Tag: Housing

How down payment-assistance programs can help clear the path to homeownership

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Two renters pose in front of their new home that they’re renting from Roots, a program that helps renters invest in real estate.

Courtesy: Katie Curran

When Will Hunnicutt was searching for an apartment in Atlanta earlier this year, pricey leases and application rejections left him feeling defeated.

“The three-and-a-half times income-to-rent ratio is kind of hard to fulfill when they’re wanting $3,000 in a lot of places,” the 30-year-old social worker said.

Then Hunnicutt found a $1,050-per-month two-bedroom apartment tied to Roots, a real estate investment trust based in the Atlanta area that works to help renters of the properties in its portfolio build wealth toward homeownership. His $1,000 security deposit is invested in the REIT, and he has earned another $200 in quarterly rebates so far for taking care of his unit and paying rent on time.

“The end goal is to buy a house, so having investment funds, that passive income, would be very helpful,” Hunnicutt said.

Will Hunnicutt with his dog Bailey in his Atlanta home that he rented through Roots, a company that helps renters build wealth by investing in real estate.

Courtesy: Will Hunnicut

Roots is currently only available in Atlanta, but has plans to expand this fall. It’s just one approach to a broader aim: helping consumers get financially ready to buy a home.

As buyers continue to struggle with home affordability, experts say programs that help with down payments may be worth another look.

The dream of owning a home is moving further out of reach for many as homes get more expensive. Aspiring homebuyers need to make $113,520 a year to buy a typical U.S. home, according to national brokerage site Redfin — 35% more than what a typical household earns annually.

One barrier toward homeownership is having enough savings for a down payment. Nearly 40% of Americans who don’t own a home point to a lack of savings for a down payment, according to a 2023 CNBC Your Money Survey conducted by SurveyMonkey. More than 4,300 adults in the U.S. were surveyed in late August for the report.

‘Thousands of down payment-assistance programs’

Down payment-assistance programs come in different forms, and from different sources — including state agencies, cities, nonprofits, financial institutions and mortgage lenders. So you’ll have to hunt around to see what’s available in your area.

Usually, assistance programs focus on first-time homebuyers and buyers who meet certain income qualifications. There are also programs focused on “first-generation homebuyers.”

In many down payment-assistance programs, participants have to take a homebuyer education course. Depending on the program, they may also have to meet other conditions, like getting their mortgage through a specific lender or saving a set amount to contribute toward their home purchase.

The aid can be significant. For example, Alternatives Federal Credit Union in Ithaca, New York, has programs offering $9,000 up to $20,000. The Chicago Housing Authority can assist with up to $20,000.

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These kinds of programs are one way to work toward equality in homebuying, as systemic barriers still block the path to homeownership for many Americans, housing experts say. 

This is especially true for Black Americans, who have largely made up the receiving end of decades of redlining, exclusionary zoning and predatory lending, according to Nikitra Bailey, executive vice president of the National Fair Housing Alliance. 

Programs targeted toward first-generation homebuyers are crucial, she said. While it’s common for family to help with a down payment, would-be buyers whose parents rent are less likely to be able to offer that help.

“We know there are thousands of down payment-assistance programs that cities have adopted,” but their reach in “underserved consumers of color” is limited, Bailey said. “And that’s why ‘first generation’ is very important, because it’s a race-neutral way to target resources to the consumers that the future health of the housing system depends on.”

How much you need for a down payment

Part of the reason coming up with a down payment is so daunting is that buyers often think they have to put down 20% of the home purchase price. They’re mistaken, experts say.

A National Association of Realtors survey based on transactions from July 2022 to June 2023 found the typical first-time homebuyer has an 8% down payment. And some loans require even less, as little as 3.5% or even 0% down.

Keep in mind, putting less than 20% down typically means you would have to pay private mortgage insurance, or PMI. PMI can cost anywhere from 0.5% to 1.5% of the loan amount per year, depending on different factors, according to The Mortgage Reports. Typically, you can request for mortgage insurance to be removed after you reach 20% equity.

‘Those dollars should not be invested in the market’

First-time homebuyers may qualify to make penalty-free withdrawals up to $10,000 from a 401(k) plan or traditional or Roth individual retirement accounts. But financial advisors recommend preserving those funds for retirement when possible.

While Roots may help its renters invest to build wealth, experts typically emphasize saving rather than investing for short-term goals.

Low-risk options including high-yield savings accounts, certificate of deposits or Treasury bills may be ideal for people whose timeline to buy is up to five years.

“Anything that you need dollars for in the next three to five years, those dollars should not be invested in the market,” said Janet Stanzak, a certified financial planner and founder of Minnesota-based Financial Empowerment. “Markets typically cycle in three to five year cycles, and the worst case would be, you find a home you want to move on and your money’s in the market and the market takes a downturn.”

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Gen Zers are willing to buy fixer-upper homes. Some already regret the decision, new report finds

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About 1 in 5 Gen Zers, or 22%, say a lack of affordable starter homes poses as a barrier towards homeownership, according to a new report. Some believe fixer-upper homes might be the answer to the issue.

A fixer-upper is an existing house that needs varying degrees of maintenance work and is typically offered at a low purchase price, by Redfin’s definition.

More than half, 57%, of Gen Zers polled said they are willing to put an offer in on a fixer-upper, according to a new report by Clever Real Estate. The site surveyed 1,000 Generation Z adults 18 and older; 126 of the total were homeowners.

However, some of those who went that route are already rethinking their decisions. To that point, of the 40% of Gen Z homeowners who did buy a fixer-upper, about 27% regret it, the report found. 

Given the survey’s small base of homeowners, it’s hard to say how fixer-upper regrets might play out on a larger scale. But experts say it’s not unusual for buyers of such properties to feel overwhelmed.

“A lot of them are first-time buyers; they don’t really know the true costs of homeownership and how these renovations and repairs can really be a lot,” said Jaime Dunaway-Seale, a data writer at Clever Real Estate.

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Buying a fixer-upper home can mean savings in the short term, but would-be buyers need to keep renovation costs in mind, as well as the home’s current functionality, said Marine Sargsyan, staff economist at Houzz, a home renovation and design site. For example, if your new home doesn’t have a usable bathroom that might delay your ability to move in.

“Functionality above everything. Anything you have in your house has to function,” she said. “If it doesn’t, then see how much it’s going to cost for you to replace [it].” 

‘Young buyers are having to make trade-offs’

As homeownership affordability is out of reach for many Americans, a fixer-upper home could mean short-term savings.

The median cost of a fixer-upper house is about $283,000, according to a May report from StorageCafe, which analyzed data from its sister division, Point2. That is about 29% lower than a move-in ready home, saving buyers roughly $117,000, StorageCafe found.

“Young buyers are having to make trade-offs because housing prices are so expensive,” said Susan Wachter, professor of real estate and professor of finance at The Wharton School of the University of Pennsylvania.

Some Gen Z buyers are even willing to buy fixer-uppers with significant disrepairs or outdated features that pose great risks. Over half, 56%, of Gen Zers in the Clever Real Estate survey said they would buy a home with asbestos, a mineral fiber that can increase the risk of developing lung diseases if exposed to it.

When shopping around for fixer-upper homes, make sure the house is safe and livable enough not to cause any health and safety issues, Sargsyan explained.

“Make sure that there is no toxin in the house,” she said.

It doesn’t take extreme deterioration for a fixer-upper to generate significant repair costs. Many of the existing homes in the U.S. were built decades ago, according to the 2022 American Community Survey by the U.S. Census Bureau. The survey found that the median age of owner-occupied homes in the U.S. is about 40 years.

“Homebuyers have to make a compromise along the way, and often it’s the age or the condition of the home,” Jessica Lautz, deputy chief economist at the National Association of Realtors, recently told CNBC.

Functionality above everything. Anything you have in your house has to function.

Marine Sargsyan

staff economist at Houzz, a home renovation and design site

About 51% of surveyed homeowners spent $25,000 or more on home renovation projects in 2023, up from 44% in 2021, according to the 2024 U.S. Houzz & Home Study. Houzz surveyed 33,830 homeowners of ages 18 and older from Jan. 19 to Feb. 27.

While cash from savings continues to be the most common way homeowners fund renovation projects, or 83%, credit card use has increased, Houzz found. About 37% of homeowners paid for their repair projects with credit cards, up from 28% who did so in 2022.

Five things to watch for in a fixer-upper house

If you’re considering a fixer-upper, ask thorough questions to the home seller or real estate agent about the property, such as when the house was built, experts say. If you get as far as the home-inspection process, line up a home inspector who can help you compile the issues with the house.

Here are five key things to pay attention to if you’re considering buying a fixer-upper house:

  • Roof: If it’s a leaky roof, you have to figure out how much it’s going to cost to fix, said Sargsyan. Roof repairs can be significant, and you also have to consider the damage that leaks might have caused inside the home. The median cost of roofing upgrades hovers around $12,000, according to Houzz.
  • Plumbing: Find out the condition of the home’s pipes and plumbing, such as where they are, where do they go, and when was the last time they were upgraded, Sargsyan said. Older pipes are more likely to break or crack if they were installed before 1980, when cast iron or clay were typical materials, according to Short Elliott Hendrickson, Inc., a building company based in St. Paul, Minnesota.
  • Electricity: Find out if the home’s wiring is in good condition, and when it was last updated. Older homes often do not have safety devices like ground fault circuit interrupters. Taking a look at the electric panel can also give you clues about the home’s wiring system, according to Lippolis Electric Inc., an electrical contractor company in Pawling, New York. The median spend on electrical system upgrades rose to $2,000 in 2023 from $1,800 in 2020, Houzz found. “It’s important to understand the overall capacity of your electrical because you don’t want to plug in too many things and then cause an outage for yourself,” Sargsyan said. “That’s also a big consideration.”
  • Walls and stairs: Make sure the walls are safe, Sargsyan said. If there are cracks in the walls and ceilings, uneven floors, and difficulty opening and closing doors could indicate underlying problems, according to Perma Pier, a foundation repair company in Texas. And if there are stairs in the house, make sure they are safe to walk on, Sargsyan said.
  • Overall land: Understand the overall land the house was built on, she said. Look for evidence that problems with the home stem from the surrounding land, like indications the basement has flooded or cracks. “Is there going to be some sort of surprise if it rains too much, especially with the weather changes in recent years?” she said.

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Selling a home is expensive, too: Homeowners typically spend nearly $55,000, report finds

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Buying a home and maintaining it is expensive, but selling it is costly, too, according to a new report.

It typically costs $54,616 to sell a house in 2024, according to a June 17 report from Clever Real Estate. Almost half of surveyed home sellers, or 42%, said their costs to sell were higher than expected, the report found.

“When people think about selling their home, they’re thinking about how much money they’re going to make from their home sale, and not how much they’re going to spend,” said Jaime Dunaway-Seale, data writer at Clever Real Estate.

“That cost does end up being very high and then they’re caught off guard and disappointed because that’s going to take a cut out of their profit,” Dunaway-Seale said.

In May, Clever Real Estate polled 1,014 Americans who sold a home between 2022 and 2024 about their attitudes related to the home-selling process. It also conducted an analysis of seller costs based on median real estate prices in May.

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About 39% of the total cost — $21,603 — is spent on real estate agent commissions, according to the report.

However, as a landmark case involving real estate agent commission fees will soon take effect, sellers will no longer be required to pick up the entire tab. If a seller decides not to pay the buyer’s real estate agent’s commission, it could “drop their cost by about $10,000,” Dunaway-Seale said.

Other typical expenses include doing some home repairs both ahead of the listing and in response to inspections, which Clever Real Estate estimates to cost $10,000; closing costs ($8,000); buyer concessions, or expenses the seller agrees to pay for the buyer to reduce upfront purchase costs, ($7,200); moving costs ($3,250); marketing and advertising costs ($2,300); and staging costs ($2,263).

But home sellers should focus on “maximizing the efficiency of the transaction,” and “not just trying to save on costs,” said Mark Hamrick, senior analyst at Bankrate. 

“Ultimately, [with] many of these fees, there’s no harm in trying to negotiate, and that includes real estate commissions,” Hamrick said.

‘There are plenty of costs involved’

Cost-constrained homebuyers in today’s housing market do not want to inherit homes in need of renovations, according to the Clever Real Estate report.

“There are plenty of costs involved,” said certified financial planner Kashif A. Ahmed, founder and president of American Private Wealth in Bedford, Massachusetts. “You might have to do some renovations to sell it.” 

If a buyer makes it as far as the home inspection process and sees issues in the house that were not noticeable during the initial walkthrough nor disclosed, they may have room to ask the seller to do the necessary repairs, Daryl Fairweather, chief economist at Redfin, recently told CNBC.

That is especially true in housing markets where listed homes are lingering on the market for longer because it gives homebuyers “bargaining power,” according to Orphe Divounguy, a senior economist at Zillow.

Sellers often incur pre- and post-listing repairs, improvements and renovations that can cost around $10,000, according to Clever Real Estate. 

“There may be a situation where a buyer might say, ‘Well, I want you to fix this before I buy it,’ and then you’re like, ‘Well, in the interest of getting rid of this place … I’ll spend the extra money,'” Ahmed said. 

But the highest expenses an owner will face when selling a home are the real estate agent commission fees, Ahmed said.

‘The rule change has not yet gone into effect’

A landmark case is poised to change the way homes are bought and sold in the U.S.

The National Association of Realtors in March agreed to a $418 million settlement in an antitrust lawsuit in which a federal jury found the organization and other real estate brokerages had conspired to artificially inflate agent commissions on the sale and purchase of real estate.

“We went ahead and included it [in the Clever Real Estate analysis] now because, as of right now, the rule change has not yet gone into effect,” said Dunaway-Seale.

A finalized NAR settlement takes effect in August, and there is a “much more defined notion that sellers are not responsible” for a buyer’s real estate agent commissions, said real estate attorney Claudia Cobreiro, the founder of Cobreiro Law in Coral Gables, Florida.

Commission rates have also been removed from the multiple listing system, or MLS, in some areas like Miami, she noted.

The new mandatory MLS policy changes will take effect on August 17, 2024, according to the NAR.

However, “that is the policy side of it,” she said. “The practical side of it is that we are still seeing the notion that Realtors are needed,” and most buyers might not have an extra $10,000 on top of closing costs and the down payment required for the purchase, Cobreiro said.

Dunaway-Seale agreed: “Sellers might not be obligated to pay the buyer’s agent commission, but a lot of them still might as just another incentive to bring buyers in.” 

Ways to reduce costs

A seller has to pay closing costs; everything else depends on the home seller’s priority, or how quickly they need to sell off the property, said Dunaway-Seale.

Here are some ways to cut or reduce expenses associated with selling a house:

1. Sell without a real estate agent: Homeowners could try to sell the house themselves and potentially drop real estate services altogether, said Dunaway-Seale.

“But they’re not going to sell for as much profit,” she said.

Among sellers who did not hire an agent, 59% did so to save money, Clever Real Estate found. But sellers who did work with an agent sold their house for about $34,000 more than those who did not, according to the report.

Keep in mind that going through the transaction without a real estate agent can pose a risk.

Signing the contract is the least of it. There are so many things that happen throughout the transaction that really require the expertise and the navigation by someone who understands the process, Cobreiro previously told CNBC.

“You’re talking about one of the most expensive and consequential transactions of a lifetime,” said Hamrick. “These fees can on the face of it look a bit daunting, but the good news is most people are not going into this where they’re going to essentially lose money on the transaction.”

2. Reduce concessions, staging and marketing costs: “If sellers don’t really care about selling their home quickly, they could possibly offer fewer concessions,” Dunaway-Seale said. Concessions are expenses the seller agrees to pay for to reduce a buyer’s upfront costs.

Lowering the budget for staging and marketing costs can also save on expenses because such tools help draw buyers in, she said.

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Homeownership isn’t for everyone, money coach says: Don’t fall for artificial ‘pressure to buy’

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Jannese Torres is the founder of the blog Delish D’Lites and the podcast “Yo Quiero Dinero.”

Photo Jannese Torres

In her upcoming book, “Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa,” author Jannese Torres discusses how she became the first woman in her family to graduate from college, build a career and achieve what she believed were marks of success.

Yet in her pursuit of the American dream, she realized that she didn’t know what to do with her financial success. She also realized certain milestones, such as homeownership, often aren’t so much achievements as a new set of challenges.

“It’s just important for people not to just feel this pressure to buy a home because you’re a certain age or you’ve reached a certain life milestone,” said Torres, a Latina money expert who hosts the podcast “Yo Quiero Dinero” and an entrepreneurship coach who helps clients pursue financial independence.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

CNBC spoke with Torres in early April about what drove her to write her new book, how she has worked through “financial survivor’s guilt,” and why pursuing the American dream can become a nightmare for some.

(This interview has been edited and condensed for clarity).

‘Nobody talks about the grief that comes with growth’

“I wanted to write the book that I needed when I was graduating from high school and that could have saved me from making a lot of financial mistakes because I didn’t learn anything about money,” said Jannese Torres, author of “Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa.”

Courtesy: Jannese Torres

Ana Teresa Solá: What drove you to write this book? 

Jannese Torres: When I was doing the market research for the book, one of the things that I did was look and see what the competitive market looked like out there, or if there is a reason that this book needs to exist. 

I couldn’t find a single book that was specifically marketed to the Latina community or Latinos in general being the majority minority in this country. 

Our families have told us to go and pursue the American dream, but we haven’t been given instructions for how to manage the emotions that come with it.

I felt like I wanted to write the book that I needed when I was graduating from high school and that could have saved me from making a lot of financial mistakes because I didn’t learn anything about money. The more that I’ve talked to folks through the podcast and through my social media platforms, that’s been a very common sentiment. We’re told to go to school, get a job and make money, but then that’s the end of the conversation. What do we actually do with it? 

ATS: Like many younger generations of Latinos in the U.S., you overcame many hurdles and achieved major goals. But you describe in the book that these milestones also come with a sense of guilt. Why is guilt tied to success? 

JT: I call it “financial survivor’s guilt” because this is one of those things that we have not been prepared for. Our families have told us to go and pursue the American dream, but we haven’t been given instructions for how to manage the emotions that come with it. Nobody talks about the grief that comes with growth. Nobody talks about what it feels like to be on the other side of the struggle when so many people that you love are still there and you feel powerless to help them all. 

Looking back at it now, it’s like I was making all these decisions because of what other people valued versus asking myself what I actually value.

It’s going to require folks to give themselves some compassion, and to be okay to feel those feelings. But don’t let them sabotage you. It’s going to require some boundaries that you learn to exercise and also being okay with feeling like you’re on this island by yourself. When you’re the first to do something, it’s always going to feel uncomfortable. But if we don’t have examples of people who can make it out, I think it’s going to be much harder for folks to believe that they can do it, too. 

‘I was over my head very quickly’

ATS: Walk me through the chapter or that point in time when you bought a house, but it wasn’t all you thought it would be. 

JT: Looking back at it now, I was falling victim to the American dream. As a first-generation kid, my parents didn’t invest. The only thing that we saw as examples of “making it” was when family members would buy homes: The sacrifices were worth it and this is the thing that you have to show for your success.

When you’re the first to do something, it’s always going to feel uncomfortable. But if we don’t have examples of people who can make it out, I think it’s going to be much harder for folks to believe that they can do it, too. 

Jannese Torres

Latina money expert and entrepreneurship coach

I definitely felt the pressure to keep up with the Joneses in that respect. I was turning 30 years old and I saw friends buying homes, getting married, doing all those things that are on the successful adult checklist of life. When I decided to purchase the home, it was coming from a place of, “Well, I need to do this too, because this is just what everybody does.”

I quickly realized that I bought a home in a place that I didn’t even want to live in. 

Looking back at it now, it’s like I was making all these decisions because of what other people valued versus asking myself what I actually value. The freedom to have that flexibility that comes with renting is something that I valued much more.

But I felt like I was falling victim to that narrative that says, “You’re wasting money if you rent, and successful adults purchase homes.” It took a lot of unlearning of those narratives and realizing that just because something works for one person doesn’t mean that it’s universally applicable. 

Homeownership is one of those things where more people need to question if they have the personality, lifestyle, or the value system for this, or are you just wanting to do it because that’s what everybody else is telling you to do. 

Jannese Torres

Courtesy: Jannese Torres

ATS: What would you tell someone who’s financially comfortable or has reached certain benchmarks where they could potentially invest in a property but are still wary about it? 

JT: One of the things that made me realize I was over my head very quickly was the fact that two weeks into moving into the home, I discovered that the basement would flood. The sewer line was blocked, and that was not something that we checked during inspection. I ended up having to spend $4,000 on replacing the pipe in the basement two weeks after moving in. That pretty much depleted the little money that I had left over after closing costs. 

I ended up having to take a 401(k) loan to pay for repairs and putting things on credit cards. It’s important to realize that closing costs, the fees and the down payment are just the beginning.

There’s this narrative where if you get a mortgage, then you’re going to be paying the same amount of money forever and that’s why you should buy a home instead of renting. And I’m like, “Absolutely not.” Your property taxes and insurance will increase. You’re not going to be able to predict when things go wrong in the home and when you need to fix something. 

You have to make sure you can afford the maintenance costs and the things that will inevitably come with homeownership. And from a value perspective, you have to really be honest with yourself: “Does this suit my lifestyle? Do I want to stay in this place for like a decade or more? … Or do I want the flexibility to give my landlord 30 days’ notice and be able to move somewhere else? Are you in a job that feels like it’s something you want to do long term? Or do you want to make a career pivot?”

‘The American dream is more of an illusion’

ATS: Do you think the American dream has changed? 

JT: I definitely do think that the American dream is in the process of being redefined because it has become so inaccessible, especially to the newer generations. I think there was this path to “success” where you could go to school, you could buy a home with a regular job, and previous generations were not saddled with the level of student loan debt and the cost of living was not as high. There’s factors in play that are making the American dream obsolete or at least inaccessible to people. 

We are seeing sort of this questioning of it and this shift. I think that the Great Recession was a big impetus for people starting to wonder. It feels very much like the American dream is more of an illusion for a lot of folks, and I am curious to see where it goes.

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What a $418 million settlement on home-sale commissions may mean for you

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A landmark class-action lawsuit may change the way Americans buy and sell homes.

The National Association of Realtors agreed to a $418 million settlement last week in an antitrust lawsuit where a federal jury found the organization and several large real-estate brokerages had conspired to artificially inflate agent commissions on the sale and purchase of real estate. 

The NAR’s multiple listing service, or MLS, used at a local level across areas in the U.S., facilitated the compensation rates for both a buyer’s and seller’s agents.

At the time of listing a property, the home seller negotiated with the listing agent what the compensation would be for a buyer’s agent, which appeared on the MLS. However, if a seller was unaware they could negotiate, they were typically locked into paying the listed brokerage fee.

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The proposed settlement would have the commission offer completely removed from the NAR’s system and home sellers will no longer be responsible for paying or offering commission for both the buyer and seller agents, said real estate attorney Claudia Cobreiro, the founder of Cobreiro Law in Coral Gables, Florida.

“The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation,” the NAR wrote in a press release.

“Commissions remain negotiable, as they have been,” the organization wrote.

However, some of these changes may take time to materialize, experts say.

Settlement process ‘can take some time’

If a settlement agreement is accepted within a lawsuit between two people, the court generally won’t look at the settlement. Yet, in a federal class-action lawsuit, one that affects a large number of people, there will be a period for the court and interested parties to review the settlement and offer commentary and feedback on the agreement, Cobreiro said.

“That’s the process that we’re about to enter, and that process can take some time,” she said.

As proposed, the settlement would have the NAR completely remove commissions from its MLS system by July. That may be optimistic, Cobriero said.

“It would be more realistic to see this being implemented later this year,” she said.

Redfin CEO on NAR settlement: People should have a voice in how much a real estate agent gets paid

In the meantime, it’s “business as usual” for buyers and sellers, Cobreiro said. “There is nothing that agents should be doing differently currently in their ongoing transactions.”

A buyer or seller already in the market is probably not going to be affected by the settlement unless their property happens to be on the market a little longer than what’s customary, she said.

“The big gray area here is how will buyer [agent] commissions be handled moving forward,” said Cobreiro, as there is no finalized agreement yet that clearly indicates how that will be handled.

What the settlement could mean for homebuyers

The settlement agreement doesn’t say that the buyer’s agent will not be paid nor that the buyer’s agent cannot charge fees.

“The big question here is who is going to pay for those services moving forward. Will it ultimately be a buyer that will have to get the buyer’s agent’s commission together, on top of closing costs and on top of down payment?” Cobreiro said.

While commission fees are negotiable between involved parties, knowing what cards you have on the table as a homebuyer will be more important now than before. Using an agent will still be a smart way to achieve that, experts say.

“A great local agent can give you a competitive advantage,” said Amanda Pendleton, a home trends expert at Zillow Group. That’s especially true as low-priced starter homes are expected to remain in demand, she said.

Here are two things to know about how the settlement could change the process of buying a home:

1. Buyers could be responsible for their agent fees: Historically, real estate commissions typically come out of the seller’s pocket, and are split between the buyer’s and seller’s agents.

As a result of the settlement, the seller will no longer be responsible for commission fees for a buyer’s agent. So this is a new potential charge buyers need to consider in their budget. Historically, if a buyer’s agent got half of a 5% or 6% commission, that equaled thousands of dollars.

For example: The median home sale price by the end of 2023 was $417,700, according to the Federal Reserve. That would mean commissions at a 5.37% rate — the 2023 average rate, according to Lending Tree — amount to roughly $22,430, about $11,215 of which might go to the buyer’s agent.

But bypassing an agent’s services may not lead to direct savings, especially for first-time buyers, experts say. You could put yourself at risk by leaving the homebuying process entirely to the seller and their agent, said Cobreiro.

Sometimes things show up in your home inspection report that merit a credit from the seller, but if you don’t have an agent, the seller’s agent may not volunteer that, said Cobreiro.

Doing so would be a breach of their fiduciary duty to the seller, and it affects their commission if the price of the property declines, she said.

“Signing the contract is the least of it; there’s so many things that happen throughout the transaction that really require the expertise and the navigation by someone who understands the process,” she said.

2. Buyers may be required to sign a contract early on: If buyers become responsible for their agent’s commission, you’re likely to see more agents asking buyers to sign a buyer-broker agreement upfront, before the agent starts helping them find a property.

Most brokerages have a buyer agency agreement, but it’s common for real estate agents to wait to present the contract.

“They want to win the person’s business, they don’t want to scare them with having to sign any contracts,” said Steven Nicastro, a former real estate agent who writes for Clever Real Estate.

Moving the contract talks to earlier in the process is a precaution to protect buyer’s agents in the market.

“That could lead to negotiations actually taking place at the first meeting between a buyer and the buyer’s agent,” Nicastro said.

Know you can negotiate the commission rate as well as the duration of the contract, which can span from three months to a year, Cobreiro said.

Don’t miss these stories from CNBC PRO:

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2 out of 5 industrial stocks are at record highs. Here’s our post-earnings outlook on all of them

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Eaton Corporation signage at the NYSE

Source: NYSE

Earnings season was not perfect for our industrial-focused portfolio companies, but we’re feeling pretty good about their prospects for the rest of the year.

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Insurers such as State Farm and Allstate are leaving fire- and flood-prone areas. Home values could take a hit

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Some insurance companies are pulling back coverage from fire- and flood-prone areas, leaving homeowners with limited affordable options. This trend may even affect the property value of American homes, experts say.

The nation’s largest homeowner’s insurance company, State Farm, stopped accepting new applications for policies on property in California in May. Allstate announced in November 2022 that it would “pause new homeowners, condo and commercial insurance policies in California to protect current customers,” the Associated Press reported in June.

This trend will likely continue across the insurance industry, said Jeremy Porter, head of climate implications research at First Street Foundation, a nonprofit research organization that compiles comprehensive climate risk data.

“They know the risk is just too high to be actuarially sound for their business,” he said.

In its announcement, State Farm said too many buildings are being destroyed by climate catastrophes, inflation is making it too expensive to rebuild, and it can’t protect its investments any longer. 

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The problem is not just in California, where wildfires are prevalent. Louisiana and Florida homeowners are also contending with a lack of access to insurance, due to flood risk.  

“Losses are increasingly related to climate risk,” said Sean Kevelighan, president and CEO of the Insurance Information Institute, an insurance industry association. “As that risk increases, so does the cost of insuring those assets that people have on hand.”

Even though there wasn’t an increase in major disasters in 2023, he said, the industry is still expecting to see $50 billion in losses just because of “severe convective issues” such as flash flooding and the implications of heavier everyday storms. 

What happens when a homeowner can’t get insurance

Darlene Tucker and Tom Pinter

Without insurance, many homeowners can find themselves in big financial trouble. 

Darlene Tucker, 66, and Tom Pinter, 68, are longtime homeowners in Sonora, California. The couple bought their “dream home” 18 years ago and have been enjoying their retirement from their respective jobs in manufacturing.

Tucker also cares for her horses and a rescued 100-pound tortoise on the property, and runs a dog day care center to help make ends meet. She said Pinter also works as a delivery driver to help out.

Darlene Tucker and Tom Pinter’s home in Sonora, California.

The couple received a nonrenewal notice from Allstate in November. Tucker told CNBC she has been working with her Allstate agent to find another insurer.

“I had one company step up and said they’d do it for $12,000 a year,” she said — that’s roughly six times her previous annual premium under Allstate of about $2,000.

She said there was no way the couple could afford that new policy, and they would likely have to move. 

Dogs play at Darlene Tucker and Tom Pinter’s home in Sonora, California.

But Tucker and Pinter may find that selling their home also comes with a steep cost.

Porter said First Street Foundation’s research in California concluded that “the moment that an individual gets a non-renewal letter from the private insurance market, they essentially lose 12% of their property value.”

Insurance costs ‘should be an alarm’ for homebuyers

Experts say the insurance landscape in California is particularly tricky because, in addition to the wildfire risk, the state has a law that adds extra approval measures, including board approval and review by the insurance commissioner, if an insurance company wants to raise the rate of insurance by more than 7%. That’s been in effect since the 1980s.

Kevelighan, of the Insurance Information Institute, said that law, called Proposition 103, creates a regulatory environment in California that restricts the industry from adequately including climate risk in its forecasting and is one of the reasons the industry is being forced to pull back coverage in the state.

“Risk management does not come into play until it’s entirely too late when it comes to individual personal property purchasing,” Kevelighan said. “It comes into play when the mortgage provider needs you to go get it.”

“And that’s the first time when a consumer even begins to think about where they’re living and what the risks might be,” he said. “The cost reflects that risk. That should be an alarm to tell them that they’re living in a risky place and then ask themselves: How could I reduce that risk? Or do I need to think about living somewhere else?”

‘Give me something to work with’

With just days remaining until Tucker and Pinter’s Allstate policy expires, on Feb. 15, the couple is still looking for more options. Tucker told CNBC that a recent quote they received was three times what they were originally paying, with a $10,000 deductible.

Of the whole situation, she said she feels frustrated.

Darlene Tucker and Tom Pinter

“We’re doing everything we can,” Tucker said. “You know, we worked hard, we retired. We take good care of our house. I’m never late on my bills. I paid that [policy] for 18 years … And you just give me no choice. That’s the part that bugged me the most, I think. Give me a list. Give me something to work with. Raise [the price] if you need to, reasonably. But don’t just give me no choice. That’s not right.”

Tucker’s insurance agent from Allstate told CNBC that “most insurance companies are not currently writing polices in high fire prone areas,” and confirmed the company was trying to help her find other options.

A spokesperson for Allstate said the company is “working with the California Department of Insurance to improve insurance availability in the state. We’ll be able to offer home insurance policies to more Californians with the use of our advanced wildfire modeling and reinsurance.”

State Farm did not respond to CNBC’s requests for comment.

Watch the video to learn more about why some American homeowners are losing their property insurance and the changes the insurance industry would like to see to be able to offset some of the mounting risks. 

Clarification: This story has been updated to clarify when Allstate announced it would pause accepting applications for new insurance policies in California.

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Taiwanese youth voice income, housing concerns ahead of crucial elections

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While cross-strait relations remain an overarching theme in Taiwan’s presidential and legislative elections this weekend, many young voters are more concerned with domestic issues, such as low wages and housing, that preoccupy them as much as or even more than the threat of an invasion by the People’s Republic of China. FRANCE 24 met with several of them. 

Some 19.5 million Taiwanese are eligible to vote in the island’s presidential and legislative elections on Saturday, January 13. Some 2.8 million, or 15 percent, are aged between 20 and 29 years old. 

Voters will determine Taiwan’s next leader from among three candidates: the Democratic Progressive Party (DPP)’s Lai Ching-te, the Kuomintang (KMT)’s Hou Yu-ih and the Taiwan People’s Party (TPP)’s Ko Wen-je. 

Incumbent President Tsai Ing-wen from the pro-independence DPP is due to step down at the end of her second consecutive term in May.     

Read moreTaiwan’s presidential election: Who are the candidates in the high-stakes vote?

Despite not being a large enough cohort to determine the outcome of an election, young people nevertheless represent a sizable chunk of Taiwan’s electorate capable of tipping the scales in a neck-and-neck race. 

With less than a day to go before the election, political groups have called on young people to return home and vote.  

Taiwan’s voting system relies on household registrations to determine voter eligibility. Despite moving to other cities for work and study, many young Taiwanese remain registered in their home town, so they must return in order to vote. 

While many have already bought tickets and packed their bags for the weekend, some remain uncertain whether they’ll cast their ballots on Saturday.  

Eligible youth participation in the past two elections ranged from 56.3 to 72.7 percent. 

Stagnant wages 

“I still haven’t decided yet if I’m going to vote … if I do, I’ll take the bus first thing tomorrow morning,” said Wang Miao, a 25-year-old woman working in Taipei’s IT sector.  

Wang’s hometown is in Kaohsiung, a southern port city over 400km from the capital. 

“The thing is, I don’t feel like the elections are going to change anything … Wages are low, and inflation is still high,” she said. 

IT worker Wang Miao pictured in Penghu County. © Wang Miao

While median wages in Taiwan grew 2.37 percent in 2023, average consumer prices increased by 2.5 percent over the same period, outpacing wage growth.  

“My company gave us a 1.5 percent raise last year, which is ridiculous compared to inflation,” said Xu Jing-chen, a 29-year-old engineer working in Hsinchu, a city southwest of Taipei.  

On the way back home to the coastal city of Tainan, Xu said he feels frustrated at the current politics because the available options seem unlikely to resolve the issues that young people face. 

“They’re all talking about raising the minimum wage, but I don’t make the minimum, so how does that affect me? I’m only voting out of civil duty … As far as I can tell, none of the candidates are offering any concrete solutions to improve our lives,” he said. 

While Lai proposes to increase the monthly minimum wage of publicly traded companies’ employees to 30,000 New Taiwan Dollars (NTD) (or €880.40), Hou proposes a general hike of minimum wage to NTD 33,000 (€968.70) from the current NTD 27,470 (€806.37). Both are significantly lower than the NTD 43,166 (€1265.13) median wage in Taiwan. 

“The only option for me, if I want to increase my salary, is to move abroad, maybe to the US. But my parents are here, my home is here,” Xu said.  

Hoping to start a family with his girlfriend, Xu said he has been looking to purchase an apartment in Hsinchu. 

Unaffordable housing 

“The market is crazy. A simple two-bedroom can cost over NTD 10 million (around €292,000), and that is without a parking space!” Xu said. 

Due to low interest rates, tax cuts and market speculation, housing in Taiwan is notoriously unaffordable, with an average unit costing over 9 times the median annual wage, far exceeding the price-to-income ratio of 3 times the annual wage recommended by the UN.  

Other young Taiwanese also talk about housing concerns. 

Wu Qian-hue, a 26-year-old graduate student working part-time and living with her parents in the suburbs of Taichung, a bustling city in central Taiwan, said soaring rents have prevented her from moving out. 

“What’s the point? I can barely pay for my daily expenses and that’s it. I barely have any savings, everything I make goes to pay my bills. There’s nothing left at the end of the month. Living with my family helps me avoid getting into debt,” she said. 

“One day I’d like to have a place of my own, but for now it’s a dream,” Wu said, lamenting her city’s high housing costs.  

“Everything’s more expensive now … House prices in Taipei are crazy. For now, I can only afford to rent. I’m glad [that] I receive a subsidy for it,” said Pheonix Hung, a 27-year-old artist working in Taipei.  

Hung added that she plans to vote for Lai in the upcoming presidential election because of his party’s policies on housing, which introduced rent subsidies for single people and households with young children in 2019.  

Taiwanese artist Pheonix Hung pictured in Taipei.
Taiwanese artist Pheonix Hung pictured in Taipei. © Phoenix Hung

Computer science student and first-time voter Sung Zhi-ming, 22, said he chose to remain in accommodations provided by his university, where he shares a room with three other students, because of high rents. 

“I don’t really have a choice. It’s either this or back home, which is too far to commute every day,” said Sung, who comes from Hualian, a city on Taiwan’s east coast. 

Sung said he plans to vote for the Taiwan People’s Party’s Ko Wen-je, a candidate popular among younger generations for his outspoken manner and focus on domestic issues. 

Both Ko and Lai propose to tax vacant properties to encourage owners to put them on the rental market.  

Cross-strait relations 

But Taiwan’s relations with its giant neighbour remain at the forefront of some young people’s minds. 

Sung, who finished his military service last year, said he’s worried about a potential Chinese invasion. 

Taiwan requires all male citizens of military age to serve for four months in the national army, a period that was extended to one year starting in 2024. 

“I know we hear about it all the time, Chinese drills, Chinese balloons and Chinese ships in the Taiwan Strait, and we’re all kind of numb, by the end of the day … but at the same time, you can’t not think about it,” he said.

Read more‘People don’t want to talk about war’: Taiwan civil defence battles invasion risk denial

Sung said he plans to vote for the KMT, a party that favours closer ties with Beijing, in Saturday’s legislative election. 

“My parents have always voted for the KMT. … We feel like they are more capable of making peace with China. We don’t want a war,” he said.  

While echoing Sung’s sentiments, Wu said she prefers to vote for the DPP. 

Although both parties aim to maintain the status quo, the DPP differs from the KMT ideologically in that it rejects the “One China” principle. The “One China” principle is a diplomatic consensus between mainland China and the KMT that only one “China” exists, without the sides agreeing about which country is the “real” China. 

“They’ve [the DPP] managed to safeguard Taiwan’s independence, despite the pressure from China … We can’t appease China forever; we have to stand up for ourselves,” she said.  

“Of course, I worry about war, but what can you do? It’s not really up to us whether China will invade or not, is it?” Wu said.  

“At the end of the day, you just have to live with it and carry on,” Wang said. 

“The threat of invasion isn’t going to go away any time soon, but that doesn’t mean we can’t care for other issues. We have all sorts of problems, and China is not the biggest one,” she said.  

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Why tornadoes are more destructive than ever in the U.S.

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May 22, 2011, began as a beautiful day in Joplin, Missouri. Families and friends gathered outside. Suddenly, the sky changed. Troy Bolander, who grew up in nearby Kansas, noticed the clouds beginning to swirl. He began to prepare his crawl space. Ann Leach, a life coach, was also at home. Tornado sirens blared. Ann took cover on her bathroom floor as a massive EF5 tornado descended upon Joplin. Troy sheltered in his crawl space.

One hundred sixty-one people were killed in the Joplin tornado. Both Troy, a city official, and Ann survived. The May 2011 Joplin tornado left behind almost $3 billion in damage, making it the costliest U.S. tornado on record.

Tornadoes are a billion-dollar problem in the United States. From 2018 to 2023, there have been 17 billion-dollar climate disasters involving tornadoes. And the costs are expected to grow.

Billion-dollar disasters

The U.S. sees about 1,200 tornadoes each year. That’s more than anywhere else in the world.

“Tornadoes are a big problem in the United States,” said Anne Cope, chief engineer at the Insurance Institute for Business & Home Safety.

In 2022 alone, the U.S. experienced two separate billion-dollar tornado outbreaks.

Based on estimated wind speeds and damage, tornadoes can range on a scale from EF0 to EF5.

“This rating scale came to us because wind engineers went out into the field to look at the damage,” Cope said. “And then based on the damage, they were trying to predict what the wind speeds are … so we have developed this system based on how the buildings react.”

That means a tornado’s rating is directly related to the resilience of the buildings in the community it hits.

The powerful EF5 tornado that struck Joplin 12 years ago had estimated winds of 200 miles an hour, according to Joplin city records. It was initially one half mile wide and expanded to three-quarters of a mile wide, traveling on the ground for about 13 miles across the city limits and beyond.

“My place was totally destroyed,” Joplin resident Ann Leach said.

In total, 7,500 residential dwellings in the city were damaged or destroyed. According to the Joplin Area Chamber of Commerce, 553 businesses were destroyed or severely damaged in the tornado.

But Joplin rebuilt.

“It was phenomenal how swiftly the community came together to respond and help their neighbors out,” Leach said.

“Rebuilding is a very long process and it’s one that is arduous,” said FEMA Associate Administrator for Resilience Victoria Salinas. “It oftentimes takes years to be able to rebuild communities, homes, [and] businesses. And it takes communities coming together to really think about the future and what they’re going to do differently to build more resilience into their communities as they move forward.” 

Shifting patterns

The central Great Plains of the U.S., including states like Kansas and Texas, have historically experienced more tornadoes than anywhere else in the nation.

However, experts say tornadoes can occur across the U.S.

“If you were to ask a thousand tornado scientists where Tornado Alley is, they’re all going to give you different definitions,” said Victor Gensini, associate professor in the Department of Earth, Atmosphere and Environment at Northern Illinois University. “The reality is, is that all 50 states, including Alaska and Hawaii, receive tornadoes.”

Places in the Southeast and Midwest have seen an increase in tornado frequency.

“That is really important because we have way more people living east of the Mississippi River,” Gensini said. “And so basically, we have more targets, more exposure, more vulnerability as humans, our built environment, where these tornadoes are happening, and that creates more and more tornado disasters.”

Some cities in these regions include Memphis, Indianapolis and Nashville. 

In March 2020, a deadly tornado hit Nashville, leaving behind over $1.5 billion in damage.

“It’s kind of like this two-sided coin, if you will, where we have this change in probability due to climate. But we also have this increasing footprint and exposure and vulnerability that are going to continue to drive the losses in the future,” Gensini said. “And that’s really how we have to look at this problem. It’s a multifaceted issue.”

Investing in resilience

The U.S. is not helpless when it comes to tornado damage. Engineers know how to build stronger structures that can withstand high winds.

“A lot of tornado damage is preventable,” Cope said. “The EF0 and EF1 portion of the storms, that type of damage can be prevented with strong, resilient building construction. Costs a little bit more than typical building construction, but it’s definitely resilient and it prevents that type of damage.”

The IBHS has some specific recommendations for building resiliently, including having a wind-rated garage door and when reroofing, choosing a stronger option.

In the 2011 Joplin tornado, 84% of deaths resulted from building and structural failures. Missouri does not have a mandatory statewide building code, but in the wake of the massive EF5 tornado, the city of Joplin made some changes to protect its buildings and people from damaging winds. The new codes require anchor bolts every four feet and require hurricane clips to connect the roof to the walls, among other provisions.

“When you’re in an EF5 tornado and the winds are over 200 miles an hour, that system is still going to fail,” said Bolander, Joplin’s director of planning, development, and neighborhood services. “But many of the homes that were on the edge of that zone probably could have been spared if we had that in place.”

Not all communities have building codes in place. As of November 2020, 65% of counties, cities and towns in the U.S. are not covered by modern building codes.

“We should have building codes in all of the places in the United States where the wind can impact us, which is the whole of the United States,” Cope said. “But sadly, only 17 states in the U.S. have a statewide building code and many states that don’t have a statewide building code; it’s a patchwork of counties or local municipalities that might have one and then large unincorporated areas that don’t have one.”

Part of the challenge with building tornado resilience in the U.S. is that building codes are generally a local and a financial decision.

“So we’re talking about counties and municipalities who all have to make a choice or not make a choice,” Cope said. “And these are sometimes tough financial decisions.”

“We didn’t want to increase the cost of housing so much that people couldn’t rebuild or some people couldn’t afford to rebuild,” Bolander said. “So that was a debate amongst ourselves, you know, how far do we want to go with these building code changes?”

Federal resources are also available when it comes to building resiliently. In 2022, FEMA released the FEMA Building Codes Strategy to advance its building code efforts and strengthen resiliency nationwide. The Biden administration has also designated billions of dollars for climate resilience and weatherization through the Bipartisan Infrastructure Law and the Inflation Reduction Act.

Watch the video above to see how the U.S. can work to try and fix its billion-dollar tornado problem.

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