Blog - George L. Duarte

How To Create A Home-Buying Partnership

October 2, 2019 by George Duarte

How To Create A Home-Buying Partnership Many want to have a home, yet find it difficult to afford one by themselves. Some people are forming home-buying partnerships to buy a home and live in it together. Here are some considerations for those interested in forming a home-buying partnership.

A home-buying partnership is a legal and personal relationship that is similar to having a permanent roommate. It has the feeling of being married to the other person in a legal way, not in a romantic way. Like any business partnership, there are advantages and disadvantages.

Advantages Of A Home-Buying Partnership

Buying a home is easier when sharing the responsibility with another person. In an equal partnership, the money needed is half and the expenses are also half of when compared to buying a home alone.

Wasting money on rent stops and the equity value may build up by owning a home over time if real estate prices increase.

Combining credit strength as co-signers may make it easier to buy a home if both parties have a decent credit history. Qualifying for a bigger home loan amount may be possible, which allows buying a larger home.

A strategy to consider is buying a duplex building, which is two homes combined into one building structure.

Disadvantages Of A Home-Buying Partnership

Getting along well with your home-buying partner is essential. Not only will you share a business relationship, but you will also see each other constantly. Having compatible lifestyles is critical to avoid personality clashes.

People who have been roommates for years and get along extremely well make great candidates for home-buying partners. This is a far better choice than doing something this serious with a person you just met.

Legal Structure

The best way to own the property is by forming a single-purpose limited liability company (LLC). The company will do nothing but own the home. An LLC is like a general partnership with the exception that it limits the liability exposure of its owners to the investment value they have in the LLC.

Ownership in an LLC is in units of the LLC. Owning half the authorized units is half the LLC. If one partner has one unit more than the other one has, that partner has decision-making control over the property.

For tax purposes, an LLC is a pass-through entity. The tax obligations and benefits pass to the owners of the LLC according to the portion of the LLC that they own.

Sudden Death, Buy-Sell Provision

This provision allows for one of the partners to buy out the other one’s ownership before it sells to a third party. This can happen automatically if one of the partners dies or becomes incapacitated. It may happen if there is a disagreement.

The idea is to use this provision so that one partner is not forced to sell the home and has the option to buy the other half of the home before it sells to another party.

Summary

These are just the basic issues about a home-buying partnership. This arrangement can be an effective way to own a home, just be very careful about how you select a partner. Use a competent real estate attorney to form the LLC properly.

And as always, consult with your trusted home mortgage professional to help you navigate through the purchase process.

4 Cool Green Material Ideas For Your New Home

October 1, 2019 by George Duarte

4 Cool Green Material Ideas For Your New Home If climate change is foremost in your mind, you may be interested in reducing your new home’s carbon footprint. Choosing green materials is one way to promote sustainability and ensure you’re doing your part to help the planet.

Green Flooring

Flooring takes up all the square feet throughout your home. If you can opt for green flooring that will do a lot to reduce your new home’s carbon footprint. Bamboo is a sustainable flooring option to consider. Bamboo grows at a rate that far outpaces any hardwood. For that reason, it’s become a popular choice for homeowners looking for green material options. Bamboo flooring now comes in a wide variety of colors, textures and styles. You’re sure to find something that matches with your style and décor.

Green Insulation

It’s now easier than ever to find green insulation options at just about any hardware stores. Green insulation is frequently made up of recycled fabric. The benefit above being sustainable is that there is no fiberglass to worry about getting into your skin or lungs. Green insulation is available in the same forms as some other kinds of insulation, including as a rolled up “blanket” that can be trimmed to match your insulation spaces.

Green Countertops

Countertops are often made of stone and granite, which may be considered green materials. However, the processing of such materials and the energy needed to transport them from the source to your home may not be so green. Consider investing in concrete countertops for your kitchen and bathroom. Concrete is a renewable and sustainable green material. Concrete countertops can be created in the same general location as your new home. They are mold and pest-resistant, fire resistant and offer a permanent countertop solution for those who are eco-conscious.

Green Roofing

Green roofing is harder to find, but in most areas, eco-conscious homeowners still have plenty of options. One such option is to have a copper or metal roof. While copper and other metals do require a labor-intensive process to extract from the earth, they last far longer than traditional roofing materials. Your copper or metal roof could last for a lifetime or more, whereas traditional roofs typically only last a maximum of 20 years.

These green material ideas for your new home will ensure that your home is leaving as small a carbon footprint as possible. For more green material ideas, contact your local contractor.

If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted home mortgage professional to discuss financing options.

What’s Ahead For Mortgage Rates This Week – September 30th, 2019

September 30, 2019 by George Duarte

What’s Ahead For Mortgage Rates This Week – September 30th, 2019 Last week’s economic reports included readings from Case-Shiller on home prices along with data on new and pending home sales. Weekly readings on mortgage rates and initial jobless claims were also released.

Case-Shiller: Home Price Gains Slow to Lowest Pace in 7 Years

Case-Shiller Home Price Indices reported slower home price growth in July with 3.20 percent growth year-over-year. There was no change in July’s reading for the 20-City Home Price Index as compared to June after seasonal adjustments.

The top-three cities in Case-Shiller’s 20-City Home Price Index were Phoenix, Arizona with 5.80 percent home price growth year-over-year. Las Vegas, Nevada reported 4.70 percent growth and Charlotte, North Carolina home prices rose by 4.60 percent.

West coast cities that dominated home price growth in recent years have given way to more affordable markets. Seattle, Washington reported a negative reading of -0.60 percent year-over-year. Low mortgage rates have compelled buyers to enter the market; this could drive up demand again and boost home prices at a higher pace than they are rising now.

New and Pending Home Sales Increase in August

New home sales rose to 713,000 year-over-year in August as compared to July’s reading of 686.000 sales and expectations of 660,000 new homes sold in August. Pending sales rose 1.60 percent in August after posting a negative reading of -2.50 percent in July.

Pending sales are transactions with signed purchase contracts, but that have not closed. Home sales typically taper off in fall after the peak selling season in spring and summer; rising sales during fall suggest stronger housing markets.

Mortgage Rates Fall, New Jobless Claims Rise

Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed rate mortgages averaged 3.64 percent and were nine basis points lower than in the prior week. The average rate for 15-year fixed rate mortgages was five basis points lower at 3.16 percent and rates for 5/1 adjustable rate mortgages fell 11 basis points to an average of 3.38 percent. Discount points averaged 0.50 percent for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

First-time jobless claims rose to 213,000 claims filed from 210,000 new claims filed the prior week. Analysts said the GM auto worker strike caused the increase in new claims.

What’s Ahead

This week’s scheduled economic news includes readings on construction spending and labor sector reports on public and private sector jobs and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims will also be released.

Is It Possible To Have A Hurricane-Proof Home?

September 27, 2019 by George Duarte

Is It Possible To Have A Hurricane-Proof Home The recent total devastation of the Bahamas by hurricane Dorian reinforced the need for hurricane-proof homes in areas that are subject to this risk. Building codes have not kept up with the increasing severity of the weather.

Wind Damage

As an example, Florida communities, such as the Miami-Dade County area, have building codes that are designated by risk zones.

The risk zones in Miami-Dade County are:

Risk Category I – Buildings must be able to withstand 165 mph winds.
Risk Category II – Buildings must be able to withstand 175 mph winds.
Risk Category III – Buildings must be able to withstand 185 mph winds.

These building codes were last updated in 2010. Broward County in Florida has these same risk categories; however, the wind speeds are 10 mph lower for each category. Other parts of Florida have building codes that are even lower than these standards. Dorian reached a 183 mph wind speed. It stayed over the Bahamas for over fifty hours with these winds.

Water Damage

Water damage from hurricanes is more severe than wind damage. The storm surge for Dorian reached over 23-feet high in some places.

Hurricane Proofing

To withstand hurricane-force winds, the structure must be able to handle 180+ mph winds over an extended period. Damage done by the wind includes all the projectiles and debris being blown about. Some homes in the Bahamas had vehicles blown through walls.

The main consideration for wind damage is to use wind-resistant, shatter-proof glass for windows that are also protected by steel shutters, which can be closed when a hurricane is coming. These shutters close to protect other openings such as doors as well. Walls should be thick, reinforced concrete, especially the lower floors that need to resist both the wind and the water.

Water is going to come into the lower two floors of a home on the beach, so beach homes need to be at least three stories high. This may be challenging in some areas because of the building-height restrictions that are in place to prevent blocking other neighbors’ views of the ocean.

The idea is to make to bottom floors able to withstand water entering the home as if it is a swimming pool. When a hurricane is coming, you can move all the items from the lower floors to the upper floor.

In Holland, where many of the coastal cities are at sea level, their solution is to have homes that float. These homes near Amsterdam are like houseboats that are moored down very strongly so that they can rise with the storm surge but not float away.

Summary

There is not a 100% certain way to make a home completely hurricane-proof; however, there are examples of well-built homes that are the only ones left standing when the entire neighborhood is devastated by a hurricane.

When considering a home on the coast, it is better to build a new home to very high standards regardless of the building codes. In all coastal areas, building codes need to be updated to make the hurricane standards more robust because hurricanes are becoming stronger and more frequent.

If you are interested in buying a new home or refinancing your current property, be sure to consult with your trusted home mortgage professional.

Case-Shiller: July Home Price Growth Hits Lowest Pace in 12 Years

September 26, 2019 by George Duarte

Case-Shiller July Home Price Growth Hits Lowest Pace in 12 Years Case-Shiller’s National Home Price Index reported U.S. home prices grew by 3.20 percent year-over-year in July; as compared to year-over-year home price growth 0f 3.00 percent posted in June. Cities with the highest rates of year-over-year home price growth were Phoenix, Arizona with 5.80 percent year-over-year home price growth. Las Vegas, Nevada had 4.70 percent year-over-year home price appreciation and Charlotte, North Caroline bumped Tampa, Florida from the top three cities with home price appreciation of 4.60 percent. Tampa, Florida posted 4.50 percent year-over-year home price growth in July.

Home Price Growth Stalls In West

14 cities had higher home price gains than in June and Seattle, Washington was the only city in the 20-City Index to post lower home prices. Analysts said that after years of rapid and unsustainable growth in home prices on the West Coast coupled with economic expansion and job growth in areas with lower home prices. July readings for home-price growth in western cities that posted double-digit price growth percentages in recent years were far lower. Home prices in Portland, Oregon rose 2.50 percent year-over-year; Los Angeles, California home prices rose 1.10 percent and San Francisco, California posted year-over-year home price growth of 0.20 percent.

High Home Prices Ease Demand Caused By Low Supply Of Homes For Sale

As home prices in many markets skyrocketed, would-be buyers were sidelined by affordability cash buyers and strict mortgage loan requirements. With home prices stabilizing and mortgage rates at near-record lows, more buyers will likely enter the market. This would increase demand on already slim supplies of homes for sale and cause home prices to rise at a faster pace than they have in 2019. Current rates of home price growth remain higher than current inflation and wage growth, but are low enough to encourage home buyers who were previously unable to keep up with rapidly rising home prices.

Seven cities posted higher rates of home price growth year-over-year in July as compared to readings for year-over-year home price growth from June 2018 to June 2019. The National Association of Realtors® said that sales of pre-owned homes were higher in July for the first time in months. The supply of available homes tightened in June; this trend is expected to boost home prices as demand for homes increases.

4 Reasons to Take Your Own Car When Viewing Homes

September 25, 2019 by George Duarte

4 Reasons to Take Your Own Car When Viewing Homes When you’re in the market for a new home to buy, your real estate agent will likely invite you to ride along with them to view homes. This is a convenient courtesy, but you may want to reconsider. Your other option is to follow the real estate agent in your own car instead.

Here are some reasons to take your own car when viewing homes:

1. It Gives You Time To Confer With Your Partner

After you’ve looked at one house, getting back into your private vehicle with your partner allows some time to openly talk about the house you just saw without worrying about how it may influence others.

2. It Lets You Drive Slower

Real estate agents do quite a bit of behind-the-scenes preparation when showing homes. They may have driven to a property several times before they bring you to see it. As such, they may drive with the intent of “getting there,” while you may might like to drive slower so you can see more of the area.

When you follow behind in your own car, you can take your time or even slow down more if you see something of interest, like a park or an interesting coffee shop.

3. It Lets You Contemplate Specific Features

When you get back into your own car after viewing a house, you and your partner can sit in comfortable silence if you wish to think about certain features you really liked. This is also an opportune time to make mental notes of features you’d be interested in seeing in future houses. Once you get your list together you can talk about it later with your real estate agent.

4. It’s More Convenient If You Decide To Make An Offer

Let’s say you’ve just seen the house that you are positive you want to buy. You ask your agent to make a formal offer. Now the agent has to head back to the office to submit the offer.

If you’ve driven your own car, you can simply part ways and you go back to work or home and await the results. Otherwise, there’s a delay on the submission while the agent drops you at your house first.

The next time you spend an afternoon looking at houses with your agent, consider taking your own car. As you can see, it’s the smart option.

Partnering with a trusted home mortgage ptofessional is another important part of your home buying experience. Be sure to make contact to discuss current financing options and to get your pre-approval before you start house-hunting.

Expanding Opportunities For Home-Buying In ‘Opportunity Zones’

September 24, 2019 by George Duarte

Expanding Opportunities For Home-Buying In 'Opportunity Zones' Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act to encourage investors with capital gains on other investments to invest that money in low-income and undercapitalized communities. They get a reward of deferring capital gains tax. They avoid a portion of it altogether if they keep the investment for five years or longer.

What started with a trickle of a few Opportunity Zones scattered around the country is now a deluge with over 3,000 approved Opportunity Zones approved in just about every part of America. 4,700 more areas may also qualify.

Opportunity Zones Expanded Dramatically

The very generous definition of Opportunity Zones not only includes poorer areas but it also includes wealthy areas within larger poor areas. Some are wealthier areas adjacent to poor areas. For example, there are Opportunity Zones in Manhattan, which is an area not typically thought of as low-income or undercapitalized.

Opportunities In Opportunity Zones

The tax incentives along with the current easy financing from real estate lenders are stimulating development projects in Opportunity Zones. Investors may increase returns on real-estate investments by up to 50% for projects in these areas.

The highest returns, based on the tax savings, are for those that invest before the end of 2019 and hold the investment for seven years until 2026. They get a capital gains step-up of 15%. After that, the tax benefits go down to a capital gains step-up of 10%.

Homes In Opportunity Zones

Another attractive characteristic is that the price of single-family homes in many Opportunity Zones is a bargain. The median price of homes in almost half of the Opportunity Zones is less than $150,000. This compares favorably to the national median home price of $266,000.

Moreover, homes in many Opportunity Zones are less than half the price of an adjacent area. The median rents in the Opportunity Zones are not as depressed as the home prices.

For real estate investors looking for cash-flow positive rental properties to acquire for a portfolio, these homes may rent for enough to pay the carrying costs.

For home buyers, these bargain prices may mean it pays to buy a home on the edge of an Opportunity Zone. If the home is adjacent to a nicer neighborhood, the upside potential for appreciation in home value may be enhanced.

Opportunities for low-cost homes exist in the Midwest, which has 73% of its Opportunity Zones with homes that cost below $150,000. The portion in the South is 57% and in the North East, it is 53%. Florida has over 300 Opportunity Zones. Pennsylvania has over 150. Tennessee has about 140. Those are states worth considering.

Summary

Looking for home-buying opportunities in newly-designated Opportunity Zones is attractive for real estate investors building up a portfolio of rental properties and for homebuyers who are looking for a bargained-price home.

If you are in the market for a new home or investment opportunity, be sure to contact your trusted mortgage professional to discuss current financing options.

What’s Ahead For Mortgage Rates This Week – September 23rd, 2019

September 23, 2019 by George Duarte

What’s Ahead For Mortgage Rates This Week – September 23rd, 2019 Last week’s economic reports included readings from the National Association of Home Builders on housing market conditions, Commerce Department reports on Housing starts and building permits issued and the National Association of Realtors® report on sales of previously owned homes.

The Fed reduced its key interest rate and weekly reports on mortgage rates and first-time jobless claims were also released.

Builder Confidence in Housing Market Improves, Sales of Pre-Owned Homes Rise

The National Association of Home Builders Housing Market Index rose one point to an index reading of 68 in September. August’s reading was adjusted to 67 from an initial reading of 66. September’s reading matched the highest reading posted year-over-year.

Readings over 50 indicate that most builders are confident about housing markets. Analysts noted that builder confidence rose despite ongoing concerns about higher materials costs caused by trade wars and tariffs.

According to the Commerce Department, housing starts rose in August with 1.364 million starts on a seasonally-adjusted annual basis. Analysts expected 1.300 million starts and 1.215 million starts were posted for July. More housing starts are good news for housing markets stifled by short supplies of available homes and high demand for homes.

Building permits issued in August also rose from July’s reading. 1.419 million permits were issued as compared to July’s reading of 1.217 million permits issued on a seasonally-adjusted annual basis.

August sales of previously-owned homes rose to 5.49 million sales as compared to July’s annual sales pace of 5.42 million sales. Analysts predicted August sales of pre-owned homes to decrease to 5.39 million sales.

Mortgage Rates, Weekly Jobless Claims Rise

Freddie Mac reported higher mortgage rates last week with rates for 30-year fixed rate mortgages 17 basis points higher at an average of 3.73 percent. Rates averaged 3.21 percent for 15-year fixed rate mortgages and were 12 basis points higher.

The average rate for 5/1 adjustable rate mortgages was 13 basis points higher at 3.49 percent. First-time jobless claims rose last week to 208,000 claims. Analysts expected 215,000 new claims based on the prior week’s reading of 206,000 new jobless claims filed.

The Fed cut its benchmark short-term interest rate by one-quarter point to 1.75 to 2.00 percent, but there was some dissent among policymakers. Seven members of the Federal Open Market Committee voted for the rate decrease; two members voted against the rate cut and one member thought that rates should be cut 0.50 percent.

What’s Ahead

This week’s scheduled economic reports include readings on Case-Shiller Home Price Indices, inflation, pending home sales and consumer sentiment. Weekly readings on mortgage rates and first-time jobless claims will also be released.

How To Crowdfund A Renovation Project

September 20, 2019 by George Duarte

How To Crowdfund A Renovation Project Crowdfunding came into prominence with the Jumpstart Our Business Startups (JOBS) Act that President Obama signed into law during 2012 and subsequent enhancements. The JOBS Act made it easier for startups to raise money and for the first time allowed the legal ability to advertise the investments and accept small investors.

Innovate And Renovate

Crowdfunding is useful for many projects. The method raises money to create new products, make documentary films, and for many kinds of fashion items. Crowdfunding successfully raises money for real estate transactions.

Smaller investors participate in real estate projects that they would otherwise not have enough investment money to create on their own. They may invest a few hundred or a few thousand dollars. When their smaller investment money combines with all the others, the project raises enough money.

One thing that makes crowdfunding projects work is their popularity. Affinity groups who have a special interest in certain things invest money in projects related to something that they like.

One application of this motivational factor is to raise money using crowdfunding to renovate buildings with a historical value or that otherwise attract the interest of the public. The process does not have to start with money. It can start with crowd sourcing ideas.

The CLUE® Mansion

A fun example is the Hasbro Company teamed up with Houzz to get innovative ideas from interior designers about how to renovate the CLUE® Mansion. The mansion is a backdrop for the popular board game.

This promotion celebrates the game’s 70th anniversary. The mansion’s style in the game stayed the same since the game debuted in 1949. The winning room designs, selected by fans, will be part of a new version of the game.

There is no reason to stop there. A real mansion can be renovated to match the game. This could be a CLUE® museum and could offer escape rooms as a money-making enterprise. This is just an idea at this moment. Perhaps, someone will take this up and run with it.

Crowdfunding Renovations

The point is, historic buildings that are of interest may need renovation funds that can be raised using crowdfunding. Those who have an interest in the building from the local community and elsewhere can support the project by investing in the renovation with a small comfortable amount.

Summary

Renovation projects are not easy to finance using traditional lenders. However, if a thousand people invest $100 each that is $100,000 for a renovation project in your community. Paying back the loan can come from a portion of the entrance fees.

Hopefully, this will spark continued interest in preserving and restoring historic homes, which are a terrific part of the American heritage.

If you are interested in learning more about current financing options, be sure to consult with your trusted home mortgage professional.

Fed Policymakers Cut Key Rate Range by .25 Percent

September 19, 2019 by George Duarte

Fed Policymakers Cut Key Rate Range by.25 Percent The Federal Reserve’s Federal Open Market Committee reduced its key short-term interest rate range one-quarter percent to 1.75 to 2.00 percent during it’s September meeting. While FOMC members had mixed opinions on reducing the benchmark rate range for short term loans, the post-meeting statement suggested that reducing the federal funds rate was a hedge against inflation. The federal funds rate impacts short-term consumer loan rates for autos and adjustable rate mortgages, but does not impact fixed mortgage rates. FOMC monetary policy decisions are governed by the Federal Reserve’s dual mandate of maintaining price stability and an inflation rate of 2.00 percent.

FOMC Members Facing Conflicted Opinions On Rate Cuts

Policymakers consider a variety of influences and news when cutting or raising the federal funds rate range. In addition to its dual mandate, FOMC members consider domestic and global impacts on the economy. Uncertainty over effects of international trade disputes and Great Britain’s looming exit from the European Union balanced strengths in the U.S. economy.

According to the post-meeting statement, seven FOMC members voted in favor of the rate cut to 1.75 to 2.00 percent; one member voted for a rate cut to 1.50 to 1.75 percent and two members voted against changing the target federal funds rate range.

Fed Chair: U.S. Economy Expected To Stay Strong

Fed Chair Jerome Powell said in a post-meeting press conference that while U.S. economy expanded for its 11th consecutive year, global economic outlook was less certain particularly in Europe and China. The U.S. economy expanded 2.50 percent in the first half of 2019; factors driving growth included rising consumer confidence, wages and strong job markets. Business investment and exports were lower due to uncertainties over trade. Job growth slowed, but this was expected based on 2018’s fast pace of job growth. Work force participation grew; the Fed expects the national unemployment rate to remain below four percent for the next few years.

Chair Powell said that maintaining strong economic conditions was particularly important for low to middle income consumers left behind during the Great Recession. While current inflation stands at 1.40 percent, the Fed projects that it will grow to 1.90 percent in 2020 and achieve the target goal of 2.00 percent in 2021. Chair Powell said that inflation pressures are muted and at the lower end of historical ranges.

Chair Powell echoed the FOMC statement in saying that the Fed would continue to monitor economic developments abroad and would adjust monetary policy according to economic developments prompted by trade disputes and emerging economic developments.