California: Worst home markets for low-income people in the U.S.

And San Francisco isn’t helping one bit


According to the real estate site Trulia, rich San Franciscans are 3.6 times more likely to be able to buy a home than poor ones.

Why is this significant, we may wonder? After all, it goes without saying that rich people are more likely to be able to buy everything. That’s the fundamental definition of being wealthy in the first place.

But the “homeownership gap”—Trulia’s term for of how many more high-earning and low-earning residents own homes—is not uniform across American cities. And when it’s remarkably high in a city, that can mean problems for the regional economy.

Nationwide, rich Americans are about 2.3 times more likely to be homebuyers, down from 2.4 in 2012 but up from 1.9 35 years ago.

Note that “rich” in this case means the top one-third of earners, while “poor” means the bottom third, each bracket a fairly diverse spread of incomes in itself.

(The site used only households headed by people 55 years old or younger, since retirees without income might skew the data.)

Here’s the remarkable thing: Of 11 California cities singled out by Trulia writer Felipe Chacon—San Francisco, Oakland, San Jose, Sacramento, Fresno, Bakersfield, Riverside, Oxnard, San Diego, LA, and Anaheim—not a single one has an ownership gap equal to or less than the national average.


Of course, since buying in the city always costs more, there’s a separate income gap just for the largest metro areas: 2.8. Does any place in California beat that?

Yes: Riverside, with 2.4. That’s it. Bakersfield ties the city average. San Jose comes close at 2.9. But San Francisco and, perhaps surprisingly, Oakland, blow it away at 3.6 and 3.5 respectively.

The only California city with a less flattering divide between rich and poor: LA at 4.2, among the highest in the country.

Such metrics are always going to go up and down. But ideally you want as many low-income people as possible to be within striking distance of home ownership.

After all, as the New York Times Magazine observed in May:


“There is a reason so many Americans choose to develop their net worth through homeownership: It is a proven wealth builder and savings compeller. The average homeowner boasts a net worth ($195,400) that is 36 times that of the average renter ($5,400).”

Those figures are from 2013, but not likely to be any closer together today.

Forbes, writing in 2016 and noting that home ownership is at a 50-year low, points out that “homeowners after 7-to-10 years typically sell their starter home and trade up […] and in the process contribute to economic growth and job creation.”

But the fewer people who can snag a starter home to begin with, the more we all miss out on those future boons.

The median price of a U.S. home has gone from $169,000 in 2000 to $296,400 in 2015, according to the US Census. In San Francisco the value increased from $396,400 to $799,600.

After inflation, that’s a value of nearly $24,000, even with the bust years during and after the mortgage crisis factored in. The average SF home buyer in 2000, if they managed to hold onto the place, is now by default much wealthier, to an almost alarming degree.

While the average renter just has someone else’s roof over their heads.


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Households living in unaffordable and/or substandard conditions increases to 8.3 million


The number of families living in unaffordable conditions or in subsidized housing increased from 2013 to 2015, according to the newly released report from the U.S. Department of Housing and Urban Development.

In 2015, 8.3 million very low income unassisted families paid more than half of their monthly income in rent, lived in severely substandard housing or both, the report showed. This is up from 7.72 million families in 2013, but still down from the 8.48 million families in 2011.

The chart below shows the number of families living in these conditions since 2005:

Screen Shot 2017-08-14 at 4.27.44 PM

“Two years ago, our nation was still feeling the aftershocks of our housing recession with rents growing faster than many families’ incomes,” HUD Secretary Ben Carson said. “After years of trying to keep up with rising rents, it’s time we take a more holistic look at how government at every level, working with the private market and others, can ease the pressure being felt by too many un-assisted renters.”

“Today’s affordable rental housing crisis requires that we take a more business-like approach on how the public sector can reduce the regulatory barriers so the private markets can produce more housing for more families,” Carson said.

HUD explained President Donald Trump and his administration are currently seeking to improve affordable housing by decreasing the government’s role in the private mortgage market. While the administration continues to insist GSE reform is still a priority for the Trump administration, legislation has yet to come forward.

However, the National Association of Home Builders is crying for more immediate action for the growing unaffordability.

“Congress and the Trump administration need to make it a top priority to enact policies that will promote the construction of sorely needed rental apartments,” NAHB Chairman Granger MacDonald said. “The bipartisan Cantwell-Hatch bill pending in the Senate would expand the Low Income Housing Tax Credit, the nation’s most successful affordable housing program, and result in an additional 400,000 LIHTC units built over the next decade.”

“Swift congressional action to pass this bill would be an important step forward to meet the growing need to develop and preserve affordable housing in communities across America,” MacDonald said. “At the same time, we call on Congress and the administration to approve sufficient funding for the HOME program and important rental assistance programs, including housing choice vouchers and project-based rental assistance.”

HUD’s estimate is part of a long-term series of reports measuring the scale of critical housing problems facing very low-income un-assisted renters. It is based on data from the 2015 American Housing Survey conducted by the U.S. Census Bureau.

The number of households with worst case needs increased 66% since 2001, and historic increases occurred between 2007 and 2011. During this time, the combination of mortgage foreclosures, widespread unemployment and shrinking renter incomes dramatically expanded severe housing problems.

During the most recent report, rents continue to skyrocket, however rising income kept up with the growth. But for the poorest renters, this was not the case.

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Veterans United Home Loans ordered to pay $1.1 million for overcharging on VA loans


Mortgage Research Center, which does business as Veterans United Home Loans andVAMortgage Center, will pay more than $1.1 million to settle allegations that the lender overcharged on loans primarily insured by the Department of Veterans Affairs.

The New York Department of Financial Services announced the settlement this week, stating that a department investigation found that Veterans United did not refund surplus “lender credits” on at least 322 loans from January 2010 through June 2014.

According to the NYDFS, its investigation found that Veterans United did not refund borrowers who obtained a credit from the lender to cover estimated closing costs by agreeing to a higher interest rate, when the actual closing costs turned out to be lower than the estimated costs.

The NYDFS said that Veterans United did not adjust down the interest rate, reduce the principal balance of the loan, reduce the down payment, provide a cash refund, or pursue any other means of refunding the surplus to the borrower, as it should have in these cases.

In a statement, the company said that the settlement was the result of a small technical issue that the company remedied several years ago, adding that each borrower received loan terms that were previously communicated.

“We are dedicated to the highest level of customer service for Veterans and military spouses. We voluntarily agreed to this settlement to bring closure to an examination going as far back as 2011,” Veterans United Home Loans Director of Communications Lauren Karr said in a statement to HousingWire.
“The Department of Financial Services’ finding was related to a technical disclosure issue, which we recognized and modified – of our own initiative – more than three years ago,” Karr continued. “At all times each borrower received terms that matched or were better than what were presented on the good faith estimate, and we remain committed to continuous review and improvement of our processes to better serve our customers.”

As part of the settlement, Veterans United will pay approximately $604,000 in restitution to the affected New York borrowers, many of whom are military veterans, plus a $500,000 penalty to the state of New York.

According to the NYDFS, the amount of restitution is higher than the amount of surplus credit retained by the lender, which was determined to be $360,286.39.

As part of the settlement, Veterans United will pay full restitution to all known affected consumers via check, including 9% interest, and estimated restitution to consumers whose records have been lost, which is expected to equal approximately $604,000.

Veterans United also agreed to ensure that going forward, any surplus lender credit is immediately returned to the borrower via cash payment or reduction in the principal balance of the loan.

According to the NYDFS, Veterans United stopped retaining surplus lender credits for new loans it originated in New York in June 2014 after obtaining agreement from investors to principal reductions.

After June 2014, when a surplus lender credit occurred on a loan, Veterans United has in “all cases” reduced the principal balance of the loan in the amount of the surplus lender credit, or returned the surplus lender credit to the borrower via other means, the NYDFS said.

But, the NYDFS consent order notes that if Veterans United begins unnecessarily retaining lender credits again, the company could face additional sanctions.

“While we appreciate Veterans United’s willingness to make its customers whole, we emphasize that lenders must not take advantage of the moving parts of the loan origination process in order to obtain hidden profits at their customers’ expense,” NYDFS Superintendent Maria Vullo said.

“New York borrowers – and New York veterans in particular – must be confident that they will get what they pay for from their mortgage lenders,” Vullo added. “Mortgage lenders have a responsibility to make sure their borrowers receive the full benefit of their agreements with their lenders. DFS will continue to take aggressive action to protect consumers in their financial services needs.”

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Starwood-Invitation merger would create company with 4,600 local homes

A pending merger of two of the nation’s largest single-family rental home companies would result in a combined company owning more than 4,600 homes in the Sacramento region.

Starwood Waypoint Homes (NYSE: SFR) and Invitation Homes Inc. — the home-rental arm of investment giant Blackstone Group LP (NYSE: BX) — would own 4,653 specifically in the region, according to a spokesman for Waypoint.

A merger between rental home giants Starwood Waypoint and Invitation Homes would create a company with more than 4,600 homes in the Sacramento region. 

But while the combined company would easily be the largest single owner of such homes in the area, one local real estate expert said he saw no reason for concern.

“Both companies enjoy excellent reputations for being good stewards of their individual assets and investment portfolios,” said Pat Shea, president of residential real estate brokerage Lyon Real Estate, in an email. “You can expect solid ongoing management of the rental properties and a thoughtful and deliberate strategy if and when they start to liquidate properties.”

However, Greg Paquin, president at Folsom-based new home industry consultancy The Gregory Group, said those homes owned by one entity means they’re not on the market, which is short on housing supply.

And if the combined company decided to start selling those homes, he said, it would create a deficit of housing for people who choose or have to rent.

“Any way you look at it, we don’t have enough housing,” he said.

In their announcement of the merger last Thursday, the two companies gave little indication of future plans for those homes, which would number 82,000 nationwide. Invitation (NYSE: INVH) scooped up hundreds of Sacramento-area homes over the last decade, most of them in 2011 to 2013, with a concentration in lower-priced homes that lost value during the Great Recession.

Local real estate market observers believed Invitation would eventually sell those homes, and the company began doing so on an experimental basis in Sacramento about a year ago. But at the time, Invitation Homes CEO John Bartling said the company was also interested in continuing to buy in markets like Sacramento. He said Invitation owned about 1,650 homes in the region.

Paquin said he expected such investment groups would’ve gotten more active by now in selling. But it’s possible that the lack of supply in both new and resale homes, and the resulting upward pressure on rents, convinced them to hold off.

“They know that in Sacramento, there’s not going to be a flush of inventory that would disrupt their model,” he said. He also noted that rental growth in Sacramento has led the nation in recent months, but there’s also only so much growth the market will bear.

Shea said if the new company decides to sell assets, that shouldn’t be a problem, given a noted lack of housing inventory.

“At today’s persistently high level of buyer demand and new normal of exceptionally low inventory, even a steady stream of institutionally owned properties entering the market would have little effect on overall market metrics,” he said.

Article and image provided by: Sacramento Business Journal

It’s A Dog’s Life For Millennials: What’s Really Driving Their Desire To Buy A House


Is the millennial homebuying surge about finally “growing up” and giving up mom’s home-cooked meals and laundry services? Is it about finally having student loans paid off and feeling secure enough to take on the financial burden? Perhaps it’s really about getting ready to marry and have kids. Nope. Turns out none of these things could convince millennials to buy homes like their little furry friend could.

Yep, when it comes to millennial homeownership, these are the dog days.

“A third of millennial-aged Americans (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to purchase their first home, according to a new survey conducted online by Harris Poll on behalf of SunTrust Mortgage. “Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/upcoming marriage, 25 percent, or the birth/expected birth of a child, 19 percent.”

There were only two factors that rated higher than dog ownership: 66 percent cited a desire for more living space, and 36 percent were interested in building equity through homeownership. Presumably, they want to do so with a pup by their side.

“Millennials have strong bonds with their dogs, so it makes sense that their furry family members are driving home-buying decisions,” said Dorinda Smith, SunTrust Mortgage President and CEO of the survey. “For those with dogs, renting can be more expensive and a hassle; home ownership takes some of the stress off by providing a better living situation.”

The survey also showed how strongly homebuyers that have not yet jumped into the market feel about this issue. Among millennials who have never purchased a home, “42 percent say that their dog – or the desire to have one – is a key factor in their desire to buy a home in the future, suggesting dogs will also influence purchase decisions of potential first-time homebuyers,” they said.

Those statistics could have a real impact on multiple aspects of the real estate industry, from the way sellers stage their home; to the types of homes that builders and developers concentrate on in pockets where millennials may be looking; to pet-related homeowners’ association bylaws that may be in need of review and revision. Most attached homes don’t offer the kind of outdoor space millennials are looking for, but townhomes sometimes do, and they can be more affordable than single-family options; some communities have breed and size restrictions and also cap the number of dogs you can have – important considerations if you happen to be one of those dog-crazy millennial homebuyer types or are an agent who’s representing one.


Looking to sell your home and think you have a millennial target in your sights? Perhaps pointing out a good spot for a doggy door, if you don’t already have one, and adding a picture of you and your dog (fake it if you need to!), a dog bed, and a basket with dog toys on the fireplace hearth before showings will help.

Pets before kids

Homeownership isn’t the only thing millennials have delayed. Marriage and kids – if they’re in the cards at all for millennials – are waiting. Pet ownership is not.

Millennials are in age brackets that are commonly associated with the idea of “settling down,” said Pet Business. “But, rather than starting families with children, millennials are instead opting for buying or adopting pets to satisfy their caretaking needs.”

Pet ownership is up overall, led by millennials. The latest American Pet Products Association (APPA) National Pet Owners Survey shows that, “Sixty-eight percent of American households now own a pet, accounting for 84.6 million pet-owning households, up from 79.7 million pet-owning households in 2015,” said Pet Food Industry. “Gen Y/millennial pet ownership has officially surpassed baby boomer ownership by three percentage points to now account for 35 percent of all pet owners.”

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Mortgage Monday: Mortgage Rates Up Slightly From Long-Term Lows


Mortgage rates rose moderately today as weekend news headlines suggested some measure of de-escalation of nuclear tensions between the US and North Korea.  To be sure, the news wasn’t resoundingly conciliatory, but investors took solace in it nonetheless.

In general, when headlines suggest the world is less likely to end by Monday, investors will be slightly more risk tolerant.  One expression of risk tolerant trading in financial markets is to favor something like stocks as opposed to bonds.  If there is net selling pressure on bonds, it creates net upward pressure on interest rates.  This was the case this morning.

In the afternoon, comments from NY Fed President Dudley (one of the 3 most important voices at the Fed) kept pressure on rates, which seemed willing to recover in the late morning hours.  Dudley affirmed investors’ assumptions about upcoming Fed policy changes.  Because these changes are net-negative for bond markets, they put upward pressure on rates.  Because investors are quite confident in those assumptions, the upward pressure was very small in the bigger picture.  Still, it was enough to prevent most mortgage lenders from considering offering improved rate sheets before the end of the day.
Loan Originator Perspective

New day/week, same deal with bond markets today, as they were virtually unchanged from Friday’s levels.  It’s going to take something far more substantial than UN resolutions, threatening tweets, or tepid economic data to motivate rates here.  Not sure what that will be, or when, but for now, we’re on hold.  If you’re floating, have realistic expectations, best case scenario, your lender credit might improve slightly from day to day.  –Ted Rood, Senior Originator
Today’s Most Prevalent Rates

  • 30YR FIXED – 4.00%
  • FHA/VA – 3.75%
  • 15 YEAR FIXED – 3.375%
  • 5 YEAR ARMS –  2.75 – 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
  • Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April.  Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher.  Geopolitical risks would also need to avoid flaring up (more than they already have)
  • For the first time since the election, we’re in a rate environment where you wouldn’t be crazy not to lock at every little opportunity/improvement.  Until/unless it’s broken, the highest rates of early-2017 mark the ceiling, and we’re now waiting to see how much lower we can go from here.
  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders.  The rates generally assume little-to-no origination or discount except as noted when applicable.  Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.
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10 Best Housewarming Gifts For New Homebuyers


Yes, a plant is a considerate gift for a friend or family member who just moved into a new house. But you know what’s better? A whole lot of stuff. If you want to come up with a thoughtful, useful, and memorable gift for a new homebuyer, we’ve got some ideas.

1. Housecleaning services

Presumably, the house your loved ones are moving into is nice and clean when the moving truck arrives. But what is it going to look like after they’ve been emptying and breaking down boxes and walking in and out of every room multiple times? A certificate for housecleaning services a few days or a week out from their move-in will be a much-appreciated gift.

2. A home-cooked meal

In all the chaos of packing and moving and unpacking, it can be easy to forget to do “normal” daily things… like actually eat a meal. Show up with dinner and you’ll be a superstar. And don’t forget to bring serving pieces, disposable dishes and silverware, and a package of napkins since the kitchen boxes may not be unpacked yet.


3. Groceries

Or, show up with groceries and stock the fridge right after everything is moved in and the electricity is turned on. Getting to the market may be a priority for them, but with so many other conflicting priorities, it may have fallen to the bottom of a long list.

4. A meal kit delivery service

If your new homebuyer friends or family members are busy professionals and/or parents, they’ll undoubtedly appreciate being able to simplify dinner. Blue Apron, Plated, and Hello Fresh all offer their own version of “a freshly prepped meal-in-a-box,” as Forbes calls them, and many of them have introductory specials you can get in on.

5. Help with unpacking

There’s nothing like the gift of time when it feels like the moving-out and moving-in process is never-ending.

6. Find landscapers

Super organized people may have already taken care of finding a landscaper in their new neighborhood, but, for many others, this is one of those things that can fall through the cracks, and the next thing you know, the HOA is sending you notices about your overgrown lawn. You can be a great friend by helping to find a landscaping service in their new neighborhood and setting up an appointment for the lawn to be cut just before or after the move, as needed.

7. Offer babysitting services

Sometimes, just making sure the kids are taken care of and entertained is all someone needs to get through a stressful event like moving.

happy mother and child son play together indoor at home

8. A move-in care package

Hit Target and put together an “essentials” bag full of things you know will come in handy the first few days/nights in the house. You can personalize to your friends’ and family’s tastes and include things like: a bottle of wine and disposable glasses, high-protein snacks like nuts and bars, toilet paper, Ibuprofin, and light bulbs and batteries.

9. A cleaning basket

A package of Swiffer floor cleaners. A box of Mr. Clean Magic Erasers. A new broom. Dish and laundry detergent. A toilet plunger. A couple of bottles of cleaning spray and a few rolls of paper towels. They’re all the cleaning items your loved ones may not have thought to buy or bring with them (or may not know which box they’re in, if they did).

10. Gift cards

Not sure if you should go this route because it might feel impersonal? A gift card to Target, Home Depot, the local supermarket, or a hot new restaurant in their new neighborhood will always be appreciated, especially when those unexpected costs of moving to a new place start to catch up with your friends.

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