Real Estate

Legislature moving to protect condo owners

BY HOWARD FISCHER Capitol Media Services

Led by a Chandler legislator, state lawmakers are moving to ensure that if you like your condo you can keep your condo.

Without debate, the House recently voted to repeal laws that allow any investor who acquires 80% of the units in any condominium to then force the owners of the other 20% to sell. HB 2275 now requires a fi nal roll-call vote before going to the Senate.

At issue are longstanding laws that deal with the formation of condos. These are real estate development where areas are designated for individual ownership, with the balance considered common ownership.

Those laws also set up procedures to dissolve condo agreements, including saying that can be done with the consent of at least 80% of the owners.

There are provisions for appraisals of the units of those who do not want to sell as well as relocation costs. But Rep. Jeff Weninger, R-Chandler, said that still isn’t fair.

What happens, he said, is developers come in, make off ers that 80% of owners are willing to accept, and then fi nd themselves in a position of being to force out everyone else.

“I just think it’s a practice that should be eliminated completely,’’ Weninger said. And he said that anyone who cares about the lack of aff ordable housing would want to repeal what is now on the books.

“This, right here, takes existing housing, where people are living in it for sometimes a modest amount of money, and in a market that is going straight up, allows a developer, not from this state, from Chicago, from other places, to come into this state, and force these people to sell them their condos,’’ Weninger said.

“And what do they do right away?’’ he continued. “They double the price.’’

The measure drew support from Rep. Jennifer Longdon, D-Phoenix.

“When you buy a home, a condo, it’s yours,’’ she said.

“It should be yours for as long as you choose to live there,’’ Longdon said. “The idea that someone can see a bigger profi t and come in and take it from you is ridiculous.’’

She said there have been real victims.

“A woman with a signifi cant disability bought her condo specifi cally because it was close to what was important to her,’’ Longdon said, things like shopping, transportation and her doctor.

What happened, she said, is the value of the condo rose and a developer got the owners of other units to sell.

“They tried to force her out,’’ Longdon said, off ering her a lot less than she would have needed to take care of herself and her adult son.

The only thing that saved her, she said, was negative publicity that forced the developer to back off . But Longdon said that this woman’s victory in this one case isn’t a real solution to the problem.

“We shouldn’t be forcing people into poverty because a developer has found more profi t in their unit than they do,’’ she said.

“This, right here, takes existing housing, where people are living in it for sometimes a modest amount of money, and in a market that is going straight up, allows a developer, not from this state, from Chicago, from other places, to come into this state, and force these people to sell them their condos.’’

– Rep. Jeff Weninger

Crypto currency a challenge for mortgage lenders

BY MARK SANDISON

Guest Writer

With the rise in popularity of cryptocurrency investing and trading, many people have a signifi cant portion of their wealth held in a cryptocurrency.

While cryptocurrency presents exciting opportunities for investors to take advantage of a new technology and diversify their portfolio, this technology is so new that traditional fi nancial institutions are mostly uncertain how to deal with these assets.

Consequently, if you are wanting to apply for a mortgage and have a signifi cant amount of your wealth held in cryptocurrencies or receive a signifi cant portion of your income in the form of cryptocurrencies, qualifying for a mortgage can quickly become a tricky endeavor.

The most common questions that people often ask who hold cryptocurrency and want to apply for a mortgage are:

Can I pay my mortgage with crypto?

Does crypto count as income?

Can cryptocurrencies be counted in asset calculations as a basis for repayment obligations?

While every lender can set their own guidelines, given the novelty of cryptocurrency and uncertainty of fi nancial regulations surrounding cryptocurrency, so far virtually all major lenders will not accept cryptocurrency as a form of payment or consider it for mortgage qualifi cation calculations.

Fortunately, though, if you have a signifi cant amount of your wealth or income in the form of cryptocurrency, there are strategies that you can employ to use crypto wealth or income to help you qualify for a mortgage.

Freddie Mac, one of the largest mortgage lenders in the US, recently released guidelines on how it will deal with cryptocurrency assets. The main points were:

Income paid to the borrower in cryptocurrency may not be used to qualify for the mortgage;

For income types that require evidence of suffi cient remaining assets to establish likely continuance (e.g., retirement account distributions, trust income and dividend and interest income, etc.), those assets may not be in the form of cryptocurrency;

Cryptocurrency may not be included in the calculation of assets as a basis for repayment of obligations;

Monthly payments on debts secured by cryptocurrency must be included in the borrower’s debt payment-to-income ratio and are not subject to the Guide provisions regarding installment debts secured by fi nancial assets;

Cryptocurrency must be exchanged for U.S. dollars if it will be needed for the mortgage transaction (i.e., any funds required to be paid by the borrower and borrower reserves).

United Wholesale Mortgage, the second largest lender in the U.S., recently decided against moving forward with its plan to accept Bitcoin as payment for mortgages.

United Wholesale Mortgage said not only would they incur additional costs by accepting Bitcoin as a form of payment, but the regulatory uncertainties surrounding cryptocurrency and the lack of demand of customers wanting to pay in Bitcoin caused them to scrap the project.

Because of its constantly changing valuation, lenders are hesitant to consider crypto income when calculating your income. Additionally, unlike other securities such as stocks, lenders will not consider the valuation of your crypto holdings when determining your basis for repayment obligations, because of the volatile changes in valuation

There is good news, though, if you store a signifi cant amount of your wealth or receive a signifi cant portion of your income in crypto. Fortunately, you can use your crypto wealth to help you qualify for a mortgage.

The main reason that lenders don’t look at crypto is because it’s hard for them to gauge what it will be worth in the future. Because of this, you will need to convert your crypto to cash in order to apply it towards mortgage qualifi cation calculations. If you are primarily paid in crypto, this means you will likely need to regularly convert a certain amount into cash to satisfy the income requirements for the loan.

If you are thinking about applying for a mortgage and hold a substantial amount of your wealth in cryptocurrencies and/or receive a substantial amount of your income in cryptocurrency, our real estate experts can help you qualify for the mortgage.

Mark Sandison is with MacQueen & Gottlieb, one of Arizona’s top real estate law fi rms. They can be reached at 602-562-7218.

Ocotillo splendor

This 5m479-square-foot house in Ocotillo recently sold for $1.8 million. The four-bedroom, 3 ½-bath, two-story home was built in 2003 and includes a private guest wing with two additional bedrooms. It also boasted a number of upgrades in addition to a four-car garage, including hand-scraped wood fl oors, a spacious basement with custom-built entertainment area and a large “resort-like” backyard.

Soaring lumber prices affect buyers and renters

SANTAN SUN NEWS STAFF

The price of a key building material is more unpredictable today than it has been since the end of World War II. And that should worry home buyers and renters alike.

A recent analysis from the National Association of Home Builders examined the recent uptick in the cost of building materials, which climbed 1.5% in December per the Bureau of Labor Statistics. The overall increase was driven largely by the rising cost of lumber.

The price of softwood lumber has increased nearly 45% since September, according to the data from the federal government. Other data suggests that the price mills are charging for lumber used to frame homes has tripled since August.

Rising prices are one problem, but volatility is another. Over the course of the pandemic, lumber prices have fluctuated dramatically. Between 1947 and 2019, the monthly change in the price of softwood lumber averaged 0.3%. Since January 2020, though, it has averaged 12%.

Not only is that the highest average monthly change over a two-year span since this data first started being collected in 1947, but it is nearly three times the previous record, according to the report.

“The cost volatility you see in the construction space is in part responsible for some of the price gains in the overall housing market,” said Robert Dietz, chief economist at the National Association of Home Builders

That volatility is producing ripple effects throughout the housing market, which already is struggling due to the record-low inventory of homes for sale.

“When you introduce the cost volatility that you see in major products like lumber, it just makes it that much more difficult for builders to expand their level of home construction, which in turn, reduces the available inventory in the market,” said Dietz.

It’s difficult to undersell the importance of lumber to home builders. All told, 90% of the single-family homes built in this country are wood-framed, Dietz said. Comparatively, just 9% are concrete-framed, while the rest are steel-framed.

“As goes the lumber industry, so goes pacing and pricing of single-family home-building,” Dietz said.

In the most direct sense, the volatility in lumber prices has contributed to the higher cost of newly-built homes. The median price on these homes was up 19% year-over-year as of November, the most recent month for which data is available.

“Higher costs for lumber and other building materials are often passed on to the buyer in the form of higher new-home prices,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “The challenge for builders is how they deal with higher material costs, while keeping new house prices within reach for buyers, particularly in a rising-rate environment.”

The uncertainty in material pricing has the most adverse effect on entry-level housing, Dietz said, because these buyers are more price-sensitive.

And to a degree, the volatility could sway builders toward constructing higher-end homes, since the additional costs are more easily absorbed.

Of course, lumber isn’t just used to build single-family homes. It’s also used to remodel existing homes and to frame individual apartments in multifamily buildings. So, to the extent that those activities are also slower or more expensive because of the availability and pricing of wood, it will have ripple effects into the rental market, too.

The defining feature of today’s housing market, whether you’re a home buyer or a renter, is it’s hard to come by affordable options. It’s a reflection of how undersupplied the housing market is. According to Realtor.com, the nation is short some 5.2 million housing units.

“This housing shortage results from the fact that we have seen more new households than new homes over the last decade, and even in the absence of supply-chain challenges and input-price volatility that shortage has stressed the housing market,” said Danielle Hale, chief economist at Realtor.com.

Given how important home-building is in that context, anything that gets in the way of construction will have an outsized impact on households across the country.

“Consumers in the market for a new home should be prepared to wait, and with price volatility and other challenges contributing to delays, the wait is likely to be longer than usual,” Hale said.

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