Great NY Times Article - Why Home Prices Change (or Don't)

On Sunday, Robert J. Shiller wrote a must read article in the Times, Why Home Prices Change (or Dont').

Every type of real estate professional should understand the economics behind residential housing and this article objectively lays out the facts. Plus, if you don't know, Mr. Shiller's credentials include being a Professor of Economics at Yale - so pay attention to what he has to say.

The article looks at the economics of residential housing and compares this investment vehicle to stocks. Most importantly, it looks at last year's gains in housing and explains that its not a predictor for the next 10 years in growth and should only be viewed in terms of just being a growth for last year.

As the article states: "Over the 100 years ending in 1990- before the recent housing boom - real home prices rose only 0.2 percent a year, on average". Mr. Shiller explains that while it may psychologically feel like prices keep going up, one must look at prices after correcting for inflation. In such, there is not much growth in the long term.

So, real estate professionals, houses are a good buy if you want to live there. They may be good if you add money to the house through construction. Yet, if you want to buy, hold and not invest in a product, do not buy a house.

Rental Permit / Accessory Apartment Search Tool by the Town of Brookhaven

Brookhaven has added a great feature to its website called House Rental Search.

With this tool, the user can "see all of the active accessory apartment and house rental permit on the street you selected in the hamlet chosen". Remember, Villages control their own rental permits, so users in Villages must contact their Village.

This feature is going to make it completely transparent to tenants if the Town has permitted their rental. Remember, without a permit, a landlord cannot enforce a lease and is subject to many fines as well.

Now Brookhaven only needs to make getting a permit as easy as looking up if one exists. This way, safety can be the paramount concern over enforcement, which this tool will greatly increase.

Landlords and real estate agents - MAKE SURE YOU HAVE PERMITS. The Town has enabled tenants to really crackdown on your illegal rentals and be sure that they will.

Ability-to-Repay and Qualified Mortgage Guide Issued by CFPB

Today, the Consumer Financial Protection Bureau (CFPB) issued a Small Entity Compliance Guide to the new Ability-to-Repay regulations, which are scheduled to commence effectiveness on January 10, 2014.

To remind our readers, the Ability-to-Repay regulations require loan originators to "make a reasonable, good-faith determination before or when [they] consummate a mortgage loan that the consumer has a reasonable ability to repay the loan, considering such factors as the consumer’s income or assets and employment status (if relied on) against:

• The mortgage loan payment
• Ongoing expenses related to the mortgage loan or the property that secures it, such as property taxes and insurance you require the consumer to buy
• Payments on simultaneous loans that are secured by the same property
• Other debt obligations, alimony, and child-support payments"

As stated within the Guide: "The purpose of this guide is to provide an easy-to-use summary of the ATR/QM rule."

Remember, ATR stands for Ability-to-Repay and QM stands for Qualified Mortgages.

So, real estate professionals, you should know that lenders will have to independently verify a borrower's Ability-to-Repay starting in January of next year and you should start now to become familiar with these new rules to effectively represent your clients. This Guide is a great starting place.