HUD Invites Local Governments to Request Thriving Communities Technical Assistance to Align Housing and Infrastructure Investments
WASHINGTON – Today, the U.S. Department of Housing and Urban Development (HUD) opened the portal for local governments to request technical assistance for its Thriving Communities technical assistance program. This funding will help local governments ensure housing needs are considered as part of their larger infrastructure investment plans, with a focus on disadvantaged communities.
The Bipartisan Infrastructure Law (BIL) provided historic resources to build and maintain infrastructure in communities across the country. This technical assistance will help local governments identify land for housing development near transportation projects; develop preservation and anti-displacement strategies; identify and implement reforms to reduce barriers to location-efficient housing; and improve intergovernmental coordination and support a holistic approach to housing and transportation.
“A thriving community is intentional about building and preserving affordable housing near public transportation and leveraging infrastructure investments to support its housing goals. Cities can now apply for technical assistance to help preserve affordable housing, identify opportunities for location-efficient housing, and reduce barriers to housing production,” said HUD Secretary Marcia L. Fudge. “HUD is encouraging a holistic approach to bringing housing and transportation together with the help of local governments, transit authorities, metropolitan planning organizations, the private sector, and community-based organizations.”
“We are excited to open the portal for local governments to request technical assistance, and we look forward to helping them meet their affordable housing and transportation needs through the Thriving Communities program,” said Solomon Greene, the Principal Deputy Assistant Secretary within HUD’s Office of Policy Development and Research. “The teams selected to provide technical assistance have a demonstrated track record and strong expertise in supporting housing planning and development in ways that also advance equity.”
HUD is offering this technical assistance as part of theThriving Communities Network, an interagency initiative between HUD and the Departments of Transportation, Energy, Commerce, and Agriculture, as well as the General Services Administration and the Environmental Protection Agency. HUD will provide priority to jurisdictions with populations of less than 250,000 people, as well as to those receiving certain Department of Transportation competitive funds.
Requests will be reviewed on a rolling basis, with technical assistance engagements to begin in spring 2023. For more information on the program, eligibility criteria, and to access the request form, please visit this webpage.
Abt Associates, in partnership with Alabama A&M University, EPR PC, Equitable Cities, and National Housing Trust, and ICF, in partnership with Smart Growth America, Partnership for Southern Equity, and Morgan State University, will receive the funds and provide the associated technical assistance as part of HUD’s Thriving Communities Technical Assistance program Notice of Funding Opportunity.
HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available at www.hud.gov and https://espanol.hud.gov.
Theme of Connecting home, health, and You highlights how fixing hazards in homes improves residents’ health while improving access to safe, affordable healthy housing across the nation.
WASHINGTON – Today, the U.S. Department of Housing and Urban Development (HUD) kicks off activities for this year’s National Healthy Homes Month (NHHM), an annual campaign highlighting the direct link between housing quality and residents’ health.
National Healthy Homes Month serves to educate families and communities about the importance of creating and maintaining a healthy home by addressing home-based hazards, including reducing moisture and mold, improving ventilation, controlling pests, and maintaining indoor air quality.
Listen to Secretary Fudge speak about HUD’s commitment to affordable, strong, sustainable inclusive communities during National Healthy Homes Month.
This year’s theme Connecting home, health, and YOU, highlights the link between housing quality and health and is designed to raise awareness of the need to lower costs for families by preventing injury and illnesses, improving and preserving the supply of affordable housing, and improving the quality of life for vulnerable populations. To learn more about NHHM 2023, including themes, and resources available, and to subscribe for updates, please visit the website at NHHM homepage.
“This month, we are reminded that everyone in this country deserves to be safe and healthy in their homes,” said HUD Secretary Marcia L. Fudge. “HUD and our many partners are working together to protect vulnerable residents from lead exposure and other home health hazards.”
A significant highlight of NHHM will be the opening of the nomination process for the new HUD Secretary’s Award for Excellence in Healthy Homes. For the first time, the competition will select one recipient (organization, group, or individual) who best exemplifies the holistic approach required to create a healthy home culture. The Nomination period and website will go live on June 5th, 2023, by 10am. It will be accessible via:https://www.hud.gov/program_offices/healthy_homes.
As part of HUD’s commitment to ensure healthy homes, we have recently announced two historic Notices of Funding Opportunities (NOFOs) that will make homes healthier and safer for low-income families.
The first NOFO provides over $700 million in grants to state and local governments for improving health and safety in privately-owned older (pre-1978) homes of low-income families under HUD’s Lead Hazard Reduction Grant Program – one of the largest health and safety investments to date for privately-owned housing. Applications are due June 14. You can download the application package from this program’s website on Grants.gov.
The second NOFO provides $50 million to assist communities in building the capacity needed to operate a full-scale lead hazard control and healthy homes program, under HUD’s Lead Hazard Reduction Capacity Building Grant Program, a program developed in direct response to feedback from communities. Applications are due June 27. You can download the application package from this program’s website on Grants.gov.
Additional funding opportunities, including the Healthy Homes Production Grant Program and the Older Adult Home Modification Grant Program, will be announced soon. You will find descriptions of these programs, when they are announced, through HUD’s Funding Opportunities homepage.
To learn more about NHHM 2023, please visit the NHHM 2023 website at the NHHM homepage.
HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available on the Internet at www.hud.gov and http://espanol.hud.gov.
U.S. Department of Housing and Urban Development – Marcia L. Fudge, Secretary Office of Public Affairs, Washington, DC 20410
HUD No. 23-079 FOR RELEASE HUD Public Affairs Monday 202-708-0685 April 17, 2023 HUD.gov/Press
HUD ANNOUNCES $486 MILLION IN GRANTS AND $43 MILLION FOR STABILITY VOUCHERS TO ADDRESS UNSHELTERED AND RURAL HOMELESSNESS
Sixty-two communities in total will receive grants and vouchers to implement coordinated approaches to addressing unsheltered homelessness and homelessness in rural areas
WASHINGTON – Today, the U.S. Department of Housing and Urban Development (HUD) is announcing the second set of communities to receive grants and housing vouchers to address homelessness among people in unsheltered settings and in rural communities. This announcement includes $171.2 million in grants for 115 new projects in 29 Continuum of Care (CoC) communities, and adds to the first set of grant awards announced in February. This will bring the total value of grants to $486 million to 62 CoC communities. In addition, HUD is inviting 139 Public Housing Authorities who partnered with grantee communities to accept approximately 3,300 Stability Vouchers.
“Housing with supportive services is what solves homelessness, but people in unsheltered settings and in rural areas have not had access to those solutions,” said HUD Secretary Marcia L. Fudge. “The combination of these grants and vouchers will help and give the communities tools they need to help people who are living on the streets, in encampments, under bridges, or in rural areas obtain permanent housing.”
In response to the competitive special Notice of Funding Opportunity, Continuum of Care (CoC) collaborative applicants were asked to formally partner with public housing authorities to leverage access to housing resources. Public housing authorities that are partnering with awarded CoC grantees will receive priority for approximately 3,300 Stability Vouchers (a special allocation of Housing Choice Vouchers) that allow people experiencing homelessness to obtain and afford housing.
From Day One, the Biden-Harris Administration has taken action to deliver housing relief and to solve homelessness. The American Rescue Plan Act of 2021 provided historic levels of homeless assistance – including nearly 70,000 Emergency Housing Vouchers – which assist individuals and families who are homeless, at-risk of homelessness, fleeing, or attempting to flee, domestic violence, dating violence, sexual assault, stalking, or human trafficking, or were recently homeless or have a high risk of housing instability –and $5 billion in HOME Investment Partnership homelessness grants – which are designed exclusively to create affordable housing for low-income households
HUD and the United States Interagency Council on Homelessness (USICH) launched House America, a national initiative in which HUD and USICH partnered with 105 communities led by mayors, county leaders, governors, and tribal nation leaders to place over 100,000 households from homelessness into permanent housing and add over 40,000 units of affordable housing into the development pipeline. In late December, USICH released All In: The Federal Strategic Plan to Prevent and End Homelessness, which set forth President Biden’s ambitious goal to reduce all homelessness by 25% by 2025.
The resources announced today build upon the momentum and renewed political will at all levels of government to solve homelessness through the provision of housing with supportive services. They respond directly to the calls from state and local leaders, advocates, and people with lived experience for more federal assistance to address unsheltered and rural homelessness specifically. Additionally, they provide communities with the resources and tools to respond to homeless encampments humanely and effectively while avoiding approaches that criminalize homelessness.
More information on HUD’s work to address homelessness can be found here.
HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available at www.hud.gov and https://espanol.hud.gov.
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“If you have these features in your home already, you should definitely flaunt them in your listing description,” said Amanda Pendleton, Zillow’s home trends expert. “That is going to set you ahead of the competition.”
The real estate website evaluated 271 design terms and features included in almost 2 million home sales in 2022. Those that came out on top may add up to about $17,400 on a typical U.S. home.
Two chef-friendly features topped the list of those that helped sell homes for more — steam ovens, which helped push prices up 5.3% over similar homes without them, and pizza ovens, which increased prices by 3.7%.
Other features that rounded out the top 10 included professional appliances, which had price premiums of 3.6%; terrazzo, 2.6%; “she sheds,” 2.5%; soapstone, 2.5%; quartz, 2.4%; a modern farmhouse, 2.4%; hurricane or storm shutters, 2.3%; and mid-century design, 2.3%,null
Zillow also looked at which features helped sell homes faster than expected.
Doorbell cameras topped that list, helping to sell homes 5.1 days faster. That was followed by soapstone, with a 3.8 day advantage; open shelving, 3.5; heat pumps, 3; fenced yards , 2.9; mid-century, 2.8; hardwood, 2.4; walkability, 2.4; shiplap walling or siding, 2.3; and gas furnaces, 2.3.
Section 8 Renewal Guidebook provides updated policies and processes for rent comparability studies required as part of Section 8 Housing Assistance Payment Contract renewals.
WASHINGTON – The U.S. Department of Housing and Urban Development’s (HUD) Office of Multifamily Housing Programs announced today newly updated guidance for owners of properties participating in its Section 8 Project-Based Rental Assistance (PBRA) program. The changes published today in Chapter Nine of HUD’s Section 8 Renewal Policy Guidebook are designed to streamline the contract renewal process by making it easier for owners to prepare and submit the Rent Comparability Studies that are used to establish contract rents. The changes also clarify the conditions under which such rents may reflect the value of providing services to residents. HUD last updated the Guidebook in 2017.
“These much needed changes reinforce our dedication to maintaining a strong program that provides vital affordable rental housing to low-income individuals and families through project-based rental assistance,” said Deputy Assistant Secretary for Multifamily Housing Ethan Handelman. “The changes provide clarity and process improvements for owners and encourage high quality resident services at a time when this nation needs to preserve and expand the availability of affordable homes.”
The updated Guidebook chapter was developed by HUD following feedback received from program stakeholders on its draft published in April 2022. Chapter Nine of the Guidebook now includes the following key updates:
· Revises options available for owners seeking to renew their contracts without a rent comparability study, when eligible, to reduce administrative and processing costs and time for owners.
· Enhances consistency in valuing non-shelter services to better support properties with services to residents, such as on-site health screening.
· Allows internet and broadband services to be considered an eligible non-shelter service for valuation purposes.
The updates contained in Chapter Nine of the Section 8 Renewal Guidebook become effective for owners beginning May 1, 2023.
About HUD’s Section 8 Project-Based Rental Assistance Program
Administered by HUD’s Office of Multifamily Housing Programs, the Section 8 Project-Based Rental Assistance (PBRA) program provides more than 1.2 million low-income and very low–income families with decent, safe, and affordable housing. Under the program, HUD maintains long-term contracts with owners of multifamily housing properties, requiring that rents covered by such contracts be comparable with (i.e., do not exceed) market rents in the area where the project is located. The Multifamily Assisted Housing Reform and Affordability Act of 1997 requires that such rents be established by reference to a Rent Compara
You don’t have to give up the dream of homeownership just because you’re short on funds.
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You don’t have to give up the dream of homeownership just because you’re short on funds.fizkes / ShutterstockBy Sigrid Forberg
The biggest obstacle for many first-time homebuyers is coming up with the cash for a down payment.
Even when the monthly mortgage payments seem affordable, setting aside up to 20% of the purchase price prevents countless households from achieving the dream of homeownership.
But there are loan types that make it possible for you to buy a home, even if you have little to no money to put down.
What is a no-down-payment mortgage?
A no-down-payment mortgage is pretty self-explanatory: It’s a mortgage you can get without having to put money down.
When you buy a home, your down payment serves as your first mortgage payment. It’s generally a percentage of your total loan, ranging from 5% to 20%.
With a conventional mortgage, the benefit of offering a larger down payment is you’ll be free of the added expense of private mortgage insurance (PMI), which gets tacked onto loans with lower down payments.
But conventional loans generally require a down payment of at least 5%. On a $200,000 loan, that amounts to $10,000. And if you’re aiming for 20% to save you the monthly cost of PMI, you’re looking at $40,000. For some households, that’s a sum that is simply out of reach.
There is an alternative. Some government-backed loans offer borrowers no-down-payment options, making homeownership more accessible for a wider range of buyers.
USDA and VA loans (backed by the U.S. Departments of Agriculture and Veterans Affairs) both offer zero-down options. However, you’ll have to meet their strict qualification requirements.
With USDA and VA loans, lenders are more willing to take a risk on borrowers who don’t have the money to secure conventional loans. A lender knows that if you ever default on your loan, the government will step in.
But note: The government agency insuring your loan doesn’t protect you, the borrower. It just protects the lender. The government’s backing is not a safety net for when you’d rather focus on other expenses some months.
Because a down payment serves as your first mortgage payment, the more you put down, the less you’ll pay in interest over the life of your loan. Unfortunately, the opposite also is true: The less you put down, the more you’ll pay in interest.
Low- and no-down-payment home loan options
Knowing that what prevents many Americans from becoming homeowners is the burden of covering a large sum needed for the down payment, there are a few government programs designed to ease that burden.
Unfortunately, these no down payment options are only available with a few types of mortgage programs, and their eligibility is restricted to rural, low-income Americans and active-duty military members and veterans.
USDA loan: No down payment
USDA loans were created to help low- to moderate-income rural and suburban Americans get mortgages. The loans are guaranteed by the U.S. Department of Agriculture and feature low fixed interest rates.
In addition to the no-down-payment feature, the loans also don’t require you to pay mortgage insurance. Instead, you will have to pay an upfront 1% guarantee fee and an annual 0.35% fee.
But the sum of those fees still tends to be lower in the long run than the mortgage insurance costs associated with other types of loans.
To qualify for the USDA loan program, a home must be in a rural area, but there’s a lot of leeway on the definition of “rural” — many suburban areas count, too.
Priority for these loans is given to Americans with urgent housing needs. Typically, that means successful applicants currently don’t have access to “decent, safe and sanitary housing,” or they can’t secure a loan from other, traditional sources.
Your income also is an important factor. To qualify for one of these loans, the money you earn will need to come in at or below set income limits for your area. You can find your region’s limit on the USDA’s website.
Your lender will take a close look at your credit score and debt ratios to verify you have an acceptable credit history and don’t have any record of debts being converted to collections over the last 12 months.
People with higher credit scores tend to have an advantage when applying for USDA loans. If you have a score of 640 and up, you could benefit from a streamlined application and underwriting process.
VA loan: No down payment
With VA loans, the Department of Veterans Affairs guarantees a portion of the mortgage.
Because the VA is backing you, you won’t be required to pay for mortgage insurance. But you will be charged a one-time funding fee, which can range from 1.4% to 3.6% of your total loan amount.
VA loans are available to regular military personnel, veterans, reservists and National Guard personnel. They’re also open to spouses of service members who died on active duty or as a result of a service-connected disability.
Most people in the military will qualify after six months of service. You’ll also need to show a Certificate of Eligibility, which you can apply for through the VA.
As with USDA loans, your credit score and debt ratios will have a big impact on your eligibility for a VA loan.
FHA loans: Low down payment
FHA loans are also backed by the federal government. In this case, the insurer is the Federal Housing Administration, which is an arm of the Department of Housing and Urban Development, or HUD.
With an FHA loan, you can put down as little as 3.5%. And while it’s easier to qualify for these loans than those offered through the USDA and VA, there are still some minimum requirements.
You’ll generally need at least a 580 credit score. The home must be your primary residence and you’ll have to move in within 60 days of closing.
There are also purchase price limits for the home. HUD offers a search engine to help you find your region’s limit.
FHA loans come with mortgage insurance premiums (MIPs) paid both upfront and then annually. When you put less than 10% down, you’ll have to pay mortgage insurance for the entire life of your loan.
To get around this lifetime requirement, some borrowers refinance under a different loan type once they have reached a 20% equity position in their home.
Conventional 97 loan: Low down payment
Most people think you need at least 5% for a down payment with a conventional loan. But a conventional 97 loan allows you to finance up to 97% of your home’s purchase price, meaning you have to put down only 3%.
If we think back to that $200,000 home, that means you’d have to come up with just $6,000 as your down payment.
Unlike with the FHA low-down-payment option, you won’t have to pay upfront mortgage insurance with a conventional 97 loan. And once you’ve built enough equity, you can cancel your mortgage insurance without having to refinance.
However, you’ll have to have a credit score of at least 620 to qualify for one of these loans. And since they’re not offered through all mortgage lenders, you might have to shop around a bit.
Other conventional options
The Freddie Mac Home Possible mortgage is designed for very low- to moderate-income borrowers to help them become homeowners. This conventional loan program requires only a 3% down payment.
With Home Possible, you can’t make more than 100% of the median income for your area.
And through mortgage giant Fannie Mae, the Home Ready program helps low- to moderate-income households, members of minority groups and citizens of disaster-impacted communities become homeowners.
Home Ready also allows for just 3% down, and the money doesn’t have to come from your own funds — meaning the money can be gifted to you by another party.
Tax Tips The Tax Benefits of Buying a Condo for For Your Child’s College Housing
With real estate prices recovering in many markets, it might make sense to buy a condo where your child can live during college. He or she can live there while attending school, and you can avoid “throwing away” money on dorm costs or rent for an apartment. If you buy a place that has extra space, you also can rent it to your child’s friend(s) to offset some of the ownership costs.
Additionally, you may be able to sell the condo for a gain after the four or five (or maybe even six) years that it takes for your son or daughter to graduate. A gain may be even more likely if you have more than one child — and you can persuade a younger child to attend the same college as an older sibling. Here are some tax issues to consider before you buy a condo near campus.
Rules about Deducting College Condo Ownership Costs
The federal income tax rules generally prevent you from deducting losses from owning and renting a residence to a family member. But an exception applies when you rent at market rates to the family member who uses the property as his or her principal home. This loophole is open to you if you buy a condo and rent it out to your college kid (and any roommates) at market rates.
As long as you charge market rent, you can — subject to the passive activity loss (PAL) rules explained later — deduct the mortgage interest and write off all the other operating expenses, including utilities, insurance, association fees, security monitoring, cleaning, maintenance, and repairs. As a bonus, you can depreciate the cost of the structure (but not the land) over 27.5 years, even if its market value is increasing.
Where will your cash-strapped college student get the money to pay you market rent for the condo? The same place he or she would get the cash to pay for a dorm room or apartment rent. You can gift your child up to $14,000 annually without any adverse federal tax consequences. If you’re married, you and your spouse, combined, can give up to $28,000. Your child can then use that money to write monthly rent checks back to you.
For recordkeeping purposes, your child should send checks that say “rent” on the memo line. It’s also helpful for you to open a separate checking account to handle rental income and expenses. Taking these steps will minimize problems with the IRS if you get audited.
Key point: Even if you don’t charge your child market rent for the condo, you can still deduct the property taxes. Designate the condo as your second home, and then you can also deduct the interest on up to $1.1 million of combined mortgage debt on your main home and the condo as an itemized deduction on your personal tax return (subject to the phaseout rule for high-income folks that normally applies to these deductions).
Watch Out for PAL Rules
The condo is likely to generate tax losses after you consider depreciation deductions. If so, the PAL rules generally apply. The fundamental concept is simple: You can deduct PALs only to the extent of passive income from other sources, such as positive taxable income from other rental properties or gains from selling them.
A special exception allows you to deduct up to $25,000 of annual PALs from rental real estate provided:
Your adjusted gross income before the real estate loss is less than $100,000, and
You “actively participate” in the rental activity.
Active participation means you’re making management decisions, such as approving tenants, signing leases, and authorizing repairs.
If you qualify for this exception, you won’t need any passive income to claim a deductible rental loss of up to $25,000 annually. However, if your adjusted gross income (AGI) is between $100,000 and $150,000, the special exception gets proportionately phased out. If your AGI exceeds $150,000 and you have no passive income, you can’t currently deduct any passive rental real estate losses. Fortunately, any unused losses will be carried forward to future tax years, and you can deduct them when you sell the condo.
Expect More Tax Benefits When You Sell
When you sell a rental property that you’ve owned for more than a year, the profit — the difference between sales proceeds and the tax basis of the property after subtracting depreciation — is a long-term capital gain.
The maximum federal tax rate on long-term gains is 15% for most folks. But if you are in the top federal bracket, the maximum rate is 20%. Higher-income taxpayers may also owe the 3.8% net investment income tax on rental property gains. Also be aware that, if you’re in the 25% regular income tax bracket or above, part of the gain — the amount equal to your cumulative depreciation write-offs — is taxed at a maximum federal rate of 25%.
Total housing wealth grew by $8.2 trillion between 2010 and 2020, according to a March report from the National Association of Realtors. The coronavirus pandemic’s housing boom added even more value to homes.
But unless people plan to sell their houses — which can be a difficult feat in a hot housing market — there are only a few ways to tap into that increased equity.
“You can’t eat your equity, but if you can monetize some of it to reduce debt and make life easier from a cash flow perspective, that makes a ton of sense in most situations,” said Dennis Nolte, a certified financial planner and vice president at Seacoast Bank in Winter Park, Florida.
Here’s what financial experts recommend.
One way to get money from your home’s increase in value is to refinance. By using a cash-out refinance, you’d also be able to add some liquidity to your savings or put the money towards another goal.
Here’s how it works: You refinance your home with a larger mortgage than you previously had to get the difference back in cash. In some instances, it may be a win-win situation — if you’re able to refinance at a lower rate or reduce your monthly payments.
It may not be the best option for homeowners right now, however. That’s because interest rates are rapidly rising, and with them, mortgage rates. That makes it less likely that someone would be able to refinance now for a more attractive rate.
“Rates have shot up so quickly that refinancing at these interest rates could be as much as twice what their current rate is,” said Jackie Frommer, chief operating officer of lending at Figure, a financial services company. “That just doesn’t make sense.”
It can also be expensive to refinance, as there are extra closing fees involved.
Home equity loan
A home equity loan can help you access some of your house’s appreciated value. It’s a loan that you take out against the value of your home and pay off over a set period, generally 10 to 30 years.
These loans do include closing costs and can also include fees, as well. In addition, you must take out a lump sum — say $100,000 — and pay off the entire amount plus interest. Usually, the interest rate is fixed, however, which can help you budget long-term.
Right now, home equity loan rates generally range from 3% to 12%, depending on the borrower, according to Bankrate.
Home equity line of credit
A home equity line of credit, also known as a HELOC, is one of the best ways to access the equity in your home without selling it.
Instead of taking out a loan at a fixed amount, a HELOC opens a pool of money that you can utilize, but you don’t have to take it all at once or use it all. For instance, instead of having a $100,000 loan, you could have access to a $100,000 HELOC that you could draw on only when you needed it for something like an emergency repair or renovation.
“You have a pool of money you can draw on, and it doesn’t cost anything unless you use it,” said Thomas Blackburn, a CFP with Mason & Associates in Newport News, Virginia, adding that he recommends them for a lot of people.
“It’s almost like insurance,” said Nolte, adding that Is like a life insurance policy; it makes sense to have a HELOC in place before you need to draw on it.
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Currently, interest rates are low on HELOCs. People with good or excellent credit — generally a FICO score of 670 or more — can get HELOCs with rates from 3% to 5% according to Bankrate. Those with fair scores or lower may see rates in the 9% to 10% range.
“Now might be a good time to lock in those lower interest rates as we’ve seen they’re gone a little higher and will continue to,” said Brittney Castro, CFP at Mint.
The amount of money mortgage holders could pull out of their homes while still keeping a 20% equity cushion rose by an unprecedented $1.2 trillion in the first quarter of this year, according to a new analysis from Black Knight, a mortgage software and analytics firm. That is the largest quarterly increase since the company began tracking the figure in 2005.
Mortgage holders’ so-called tappable equity was up 34%, or by $2.8 trillion, in April compared with a year ago. Total tappable equity stood at $11 trillion, or two times the previous peak in 2006. That works out to an average of about $207,000 per homeowner.
Tappable equity is largely held by high-credit borrowers with low mortgage rates, according to Black Knight. Nearly three-quarters of those borrowers have rates below 4%. The current rate on the 30-year fixed mortgage is over 5%.
The flipside of rising home values is that prospective buyers are increasingly being priced out of the market. Mortgage rates have also been rising sharply, putting homeownership further out of reach for some.
Homeowners are in the money, and it just keeps coming. Two years of rapidly rising home prices have pushed the nation’s collective home equity to new highs.
“It really is a bifurcated landscape – one that grows ever more challenging for those looking to purchase a home but is simultaneously a boon for those who already own and have seen their housing wealth rise substantially over the last couple of years,” said Ben Graboske, president of Black Knight Data & Analytics. “Depending upon where you stand, this could be the best or worst of all possible markets.”
The housing market, however, is showing slight signs of cooling. Home prices, as measured by Black Knight in April, were up 19.9% year over year, down from the 20.4% gain seen in March. The slowed growth could be an early indication of the impact of rising rates.
“April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards,” Graboske said. “The March and April 2022 rate spikes will take time to show up in repeat sales indexes.”
Rising interest rates historically cool home prices, but supply remains pitifully low in the current market. Active listings are 67% below pre-pandemic levels, with about 820,000 fewer listings than a typical spring season.
Given the current market conditions, homeowners are less likely to sell their homes and more likely to tap some of that vast equity for renovations. Home equity lines of credit are preferable now, as an owner likely wouldn’t want to refinance their first mortgage to a higher rate, even to pull out cash.
A recent report from Harvard’s Joint Center for Housing projected home improvement spending to increase by nearly 14% this year.
“Record-breaking home price appreciation, solid home sales, and high incomes are all contributing to stronger remodeling activity in our nation’s major metros, especially in the South and West,” said Sophia Wedeen, a researcher in the Remodeling Futures Program at the Center.
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