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Biden’s New Infrastructure Plan Boosts Wellness Design Potential For Nation’s Homes

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The Biden administration unveiled a $2 trillion infrastructure plan last week, and it contains some much-needed wellness design enhancements for American homes. Even its goals of increasing affordable housing stock and improving public housing advances the ideal of everyone having a safe, healthy place to live. 

The pandemic pointed out the importance of this ideal, though the President’s infrastructure plan doesn’t specifically include one of its major findings for the residential end of its plan: Potentially deadly airborne viruses like the one that causes Covid-19 are more transmissible in poorly-ventilated spaces. There are provisions in the plan summary for improving ventilation in schools, but it does not mention it for public housing or other residential buildings.  

Affordability

“I don’t think that residential ventilation/indoor air quality was ‘omitted,’” counters Bob Simpson, a board member of the Center for Active Design, a nonprofit organization that researches and certifies healthy buildings and communities through its Fitwel program. “No one disputes the need to improve the indoor air quality in these buildings. Improving HVAC systems across our nation’s public housing stock represents one of the most effective ways to create healthier living environments and creates opportunities for public housing authorities to do so in a way that not only reduces the rates of asthma and other lung diseases but also reduces the future transmission and spread of harmful airborne pathogens.”

Simpson adds, “”The $40 billion proposed for upgrades would put a significant dent in the current backlog of capital repairs that are needed to create safe and healthy public housing. After years of disinvestment, residents of public housing far too often live in buildings with poor indoor air and water quality due to lead hazards, faulty plumbing, and inadequate HVAC systems. If passed, the infrastructure bill will create a significant opportunity for public housing authorities to upgrade faulty plumbing and inadequate HVAC systems and improve the indoor air and water quality for millions of low income renters.”

The infrastructure plan also calls for building and rehabilitating homes for low- and middle-income homebuyers, especially in underserved communities. Biden is calling on Congress to pass the Neighborhood Homes Investment Act to help achieve this goal. “Offering $20 billion worth of NHIA tax credits over the next five years will result in approximately 500,000 homes built or rehabilitated, creating a pathway for more families to buy a home,” the summary states.

Relieving overcrowding in low income housing units can reduce the severity of future Covid waves and as-yet unknown pandemics, according to numerous studies published in 2020.

Accessibility

The plan also references $40 billion to “address critical life-safety concerns” and “mitigate imminent hazards to residents,” noting that these improvements will benefit people with disabilities, pointing to the possibility of accessibility features being included in the bill.

As Sarah L. Szanton, director of the Center for Innovative Care in Aging at Johns Hopkins School of Nursing, has proved with the CAPABLE program that she helped create, making homes and apartments safer and more accessible for seniors improves their lives and pays for itself over time with Medicare and Medicaid savings. Whether it’s her program or one like it that also recommends and installs accessibility features, providing for this through federal funding would allow “older adults to be able to age with dignity and independence” and “be able to bathe themselves, cook for themselves, get dressed with dignity and autonomy,” Szanton says.  

The infrastructure plan’s fact sheet summarizes this goal as building and retrofitting more than two million homes as accessible and resilient housing. It’s unclear yet whether, if passed, this could provide additional funding and eligibility criteria to existing home modifications programs for disabled veterans run by the VA.

Clean Drinking Water

Americans in Flint, Michigan got a painful lesson about the importance of clean drinking water and the dangers of lead pipes in 2014. The Biden infrastructure plan wants to prevent future occurrences with a goal to “eliminate all lead pipes and service lines in our drinking water systems,” its summary says.

This can have particular benefit to children and teens, according to Karen Peterson, a professor of global public health and environmental health sciences at the University of Michigan School of Public Health. “A child’s body absorbs more lead than does an adult’s body. In addition, children’s brains and nervous systems are more sensitive to the effects of lead,” she notes.

Aging treatment plants and polluted drinking water are also endangering public health, the plan notes, with $111 billion budgeted to address these issues, as well as an improved electrical grid and universal broadband.

Improved Electrical Grid

It was barely two months ago when non-winterized utility infrastructure across the South, especially in Texas, left millions of residents without heat, water or electric for weeks. There were more than 100 deaths attributed to the massive failure, and thousands of others struggled to keep their life-saving medical devices powered during the outage. Modernizing the nation’s electrical grid could conceivably prevent manmade disasters like this one from occurring in the future.

Universal Broadband Access

This may not seem like a wellness design feature, but with telehealth providing more care than ever before (especially since the pandemic began last year), and with families gathering virtually at an increasing rate, broadband is the infrastructure that enables care and connection. According to the infrastructure plan summary, 35% of rural Americans lack access to high speed internet connections. Providing this service can improve their lives and health.

Final Thoughts

The country’s builders, engineers, architects and interior designers all see the need and benefit of infrastructure upgrades. One of the largest and most powerful trade associations in this sphere is the National Association of Home Builders. The group’s chairman, Chuck Fowke, issued the following statement on the President’s infrastructure proposal: “The plan recognizes the urgent need to build more affordable housing and retrofit existing homes to increase energy efficiency. NAHB looks forward to working with the White House and bipartisan leaders in Congress to advance an infrastructure package that addresses the nation’s housing affordability challenges.”

The plan’s fate and timing are uncertain, but its goals of improving the nation’s housing stock is applauded by professionals ranging from social services to building services.

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Are We In a Housing Bubble? Will the Housing Market Crash?

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Today’s housing market is fierce! Due to remote work and record-low mortgage rates, Americans are relocating and purchasing homes at an all-time high. However, there is a major problem – there aren’t nearly as many homes for sale as there are buyers. And this severe housing shortage is fueling record-high prices and cutthroat competition.

With the red-hot real estate market we’re experiencing, many consumers are understandably concerned. The soaring home prices and a lack of homes for sale may feel eerily similar to the 2007 housing bubble that led to The Great Recession. 

So, is there a reason to worry? Are we in a housing bubble and headed for another housing market crash? Let’s take a look. 

What is a housing bubble?

Before we jump into our current situation, let’s first take a look at what a housing bubble actually is. Also known as a real estate bubble, a housing bubble occurs when home prices rise at a rapid rate to a level of instability. Housing bubbles generally begin when there is a shortage of inventory and an increase in demand in a market. As the prices start rising, speculation begins to take effect. Consumers expect prices to increase further, so everyone wants to buy a home as quickly as possible. This drives up demand further and prices continue to skyrocket.

As we know from physics, what goes up must come down. So at some point, the steep housing prices become unsustainable and homes become overvalued. When this happens, demand begins to decrease and therefore, supply starts to rise. Suddenly, we’re in a situation where there are more homes for sale than prospective buyers. As a result, housing prices can fall drastically – and the bubble bursts.

What leads to a housing bubble?

Bubbles are a phenomenon that can happen in just about any industry, whether it’s homes, stocks, or gold. Traditionally, bubbles don’t often occur in the housing market because of the large financial responsibility associated with purchasing a home. However, with the right combination of factors, a housing bubble can begin. Here are several situations and variables that can occur, drive up demand, and lead to a housing bubble. 

  • A rise in economic activity. When the economy is doing generally well, people have more disposable income to spend on housing.
  • Low mortgage interest rates. This puts homeownership within reach for many hopeful homebuyers.
  • Loose mortgage lending practices. This is a major factor that led to The Great Recession as many lenders offered home loans to homebuyers without regard for their ability to repay.
  • New mortgage products. Specifically, those allowing the buyer to make low monthly payments. This can make the idea of homeownership appear more affordable than it actually is. 
  • A sudden increase in migration. For example, if a large group of homebuyers relocates from San Francisco, CA to Austin, TX – this will increase demand and shrink supply in Austin, driving prices up further. 
  • The time it takes to build a house. It generally takes a long time to build a new home which makes supply slow to respond to dramatic increases in demand.
  • Speculative and risky behavior. This can lead to more property investors entering the market, along with homebuyers who can’t afford the homes they are purchasing. 

What happens when housing bubbles burst?

Housing bubbles can cause major problems in the larger economy. Once the bubble bursts, many people may realize that they have borrowed more than their home is worth and could struggle to keep up with their house payments if they lose their job or find themselves in other financial trouble. This can lead to foreclosures and a loss of financial security across the board. However, if a homeowner maintains a steady income, they should still be able to make mortgage payments and hold onto their home even if their home goes down in value.

Are we in a housing bubble now? 

So, will the increase in prices and shortage of housing inventory result in a housing market crash in 2021? Most experts don’t think so. 

The circumstances influencing the housing market today are different than those of the 2006-2007 housing bubble. The bubble that eventually led to The Great Recession was primarily a result of irresponsible lending. Just about anyone who wanted a mortgage could get one, even if they didn’t have the income to afford it. However, this time mortgage requirements are stricter and the current demand isn’t caused by reckless lending. It’s the result of true supply and demand. 

“I wouldn’t call this a housing bubble because the demand for homes is truly there and the buyers can afford these high prices,” said Redfin Chief Economist Daryl Fairweather. “Bubbles burst; I don’t see that happening.”

Instead, Fairweather believes that as the U.S. reaches herd immunity from COVID-19 and the economy rebounds, the demand and home prices will slowly begin to come down. “That’s because mortgage rates will make buying a home more expensive, and Americans will have more options for how to spend their money. Instead of spending on homes, Americans will want to spend on activities like vacations, parties, and dining.”

What should you do if you’re buying a house right now?

While no one can say for sure what will happen with the housing market, it’s important to be prepared if you are currently buying a home. The most important takeaway, if you are currently house-hunting, is don’t buy more than you can’t afford. 

Right now, bidding wars are at an all-time high and buyers are paying well over asking to secure a home. So before embarking on the homebuying process, we recommend using an affordability calculator to help you determine your budget. This can help you set expectations ahead of time, so you know what you can offer and when to walk away.

It’s also important to work with a real estate agent who has your best interest in mind and a deep understanding of current market conditions. They can help you navigate the ins and outs of this tricky seller’s market. 

 

Redfin does not provide legal or financial advice. This article is for informational purposes only and is not a substitute for professional advice from a licensed attorney or financial advisor.

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Real Estate

Are Closing Costs Tax Deductible?

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Are Closing Costs Tax Deductible?

There are some great benefits that come with homeownership. Things like the ability to make improvements to your home increased wealth due to an increase in your home’s value through the years, and certain tax advantages. But what if you recently bought a home, are closing costs tax-deductible? Before answering that question, it’s a good idea to understand what closing costs are and what is typically included in them.

What Are Closing Costs?

Closing costs are the fees you pay when you obtain a mortgage loan. Typical closing costs run anywhere from 2% to 5% of your loan amount. For example,on a $250,000 loan, you’ll pay between $5,000 and $12,500 in closing costs.

Here is What’s Typically Included in Closing Costs:

Property Taxes

These are fees homeowners pay to the state, county, and even various local entities to help fund the school district where you will be living, pay to repair and keep roads in good condition, and fund the local library, to name a few. The tax amount varies depending on where you live and the amenities available in your community.  

Usually, you will be responsible for paying property taxes from the date of closing forward, and the seller will pay from January to the date of closing. Your lender will typically collect between three and six months of property taxes from you at the time of closing. This is to ensure there is enough in escrow to pay the tax bill when it comes due.   

Recording Fee

Recording fees are charged by the county to record the documents related to the transfer of ownership of the property. This takes place every time a house is bought or sold.

Loan Origination Fee

This is a fee charged by the lender as compensation for handling your mortgage loan from inception to closing. The amount of this fee varies from lender to lender.

Homeowner’s Insurance

This insurance typically protects loss related to the property. It is required by the lender so that they know the property is protected. The cost of this insurance varies depending on the value of your home and the amount of coverage you carry on the property.  

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Primary Mortgage Insurance

Lenders require PMI (Primary Mortgage Insurance) on Conventional loans if the borrower does not put at least 20% of the sales price toward the down payment. This insurance is protection for the lender should the loan ever go into default. On a home valued at $250,000, you would need to have a down payment of $50,000, to equal 20% down, or you will be charged PMI.  

Appraisal

The appraisal provides the lender with an independent opinion on the value of the home. It is provided by a professional who is trained to estimate the value of real estate. The home appraisal process provides assurance to the lender that the amount they are lending is not greater than the value of the property.

Credit Report Fee

The credit report provides the lender with information about your credit history and credit worthiness. If your score is too low, it will impact your ability to secure financing and could cost you the ability to obtain the best interest rate available.  

Flood Inspection

The flood inspection determines whether the property you are purchasing lies in a flood zone. If it does, flood insurance will be necessary.

Pest Inspection

Your lender will require a pest inspection if the appraiser notices any infestation of termites or other pests when completing the appraisal. In some places, a pest inspection is required on all deals.

Title Search

The title search is performed by a title company. They are responsible for making sure the title to the home is clear, meaning there are no defects in the title or problems that would prevent the title from transferring to you at the time of purchase.

Title Insurance

You will need two types of title insurance when buying a home. The first kind protects your lender (lender’s title policy) in case something was missed during the title search. The second type of title insurance is an owner’s title policy. This protects you against any defects or problems in the title just as the lender’s title policy protects the lender. 

Survey Fee

If there is a question regarding property lines, the title company can order a survey.

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Discount Fee or Points

When you pay points toward your mortgage loan, it is also known as buying down the loan. These fees, paid to your lender, lower the interest rate of your loan. One point equals 1% of the loan amount. In our example of a $250,000 loan, you would pay $2,500 to buy the loan down one point. The amount the one percent buy down would impact your interest rate varies by lender, type of loan, and current mortgage rates.

Escrow Fee

The escrow company is responsible for handling all the funds involved in buying your new home. They make sure all parties involved in the transaction get paid accurately. The fee charged by the escrow company, also known as a closing fee or settlement fee, pays for their involvement in the transaction.

Prepaid Daily Interest Charges

At the time of closing, borrowers pay interest on their loan from that date to the end of the month. If your closing date is near the end of the month, you will pay fewer taxes than if you closed on your loan the first week of the month. The seller is responsible for paying interest from the first of the month to the date of closing.

Are Closing Costs Tax Deductible?

Not all closing costs are tax-deductible, and the tax code changes frequently, so check with a tax professional to determine what deductions apply to your situation. Here are some typical closing costs that may be able to deduct from your taxes this year:

Mortgage Interest

This deduction allows you to deduct the amount of interest you pay when you buy your new home. It is one of the best tax deductions for buyers. Your tax professional can assist you with questions regarding this deduction.

Primary Mortgage Insurance (PMI)

Through 2020, the PMI deduction is allowed. After 2020, this closing cost will no longer be tax-deductible unless extended by Congress.  

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Discount Points

Any of the discount points you paid when you closed on your loan are tax-deductible. You should consult your tax professional or visit the IRS website to determine whether you can take this deduction in the year you purchased the house, or whether you are required to deduct the points over the life of the loan.

State and Local Real Estate Taxes

This deduction includes state and local taxes and property taxes. Again, you will need to consult your tax professional or visit the IRS website.  

Standard Deduction

Your tax preparer will determine if it is in your best interest to take the standard deduction versus itemizing your deductions in the year you purchase your home. The IRS has determined standard deduction amounts for each taxpayer category. If the standard deduction for your situation is higher than if you were to itemize, then it would benefit you to take the standard deduction, and vice versa.

Homeowner tax benefits do not end when you buy your home. If you work from home, the IRS also allows for a home-office deduction. And should you decide to install solar panels or other energy-efficient improvements to your home down the road, there is another deduction that might apply to your situation, known as the residential energy-efficient property credit. Always talk with a tax professional to ensure you are taking full advantage of the latest tax code.

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SoftBank-Backed Better.Com Places Top Executive On Leave After Bullying Complaints

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There’s more executive turmoil swirling at Better.com, one of the mortgage industry’s hottest new startups, and it’s hitting just days after reports that SoftBank is investing $500 million of new funding that values the business at $6 billion.

Elana Knoller, Better’s chief product officer, has been placed on administrative leave following allegations of bullying and other workplace grievances, multiple sources familiar with the matter tell Forbes. Knoller has been one of the mortgage lender’s most powerful executives and a gatekeeper to CEO Vishal Garg, whose grueling management style was the subject of a 2020 Forbes report.

Discontent against Knoller has simmered for many months, according to interviews with six people who have worked with her, but complaints boiled over in the last three weeks on the social media app Blind, which lets employees leave anonymous feedback about their companies.

The upheaval began when some employees who report to Knoller questioned why they hadn’t received a job satisfaction survey that went to other departments, according to messages on the app that were shared with Forbes, with some commenters blaming her for the decision. The discussion then spiraled into broader accusations of bullying and mismanagement. As one example, Knoller had allegedly placed some individuals on performance improvement plans when they voiced discontent with her leadership. Other employees say that Knoller has presided over a culture of intimidation and retaliation, where workers were promoted based on loyalty and were otherwise sidelined or pushed out. “I think [she] knows that she has power and wields it in ways that are not the most, I guess, democratic,” says one person who has worked with her.

In response to a request for comment, an independent spokesperson for Knoller said, “Ms. Knoller is an incredibly accomplished executive who demands a great deal of herself as well as those who work for her. She has served in numerous leadership roles at Better.com and has significantly contributed to the company’s success. It is not a surprise some disgruntled employees have sought to undermine this talented female executive through a website that is dedicated to anonymous griping and chatter.” 

SoftBank declined to comment. A spokesperson for Better said, “We do not comment on employee matters.” 

Garg—who once berated employees over email for being slow, likening them to “a bunch of DUMB DOLPHINS”—has responded internally, however. “This stuff on Blind hit me like a sack of bricks,” he wrote on the app on April 2, identifying himself at the top of the message. “Now I know. And knowing is half the battle…. And whether I agree with everything said below or nothing said below, thank you for posting it and sharing. I am going to look into these issues.” In an email to employees, Garg also invited staffers to fill out a confidential survey to further detail potential grievances.

Knoller, 29, joined Better in 2017 from the commodities department at Goldman Sachs and was a member of Forbes’ 30 Under 30 finance list in 2021. She has ascended quickly at the company, rising from Garg’s chief of staff and head of partnerships to become an executive vice president in 2019. She was named chief product officer in February 2020. 

Better, meanwhile, has grown rapidly, fueled by a wave of refinancings during the pandemic caused by record-low interest rates. In the fall the company closed a $200 million Series D round at a $4 billion valuation—up from a less than $900 million valuation in 2019—sparking chatter about a possible IPO. The company generated about $800 million in 2020 revenue, according to PitchBook data, eight times more than the prior year. 

There are questions about whether Better can sustain that growth, as mortgage applications and refinancings begin to slow. SoftBank is clearly not spooked. According to The Wall Street Journal, which first reported the $500 million investment, the Japanese conglomerate is buying out some existing shareholders and will hand all of its voting rights to Garg.

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