A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
Scott Olson | Getty Images
Mortgage rates turned higher again last week. But the increase did not cut into mortgage demand, as buyers sought newly built homes.
Total mortgage application volume rose 3% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the Juneteenth holiday.
Applications for a mortgage to purchase a home rose 3% for the week but were 21% lower year over year. These applications have increased for three straight weeks to the highest level since early May, despite still-high mortgage rates.
“New home sales have been driving purchase activity in recent months as buyers look for options beyond the existing-home market,” said Joel Kan, MBA’s vice president and deputy chief economist, in a release. “Existing-home sales continued to be held back by a lack of for-sale inventory as many potential sellers are holding on to their lower-rate mortgages.”
Sales of newly built homes in May soared 12% compared with April and were 20% higher than May 2022, according to a report Tuesday from the U.S. Census. Builders are driving demand in part by offering incentives, like paying down mortgage rates.
Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.75% from 6.73%, with points remaining at 0.64 (including the origination fee) for loans with a 20% down payment. The average rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) rose more sharply to 6.91% from 6.80%.
“The spread between the jumbo and conforming rates widened to 16 basis points, the third week in a row that the jumbo rate was higher than the conforming rate,” Kan said. “To put this into perspective, from May 2022 to May 2023, the jumbo rate averaged around 30 basis points less than the conforming rate.”
The widening spread and the increase in the jumbo rate stem from the recent regional bank failures. Lenders hold jumbo loans on their balance sheets, because Fannie Mae and Freddie Mac don’t buy loans of that size. Bank credit, especially at community banks, has tightened substantially, resulting in higher rates.
Applications to refinance a home loan rose 3% for the week but were 32% lower than the same week one year ago. The vast majority of borrowers today have mortgages with interest rates below 4%.
The Federal Housing Administration (FHA) published Mortgagee Letter (ML) 2023-14 this week, which increases the threshold from $75 million to $120 million for multifamily loans to be considered large loans.
This marks the first major increase to the threshold since 2014. The goal of the increase is to “enable a greater number of transactions to use standard underwriting processes when submitted for FHA Multifamily insurance,” the agency said.
The FHA said it will also review the threshold on an annual basis, leaving open the possibility for future increases in $5 million increments.
The review schedule and loan threshold changes are designed to “simplify underwriting for multifamily housing development without presenting undue risk to FHA,” the agency said, and to allow for regular adjustments in response to market changes.
“We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing,” said FHA Commissioner Julia Gordon. “Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”
Another driver was the age of the threshold, which was nearly a decade old prior to the increase, according to Ethan Handelman, deputy assistant secretary for Multifamily Housing.
“Revising the threshold, which is almost a decade old, is an important step for us and for the industry,” he said. “We want stakeholders to be able to rely on FHA-insured financing for a wide variety of multifamily transactions, and without unnecessary barriers.”
The new ML “includes page revisions to the [Multifamily Accelerated Processing (MAP)] Guide to reflect the new $120 million threshold and the annual review methodology,” the agency said. “FHA’s other requirements in the MAP Guide related to Large Loans remain unchanged.”
A 20-year battle over the fate of a rugged, verdant hillside in Los Angeles is barreling toward an epic conclusion as developers move forward with plans to construct a luxury housing project in the Verdugo Mountains, above the Sunland-Tujunga neighborhood.
The Canyon Hills development project, approved by the Los Angeles City Council in 2005, is awaiting one final rubber stamp before crews can begin clearing hundreds of acres to make way for 221 homes.
Nevada-based developer Whitebird Inc. says it is within its rights to proceed with the project, which was granted a 20-year window of completion when it was initially approved nearly two decades ago.
But community members, neighborhood officials and other opponents say a lot has changed since then, and insist the development will harm wildlife in the area and put residents in the path of worsening wildfires. They’re calling for the project to be halted — or at least delayed — until a new environmental impact report can be conducted.
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“I just think 20 years is a long time in terms of climate conversations and environmental concerns,” said Emma Kemp, a Tujunga resident and co-founder of the group No Canyon Hills, which began a campaign opposing the project. A petition it started in February has more than 165,000 signatures.
“Before you start chopping down this mountain based on a report that was conducted in 2003, can we just reassess so we can make sure that we are taking really responsible precautions?” she asked. “You know, once you cut it up, you can’t go back.”
The project site runs north of the 210 Freeway and offers sweeping vistas of Los Angeles. On a recent hike around the area, the landscape was alive and buzzing with insects and green vegetation fueled by this year’s wet winter.
Adam Gelbart and Devon Christian, two amateur naturalists who regularly comb the hills there, have spotted a number of plants and critters they say would be threatened by the project, including live oak trees, rare bumble bees and lizards, and the critically imperiled Davidson’s bush mallow plant, which grows only along the Central Coast and in the hills around Tujunga.
“These are the last crumbs of a much larger ecosystem,” Christian said as he swished through chaparral and knee-high brush. “These ecosystems support a myriad of life — not only insects but also birds, larger carnivores. It’s all tied together, and if you see it within the larger context of biodiversity loss across the planet, we really need to fight to protect any last scrap of biodiversity that’s out there.”
Residents have also spotted mountain lions in the area, which alone should be enough to warrant a new environmental impact report, opponents say. Southern California’s mountain lions have reached a critical threshold in recent years as human development squeezes the landscape and leaves lions in the path of speeding cars.
The environmental impact report, finalized in 2004, found no evidence of mountain lions or bobcats at the time. And while the city’s development agreement acknowledges that “significant and unavoidable impacts will result from implementation of the project,” it concludes that “the benefits outweigh and override” such impacts.
Cited benefits include providing a substantial amount of high-quality housing to accommodate population growth in the area, as well as the creation of hundreds of construction jobs. The agreement also states that the project will replace old oak trees with new plantings that will benefit the habitat, and will decrease fire risk in the area by introducing fuel modification zones.
But in the nearly two decades since that agreement was approved, at least three wildfires have seared the area, including the La Tuna fire of 2017, which burned about 7,200 acres and destroyed five homes. The remnants of charred trees and structures can still be seen in the hills today.
The community was also threatened by the Station fire of 2009 and the Sand fire of 2016, both of which prompted the evacuations of thousands of people. Sunland-Tujunga Neighborhood Council President Lydia Grant said she fears the project will leave more residents in harm’s way.
“Our community is a high fire danger area, and we do everything we can to keep the building off the hillsides because it’s just not safe,” she said. The Los Angeles Fire Department ranks the area as a very high fire hazard severity zone.
Grant said adding more homes and people to the wildland-urban interface could also put pressure on the community during an evacuation. The two major arteries in the area, Foothill Boulevard and La Tuna Canyon Road, have both been “road-dieted” from two lanes to one in recent years, she said.
“Now you’re adding that onto one lane in a high fire danger area. … This is just adding gasoline to a fire,” Grant said.
Such conditions are not unlike those that spurred a judge to pause a luxury development project in Lake County last year until further assessments of wildfire evacuation routes could be completed. Judges in recent years have also halted developments in a fire-prone part of San Diego County and the Tehachapi Mountains in Los Angeles County due to fire risk.
Grant said she has not heard from any community members in favor of the development. Los Angeles City Councilwoman Monica Rodriguez, who represents the area, declined to speak with The Times about the project.
Jack Rubens, an attorney for the developer, rejected the claims about fire danger, saying the project will in fact reduce the wildfire risk for existing residents to the north and east of the site by providing a new southern evacuation route to La Tuna Canyon Road and the freeway.
The project will also include a new million-gallon water tank close to the existing neighborhoods, which can be used by firefighters “who will have far superior access to the hillside after the project’s road system is constructed,” Rubens said. He added that future residents of the development will also be protected by a 200-foot-wide fuel modification zone that includes about 100 acres of land.
Rubens said concerns about mountain lions are similarly unfounded and noted that the original environmental impact report determined that the project would not interfere with local or regional movement of the animal. Should such movement occur, it would be outside of the development area, he said.
He added that in the wake of the initial approval, Whitebird and developer Rick Percell agreed to eliminate a portion of the project site south of the 210 Freeway, donating about 600 acres of land to an affiliate of the Santa Monica Mountains Conservancy for permanent preservation, so “the public has therefore already received an enormous public benefit,” he said.
Paul Edelman, deputy director of the Santa Monica Mountains Conservancy, said developing the remaining acres would still amount to a considerable ecological loss.
“As a mountain range, [the Verdugos] are big enough to sustain subpopulations of all the animals we’re concerned about, and that is the key, because they’re just big enough to do that,” he said.
“As you start to take big chunks out of it, it degrades the whole system — you don’t have enough critical mass for one or two mountain lions or a healthy bobcat population,” he said. “It’s already so small that taking a big chunk out of it hurts a lot more than, say, if the equivalent-sized development happened in the Santa Monica Mountains.”
He and other opponents of the project acknowledged that the city’s hands are probably tied by the agreement, especially in this eleventh hour.
Whitebird recently pulled a grading permit that would allow it to begin leveling the pads for properties as soon as it’s approved. City officials could face a lawsuit from the developer should they try to intervene.
Under the agreement, additional environmental clearance could be required under the California Environmental Quality Act if there are substantial changes in the project, including new information showing that the project will have “new or more severe significant effects” than those described in the original environmental impact report.
Rubens said that’s a moot point. A second report cannot be lawfully required as the project is “fully entitled and doesn’t require any further discretionary approval simply because its development has been delayed,” he said.
“The project was approved after a five-year administrative process with significant community involvement and, by the way, those approvals were not challenged in court,” he added.
Dean Wallraff, an attorney who has been fighting the development for decades, said the city probably will agree. But it’s possible some elements of the grading permit could contain enough modifications to trigger a new report.
“Twenty years ago, they approved this project that has now all kinds of extra environmental effects, and it’s in this kind of sensitive area in the middle of the city, and if this goes forward now without anybody looking at it again — that doesn’t make sense,” said Wallraff, executive director of Advocates for the Environment.
The Verdugo Mountains and surrounding areas were originally home to the Chumash, Gabrielino/Tongva and Fernandeño Tataviam tribes, and some members have spoken against the project.
“We believe in protecting the last remaining open spaces of L.A. County,” said Nathan Nuñez, Gabrielino Indigenous cultural keeper. “These places are important to our people, but they’re also important to the broader community. We have to do the work that we can do now to protect these places before they get lost to development.”
He worried about the potential presence of archaeological artifacts in the area because the hills and nearby areas once served as transportation corridors, campsites and places for gathering, hunting and ceremonies for the tribe.
His father, cultural bearer Kevin Nuñez, said he understands that the situation is complicated, but hoped politicians and decision makers would “pump the brakes.”
“I think there are options, but it takes some diligence, it takes some intestinal fortitude, to step up and say hold on, we’re going to vet this well,” he said.
Kemp, of the No Canyon Hills group, said the average lot size for the planned homes is about 17,000 square feet, with some as large as 100,000 square feet. It’s an equity issue as much as it is an environmental one, she said.
“Tujunga is one of the more affordable neighborhoods in and around urban L.A., and it is more rural and it’s definitely more working class … so how can you justify putting in a gated community of luxury mansions in this area?” she said. “What is the benefit to our community?”
However, she said she does not see the group expressing NIMBYism, an anti-development stance that stands for “not in my backyard.”
“I do understand that this developer has his project approved, and he wants to proceed with his plan. I do understand that,” she said. “It just feels that we have this very slim opportunity to do better by the environment, by current community members, by plants, animals and other species, and just to ensure that this is a viable and responsible and worthy project.
“And if things need to change about it,” she added, “then we can make those changes and find a position that works for everyone.”
Hiking through the brush, Gelbart and Christian, the naturalists, said California’s climate conditions are changing so rapidly that it’s difficult for even ecological experts to keep up — much less developers. The pair recently found a massive hollyleaf cherry tree growing in the hills that they hadn’t seen before.
“The land has value beyond what humans use it for,” Gelbart said as he surveyed the view. “And once this is gone, you can never put it back together.”
This week, we interviewed Aaron Letzeiser from Obie.
Without further ado…
Who are you and what do you do?
My name is Aaron Letzeiser and I’m the Co-Founder and COO of Obie. Obie is an insurance and risk management platform for landlords.
What problem does your product/service solve?
Obie brings a fast, transparent, and consultative approach to the insurance process for investment properties. Insurance is one of a landlord’s largest expenses, but also the one they have the least amount of control and insight into. It’s been a black hole for far too long and when saving money means higher NOI and property value, it’s important to know you have market best pricing that didn’t take weeks or months to find and procure.
What are you most excited about right now?
I love seeing the collaboration between real estate tech platforms. Successful adoption of new and innovative solutions happens in the real estate space when a company recognizes a singular problem and attacks it head on. It makes it easy for clients to realize the ROI and it’s not super complicated to adopt the product and make the change. The magic happens when synergistic platforms start to collaborate and roll out additional complementary features to their clients. A leasing platform can syndicate out to a new marketplace. A property management platform can offer insurance. A brokerage management platform can sync with digital accounting and commission tracking. All of this helps to move the industry forward.
What’s next for you?
Instant insurance quotes. Home and auto insurance are easy to shop for from your couch. 3-5 minutes, 7-10 questions, and you’re done. We’re bringing that to the real estate investment space with the first instant insurance offerings.
What’s a cause you’re passionate about and why?
The intersection of technology and affordable housing, and the way that tech can play a role in new housing development strategies, streamlining the tenant experience and obligations, and cutting costs for landlords. When all three work together, there are ways to provide housing that’s affordable while also making a healthy return.
Thanks to Aaron for sharing his story. If you’d like to connect, find him on LinkedIn here.
We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop us a line (Community @ geekestate dot com).
Facing a persistent housing crisis, Los Angeles is doubling down on converting unused commercial buildings into residential properties. Last month, as part of the DTLA 2040 Community Plan, the City Council approved a long-awaited update to the Downtown Adaptive Reuse Ordinance adopted in 1999, which enabled the production of more than 12,000 units of new housing. The update would make more commercial buildings eligible for incentives such as streamlined permits and flexible regulations.
This might seem like the perfect time for office-to-apartment conversions: The persistence of remote work has led to record office vacancy rates in L.A. But the dramatic increase in interest rates over the last year made refinancing loans for office buildings very difficult, prompting defaults and distressed sales. “Maturity defaults” — loans that have come due and cannot be refinanced — have surged. Nearly 90% of office loans maturing this year are likely to face difficulty in refinancing.
In downtown L.A., skyscrapers are selling for half of what they did a decade ago. Given that high commercial real estate prices have typically hurt the financial feasibility of adaptive reuse projects, a steep decline in office building prices could be helpful in theory. But high interest rates also make conversions more costly to finance. Measure ULA — the so-called “mansion tax” that took effect this April — is another disincentive for both selling and converting office properties, applying a 4%-5.5% tax to transactions for commercial properties and multifamily housing properties as well.
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From a local government perspective, there is significant risk in leaving the fate of these properties to chance. Steep declines in sale prices mean steep declines in local tax revenue. To mitigate this risk, L.A. should consider fiscal policy to tip the scale more convincingly toward adaptive reuse. One approach worth entertaining is a temporary property tax abatement program for office-to-residential conversions.
A multiyear tax abatement for eligible projects would decrease the initial costs of adaptive reuse projects. A simple example of a 10-year abatement program might reduce an eligible property’s tax bill by 100% for the first year after approval, then by 90% in the second year, 80% in the third year and so on until the property returns to the full taxable value of the converted housing development. In addition to encouraging new purchases, an effective abatement program could also spur current owners to convert their buildings and avoid the financial disincentive of Measure ULA on property transfers.
In New York City, a tax abatement program helped produce nearly 13,000 housing units in Lower Manhattan between 1990 and 2020, representing more than 40% of the total housing growth in the area over this period. A similar program may be scaled up in Washington, D.C.
Tax abatements to encourage housing production have been decried by opponents as unnecessary giveaways to developers. But these criticisms do not account for the cost of doing nothing.
Consider an unconverted office building that had a current tax valuation of $50 million but would become a distressed sale at half that value in 2024. Suppose that sale results in a 50% decline in property tax revenue over the next 10 years. Now suppose that, instead, the building is converted into 200 units of housing while benefiting from a tax abatement program that means forgoing 50% of tax revenue over the same 10 years. This conversion to housing could be expected, conservatively, to preserve the full 2023 valuation of the property. After a decade, the forgone tax amount is equal to the decline in tax revenue under a distressed sale — but Los Angeles ends up with 200 more units of housing instead of an underutilized office building.
Beyond helping to meet Los Angeles’ ambitious housing production goals, adaptive reuse conversions can provide a more stable source of property tax revenue because the housing sector is much more insulated from factors such as remote work and other economic shocks affecting the office sector. And they can also help to maintain office prices through a reduction in supply. Both of these forces could place city and county finances at less future risk.
In Greater Los Angeles, 20% of office building loans are coming due by 2025 and will need to be refinanced. Creating a tax abatement program or comparable incentive in time to avoid huge declines in property tax revenue would be a big lift for policymakers to pull off. But other massive fiscal programs such as California’s Project Homekey — which provided $600 million in the first year of the COVID pandemic to convert housing for individuals experiencing homelessness — have been quickly formulated and expanded in times of crisis.
The clock is ticking to address L.A.’s potential “doom loop” for office real estate. Decisive action could increase housing production and lead to robust property tax revenue that could benefit Angelenos for decades to come.
Jason Ward is an economist, associate director of the Rand Center on Housing and Homelessness in Los Angeles and a professor at the Pardee Rand Graduate School.
Growing up in Orange County in the late 1970s, KL DeHart often wandered the Westminster Mall with her mother, checking out the latest fashions and seeing what movies were playing.
As a teenager, she spent many weekends there with friends playing pinball and skeeball at the arcade and shopping for trendy Chemin De Fer jeans.
Now, the mall is pocked with empty storefronts. At the remaining businesses, employees eagerly jump to help the few customers passing through.
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What may rise in its place, if developers and city officials have their way, is a new kind of mall, one that will include lawns, walking trails and thousands of apartments.
“It was the hip place to be, and it’s really faded out, but it’s just sad to see it go,” said DeHart, a 55-year-old massage therapist who still lives near the mall, in the house she grew up in. She is among the residents worried that the new apartments will increase traffic while doing little to solve the region’s affordable housing crisis.
In Orange County, the San Fernando Valley and suburbs throughout America, the mall was a gathering spot where there were few other places to hang out. It was where kids stocked up on the latest fashions and roamed in packs after school, spawning the term “mall rat.”
The 1980s cult classic “Fast Times at Ridgemont High” began and ended at the mall where the teens worked. In the 1995 film “Clueless,” a Beverly Hills teen retreated to the mall, which she described as a “sanctuary,” after failing to persuade a teacher to boost her grade.
Now, teenagers text with their friends and make TikTok videos. Their parents are more likely to shop online than at a brick-and-mortar store.
At the same time, Orange County is desperate for housing, with rents and home prices escalating and state laws requiring cities to zone for new construction. In a region where there is little undeveloped land and neighbors are likely to push back at new housing, some see declining malls as ideal places to build.
The Westminster Mall is “probably one of the largest areas of developable space that still exists in our time in this area,” City Manager Christine Cordon told the City Council during a meeting last November.
Cordon remembers taking the bus to the mall decades ago to pick out CDs at Best Buy.
“You’re too young as a teenager to hang out in an actual nightclub, so back in the day, where would you go? The mall,” said Karen North, a USC professor who specializes in social media and psychology.
“It became this default place to go because it had something for everybody. You never knew who you were going to bump into, but you were always guaranteed there was something going on and there would be people around.”
As envisioned in a plan adopted by the City Council last year, the new mall would contain at least 600,000 square feet of retail space. It would include up to 3,000 residential units and up to 425 hotel rooms, surrounded by a park with 17 acres of green space.
Teenagers could still hang out there — it just wouldn’t be the echoey indoor turf that Alicia Silverstone claimed in “Clueless.”
Orange County is catching on to a trend that has already taken hold farther north in the Los Angeles area, led by developer Rick Caruso with his Americana at Brand and Palisades Village malls and residences.
“This is really our opportunity to create something that we can be absolutely proud of for the next generation to create those same fond memories that I have and that others have in a fashion that is consistent with what the times are now,” Cordon said.
Bill Shopoff said his company, which purchased the Macy’s store and the former Sears store in the Westminster Mall last year, hopes to draw people back with shops, a hotel, townhouses and apartments.
Upscale malls like South Coast Plaza are thriving because “they have entertainment, food, there’s a reason to go there,” said Shopoff, president and CEO of Shopoff Realty Investments. “I think we need to do that in Westminster to create a sense of something.”
As for who will rent or purchase the homes in his preliminary plan, Shopoff is counting on a modern type of suburban dweller — one who would rather walk to restaurants and other amenities than live in a single-family home with a yard.
Experts say that new laws, along with increased pressure from the state to build more homes, have convinced some local officials who might have been resistant to rezoning commercial properties in the past.
Roughly every eight years, California cities are assigned a certain number of new housing units they’re required to zone for. As part of the 2020 assessment, Orange County needs to make space for about 183,000 new units, shared among all its cities.
Last year, Gov. Gavin Newsom signed two pieces of legislation aimed at spurring housing development in corridors otherwise zoned for large retail and office buildings.
“Whether you want to call Orange County urban suburbia or suburban urbanism, it’s definitely shifting,” said Elizabeth Hansburg, co-founder and executive director of People for Housing Orange County. “We have an interesting mix of historic districts and tract housing of the ’40s, ’50s, ’60s and even the ’70s, but I don’t see us building like that again. It’s going to be interesting to see how families evolve in denser spaces.”
Elsewhere in Orange County, similar mall conversions are at various stages.
In Santa Ana, a 309-unit apartment complex is under construction on the parking lot of the Mainplace Mall, part of a larger project that will include more apartments, restaurants, courtyards and a music venue.
Simon Property Group has said it is open to adding residential zoning to its mall in Mission Viejo. In Brea, the company has proposed redeveloping 15.5 acres of the mall to include shops, a resort-style fitness center, apartments and a large central green space.
A proposal to redevelop the Village at Orange mall to include housing along with retail has run into stiff opposition. Residents are voicing concerns about tall residential buildings looming above nearby single-family homes.
In Westminster, DeHart said that she and her neighbors who live in tract homes adjacent to the malls are not “NIMBYs” — an acronym for “Not In My Backyard.”
“That’s not what this is,” she said. “We’re asking legitimate questions, and we’re not getting answers.”
In Laguna Hills, the mall is being repurposed along the lines of Caruso’s Los Angeles-area developments, with up to 1,500 apartments, an upscale hotel, commercial office space and 250,000 square feet of stores surrounding a large green space.
On a recent day, a chain-link fence wrapped with a blue tarp surrounded the partly demolished main building, with the “Laguna Hills Mall” lettering barely legible.
A sign affixed to the fence featured a rendering of the new homes, asserting that “a brighter future is coming soon.”
Residents have voiced concerns similar to those of DeHart and her neighbors — traffic, overcrowding. But Laguna Hills Mayor Janine Heft said a change is needed.
“There’s a lot of nostalgia for what the mall used to be,” Heft said. “What we didn’t want was a blight, and that’s really what we had. We had this mall that hadn’t been kept up in years.”
On a recent afternoon, most of the sprawling Westminster Mall was deserted. The only activity was at an indoor playground near JCPenney.
Corrie Essex watched her 5-month-old son playing on a blanket as rain pounded on the glass ceiling.
She grew up in the San Fernando Valley and recalls listing the Northridge Mall as one of her favorite places in an elementary school assignment. Her mother took her and her siblings there to get burgers and go to the movies — a relatively inexpensive way to keep four kids occupied.
“We’d go all the time,” said Essex, 30, who now lives in Huntington Beach. “It was fun. Now, I hate the mall. It’s just not the same. Nothing’s beautiful anymore.”
But on a rainy day like this one, it was a good place to take her son. And, noted her sister, 27-year-old Jessie Lane, there’s little danger of spending money — “it doesn’t have any bougie stores that we would want to buy anything from.”
Their mother, 57-year-old Rachel Lane, said she likes the idea of adding housing to malls.
But with the new outdoor designs, she wondered, “Where are we going to go when it rains?”
Building a home known as an accessory dwelling unit could be a novel solution to low housing supply.
ADUs are units built on the lot of an existing home and tend to be cheaper to construct and live in.
Higher rates have frozen the housing market, leading to a national shortage of homes for sale.
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housing market has never been this unaffordable.
A big problem is extremely low supply, and that could lead to a trend of eager homebuyers building a kind of house—known as an accessory dwelling unit—in the yard of an existing home, according to two researchers at Miami University.
Architecture professors Jeff Kruth and Murali Paranandi pointed to the huge shortage in housing supply as mortgage rates hover near a 20-year high. The shortage of properties has kept home prices elevated and exacerbated housing un affordability, which could result in the rise of accessory dwelling units, they said.
ADUs, also referred to as “backyard homes” and “in-law suites,” are housing units that are built on the land of existing properties. They can also be cheaper to build and to live in, as they’re typically smaller than single-family homes.
“Recent trends – working from home and aging in place, along with a homeownership market that’s pricing out younger adults – all demand housing types that are not readily available in a market dominated by single-family housing.
“We believe ADUs – with their social, economic and environmental benefits – should become a more common housing option,” the researchers said in an op-ed for The Conversation.
Historically, there’s been stiff opposition to ADUs, and there is often a byzantine permitting process in many states that requires obtain as many as seven permits to be allowed to construct a dwelling on a lot with an existing home. But some states are softening their stance as the housing crisis deepens. Leading the charge is California, which is even offering subsidies to make construction more affordable.
32% of homeowners said they were interested in developing an ADU on their property after learning about it, according to a January survey from mortgage giant Freddie Mac. And the trend has already taken off in some packed housing markets, with ADU permits in California jumping from 9,000 to 12,392 from 2018-2020, per UC Berkeley research.
“As the country grapples with alleviating its housing crisis, solutions will require rethinking existing policies and re-imagining what housing development and neighborhood cohesion looks like. ADUs can be on of those solutions,” Kruth and Paranandi wrote.
Rising interest in ADUs and other novel ways into the housing market comes as US housing hangs in a state of limbo, with the high cost of borrowing shutting out both buyers and sellers. The average 30-year fixed mortgage rate topped 7% for the first time since March, and has hovered not far from that level since last November.
This has shut out many buyers, who are faced with higher costs of borrowing, a trend of sellers sitting on the sidelines is also keeping prices high.
Current homeowners are less likely to want to list their home for sale if it means financing the purchase of a new home at a higher rate. Many buyers in the last decade locked in mortgage rates close to historic lows, and the pandemic era in particular saw a steep drop in borrowing costs for buyers, as the the 30-year rate dipped under 3%.
The result is a frozen housing market, with sales unlikely to pick up unless mortgage rates ease substantially. Experts, however, don’t expect a major pullback in rates this year: the 30-year mortgage rate will likely ease to 6% by the end of 2023, Redfin’s chief economist told Insider, which will keep affordability and housing activity low through the second-half of 2023.
The California State Senate passed a bill this week that would permit the construction of affordable housing units on land owned by faith-based institutions and nonprofit colleges, even if local zoning ordinances and laws would normally prevent construction.
The bill, introduced last December by Sen. Scott Wiener (D-San Francisco), is designed to reduce barriers faced by nonprofit organizations, churches, synagogues and mosques for constructing multifamily housing units on their properties.
“Tackling our housing crisis requires every tool available to us,” Sen. Wiener told the Davis Vanguard. “Many faith institutions are called to provide housing to those in need, as our severe housing crisis continues to inflict its most serious damage on the most marginalized. I look forward to working with my colleagues in the Assembly to allow faith institutions to help with our housing crisis, opening up a huge amount of essential land exclusively for affordable housing.”
If signed into law, the bill would supersede local zoning rules for applicable institutions and would prevent opponents of the construction from using the environmental review process to slow the construction process through litigation.
In addition to zoning limitations, the state’s strict environmental review process has also been considered by the bill’s supporters as an impediment to construction, according to the Los Angeles Times.
“SB 4 will unlock an enormous, and I’m not exaggerating, an enormous amount of land for 100% affordable housing,” Wiener said late last year when announcing the proposal. He cited a 2020 study by the University of California, Berkeley’s Terner Center for Housing Innovation, which found that roughly 40,000 acres of land that are currently used by religious institutions have potential for housing development.
While a union dispute over pay language previously threatened to derail the bill, according to CalMatters, once the bill made it to the Senate floor, it passed overwhelmingly — with 33 in favor and two lawmakers voting against it. Five members did not record a vote.
The bill was delivered to the California State Assembly on Wednesday, where it was read in the chamber for the first time.
Mortgage Investors Group, or MIG for short, has a familiar story in that they were founded by a small group of loan officers before growing into a billion-dollar independent mortgage bank.
What makes them more special is the fact that they’ve been around since 1989, a testament to their staying power in the very unforgiving mortgage industry.
That means surviving a few housing booms and busts, yet carrying on and continuing to grow along the way.
A couple of their claims to fame include being the Tennessee Housing Development Agency’s (THDA) top lender annually since 2003.
And the number one USDA home loan lender in Tennessee every year since 2014. Let’s learn more about them.
Mortgage Investors Group Fast Facts
Direct-to-consumer retail mortgage lender
Offers home purchase loans, refinances, and reverse mortgages
Founded in 1989, headquartered in Knoxville, TN
Funded about $4 billion in home loans last year
The 3rd largest mortgage lender in the state of Tennessee
The Tennessee Housing Development Agency’s (THDA) top lender since 2003
The #1 USDA home loan lender in TN since 2014
Mortgage Investors Group is a direct-to-consumer retail mortgage lender based out of Knoxville, Tennessee (pictured above is the Sunsphere from the 1982 World’s Fair there).
As noted, they got started all the way back in 1989 by co-founders Chuck Tonkin II and Chrissi Rhea, along with five colleagues.
Today, the company has grown to 26 branch locations and 450 employees, with more than $20 billion in closed loans since inception.
This means you can apply for a mortgage at a local branch or online via their website.
Last year, they mustered nearly $4 billion in total loan volume, despite only working in the Southeast.
They’re licensed in just nine states, including Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee.
In their home state, they are the third largest lender, beaten out only by behemoth Rocket Mortgage and megabank Wells Fargo.
The company is also quite active in nearby Alabama and Georgia, the #1 USDA loan lender in Tennessee, and the top Tennessee Housing Development Agency (THDA) lender since 2003.
Roughly 60% of their volume consisted of home purchase loans, meaning they’re probably a good choice for a home buyer.
The rest was made up of mortgage refinances, home improvement loans, and reverse mortgages, all of which are geared toward existing homeowners.
How to Apply with Mortgage Investors Group
To get started, you can either visit their website or head over to a local branch if one happens to be situated nearby.
Their website offers a wealth of information, including how-to guides, mortgage calculators, a mortgage glossary, and a loan officer directory.
You can search for loan officers by location or name, then apply directly from their webpage once you find the individual you’d like to work with.
MIG offers a digital mortgage application that uses the latest technology to ensure a quick and pain-free loan process.
This includes the ability to fill out an app from a smartphone or computer, eSign disclosures, and scan and upload documents.
Additionally, their on-site underwriting, loan processing, closing, and appraisal services mean you can get to the finish line without delays.
This is especially handy in a competitive housing market where time is money and then some.
Available Loan Programs at Mortgage Investors Group
Home purchase loans
Refinance loans: rate and term, cash out, streamline
Conforming loans backed by Fannie Mae and Freddie Mac
Jumbo loans
FHA loans
VA loans
USDA loans
Reverse mortgages
Reverse purchase mortgages
Georgia Dream loans
THDA loans
Down payment assistance loans
Fixed-rate and adjustable-rate options available in various loan terms
One standout area for Mortgage Investors Group is their selection of loan programs, which is seemingly endless.
Aside from all the usual stuff like loans backed by Fannie, Freddie, and the FHA/USDA/VA, they offer jumbo loans, reverse mortgages and even reverse purchase mortgages.
They also have several options for first-time home buyers and low-to-moderate income borrowers, including the Georgia Dream loan and THDA loans.
Their Home Court Advantage program offers up to 105% of the purchase price and includes a second mortgage that can cover down payment, closing costs, and other prepaid items.
Both fixed-rate and adjustable-rate mortgages are available in various loan terms, including 15-year fixed mortgages and 5/1 ARMs.
They lend on all major property types, including single-family homes, condos/townhomes, and multi-unit investment properties.
Mortgage Investors Group Rates
Mortgage Investors Group says they’re here to get you an affordable mortgage with award-winning service, but they don’t post their mortgage rates online.
In order to get pricing, you’ll either need to call up a loan officer on the phone or fill out a preliminary application online to get in touch with one.
At that point, you’ll you be able to receive a mortgage rate quote and determine what lender fees they charge, if any.
Because they don’t publicize mortgage rates, the only real hint we have is customer reviews, which are generally favorable.
But pricing will always depend on the loan scenario in question. And you should always obtain several mortgage rate quotes to ensure you don’t miss a lower-priced, quality option.
Be sure to compare Mortgage Investors Group’s quoted mortgage APR to other lenders, which factors in both lender fees and the interest rate.
Mortgage Investors Group Reviews
Over on Zillow, Mortgage Investors Group has an almost-perfect 4.97-star rating out of 5 from over 2,500 customer reviews.
Many of the recent reviews indicate that the interest rate and/or closing costs were lower than anticipated, a good sign if you want a low-cost mortgage.
They’ve also got a perfect 5.0-star rating from over 100 Google reviews, along with a 4.7-star rating on Facebook from roughly 130 reviews.
The company is an accredited business with the Better Business Bureau (BBB) and currently holds an ‘A+’ rating based on customer complaint history.
Speaking of, they’ve only had one complaint closed over the past three years.
To summarize, Mortgage Investors Group seems to be a particularly good choice for home buyers thanks to their wide range of first-time home buyers loan programs.
This is especially true for those short on down payment funds or income, as they work extensively with the Tennessee Housing Development Agency and USDA.
But they’re also quite active when it comes to mortgage refinancing as well, so they could also be a great choice for an existing homeowner too if their mortgage rates and fees are competitive.
Mortgage Investors Group Pros and Cons
The Good
Offer a digital mortgage application and in-house processing/underwriting
Can apply for a home loan from any device or in-branch with a human
Tons of loan programs to choose from including first-time home buyer and reverse mortgages
Excellent customer reviews across ratings websites
A+ BBB rating
Lots of free loan calculators and how-to guides on their website
Website also available in Spanish
The Maybe Not
Only licensed in a handful of states in the Southeast
Do not publicize mortgage rates or lender fees online
Offers home purchase loans and mortgage refinances
Founded in 2005, headquartered in Columbia, MO
Funded about $3.75 billion in home loans last year
#1 retail home purchase lender in the state of Missouri
Roughly two-thirds of overall business comes from home state
Also very active in Illinois, Kansas, and Oklahoma
Currently licensed in 30 states nationwide
Flat Branch Home Loans is an employee-owned, direct-to-consumer retail mortgage lender located in Columbia, Missouri.
They were founded by current president Jim Yankee in 2005, and have since grown to a 700-employee strong company.
Their claim to fame is being #1 home purchase lender in the state of Missouri, as well as a big-time USDA loan lender.
This makes it obvious that they’re a solid choice for home buyers, though they also do a good deal of mortgage refinancing as well.
Last year, they funded about $3.75 billion in home loans, with a 70/30 split of purchase loans and refinances.
Roughly two-thirds of their overall production comes from their home state of Missouri.
And they’re the fourth largest mortgage lender in Missouri overall, only bettered by U.S. Bank, Rocket Mortgage, and Wells Fargo.
Aside from Missouri, they’re quite active in the states of Illinois, Kansas, and Oklahoma.
At the moment, they’re licensed in 30 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.
For the record, their name is derived from the Flat Branch stream that flows near Columbia, MO.
How to Apply with Flat Branch Home Loans
To get started, you can visit a local office if located in the Midwest, or simply navigate to their website.
At last count, they’ve got about 58 physical locations in a handful of Midwestern states.
If you begin at the website, you can browse their online loan officer directory, read bios, and find someone to work with.
Once you narrow down your loan officer search, you can click on “Apply” and you’ll have the option to continue on to the digital application or have them reach out to you.
It might be wise to have them reach out first so you can discuss loan pricing and eligibility before filling out the app.
When it comes time to complete the app, their digital mortgage experience is powered by SimpleNexus.
You can fill out the app from a computer, or download their smartphone app and tackle it that way.
Applicants can eSign disclosures, quickly calculate payments, securely scan and upload documents, and message their loan officer with questions along the way.
You’ll also receive updates as you go to determine where you’re at in the process. And receive a notification whenever they request a new document from you.
Simply put, Flat Branch Home Loans offers a good combination of the latest technology and human touch.
Loan Programs Offered by Flat Branch Home Loans
Home purchase loans
Refinance loans: rate and term, cash out, streamline
FHA loans
USDA loans
VA loans
HomeReady and Home Possible (3% down)
Grants and down payment assistance programs
MHDC loans
Section 184 Indian Home Loan Guarantee program
Flat Branch Home Loans is big on home purchase financing, and has a long list of programs to help secure a mortgage.
If you’re an EMT, firefighter, police officer, teacher, or military, their “Community Champions Program” comes with up to $900 in lender credits and a waived appraisal fee.
They also originate Missouri Housing Development Commission (MHDC) loans, which feature down payment assistance via a forgivable second mortgage.
As noted, they’re a major USDA loan lender, so if you’re purchasing a rural home they should be a great fit.
The USDA program has its quirks, so using an experienced lender who knows how to navigate it is advised.
Aside from that, they offer all the major stuff like conforming loans, FHA loans, VA loans, and even bridge loans to help you buy before you sell.
Their Lock and Shop option, which allows you to lock a mortgage rate before you find a home, is available in the states of Arkansas, Illinois, Iowa Kansas, Missouri, Oklahoma, Texas, and Nebraska.
Lastly, they offer the Section 184 Indian Home Loan Guarantee program, a low-down payment loan option for Native Americans.
It’s unclear if they offer jumbo loans or adjustable-rate mortgages, though you can get a fixed-rate mortgage in a variety of different loan terms.
Flat Branch Home Loans Rates
While we know they specialize in home purchase lending, we don’t know a lot about their loan pricing.
To my knowledge, they don’t feature their mortgage rates or lender fees on their website. As such, you’ll need to speak with a human to get a quote.
This doesn’t say anything about their rates, good or bad, it just doesn’t give us anything to go on in this review.
Once you get a mortgage rate quote, be sure to shop their mortgage APR with other banks, lenders, and mortgage brokers to see where they stand.
Take note of any lender fees and/or discount points required for the quoted rate to ensure you’re doing an apples-to-apples comparison.
The only hint we have about pricing comes from their Zillow reviews, in which a good chunk of customers indicated a lower rate and/or closing costs than expected.
Flat Branch Home Loans Reviews
Over at Zillow, Flat Branch Home Loans has a stellar 4.96-star rating out of a possible five from about 900 customer reviews.
Many of the reviews highlight their hands-on service and fast closings, especially important to home buyers.
They’ve also got a 4.9-star rating from about 160 Google reviews, along with a 4.7-star rating on Facebook from roughly 200 reviews, and a 4.9 rating on LendingTree from 40 reviews.
While they aren’t an accredited business, they do hold an ‘A+’ rating with the Better Business Bureau based on customer complaint history.
To wrap things up, Flat Branch Home Loans is clearly a home purchase lender first and foremost.
They pride themselves on their extensive mortgage knowledge and experience, important attributes when it comes to home buying.
Ultimately, if you want a competent lender who you can rely on to close on time, they might be a solid choice.
Their wide array of loan programs, including proprietary offerings and low or zero down options, is also a big plus.
Just pay attention to pricing as well to ensure you receive quality service and a competitive rate.
Flat Branch Home Loans Pros and Cons
The Pros
Can apply for a home loan online or via smartphone
Offer a mostly paperless, digital mortgage experience
Physical branches in many Midwestern states
A good range of loan programs to choose from (especially for home buyers)
Excellent customer reviews across ratings websites
A+ BBB rating
Free smartphone app
Free mortgage calculator and home buyer guides online
They service their loans after closing
The Cons
Do not list their mortgage rates or lender fees online