Some people call it buying the worst house in the best neighborhood, but most nice neighborhoods work just fine – especially when houses to choose from are scarce. But either way, this equity-building strategy isn’t for the faint of heart.

Back Door Entry to a Ritzy Area

The theory is that lower-priced homes in upscale neighborhoods will appreciate at a higher percentage than all the other houses in the neighborhood. It’s a chance to build a lot of equity fast when you purchase a $325,000 home in a neighborhood of $425,000 homes without multiple other buyers attempting to outbid you. Let’s assume going forward that house in the neighborhood will appreciate at 7% each year for the next two years. Compounding the typical $425,000 house over two years means the values rise to $486,691.

Buying the $325,000 house is like a back door entry to a ritzy area. It comes with neighborhood amenities like an HOA with a clubhouse, swimming pool, tennis courts, and/or golf course. It can also be a way to get into a better school district at a price you can afford. The intended result of buying the worst house in a nice neighborhood is that all the neighborhood amenities and prestige increase the percentage rate of appreciation for the out-of-place, lower-value house. All the extras cause the $325,000 house to appreciate at 12% instead of 7% per year for the next two years. The bottom line is that while the $425,000 houses gain $61,691 in value, the smaller investment of $325,000 gains $82,680 in value. A nice little investment trick when it works.

Sounds too good to be true. It could be because buying the worst house does involve both risk and the cost to bring it back up to neighborhood standards. If the house needs major rehab, you could easily spend all the anticipated increases in value making repairs and upgrades. You would end up in a nice neighborhood with a home valued on par with all the others, but you would not have made much financial gain (if any). It would be a push.

But a major rehab isn’t always the case…

A reverse mortgage is a type of consumer home loan that allows homeowners ages 62 and older to borrow against their home’s equity to receive either cash or a line of credit. 

Unlike a traditional mortgage, homeowners don’t make a monthly payment; the loan is repaid when the homeowner or their heirs sell the house. 

Senior homeowners often use a reverse mortgage to minimize their monthly housing costs and have access to liquid assets like cash during their retirement. 

How a Reverse Mortgage Works

The most common type of reverse mortgage is a home equity conversion mortgage (HECM), which is a federally backed loan regulated by the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development.

To qualify for an HECM you must: 

JPMorganChase has said it’s cutting jobs in its mortgage lending business amid tightening monetary policy that has seen mortgage rates pushed above 6%.

The nation’s biggest bank said last week that the decision was the result of “cyclical changes” in the mortgage market. “We were able to proactively move many impacted employees to new roles within the firm and are working to help the remaining affected employees find new employment within Chase and externally,” it said in a statement.

The bank did not confirm how many employees have been moved or laid off, but Bloomberg cited anonymous sources as saying around 1,000 staff have been affected by the move, with around 500 being forced to leave.

Two months prior, Wells Fargo & Co. also announced job cuts in its lending business, including hundreds of mortgage application processors.

The industry has been left reeling by lower demand for mortgages, with non-bank lenders such as Mr. Cooper, Loan Depot, Pennymac, Guaranteed Rate, Fairway Independent Mortgage, Interfirst Mortgage, Movement Mortgage and Better.com all laying off staff earlier this year as rates jumped past the 5% mark.

Pending home sales increased in May, breaking a streak of six successive monthly declines, but the National Association of Realtors said it is likely a blip and that sales will continue to fall as the year progresses.

The NAR’s latest data shows that contract signings, which are a forward indicator of home sales based on signed contracts to buy a home, rose by 0.7% last month. Contract signings are considered to be the most useful gauge of future home sales, though of course some deals may fall through.

Although the increase is encouraging, NAR Chief Economist Lawrence Yun said the data doesn’t hide the fact that the housing market is going through a transition. After all, contract signings are still down more than 13% from the same month last year.

“Contract signings are down sizably from a year ago because of much higher mortgage rates,” he pointed out.

Economists have previously cited the rapidly rising mortgage rates as the main culprit that has made buyers more cautious. Assuming a 10% down payment, the monthly payment on a media-priced single family home has increased by around $800 since the start of the year. That’s solely because of mortgage rates, which have risen by just over 2.5 percentage points since January.

Workforce planning can help you meet organizational goals in any economy. It’s been a challenging couple of years for HR. Fortunately, with COVID slowly coming to a halt,

businesses big and small are finally returning to normal. For many organizations, the new normal implies dealing with the consequences of pandemic layouts, remote work, and talent gaps.

During 2020, the first year of the pandemic, at least 89% of US organizations have managed to integrate workforce planning with business planning, despite tremendous challenges. However, only half of these organizations – some 54% – have reported a successful integration.

So, how do we stand in the post-COVID world?

Is workforce planning more effective today than it was a few years ago?

Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question from Sandy in VT: Hi Brian, We have more than $260,000 of equity in our house today and we are afraid the white hot seller’s market is fading fast. We don’t want to see that huge chunk of cash on paper also fade away. We are at retirement age and think this might be our one chance to cash out for this large of a profit. We want to sell quickly to lock in the profit at today’s value. The problem is that we don’t where we would live or what we would do. Can you help with some ideas to solve our homeless problem?

Answer: Hello Sandy. That’s a great question and one that I think a lot of baby boomers are asking themselves right about now. It’s also a question where one answer will never fit all. The good news is that there are several viable solutions that you can consider. I’ll cover a few of them.

This first is pretty radical. I know a couple that sold their house for a $185,000 profit several months ago. They don’t have any plans of buying another house any time soon. The good news is that they won’t have to pay taxes on the capital gain from the sale of their primary residence. The IRS rules say that you can exclude up to $250,000 of that gain from a single filer’s income, or up to $500,000 of that gain if you file a joint return with your spouse.

What this couple did is buy a luxury motor home with a large part of the profit. They consulted with a financial advisor and invested the balance in a S&P mutual fund alongside their 401k accounts for retirement. For tax purposes, the mutual fund and 401ks are separate accounts. I’m not sure how well that worked for them now the stock markets are crashing but that is what they did. And then they hit the road in their new motorhome. The last time I talked to them, they didn’t have a plan for when they got tired of living in a motorhome, but they were comfortable knowing they had somewhere to live and the opportunity and savings to do a lot of traveling before they got any older.

We spoke to Aaron Drussel, Broker/Owner of Better Homes and Gardens Real Estate Momentum in Provo, Utah, about how agents should be talking to sellers in today’s market.

Realty Biz News: Should sellers try and time the market to get the most money for their home?

Aaron Drussel: People always try to time the market, but it’s a lost cause. It’s like the waves of the ocean – they go up and down. If you say you want to surf the biggest wave, how would you accomplish that? You can watch on the beach for a big wave to come, but by the time you see it, your opportunity to ride it is gone. So it’s much better to roll with the waves and be active in the ups and downs in the market because you will never be able to time it right.

RBN: Is it really about getting the most money?

AD: Of course, sellers don’t want to leave money on the table and agents work their hardest to ensure that doesn’t happen. But the reality is that the majority of people sell their homes because of more emotional external factors than money. These are the many life changes that trigger a move – marriage, birth, divorce, retirement, etc. Many sellers who need to move are more interested in reducing stress and getting across the finish line as quickly as possible than maximizing every dollar.

Mortgage applications surprisingly jumped 8% last week compared to the previous seven day period, boosted by demand for adjustable-rate mortgages, according to the Mortgage Bankers Association. However, applications are still down 10% compared to one week ago.

The MBA said that last week’s jump in mortgage rates may have actually increased homebuying demand, as consumers worry that rates will rise again in the coming weeks. Mortgage rates are now at their highest level since 2008.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.98% from 5.65%, with points rising to 0.77 from 0.71 (including the origination fee) for loans with a 20% down payment. Rates are now nearly double what they were one year ago.

MBA economist Joel Kan told CNBC that purchase applications increased for the second week in a row, driven by both conventional mortgage applications and a 10% rise in ARM mortgage applications.

“The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating,” he added.

Ballooning mortgage costs, driven by skyrocketing prices and interest rates, have made mortgages less affordable than at any time since at least 2007. Demand for homes has pulled back in response, easing price growth, slowing sales and boosting inventory, according to the latest market report from Zillow.

Mortgage rates shot up in early June, averaging 5.78%2 as of Thursday. A new purchase of a typical U.S. home3 at that rate would mean monthly mortgage payments of $2,127, that’s 51% higher than a year ago and up 36% year to date.

“Mortgage rates took an unprecedented leap skyward over the past two weeks and quickly multiplied housing costs as they rose,” said Zillow economist Nicole Bachaud. “We are already seeing signs of waning demand, and expect these recent rate hikes to quicken the market’s needed rebalancing. While shoppers will likely experience less competition for homes than the frenzied recent months, their purchasing power has dwindled.”

Incomes are lagging further behind fast-rising mortgage costs, leading to the most significant affordability challenges in the past 15 years. The latest data available from April shows monthly payments taking about 28% of homeowners’ monthly income — dangerously close to the 30% threshold, beyond which is considered a cost burden. With rates now far above April’s average, that share is at or very near 30% already. Zillow data for this metric is available through 2007; the Atlanta Federal Reserve’s Home Ownership Affordability Monitor shows affordability bottoming out in July 2006.

Although rents have soared since the start of 2021, the rapidly rising cost of a mortgage still makes rent the cheaper option nearly everywhere. A typical rent payment in May is more expensive than a mortgage payment (with a 20% down payment), including taxes and insurance, in just five of the 50 largest U.S. metros. In May 2019, rent was more expensive in 28 of those metros.

At first glance, it might seem intuitive that rising interest rates will have a negative effect on the housing market. However, with a little more thought, the opposite is more likely to be true. Interest rates rising today and for the next several months is probably good for the housing market. Specifically for home buyers and real estate agents in need of more inventory on the market and at more stable prices. Is the Federal Reserve the answer?

In his remarks to reporters on June 13, Federal Reserve Chairman Jerome Powell said…

“Obviously, we are watching that quite carefully [prices and mortgage rates]. … It’s a very tight market. … So, it’s a complicated situation and we watch it very carefully. … We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.”

Realistic Mortgage Rates Return

Historically low interest rates for the past couple of years have enabled housing prices to soar at an astonishing rate. Desperate buyers bid up prices to unaffordable levels in a race to get a purchase locked in before prices went even higher. At the same time, potential sellers delayed listing houses on the market in hopes that prices would go higher. That is all ending now with higher and still rising interest rates, which when combined with peak prices have drawn an unaffordability line in the sand that many potential buyers cannot cross.

That means fewer buyers in the market – which also means lower demand. At the same time, prices are close to the peak in this market cycle. For sellers that want top dollar, now is the time to sell. That means more inventory is entering the market. With rising interest rates, we can expect supply and demand to move towards a more balanced market.

Mortgage rates continue to increase nationwide; inventory is increasing slightly as buyers back off, and the extremely hot seller’s market we saw during the peak of COVID-19 is cooling down. We see terms like “bubble,” “buyer remorse,” and “recession” thrown around, sparking emotion and even fear in some. Is the sky falling? 

In May of this year, NAR’s Chief Economist Lawrence Yun referred to the real estate market as uncertain. But what does this mean for you today, and more importantly, for your clients? You, as the real estate professional, are seen by so many as an expert in your local market, a trusted advisor, a problem solver, and an advocate for fair housing and home ownership. 

Your marketing is a direct reflection of who you are and personifies your business so it’s critical that your marketing efforts are informed by current market conditions. Therefore, having the most up-to-date local and national housing market information is pivotal to your marketing strategy and to position yourself for receiving the best return on investment for your marketing dollars spent. 

Here are three tips for keeping your marketing efforts up to date.

The Importance of Staying in-the-Know

Existing home sales declined again in May, falling by 3.4% to a seasonally adjusted annualized rate of 5.41 million units, according to new data from the National Association of Realtors.

On a yearly basis, existing home sales were down 8.6% compared to May 2021.

The NAR said the market is now at its weakest reading since June 2020, during the early months of the COVID-19 pandemic when a lot of activity was temporarily paused. Excluding that month, sales hit their lowest point since January 2020.

The latest data is based on deals that closed in the month, and therefore represents contracts that were likely signed in March and April. At that time, the average 30-year fixed mortgage rate increased from 4% to around 5.5%. Now, the rate is even higher at 6%. Rising rates, along with the low supply of homes and price appreciation have had a devastating impact on affordability.

“I do anticipate a further decline in home sales,” said Lawrence Yun, chief economist at the NAR. “The impact of higher mortgage rates is not yet fully reflected in the data.”

As a society, we are recognizing the need to become more environmentally conscious. It’s been shown that consumers are more often shopping with their values in mind, choosing brands that are good for the planet — not just good for their wallets. 

Nearly all major corporations now have environmental goals, outlining the ways they intend to better their practices and foster a greener tomorrow. Unsurprisingly, this trend has also spilled over into the housing sector, with many homeowners looking for ways to make their property more sustainable. 

Making your home environmentally friendly is not just trendy, it’s also a great way to save on utility bills in the long term, and ultimately boost the resale value of your house. While some renovations can be pricey, there are certain things you can do to put money away for these eco-updates. For instance, when buying a house, consider negotiating a home buyer rebate to potentially save thousands at closing. And when selling your house, try working with a low commission real estate agent (some of whom charge as little as 1% commission). 

Once you can afford some upgrades, consider things such as adding solar panels, dual-paned windows, insulation, Energy Star appliances, energy-efficient light bulbs, under-the-floor heaters, chemical-free cleaning supplies, adding compost to your garden, using drought-tolerant plants for landscaping, installing low-flow toilets, using water-based eco paints for the walls, and designing your house to get more natural light. 

1. Add Solar Panels

Solar panels enable homeowners to power their properties with renewable, clean energy. As a replacement for traditional energy, which depends on fossil fuels, solar panels help combat greenhouse gas emissions.

Whitestone Home Collection today announced its partnership with Side, the only real estate technology company that exclusively partners with high-performing agents, teams, and independent brokerages to transform them into market-leading boutique brands and businesses. The alliance will ensure that Whitestone Home Collection, a firm driven to create an experience of partnership for both clients and agents, is powered by the most advanced platform in the industry.

Whitestone Home Collection founder Lisa Mailhot began her industry career as a real estate investor who flipped a dozen properties throughout Southern California. Mailhot has become a top-producing agent, closing out 2021 with nearly $20M in sales and achieving almost $50M in total sales since becoming a licensed agent in 2018. Mailhot draws from her personal real estate experience and supreme resourcefulness to expertly handle every facet of her clients’ transactions. Whitestone Home Collection represents buyers, sellers, and investors throughout San Bernardino, Orange, and Riverside counties.

Partnering with Side will ensure Whitestone Home Collection remains on the cutting edge of the evolving real estate market while continuing to deliver premium services to its clients. Side will operate as the broker of record, working behind the scenes to support Whitestone Home Collection with a one-of-a-kind brokerage platform that includes proprietary technology, transaction management, branding and marketing services, public relations, legal support, lead generation, vendor management, infrastructure solutions, and more. Additionally, Whitestone Home Collection will join an exclusive group of Side partners, tapping into an expansive network from coast to coast.

“Side better prepares me to attract a robust, like-minded team of agents,” Mailhot said. “Furthermore, its incomparable platform, services, and support provide me with the resources and tools to help my company become the brand of choice within the community.”

About Whitestone Home Collection

Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question from Lucas in WV: Hi Brian, We got married as a young couple a little over four years ago with plans to buy our first home as soon as we could. Right now, we are very frustrated. Both of us work and between us, we earn a little more than $150k before taxes, our 401ks, and other withholdings. We both have car payments that total $600 per month and make credit card payments of $350 each month. We’ve been frugal these past four years and have saved a 5% down payment towards a home purchase of around $290,000.

We’ve been looking at houses for almost eight months. There hasn’t been much to look at although we’ve stretched into areas that would have a 45-minute work commute. We’ve had six offers rejected. Our realtor tells us to be patient because more houses are starting to come on the market, and we will probably be able to make a successful bid on a house that we want in the next several weeks or a couple of months. Now, we are watching mortgage rates climb almost every week. I talked to our mortgage broker yesterday and she said to expect to pay an interest rate of at least 6.1% if we find something to lock-in during the next couple of weeks. We think that interest rate is insane. We’re thinking about giving up altogether and using our savings for something else like a big vacation or refurnishing our rental house. Should we give up on buying a house now the interest rates have gotten so high?

Answer: Hello Lucas. I don’t think you should be thinking about giving up at all. I think you should keep everything in perspective. Yes, interest rates are going up. But that is why you are more likely to find the house that you want and have an offer accepted. It’s unfortunate for others that are being priced out of the market by higher interest rates but that is expected to stabilize prices and make more houses available to the people that can still qualify. More or less, you are trading a higher interest rate for rising house prices that have been skyrocketing for a couple of years. Interest rates might go a little higher but not at the rate houses have gone up. It should become a more stable market.

Based on the price range that you are looking to buy in, you should be looking at a mortgage payment of around $1,850 per month. That includes the principal, interest, property taxes, and insurance. Using that and a rough calculation of your finances, I looked at how affordable a house should be for you.

Moving to a New Home with Pets

When moving day arrives, no one wants to leave behind their favorite family member, right? But, if your pet has become clingy, standoffish, or maybe excited at the sight of the suitcase, then you know how sensitive they can be to the change of scenery.

Therefore, you can expect the same reaction when moving, especially if long-distance trips are involved. It can be challenging to figure out what to bring with you and what your furry companion actually needs.

That’s why we compiled a short guide that will help you pack and move like a pro.

Get familiar with laws and regulations

If you are traveling to a new state, city, or overseas, keep in mind that some regulations could be related to pet ownership. In fact, some requirements might affect or even postpone your move, so check policies on time.

For instance, if you own exotic animals like reptiles or domesticated livestock, you may need to fulfill additional requirements, paperwork, or quarantine periods. Keep in mind that some states might have breed restriction rules, so you won’t be able to bring your pet with you. Check valuable resources, city hall, and local laws before making any move. 

Green construction is a hot topic right now. Many people talk about it, and many businesses are trying to get in on the action. But what is green construction? And is it as great as everyone seems to think it is? In this blog post, Vikki Gerrard La Crosse will discuss the truth about green construction. We will look at both the pros and cons of going green, and we will help you decide if this is the right choice for your business.

What Is Green Construction?

Green construction is a term used to describe buildings designed and built in an environmentally responsible way. This means that they are constructed using sustainable materials, are energy-efficient, and have a small carbon footprint. Green construction is also often referred to as “sustainable construction” or “high-performance building.”

Why Is Green Construction Important?

There are many reasons why green construction is essential. First of all, it is crucial because it helps to protect the environment. Green buildings use less energy and water than traditional buildings, generating less waste. They also often use recycled materials, which means they have a more negligible impact on the environment.

In addition to being good for the planet, green buildings are also suitable for the people who live and work. Studies have shown that green buildings can improve indoor air quality and improve the overall health and well-being of the people who live and work in them. Green buildings have also been shown to increase productivity and improve cognitive function. So, as you can see, there are many good reasons to choose green construction for your next building project.

The Benefits of Green Construction

There are many benefits to green construction. As we mentioned before, green buildings are good for the environment. They also tend to be more energy-efficient than traditional buildings, which costs less to operate.

Just days after two of the industry’s biggest online brokers announced job cuts, the remote online notarization firm Notarize has gone and laid off workers too.

The announcement came directly from Notarize Chief Executive Pat Kinsel, who revealed on Twitter that the company had laid off 25% of its workforce. It is the second time the 7-year-old Boston firm has laid off staff, having previously done so in 2019 after it failed to secure funding.

Kinsel said in a statement that he was “exceptionally proud” of the team Notarize had built and stressed they are leaving through no fault of their own.

“They are truly the best of the best,” he said. “I will forever be grateful for the chance to work with them.”

Kinsel explained that the layoffs were his decision and that it was taken to put the company on a path to profitability with its current level of capital.

Rising inflation means that more homeowners are delaying home improvement and maintenance projects, but experts warn that it may not always be wise to do so.

A new survey by Hippo Insurance shows that 43% of homeowners have delayed planned home improvement and maintenance projects this year as a result of high inflation, which means they have less spending power than before.

The poll used to generate the study was conducted April 29 to May 1 among 1,915 U.S. adults, by Ipsos on behalf of Hippo.

At that time, inflation was already up by 8.6% from the year prior, the fastest increase since 1981. Because of inflation, households are seeing the price of everything from groceries and gas to rent and clothes increase by a considerable margin.

That has forced more homeowners to delay making repairs to their homes, but Hippo warned that doing so may not always be smart. Putting off some projects can be risky, because if it’s something important then not fixing it will result in even greater damage, and more expense, later on down the road.

Younger millionaires are feeling the brunt of higher inflation and have temporarily shelved plans to buy homes and cars.

CNBC’s Millionaire Survey shows that almost half of millennial millionaires have delayed buying cars, while 44% have put off the purchase of a home due to higher interest rates that have raised the cost of borrowing.

The survey, whose respondents have investable assets of $1 million or more, suggests that the effects of higher inflation are working their way up the wealth ladder to the highest echelons of society. Typically, inflation always impacts lower-income and middle class households the most, but younger, more affluent members of society are now also feeling the brunt when it comes to big ticket items.

“The millennial millionaires are clearly dealing with something they’ve never experienced,” said George Walper, president of Spectrem Group.

The Federal Reserve has raised interest rates to try and curb runaway inflation and that has two effects on affluent individuals. First, it increases the cost of luxuries such as dining out, plane tickets, hotels and some monthly subscriptions. The survey found that 39% of millennial millionaires have cut back on dining out due to the higher costs. Moreover, 36% have canceled vacations, and 22% are driving less than before.