

If you’re concerned about your management’s preparation for coronavirus prevention, sit down with your landlord or property manager and find out if they’re following CDC guidelines. Here are some suggestions for protections they can take based on CDC recommendations.

1. Make hand sanitizer available everywhere

You don’t have sinks to wash in all over your lobby or common areas, so your building should provide hand sanitizer everywhere — at the front desk, at the gym, by the mailboxes — and encourage residents, staff and visitors to use it often.

2. Clean a lot

Just like in your apartment, high-traffic surfaces in common areas should be cleaned and sanitized, and it should be repeated multiple times a day. The staff should be instructed to disinfect commonly-touched surfaces in places like the front desk, lobby restroom, mailroom, game rooms, elevators, door handles and delivery areas. All deliveries should be left in the lobby for pickup and not taken to apartments.

3. Close the garbage

All trash cans, both outdoor plastic garbage cans and lobby wastebaskets, ought to have working lids which should be kept closed. No one wants to, or should be forced to, pick up used tissues that have fallen on the ground.

4. Don’t come in if you’re sick

Apartment management should implement flexible sick leave policies and make sure all workers and staff know that their jobs are safe and they won’t be docked pay for staying home if they’re sick. Sick employees will only spread infections to residents. Ask management to ensure all contractors are following the same policies.

5. Be transparent and communicative

All employees, residents and visitors should be encouraged to alert property management if they believe they might have contracted coronavirus, especially if they have used common areas. That way, other residents and staff can be notified and take appropriate precautions.

sick personsick person

If you’re sick or feel like you’re getting sick

Even with all of the precautions, there is still a chance you’ll contract the disease. Follow these steps the moment you begin to feel sick, even if it just feels like a cold.

1. Stay home

Unless it’s to see your doctor or go to the hospital, stay in your apartment and don’t go out. Don’t go to work, school or to public areas. Try to avoid public transportation, taxicabs or rideshares. Not only will you not infect others, the more you stay at home and rest, the faster you’ll recover. Utilize food and personal item delivery if necessary.

2. Separate yourself from others at home

As best you can, stay in a designated sick room and keep away from other people. Eat separately from others. If your apartment has more than one, designate a bathroom just for you. Avoid touching pets, as well. If you must feed or clean up after a pet, wash your hands before and after as detailed above.

3. Don’t share household or personal items

Set aside drinking glasses, plates, silverware, sheets and blankets, towels and toiletries for your use and your use only. Clean them thoroughly with soap and water after every single use.

4. Wear a face mask

While it’s only a recommendation for everyone to wear a mask, people who are already sick (or people caring for those that are) need to wear one around other people (or pets) or if they go to the doctor.

5. Cover your mouth when you cough or sneeze, wash your hands

See above for details.

6. Clean and disinfect even more

Sanitize your apartment as explained above, but do it every day.

7. Call before going to the doctor

Keep an eye on your symptoms and seek medical attention if needed. Give them a heads up before you go to allow them to take precautions to keep others visiting their office from being infected or exposed. If you suspect you only have a cold or flu, consider a virtual doctor’s visit. If you must call 9-1-1, inform them of your symptoms before they arrive, as well.

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Today’s Mortgage Rates in Massachusetts

Massachusetts has some of the highest housing prices in the nation, especially in the popular Boston area. This state has an average overall home value of $464,000, which is much higher than the nationwide average of about $263,000. These high home prices are due, in part, to the central location of the state, the easy access to major metro areas and the many other perks that this state offers.

Despite the high home prices in Massachusetts, this could be the perfect time to buy a home in the state. Not only are the nationwide mortgage loan interest rates low across the board, but the Massachusetts mortgage rates are also at some of the lowest points ever.

Those rates, along with the state’s housing prices, are expected to rise in the next year. If you’re looking to move to Massachusetts, or if you’re a resident of this state and are ready to buy or refinance a home, here’s what you need to know.

Mortgage Rates in Massachusets

The mortgage interest rate table below is updated daily to reflect the most current mortgage rates available in the market. According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current average rates for a 30-year fixed, 15-year fixed, FHA and VA mortgage rates.

Product Rate Rate Last Week
30-Year Fixed Rate 3.170% 3.180%
20-Year Fixed Rate 2.960% 3.040%
15-Year Fixed Rate 2.500% 2.570%
10-Year Fixed Rate 2.390% 2.440%
30-Year FHA Rate 3.100% 3.100%
30-Year VA Rate 3.240% 3.240%

Rates data based on Boston, Massachusetts as of 3/5/2021

Mortgage Rates Trends

In this graph: On , the APR was for the 30-year fixed rate, for the 15-year fixed rate, and for the 5/1 adjustable-rate mortgage rate. These rates are updated almost every day based on Bankrate’s national survey of mortgage lenders.Toggle between the three rates on the graph and compare today’s rates to what they looked like in the past days.

Mortgage rates around the nation have reached their lowest levels ever over the last year due in major part to the COVID-19 pandemic and the actions the Fed took to lower rates during the coronavirus pandemic. Rates began falling in March at the start of the pandemic and have consistently dropped since that time, remaining low into the new year.

Massachusetts buyers may have access to mortgage rates that are even lower than the national average. Though these rates won’t exactly offset the high housing prices, they can help make homeownership a bit more affordable. In the second week of January 2021, the average rate on a 30-year fixed-rate mortgage in Massachusetts was 2.89%. During that time, the average 15-year fixed-rate mortgage loan in Massachusetts had a rate of 2.42%. The average rate for a 5/1 ARM was 2.80%, and the average rate on a 30-year fixed refinance in Massachusetts was just 2.95%.

There’s no way to know how rates will trend in the future, so it’s unclear whether the rates in this state will stay as low as they currently are. That said, many experts expect that rates will increase in early 2021.

[ Read: How to Calculate Your Mortgage ]

Massachusetts mortgage rates overview

The state of Massachusetts has the fourth-highest housing prices in the nation, especially in the Boston area. Prices in this state have increased dramatically over the past decade. The state’s average home price has increased more than $100,000 in just the past five years along.

The bad news for homebuyers is that prices are only expected to increase. Luckily, the state also has some of the most competitive mortgage rates.

Massachusetts homebuyers have plenty of options to choose from when it comes to financing a home. Common mortgage types include:

  • Conventional mortgage: Conventional mortgages are available with either fixed or adjustable rates with terms ranging from 15 to 30 years.
  • FHA loan: These loans are backed by the Federal Housing Administration to help low and moderate-income buyers get a mortgage.
  • VA loan: Backed by the U.S. Department of Veterans Affairs, these loans are meant to help current and former military members buy a no-down-payment home at a low interest rate.
  • USDA loan: Backed by the U.S. Department of Agriculture, these loans are used to help rural residents buy a home.

First time home buyer programs in the state of Massachusetts

The state of Massachusetts doesn’t directly offer any first-home homebuyer programs, but other organizations within the state do. MassHousing is an independent agency in the state that helps homebuyers find affordable housing solutions. MassHousing’s offerings include:

  • The MassHousing Mortgage — This program helps low and moderate-income borrowers buy a home as long as they meet certain income and credit requirements. The mortgage is available through more than 100 lenders in Massachusetts.
  • MassHousing Down Payment Assistance — This program provides buyers with down payment assistance for up to 5% of a home’s value. The maximum benefits vary depending on where in the state you are located.

[ Read: First-Time Home Buyer Programs and Grants ]

Most and least expensive places to live in Massachusetts

The average housing price in Massachusetts is well above the national average, but prices vary quite a bit depending on where you go. There’s a difference of more than $800,000 between the most affordable and most expensive cities in the state — showcasing just how wide of a price gap there is between areas in this state.

Least expensive places to buy real estate in Massachusetts

The areas below are based on Zillow’s Home Value Index, which was used to find the most affordable cities to buy real estate in Massachusetts. The numbers below reflect the typical home value for homes in the 35th to 65th percentile range.

Massachusetts has some of the highest housing prices in the nation, but there are a handful of cities that offer housing prices below (in some cases far below) the national average.

  • Springfield, MA: Average home price of $142,100
  • Worcester, MA: Average home price of $214,100
  • New Bedford, MA: Average home price of $223,400
  • Fall River, MA: Average home price of $234,300
  • Lawrence, MA: Average home price of $236,800

Most expensive places to buy real estate in Massachusetts

The average home prices below reflect the typical home value for homes in the 35th to 65th percentile range. A quick glance at a map will show you that each of the most expensive cities in Massachusetts are neighbors.

The top five most expensive places to buy real estate in Massachusetts includes the city of Boston, as well as its four neighbors to the west.

  • Newton, MA: Average home price of $982,600
  • Brookline, MA: Average home price of $822,900
  • Cambridge, MA: Average home price of $726,000
  • Somerville, MA: Average home price of $605,100
  • Boston, MA: Average home price $554,600

Massachusetts mortgage rates compared to the national average 

As noted, Massachusetts has the fourth-highest home prices in the nation, following only California, Washington, D.C. and Hawaii. One reason for the high home values is that the household income in Massachusetts is $20,000 above the national average. Housing prices in the state have also increased since the pandemic began, which is a trend spotted in many states.

Luckily, Massachusetts home buyers currently have access to lower mortgage rates than much of the nation. The nationwide average interest rate in the second week of January was 2.94% on a 30-year fixed-rate mortgage, while the average for the same loan in Massachusetts was 2.89%.

Already own a home and want to refinance?

Historically low interest rates make 2021 an excellent time to buy a home, and current homeowners can take advantage of the low rates as well. The refinance rates in this state were 0.06% below the national average as of the second week of January.

If you’re considering refinancing your mortgage, be sure to shop around for the best rate. Your raate will depend on factors, such as your credit score, overall financial picture and current home equity, but rates can also vary quite a bit from one lender to the next.

[ Read: How to Refinance Your Mortgage ]


12 Reasons Today’s Housing Market Is Not the Great Recession All Over Again

Posted on April 27th, 2020

While it’s becoming easier to compare the housing bust that sparked the Great Recession with today’s uncertain climate, the two just aren’t the same.

You’re probably going to see lots of articles warning of the next housing crash, claiming homeowners will be unable to pay their mortgages and forced to sell due to COVID-19.

But those opinions may ignore a lot of real statistics that paint an entirely different picture.

I used actual numbers from the latest Black Knight Mortgage Monitor report for February 2020 to illustrate.

Greater Share of Homeowners with 10% or More in Equity

then vs. now

First off, today’s homeowners are flush with home equity. In 2007, 14.5% of homeowners had 10% or less in equity. Today, just 6.6% have less than 10% equity.

This is due to several years of strong appreciation coupled with deleveraging.

In other words, not tapping equity via a HELOC or a cash out refinance, while also paying down debt via regular principal and interest payments.

During the early 2000s, homeowners were serially refinancing their homes while also making interest-only payments.

This meant they were overleveraging themselves and often getting into loans they couldn’t actually afford due to lax underwriting standards.

Loan-to-Value Ratios (LTVs) Are Lower Today

To that same point, today’s loan-to-value ratios (LTVs) are a lot lower than they were a decade or so ago thanks to more prudent underwriting guidelines.

The total market combined LTV (CLTV), which includes second mortgages, was 57.4% in 2007, and just 52.3% today.

The average CLTV was 61.83% back then, and just 53.31% today. Again, this shows many homeowners have lots of equity, as opposed to a massive mortgage on an overpriced property.

Simply put, equity means options, and vice versa. Even if borrowers struggle to make mortgage payments, the equity cushion provides better exits like a normal home sale as opposed to a short sale.

It also disincentivizes things like strategic default, where homeowners voluntarily walk away from their “worthless homes.”

Average DTI Ratios Are Also Lower

In terms of borrower capacity to repay, debt-to-income ratios (DTIs) are also lower today than they were in 2007.

While the average DTI at origination was 34.5% back then, it’s currently 33.5%. You might say it’s not much different.

But consider this – how many loans were actually properly underwritten back then? How many were stated income, effectively making the DTI measure useless?

The answer is most loans relied on stated income back then, while today’s DTI ratios are driven by real tax returns, pay stubs, and so on.

Borrower Credit Scores Are Higher, Delinquency Rate Lower

Then we’ve got credit, which is also better than it was leading into the Great Recession.

In 2007, the average original credit score was 708, compared to 736 today. And the average current credit score is 713, much lower than the 747 today.

While credit score isn’t everything, combined with more homeowner equity and better quality mortgages means lower defaults.

And we’re seeing that, with the mortgage delinquency rate 4.92% in 2007 compared to 3.28% today.

Again, you can thank properly underwritten mortgages for that, and a homeowner’s desire to protect the equity they’ve accrued.

Payment-to-Income Ratios Are Much Lower

Part of it just has to do with affordability, or the payment-to-income ratio.

It’s “a measure of how well home prices are supported by current incomes and interest rates,” and is much stronger than in years past.

In 2007 it stood at 31.8%, and today just 20.9%, a testament to how affordable homes are despite prices being nominally high.

Remember, you have to factor in inflation between now and then, along with higher wages, lower mortgage rates, and so on.

While the home may cost more than it did at the subprime peak, it’s actually cheaper for the reasons mentioned.

And again, a borrower’s income is actually verified today, as opposed to them simply stating that they made X amount per month.

Much Less Subprime Lending Today

While credit profiles are mostly better today than they were, subprime lending still exists today.

In the mortgage industry, it’s defined as a sub-620 FICO score, which is all you need to get an FHA loan or a VA loan.

However, the number of active subprime loans in 2007 was a whopping 5.1 million. Today, it’s less than two million.

To make matters better, these homeowners generally have more equity and a boring old 30-year fixed as opposed to some exotic mortgage.

Fewer Adjustable-Rate Mortgages and Option ARMs

Speaking of mortgage product, the number of active adjustable-rate mortgages is nowhere close to what it was in 2007.

Entering the Great Recession, there were a staggering 12,890,000 ARMs in circulation. Today, just 3.2 million.

Additionally, 4.95 million of those 2007 ARMs were scheduled to reset (higher) within three years.

Just 320,000 of today’s ARMs are scheduled to reset in three years. These borrowers also have fantastic options to refinance to a lower or comparable fixed-rate mortgage.

Then there were the option ARMs, which numbered 2,230,000 in 2007. Those are/were truly toxic mortgages that total just 320,000 today.

So to summarize, today’s homeowners have more equity, higher FICO scores, lower DTI ratios, properly-underwritten loans, and mostly fixed-rate mortgages with interest rates at/near record lows.

Throw in the fact that housing inventory is at its lowest point in years and it’s hard to compare then to now, even with COVID-19 beginning to make us question everything.


Payment Deferral Will Be an Option to Repay Mortgage Forbearance

Last updated on June 23rd, 2020

The Federal Housing Finance Agency (FHFA) announced today that Fannie Mae and Freddie Mac have launched a new payment deferral option in light of the unprecedented disruption caused by the coronavirus.

The new workout option, known as “COVID-19 payment deferral,” was specifically designed by Fannie Mae and Freddie Mac to help those affected by a temporary hardship related to COVID-19.

The goal is to help borrowers in a simple and straightforward manner achieve current loan status after up to 12 months of missed mortgage payments.

How COVID-19 Payment Deferral Works

  • The delinquent amount is moved into a non-interest bearing balance
  • No payments are made toward this balance and mortgage remains otherwise changed
  • It is due at maturity or earlier if mortgage is refinanced or home sold
  • No trial period is necessary and runs through automated process to expedite

The way payment deferral works is pretty simple, which is the entire point of offering it.

Say a borrower missed 12 mortgage payments that were $2,000 each. That $24,000 would be set aside in a non-interest bearing account.

It would not need to be paid down or touched at all until the homeowner either refinanced their mortgage, sold their home, or otherwise reached maturity based on the original loan term.

The borrower’s original mortgage would remain unchanged otherwise, meaning they’d resume making the $2,000 monthly payment they were accustomed to making before COVID-19 disrupted their income.

This would make getting back on track very straightforward, and hopefully doable for most homeowners, assuming they are re-employed or find new work.

Eligibility for a COVID-19 Payment Deferral

  • Borrower must be on a COVID-19 related forbearance plan and unable to reinstate loan in full
  • Borrower must have a hardship resulting from COVID-19 such as illness, unemployment, or reduced income
  • Loan servicer must determine delinquency was temporary and borrower has ability to repay mortgage
  • Must confirm borrower has resolved hardship and is committed to resolve the delinquency
  • Loan must have been current or less than 31 days delinquent as of March 1, 2020

In order to be eligible for the COVID-19 Payment Deferral option, you must be in a COVID-19 related forbearance plan and able to resume regular mortgage payments.

This includes forbearance plans such as the one offered under the CARES Act, along with proprietary plans offered by individual banks, assuming Fannie or Freddie own your mortgage.

At the same time, you must be unable to fully reinstate your mortgage at the end of the forbearance period or unable to afford a repayment plan.

Additionally, the hardship has to be a result of COVID-19, not for some unrelated reason. To that end, the mortgage should have been current or no more than 31 days late as of March 1st, 2020, before this all began.

It should also be 31 or more days (one month) delinquent but less than or equal to 360 days (12 months) delinquent as of the date of payment deferral evaluation.

The loan servicer will achieve a so-called “Quality Right Party Contact,” or QRPC, in which they determine the reason for delinquency and whether it’s temporary or permanent.

This includes determining if the borrower has the ability to repay the mortgage debt, educating the borrower on workout options, and obtaining a commitment from the borrower to resolve the delinquency.

Lastly, the servicer must confirm that the borrower has resolved the hardship, though they are not required to obtain documentation of the borrower’s hardship.

The servicer must complete the COVID-19 payment deferral in the same month in which borrower eligibility is determined, though they will be granted a processing month.

So if your mortgage is 12 months delinquent as of the date of evaluation, you must make your full monthly mortgage payment during the processing month in order to receive the payment deferral.

Note that while loan servicers may report the status of payment deferral to the credit bureaus, they cannot charge the borrower administrative fees, late fees, penalties, or similar charges.

This means it shouldn’t count against you, though I did discuss the idea of forbearance preventing you from getting another mortgage.

Those who are unable to resume mortgage payments will be evaluated for other options, such as a Flex Modification that lowers payments via interest rate and/or loan term adjustments.

Overall, this confirms what we knew was coming and is excellent news for homeowners in forbearance plans.

It means they can continue making regular mortgage payments if affordable, as opposed to being forced to pay a lump sum or go on a repayment plan.

And the missed payments won’t be due until they refinance, sell their home, or the loan term ends.

The bad news is this might cause even more homeowners to opt for mortgage forbearance.

If you have an FHA loan and requested forbearance, they have a similar offering known as a “COVID-19 Standalone Partial Claim,” which is also a no-interest, junior lien that requires no payments and isn’t due until payoff, sale of your property, or when refinancing.

Those with VA loans are allowed to defer any missed payments and pay them at the end of the loan term along with the final payment.

Additionally, the VA requires any forborne payments to be non-interest bearing, meaning you won’t be penalized for doing so.

You may also be given the option to pay toward that deferred amount over time via a repayment plan or request a loan modification if unable to resume regular payments.

Read more: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance


Investing in Treasury Inflation-Protected Securities (TIPS)

The Federal Reserve aims for an average annual inflation rate of 2%. But they don’t directly control the value of the dollar or the price of goods and services, and inflation sometimes leaps unexpectedly. Inflation dilutes the value of your retirement savings, and all other savings for that matter.

That’s precisely why you shouldn’t leave all your money sitting in a savings account. Instead, you can protect against inflation by investing money to earn a return higher than the pace of inflation. In the wake of the COVID-19 pandemic and the massive “printing” of new money to spend on stimulus measures, many investors have looked for inflation-proof investments to avoid a post-pandemic drop in the dollar’s value.

One of these strategies includes unique U.S. Treasury bonds called Treasury inflation-protected securities, otherwise known as TIPS.

How Do TIPS Work?

Treasury inflation-protected securities fluctuate in value specifically based on inflation rates. The Treasury ties their value directly to the Consumer Price Index (CPI), which measures inflation.

These bonds pay interest (coupon payments) twice per year based on a fixed rate declared when the Treasury first sells each bond. Investors receive an interest payment based on that interest percentage of the principal amount — the value of the bond. However because the principal amount changes along with inflation, so too do the semiannual payments.

The higher the inflation rate, the greater the jump in the value of the bond. But these adjustments work both ways: your principal and interest payments both fall during deflationary periods. If the CPI falls before your term is up, you are guaranteed to get your principal back, but will not benefit from any growth.

Because TIPS adjust in principal value — unlike normal bonds — they generally pay less in interest than normal Treasury bonds.

The Treasury issues TIPS at five-, 10-, and 30-year maturities. You can buy them new, directly from the Treasury, in increments of $100. Or you can buy them from other investors on the secondary market through a brokerage account like SoFi Invest.

For that matter, you can also buy them securitized as exchange-traded funds (ETFs) or mutual funds. These funds make TIPS easy to buy or sell instantly, but prices gyrate based on the market.

Example TIPS Investment

Confused yet? Don’t fret — TIPS work differently than normal bonds, which makes them hard for many investors to wrap their head around. An example helps clarify how they work.

Say you buy $1,000 in TIPS that pay 1% interest. In the first year, you receive $10 in interest (1% of $1,000), split into two semiannual payments of $5 apiece.

Over the course of that first year, inflation runs at 2%. So the face value — the principal amount — of your TIPS adjusts upward from $1,000 to $1,020 at the end of that year.

In the second year of ownership, you collect 1% of the new principal amount of $1,020. That comes to $10.20, again split into two semiannual payments, this time of $5.10 apiece.

At the end of that second year of ownership, the principal amount adjusts again, based on the inflation rate that year. If inflation jumps by 4% that second year, your principal amount adjusts upward to $1,060.80. For the following year, you collect interest payments equal to 1% of $1,060.80, or $10.61 total.

And so on, until the bond matures.

You can sell your TIPS bonds on the secondary market if you like. Or you could keep them until maturity, and receive the final adjusted principal amount back.

Advantages of TIPS

To begin with, TIPS are as risk-free as investments get. They come with the full backing of the U.S. government, they protect against inflation, pay a predetermined interest rate, and guarantee that you won’t lose your initial investment.

Upon maturity, you receive back more than you paid, in direct proportion to inflation since you purchased — assuming that inflation was positive during your period of ownership.

Your interest payments also rise over the course of your TIPS ownership, as the principal value rises. That adds another layer to your protection against inflation.

In short, TIPS offer straightforward protection against inflation, plus a small return.

Downsides of TIPS

That last point deserves special emphasis: a very small return. Investors don’t get rich form TIPS; they serve as more defensive investments.

As noted above, TIPS usually pay lower interest rates than traditional Treasury bonds. That’s the tradeoff for the upward mobility of the principal amount.

In a period of slow or no inflation, you earn a low return. Periods of zero growth do happen, especially with the Federal Reserve’s dovish stance in recent years keeping interest rates low, which hasn’t seen an accompanying rise in inflation. When Japan instituted similar policies in the late 1990s, a period of zero growth lasted for about a decade.

During periods of deflation, your interest payments actually fall since they are calculated off of the downwardly-adjusted principal.

Speaking of interest payments, you pay regular income taxes on them. The IRS taxes them like dividends, rather than capital gains, because you earn them as income within the same year.

How Do TIPS Differ From Regular Bonds?

Traditional bonds pay a predetermined interest rate for their entire lifespan. You earn interest each year, and when they mature, you get back your original principal amount (purchase price). The principal amount never changes.

The principal amount on TIPS does change, adjusting every year based on the inflation rate that year.

Imagine you purchased a traditional 10-year treasury bond paying 4% on a $1,000 investment. You would earn $40 in income every year, regardless of any changes in the economy, and then you’d receive the principal $1,000 back at the end of the 10-year period.

High inflation would eat into your returns because your $1,000 would be worth less when you got it back than when you invested it. And if the inflation rate surpasses your 4% interest rate, then your real return would in fact be negative.

If you instead invested in 10-year TIPS that started at only 3.5% with that same $1,000, your interest payments would start out lower at around $35. Then, the inflation adjustment would increase or decrease your principal on a monthly basis, which would in turn impact your interest payment.

If the rise in the inflation index increased your principal to $1,250, then your new interest payment would be $43.75. As inflation continues to rise, so do your regular payments.

Moreover, as long as the economy doesn’t experience deflation, you will also benefit from the upwardly-adjusted principal amount you receive back once the bonds mature.

Where Do TIPS Fit Into Your Portfolio?

Treasury inflation-protected securities offer a valuable hedging tool for your personal investment portfolio. They protect you against inflation without the heightened risk of commodities or precious metals.

That makes them low-risk, low-return investments — a safe-haven investment for playing defense, particularly if you worry a rise in inflation is coming. As low-risk investments, they make for a good short-term investment to simply avoid losing money to inflation.

I keep some of my capital in an ETF that holds TIPS to avoid losses from inflation while parking money. As a real estate investor, I typically set aside money for upcoming property purchases, but I don’t always know when I’ll need that money. A deal might come along next month, or I may need to wait a year for the right deal.

As safe as TIPS are, however, the majority of your money should probably work harder for you, earning a higher long-term return. Speak with an investment advisor about the ideal asset allocation for your age and long-term goals.

Final Word

If you suspect higher inflation lurks in the near future, TIPS can make a great addition to your portfolio.

With virtually no risk of losses and easy liquidity, they offer more security than other inflationary hedges. The federal government guarantees that you won’t lose money on them.

But that doesn’t mean they pay well. You could easily find yourself earning one-tenth the long-term average return of stocks. As you structure your portfolio, consider TIPS as a conservative backstop reserve, rather than the main force of your investment dollars out working to earn you money.


Planting Roots: LoKey Designs Opens Storefront in St. Louis’ Shaw Neighborhood – Ladue News

“If not now, when?” That was the question Laura Dooley asked herself before ultimately deciding to push forward to open a studio for her home goods and plant business, LoKey Designs, last June.

It was a serendipitous journey to get the Shaw storefront to where it is now – a retail space showcasing a range of plants, pots, home décor and more, as well as one for hosting by-appointment shopping and virtual consultations and bathing in the peacefulness of the lush greenery stocked from floor to ceiling.

“The biggest deciding factor was whether it will get enough light to keep plants happy and healthy,” Dooley says. “I was so fortunate this space has a gorgeous amount of natural light.”

Dooley was fortunate, as well, in finding the studio itself. The space had been special to her for a few years. “A friend of mine had a retail store in this space, and when she was moving out, I remember wishing silently that I could move my business in there,” she says. “I just felt connected to it somehow.”

However, taking it over solo wasn’t possible at the time. But here’s where things got weird: A completely unrelated friend asked if Dooley would be interested in co-using an available space, and lo and behold, it was the one her other friend was leaving.

By October 2019, Dooley was operating LoKey Designs from the shared retail space, but after the coronaviral pandemic shut it down, she moved her business online. There, orders and collaborations flourished, but Dooley knew she needed a space to work with clients and couldn’t keep running things from her home. By late spring, with the decision looming of whether to let the physical space go, Dooley decided to push ahead and take it over on her own.

“Each time I walk into my studio, I am instantly filled with so much joy and excitement – it’s truly become my happy place,” she says. “It’s an undeniable tranquil, plant-love vibe.”

With the brick-and-mortar in St. Louis’ Shaw neighborhood, Dooley can carry a wider selection of plants and pots, and she has added to LoKey’s offerings local, hand-poured candles, plant-related books and seasonal gift boxes curated with other local makers. Her top-selling items are low-maintenance, low-light sansevieria and pothos snake plants and DIY succulent kits, which are popular for beginners and make a great gift that can be shipped across the country.

Currently, shopping at the studio is done only by appointments, which can be booked in 30-minute increments online. Dooley also recently started offering virtual plant consultations via email, phone or videoconference. Most often, clients are searching for plants that will work with specific spaces in their home or office, especially with spending more time in these spaces due to remote work.

“We cover the light, water and soil conditions, and from there, I make suggestions on next steps and care,” she says. “It’s always been a goal to make plants approachable and bring practical plant knowledge to clients so they can have the confidence to care for them on their own.”

Virtual consultation pricing starts at $15 for 30 minutes. Some clients bring photos of their space or show Dooley a specific pot or plant they need to find a fit for. The biggest myth she hears is that people wish they were good with plants.

“Just about every client who walks into my studio or I chat with virtually says this,” Dooley says. “The aspiration to be a good plant parent is not unattainable. It’s not crazy either. I try to bridge the gap of information on houseplants so my clients can have the tools, info and confidence to keep their plants lush and happy.”

Moving forward, LoKey will be offering video tutorials on plant care and more nationwide shipping on items, as well as hosting more virtual planting parties in lieu of the in-person ones that gained popularity before the COVID-19 pandemic. Overall, Dooley hopes to hone in on the creative adaptability she admires in her plants and continue instilling that in others.

“With the studio, I have the opportunity to take my business in a lot of new directions,” she says. “I can showcase my plant love and passion for home décor in a way that inspires people.” 

LoKey Designs, 2207 S. 39th St., St. Louis,

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Will Forbearance Prevent You from Getting a Mortgage in the Future?

Last updated on May 19th, 2020

Since the CARES Act rolled out in early April, more than four million Americans have reportedly put their mortgage payments on hold for up to 12 months.

The massive numbers taking part can be attributed to the widespread fallout from the coronavirus epidemic (COVID-19), and also the ease at which a homeowner can request assistance, with not much more than a letter or simple request to their loan servicer without proof.

It’s expected that many more borrowers will request mortgage forbearance in the month of May and beyond, as evidenced by a recent survey from Bankrate.

Update: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance

Need Help, But Not Yet Asking for It

need help

Apparently, many Americans are concerned about making mortgage payments in light of possible job losses or income curtailments, but most haven’t reached out for help yet.

Some 70% of Millennials said they were concerned about their ability to make mortgage payments over the next three months, but only 60% said they have contacted their lender.

Meanwhile, 56% of Gen Xers are concerned, but a mere 29% have reached out to their lender or loan servicer.

It’s even worse for Baby Boomers, with 43% concerned, and only 17% asking for help.

As to why, some said they didn’t know it was an option, or simply haven’t gotten around to it, or are waiting for lenders to reach out to them (good luck!)

Others cited unspecified reasons or said they came up with their own solution.

For me, this proves that homeowners are reticent to ask for help, possibly because they think it’ll count against them somehow, even though mortgage forbearance isn’t supposed to harm credit scores or result in delinquencies.

Mortgage Lenders Will Know You Requested Forbearance

  • Lenders told not to report loans in forbearance as delinquent to credit bureaus
  • But loan servicers and lenders are still flagging accounts on credit reports
  • Will these borrowers be considered “late” once the forbearance ends?
  • Could presence of forbearance on credit reports prevent borrowers from getting another mortgage?

My initial thoughts are it shouldn’t count against you, but that’s not always how it works, especially if a private company plays by its own rules.

After housing blew up a decade ago, the Home Affordable Modification Program (HAMP) and Home Affordable Refinance Program (HARP) were rolled out to help struggling homeowners.

While these initiatives provided relatively immediate relief to homeowners, they also resulted in various waiting periods to get subsequent mortgages.

So a homeowner who opted to receive assistance may have had to wait a year or two to get another mortgage.

These waiting periods were even longer (up to four years) if the borrower received a principal reduction that resulted in them owing less than originally agreed.

But shorter if there were extenuating circumstances, of which there will be for just about everyone this time around.

The question is will they use the past as a model for the future? Things were a bit different back then because there was perhaps some borrower fault, and basically none today.

While you could argue that all homeowners should have reserves saved up for moments like these, they often aren’t required by Fannie Mae, Freddie Mac, the VA, or the FHA.

So you can’t really blame a homeowner impacted by an unforeseen virus to continue making mortgage payments. Nor can you blame them for accepting the assistance you’re offering.

In other words, I can’t see Fannie, Freddie, the FHA, or the VA disallowing a mortgage refinance or a new purchase loan if they extended the forbearance in the first place.

In the case of a refinance, mortgage lenders (or the investors) would presumably receive the missed payment amounts via the payoff to make them whole.

Will Mortgage Forbearance Count Against You?

  • Just because your mortgage isn’t late doesn’t mean it won’t hurt you
  • Lenders may impose waiting periods for borrowers post-forbearance
  • They will likely scrutinize loan files if you requested forbearance in the past
  • It will be key to show them the event is behind you if you want another mortgage

Sure, you’re not technically behind on the mortgage, per the CARES Act and other forbearance programs, but lenders will know that you entered into a mortgage forbearance plan. It’ll be noted on your credit report.

While it might not be a formal delinquency or late mortgage payment, it’ll be visible to creditors when you apply for a new credit card, auto loan, or a mortgage.

It’s a notable event from a credit perspective, and thus will be shared, though it shouldn’t officially count against you.

In other words, its presence doesn’t necessarily mean you won’t be able to refinance or get another mortgage on a different property, especially if it wasn’t your fault.

However, you’re going to have to qualify for the mortgage, like you usually would in normal times.

That might be the dividing line, not so much a waiting period or a flat-out denial just because you took advantage of widespread mortgage forbearance.

Note that guidelines will vary by bank, especially if it’s a jumbo loan or portfolio loan that isn’t backed by Fannie Mae or Freddie Mac, or a government agency like the FHA or VA.

Regardless, it’ll be very important to stay current on mortgage payments post-forbearance. The same goes for any other accounts that show up on your credit report.

An underwriter will dig into your financials to determine this to ensure it’s an isolated incident and really behind you.

Ultimately, it might hinge on the borrower showing that they are back on their feet and that it was a blip related to COVID-19 and not due to their own personal financial missteps or issues.

Like those loan mods in the past, it’ll be crucial that the borrower make on-time payments once forbearance ends to ensure they qualify for a new mortgage without further delays.

Those who still need assistance post-forbearance, via a loan modification or further forbearance, will likely have trouble qualifying for another mortgage.

But that’s pretty obvious – if you can’t pay your existing home loan, why would a lender give you another one?

Read more: Will home prices go up or down due to COVID-19?


Fannie Mae and Freddie Mac Agree to Buy Mortgages in Forbearance

Posted on April 22nd, 2020

While the CARES Act has allowed millions of homeowners nationwide to put their mortgage payments on hold, doing so has left lots of questions for mortgage lenders.

One being how they’d continue to pay investors while the loans they service were in forbearance. The FHFA clarified that piece yesterday by agreeing to only hold servicers to the first four missed payments.

But how do they originate new loans if borrowers turn around and stop paying right away? Will lenders be punished, even if they had no idea these homeowners would immediately request forbearance?

Fannie and Freddie Will Temporarily Buy/Securitize Loans in Forbearance

  • Lenders can now sell or securitize their new mortgages even if in forbearance
  • This is a temporary policy aimed at keeping the mortgage market liquid
  • Loans must still meet the general requirements of Fannie Mae and Freddie Mac
  • Eligible loans will be priced to mitigate the heightened risk of loss to the GSEs

To alleviate some of that concern, both Fannie Mae and Freddie Mac (the GSEs) have announced a temporary policy to purchase mortgages actively in forbearance plans, counter to their long-held position.

Typically, mortgage loans that are either delinquent or in forbearance are ineligible for delivery under Fannie/Freddie requirements.

However, things are far from typical at the moment thanks to the coronavirus (COVID-19).

In short, some borrowers have sought mortgage forbearance just after closing on their loan, before the lender could actually deliver it to the GSEs.

This put lenders in a bad spot if they wound up stuck with the loan, and unable to unload it, thereby putting their liquidity at risk.

Today’s action removes “that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria.”

For eligible loans that can be purchased by the pair, they will “be priced to mitigate the heightened risk of loss” to the GSEs.

Which Loans Are Eligible?

  • Home purchase loans and rate and term refinances only
  • No cash out refinances may be delivered while in forbearance
  • Reason for forbearance must be directly/indirectly related to COVID-19
  • Loans must not be more than 30 days delinquent with note date on/after February 1st, 2020

It should be noted that not all mortgages are eligible for this new, temporary benefit.

First off, this relief is only limited to home purchase loans and rate and term refinances. No cash out refinances are permitted.

Additionally, the note date must be on or after February 1st, 2020 for May 1st delivery to the GSEs.

The loan must also not be more than 30 days delinquent at the time of sale or securitization to Fannie/Freddie.

Perhaps most important, the forbearance must be related to COVID-19, either directly or indirectly.

It shouldn’t be for some other reason, though at the moment this appears to be the one and only reason anyone is requesting forbearance.

For the record, Fannie and Freddie are also tacking on hefty loan-level pricing adjustments (LLPAs) as follows:

– 500 basis points (5.000%) for loans where any borrower is a first-time homebuyer
– 700 basis points (7.000%) for all other loans

Expect this cost to be passed onto consumers, either via a higher mortgage rate or increased discount points due at closing.

Since cash out refinances aren’t eligible, those may be even more expensive for the time being relative to purchase loans and rate and term refis.

Fannie has also warned loan servicers to “not in any way discourage borrowers from contacting them or encourage borrowers to delay notifying them either before or after the note date if they are experiencing a COVID-19 related financial hardship.”

In other words, don’t tell them to hold off on the forbearance request so they can sell off their loans first without issue.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.


Home Prices vs. COVID-19: Will They Go Up or Down?

Posted on May 7th, 2020

It’s time to take a look at how COVID-19 could impact home prices given the massive disruption to the local, state, national, and global economy.

On the one hand, inflation is expected due to all the government spending, which could lead to a price increase since real estate often acts as an inflation hedge.

Conversely, if tons of borrowers lose their homes due to unemployment, we could see properties flood the market. And when combined with fewer eligible buyers, it could lead to a supply glut.

Consider the Lack of Housing Supply and Mortgage Quality

  • The housing market has three great things working in its favor right now
  • Housing supply is low enough even if buyer demand wavers during this uncertain time
  • The quality of today’s mortgages is excellent any many homeowners have lots of equity
  • Mortgage rates are at record lows, which further increases home buyer appetite

First, let’s compare today’s housing market to the one in 2006. They really couldn’t be any different, both from an inventory standpoint and from a mortgage perspective.

Simply put, back then there were way too many homes being built, and not enough demand to meet that supply.

At the same time, banks and lenders were doling out home loans to anyone with a pulse, knowing they could quickly bundle the underlying mortgages and sell them to Wall Street shortly after origination.

Taken together, it was a recipe for disaster. Homeowners had massive mortgages they couldn’t truly afford that were often set to adjust higher just months after they took them out.

They also had no skin in the game, aka home equity, so there wasn’t much incentive to stick around and try in vain to keep a sinking ship afloat.

Today, Americans are sitting on the most home equity in history, and very little of it is being tapped thanks to tighter underwriting guidelines that have only become more restrictive since COVID-19 reared its ugly head.

Meanwhile, there’s an inventory shortage that has likely only worsened as fewer existing homeowners list their properties, and mortgage rates are at record lows.

In short, homeowners today have tons of equity and historically cheap mortgages, and home buyers have fewer properties to choose from and ridiculously low mortgage rates at their disposal.

The Great Unknown Ahead

  • Ultimately nobody knows what the future holds or how we recover post-coronavirus
  • 1 in 5 Americans have already filed for first-time unemployment benefits since mid-March
  • That will likely worsen over time and lead to increased mortgage forbearance requests
  • The big question – is this income hit temporary for most homeowners or permanent?

Now it’s wonderful that today’s mortgages are mostly pristine, and that homeowners have tons of equity to serve as a cushion if forced to sell.

But we’re living in a very fluid and strange environment at the moment that could change in no time at all.

For example, one in five Americans have filed for unemployment since mid-March, and that’s likely only going to get worse.

So even if many of these homeowners had super affordable mortgages, a lack of income and the inability to tap their equity could put them at risk quickly.

To counter that we’ve got the mortgage forbearance offered via the CARES Act, which is great for struggling homeowners but only lasts for 12 months.

What happens after that? At best, if they simply have to resume making normal payments, there’s a decent chance not everyone will be re-employed and able to do so.

The world has changed and may not go back to “normal,” and thus not everyone will have the realistic ability to return to making monthly mortgage payments.

Even if they’re offered a loan modification to lower their payment, it still might not be enough if they can’t find work.

The same goes for investment properties such as those offered by Airbnb and other short-term vacation companies, or kiddie condos owned by parents in college towns, which might remain vacant.

If this is the case, we could see a flood of new properties hit the market similar to what we saw back in 2008, 2009, etc.

That’s where these two very different housing markets could begin to intersect. The good news is we didn’t have a supply glut before COVID-19 came around.

Back in 2006, we had a massive oversupply that was further exacerbated by a financial bubble, so it was a one-two punch.

Additionally, one could argue that both homeowners and lenders were to blame for what happened back then.

Sure, lenders offered high-risk products, but borrowers happily pulled out billions in cash out along the way to spend on who knows what.

Today, you can’t really blame a homeowner who is unable to make their mortgage payment due to the coronavirus epidemic.

And it’d look really bad to foreclose on this type of homeowner, which could limit the damage and keep inventory tight.

But here’s the thing – no one can sit here today and say they know what’s going to happen with COVID-19. And data models can’t forecast properly in this environment.

So really anything right now is a guess.

What Are We Seeing So Far in the Housing Market?

homebuyer demand

  • Home sellers mostly haven’t budged on listing prices
  • Prospective sellers are ready to go once stay-at-home orders are lifted
  • Amenities like big yards and home offices are becoming more important to buyers
  • Home buying demand is recovering and listing prices are up from a year ago

Everyone seems to want to call this event temporary – a moment in time that will magically fix itself once the economy opens up.

I don’t subscribe to that, as much as I wish it were true. You can’t simply erase what’s happened the past several months, nor what lies ahead in the aftermath.

Speaking of, are we even “after” yet, or is this still in the early innings. While that too can be debated all day long, again no one really knows.

But we can look at early impact to get some sort of a clue.

The MBA reported that seasonally adjusted home purchase applications increased 6% from a week earlier, with even bigger gains seen in California and New York.

The ever-cheerful National Association of Realtors reported that home sellers have not lowered their listing prices as a result of COVID-19.

In the latest week, 73% of Realtors said their clients did not reduce listing prices to attract home buyers.

That’s been pretty steady for the past few weeks since NAR began reporting on it.

Additionally, they said today that 77% of prospective sellers “are preparing to sell their homes following the end of stay-at-home orders.”

In other words, once this blows over it’s going to be real estate business as usual, sans discount!

Interestingly, buyer needs might have changed – they now want a big backyard to play in and grow their own food, along with a home office and possibly a home gym too.

The less is more thing may no longer be a hot trend, nor is urban living possibly as popular. The Burbs are back!

Over at Redfin, it’s also good news with nearly 53,000 homes hitting the market during the week ending April 24th, compared to just over 48,000 for the week ended April 13th.

Additionally, pending home sales have increased from less than 31,000 to more than 32,500 during those same periods.

Despite the rise in new listings, there were less than 700,000 homes for sale in Redfin markets nationwide, the lowest amount the real estate brokerage has seen during the past five years.

That might explain why the median listing price was $308,000 for the week ending April 24th, up 1% compared to the same period last year.

Home buyer demand has also begun to climb back after taking a hit in March, a sign potential buyers are unfazed and ready to move forward.

A Home Price Projection from Zillow

Zillow scenarios

  • Company sees home prices falling just 2-3% by the end of 2020
  • With a recovery in home prices throughout 2021
  • Their pessimistic model sees a 3-4% decline in prices and no recovery in 2021
  • Home sales are expected to fall 50-60% in all their models before rebounding at varying speeds

Now let’s take a look at a projection from Zillow, the creator of the Zestimate that should know a thing or two about home prices.

They have forecast a mere 2-3% drop in home prices through the end of 2020, which will be followed by a recovery in prices throughout 2021.

That means a small drop this year that is recovered next year could mean no material change for home prices due to COVID-19.

So they appear to be on the “this is temporary” wagon. Prior to the coronavirus outbreak, home prices were expected to rise 3.3% on average in 2020, and 2.7% in 2021, per the Zillow Home Price Expectations Survey, which includes a panel of more than 100 economists and experts.

But again, their “proprietary macroeconomic and housing data” might not be well-equipped to take into account a pandemic.

They have three different scenarios for home prices, including an optimistic, medium, and pessimistic outlook.

At best, they drop only 1-2% this year, at worse they fall 3-4% and “remain depressed through 2021.”

In all cases, home sales are expected to take a big hit of 50-60%, though when they recover varies.

That might hurt real estate agents and mortgage lenders if mortgage refinance volume begins to waver.

The good news, despite all the horrible news, is that homeowners are a lot better off today than they were in 2006, which means more of them should be able to get through this crisis without losing their home.

And that should bode well for home prices.