Used with permission of HomeBuyersUnite.com
Let’s face it, this is not your parent’s real estate market. Housing has become more expensive, for both renters and buyers, wages have decreased significantly, and consumer debt has now reached $13.8 Trillion (debt.org).
And, as we have always done in America when things get difficult, outdated or become seemingly impossible, we innovate!
Consider, how over the last five years we have embraced the sharing economy in our travels with Uber, and how we have now adopted the option of staying in an Airbnb instead of a hotel, and now there is a new option to how we buy real estate, together through HBU, HomeBuyersUnite! This new startup is addressing the challenges of cost, inventory and down payment through real estate co-buying.
So, how do we take advantage of the new co-buying option and why should we care? You may not think the above market conditions of cost, inventory and down payment will directly impact your plan or wealth trajectory, but it will certainly impact the greater American real estate market, and eventually influence how our children and grandchildren buy real estate.
If you are someone who looks for research and evidence before making any decisions, the following information is for you!
The following article examines market affordability, co-habitation trends, and emerging solutions within the sharing economy, which has forever changed how we live and expand our resources.
And, finally, we will discuss the new co-buying option.
According to the World Economic Forum, the cost of housing is tearing our U.S. society apart.
Americans have had 70 years of consistent appreciation in housing values, and stagnation in real wage growth, causing, among other things, a nationwide housing affordability crisis in major cities.
In two generations, according to US Census data, new home buyers have now become priced out of many markets for the same homes their parents could afford at their age. In cities such as San Francisco, Los Angeles, and New York, there has been a consistent 2.5% annual appreciation above inflation in housing prices resulted in a quadrupling of housing costs since 1950 and homelessness rates not seen since the Great Depression.
Now let’s consider the impact the above will have on home buying options for young adults and if you are older, your children and grandchildren.
According to the World Economic Forum, “In 1950, the median home price was 2.2 times the average yearly income. In 2013, a few years after the worst housing market crash in a century, median home prices had already risen to 3.7 times the average income. Largely, this inflexible cost has been paid for with greater private debt. Between 1949 and 2018, mortgage debt as a percentage of GDP grew from 15% to 80%”.
Lawrence Yun, NAR’s chief economist, states that home prices are expected to grow at 4 percent next year while mortgage rates will remain just below 4 percent. The primary factors are affordability and the lack of inventory. Mr. Yun says we have had a 48 to 50 percent increase in the cumulative cost of housing and only a 15% increase in income since 2011, resulting in aggressive competition for homes at a rate that even low mortgage rates and a strong economy cannot offset.
Wages are not keeping up for younger buyers, so there must be creative, and new solutions to help them with their home purchase options, other than what exists with down payment assistance programs that are only for those who meet strict income guidelines.
Here is the stark truth, the U.S. Department of Labor has stated that the average Millennial American, those aged 16 to 34 in 2015, earned wages equal to $684 per week or $35,592 per year, which leaves little room to save enough for a suitable down payment as a single buyer.
So how has the cost of housing influenced working-age adults and how have we have adjusted to this challenge? Americans have taken to cohabitation in record numbers. In fact, on average 30% of working-age adults now live with roommates who are not family members, love interests or college-age students, and that percentage increases to 45% in markets like Los Angeles.
Now consider the people in your immediate circles of influence and you will see many have decided to live with roommates, to navigate the increasing cost of housing.
American innovation has never failed to address difficult situations, and in fact, has a great track record of even taken leadership roles when it comes to addressing market challenges and creating solutions. We have created giants of industry including Uber, Amazon, Apple, and more. So, it was only a matter of time before an innovative platform would emerge to address the issue of housing affordability, while simultaneously including the ability to leverage the sharing economy.
Introducing HBU, HomeBuyersUnite.com a Colorado Startup providing a free membership platform to provide home buyers with a structured process to help them confidently co-buy property with safeguards such as co-buyer agreements, agents, lenders and guidance during the entire process.
HBU, HomeBuyersUnite.com is not a coop or fractional buying program. The new co-buying platform helps co-buyer buy with family members, friends, co-workers, love interests or simply another verified member who has passed a strict screening process.
What kind of co-buying partnerships would most benefit from a program like HBU, HomeBuyersUnite.com?
Are their examples of co-buyer transactions to consider?
Investment co-buying example #1:
A HUD home for sale in Denver, CO at 20% below market – Have your adult son or daughter purchase the property as a principal residence, and you put up the down payment • Son or daughter gets an FHA 203k loan for 96.5% of the purchase price and all of the upgrade costs. One year after closing, son or daughter moves out and deeds the property to an LLC of which you and he (or she) are partners.*
Investment co-buying example #2:
A four-plex for sale in Colorado Springs, CO – $750k asking price • Negotiate down to $700,000 • Option 1, have 2 people split this, would need $70k each, live in one unit each and still have 2 units to rent • Use the other two units as short-term rentals to completely pay their mortgage and have no payment • Option 2- remodel and furnish each unit and use as short term rental. Cash flow between $2,000 and $3,000 per month per person.*
*These examples are for illustration purposes only and is a generalized approximation. Each borrower’s ability, credit factors, and income are unique scenarios and must be considered prior to qualification and cash requirements for the purchase.
Finally, timing is everything in life. We need to consider how we prepare for our future and that of our children and grandchildren. The real estate market will never be the same, wages will not increase enough to change things and with the market conditions as they stand solutions like HBU, HomeBuyersUnite.com will continue to enter the market at an accelerated rate. The only remaining question is how will you wait to take advantage of solutions like HBU, HomeBuyersUnite.com and at what cost?
Our choices in the sharing economy will only grow. Taxi or Uber, Hotel or Airbnb and now buy, rent or HBU?
The Founder & CEO of www.HomeBuyersUnite.com, Leena Bella Mayo is a seasoned business executive with a business school education with more than 15 years of experience as a chief of marketing and consultant with great brands including Western Union, First Data, Apple, GE, and more.
President and founder of the Colorado Landlords Association, best-selling real estate author and attorney, landlord and real estate investor with 28 years' experience.