Monthly Archives: October 2017

Student Loan Debt Delays Homeownership in Minnesota and Beyond

Student loan debt is an increasing problem in the United States.

Student loan debt is an increasing problem in the United States. It is impacting life decisions for many young adults, millennials and yes, even Americans approaching retirement age.

Debt can affect everything from where to live to whether to start a family.

With the debt load in this country from student loans at $1.4 trillion – or 10 percent of all outstanding debit in the U.S., it’s also having a significant impact on the housing market.

With the debt rising, homeownership rates are falling – especially among younger generations.

Recently, the National Association of REALTORS® (NAR) and American Student Assistance® (ASA) worked together to conduct a study of student loan borrowers who are currently in repayment, splitting them into younger millennials (born between 1990 and 1998) and older millennials (born 1980 to 1989).

The results of the survey are staggering, showing that even those who pay their bills on time are having a hard time buying a home.

According to the survey, 20 percent were delayed by at least two years in moving out of a family member’s home after college due to their student loans.

And while 20 percent are currently homeowners, 15 percent live with friends or family and do not currently pay rent.

The Student Loan Problem in Minnesota

And this is heightened on a local level in some states.

Take Minnesota for instance.

According to a report published by University Government and Community Relations at the University of Minnesota, more than half of the college’s students graduate with debt.

According to a report from LendEdu, statewide in Minnesota, college students average roughly $31,000 in debt, which is about $4,000 higher than the national average.

“Minnesota has always tended to have a higher student debt than other states,” said Megan Fitz Gibbon, a financial aid specialist at the Minnesota Office of Higher Education to the Minnesota Daily. “Part of that is because our campuses or colleges have higher tuition than many other states … but we also tend to have higher family incomes, so families may not qualify for those need-based scholarships as much because they have higher incomes so they rely more on student loans.”

Part of the problem is a lack of education for students on what college is going to entail financially.

According to the NAR/ASA study, before attending college, 28 percent of borrowers knew generally the school “might be expensive” or “might be cheap”, but had no further information.

Additionally, more than one-quarter of borrowers had an understanding of tuition, but had little understanding of other costs such as fees and housing expenses.

This likely leads to graduates going into forbearance on their loan, or going into default.

Making matters worse is that it’s not like these Millennials are simply eating avocado toast.

Eighty-four percent of respondents are working full-time. Eight percent are working part-time and the majority of those are looking for full-time work.

Student Loans Delay Homeownership

Forty-two percent of poll respondents have delayed their move out of their family home because they can’t afford to live on their own, let alone purchase a home.

Twenty percent delayed moving out of a family member’s home after college for at least two years.

Among non-homeowners, 83 percent believe their student loan debt has delayed them from buying a home.

The primary reason for this lack of homeownership is the inability to save enough money for a down payment.

What To Do?

So, what can be done – especially when, according to the Georgetown University Center on Education and the Workforce, 65 percent of all jobs in America will require a college education?

Going to college is important in the United States for us to stay competitive globally, but there needs to be financial relief for these students who are attending college to make sure that is the case.

Solutions need to both reduce student debt levels in the future and enable current borrowers to manage education debt successfully, so they can simultaneously achieve other financial goals.

To that end, NAR makes the following policy recommendations to ease the struggles of past, present and future borrowers:

Allow students to refinance their loans:

As mentioned above, high student loan payments have made it very difficult for potential homebuyers to save up for a down payment. Lawmakers can help student loan borrowers mitigate this problem by providing student loan borrowers the ability to refinance into lower interest rates.

Increase financial education for college students:

Colleges can help minimize borrowing by teaching students basic personal finance 101, such as budgeting and distinguishing between wants and needs. Additionally, using student loans as a teaching tool to convey such concepts as principal, interest and capitalization will lay the groundwork for students to be more educated consumers for future purchases – like a home.

Student loan simplification, clarity and education of repayment options:

The loan process can be very confusing for both parents and students. Thus, the loan process for all student borrows should be simplified and student loan borrowers should have access to education to help give them a better understanding of debt and repayment options.

Streamline income-based programs:

Currently there are numerous income-based repayment programs with different income caps, repayment schedules and forgiveness options. This has created confusion amongst students, parents and loan servicers in trying to identify the best repayment option for the borrower.

Standardize mortgage underwriting guidelines:

Mortgage underwriting guidelines related to student loan debt at Fannie Mae, Freddie Macand various government agencies need to be standardized to promote fairness and to ensure student loan debt is calculated appropriately in a borrower’s debt-to-income calculation.

Staged Homes Sell Faster

Staging a home decreases the amount of time the home spends on the market.

Selling your home is not an easy process. In fact, it’s harder than most people think. But there are ways to making it easier, and one of those ways is staging your home.

It’s a tactic that more and more homeowners are starting to take either on their own accord or through the recommendation of a REALTOR® – and it’s proving to be effective.

According to a study conducted by the National Association of REALTORS® (NAR), homes that are staged are selling faster and at higher prices than those that are not staged.

“REALTORS® know how important it is for buyers to be able to picture themselves living in a home and, according to NAR’s most recent report, staging a home makes that process much easier for potential buyers,” said NAR President William E. Brown, a Realtor® from Alamo, California and founder of Investment Properties. “While all real estate is local, and many factors play into what a home is worth and how much buyers are will to pay for it, staging can be the extra step sellers take to help sell their home more quickly and for a higher dollar value.”

According to the report, nearly two-thirds of sellers’ agents said that staging a home decreases the amount of time the home spends on the market. Sixteen percent of sellers’ agents believe that staging either greatly or slightly increases a home’s time on the market.

Seventy-seven percent of buyers’ agents said that staging a home makes it easier for buyers to visualize the property as their future home, and 40 percent are more willing to walk through a staged home they first saw online.

Where things get interesting is that 38 percent of buyers’ agents said that staging positively affects a home’s value if the home is decorated to the buyer’s taste, meaning that a home’s staging should be designed to appeal to the largest number of potential buyers.

That’s interesting because potential buyers may not have the same tastes as the current homeowner, and as such the current style inside the home may not mesh with that of a majority of buyers.

Which is what makes home staging its own cottage industry.

“Although 25% of sellers pay for the staging themselves before listing their home, 21% of REALTORS® offer to stage the home,” said Jessica Lautz, managing director of surveys, research and communications in NAR’s Research Division. “Additionally, 14% of REALTORS® offer a home-staging service and 8% hire a professional home staging service.”

And those numbers are creeping up higher and higher each year.

“You want the house to feel comfortable and welcoming when people walk through the door,” Lautz said. “Our members suggest decluttering the home and a full cleaning – including carpet cleaning if you have carpets. Also removing pets, and that minor repairs are taken care of. If you have that drippy faucet, a potential homebuyer will notice it.”

More home buyers are doing all their research online before going to see a home.Click To Tweet

More buyers are doing all their research online before going to see a home, so how it looks online will dictate whether they are interested in a particular home or not.

The living room is the most important room, according to the study, to stage, followed by the kitchen and the master bedroom.

Some agents are even staging areas of homes if they are unique to the property – like an enclosed deck or a pool area.

And even a new kind of staging is starting to exist – virtual staging.

That’s right, using simple Photoshop tools, a Realtor is able to decorate an empty home digitally and present those photos online for potential buyers. It’s become such an savvy tool, that the REALTOR® personalize a home for multiple buyers and make it look different for each based on preferences – even though the home is, in reality, empty.

“It’s easier to visualize yourself as that future homeowner and you are willing to walk through that home you saw online,” Lautz said. “And you don’t even have to physically bring in furniture and what not to take pictures.”

It kind of equates to the old adage about book covers – if it’s appealing while the consumer is browsing, they are more likely to pick up the book to learn more about it, and once a book is in a consumer’s hand, they are more likely to buy it.

And when it’s staged, buy it, they are.

The highest share of buyers’ agents, 31 percent, reported that staging a home increases its dollar value by 1 to 5 percent. Thirteen percent said that staging increases the dollar value 6 to 10 percent.

Sellers’ agents report even more value is added from staging: 29 percent reported an increase of one to five percent in dollar value offered by buyers, 21 percent reporting an increase of 8 to 10 percent, and 5 percent reported an increase of 11 to 15 percent.

“We’ve been getting so many questions from members about the value of home-staging, which is why we did this study a second time,” Lautz said. “What I think is going on is that a lot of homebuyers not only look at homes online, but they are also watching shows on TV and have different expectations when they go into a home than what is mostly out there on the market.

“So, home staging has become much more popular with T.V. shows that are about home ownership and purchasing a home.”

Video: What Every Seller Needs to Know About the Value of Home Staging

Who doesn’t love a good real estate television show? In the span of thirty minutes we watch as home buyers check out a handful of homes, fall in love with one, and eagerly negotiate a deal with the seller.

But in real life, selling your home is not quite that easy. For starters most buyers pre-view far more listings than a TV buyer appears to see. And your home will be competing against every last one of them.

That’s why more and more sellers today turn to home staging.

Watch this video to learn.

REALTORS® Reveal Which Home Projects Bring The Biggest Return To Homeowners

Hard wood flooring in beautiful stylish living room area.

It’s not exactly a REALTOR® secret that upgrading your home usually means a bigger check at the closing table. But not every remodeling project translates into greater profit. And some homeowners have learned the hard way that the projects they’ve chosen to invest their time and money into don’t always bring the returns they banked on.

The 2017 Remodeling Impact Report from the National Association of Realtors® (NAR) provides some good insight for homeowners who want to make sure that they’re investing wisely when choosing a remodeling project. “Realtors® understand which remodeling projects and home upgrades will bring the most value to homeowners, whether they are remodeling with the hope of impressing potential buyers, bringing in higher offers or gaining more equity in the home,” said NAR President William E. Brown.

Kitchen renovations/upgrades, bathroom renovations and new wood flooring have the biggest appeal to home shoppers.Click To Tweet

Owners who want to spruce up their interior before selling their home, would be wise to learn which projects are worth the expense. REALTORS® found that complete kitchen renovations, kitchen upgrades, bathroom renovations and new wood flooring generated the biggest appeal to home shoppers. The interior projects that ended up yielded the largest financial return though? Hardwood floor refinishing.

Buffing and staining your hardwood is well worth it as homeowners typically recover 100% of project costs upon resale. If you need to lay down brand new wood flooring you’ll lose a bit of return, recovering only 91% of the investment. Surprisingly, bathroom renovations or adding a new bathroom entirely, actually yielded the lowest return. Homeowners only recouped 50% of those project costs.

REALTORS® advise homeowners looking to add curb appeal to focus on their rooftop. New roofing recovers 109% of projects costs at resale – more than any other remodeling project covered in the report. Vinyl windows, garage doors and vinyl siding are also worthwhile upgrades but none give homeowners as much bang for the buck as roofing.

Brown shares that most REALTORS® suggest focusing on the exterior first when remodeling for profit. “A home’s exterior is its first impression to potential buyers, so any project that improves curb appeal will yield plenty of bang for the buck.”