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U.S. Housing Stock is Aging; Here’s Why!
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U.S. Housing Stock is Aging; Here’s Why!Daniel Dobbs2022-12-17T08:17:19-08:00
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American homes aren’t just getting more expensive; they’re also getting older, and newer homes are increasingly being built-in natural disaster areas, raising insurance rates which further reduces buying power /affordability.
The situation will worse before it gets better.
The median age of U.S. homes had risen to 39 years as of 2019, according to the latest American Community Survey.
For homebuyers frustrated by fierce competition and soaring prices, older homes present a more affordable option.
One obvious caveat: Aging structures require more maintenance and many have hidden defects.
“In many markets, those older homes are more affordable — but they come with an increased need for repairs and maintenance,” says Danielle Samalin, chief executive of Framework Homeownership, a company that coaches first-time homebuyers. “Budgeting for maintenance and repairs is critically important.”
Why Homes are Getting Older
The aging of the U.S. housing stock is partly a lingering bit of fallout from the Great Recession.
Overbuilding was a hallmark of the real estate bubble of 2005. Since then, builders have been underbuilt.
In contrast to the massive suburbs built in the 20th century, the homes that have gone up in recent years are larger, pricier, and less numerous.
The result? There just aren’t a lot of new homes in the U.S. housing market.
Fully 65% of American homes were built before 1989, according to American Community Survey data.
Homebuyers are adapting to the new reality. According to a recent survey of Americans aiming to buy their first home in 2021, fully 71% aren’t looking for a dream home.
Instead, they’re shopping for a starter home or a fixer-upper.
Regardless of new vs. old; “low inventory has been out there as an issue since the financial crisis of 2008”.
Homebuyers should check for a number of state and local grants and zero-interest second trust deed loans, available to owners of older homes such as Mass Save, an initiative by Massachusetts utilities that funds home improvements for energy efficiency.
That program is just one of many forms of financial assistance available to homeowners who invest in aging properties. State and local governments also offer home improvement programs and historic preservation.
While mortgages are available for older homes, appraisers often struggle to find comparable properties for her place — most homes in the surrounding neighborhood are 30 years newer.
Tips for Buying an Older House
When you buy an older home or one in need of work, closing is just the beginning of a long process.
1) Be there for the physical inspection(s); pay close attention (be present) during the process, as this is your first (best) chance to really get to know your home’s hidden flaws.
2) Beware of cost overruns. It’s an unwritten rule of home renovation: No matter how thorough a cost estimate seems, you’ll discover new issues.
3) Consider a fixer-upper loan. If you deplete your savings for the down payment, that leaves you no cash to pay for repairs. The 203k loan is for owner-occupied loans.
One possibility: an FHA 203(k) loan, a type of mortgage that lets you borrow the purchase price and construction costs based on the post-renovation value of the property.
4) Look for other sources of help. State and local home improvement programs, historic preservation loans, and energy-efficiency programs can provide low-cost money for upgrades.
5) Some municipalities offer breaks on property taxes.
6) Property title searches until the 1990s were very done manually and were very cursory, due to a lack of digitization that we rely on today.
Older homes often have title issues going back decades.
Previous owners ‘ heirs may now be deceased, an institution that didn’t reconvey loans, file deeds, and may now extinct. (i.e Countywide).
A builder may have failed to record new ingress and egress easements. The list goes on and on and on.
You need an experienced title rep and title officer.
I’ve gotten loans funded with mechanic leans, un-unpermitted structures, one had an unrecorded deed, a property line dispute, a court lien that was paid but not reconveyed. The oldest home was built in 1904.
Every deal was a nightmare for everyone involved in the transaction. But they funded, everyone got paid. I guess that’s why I get paid the big bucks!
But it took a lot more time and often “cash to cure” the issues.
When it was all over, I was ready for PTSD counseling and Xanax drip.
In Conclusion – My Experience
Obtaining a loan for a fixer with conventional, FHA, or VA is rough. If not impossible.
A 203k FHA loan is often promoted by lenders.
I don’t mean to discourage anyone but agents (and buyers) should know what they are getting into as the 203k loans are a “niche” product.
Do not use a mortgage broker for this type of transaction; or any inexperienced loan officer, as these transactions are not for newbie MLOs.
I’ve done several 203k loans in my 40+ year career; and although they all funded, but were very tedious (70-day closings / 2 appraisals for each countless contractor bids and multiple inspections were required).
Truthfully; I’d buy stock in Chlorox and be waterboarded with hot bleach, rather than go through that process again.
Another drawback: In today’s “seller’s market” market only a few sellers will entertain 203k offers for the “fixer properties.
American homes aren’t just getting more expensive; they’re also getting older, and newer homes are increasingly being built-in natural disaster areas, raising insurance rates which further reduces buying power /affordability.