Is There an Eviction Crisis Brewing?

Is There an Eviction Crisis Brewing?

An estimated 2.7 million people were evicted from rental units in 2015. And one real estate brokerage says it may partially be the high costs of real estate to blame.

Redfin’s research team scoured eviction data and they believe that higher costs are fostering an environment of greater evictions.

Rents are skyrocketing across the country, having jumped 66 percent since 2000. Household incomes, on the other hand, have risen only by 35 percent in that time frame. More than 20 million renters – half of all renters in the country – in 2015 were considered “cost burdened,” spending at least 30 percent of their income on rent.

The 15 metros with the largest increases in the portion of income spent on rent from 2011 to 2014 saw a 3.8 percent increase in the number of evicted families from 2013 to 2014, according to Redfin’s analysis of the data. The other 56 metros evaluated saw a slight decline in evictions (-1.4 percent). For example, in Newark, N.J., housing costs have risen by 4 percent, and one out of every 11 rental household was evicted from their home in 2014, Redfin’s research shows.

The data from the American Community Survey also reveals that evictions are most common in areas with higher foreign-born population rates.

“Evictions have devastating consequences on families and communities,” Redfin’s blog notes about its findings. “Evicted families are often excluded from participating in the Housing Choice (Section 8) Voucher Program. Getting evicted has also shown to cause jobs loss, or worse, homelessness for some time. Communities with high eviction rates have an unstable social structure and are plagued with crime. … Without an expansion in policies to address the affordable housing shortage and the increase in cost-burdened renters, evictions will become an even more prevalent feature of the U.S. housing market.”

Source: “Millions of Renters Face Eviction – Why Today’s Housing Market Is Partially to Blame,” Redfin (Dec. 12, 2016)

HAMP to Be Replaced with ‘Flex Modification’

HAMP to Be Replaced with ‘Flex Modification’

Mortgage financing giants Freddie Mac and Fannie Mae announced a new foreclosure prevention program that will roll out next year to replace the Home Affordable Mortgage Program (HAMP), which expires at the end of this month.

The new program will be called “Flex Modification.” It reportedly will provide a 20 percent reduction in mortgage payments for eligible borrowers. The majority of those homeowners who can qualify will be 60 days or more past due on their payments, although the GSEs note that some exceptions may be granted to those who are current on their mortgages or less than 60 days delinquent in certain circumstances.

“The new Flex Modification announced by Fannie Mae and Freddie Mac was designed based on lessons learned from crisis-era modification programs to help borrowers stay in their homes and avoid foreclosure whenever possible” says Sandra Thompson, the Federal Housing Finance Agency’s deputy director. “By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the GSEs and taxpayers. And it will provide borrowers who face permanent hardships with a sustainable modification.”

The new program will be implemented by Oct. 1, 2017.

Source: “‘Flex Modification’ Designed as New HAMP,” Mortgage News Daily (Dec. 15, 2016)

Easy Ways to Enhance the Home’s Entryway

Easy Ways to Enhance the Home’s Entryway

The entrance to the home is where buyers often form some of their first impressions of the interior of the home.

However, too often, “the entryway gets neglected because it isn’t necessary in the same way that a living room sofa is,” Larina Kase, an interior designer and home stager in the Philadelphia area, told realtor.com®. “But it’s actually one of the simplest and least expensive areas to decorate to get the biggest impact.”

That said, many entryways suffer from overcrowded coat racks and oversized furniture that is making the area feel less appealing and less spacious, designers say.

Here are a few simple things you can try to spice up the home’s entryway:

Add a mirror: “Every entryway needs a spectacular mirror, especially in small spaces,” says Jack Menashe of Menashe Design in New York. “It makes them optically larger and adds depth. Plus, who doesn’t want to check themselves out before they leave the house?”

Light it up: Add a small lamp on a table for a welcoming glow.

Fresh flowers: Try an orchid, potted plant, or vase of cut blooms to add a touch of nature and color.

A bench: If there’s space in the entryway, have a place to sit down and that ideally has some storage underneath it too. Add a colorful pillow to brighten up the space too.

Source: “5 Entryway Essentials to Welcome People Into Your Home – and 3 Eyesores,” realtor.com® (Dec. 14, 2016)

Lessons the Chicago Cubs Can Teach Investors

Lessons the Chicago Cubs Can Teach Investors

The Chicago Cubs’ 108-year journey to its World Series championship this year provides some lessons about strategic investment strategies that can be applied to the real estate industry, says David Scherer, cofounder of Chicago-based private equity firm Origin Investments. Theo Epstein, president of baseball operations for the Cubs, learned these lessons from Billy Beane, general manager of the Oakland Athletics and Boston Red Sox, which were then chronicled in the book Moneyball. How can you and your clients compare real estate investment to baseball? Here are Scherer’s six real estate lessons from the Cubs:

1. Don’t follow the herd. Moneyball shows investors that information alone doesn’t make a market efficient; it’s what you do with it. Beane and Epstein used statistics widely available to fellow general managers, who instead trusted traditional scouting reports. The same can be true of investment strategies: Profitable choices often are ignored in popular vehicles such as index funds. Investors can’t beat the market if they mirror the market. Investors can diversify a portfolio with alternative investments such as commercial real estate, which is not correlated to pubic equities.
2. Be ready to change your lineup. While baseball players often enjoy long-term contracts based on past performance, championship-caliber teams are buoyed by veterans who show immediate productivity even when inked to short-term deals. Likewise, investors should remember not to fall in love with specific assets in their portfolios. A property may show its fastest appreciation in just a few years’ time. While it may continue to bring in steady rents, its timetable for maximum appreciation might be much shorter. Strategic private equity real estate managers know how to minimize risk and maximize investment value.
3. Don’t be scared off by shortcomings. As a GM, Beane, and then Epstein, were successful with players other teams had discarded because of age, injury, lack of speed, or awkward mechanics. But those players had talents that were needed or that could be improved. Similarly, value investors look for companies with fixable problems or properties that have been overlooked due to age, management, or marketing issues. In real estate, this is known as value-added investing. Thoughtful and strategic business plans can turn around undervalued assets.
4. Don’t trade at the deadline. The best deals made by championship teams are those made throughout the year, not just at the trading deadline when bidding is fiercest. Beane once told ESPN, “I don’t want to make decisions based on micro-events [or] the small sample size.” In investing, the price swings of stocks and bonds show that markets constantly overreact to new information. Smart investors anticipate market changes rather than reacting to them. Choosing less volatile alternatives, such as commercial real estate, will give a portfolio added protection compared to frequently traded REITS.
5. Look for a track record. Like Beane did years before, Epstein drafted out of college rather than high school, looking for experience that could translate more closely to the big leagues. It’s best not to choose investments based on a single top-rated performance — it’s unlikely to repeat, compared to one that has rated near the top for several years. Similarly, in real estate, we don’t judge an investment’s projected internal rate of return (IRR) without comparing projected and actual IRRs for a manager’s past choices.
6. Measure the right things. The Moneyball approach picked players based not only on their batting average but their on-base percentage, since walks proved as useful as singles. Real estate investors looking to build wealth might want to focus not on IRR alone as much as types of risk and multiple on equity, the degree to which property values are expected to rise.

Source: David Scherer, cofounder of Origin Investments

Younger Buyers Move Closer to Middle America

Younger Buyers Move Closer to Middle America

Millennials in search of affordable housing are moving inland to find it, with Minneapolis drawing the nation’s highest home buying activity for this age group in the fall, according to Ellie Mae’s latest Millennial Tracker. Other cities in the top five for millennial home buyers are Philadelphia, St. Louis, Chicago, and Detroit.

“As housing prices continue to rebound, millennials are increasingly representing a higher percentage of homeowners in the middle of the country,” says Joe Tyrrell, executive vice president of Corporate Strategy at Ellie Mae. Meanwhile, cities in California and Florida saw the least millennial home buying activity this fall, including Los Angeles, Miami, San Diego, San Francisco, and Tampa-St. Petersburg.

Here’s a profile of the millennial home buyer based on the latest readings from the index:

• About half of millennial borrowers are nearly 29 years old.
• About half were single and half were married (which reflects a growth in single home ownership).
• Their FICO credit scores averaged 722.
• They are able to afford a pricier home than they were six months ago. The average appraised value of a home bought by millennial buyers has jumped from $212,939 in June to $223,153.
• More than three quarters of closed loans for millennials were purchases, and 22 percent were refinances. The average loan amount was $184,733.
• Average days to close for millennials held steady at 47, with 46 days for conventional loans and 47 for FHA loans.

Source: Ellie Mae

Facebook Says It Got More Ad Metrics Wrong

Facebook Says It Got More Ad Metrics Wrong

Facebook’s metrics woes are getting worse. This fall, the social media giant revealed that it had overstated the average video advertisement view time for several years. Now, the company says it has miscalculated several other metrics too that also focus on how marketers’ ads are performing.

In a new blog post, Facebook says a fix will be coming in mid-December to correct tallies from video posts and shares of live video posts. The company is also working on a fix between discrepancies of “like” and “share” button counts that are calculated by its Graph API. Further, Facebook says totals generated by entering a URL into the search bar of Facebook’s mobile app also may be miscounting. Facebook says it will overhaul its methodology for estimating reach for advertising campaigns too. The company said its update should increase or decrease ad-reach estimates by less than 10 percent.

“We are working to resolve this issue so that the like and share button metrics and our mobile search query metrics match up, and we will notify partners as soon as we have an update,” Facebook wrote in its blog post.

Facebook faced scrutiny earlier this year when it had been revealed an inflated number of average video ad view time metrics for the last two years. Facebook apologized for the errors, and it also assured users that the metric did not affect billing. In November, Facebook revealed four more metrics were being miscalculated (the number of full video views, time spent on Instant Articles and monthly and weekly reach of marketers’ posts).

To find the latest on Facebook’s metric updates, the social media network has created a page devoted to informing users about updates as they come available.

Source: “Metrics FYI: Estimated Reach, Streaming Reactions and Graph API,” Facebook Newsroom (Dec. 9, 2016) and “Facebook Says It Has Miscalculated Several More Engagement Metrics,” Forbes.com (Dec. 9, 2016)