Photos and listing data courtesy of StreetEasy.com
The process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents
Poor hipsters. In the process of turning Brooklyn into a hive of artisanal mustache boutiques and fixie-bike shops, they may have priced themselves out of the neighborhood. According to a recent study by RealtyTrac, which analyzed the affordability of 475 counties through October 2014, Kings County—also known as Brooklyn—was the least affordable in the nation.
The study gauges affordability by measuring the percentage of the locality’s median monthly household income that is required to make monthly payments on a median-priced home in the area.
When RealtyTrac ran the nation-wide numbers in October, payments on a median-priced home required 26% of the average household income. In Brooklyn, by contrast, where the median home costs $615,000 and the median household brings in only $46,960, home payments take up about 98% of a regular family’s wages. That’s less affordable than Manhattan — and even than San Francisco, where half of all homes sell for $1 million or more.
In fact, the typical homebuyer has been priced out of the borough’s real estate for longer than you might have thought. RealtyTrac’s report also measures affordability between January 2000 and October 2014. Over that 14-year period, home payments on a median-priced house still would have cost the typical family 95% of their income. Earlier this year, RealtyTrac found Brooklyn was also one of the most expensive places for young people looking to rent.
Why has BKLN gotten so expensive? The answer is probably a mixture of stagnant wages, investor interest, and an influx of more affluent residents. “Incomes have not grown nearly as fast as home prices” in the regions where affordability declined, said Daren Blomquist, vice president at RealtyTrac, in an interview with Bloomberg. “That disconnected home-price growth has been driven by investors and other cash buyers who aren’t as constrained by income.”
An elderly woman is battling a bank that's trying to foreclosure on her.
A 103-year-old Texas woman is fighting to keep her home after she let her insurance lapse, a CBS affiliate in the Dallas/Fort Worth area reports. Myrtle Lewis told CBS she accidentally let her insurance expire and renewed it after noticing the mistake, but the gap in coverage apparently violated the loan agreement for her reverse mortgage. Now, OneWest Bank, which holds the loan, is attempting to foreclose on Lewis.
It’s unclear if it was mortgage or homeowner’s insurance, and when contacted by Credit.com, a public relations representative for OneWest said the bank declined to comment on Lewis’s case. One thing is clear: Lewis is worried about losing her home. In the interview with CBS, she said it “would break my heart.”
Lewis took out a reverse mortgage on the home in 2003, when she was 92. Reverse mortgages are a type of loan for homeowners ages 62 and older, allowing senior citizens to use the equity they’ve built in their properties without making monthly payments. Repayment is deferred until the borrower dies, moves or sells the home, but the homeowner is still responsible for paying taxes, insurance and any other fees associated with maintaining their home. A 2012 report from the Consumer Financial Protection Bureau said 10% of reverse mortgage borrowers face foreclosure because they fail to pay taxes or insurance.
Missing insurance payments may not seem like a huge deal, especially if you correct the mistake, but it is. It’s not unheard of for homeowners to face foreclosure because of something seemingly small, like unpaid homeowners’ association fees, but there are serious consequences for not upholding your end of a loan agreement. Foreclosure will also negatively affect your credit for years.
A focal point of the CFPB’s 2012 reverse mortgage report is that these loans need to be better explained to and understood by borrowers, and it found that many lenders were deceptively marketing reverse mortgages to senior citizens. Lewis’s case may be in the process of unfolding, but no matter what happens, her story is a good reminder to consumers that there’s often not room for error with large loans. It’s crucial to understand your responsibilities before putting your financial future and well-being on the line.
More from Credit.com
- How to Refinance Your Mortgage With Bad Credit
- How to Save Your Home From Foreclosure
- How Home Equity Lines of Credit Work
This article originally appeared on Credit.com.
Buying in a hot market can be tough. These tips can help beat the competition.
How much house will $2 million get you in the United States these days?
You could buy 25 pretty nice four-bedroom, two-bath homes in Cleveland, Ohio. Or, you could get just one modest ranch house in Los Altos, California, the most expensive real estate market in the country, according to a new survey by Coldwell Banker.
But, then again, you would probably get beat out by an all-cash buyer offering a higher bid.
Competition is fierce in today’s emerging hot real estate markets because the inventory of available properties is still extremely low. In areas like Silicon Valley, though, the economy is humming and buyers have plenty of money.
Los Altos is in the middle of the action, surrounded by the corporate headquarters for Google, Facebook and dozens of other major tech companies, as are other California cities: Newport Beach, Saratoga, Redwood City and Los Gatos, the rest of the top five on Coldwell’s list.
As other markets heat up around the country, buyers can learn a few things from what’s happening in some of the hottest places.
If there is one thing Silicon Valley’s techies know, it’s algorithms. You’re going to need one in today’s top markets to figure out how far above asking you need to bid.
Sumi Kim Hachmann, a 32-year-old researcher at Quora.com, snagged her three-bedroom, one-bath house in Menlo Park last year after six months of trying. Each time she found a house she liked, she crunched the square footage and comparable sales to figure out how much to bid, refining her math each time she lost out.
She liked a fixer-upper listed at $1.1 million, and was willing to bid $100,000 over asking. Her agent told her to double that, at least. She did, but the sellers countered. The house sold for $1.4 million to somebody else
“That was definitely discouraging,” Hachman says. “But it was a learning experience.”
Next time, she went in with a strong offer that amounted to $1,000 per square foot, and won. Now, a year later, she’s incredulous that houses in the neighborhood are going for double that.
While price is largely controlled by location and size, you need to add a premium to your offer if you need a mortgage, says Joe Brown, managing broker of a Coldwell branch in Los Altos. Bids being equal, sellers prefer all-cash because there is less risk. Price will still prevail, though, so a higher bid from a qualified buyer with a mortgage should win.
Another caveat: Keep contigencies out of the purchase agreement. Doing this is difficult for mortgage-seekers because banks typically require that the purchase price match the appraised value of the house. With prices going so far above asking, that can get tricky.
“You either ask them to put a lot more down or have them sign something that they will waive the appraisal contingency,” says Ducky Grabill, a founding agent of Sereno Group realty, who is based in Los Gatos.
Grabill also suggests having the lender call the listing agent and let them know they will guarantee the financing.
Another strategy is to buy below your price point, says Brown. If you have the resources for a $2 million house but cannot compete with stronger buyers, then aim for $1.5 million and turn it into the house you want.
This is a modification of the old “buy the worst house in the best neighborhood” adage. But you cannot just sit on this kind of property and hope it will appreciate; you’ve got to renovate.
That’s what Amy Bohutinsky, chief marketing officer of real estate site Zillow.com, did with her own purchase of a fixer-upper in the Seattle area two years ago.
“If you buy it with the intent of fixing it up, it can be an easier way” into a house than engaging in a bidding war, Bohutinsky says.
She also recommends expanding the boundaries of your search: considering for-sale-by-owner properties, preview listings like Zillow’s “Make Me Move” section and “coming attractions” on listing sites.
It is not enough anymore to show up at an open house pre-qualified for a mortgage and with a letter that sells yourself. You may need to have an engineer or other inspector come along, says Sereno Group’s Grabill.
She had a client recently clinch a $2 million all-cash deal after his first viewing, but only because he was able to do his due diligence on the foundation issues immediately.
This buyer was one of those bidding down on a property. He was really in the market for more like $2.5 million, and will put the remainder of his budget into fixing it up.
“They are throwing so much more money at properties to get it. It’s a little crazy,” Grabill says.
Almost two-thirds of recent home buyers surveyed said they were "addicted" to online listings, but only 22% said they were always accurate.
A new study from Discover Home Loans confirms the extent to which technology has transformed the way people buy and sell houses. But it also shows the limits of using online real estate sites when shopping for a home.
According to the survey, which polled 1,003 recent homebuyers on how technology affected their experience, 83% used listings sites like Zillow and Trulia, more than any other online resource. But the majority of respondents weren’t always satisfied with what they found. Only 22% said online listings were always accurate. The results reinforce previous studies, which found a disparity between the accuracy of listings on third-party websites and those found on local Multiple Listing Services, the primary tool of real estate brokers. Those listings tend to be updated more quickly than consumer-facing sites.
Zillow and Trulia have previously responded to such studies, noting that their sites also offer special tools to educate buyers on neighborhoods and housing conditions, and include listings of for-sale-by-owner, premarket and new-construction homes that don’t show up in MLSs.
Alison Paoli, public relations manager with Zillow, noted that while she hadn’t seen the full research, “what’s more important to understand about a study like this is that there is no gold standard for [accuracy in] real estate listings.” She added that Zillow gives brokers, agents, and MLSs the option of sending their listings directly at no cost. “Accuracy is top priority for us,” Paoli.
Accuracy aside, the survey showed that buyers still love trolling listing websites. The vast majority of respondents said technology made them feel “smarter” and “more confident,” and almost half said it helped them save money. In fact, two thirds said looking at online property listings “reached the point of becoming addictive.”
T.J. Freeborn, senior manager of customer experience at Discover Home Loans, said the results show that buyers still need a combination of online information and local expertise. “I think technology is an incredibly useful tool in this marketplace, but Realtors have a very deep knowledge of neighborhoods and particular homes,” Freeborn said.
Discover’s data shows buyers tended to shun social media when looking for houses—a surprising result in a world where virtually all other activities are in some way connected to Facebook and Twitter. Only 25% of homebuyers collected ideas on social media, and just 29% used social media to consult friends. (Given how hot some real estate markets have become, perhaps their reluctance can be chalked up to justifiable paranoia about oversharing.)
That data could have implications for home sellers. At least for now, a social media presence is far less important than making sure your home is listed online.
And it has a "man cave" in it
Here’s a real estate offer you can’t refuse: The house that was used as the Corleone family home in The Godfather is on the market for a cool $2.895 million.
The 6,248-square-foot English Tudor in the Emerson Hill area of Staten Island was home to Don Vito Corleone in Francis Ford Coppola’s iconic 1972 movie. The home has changed hands only once since Marlon Brando and Al Pacino filmed there.
The exterior and nearby gardens were the setting for Corleone’s daughter’s wedding at the beginning of the movie. And while the interior of the house wasn’t used in the film, the owners renovated it in 2012 to make some rooms look like the ones in the movie.
The real-estate listing for the property notes that the house has an English pub and a “man cave” area. Sounds perfect for watching, well, The Godfather.
Feast your eyes on some of the priciest homes on the planet.
The owners of the world’s most luxurious houses can be a mysterious bunch. We all know who owns Buckingham Palace, but does anyone recognize the name Tim Blixseth? Or know the Indian billionaire who built a 27-story apartment building just for himself? We’re guessing not.
Well, the mystery ends here. Using information provided by CompareCamp.com, we’ve got a rundown of the world’s 10 most expensive houses—modern castles, really—and the people lucky enough, and rich enough, to own them.
Value: $128 million
Details: This 10-bedroom prep school turned mansion has an underground swimming pool, a sauna, gym, cinema, and even a panic room. That’s all in addition to an interior covered in marble, gold, and priceless artworks.
Owner: Olena Pinchuk—daughter of Leonid Kuchma, Ukraine’s second president. She is known for being the founder of the ANTIAIDS Foundation and a friend of Elton John.
Value: $140 million
Details: Located on London’s Billionaires Row, the already tricked-out pad will soon add an underground extension with a tennis court, health center, and auto museum.
Owner: Roman Abramovich—a Russian billionaire and owner of the private investment firm Millhouse LLC. He’s probably best known in the West as the owner of the English Premier League’s Chelsea Football Club.
Location: Big Sky, Montana
Value: $155 million
Details: The largest property in the Yellowstone Club, a private ski and golf community for the mega-rich, the house has heated floors, multiple pools, a gym, a wine cellar, and even its own ski lift.
Owners: Edra and Tim Blixseth—Real estate developer and timber baron Tim Blixseth cofounded the Yellowstone Club, but the club’s bankruptcy, a divorce, and other troubles have seriously reduced his wealth in recent years.
Location: San Simeon, California
Value: $191 million
Details: The 27-bedroom castle, used in the movie The Godfather, has hosted John and Jackie Kennedy, Clark Gable, Winston Churchill, and other famous figures.
Owners: William Randolph Hearst’s trustees—The castle, built by the country’s first newspaper magnate, is now a heritage and tourist site and part of the California Park System.
Location: Woodside, California
Value: $200 million
Details: Less a house than a compound, this 23-acre property is home to 10 buildings, a man-man lake, koi pond, tea house, and bath house.
Owner: Larry Ellison—Co-founder of Oracle and the third-richest man in the world in 2013, according to Forbes.
Value: $222 million
Details: Another property on Billionaires Row, 18-19 sits alongside the home of Prince William and Kate Middleton. This particular residence has 12 bedrooms, Turkish baths, an indoor pool, and parking for 20 cars.
Owner: Lakshmi Mittal—The head of Arcelor Mittal, the world’s largest steel manufacturer, and, according to Forbes, one of the 100 richest men in India.
Location: Sagaponack, New York
Value: $248.5 million
Details: This 29-bedroom home sits on 63 acres and has its own power plant. Inside, there are 39 bathrooms, a basketball court, bowling alley, squash courts, tennis courts, three swimming pools, and a 91-foot long dining room.
Owner: Ira Rennert—Owner the Renco Group, a holding company with investments in auto manufacturing and smelting. He also has holdings in metals and mining.
Location: Cote D’Azure, France
Value: $750 million
Details: This 50-acre estate includes “a commercial sized green house, a swimming pool and pool house, an outdoor kitchen, helipad, and a guest house larger than the mansions of most millionaires,” according to Variety. The house was famously used as a set in the 1955 Hitchcock classic To Catch a Thief.
Owner: Lily Safra—A Brazilian philanthropist and widow of Lebanese banker William Safra. Her husband died when another one of the couple’s homes burned down, apparently due to arson.
Location: Mumbai, India
Value: $1 billion
Details: The Antilia isn’t even really a home in the traditional sense. This 27-story, 400,000-square-foot building has six underground parking floors, three helicopter pads, and requires a 600-person staff just to maintain it.
Owner: Mukesh Ambani—India’s richest man, with a net worth of $23.6 billion, according to Forbes. Ambani made his money running Reliance Industries, an energy and materials company.
Value: $1.55 billion
Details: Technically still a house, but certainly not for sale, the Queen’s residence was valued at roughly $1.5 billion by the Nationwide Building Society in 2012. The property holds 775 rooms, including 19 state rooms, 52 bedrooms, 188 staff rooms, 92 offices, and 78 bathrooms.
Owner: The British Sovereign—Currently Queen Elizabeth II, who has ruled since February 6, 1952.
Conventional wisdom says that millennials are a new and different generation. But when it comes to housing, they're likely to be more conservative and traditional than their parents were.
If you’ve come across any stories mentioning millennials and home ownership, you’ve likely heard this refrain: Young people just aren’t very interested in buying a house. Instead, the story goes, they want to rent a cool apartment, live in a city, and walk to coffee shops. Forever.
This narrative was eloquently expressed in a recent New York Times article about a hip, 30-year-old, unmarried couple choosing to rent in a swanky Virginia high-rise. What made these millennials pick a rental apartment over a nest of their very own? The developer of the couple’s new home, Joshua Solomon, had his theories:
“That generation of folks has seen people really get hurt by homeownership,” said Mr. Solomon, president of the company, which is based in Waltham, Mass. “The petal has really fallen off the rose as it pertains to homeownership. People don’t want to be tied down to a mortgage they can’t get out of quickly.”
Sounds like a reasonable conclusion, right? Multi-unit construction is up, after all, and first-time home buyers are in historically short supply.
But if you dig a little deeper, both Solomon’s generalization and the “millennials don’t really want to own homes” trope turn out to be largely untrue. A number of surveys have shown that the vast majority of millennials would love to own a place of their own. Recent research from housing site Zillow, for example, found that adults age 22 to 34 are actually more eager to own a home than older Americans.
According to Zillow’s data, young married couples in which both partners work (represented by the orange line in the left graph below) currently own homes at a rate close to or above historical norms for their demographic. Even single employed millennials (the yellow line in the right graph) are slightly more likely to own a home than their counterparts in the ’70s, ’80s, and ’90s.
So if young adults want homes more than previous generations, why is their homeownership rate at a historic low? The answer is that millennials are getting married later in life, and not having two income streams makes it much harder to scratch together a down payment.
From 1960 to 2011, Americans’ median age at the time of their first marriage increased by six years, to around 29 from 23 for men and 26 from 20 for women, according to Census data. Then came the financial crisis, which pushed marriage back even further by making financial stability—a marital prerequisite for many— a rarity among recent college graduates. According to one recent study from the University of Arizona, only about half of adults ages 23 to 26 and at least one year out of college have a full-time job.
As a result, the millennial generation’s overall home purchases are down—but they probably won’t be down forever. Zillow’s analysis shows that if millennials were marrying at the same pace as previous generations, their rate of homeownership would be 33%, six percentage points higher than now and roughly the same as in the 1990s. Once this generation begins to tie the knot, the evidence suggests, it’ll be buying homes at least as frequently as older Americans once did.
Old School Values
In fact, there’s some evidence that home ownership is more important to millennials than it is to Gen Xers or boomers. In a recent survey, forty-six percent of respondents ages 18 to 34 told Zillow they believe “owning a home is necessary to being a respected member of society,” and 65% said “owning a home is necessary to live The Good Life and The American Dream.” Both results were higher (in most cases, significantly higher) than older age groups.
America’s newest generation—post-millennials—are perhaps the most old-fashioned of all. A shocking 97% of teens age 13 to 17 believe they will one day own a home, and 82% say homeownership is the most important part of the American dream. If anything, buying a home seems to be getting more attractive, not less.
So millennials really want a home, but they still want a cool home, right? One that’s urban, and different, and close to a Blue Bottle Coffee? Maybe when they’re still young and single, but a large amount of evidence suggests that even today’s young adults look to the suburbs once children come along. Highly dense “core cities” like San Francisco and New York are attractive to millennials looking for fun and adventure, but they’re also extremely expensive to live in when dependents enter the picture.
Research suggests a negative correlation between big cities and child populations. City Journal found that between 2000 and 2010, the population of children 14 and younger fell by 500,000 in the country’s densest urban areas, including Los Angeles, Chicago, and New York. As children disappeared from cities, the nation’s 51 largest metro areas lost 15% of adults 25 to 34—the same age range when many begin to marry and start families. “While it’s not possible to determine where they went,” the Journal noted, “suburbs saw an average 14 percent gain in that population during the same period.”
Mollie Carmichael, principal at John Burns Real Estate Consulting, is already seeing millennials flee cities to more child-friendly environments. “We do find that the millennials want to be in urban areas, but usually when they’re not married and they’re renting” says Carmichael. “But the trigger is marriage, and then frankly they want more traditional areas and more traditional environments than even their parents. They want suburban; they want single-family detached; they want a yard.”
What about millennials’ much-reported fixation on urban-ness? There’s some truth to it, Carmichael acknowledges, but “urban to them means they want the ability to walk to the park and walk to the Starbucks. It’s more about accessibility, and that could be driving to those great places they want to go.”
In the end, America’s newest adult generation isn’t that different from the previous ones. Millennials may Instagram their new home instead of sending photos through the mail, but not much else has changed.
The World Series championship will be determined by how Wednesday night's Game 7 plays out, but how do San Francisco and Kansas City match up off the ball field?
After the Kansas City Royals stomped the San Francisco Giants in Game 6 of the World Series, the stage is set for an exciting winner-takes-all Game 7. The Royals, who skipped through earlier rounds of the 2014 playoffs without a loss, were named as a slight favorite to win the championship when the World Series began, and the Royals’ run is all the more impressive because the Giants’ payroll is more than 50% higher ($148 million versus the Royals’ $91 million).
For that matter, San Francisco blows away its opponent in terms of global cachet and higher incomes, and the home markets of this year’s World Series contenders couldn’t be more different. San Francisco is a hip, high-powered, and high-priced magnet for tech startups where the average home sells for close to $1 million, compared to a mere $186,000 for the typical house in Kansas City, a low-key, highly livable Midwestern hub famed for top-notch barbecue. Nonetheless, the secondary market price of World Series tickets for Kansas City home games has been roughly 30% higher than games hosted by San Francisco. That somewhat unexpected disparity likely comes as a result of San Francisco owning the edge on most recent World Series title. Giants fans have been spoiled of late with championships in 2010 and 2012, whereas Royals’ fans have been waiting since 1985 for another World Series title.
With the Series wrapping up tonight, click through the gallery above for a look at how the competitors match up, on and off the field.
Insurers are moving from flat deductibles to higher ones based on the value of your home. Here's what you need to know about this change.
Two years after Superstorm Sandy, State Farm agent Jen Dunn is busy explaining new insurance math to her customers in upstate New York. Instead of the dollar-amount deductibles they have been used to for years, she is now writing their policies based on percentages.
For many, it means turning the typical $500 deductible into 1% of the insured value—for a $250,000 house, that means a gasp-producing $2,500.
“My clients who have been offered this initially say, ‘I don’t like this,'” Dunn says. But then she explains that the higher amount is usually offset by a lower annual premium. If they go years without a claim, they can save in the meantime.
Jason Corbett, 39, who lives in central Georgia, is using a 1% deductible. Because Corbett’s rural home is valued at slightly less than $200,000, it was a better deal than a flat $1,000 deductible. The difference between the two deductibles was only a couple of hundred dollars. However, he saved money by lowering his premium, so over time the difference in his out-of-pocket costs will be negligible.
If he had a $300,000 home and the deductible was double what he pays now, “that would be a different decision,” says Corbett, who writes a personal finance blog.
State Farm, the largest U.S. property and casualty insurance company by market share, says a “significant” number of its policies now have percentage deductibles. Other carriers, like Allstate Corp, USAA, and Nationwide, also offer the option to consumers in certain states, but the prevalence is not yet tracked nationwide. The practice is near-universal in Texas at this point, according to that state’s insurance office.
With a percentage deductible policy, things are a little different than the old-fashioned flat rate. Here are seven things you need to know:
1. Do not be afraid of high deductibles
You might be used to $500, but a higher deductible could actually be better for you.
“It’s a very smart move to buy high deductibles if you can afford it,” advises J. Robert Hunter, director of insurance for the Consumer Federation of America.
The main reason? Every claim you make against your homeowners insurance can raise your rates. One claim pushes it up an average of 9% and two claims will raise it by 20%, according to a recent study by insuranceQuotes.com. So you want to pay out of pocket for small claims anyway.
2. The 1% deductible is not a percentage of your loss
The new terminology makes people think of health insurance, but homeowner claims do not work that way, says Jim Gavin, director of insurance information services for the Independent Insurance Agents of Texas trade group.
Rather, the out-of-pocket deductible you have to pay before the company will cover any claims is based on a percentage of the insured value of your home—which is not the market value or the appraised value, but the cost of replacing your home should it burn to the ground and need to be rebuilt.
For example: If a kitchen fire damaged your $250,000 home with a 1% deductible, and it cost $5,000 to repair the damage, you would receive a check from the insurance company for $2,500 after paying the other half yourself.
3. Your out-of-pocket costs will regularly increase
Your $500 deductible stays flat forever, but a percentage deductible will go up incrementally over time as the insured value of your home rises.
Some homeowners may not even notice this, like Will Harvey, 34, of Tyler, Texas, who is five years into a 1% policy on his home. “If it went up, it wasn’t enough for me to remember it,” he says.
4. You will still have other deductibles on top of the basic rate
Many homeowners have add-on clauses like a 5% hurricane deductible that is common in coastal areas, or 2% for wind and hail damage. Many states require separate coverage for earthquakes and floods.
Those all still apply on top of the basic coverage for fire and theft, says Amy Danise, editorial director of Insure.com. So if you have any damage that is caused by a specified risk, you will have to pay out of pocket first for that.
5. Your might be able to pay down your percentile
If 1% is too much for you, you may have the option to accept a higher premium to lower out-of-pocket costs—going from 1% to half a percent or some other fraction. The value to you depends on how much your house is worth and how much you can afford to pay out of your savings if something goes wrong, says State Farm’s Dunn.
6. You can still shop around
Even in Texas, where almost every company offers a deductible of at least 1%, or sometimes up to 1.5% or 2%, some carriers still do things the traditional way. Texas insurance agent Criss Sudduth says the customers who might benefit more from a flat-fee policy are those whose premiums do not actually go down despite the percentage policy—either because the weather risks are too high or because their personal credit is bad.
7. You should still figure out your dollar amount
After years of hearing complaints from consumers who are confused, the Texas legislature passed a bill recently requiring carriers to explain what the percentage deductible translates into, in dollars.
In other states, if your carrier does not do this, you should find out the information yourself and write it on your declarations page, says Deeia Beck, public counsel and executive director of the Texas Office of Public Insurance Counsel.