Home Equity Hits Record High, and Here’s How Homeowners are Spending It

Home equity hits record high, and here’s how homeowners are spending it

  • Remodeling spending topped $152 billion in 2017, and is forecast to increase in 2018.
  • Homeowners are using home equity cash to pay down other debt in order to lower monthly payments.
  • But homeowners are increasingly taking the cash out to make more cash.

An aerial view of a retirement community in Central Florida

Home equity hits record high  

Homeowners are racking up record amounts of home equity, thanks to fast-rising values in today’s competitive housing market. No surprise, more people are now starting to tap that cash. What are they spending it on? Mostly making their homes even more valuable.

Renovation spending is soaring, and 80 percent of borrowers taking out home equity lines of credit say they would consider using that money to renovate, according to a survey released in December by TD Bank.

“We’re not only seeing more requests for proposals, but more committed projects from home owners,” said Steve Cunningham, a remodeler from Williamsburg, Virginia, in a report from the National Association of Home Builders. “In addition to regular updates and repairs, there’s been an uptick in more ambitious large remodel requests.”

Remodeling spending topped $152 billion in 2017, and renovations for owner-occupied single-family homes will increase 4.9 percent in 2018 over 2017, according to the NAHB. That does not include remodeling done by investors looking to flip or rent properties, both of which are increasing as well.

A home improvement contractor works on a house in Cambridge, Massachusetts.

Suzanne Kreiter | The Boston Globe | Getty Images
A home improvement contractor works on a house in Cambridge, Massachusetts.

“Below-normal rates of home building are creating an aging housing stock,” said Paul Emrath, vice president of survey and housing policy research at the NAHB. “Factors inhibiting stronger growth include the ongoing labor shortage and rising material prices.”

An older housing stock, combined with not enough new homes being built, means more people will choose to renovate.

Homeowners are also using home equity cash for education expenses and to pay down other debt in order to lower monthly payments, but there is a new and increasingly popular use: taking the cash out to make more cash.

“Essentially there is a confidence from some homeowners in the overall market that indicates to them that they can generate a return on their money at a rate greater than the cost of borrowing it,” said Matthew Weaver, vice president of sales at Finance of America Mortgage.

He also said there is now a strong confidence among borrowers that home values will continue to rise, making it less likely that borrowing against their homes even more will not end up putting them underwater on their mortgages in the future.

For some that means investing in the stock market. For others it is buying more real estate. Rental demand is still very high, especially for single-family homes, and a new breed of rental management and investment company is making it much easier to become a landlord.

And of course, “Some are looking to profit from the popularity of cryptocurrencies such as bitcoin,” added Weaver.

Posted on January 17, 2018 at 7:08 pm
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Portland home-sellers must disclose home energy score under new city mandate

A for-sale sign in front of a house in North Portland.

A requirement that Portlanders selling their houses disclose the results of a home energy audit took effect this week, though it appears to be off to an uneven start.

The requirement, approved by the Portland City Council in 2016, is intended to give buyers a better idea of their maintenance costs in the long run. It’s modeled off programs in cities including Austin, Texas; Berkley, California; and Boulder, Colorado.

It requires many homeowners to have their homes scored on a 1 to 10 scale, as well as disclose the estimated annual energy use and cost, before putting it on the market. (The policy applies to single-family houses and any housing unit that occupies the entire space from the foundation to the roof, like townhouses and certain condos.)

That information must be disclosed in listings and the audit results made available at open houses and in-person showings. The city may exempt certain low-income households, as well as households in foreclosure or other financial distress.

The disclosure requirement was off to a slow start after taking effect Monday. Many new online listings within the city limits lacked the home energy score. (Homes on the market before Jan. 1 weren’t required to obtain a score.)

Andria Jacob, the senior manager for energy programs at Portland’s Bureau of Planning and Sustainability, said the city would be monitoring new listings and contacting brokers when their listings lacked the disclosure.

“We’re expecting it to take a little bit of time,” she said. “Our plan is not to come out swinging a heavy stick right away.” The ordinance allows for fines of up to $500.

The 10-point rating system was developed by the U.S. Department of Energy, with a score of 5 representing the average U.S. home. A house that scores a 1 is estimated to use more energy each year than 85 percent of homes, while one that gets a 10 is expected to use less energy than 90 percent of homes.

The scores are based on a home’s size, its heating and cooling systems and its insulating features.

The city has contracted with Earth Advantage, a Portland nonprofit, to oversee the program. The scores are determined by energy assessors certified by Earth Advantage; many are home inspectors, while others are affiliated with contractors that do energy retrofits.

The Portland Metropolitan Association of Realtors opposed the measure, arguing it would add to a seller’s costs without meaningfully changing buyer behavior. Real estate brokers aren’t totally in agreement about that, however.

“Of course it’s going to be a bargaining chip that will help certain people make a decision,” said Annie Rose Shapero, a broker with Oregon First Realty. “But it’s also going to help those people who are more financially vulnerable make a decision about which probably is going to give them the most security as far as their future utility bills.”

And while homeowners have always considered the potential resale benefits of installing new hardwood floors or updating appliances, the return on energy-efficiency improvements has never been very clear because they’re rarely featured in listings. A required rating could change that.

“We’re helping change the conversation,” said Hilary Bourasa, a principal broker with Meadows Group Inc. Realtors. “It’s taking the focus away from granite countertops and stainless-steel appliances and putting it on housing affordability.”

In the handful of days since the program took effect, some real estate brokers have complained that scores are coming in low, or include inaccurate information.

Mark Wheeler, the owner of Roots Realty in Southeast Portland, said an energy score audit of one client’s house failed to include a high-efficiency furnace. The clients are selling because they can no longer afford the home, he said, and the prospect of spending more money or losing prospective buyers is an added stress.

“If my clients had spent $250 on doing some actual energy improvement on the house I’d feel good about that,” he said. “But they spent $250 on a flawed piece of paper.”

Jacob, the city’s energy programs manager, said Energy Trust would be auditing 5 percent of the completed energy scores to ensure they’re accurate.

Posted on January 10, 2018 at 11:35 pm
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NEW PRICE | $890,000 | The Eliot Condominium

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Perfectly Located | 0214 SW Sweeney


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6316 SW Thomas Street | Architectural Icon

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2970 NW Circle A

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Bedford Brown

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Posted on December 6, 2017 at 12:13 am
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The Eliot #1705


Amenities abound in this sophisticated condo located in the contemporary Eliot Tower. With room for guests and an open floor plan for entertaining, this building also enjoys a gym, library and community room with a kitchen and grill for all to accommodate holiday parties large and small. Take in the city lights and cozy up by the fire in this not-to-be-missed home.

 

Posted on November 16, 2017 at 12:45 am
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New York Time’s Winter Home Checklist

By Ronda Kaysen, NYTs

For the most part, we hunker down in the winter, as the weather is often too cold and unpredictable to tackle major home improvement projects. Make sure your home is prepared for the harsh weather.

YOUR GROUNDS

Bring out the snow blower. Make sure your snow blower is in good working order before it snows. You do not want to be caught in the first major storm with only an orange shovel to dig you out, Send the snow blower to a small-engine repair company for a tune-up. Some companies will pick up and drop off your equipment for you. Expect to spend $60 to $200, depending on the size of your blower, according to Angie’s List. Make sure you have gasoline and motor oil.

Read more about the best snow blowers from Wirecutter.

Stock up on supplies. Stock up on ice melt before the Weather Channel tells you a storm is coming. Pet owners and parents should shop carefully, as the chemicals in ice melt can harm pets and people alike, if ingested. Look for brands free of salt or chloride. But even products billed as “pet safe” can still harm your pet, so wipe their paws and don’t let them lick treated snow. Ice-melting products can also damage your foliage, so use sparingly. Make sure your shovel survived last winter because you will need to dig out of stairways and narrow pathways, even if you have a blower.

Ice dams. When ice accumulates along the eaves of your roof, it can cause a dam that can damage gutters, shingles and siding. As water leaks into your house, it can wreak havoc on your paint, your floors and your insulation. Throughout the winter, inspect the exterior of your home regularly for signs of ice dams. Look for icicles, because the same forces create dams. Consider buying a roof rake. The $30 tool will help keep ice off your roof in the first place by removing fresh snow from your roof after a storm. Do not hack away at the ice, as that could harm you or your roof

INSIDE YOUR HOME

Heating systems. Check and change filters on your heating system, as filters need to be replaced anywhere from twice a year to once a month. Keep an eye on the water levels in your boiler to make sure they do not fall too low.

Frozen pipes. When water freezes in pipes, it expands, damaging or cracking the pipes. When the ice melts, and the pipe bursts, your home fills with water. Pipes near the outside of your home are at greatest risk, like outdoor faucets, pipes in an unheated garage or swimming pool supply lines. A few tips:

  • Shut off and drain outdoor faucets before the cold weather hits.
  • Insulate pipes where you can.
  • On cold days and nights, keep the cabinets below sinks open to let warm air in.
  • You can also run the faucet at a drip to keep water moving.
  • Keep the thermostat set at a steady temperature.
  • If you go away, set the thermostat to a minimum of 55 degrees, according to the American Red Cross.

Generator. A portable generator can provide you with a lifeline in a blackout. Power it up every three months, and have it serviced twice a year (even if you never use it). Keep fuel and motor oil on hand in the event of a storm. Do not let fuel sit in the tank for long periods of time, as that can damage it. Check it regularly for corrosion and wear.

Winter storm prep. A heavy winter storm can leave you housebound for days. Stock up on wood for the fireplace, gas for the snow blower and canned food and bottled water, in case you lose power. Check your emergency supply kit for batteries, a radio, a first-aid kit and any medicines you may need. Check in on neighbors who may need help shoveling out (a little camaraderie in a storm goes a long way).

Posted on November 8, 2017 at 9:17 pm
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SW Portland Modern Estate | 6316 SW Thomas Street

Posted on October 23, 2017 at 11:33 pm
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