Entry Level Home Investing Reaches 20 Year High

According to a report by CoreLogic, over 11% of homebuyers are investors.  While it could be speculated that conglomerate investment firms such as Blackstone and American Homes 4 Rent account for a large portion of these sales, data indicates that is not the case.  CoreLogic’s research indicates that most investors in real estate properties have purchased between one and ten properties in a ten year period.  Their data indicates that 61.6% of investment properties are owned by “mom and pop” investors vs just 15.8% being owned by institutions, with professional investors making up the other 22.7%.  Many houses purchased by investors are bought to diversity their investment portfolio, to function as a landlord, or by someone who will fix the home up and flip it to an owner occupier.  

It is important to note that CoreLogic only considers buyers who use a corporate, non-individual identifier on the deed at time of purchase. What that means is buyers who use their names when purchasing investment properties as opposed to that of an LLC, corporation, or other business entity, are not included in this report.

Home purchasing activity of investors has been on the rise in the US, and in 2018 it reached its highest level in two decades.  CoreLogic’s research indicates that most investor activity is being seen in the entry level home tier, also targeting areas with higher than average rents.  What this does to potential owner occupant homebuyers is create a shortage of available houses, and drive rental prices even higher. 20.3% of investor purchases were in the entry level housing market in 2018, compared to 6.3% of upper end homes.

So what does this mean for renters and potential homebuyers in the Reno housing market?  It means that there is more competition now to get into an entry level home that there has been in 20 years. What I have personally witnessed in Reno is great number of out of state investors who have purchased properties in the downtown Reno area, and either use them as rentals, or simply let them fall into disrepair, waiting for their value to increase for resale.  

Many of these properties end up boarded up and condemned.  These investors take the money they earn in our community elsewhere, leaving blight in our city with very little short or long term benefit to our city.  

If you are a first time homebuyer, or a homebuyer looking to get into an entry level home, there are things you can do to help your chances of getting into an affordable home.  Working with a licensed real estate agent to closely watch the market will give you an advantage over home seekers simply using the internet to find homes. Agents have access to more up to date and accurate listing information.  Additionally, working with a qualified and competent lending institution can give you an advantage over other buyers.  Sellers in a competitive market can be more picky about the sales contracts they choose to accept, and having a reputable lender backing your offer with a financial pre-qualification letter makes your offer much more likely to be accepted.  As always, if you need help, get in touch with me here any time. I am here to help. 

Pros and Cons of the Reverse Mortgage

As our population ages and property values and the cost of living continue to rise, some homeowners have taken or may be thinking of taking advantage of a reverse mortgage option.  A reverse mortgage allows the homeowner to take a monthly draw from the equity they carry in their home, increasing their monthly cash flow but reducing the equity in their home.  At the end of the borrowers tenancy in the home, either at death or if they move into assisted living, the mortgage company sells the home to fulfill the remaining obligation of the mortgage.  The amount of the lien against the property, including any fees and interest that has accrued over the years, will be taken from the proceeds of the sale.  Any remaining value from the sale then goes to the previous homeowner, or their heirs.

The reverse mortgage was once considered a loan of last resort.  Intended for the elderly to extend their period of financial independence; helping them to afford the mounting costs of healthcare, or aide in supplementing their retirement savings. 

There are also ‘single purpose reverse mortgages’ offered by some state and local government agencies, which allow homeowners to draw against their property for instances of required home repairs, improvements, or property taxes.  According to the MetLife Mature Market Institute, 20% of reverse mortgage borrowers are between the ages of 62-64, and over half are under the age of 70.

While there are risks in taking out a reverse mortgage, under the right circumstances they can be a good, generally tax free source of income for older individuals.  Additionally, a homeowner will never owe more than your home is worth and the payments will not affect ones Medicare of social security benefits.  The AARP (formerly the American Association of Retired Persons) recommends to its members that if they are in their seventies and have a substantial nest egg, the reverse mortgage may be a consideration to bolster their income and free up their cash savings for other investments.

One caveat to the reverse mortgage is the requirement that the homeowner continue to pay any property taxes and insurance on the home.  Failure to meet this obligation due to financial or other reasons means the bank can foreclose on the property. 

According to the US Department of Housing and Urban Development (HUD,) approximately 8% of reverse mortgages end in default.  If a household is occupied by a married couple and only one spouse is on the loan and the spouse who is not on the loan ends up as the surviving spouse, the bank will still require immediate repayment upon the death or relocation of the borrower.  If the surviving spouse is unable to pay back the loan, the house will be sold out from under them.

If you or someone you know are unsure if a reverse mortgage is the right choice, it is always best to consult with several financial professionals before committing to any major financial obligation.  While I am not a loan consultant, if you need help finding the right person to talk to I would be happy to facilitate the help you or your loved one needs.  

Don’t Let the Term ‘Rural’ Fool You When it Comes to Home Buyer Assistance

Alleviating the affordable housing problem in the greater Reno Metro area starts with getting qualified buyers into home ownership and out of high priced rentals.  Lowering the demand for rentals will drive prices down and make it easier for those with fewer monetary resources to find homes. In my last post, Down Payment Assistance May Be Right At Your Fingertips, I provided details of some of the programs offered by the Nevada Housing Division. Today I hope to dispel some confusion surrounding another program available to Nevadans, Home At Last™

The Nevada Rural Housing Authority (NRHA) offers a program, Home at Last™ Down Payment Assistance, that can help home buying hopefuls with up to $24,000 in down payment assistance.  

The Nevada Rural Housing Authority (NRHA) offers a program, Home at Last™ Down Payment Assistance, that can help home buying hopefuls with up to $24,000 in down payment assistance.  

The term “Rural” often leads people to believe they will not be able to take advantage of the assistance if they want to live in their preferred area, but you may be surprised to find out that an area of interest to you actually does qualify.  People are often surprised to find out that areas such as Sparks, Carson City, and Fernley qualify.  To check an address of interest for eligibility you can visit the NRHAs eligibility map here.

The down payment assistance offered by the NRHA is provided in the form of a 3-year second mortgage that is completely eliminated (forgiven) after living in the home as a primary residence for three years.  The secondary loan does not charge any interest and requires no payments.  Eligible loan types include FHA, VA, USDA Rural Development, and exclusive Conventional loans known as HFA Preferred and HFA Advantaged. The program does not have any purchase price limits, although a homebuyer may be limited by their loan type.

Another differentiating feature of the NRHAs loan assistance program is that the home being purchased does not have to be the only property you own.  What this means is as long as you are planning to live in the new home as your primary residence, you do not have to have already sold your previous residence to qualify.

An additional benefit to the Home At Last™ program is their Home At Last™ Pals Pet Adoption Program. 

At the completion of your loan process you will be given a certificate, good for 60 days to present to your local animal shelter. With this certificate the NRHA will cover the entire cost of your pet adoption fee.  For more information on the Home At Last™ Pals Program you can call the Pals hotline at (775) 283-0173 or visit their website here.

If you need help navigating the options for home ownership assistance, feel free to contact me any time.  Although I am not a Loan Consultant, I would be happy to refer you to a lender that will find a program that works for you.