Jaxx Fox talks about buying her first home
Jaxx Fox shares tips for first-time homebuyers in Knoxville after purchasing her first house in 2021.
Calvin Mattheis, Knoxville News Sentinel
Jaxx Fox has lived in East Tennessee her entire life, although she never felt at home inside the apartments she rented. That’s why, three years ago, Fox decided to buckle down to save for her own home.
First-time homebuyers like Fox are entering a real estate market with drastically declining housing affordability, according to the National Association of Realtors (NAR).
The organization’s Housing Affordability Index indicates the short supply of homes is increasing costs across the country, and especially impacts first-time buyers.
Median family incomes in April fell 1.0% from March. Meanwhile, the monthly mortgage payment increased 16.1%.
Fox spent three years paying her student loans and saving so she could buy the home she always wanted. When she started searching, it wasn’t like anything she expected.
Fox found a place within a month, but that doesn’t mean it was easy.
From financing to finding a place, this is what first-time homebuyers need to know about a competitive and expensive real estate market.
How to prepare to pay for a house
The first step for new buyers is to figure out how to pay for a place. Usually, people buying their first property turn to mortgage lenders for a home loan.
Claudia Rios, senior loan officer with First Community Mortgage and founding member of the National Association of Hispanic Real Estate Professionals, has helped many first-time homebuyers since starting her career in financial services in 2006. She said the current real estate market is drastically different than anything she’s seen before.
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Here’s how Rios suggests new buyers prepare to purchase their first place.
- Plan months in advance: Rios told Knox News new buyers should talk with a lender about six months before they hope to buy. “It’s never too early to start getting ready for a mortgage,” she said. Once first-timers find a lender, Rios advises following up often until they’re ready to start searching for a home.
- Check that your credit score is correct: The COVID-19 pandemic has created challenges for credit bureaus. Rios said she’s discovering that many scores are incorrect. If a buyer’s score is reported wrong, they can work with a lender to dispute the issue.
- Connect with a credit counselor if needed: Not everyone’s credit score is in the best position to buy a home. Rios tells her clients to aim to have a credit score of 700 or higher to get a good interest rate and to pay down debt. If you’re having trouble increasing your score, credit counselors are available to assist.
- Make a budget: Buying a home is a big investment, but you don’t want to get stuck paying more than you can afford. Rios asks her clients how much they’re comfortable paying monthly and works backwards. The goal is to make enough room in your income for a mortgage payment. Rios said setting aside 45% of income for a mortgage and 55% toward other expenses works well for most of her clients.
The most important thing to do before buying is to set realistic expectations. This starts with financing. Home costs are rising quicker than ever, meaning money doesn’t go as far.
According to an analysis by Hancen Sale, governmental affairs and policy director for the Knoxville Area Association of Realtors (KAAR), the median sales price of a home was $275,000 in June — up 21.4% from June 2020.
The 30-year fixed mortgage rate was 3.11% in April compared to 3.37% one year ago.
“Nowadays, the market is tight because a $250,000 loan doesn’t get you the nice four-bedroom house you might expect. Buyers have to go higher and be strategic,” Rios said. “It’s a disadvantage for a lot of people, new and previous buyers included, but that’s the reality.”
How to buy your first home
For Fox, finding and buying her first home was the hardest part. It’s often the reason why many new buyers give up, especially in this competitive market. But realtor Nikita Hudson of Hudson Legacy Group said there are ways for buyers to withstand the pressure.
“My first conversation with a new buyer is just giving them a clear picture of what the market looks like right now and what the process is going to be like,” Hudson said. “It’s been tough because it’s not what they think it is.”
Here are Hudson’s tips to help set first-time buyers up for success.
- Research the real estate market: Just like it takes time to secure financing, new buyers should watch the market months before buying. Doing so allows first-timers to get a good idea of costs, timing and supply.
- Look below your budget: Hudson recommends buyers avoid homes at the top of their budgets. Look at listings that leave you $20,000 of wiggle room, she said. KAAR’s calculations show more than 68% of homes sold in Knoxville in May went for list price or above; nearly 10% sold for $25,000 or more over asking price.
- Be prepared to pay: Fox said a big down payment, paying for closing costs and offering earnest money helped her secure her home. Hudson seconds these strategies and advises buyers to include contingencies in their contracts. An example clause would be to agree to only ask for improvements over a certain cost.
- Get creative: Money talks, but Hudson said she’s seeing more buyers come up with creative solutions. “I’ve even had agents write up offers where they offer to have a champagne brunch at closing,” Hudson said. “You never know what’s going to sway a seller.”
- Always ask for an inspection: Jim Clabo, owner of A-Pro Home Inspection Services, said even amid market mania, it’s never a good idea to skip inspection. “Inspection can save you hundreds of thousands of dollars. At the very least, it gives buyers peace of mind.” Clabo advised new buyers to expect inspections to take a week because of delays.
- What’s meant to be will be: Hudson said she encourages her clients to have patience on their homebuying journeys. “Lord knows we all need it right now,” Hudson said.
From one first-timer to another
Fox’s homebuying experience ended quickly, and she counts herself among the lucky ones. She worked for years to achieve her money goals, which helped her prepare to purchase a place. What really made the difference was timing.
The North Knoxville house Fox bought appeared back on the market after the first buyer’s financing fell through. Fox bid above asking price, but the appraisal came in under the cost she offered. The owners were desperate to close quickly and accepted the appraisal price.
Since then, Fox and her husband have been fixing up the place to make it their own. Fox said she wouldn’t trade the stress of homebuying, though.
“(Owning a home) means certainty and stability with my housing. I’m in control of what happens or doesn’t happen with my living space, and it just feels so much more secure than if I was renting,” Fox said.
GCP Raises $2.3 Billion for Logistics Real Estate Investments – BNN
(Bloomberg) — Real estate focused investment firm GCP said it closed a $2.3 billion fund that will be used to buy and operate warehouses tied to logistics and e-commerce.
The fund has already acquired about 25 million square feet of real estate and will will look to buy about 25 million more, GCP Chief Executive Officer Alan Yang said in an interview. Los Angeles-based GCP is aiming to own about 100 properties in the fund.
Yang said it’s GCP’s first discretionary fund and is unlike previous vehicles tied to specific investments.
GCP spun out of Singapore-based investment manager GLP in 2019 following Blackstone Group Inc.’s $18.7 billion acquisition of GLP’s U.S.-based assets. Yang, who was GLP’s chief investment officer, founded GCP after it took on $1.1 billion of GLP assets that weren’t part of the Blackstone deal.
GLP is a limited partner in GCP, alongside other investors including Goldman Sachs Group Inc. and several pension funds, according to people familiar with the matter who asked not to be identified because the information was private. Representatives for GLP and Goldman Sachs couldn’t be reached for comment.
Yang, who founded the firm with former colleagues from Blackstone where he worked earlier in his career, said he’s betting on e-commerce to keep driving the need for warehouses to help in the last-mile delivery of goods.
“Logistics 1.0 was about delivering wholesale goods,” Yang said. “Logistics 2.0 is now about retail and direct to consumer — getting goods to people’s doorsteps for the lowest price and least amount of time.”
The GCP fund will focus on real estate logistics, investing and acquiring warehouses and other facilities in key markets across the U.S., chiefly Seattle, Los Angeles, Miami, Portland and the northeast corridor via eastern Pennsylvania.
GCP also owns and operates Modlo, a logistics platform founded in 2019 that operates its properties and serves as its consumer-facing brand. Modlo’s clients include Amazon.com Inc., which leases a Seattle property that was custom-built for the e-commerce giant, Yang said. Other big clients include Keurig, Dr. Pepper, DHL and FedEx, he said.
Modlo’s staff — part of GCP’s total team of about 35 employees — also helps identify new assets for investment.
The logistics real-estate world already has some big players, including real estate investment trust Prologis Inc. and Blackstone, which created a company called Link to manage its U.S. logistics real estate.
One of GCP’s largest deals was a $308 million portfolio of properties in Pennsylvania and Central California that it bought from USAA. It has invested about 60% of the fund and will start raising its next one when 75% of it is deployed, Yang said.
“How we designed GCP and the fund is that it can go anywhere on the risk spectrum,” Yang said. “We’re agnostic to specific deal size or market.”
Yang said that the fund is targeting mid-teens returns for the fund.
©2021 Bloomberg L.P.
In its latest crackdown, China intensifies focus on real estate – Aljazeera.com
After a years-long campaign to tame property prices, China is upping the ante to break a stubborn cycle of gains that’s made homes increasingly unaffordable.
In recent days, China jacked up mortgage rates in a major city, vowed to accelerate the development of government subsidized rental housing, and moved to increase scrutiny on everything from financing of developers and newly-listed home prices to title transfers. Echoing Xi Jinping’s famous words that “housing is for living in and not for speculation,” Vice Premier Han Zheng added that the sector shouldn’t be used as a short-term tool to stimulate the economy.
The intensified focus on real estate — an industry that was already under the scanner — mirrors broader crackdowns on businesses such as education that are seen as widening social inequities. As China’s economy slows and President Xi tries to increase the nation’s birth rate, the policies underscore the Communist Party’s growing resolve to respond to mounting dissatisfaction with hoarded wealth and narrowing avenues for advancement.
“China’s property sector has been one of the biggest sources of discontent and the government is hell bent on controlling prices so it doesn’t lead to social unrest,” said Beijing-based Liao Ming, a founding partner of Prospect Avenue Capital. “The measures echo the policy curbs in education in that they are aimed at easing public angst against inequity.”
While China has spent years trying to cool property prices, analysts say this round of crackdowns will be different. One clear signal came in Vice Premier Han’s comments on steering away from using real estate to provide short-term boosts for the economy.
“In the past, Beijing has consistently used the property sector to stabilize overall growth,” Nomura analysts led by Lu Ting wrote in a research note, adding that they expect Beijing to change its playbook. Policy makers won’t lift property restrictions this time partly due to concerns about a systemic financial crisis, the analysts wrote.
Another signal came from the unusually large number of government entities that vowed recently to strengthen measures on everything from project development and home sales, to rental and property management services. Eight policy bodies said in a joint statement that they would step up penalties for misconduct. In the line of fire will be developers that default on debt repayments, delay deliveries on pre-sold homes or elicit negative news or market concerns.
Local bureaucrats’ careers are on the line. Officials in cities that lack sufficient regulations and experience rapid price spikes will be held accountable, Zhang Qiguang, an official for the Ministry of Housing and Urban-Rural Development said on July 22.
On Monday, commentary from state-media Xinhua urged governments across the nation to keep home prices at a reasonable level and make it an urgent task.
“New residents and young people can’t afford to buy or rent good homes,” the editorial said. “Those problems are especially acute in cities with population inflow and metropolises.”
Investors have responded by selling property stocks, with the recent stream of news piling pressure on developers that were already being pressed to deleverage and meet China’s “three red lines” on debt metrics.
China Evergrande Group shares were little changed as of 14:13 p.m., after plunging more than 40% in just under two weeks. A Bloomberg Intelligence index of 33 major Chinese developers mostly traded in Hong Kong dropped for a fourth consecutive day on Wednesday.
China Chengxin International Credit Rating revised its outlook for the country’s real estate sector to negative from stable on Monday, citing concerns about policy tightening and weakened investor confidence.
“Owning property is one of the key ways in which income inequality has worsened in China so the clamp down will come and will be severe,” said Alicia Garcia Herrero, the Hong Kong-based chief economist for Asia Pacific at Natixis. The cost of mortgages will increase, particularly for those with multiple homes, as will things like property taxes, she estimated.
The policies are here to stay, Ren Yi, the social media commentator and Harvard University-educated princeling otherwise known as Chairman Rabbit, wrote in commentary online.
“The nation’s leaders are looking at this issue from a bigger point of view, property isn’t just a economic tool, it sits at the root of all social economic and political issues, and must be dealt with,” Ren said.
The Chinese government needs to maintain a delicate balance. The real estate sector accounts for 13% of the economy from just 5% in 1995, according to Marc Rubinstein, a former hedge fund manager who now writes about finance.
Policy missteps could have unintended consequences for the banking system. Chinese banks had over 50 trillion yuan ($7.7 trillion) of outstanding loans to the real estate sector, more than any other industry and accounting for about 28% of the nation’s total lending.
Of those loans, about 35.7 trillion yuan were mortgage loans to households and 12.4 trillion yuan were for property development, according to official data.
But all signs point to the government’s determination to ensure social stability, even if it spells near-term turmoil for capital markets. Just in June, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, warned against betting that property prices will never fall.
“Property is the single most important source of financial risks and wealth inequality in China,” said Larry Hu, head of China economics at Macquarie Securities Ltd. It “is worth watching.”
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