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Thursday, August 17, 2023

A “Livability” study attempted to rank states based on how happy they’ll make residents

 By Kerry Smith

Florida was No. 6 – but No. 1 in some categories.

ORLANDO, Fla. – Around 8.6% of Americans moved last year, a slight uptick from the year before. Some movers wonder if they should stay put or move to another state. Others know they want to move to another state, but which one?

To help answer that question, a personal-finance website, WalletHub, released a comprehensive report on 2023’s Best States to Live In.

WalletHub compared the 50 U.S. states across 51 key indicators of livability, which is subjective by definition. But they also weighed each variable for its worth, which can change from person-to-person.

As a result, the “best state to live in” may not be true for any specific person – but WalletHub believes it's true for the average person. And for that average person, Florida ranks No. 6 on WalletHub’s list of best-to-live-in states.

Florida “Living Conditions” examples (1=Best, 25=Average)

  • No. 9 – Income Growth
  • No. 17 – Percent of Adults in Fair or Poor Health
  • No. 27 – Average Weekly Work Hours
  • No. 1 – Restaurants per Capita
  • No. 1 – Unemployment Rate

What should state-to-state movers consider?

Jesse Saginor, Ph.D., AICP, chair and professor, Department of Urban and Regional Planning at Florida Atlantic University, says they should start with a market analysis.

“Ultimately, this depends on the person and where that person is in life,” Saginor says. “A young person might want an area with great job prospects related to that person’s industry of interest and/or other activities that person enjoys. So, beyond work, if that person enjoys the outdoors, then the combination of job and outdoor amenities might be the two most important things on that person’s list. If that person has young children, then schools become another part of the equation.”

While WalletHub’s list might work for the average person, “Each step in a personal market analysis to determine whether an area is right for that person comes with additional dimensions,” Saginor adds. “In terms of pondering steps, where does that person want to be now, in five years, in ten years? Is there a place that enables them to have that personal growth without moving?”

“Use online resources to research basics like cost-of-living and housing costs in particular, employment opportunities, quality and cost of education and health care, state and local tax policies, climate, and given the recent political polarization in this country, where does the area lie in terms of liberal vs. conservative politics,” adds Alan Weinstein, Professor Emeritus, Cleveland State University. “Plan to visit the area for at least a few days and longer if possible. If you are able to work remotely and a longer stay is possible, that is even better.”

The most important financial factors when deciding where to live?

 “I tend to focus on the cost of living relative to the employment opportunities available in the area,” says H. Shelton Weeks, professor and director of the Lucas Institute for Real Estate Development & Finance, Florida Gulf Coast University.

“In addition to cost-of-living calculators that allow individuals to compare locations to see how much they will need to earn to have a comparable standard of living, there are other tools available that will help them understand what to expect in terms of cost for rental housing and whether market conditions indicate that renting or buying makes more sense. Combining these tools with solid budgeting can help people make better decisions with respect to potential moves.”

What can state policymakers do to attract and retain new residents?

 “I think this starts with creating an environment that is business-friendly with a high degree of economic freedom,” says Weeks. “One of the key lessons that can be learned from the experience of states that have struggled with attracting and retaining residents is that less government intervention in markets is a good thing.”

“Adopt and maintain policies that: (1) attract new and keep existing employers that offer good-paying jobs with benefits; (2) adequately fund public education from pre-school through post-graduate; (3) adequately maintain and build as needed transportation infrastructure, including public transit where appropriate; and (4) fund governmental services as adequately as possible while holding tax increases as low as possible,” says Weinstein.

Factors WalletHub weighed to create its list of most livable states

Affordability – total points: 20

  • Housing affordability: full weight (~2.22 points)
  • Median annual property taxes: double weight (~4.44 points)
  • Cost of living: quadruple weight (~8.89 points)
  • Median annual household income: full weight (~2.22 points)
  • Homeownership rate: full weight (~2.22 points)

Economy – total points: 20

  • Unemployment rate: full weight (~1.05 points)
  • Underemployment rate: full weight (~1.05 points)
  • Sharecare well-being “economic security”: full weight (~1.05 points)
  • Share of population living in poverty: full weight (~1.05 points)
  • Median debt per median earnings: triple weight (~3.16 points)
  • Population growth: full weight (~1.05 points)
  • Income growth: full weight (~1.05 points)
  • Building-permit growth: full weight (~1.05 points)
  • Wealth gap: full weight (~1.05 points)
  • General tax-friendliness: full weight (~1.05 points)
  • Entrepreneurial activity: double weight (~2.11 points)
  • Foreclosure rate: double weight (~2.11 points)
  • Bankruptcy rate: full weight (~1.05 points)
  • Food insecurity: full weight (~1.05 points)

Education & health – total points: 20

  • Quality of public school system: full weight (~1.74 points)
  • High school graduation rate: double weight (~3.48 points)
  • Share of population aged 25 & older with a high school diploma or higher: full weight (~1.74 points)
  • Share of insured population: full weight (~1.74 points)
  • Quality of public hospital system: full weight (~1.74 points)
  • Premature-death rate: half weight (~0.87 points)
  • Poor or fair health: half weight (~0.87 points)
  • Life expectancy: full weight (~1.74 points)
  • Share of live births with low birthweight: half weight (~0.87 points)
  • Share of obese adults: double weight (~3.48 points)
  • Share of physically inactive adults: full weight (~1.74 points)

Quality of life – total points: 20

  • Average hours worked per week: full weight (~0.93 points)
  • Average commute time (in minutes): full weight (~0.93 points)
  • Miles of trails for bicycling & walking per total state land area: full weight (~0.93 points)
  • “bicycle friendly state” ranking (proxy for bike score): full weight (~0.93 points)
  • Infrastructure & funding – 20%
  • Education & encouragement – 15%
  • Legislation & enforcement – 15%
  • Policies & programs – 20%
  • Evaluation & planning – 20%
  • Discretionary scoring – 10%
  • Access to public transportation: double weight (~1.86 points)
  • Quality of roads: full weight (~0.93 points)
  • Traffic congestion: double weight (~1.86 points)
  • Restaurants per capita: double weight (~1.86 points)
  • Bars per capit*: full weight (~0.93 points)
  • Museums per capita: full weight (~0.93 points)
  • Performing arts centers per capita*: full weight (~0.93 points)
  • Movie theaters per capita: half weight (~0.47 points)
  • Fitness centers per capita: double weight (~1.86 points)
  • Accessibility of beaches: full weight (~0.93 points)
  • Weather: triple weight (~2.79 points)
  • Air quality: full weight (~0.93 points)

Safety – total points: 20

  • Violent-crime rate: full weight (~3.64 points)
  • Property-crime rate: double weight (~7.27 points)
  • Traffic-related fatalities per capita: half weight (~1.82 points)
  • Total law-enforcement employees per capita: double weight (~7.27 points)

© 2023 Florida Realtors®

Wednesday, August 16, 2023

Intro to Mortgage Insurance - The 80/20 Rule

 By Christopher Carter

Mortgages revolve around a 20% down payment, and buyers who put less down use mortgage insurance to do so – yet many don’t understand what that means.

KEY BISCAYNE, Fla. – Mortgage Insurance is one of the most misunderstood topics in real estate.

When buyers use financing and their down payment is less than 20% of the purchase price (or appraised value), lenders require mortgage insurance. Lenders’ tracking studies indicate that when buyers start out with less than 20% initial equity in the property, there is a higher risk of the loan going into default, then into foreclosure. Mortgage Insurance (MI) offsets the risk of lender financial loss.

Real estate’s 80/20 Rule refers to the Loan-To-Value (LTV) ratio, a primary element of all lenders’ risk management. A mortgage loan’s initial LTV ratio represents the relationship between the buyer’s down payment and the property’s value (20% down = 80% LTV).

Here are 3 important points to keep in mind while reading today’s article:

  • Mortgage Insurance protects the lender from loss, though the borrower pays the insurance premiums. MI premiums do not go toward principal or interest, they are separate additional charges. Initial LTV (and the need for MI) is determined by the amount of the buyer/borrower’s down payment.
  • With less than a 20% down payment, buyers pay MI premiums for coverage that reimburses the lender for its loss if the borrower defaults on the terms of the loan. MI is an additional charge to buyers in conventional as well as government-insured financing programs. Depending on the loan program and MI requirements, premiums might be paid upfront, monthly, or both.
  • On conventional (not government-insured) mortgages, those premiums are paid to third-party specialty insurance companies. With government-insured mortgages (FHA, VA, USDA), MI premiums are paid to the insuring government agency.

(Important: The Mortgage Insurance we are discussing today is NOT to be confused with Mortgage Life Insurance, which pays off the remaining mortgage balance in the event of the borrower’s death. They are very different insurance policies used for very different purposes.)

Most people have seen the acronym “PMI,” which stands for Private Mortgage Insurance. PMI is issued by specialty insurance companies for conventional loans in which the buyer/borrower has put down less than 20%. Annual premiums for PMI depend on initial LTV (down payment amount), credit score, property type, and other transaction details. PMI can be structured as a one-time payment at closing (upfront), monthly payments added to scheduled principal and interest payments, or a split plan combining both upfront and monthly.

Mortgage insurance premium structure overview

Note: Upfront MI payments on government-insured loans can be wrapped into the loan amount. Conventional one-time upfront MI must be paid at closing.

Lenders might pay for a borrower’s PMI in exchange for charging a higher interest rate for the life of the loan. Ask your licensed Loan Originator about Lender-Paid Mortgage Insurance (LPMI) and other lower down payment programs.

Under the U.S. Homeowners Protection Act (HPA) of 1999, borrowers may request, in writing, that conventional PMI be removed (and ongoing PMI payments ended) when the loan principal balance is paid down to 80% (there’s that 80/20 Rule again) of the property’s appraised value when purchased. Also under the HPA, lenders must remove PMI when LTV reaches 78% of the property’s original value, as long as payment history has been satisfactory.

Important: This removal procedure ONLY applies to conventional mortgages, not government-insured financing.

The Federal Housing Administration (FHA) is an agency of the US Department of Housing and Urban Development (HUD), a Cabinet-level department of the Federal government. To help make mortgage funding available to a broader range of buyers, the FHA insures independent lenders against buyer/borrower default.

FHA qualifying standards for borrowers are more lenient than most lenders’ conventional loan programs. These standards help buyers with lower credit scores and lower down payments qualify for mortgage financing on primary residences. Lenders are more willing to make loans using these broader qualifying standards when they are protected by FHA insurance.

FHA-insured financing includes both upfront and monthly Mortgage Insurance Premiums (MIP). The upfront portion can be either paid at closing or wrapped into the total loan amount, and is required on all FHA-insured mortgage financing. There is also an annual MI premium that is paid with the borrower’s monthly PITI (Principal, Interest, Taxes, Insurance) payment.

For FHA-insured mortgages, the annual MIP stays in place for 11 years when the initial LTV is less than 90%. This means that buyers putting down more than 10% will be paying monthly MI for the next 11 years unless they refinance or move within that time.

When buyers use a less than 10% down payment, FHA MIP stays in place for the life of the loan. In this case, buyers could be paying monthly MI premiums for up to 30 years, or until they refinance or sell the property.

© Copyright 2023, Key Biscayne, FL. This report was first published in The Florida Real Estate Blog by Chris Carter, a real estate broker associate and former Key Biscayne resident.

Friday, August 11, 2023

60% of metro markets (128 out of 221) registered home price gains in the second quarter of 2023

 By Kerry Smith

Overall, though, U.S. home prices dropped 2.4% year-to-year because total declines outweighed increases. Still, 5% of markets saw double-digit price increases.

WASHINGTON – Almost 60% of metro markets (128 out of 221) registered home price gains in the second quarter of 2023 as 30-year fixed mortgage rates oscillated between 6.28% and 6.71%, according to the National Association of Realtors®’ (NAR) second quarter report.

Some areas – 5% of the 221 – continued to see double-digit, year-to-year price increases, though the percentage dropped from 7% in 1Q 2023.

“Home sales were down due to higher mortgage rates and limited inventory,” says NAR Chief Economist Lawrence Yun. “Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and income (levels) are increasing.”

Compared to a year ago, the national median single-family existing-home price dipped 2.4% to $402,600. In 2Q 2022, the national median price had decreased 0.2%.

“Just like the weather, large local market variations exist despite the minor change in the national home price,” Yun adds.

Among the major U.S. regions, the South – the area that includes Florida – saw the largest share of single-family existing-home sales (46%) in the second quarter, with year-over-year price depreciation of 2.2%. 

Prices rose 3.2% in the Northeast and 1.4% in the Midwest but retreated 5.8% in the West, with noteworthy declines in Austin (down 19.1%), San Francisco (11.3%), Salt Lake City (9.6%) and Las Vegas (7.4%).

“Interestingly, price declines occurred in some of the fastest job-creating markets,” Yun says. “Prices in these areas are trying to land on better fundamentals after several years of skyrocketing increases. In fact, the number of homes receiving multiple offers, alongside continuing job and wage gains, signal price slides may already be a thing of the past.”

The top 10 metro areas with the largest year-over-year price increases all recorded gains of at least 10.4%, with six of those markets in the Midwest. Those include Fond du Lac, Wis. (up 25.3%); New Bern, N.C. (19.7%); Duluth, Minn.-Wis. (14.6%); Davenport-Moline-Rock Island, Iowa-Ill. (12.6%); Allentown-Bethlehem-Easton, Pa.-N.J. (11.7%); Kingsport-Bristol-Bristol, Tenn.-Va. (11.5%); Peoria, Ill. (11.5%); Green Bay, Wis. (10.9%); Trenton, N.J. (10.5%); and Cape Girardeau, Mo.-Ill. (10.4%).

Seven of the top 10 most expensive markets in the U.S. were in California. Overall, those markets are San Jose-Sunnyvale-Santa Clara, Calif. ($1,800,000; down 5.3%); San Francisco-Oakland-Hayward, Calif. ($1,335,000; down 11.3%); Anaheim-Santa Ana-Irvine, Calif. ($1,250,000; down 3.8%); Urban Honolulu, Hawaii ($1,060,700; down 7.4%); San Diego-Carlsbad, Calif. ($942,400; down 2.4%); Salinas, Calif. ($915,600; up 0.6%); Oxnard-Thousand Oaks-Ventura, Calif. ($904,900; down 2.7%); San Luis Obispo-Paso Robles, Calif. ($890,900; down 3.2%); Boulder, Colo. ($871,200; down 6.7%); and Naples-Immokalee-Marco Island, Fla. ($850,000; unchanged).

2Q home sales report takeaways

  • About two in five markets (41%; 90 of 221) saw home price declines, up from 31% in the first quarter.
  • Housing affordability worsened quarter-to-quarter due to rising home prices and mortgage rates. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,051, up 10% from the first quarter ($1,864) and 11.6% – or $214 – from one year earlier.
  • Families typically spent 27% of their income on mortgage payments, up from 24.5% in the previous quarter and 25.3% one year ago.
  • Lack of inventory and affordability continued to impact first-time buyers during the second quarter. For a typical starter home valued at $342,200 with a 10% down payment loan, the monthly mortgage payment grew to $2,012, up 9.9% from the previous quarter ($1,830). That was an increase of more than $200, or 11.3%, from one year ago ($1,807).

    First-time buyers typically spent 40.7% of their family income on mortgage payments, up from 37.1% in the prior quarter.
  • A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 40.3% of markets, up from 33% in the prior quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 6.3% of markets, down from 10% in the previous quarter.

Data tables for MSA home prices (single-family and condo) are posted on NAR’s website. If insufficient data is reported for an MSA in a particular quarter, it is listed as N/A.

© 2023 Florida Realtors®

Thursday, August 10, 2023

More New Homes? Builders Face Big Labor Shortage


By Elena Cox

New construction could help create the 4.3M homes the U.S. needs, but there aren’t enough people to build them. It’s a lingering aftermath of the Great Recession.

WASHINGTON – The U.S. is short about 4.3 million homes, according to recent estimates from Zillow – a key reason buying a home has gotten more expensive. But the simplest solution, to build more houses, has a flaw – there’s no one to build them.

“In the wake of the Great Recession, the residential construction industry lost 1.5 million jobs. Tens of thousands of homebuilders went out of business. The workforce really fell,” explained Robert Dietz, chief economist at the National Association of Home Builders. “Building that kind of infrastructure and human capital takes time. Years later, we’re still clawing our way back.”

With fewer workers, building homes is taking longer than ever. In 2022, it took an average of 8.3 months to build a single-family home, the longest since the Census Bureau began collecting data in 1971. And as the saying goes: Time is money. So even with stagnating wages, it costs more to build a house – costs that ultimately are passed on to the buyer.

Even as the housing market cools and fewer people are buying homes, the sector needs to add 723,000 jobs per year to keep up with demand, according to an analysis from the National Association of Home Builders. In the first half of 2023, homebuilders added 2,000 new workers per month on average.

In other words, builders must bring on 30 times the number of new hires than the current pace. Builders are trying; So far this year, there have been 350,000 construction jobs available every month on average, according to the Bureau of Labor Statistic’s Job Openings and Labor Turnover Survey.

Stacker looked at the state of employment in the home construction industry and reasons for the shortage using data from the Labor Department, the National Association of Home Builders, the Department of Education, and other sources.

Aging out

The average age of construction workers has increased as fewer young people enter the workforce. As those workers retire, there aren’t enough people coming up behind them to take their spots. In 2022, nearly a quarter of construction workers were over 55.

This trend is largely due to the growing stigma of manual labor and the emphasis on college education for success.

“Even an aged plumber, someone 60 years old, where his or her dad was a plumber, has become somewhat brainwashed into thinking their child needs a degree,” said Ed Brady, president and CEO of the Home Builders Institute, an educational nonprofit organization. “We’re going to run out of people.”

States with the oldest construction workers

In 2021, the median age of someone working in the construction industry was 42, one year older than the overall workforce. In states such as Maine and Vermont, that number was closer to 47.

Part of this is because homebuilders have been focusing on building in the South over the past decade, so that’s where the jobs are. But the other reason is fewer internationally born workers, who also tend to skew younger, are moving to these states.

In large states such as New York and California, immigrants make up more than one-third of the construction workforce, compared to just 1% in Maine and New Hampshire.

Slowed immigration takes toll on industry

The construction industry has long relied on immigrants to fill positions. Hispanic workers have recorded the largest job gains over the past two decades as the number of people from the Americas entering the U.S. has grown. But that trend has slowed as the COVID-19 pandemic and unfriendly immigration policies decelerated Hispanic people’s relocation to the United States.

“Our industry is 30% immigrant, so with a lower pool of immigrants coming in, it’s hard to fill those gaps,” Brady said.

Career and technical education loses favor

Decreasing immigration is only part of the reason for the labor shortage, though, and a more recent one.

Over the last few decades, people have viewed manual labor as an unsuccessful career path. That, along with the proliferation of computers, caused schools to switch their curricular focus to STEM courses instead of career-focused classes like woodshop.

At the same time, public high schools began to measure success based on the share of students who graduated. By the early 2000s, the No Child Left Behind Act required schools to report and set target high school graduation rates or face sanctions. The government used those metrics to determine how much federal funding schools would receive.

These changes put more young people on a college-bound track, as they took 0.5 fewer credits of career-oriented courses and 1.8 more core academic course credits between 1992 and 2013.

Building the future

Looking ahead, both Brady and Dietz agree the construction worker shortage is a problem that won’t resolve itself.

Both private companies and the government must actively recruit and train young people to enter the workforce, which takes time and money.

That includes reaching out to women and Black Americans, who have long been underrepresented in the industry, and providing on-the-job training or apprenticeship programs. Getting more people interested in construction trades is a significant piece of the puzzle in solving the housing affordability crisis. And at the end of the day, builders need people to be able to buy their products.

If not, Brady said, “We’re going to continue to have inventory shortages and price increases that are taking buyers, especially first-time buyers, out of the market.”

© Copyright 2023 Mexico Ledger. All rights reserved. Story editing by Ashleigh Graf. Copy editing by Kristen Wegrzyn.

Thursday, August 3, 2023

More than a quarter of U.S. families spend more than 30% of their monthly income on housing

 By Brett Rowland

House-poor families spend more than 30% of their monthly income on housing. Hialeah, Florida, is No. 1 in the nation, with 59.3% of households considered house poor.

MIAMI – Nationwide, 27.4% of homeowners are considered “house poor,” meaning they spend more than 30% of their income on housing costs. However, in some U.S. cities, far more Americans are living beyond their means, according to research from the U.S. Chamber of Commerce.

In Hialeah, Florida, 59.3% of homeowners are spending more than 30% of their income on housing costs. While Hialeah has the highest percentage of homeowners spending more than 30% of their income on housing costs, it was not alone.

Among the top five highest are:

  • Los Angeles (48.7%)
  • New York City (45.3%)
  • Miami (44.6%)
  • Hollywood, Florida (44.3%)

Of the top 10 cities, four are in California and four are in Florida. The other two were New York City and Honolulu, according to the report from the U.S. Chamber of Commerce.

Nearly 3 in 10, or 27.4% of U.S. homeowners with a mortgage, are considered to be cost-burdened with housing expenses, according to the U.S. Census Bureau. Overall, 21% of cost-burdened homeowners have a household income of less than $75,000, according to the report.

In Los Angeles, where 48.7% of homeowners are considered “house poor,” that’s about 179,821 households in a city where the median household income was $122,032 and the median yearly household costs totaled $35,664.

The “30% rule” is a common standard for budgeting, which advises homeowners to avoid paying more than 30% of their income on housing expenses. However, the U.S. Chamber of Commerce notes that for many homeowners, it’s not an easy rule to follow.

“These cost-burdened homeowners have found themselves facing budget-busting housing expenses, such as monthly mortgage payments, property taxes, homeowners insurance and utilities,” according to the report.

At the other end of the spectrum are homeowners who pay less than 20% of their income toward housing. Huntsville, Alabama, tops of the list of cities with the most “budget-minded” homeowners, according to the report. In Huntsville, 65.1% of homeowners spend less than 20% of their income on housing.

Other budget-minded cities include Cary, North Carolina (59.8%); Pittsburgh, Pennsylvania (59.3%); Raleigh, North Carolina (58%); and Fort Wayne, Indiana (57.5%).

© Copyright 2023, The Courier-Times, all rights reserved.