Monthly Archives: November 2019

Homebuyers in New York State closed over 12,000 sales in October

Against the continual backdrop of fewer homes on the market, homebuyers in New York State closed 12,408 sales during October, falling 4.1-percent from October 2018, according to the housing market report released by the New York State Association of REALTORS®.

For more details, see “New York State Housing Report – September 2019” from the New York State Association of REALTORS®.

Prices increase while new listings decrease in Chattanooga region

In October, mortgage rates increased slightly from the three-year lows seen in September. While the Federal Reserve reduced the federal-funds target rate by .25%, this decline was widely expected and largely factored into mortgage rates already, which are still approximately 1% lower than this time last year. Fannie Mae is predicting that continued low rates, and possibly lower rates, are expected in 2020.

For more details, see “October 2019 Market Statistics” from the Greater Chattanooga Association of REALTORS®.

Connecticut’s Foundation Crisis Continues On

Some homeowners in northeastern Connecticut have been experiencing their own personal earthquakes as faulty home foundations fail underfoot. The New York Times article, “With Connecticut Foundations Crumbling, ‘Your Home Is Now Worthless’” shared one resident’s harrowing experience.

“Sandra Miller was at work in January when her daughter called from their home here on Oakridge Drive with alarming news. The house was making loud noises as if someone had jumped off the counter and landed with a bang. For a few seconds afterward, the house shook. A while later, it happened again, and again. Over the next several hours, terrifying bangs rattled the house.” The next day a structural engineer determined that the house was literally collapsing underfoot.

“The cracking (of the foundation) starts small and may take more than 10 years to over 30 years to appear.”

While not every homeowner’s discovery was as frightening as the Millers – hundreds, likely thousands of home foundations in the area are falling apart. In search of an explanation, the state reached out to The University of Connecticut, asking them to conduct a study to find out why.

The university found that one common factor in all the foundations was the presence of pyrrhotite, a mineral that is known to swell when exposed to oxygen and water causing cracking of concrete. Concrete is composed of cement, sand and aggregate and typically mixed at the building site. The pyrrhotite that was compromising the integrity of the concrete, and causing foundations to deteriorate, was traced back to one particular quarry and the aggregate that they provided for the  mix.

The compromised aggregate was used to mix concrete for thousands of Connecticut homes from 1983 until 2016 when the company went into a voluntary agreement to no longer use that aggregate for residential construction. The current number of homes who are experiencing foundation issues is expected to continue to increase.  Connecticut State Department of Housing explains that this is because “The cracking (of the foundation) starts small and may take more than 10 years to over 30 years to appear.”

Homeowners who experienced foundation failure and turned to their insurance providers for assistance and found their claims denied. The state stepped in, advising insurers that while they may be within their rights to deny claims they should not consider canceling policies over foundation claims.

A bill was also passed in 2016 that allowed homes experiencing foundation failure to undergo property value reassessments. While short term solutions did save property owners money come tax time – it had a negative impact in communities where multiple homes within the same township were given lower property value assessments.

The Middletown Press reported that “A handful of medium-to-small towns now have seen up to $8 million in losses on their taxable property lists, and the subsequent dip in tax collections is beginning to show up in their budgets.” The towns the article refers to are South Windsor, Vernon and Tolland. Other towns have lost anywhere from $1 to $6 million according to data provided by the Capital Region Council of Governments (CRCOG).

“We’re looking at a natural disaster here. A catastrophe. This is an insidious problem. It’s gradual.”

In addition to warning insurers not to drop homeowners from their policies, Connecticut has provided financial assistance in several different ways.

The Connecticut Foundation Solutions Indemnity Company (CFSIC) was established to provide grants of up to $175,000 to eligible homeowners. However, since the work is extensive, even $175,000 doesn’t cover the full amount to bring the home back to the original condition.

This is where the Connecticut Housing Finance Authority (CHFA) comes in. The CHFA works with four banks to provide guaranteed, gap loans for homeowners. What the CHFA lends, helps homeowners to pay for the costs that go above and beyond the funding provided by the indemnity company.

Because the number of affected homes continues to rise, the grant money provided by the CFSIC is running out. When the CFSIC was created they were to receive $125 million, to be dispersed to eligible homeowners up until 2022. As of 2019, their funding is almost exhausted by the 121 million applications that have been submitted. This has forced the CSFIC to temporarily suspend taking applications until new sources of funding are found.

Dan Keune is the President of the Connecticut Association of REALTORS®, and he also serves on the CFSIC’s Board of Directors. From his vantage point, “The number of applications the CFSIC has received says a great deal about the success of the program. When we first began accepting applications in February there were individuals who didn’t believe that the problem was as large as it appeared. Yet, here we are about to run short of funding three years ahead of schedule because of the rising need for assistance.”

Michael Maglaras, the CFSICs Superintendent, is very concerned about the future. “We’re looking at a natural disaster here. A catastrophe. This is an insidious problem. It’s gradual. It creeps up through the system and it destroys homes and it destroys lives.” Maglaras is urging state and federal lawmakers to put forward another $100 million, funding that he believes will put an end to the first wave of the problem.

One of the requirements of the CFSIC that began this past February was that homeowners were had to have an inspection conducted by an engineer if they needed to qualify for CFSIC funding in the future. Because the foundation issues could arise at any time, new home buyers needed to complete this inspection as soon as possible. However, the time it took to find a qualified engineer was causing a significant delay in home sales.

The Connecticut Association of REALTORS® created a solution by funding a course, that the CFSIC led, giving traditional home inspectors the knowledge they need to perform the required foundation inspections. This greatly reduced the time it took to buy and sell a home as well as ensuring that homeowners had a reliable inspection.

Keune says that the Connecticut Association of REALTORS® will continue to support its members, clients and communities the best we can with this difficult situation.

Ocean City Residents Grapple with Short-Term Rentals

Ocean City is a unique beach town because of its location on the far northeastern tip of Maryland.

Nestled between the Delaware beaches and the Virginia border, Ocean City tends to be a 115-block long slice of heaven for many tourists between May and September.

But because of where it is situated, so close to neighboring states, it also faces some significant challenges. None are likely bigger for homeowners than the ongoing battle with the city government on how to manage short-term rental properties.

For much of the past five years, full-time Ocean City residents have been at odds with property owners who do not live at the beach year-round, about renting their homes to tourists.

The line in the sand, as it were, stems from the full-time residents not wanting a constant changeover from one rental group to another in their neighborhoods, while the property owners who are renting out their beach houses fight back with arguments about property rights.

The problem is, these property owners, who dutifully pay property taxes as well as other utility bills and fees to the city and who help the local economy by welcoming vacationers to their homes who will undoubtedly spend money at local businesses, aren’t well-represented.

And now, with Mayor Rick Meehan and City Council discussing solutions for short-term rentals, which could include a ban on all rentals of less than four weeks within certain designated zones in the city, out-of-area homeowners could get squeezed financially on their investment and not even be aware that it’s happening.

“Homeowners who use their properties in Ocean City as an investment should try to stay more on top of the goings-on at City Hall.”

That’s because many homeowners who live outside of Ocean City, do not have the ability to attend City Council Meetings or even Council work sessions.

As such, many decisions that could be made that may have an adverse effect on property rights are being conducted without a real voice for those homeowners.

In short, if they don’t have a seat at the table, then their homes might be on the menu.

Making matters worse, non-resident Ocean City property owners are not allowed to vote in city elections and their voices are largely muted by town officials during these proceedings because they don’t live in the town full time.

It leaves trade organizations like the Coastal Association of REALTORS® to speak out on behalf of these property owners, but that voice while presented loud and clear, isn’t often enough by itself.

Many restrictions on short-term rentals have been considered in recent years in Ocean City, and with the use of social applications like Airbnb, HomeAway and VRBO to rent properties growing exponentially, the clamor from full-time residents has grown louder in recent years, leading to the city government to try and come up with a way to combat it.

No property owner who rents their home wants to see a ban on short-term rentals, but it would have an especially negative impact in Ocean City.

Again, considering it’s location, if bans are instituted, and fewer homes or properties are available to rent in Ocean City, tourists will likely look to neighboring beaches – which happen to be situated inside the borders of other states, and all the economic revenue will go to those towns and states, and not to Ocean City, or Maryland.

As such, homeowners who use their properties in Ocean City as an investment should try to stay more on top of the goings-on at City Hall, where Meehan and City Council are in the process of updating the city’s Strategic Plan.

These out-of-area residents can track the conversations being had at City Hall by watching agendas and videos of council meetings that are available to stream through the city’s web site under the headings of “Government” and “Council Agendas and Videos.”

Outside the Box Thinking: San Jose Tackles Affordable Housing Crisis

Finding affordable housing in most major cities in the United States is becoming increasingly harder by the day.

Especially in San Jose, where being in the heart of Silicon Valley has caused home prices to skyrocket. Couple that with a housing shortage and, well, finding a place to live in San Jose has become next to impossible for middle income earners.

The good news is, San Jose government isn’t sitting on its laurels, as it tries to tackle this housing crisis that is punishing to many workforce individuals like teachers, nurses, and first responders.

The Bay Area’s largest city has turned to creating co-living environments. Taking a page from New York, which is the most established co-living city in the country with more than 1,100 existing units and another 1,600-plus in the pipeline according to Bisnow, San Jose is incorporating some progressive ideas to address this affordability issue.

While New York’s Department of Housing Preservation and Development launched ShareNYC, a program that provides public funding for the development of affordable, co-living environments, San Jose has gone a step further.

In the past year, it has completely re-written its zoning code to include co-living as a use within the code.

It became the first city in the country to do that, and others are sure to follow suit as they see the influx of co-living development in San Jose.

New Multifamily Complex

The jewel of that development is a co-living high rise being built in the city that will be a 302-unit, 803-bed multifamily complex slated to break ground before the end of the year. This 18-story building, being developed by the California-based company StarCity, will be the largest co-living development in the world.

However, with San Jose changing the zoning code, there’s a good bet that this project will only hold that title for a short period of time. That’s because having its own zoning code for co-living, San Jose has basically put up a flashing neon sign to developers across the country that says, “Come build here.”

Not to mention, co-living is a trend that is starting to gain some steam in many major cities around the country. StarCity already has smaller developments in Los Angeles and San Francisco, and New York remains the bell cow for this concept.

While there is a unit count, these co-living spaces are measure more on the number of available beds. Co-living spaces are similar to college dormitories in the sense that they offer private living spaces, or bedrooms, with shared living rooms, kitchens, laundry facilities, etc.

“The growth coming to San Jose will attract a slew of younger tech workers, which is ideal for a co-living environment.”

The new development in San Jose is close to public transit and is located conveniently near big employers who are either already in San Jose or in the process of re-locating there.

For example, Google has purchased more than $300 million in property in the city, most of it near Diridon Station where the tech giant has plans for a transit-focused village.

According to San Jose Spotlight, the Jay Paul Co., a Northern California developer has already committed nearly $700 million in the city while Urban Community, a San Jose-area based developer is planning to spend billions in this market, according to Bisnow.

With all that additional business space development on tap for San Jose in the roaring ‘20s, the city is going to need even more affordable housing, which makes the notion of co-living all the more practical.

25,000 new homes

The San Jose City Council has set a target of 25,000 new homes in the city by 2023 and an ambitious 120,000 by 2040.

With the costs required for more traditional development, those goals seem a little far-fetched. But, once you mix in the concept of co-living, suddenly they seem attainable.

Rents for the new StarCity development are expected to star in the low $2,000s, which could be as much as 50% cheaper than the typical studio apartment in downtown San Jose.

The growth coming to San Jose will attract a slew of younger tech workers, which is ideal for a co-living environment.

According to a report from JLL, investment in co-living has increased by 210 percent globally since 2015. A majority of that is new development – roughly 60 percent – rather than converting existing space into co-living use.

StarCity has made it known they are looking at other potential sites in San Jose and other major co-living companies are exploring options there as well. This could make San Jose the model for easing the affordable housing crunch nationwide.

Maryland Housing Report

The start of the final quarter of 2019 reveals a steady real estate market throughout the state, according to housing statistics released by Maryland REALTORS®. Average home prices rose by 5.9 percent while the median price increased by 7.1 percent compared to the same time in 2018.

For more details, see “Housing Market Remains Stable” from the Maryland REALTORS®.