Guides to help you become a better real estate investor

Investment Guides

<p>The Biden Administration is taking steps to increase the available housing stock in an effort to overcome today’s massive inventory shortage. For real estate investors the plan has its pros and cons.</p>
<p>The background, of course, is that few homes are coming to market. This is not something new, and it is not something specific to one administration or another. A bad situation before the pandemic, there’s little to suggest that things are about to get better or get better quickly.</p>
<h2>The Real Estate Inventory Shortage</h2>
<p>One solution might be to build our way out of the inventory shortage. There’s surely no shortage of demand, and yet new construction is slowing. The National Association of Home Builders (NAHB) said that in July, “single-family starts decreased 4.5 percent to a 1.11 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 13.1 percent to a 423,000 pace.”</p>
<p>One reason for reduced new home development is that the workforce is inadequate. The Bureau of Labor Statistics estimates that in June there were 365,000 job openings in the construction trades, up from 238,000 a year earlier.</p>
<p>It’s not just new homes. Existing sales are hardly encouraging, July inventory was down 12% from a year ago, according to the National Association of Realtors (NAR).</p>
<p>What’s behind the inventory shortage? And can the new White House plan significantly increase the available housing stock?</p>
<h2>Have prices risen “too much”?</h2>
<p>The inventory shortage cuts both ways. Home costs have been forced up as a result of less supply relative to demand. The average price for new homes was $446,000 in July, according to the government. Alternatively, the typical existing home sold for $359,900 in July, according to NAR, up 17.8% from a year ago and the 113th straight month of year-over-year gains.</p>
<p>Make no mistake, soaring property values are great news for real estate investors and current real estate owners. They certainly delight state and local governments, entities that see rising property tax revenues when home values grow.</p>
<p>But increasing property values also have downsides.</p>
<p>Ownership is less affordable — not a lot of people got an 18% pay hike during the past year. No doubt many potential sellers are staying out of the market, fearing that a great sale today does not resolve the problem of finding a replacement property tomorrow. And, fast-rising values themselves are problematic because they cause buyers to ask if swift increases continue. After all, who wants to buy at the top of the market?</p>
<h2>The White House Plan</h2>
<p>Economic advisors to President Biden have <a href="https://www.whitehouse.gov/cea/blog/2021/09/01/alleviating-supply-constraints-in-the-housing-market/" target="_blank" rel="noreferrer noopener">produced a blog</a> looking at the inventory shortage and suggesting a number of steps to take in response. While no one believes that the lack of available inventory can be quickly resolved, several ideas put forth by the White House economists are likely to be helpful, bipartisan, and actionable.</p>
<p>The biggest proposal components involve a vast program to rehab existing housing units and a national effort to change traditional zoning patterns.</p>
<h2>2 million rehabs</h2>
<p>The economists want to “create or rehabilitate over 2 million housing units.”</p>
<p>“Low-cost units fall out of the inventory through demolition or are converted to higher-cost housing,” explains the proposal. “It is difficult for the private market to replace low-cost units through new construction without subsidies or incentives, because the cost of constructing new units exceeds the ability of lower-income families to pay the unit cost.”</p>
<p>Under the American Rescue Plan passed earlier this year — also known as the $1.9 trillion COVID-19 Stimulus Package – the Biden Administration will seek targeted tax credits, formula funding, grants, and project-based rental assistance to expand and improve the housing stock. The money has already been set aside, so look for announcements from DC as the programs start.</p>
<h2>Zoning do-over</h2>
<p>The second big idea is to undue traditional zoning rules, to allow the construction of two-to-four units on lots now restricted to one home.</p>
<p>The blog explains that “rigid single-family zoning, a practice linked with racial segregation, has prevented the construction of multifamily units, which would allow for higher density and an increased supply of housing.”</p>
<p>According to Rick Sharga, Executive Vice President with <a href="https://www.realtytrac.com/" target="_blank" rel="noreferrer noopener">RealtyTrac</a> “traditional zoning codes already face challenges. New Hampshire, Oregon, and California as well as many localities allow the construction of accessory dwelling units (ADUs). Freddie Mac says there are already 1.4 million ADUs. Also known as <em>granny flats</em> or <em>casitas</em>, ADUs are typically detached small houses constructed on a property with an existing single-family home.”</p>
<p>The attraction of ADUs is that they can be used for offices, mother-in-law suites, and other purposes. Also, in many cases, they can be rented out, a benefit that can help both owner-occupants and investors.</p>
<h2>Other Ideas</h2>
<p>The economists point out that Fannie Mae and Freddie Mac can be authorized to buy more mortgages for the purchase of 2-4 unit properties. “In so doing,” says the proposal, “it will be easier for prospective buyers to purchase and build wealth with these properties, and the supply of rental housing can expand as well.”</p>
<p>Another idea is to expand mortgage options for single-wide manufactured homes. These are generally borrower-owned homes classified as “real estate;” permanently attached to a foundation; without wheels, axles, or a hitch; on the property tax rolls; built after June 15, 1976; and with a HUD Data Plate and Certification Label or a Label Verification Letter.</p>
<p>“Such properties,” say the economists, “have been significantly improved in terms of quality and amenities and, because they are pre-manufactured, they can quickly enter the supply chain.” Additional finance options also increase demand and make such properties easier to sell.</p>
<p>Lastly, not every proposal will be favored by real estate investors. For instance, owner-occupants can now bid on HUD homes without investor competition for as long as 20 days. The economists’ plan extends the no-compete period to 30 days.</p>
<hr class="wp-block-separator">


The White House Washington sign on blue background

Tips and tricks for home owners and real estate investors looking to invest in homes

Real Estate Investing

living room set up for staging with blue chairs

5 Essential Tips To Get Your Home Ready For Sale

Top of residential skyscraper in Brooklyn Heights, NYC against a clear blue sky.

A Guide to Home Buying: Tips and Insights

money_map

7 Cities Where Airbnb and Short-term Rental Investing is Banned or Limited

White House Planning To Increase Housing Supply

Learn how the White House proposals for zoning and rehabs plan to increase the available housing inventory affects real-estate investors.

White House Planning To Increase Housing Supply - RealtyTrac

Comment

https://www.realtytrac.com/wp-content/uploads/2023/07/iStock-1046560842-1.jpg

Resource

RealtyTrac

Manuel is an expert in all things real estate, including buying and flipping homes.

https://secure.gravatar.com/avatar/017e3eb9b2b2815da5c9c544f2b2cb568f9de91a1fb2c8168ec7e918e3971cee?s=96&d=mm&r=g

Manuel Martinez

Tips and guides on how to buy your next home

Home Buying Guides & Tips

Construction Site of New Homes

Resources for purchasing property and homes

Home Buying

What to Know About Buying a Second Home

home-selling-stress

What’s More Stressful: Buying Or Selling A Home?

Luxury Home

What Type of Home Do You Live in? We List The Most Common Property Types

Abstract blur supermarket

Should You Buy Investment Real Estate Where You Shop?

A few quick tips to considering when purchasing a new home.

What to Know About Buying a Second Home - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/iStock-482361158-1.jpg

Brickell Avenue Miami, Fl

Will Downtowns Go From Offices to Apartments?

With more people working from home, there's an of excess office spaces. Older buildings may be up for apartment conversions especially with proposed tax breaks

Will Downtowns Go From Offices to Apartments? - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/downtown-offices-apts-v2-1.jpg

Information on purchasing properties for rental income

Buy To Rent

iStock-1165258864-2-2-1

Real Estate Guides

FLIP-2-e1606855565845

Flipping vs Rental Investment: Which is the Smarter Choice?

Hand holding wooden home with text message Buy or Rent, on wooden desk office. Save money and buy house concept.

Rent vs Mortgage Costs – It’s Complicated

Home for rent

Should Real Estate Investors Consider Built-for-rent (BFR) Properties?

Renters Get New Credit Opportunity

Fannie Mae's innovative approach to mortgage qualification using direct access to bank records offers renters a chance to have their consistent payment history recognized, bridging the credit gap and empowering aspiring homeowners.

Renters Get New Credit Opportunity - RealtyTrac

https://www.realtytrac.com/wp-content/uploads/2023/07/iStock-1165258864-2-2-1-1.png

White House Planning To Increase Housing Supply

$505,558

$335,000

$328,092