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Homeownership

Rising rents are choking off renters, creating mass vacancies

(HOMEOWNERSHIP) With rent prices skyrocketing, many renters find themselves between a rock and a hard place. Soon, many landlords will find themselves with a ridiculous amount of vacancies.

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No matter what the situation, rent will always be a daunting task. For those who struggle to make that overwhelming monthly payment, know that you are not alone. Rent is on the rise across the board, and now more than ever, people face challenges to make rent on time.

A new survey conducted by the website Apartment List revealed the consequences of rising rent costs. Apartment List utilized the data from their 8 million users and polled 40,000 renters with various yearly income levels to research the effects of rent. What they discovered for the most part is that rent struggles are real and universal.

Data showed that as income level increased so did the ability to pay rent on time. Results pulled from users who make an average of $30,000/year show that 27.5% of them failed to pay their rents in full during the last three months.

Just below 15% of users with an income level at $30-60,000/year find themselves in the same situation. Out of the users with an income over $60,000/year, 8.8% could not make rent in the last quarter.

The burden of rent is worse now than ever.

In 2013 a similar survey found an average of 7% of renters struggled to pay their rents. The fact is that housing and apartment costs have become inflated, even in areas where the average income has yet to increase.

Apartment List also comprised data based on eviction rates. Metropolitan areas like Phoenix, Arizona and Atlanta, Georgia have a higher share of renters that reported a past eviction. Memphis, Tennessee was at the top of the list with a 6.1% eviction rate.

Of the nine areas reported, major cities in California made up almost half of the list. This included San Diego, San Francisco, Los Angeles and San Jose.

Additional information pulled from respondents showed that the percentage of rent-burdened households is decreasing, but they are still unusually high. Rent-burdened households refer to those where 30% or more of the income is being spent on debt.

Rent is a widespread problem that is not diminishing. In August, data from a survey published by Freddie Mac showed that almost half of renters had trouble finding affordable housing near their work.

Natalie is a Staff Writer at The Real Daily and co-founded an Austin creative magazine called Almost Real Things. When she is not writing, she spends her time making art, teaching painting classes and confusing people. In addition to pursuing a writing career, Natalie plans on getting her MFA to become a Professor of Fine Art.

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Homeownership

Loftium trades a fat down payment for a spare bedroom made available for Airbnb

(REAL ESTATE NEWS) Loftium will help you out with a down payment on your first home if you turn your spare bedroom into an AirBnB and millennials seem open minded about this option.

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Homeownership may not be such a distant dream for renters hoping to buy one day. Seattle-based startup Loftium has devised an alternative approach to obtaining a down payment on a house: Airbnb a bedroom in the house for up to three years.

For buyers who have been pre-approved by a lender, Loftium will pay up to $50,000 on a down payment on a house.

The home must be the primary residence of the homeowner, so Loftium is not available for purchase as an investment property, per their eligibility FAQ.

In exchange for the dough, Loftium requires home buyers to sign a service contract agreeing to list a spare room on airbnb.com for 12-36 months, depending on the loan amount and rental price, and split the profits 70/30 with Loftium. The idea is to generate a passive income stream for the homeowner to help with monthly payments on the home.

While Loftium does take a cut of the Airbnb profits, they are in no way a co-owner of the home. If you purchased a home through them, it’s yours and yours alone – “like it should be,” the website declares.

There are a couple of caveats, and I mean, if someone is handing you $50,000 to help you buy a house, it would make sense to look into the conditions of ownership.

For instance, the Loftium home owner must be a good Airbnb host. So no sabotaging the listing by making the space sound like Shawshank, no making guests feel awkward or unwelcome, and listed rooms must be furnished with at minimum: a queen-sized bed (or larger) with mattress and frame, a chair, a desk or bedside table, and a lamp.

All other stipulations would be the same for any other Airbnb host.

This may sound a little insane, maybe even a little desperate to anyone who has successfully managed a down payment on a house to share the space with strangers for an agreed upon time, but this is exactly the boost many renters need to overcome the down payment hurdle. And Millennials are already primed for this sharing economy and are open minded to the arrangement.

Loftium co-founder Yifan Zhang believes that within the next five to ten years, prospective home buyers will have three standard options for coming up with a down payment: save, ask the parents to help out, or sign up for Loftium. Based on early interest, likely from those signing up for quotes and votes for their city (more on that), Zhang expects business to scale quickly.

So far, Loftium is only available in Seattle as a beta test for the service. There have already been successful homeowners in this brand new program, one of which had the clever idea of finding a place with a mother-in-law quarters to rent out as her listed space/bedroom, and Loftium is currently offering 50 down payments initially this fall in the Seattle area.

The plan is to eventually expand into Chicago and Washington D.C., but interested renters have the option of submitting votes for their city. As of publication, Austin is currently sitting around 4,000+ votes.

There will be some obstacles for particular cities that will prevent Loftium from setting up shop, such as city legislation that prevents people from renting out rooms in their homes, but I suspect that with the rise in popularity of alternative approaches to homeownership coupled with the demand of travelers seeking to rent out a shared space, this could absolutely change over time.

The service sounds almost too good to be true, and it will be very interesting to hear the success, or even horror stories, of how these contracts will play out, but I believe others will jump on board to offer something similar.

Take heed millennials, homeownership is within reach!

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Homeownership

How many homeowners are impacted by proposed MID cap?

(REAL ESTATE NEWS) The mortgage interest deduction (MID) cap inserted in the proposed tax bill could impact more homeowners than originally thought.

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As a part of the recent tax reform legislation release, the House proposed reducing the mortgage cap at which one can no longer deduct their interest payments from their taxable income by a factor of 50 percent. But how many people would this proposal actually affect? As it turns out, quite a few.

The current mortgage interest deduction (MID) sits at a cool million dollars, meaning that anyone who currently has a mortgage of up to $1,000,000 can deduct the amount of paid interest from their taxable income. These proposed changes would lower that number to $500,000 — still a respectable figure, some would argue.

That said, researchers at the National Association of Realtors (NAR) crunched the numbers, and the results are surprising: somewhere around 15 percent of Americans own homes with mortgages totaling at least $500,000 — and those numbers are “conservative” by NAR’s estimates.

Additionally, projections show fairly aggressive growth in the number of homeowners with $500,000-plus mortgages in as few as 10 years.

Once one adjusts for future inflation, the number of people who might be affected by this bill within the next ten years certainly isn’t negligible, with some states seeing almost twice the number of $500,000 and up mortgages within that time frame.

The bill wouldn’t affect people who now own houses with mortgages that are in excess of the proposed MID cap, but the current rate at which houses are rising in value means that the percentage of people affected could still be quite high, and anyone hoping to remodel or sell during this time will most likely have to contend with the revised MID cap if the legislature does pass.

Ultimately, NAR says a bill lowering the amount of deductions from taxable income will lead to a few things. First and foremost, homeowners whose mortgages meet or exceed the proposed MID cap may be reluctant to sell, resulting in scarcity and tampering with the market.

Equity value could potentially drop, and home values in general may be susceptible to dropping values as a result of the tax reform as it is currently proposed.

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Homeownership

Feds say Northwest Trustee knew they illegally foreclosed on active military, veterans

(REAL ESTATE NEWS) The Justice Department alleges that for the past six years, Northwest Trustee opted to knowingly foreclose illegally on active and former military servicemembers.

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Obviously foreclosures are heartbreaking and tragic, but what if you had your home taken away from you while you were overseas serving your country? Should be impossible, right?

In exchange for their service, the U.S. federal government protects active duty military from foreclosure under the Servicemembers Civil Relief Act (SCRA). The Act ensures that servicemembers can’t have their houses repossessed while they are actively serving in the military.

According to the U.S. Justice Department, the largest foreclosure trustee in the Pacific Northwest has knowingly violated this law on many occasions over the past six years.

Recently, the Justice Department filed suit in the U.S. District court in Seattle. The case will potentially provide financial compensation for 28 military servicemembers or veterans whose houses were repossessed while they were serving.

The case centers on Jacob McGreevey, a Marine who has served four tours of duty in the Middle East. His Vancouver home was repossessed between his third and fourth tour by Northwest Trustee Services of Bellevue, Washington. It was only several years later that McGreevey found out that he should have been protected by the SCRA.

The Justice Department says that Northwest Trustees did reference a database to see if McGreevey was protected by the Act, and then chose to foreclose on him regardless.

Originally the court had sided with the lender, saying that McGreevey had waited too long to file suit. After McGreevey and his lawyer wrote a complaint, the U.S. Justice Department took up the case. They argue that there is no statute of limitations on the Servicemembers Civil Relief Act. This contradicts state laws.

Legislation may be necessary to reconcile the federal and state laws.

Annette Hayes, U.S. Attorney in the western district of Washington says that their “investigation revealed that Northwest Trustee Services repeatedly failed to comply with laws that are meant to ensure our servicemembers do not have to fight a two-front war – one on behalf of all of us, and the other against illegal foreclosures.”

Sean Riddell, McGreevey’s lawyer and former commanding officer, condemned Northwest Trustee in even harsher terms.

“I want Northwest Trustee and PHH put out of business, their buildings burned down and the ground salted so that nothing ever grows for what they did to veterans,” said Riddell.

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