Tag Archives: Reiss

Buying Into The Sexiest Real Estate

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Metropolitan Transportation Authority of the State of New York - Construction at Hudson Yards

Newsmax quoted me in How to Buy and Sell in the Sexiest of Real Estate Markets. It opens,

With the opening of the 7 subway station at 34th Street last year, more than 100 shops and 5,000 residences, the Hudson Yards neighborhood in Manhattan is creating new demand for housing.

“We’ll likely witness a progression of rising prices as the entire development grows both residentially and commercially,” said Brad Malow, licensed real estate broker with Charles Rutenberg, a real estate firm in Manhattan.

Stretching from West 30th to 34th Streets and 10th to 12th Avenues, Hudson Yards is just one example of how supply of inventory impacts pricing in the world of real estate.

“The problem right now in the sales market is that supply is not catching up fast enough to pent up demand,” Malow told Newsmax Finance. “If supply increases and demand stays the same, what usually results is lower pricing.”

The New York housing market is very different from most others in the U.S. The vacancy rate in New York has hovered at 2% on average, according to a Douglas Elliman/Miller Samuel data and new development inventory is up 101% with supply and demand fluctuating from season to season.

That makes proper pricing important to the marketing of all types of property given the extraordinarily low vacancy rate.

“The supply of new housing is very low given the size of the market and the rental market is heavily regulated, depressing the rents for many units,” said David Reiss, professor of law with the Brooklyn Law School in Brooklyn.

High and Low Property Taxes

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photo by JRPG

Newsmax quoted me in Lowest Property Tax Is Hawaii and the Highest Is New Jersey. It reads, in part,

The average American household spends $2,089 on real estate property taxes each year and residents of the 27 states with vehicle property taxes shell out another $423, according to the National Tax Lien Association.

However, some states cost more than others when it comes to the American Dream and its staples of a house and car.

“Different parts of the country have different levels of taxation and amenities paid for by the tax receipts,” said David Reiss, professor of law and research director with the Center for Urban Business Entrepreneurship at Brooklyn Law School.

The state with the lowest real estate property taxes is Hawaii where residents pay only $482 per household, which is the least average amount typically shelled out by a taxpayer, according to a 2016 WalletHub study, ranking states with the highest and lowest property taxes.

“High property taxes tend to be correlated with high income and high income tends to be correlated with Blue States, so it is not surprising that high property taxes are correlated with Blue States,” Reiss said.

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“Local property taxes can help pay for all sorts of municipal services, including schools, road maintenance and emergency services,” Reiss said.

Alabama, Louisiana and Delaware, D.C. and South Carolina follow Hawaii among the states with the lowest property taxes.

High tax localities, such as Westchester County in New York, could have annual taxes that easily are in the tens of thousands of dollars a year range but such areas also have some of the best schools in the nation.

The WalletHub report further found that in Blue states, real estate property taxes are 39% higher at $2,250 a year than homeowners in Red states who pay $1,613.

The yearly burden weighs far more heavily on taxpayers in some states than in others based on region.

For example, communities in the Northeast typically have higher property taxes than many of those in the rest of the country.

“Monthly mortgage payments are usually much higher than monthly real property tax payments, measuring in the high hundreds in low-cost metros like Pittsburgh to the thousands in a high-cost metro like San Francisco so it is hard to put default rates squarely on the shoulders of real property taxes,” said Reiss.

Party at Your Place?

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photo by Devin Ewart

Realtor.com quoted me in Moved Out? Watch Out, Teens May Be Partying in Your Old Home. It opens,

Teenagers are always on the lookout for a house party—and there’s nothing better than a venue where it’s all but guaranteed that nobody’s parents will barge in and disrupt all their risky business: vacant homes!

That’s right, if you’ve moved out and planted a “for sale” sign on your lawn—or are waiting to move into a place under construction—it’s a sitting duck for young revelers to … revel in.

The latest victim of this fast-growing trend: a newly built home in El Dorado Hills, CA, where nearly 200 kids broke in and had a bacchanal before they were busted by the cops. According to the Sacramento Bee, most of the partygoers scattered to safety, but 14 were detained and cited for trespassing.

Sadly, by the time law enforcement arrived, the house had suffered enough damage to qualify as a felony. Cops noted numerous holes in walls, busted electronics, and other property devastation in the house (estimated to be worth around $500,000).

And this is hardly an isolated incident: Last month, a teen in nearby Ceres, CA, pulled up a “for sale” sign from the yard of an unoccupied house, then spread the word on social media to come on down—BYOB and BYOW (bring your own weed)—charging $10 a head for the 100 or so who showed up. The noise prompted neighbors to eventually call the cops, who suspect the “host” has made a habit of organizing fetes in abandoned homes.

All in all, such stories can haunt the dreams of homeowners who’ve moved out or are about to move in: Are hooligans holding beer pong tournaments in your abandoned (or soon to be occupied) living room every Saturday night? And if they do crack your granite countertops, who’s responsible for the damage?

The answer depends on your homeowner insurance, which rarely covers policyowners who aren’t living on the premises.

“Many homeowner policies won’t cover a home if it’s vacant,” warns David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. Funny right? But here’s the punch line: “Homeowners should also be concerned about injuries suffered by the teens. It is all too plausible that you will face a lawsuit if one of them gets hurt while partying at the house. This is true notwithstanding the fact that the teens had trespassed.”

In other words, if some drunk punk stumbles and falls off your balcony and lands on his noggin, it might be all on you.

Yet there are things you can do to head this problem off at the pass.

“Some insurance companies offer endorsements to your existing policy or altogether new insurance policies that cover vacant homes,” points out Reiss. “Some even offer special coverage for vandalism damages. It’s worth looking into them if your home will be vacant, even for a relatively short time.”

Silicon Valley’s Housing Crisis

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photo by Smitha Murthy

Drop in the Bucket?

Realtor.com quoted me in Could There Really Be Relief Ahead for Silicon Valley’s Housing Crisis? It opens,

Finally! A glimmer of hope has appeared in Silicon Valley’s housing crisis. Amid gloomy and downright terrifying stories about astronomical home prices and tighter-than-tight inventories forcing well-paid tech workers to live in vans, pay $2 million for a tear-down shack, or ponder commuting to work from Las Vegas, there seems to be some good news for a change: City Council members in Mountain View, CA, approved plans to build 10,250 new homes in the area.

Given that Mountain View has only about 32,000 homes total, this will increase its housing inventory by a whopping 32%—all purportedly within “walking distance” (possibly a bit of a long walk) of tech giant Google, which has long been lobbying on this front and will no doubt break out the Champagne once developers break ground. Sure, it may be years before these homes become a reality, but even the idea of them may have many locals (or those moving there) daring to dream. Might this new influx of housing cause home prices to drop within reasonable reach?

As logical as this renewed optimism about Silicon Valley’s housing market might seem, experts aren’t so sure home prices will budge all that much.

“This news in itself will not drive down prices much,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “While a 10,000-unit commitment is significant, Silicon Valley as a whole has about 3 million people living there.”

So if you consider the population of the entire area—many of whom would likely kill to move to Mountain View—10,000 new houses would house only 0.3% of these people. For you math-challenged, that’s less than a measly half-percent! 

And even though the number of homes may be edging upward, so are the number of people moving there.

“Silicon Valley remains a booming economy, so it’s likely that the population will continue to grow, further driving up prices,” Reiss continues.

As further evidence that more homes doesn’t necessarily lead to cheaper home prices, Florida Realtor® Cara Ameer points to another historically hot market: New York City.

“In New York, more new buildings has had no impact on housing prices or rents,” she says. If anything, the only change New Yorkers noticed is their neighborhood got a lot more cramped. The same will likely be true for picture-perfect Mountain View.

“The biggest thing people will see is increased congestion,” says Amer, “with many more residents, cars, and the need for schools and additional services.”

In fact, fears of overcrowding might even galvanize current homeowners in the area to show up en force at future City Council meetings to fight the greenlighting of additional developments—that is, unless they’re out-muscled by employee-hungry firms such as Google.

“As key businesses realize that the lack of housing is hurting their ability to recruit and retain good employees, it is possible that Mountain View’s decision is a harbinger for more pro-development decisions throughout Silicon Valley,” Reiss explains. “Current homeowners, called ‘homevoters,’ tend to make their anti-growth views known to local officials, but once the interests of local businesses focus on the lack of workforce housing, it can change the dynamics.

“These are powerful companies. The result is that those decisions can become more pro-growth than is typical for suburban communities.”

Risky Rent-to-Own

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photo by Steve Snodgrass

The Pittsburgh Tribune-Review quoted me in Rent-to-Own Option for Home Shoppers Rife with Pitfalls, Experts Caution. It opens,

Finding the right rental house was more difficult than Phyllis Lombardi anticipated.

“It’s hard to find a big enough house that allows pets, for the number of people we have in South Fayette,” said Lombardi, 45. She and her husband have four children living at home.

The Lombardis are moving because the owners of the house they are renting want to sell. But the couple isn’t ready to buy. The husband’s income was cut by more than half when they relocated to the Pittsburgh area several years ago, and they are repairing their finances after a short sale on a home.

Finding no rentals in South Fayette that meet her criteria and price, Lombardi is going with an option suggested by her real estate broker: Pick a house for sale on the market and do a rent-to-own contract with an investor who would buy it.

Rent-to-own agreements require prospective buyers to pay rent with an option to purchase the house at a later date, usually within two to five years. It can broaden the options for people with checkered credit histories who think they might soon be in a position to buy.

But it is an industry with a lot of shady operators and which can prove costly to prospective buyers who are not careful, said David Reiss, a professor of law at Brooklyn Law School.

“In some cases, these programs are based on the idea of hope springs eternal,” Reiss said. “But a large percentage of them are likely to fail.”

The terms of these contracts vary, but renters often pay a premium above market price, with a portion of that going toward the eventual cost to buy the home.

Many times, renters reach the end of the agreement and are still unable to buy, forfeiting everything they have paid — rent, fees and any premium toward the purchase price — to the owner and walk away with nothing, said Max Beier, a real estate attorney Downtown.

“Traditionally, what you’re going to have in these agreements is a default provision that’s pretty harsh,” he said. “Commonly, you’re going to lose 100 percent of the equity you’ve paid.”

And many don’t come with the same renter protections. For example, maintenance and upkeep costs are often the tenant’s responsibility — just as if they owned the home.

Also, the penalty for late rent payments tends to be more severe than the standard 5 percent for a late mortgage payment, and even cause someone to be kicked out of the home, Reiss said.

“The rights you have as a tenant in a rent-to-own situation are not as clear and not as good as if you were a homeowner,” Reiss said.

Keeping Cash on Hand

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1127px-American_CashTheStreet.com quoted me in Why Some Investors Are Keeping Large Sums of Money in Cash. It reads, in part,

Investors are still holding large positions in cash amid the continued volatility in the stock market since they remain uncertain about the outlook of the economy.

After being spooked by the markets this year — evinced by the 21 times the Dow gained or lost 200 or more points through March 1 compared to only nine in 2015 — investors are finding a large cash reserve to be a reassuring cushion.

A report by Capgemini and RBC Wealth Management in 2015 cites the total cash held by high net households or those who have $1 million or more investable assets in North America as $3.8 trillion. Out of that total, $3 trillion to 3.5 trillion of those assets are estimated to be in the U.S., said Gary Zimmerman, CEO of MaxMyInterest, a New York-based company that maximizes cash balances for savers.

One reason cash remains popular among all age groups is because the sentiment of the economy, job growth and markets is viewed unfavorably. Data on the amount of cash that consumers keep in checking or savings accounts or CDs are not tracked.

“Cash is still a favored asset for investors, because frankly, people are nervous about the economy,” said Sean Stein Smith, a CPA in Hackensack, N.J.

Even wealthy people are allocating large sums of their assets in cash, with 23.7% of high net worth people keeping their portfolios in cash in 2015, according to the report.

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Homeowners should also consider starting a repair fund in addition to having emergency savings to cover household expenses, said David Reiss, a law professor at Brooklyn Law School in N.Y. Some repairs need to be made immediately such as a roof leaking during the rainy season or the boiler during winter months.

“A homeowner who wanted to be conservative could put an amount equal to 10% of his or her mortgage payment into a comparable fund for home repairs,” he said. “There is probably not one right answer for everyone. Some people are handy and can do all sorts of repairs themselves, others can’t.”

Docs You Need for A Mortgage

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photo by LaurMG

HSH.com quoted me in The Documents You Need To Apply for a Mortgage. It opens,

When it comes time to apply for a mortgage in 2016, you might be surprised at how much documentation you’ll need when applying for a home loan.

J.D. Crowe, president of Southeast Mortgage in Lawrenceville, Georgia, says most of the documentation should be familiar to you if you have applied for a mortgage loan in the last five years. If you’re new to the mortgage market this year, he says, this is all new.

The new Qualified Mortgage rules that took effect on January 10, 2014 make this paperwork even more important. To meet the new Qualified Mortgage rules, lenders will be even more diligent in collecting the paperwork that proves that you can afford your monthly mortgage payments.

David Reiss, professor of law at Brooklyn Law School in Brooklyn, N.Y., says that while the documentation requirements under the new Qualified Mortgage rules might come as a shock to those who haven’t applied for a mortgage since 2008, they are common-sense requirements for the most part.

“These are really common-sense rules,” Reiss says. “The new rules say that mortgage lenders are no longer allowed to throw out the common-sense standards of lending money during boom times, when they might be tempted to overlook long-term financial goals for quick profits. If the rules help that happen, they’ll be a good thing.”