New Data Reveals Hidden Flood Risk Across America

No one wants one more thing to worry about but... it would be wise to check out your home's risk for flooding, recognizing that damage from floods is specifically excluded from homeowner's policies. New data on flood risks across the U.S. reveals that the risk of flooding has increased substantially and that many homes at risk of flooding are not included in flood maps. 

"Across much of the United States, the flood risk is far greater than government estimates show, new calculations suggest, exposing millions of people to a hidden threat — and one that will only grow as climate change worsens."

"That new calculation, which takes into account sea-level rise, rainfall and flooding along smaller creeks not mapped federally, estimates that 14.6 million properties are at risk from what experts call a 100-year flood, far more than the 8.7 million properties shown on federal government flood maps. A 100-year flood is one with a 1 percent chance of striking in any given year." 

"Federal flood maps, managed by the Federal Emergency Management Agency, have long drawn concerns that they underestimate flood risk. Part of the problem is keeping the maps up to date, which is not only costly and labor intensive, but further complicated as climate change has worsened the dangers."

"In addition, FEMA’s maps aren’t designed to account for flooding caused by intense rainfall, a growing problem as the atmosphere warms."

Check out the article and map in The New York Times June 29, 2020 by Christopher Flavelle, Denise Lu, Veronica Penney, Nadja Popovich and John Schwartz  https://www.nytimes.com/interactive/2020/06/29/climate/hidden-flood-risk-maps.html?referringSource=articleShare

Millions of homeowners face flood risks without realizing it, and climate change is making it worse

By 2050, 16.2 million properties will be at ‘substantial risk’ of flooding in a given year, report finds.

And it's not just properties along the coast or near rivers. 

"When Hurricane Harvey struck Southeast Texas in 2017, it provided a real-life stress test of the plans for flood risk in a highly vulnerable region. Southeast Texas failed that test. More than half of the homes engulfed by floodwaters were located outside city- and federally designated 100-year floodplains."

"Nationally, there are at least 6 million households that are unaware they’re living in homes that have a 1 percent chance of flooding in each year — putting them within a '100-year' flood zone. This is nearly 70 percent more homes at substantial risk of flooding than are within the Federal Emergency Management Agency’s Special Flood Hazard Areas, a designation that determines eligibility for the National Flood Insurance Program."

"This count is set to grow substantially in coming decades due to the effects of climate change, including sea level rise, which will make hurricane storm surges more damaging, as well as precipitation extremes."

"The report, from the nonprofit flood research and communications group First Street Foundation, is aimed at leveling the playing field between buyers and sellers, and democratizing specialized flood risk analyses that insurance companies and consulting firms are producing but charge hefty sums to access."

Now, a prospective buyer can see a property’s flood risk score, which First Street calls the “Flood Factor,” along with a map showing flood information, for 142 million properties in the Lower 48 states.

First Street is providing property-level mapping free on its website.

As reported by The Washington Post

https://www.washingtonpost.com/weather/2020/06/29/flood-risk-climate-change/?utm_campaign=wp_post_most&utm_medium=email&utm_source=newsletter&wpisrc=nl_most

Check out your property at: https://www.floodfactor.com/ 

The modern woman’s guide to homebuying (great ideas for men, too!)

Live With Plum is a website designed for homebuyers, homeowners and real estate investors. 

The website's mission "is to empower all women on their journey towards homeownership." (It's OK for men to sneak a peak at the website and learn about the homebuying process. The site is not just for first time homebuyers. 
"We think the homebuying process is archaic and convoluted so after years of trying to find an easy-to-understand guide, we set out to create it." https://www.livewithplum.com/

Buying a primary residence might not be as good of an investment as conventional wisdom suggests. However, there are still benefits -- financial and otherwise -- to owning a home.

Writing for US News and World Report, Miranda Marquit explains the economic costs and benefits of home ownership. Like most economic analyses, the bottom line is that home prices typically track inflation and are NOT a "good" investment when historically one could earn much more by investing in the stock market.

Of course the real estate agent and mortgage broker will claim that houses are the best investments. They want you to buy the most expensive home you can get a mortgage for because the larger the home price and mortgage, the larger their commissions. And they get paid up front and have no worries about whether you really can afford that house in the long run
.
Marquit explains the costs (beyond purchase price) of  primary residence over the years of ownership including:

• Property taxes.
• Homeowners insurance.
• Maintenance.
• Repairs.
• Any upgrades or remodels.
• Landscaping and yard care. 

Get the details at: https://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/articles/how-investing-in-a-house-can-pay-off

Homeownership Reality

One of my favorite financial writers, Jonathan Clements, writes about "House Rules" in a recent blog post: 

“Real estate discussions almost invariably fall hostage to anecdotal evidence. We all know folks who supposedly made a mint in real estate, as well as people who lost their shirt. But forget the anecdotal evidence, and instead focus on statistics and commonsense. To that end, here are my 13 rules for real estate:

1. Homeownership isn’t as safe as it feels.
2. We shouldn’t buy unless we can see staying put for at least five years.

3. Over the long haul, home prices nationwide should rise roughly in line with per-capita GDP.
4. The land underneath our homes should appreciate, but the dwelling itself will depreciate

5. Any gain in our home’s value will likely be largely or entirely offset by transaction costs, maintenance, property taxes and homeowner’s insurance.

6. The benefits of leverage are often offset by the cost of leverage.
7. The mortgage-interest tax deduction has always been overrated—and, today, that’s truer than ever
8. If you’re a homeowner with a fixed-rate mortgage, what you really want is inflation.
9. While a home’s price appreciation and mortgage-interest tax deduction will likely prove disappointing, homeowners enjoy one huge benefit: They get to live in the place.
10. All homes should be priced to deliver the same expected total return.
11. A paid-off home is the cornerstone of a comfortable retirement.
12. Remodeling is a money loser.

13. A real estate agent’s greatest financial incentive isn’t to get us the best price, but to get us to act quickly.”

Read all the details at: https://mailchi.mp/jonathanclements/humbledollar13-rules-for-real-estate?e=56625ff43a

Thinking of buying a condo? Do your homework first

Having lived in a homeowners association for more than 25 years and having recently bought a condo, I'm well aware of the differences between owning a single family home and living in some type of home owners association. A recent article does a great job of explaining what condo (and HOA) owners need to know and ask about before they buy. Deb Hipp wrote:

8 Things to Know Before Buying a Retirement Condo: In many ways, this purchase is much different than buying a house

Note that the same "rules' apply regardless of whether the purchase if for retirement living.

Buying a Condo Isn’t Like Buying a House

1. What information must the seller provide?

2. Is the reserve fund adequate?

3. What’s in the annual budget?

4. Are there assessments?

5. Is the condo warrantable?

5. Is there pending or potential litigation involving the complex or the unit?

7. What is the master insurance policy deductible?

8. How well-managed is the homeowners’ association? 

Get the full details at: https://www.nextavenue.org/buying-a-retirement-condo/?hide_newsletter=true

Other suggestions:  talk to as many residents as possible to find out what they like and dislike the most about living there, problems they experience, how well they know their neighbors, etc. 

Home buying for persons with disabilities

A new guide was created by the financial experts at The Simple Dollar addressing the challenges of buying a new home as a person with a disability that’s published in conformance with the Web Content Accessibility Guidelines to accommodate the special needs of persons with disabilities.

The Fully Accessible Guide to Home Loans for People with Disabilities

https://www.thesimpledollar.com/home-ownership-for-people-with-disabilities/

Buying too big a house is risky

"Tempted to buy the largest house you can afford? More square footage typically means more money—and that means higher mortgage payments, taxes, utilities and maintenance.
Young couples buying a starter home are often coached to get something bigger than they need to anticipate a growing family. Others think large homes have better resale value."

"The larger the house, the more you’ll pay in utility bills, property taxes, insurance and repairs (and the more you’ll have to clean)." writes Robyn Friedman for The Wall Street Journal 12/27/17.

Do you really want to spend your 'spare' time cleaning? Another downside that I learned from experience is that more closet and storage space means accumulating more stuff which translates into junk to sort through or leave for your heirs to deal with at your demise. Since I retired I've been on a cleaning out and getting rid of "stuff" binge. 

Consider alternate uses for the extra money you would fork out from down payment to final mortgage payment and beyond (utilities, maintenance, and property taxes). Some of those fund could be used to invest for retirement, higher education (for yourself or your kids), memorable vacations with loved ones, or charitable giving.
The house you live in is NOT an investment; it's a place to live. If you want to invest, buy a total stock market index fund.

The world doesn't need more McMansions!

Rental Rates Rising Among Retiring Boomers

"A fully paid-off home—once a quintessential part of the American dream, is becoming far less popular among a new generation of retirees. In lieu of the stability and security home ownership (supposedly) provides, more and more retiring Baby Boomers are choosing the convenience and flexibility of apartments and condominiums."
"In fact, a recent study by Harvard University’s Joint Center for Housing Studies found that rental rates steadily increased among seniors aged 55 to 75 from 2004 to 2013, and that the 75 and older crowd was the only group to see it drop. What’s more, many if not most of these older renters are former homeowners. A Rent.com survey of apartment managers actually found that 29 percent of Americans transitioning from home ownership to renting were between the ages of 50 and 65."
Maybe it's time to re-think the importance of homeownership... http://www.thinkadvisor.com/2015/04/20/rental-rates-rising-among-retiring-boomers

Ready to buy a house?

Check out Owning a Home:
consumerfinance.gov/owning-a-home
This new resource is provided by the US Consumer Financial Protection Bureau. "In coming months, we will continue to add new features, but today Owning a Home can help you:

·         Learn about your loan options: As you begin your home and mortgage search, this guide will tell you all you need to know to choose the right mortgage for your situation.

·         Check interest rates: This tool gives you a realistic sense for the range of interest rates you should expect when shopping for a mortgage, so you can know whether you’re getting a good deal.

·         Understand your closing forms: Learn what to look for in your closing documents before signing.

·         Get ready for closing: As you near the end of the process, a simple checklist will help prepare you for the big day."

Check out the Owning a Home tools and tell us what you think at owning-a-home@cfpb.gov.

Why you’re often better off saving for retirement than buying a home

Is homeownership the best way to build wealth? Not for many. A study by HelloWallet found that many would have generated more personal wealth by renting a home and investing their money in tax-advantaged accounts.  As reported in The Washington Post http://www.washingtonpost.com/news/get-there/wp/2014/11/11/why-youre-often-better-off-saving-for-retirement-than-buying-a-home/ U.S. home prices lost 43% from 2005 to 2012, yet the vast majority of Americans consider home ownership to be a good idea and the best way to build wealth. But is it? For half of current homeowners—the answer is no, according to a new study by HelloWallet. People in those households would have built more wealth by renting and investing their money in 401(k)s, IRAs or other tax-advantaged investments.  Most of the income tax breaks go to the highest earners, thus low to moderate income households subsidize the wealthy. View:  House of Cards: The Misunderstood Consumer Finance of Homeownership http://www.hellowallet.com/research/house-of-cards

Can you hear the outcry from the real estate industry? So, young adults, think carefully about committing a huge chunk of your future paychecks to the biggest, most expensive house that you can possible “afford” (according to the real estate sales person and mortgage broker who will collect their fat commission at closing and don’t care if you can afford the house in the long run).  Once they have children most Americans aspire to live in a single family house. It’s true that the rental stock is not the same as the stock of homes for sale. Just don’t get suckered into thinking you’re going to get a big tax break. As the study authors point out, the mortgage tax deduction is ripe for revision to end subsidies for the well-off that encourage building of large, unsustainable houses.