Real Estate

Tackling a Giant

An Interview with Borko Milosev Regarding Repositioning Real Estate “What were you thinking?”  I inquired half-jokingly when the conversation began.   The response I received was a boisterous laugh followed by, “we studied the building, put together the right team and determined if we did something different, we could make this work.” Developers across the country […]

An Interview with Borko Milosev Regarding Repositioning Real Estate

“What were you thinking?”  I inquired half-jokingly when the conversation began.   The response I received was a boisterous laugh followed by, “we studied the building, put together the right team and determined if we did something different, we could make this work.”

Developers across the country are seeing the value in repositioning properties, and the same holds true in the Lehigh Valley. Whether it is updating an old building, redeveloping a brownfield or adaptive reuse (i.e. changing building’s purpose), the repositioning of an existing building is a popular, socially responsible approach.

As an avid mountain climber, including a recent summit climb of Mount Rainer, and one who enjoys swimming with sharks in Honduras, local developer Borko Milosev is no stranger to great adventures and taking risks. In the real estate game, his risks have included purchasing underperforming and poor conditioned properties since 2003.  “I was in college when I bought my first investment property, a single family house.  It was in horrible condition. It brought my mother to tears when I sent her a picture of a falling ceiling captioned ‘Mom, I bought my first house!’ I did not have a construction background.  I learned how to do repairs from a Home Depot Home Improvement 1-2-3 book.”

For Borko, the idea of purchasing real estate came from a mentor who often spoke of real estate investments and recommended the book Rich Dad Poor Dad by Robert T. Kiyosaki.  Borko’s means for purchasing the property is one that developed from a bit of good luck.  He reminisced, “With about $300 in my bank account, I received a letter from my bank alerting me to a bank merger and initial public offering. I took the letter to my finance professor and asked her what I should do.  She advised me to buy as much stock as possible.  I was able to borrow $10,000, purchased the stock and, after paying everyone back, I had $7,000 profit.”  This served as his deposit monies, closing costs, and construction funds.

After college, Borko began working in New York City for a large financial group, but could not shake the ‘real estate bug.’  In the years that followed he purchased additional distressed or underperforming properties.  In 2015, he and a business partner decided to take a chance on the ten story, a 100,000-square-foot darkening tower located at 65 E. Elizabeth Avenue in Bethlehem.  The vacancy rate of the building at the time of purchase was 60%.  Outdated mechanical systems, lack of amenities, and inefficient layouts and finishes were part of the problem for the struggling building.

With an attorney, a lender, a broker, an architect, an interior designer, and construction team in place, the partnership began to reimagine the sad giant of a building into what is now known as The Pinnacle @ 65.  The once drab and dark building is now buzzing with activity, and commercial vacancy is down to 5%. The first four floors are occupied by an array of commercial tenants including medical, media, and service oriented business. Santander Bank and a soon-to-be-completed restaurant occupy the entire first floor.  The upper floors house 48 luxury homes which consist of 1-, 2- and 2-bedrooms plus a den units available for lease in July of 2017.  The oversized apartments are equipped with high-end finishes, wine coolers, nest thermostats, washers and dryers, double ovens and cooktops.

The building’s amenities are designed for tenants who enjoy the “live, work, play” lifestyle.  They include a health facility staffed with a fitness instructor and a nutritionist, a Package Concierge System, electronic lockers, storage lockers, and bike racks. There is a quiet room, conference room, game room, and a lunch room.  The building also features onsite management. “We focused our design to increase tenant retention.  Based upon current market trends, it is anticipated that the majority of occupants will be empty nesters and millennials,” said Borko.

For those looking to reposition real estate, Borko suggests a hands-on approach, a detailed study of the financials, and an assemblage of hardworking, trustworthy team members to raise the bar and lessen the risk.

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The Economic Bridge from Our Past to the Future

It’s often hard to get perspective when you are close to something. Those of us living in the Lehigh Valley during the last five years realize that something is going on here. We are changing, getting bigger, more cosmopolitan and diverse. The annual Site Selection Governor’s Cup ranking provides some perspective on that growth. The […]

It’s often hard to get perspective when you are close to something.

Those of us living in the Lehigh Valley during the last five years realize that something is going on here. We are changing, getting bigger, more cosmopolitan and diverse.

The annual Site Selection Governor’s Cup ranking provides some perspective on that growth. The Lehigh Valley was the fifth leading metropolitan area in 2016 for growth and development in the Northeastern United States. The only metros with more growth were New York, Philadelphia, Pittsburgh and Boston, in that order.

What makes this even more significant is that Site Selection is the premier magazine for the economic development and location consultant crowd. Its annual ranking is based exclusively on objective criteria such as the number of new projects, the amount of investment and number of jobs created, not on subjective observations.

This is not your grandfather’s Lehigh Valley.

The annual economic output of the two-county region has hit $37 billion in GDP, that’s more than the entire state of Vermont and 97 countries in the world. Job creation of 5.5 percent in the Lehigh Valley since the Great Recession of 2008 outranked every other region in Pennsylvania. The next highest was the Lancaster region with 4.5 percent job growth.

Most importantly, the growth has been broad-based and balanced. The Lehigh Valley is not just a one or two industry economy. All of our eggs are no longer in a single basket.
GDP in the Lehigh Valley is very balanced in four economic sectors with manufacturing at the top generating $5.6 billion in economic output. Not far behind is the financial and real estate sector with $5 billion of GDP, followed by education and health care with $5 billion and professional and business services with $4.9 billion.

Health care still leads the way in the number of jobs with about 55,000. The growth of e-commerce drives the industrial economy, and the Lehigh Valley’s location in the middle of the Northeast with 40 percent of American consumers within an 8-hour truck drive, is the fastest growing sector.

Since 2014, 10 million square feet of industrial space has been added in the Lehigh Valley, leading to the region being deemed a new Inland Empire of the Northeastern U.S. There is another 6.1 million square feet of industrial space under development.

Not all of the industrial space is for e-commerce and warehouse centers. Manufacturing is a big part of the industrial market. There are more than 680 manufacturers in the Lehigh Valley employing about 32,000 workers. The products produced here cover a wide range of goods from medical devices to food and beverage to traditional heavier manufacturing like cement, Mack Trucks, and metals.

As the industrial base and manufacturing have grown, contrary to what is taking place across many areas of the U.S., there has been a rebirth and resurgence in the Lehigh Valley’s three cities of Allentown, Bethlehem and Easton. Riding a groundbreaking state economic incentive, which created a 130-acre Neighborhood Improvement Zone in the downtown and on the Lehigh River waterfront, Allentown has seen more than a $1 billion in new office, residential and downtown development, including the 10,000-seat PPL Center arena.

City Center Development has led the way in developing a new skyline and luring major companies and institutions back to the downtown of the state’s third-largest city, along with building new apartments for Millennial workers and Baby Boomer retirees.

Easton has taken full advantage of its river town vibe developing a wide variety of restaurants, shops, and nightlife to go with the Crayola Experience and State Theater. Bethlehem has continued its urban growth on both sides of the river as the former lands of Bethlehem Steel Corp., which stretch for 1,800 acres on the South Side of the city, have become a nearly fully redeveloped industrial and commercial job center. New apartments and townhouses, along with an office complex, are being added to the core of the South Side neighborhood near the Greenway walking path. Lehigh University and St. Luke’s Hospital will be the lead tenants in the new 127,000 square foot Greenway Park office building, anchored by a new municipal parking garage.

No matter where you look in the Lehigh Valley the landscape is changing, and jobs are being created, and the rest of the world has begun to take notice.

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Searching for Your Dream Home?

 Make Sure You’re Prepared It’s home buying season! While interest rates have risen slightly, they continue to remain low which has fueled buyers to look for homes. Currently, we are seeing the demand for homes listed for sale exceeding supply, so it is important you are properly prepared to start the home buying process. Most […]

 Make Sure You’re Prepared

It’s home buying season! While interest rates have risen slightly, they continue to remain low which has fueled buyers to look for homes. Currently, we are seeing the demand for homes listed for sale exceeding supply, so it is important you are properly prepared to start the home buying process.

Most often buyers look for a home before contacting a lender to be pre-qualified or pre-approved for a mortgage; however, it is important to know how much of a home you can afford to buy before you begin the search. Buyers need to realize how much money will be needed for a down payment and closing costs as this impacts the amount for which you will be approved. Many times, people qualify for a higher price home based on income, but do not have the adequate funds for down payment and closing costs and realize too late that their “dream home” is, in fact, out of reach.

Unless you can make an all-cash purchase, it is important to be pre-qualified or pre-approved for a mortgage before you begin to look for a home. This will show you are a qualified buyer and allow your realtor to offer a copy of the pre-qualification or pre-approval letter to the sellers.

What is the difference between Pre-Qualification and Pre- Approval?

For a pre-qualification, a tri-merged credit report is pulled which is a credit report from all three credit bureaus consolidated into one. Most often the information needed is obtained in a phone call between the borrowers and the mortgage consultant. Based on this verbal conversation, the consultant can work the numbers and issue a pre-qualification. This is done without seeing documentation proving the borrowers’ income and assets. Instead, the pre-qualification is provided based on the information provided, which will be verified when you apply for the mortgage. In most cases, a pre-qualification can be done quickly, usually within hours.

For a pre-approval, there are additional steps taken. Like is done for a pre-qualification, borrower information is obtained, and a credit report is pulled. In addition, all supporting documentation is collected such as recent pay stubs, W-2’s, tax returns, bank statements, driver’s licenses, etc. These are processed and underwritten which provides the seller and realtors with confidence the pre-approval is accurate, and it is likely the sale will go through.

Another benefit of getting pre-qualified or pre-approved is that you will know what your monthly payment will be. To calculate the amount of your pre-qualification or pre-approval your total housing debt needs to be determined. This includes estimates for annual property taxes, homeowners’ insurance, and mortgage insurance. These expenses are then added to the anticipated monthly principal and interest mortgage payment to determine your total monthly cost. Knowing this figure can help you determine what will work for your budget. You can then shop for homes in the price range with which you are comfortable.

One thing to keep in mind is that property taxes can vary greatly depending on the county, city, borough or township and school district in which the property is located. When looking at homes always ask your realtor how much the taxes are on each property even if you are looking at homes in a similar price range all located in the same general area. Borough and township lines as well as school districts often divide neighborhoods and can impact taxes for similarly priced homes just a street or two apart.

Purchasing a home is likely one of the largest purchases you will ever make. While it can sometimes feel like an overwhelming process, working with the right mortgage consultant can help alleviate some of the stress and anxiety. Do not hesitate to ask questions, and then more questions, until you fully understand the details of mortgage for which you are applying. Your mortgage consultant should explain the process and be happy to answer questions. If you are ready to begin your home search, please contact me at 484-347-2586.

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GLVR Annual Report

With the release of a new Annual Report on the local housing market, the Greater Lehigh Valley REALTORS® (GLVR) has continued its reign as the premier source of real estate information in the Lehigh Valley and its surrounding communities. The Annual Report offers a snapshot of eye-opening information that spans a five-year period. The information […]

With the release of a new Annual Report on the local housing market, the Greater Lehigh Valley REALTORS® (GLVR) has continued its reign as the premier source of real estate information in the Lehigh Valley and its surrounding communities.

The Annual Report offers a snapshot of eye-opening information that spans a five-year period. The information that follows is an overall look at the 2016 housing market, in addition to our predictions for 2017.

2016: A Measured Success

After several years of housing market improvement, 2016, as predicted, was not a pronounced triumph but more of a measured success. Markets took a steady and mostly profitable walk from month to month. Even as supply was short and shrinking, sales and prices were often increasing.

In 2016, we saw pending sales increase 6.5 percent to 7,996 to close out the year. Closed sales increased 7.2 percent to 7,876 in 2016. Inventory was lower in year-over-year comparisons. There were 2,025 active listings at the end of 2016. New listings decreased by 8.7 percent to finish the year at 11,400.

Home prices rose compared to last year, and sellers received 97.2 percent of their original list price received at sale, a year-over-year increase of 0.6 percent. The overall median sales price was up 2.9 percent to $178,000 for the year. When inventory is low, and demand is high, prices will rise. Prices should increase in most areas in 2017 but at a slower growth rate. Single Family homes were up 4.1 percent compared to last year, and Townhouse-Condo homes were up 1.8 percent. We will likely need years of improved wage growth to account for recent price gains.

Inventory Woes with a Touch of New Construction

Low home supply is expected to continue throughout 2017. While new construction is being seen throughout the Lehigh Valley, the properties are still being built, and the majority aren’t yet ready for sale. We don’t expect to see the benefits of this new construction, which is still lagging behind as a whole, until future years.

Interest Rates and You

Interest rates were expected to rise throughout 2016, but they did not. Just as happened in 2015, the Federal Reserve waited until December 2016 to make a short-term rate increase. Incremental rate hikes are again expected in 2017.

Mortgage rates, meanwhile, are not expected to grow by more than .75 percent throughout 2017, which should keep them below 5.0 percent. If they rise above that mark, we could see rate lock, and that could cause homeowners to stay put at locked-in rates instead of trading up for higher-rate properties. Such a situation would put a damper on an already strained inventory environment.

Who’s Buying? Some Millennials, Many Boomers

Millennials continue to command attention as the next wave of home buyers, yet the rate at which this massive population is entering the market has been less than stellar. This may be due to a cultural change away from settling into marriage and parenthood until later in life, high student loan debt, or even reservations about a home being a wise investment in the wake of what the last recession did to their elders. That said, some have suggested that this group is simply willing to wait longer to buy, thus skipping the entry-level purchase altogether to land in their preferred home.

At the other end of the age and price spectrum, baby boomers are expected to make up nearly one-third of all buyers in 2017.

By and large, this group is not looking to invest in oversized homes, yet we could see improvement in higher price ranges as a hedge against inflation and risk. Shifting wealth away from the stock market into valuable homes may be seen as a safer bet during a transition of power and a period of pronounced change.

What to Expect in 2017

With an economy that shows unemployment at a nine-year low coupled with higher wages, there is confidence as we head into the summer. This is evident with increased open house traffic and multiple bid situations that Realtors® are reporting throughout the Lehigh Valley. Our only hope is that inventory doesn’t dip too low for our selective buyers.

About the Data:

The new Annual Report provides thorough data on the 2016 real estate market in Lehigh and Northampton counties. A school district review for Carbon County is also reported. The research is collected from the Greater Lehigh Valley REALTORS® Multiple Listing Service (MLS), which is utilized by more than 2,500 REALTORS® and Appraisers.

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Emotional-intelligence

Emotional Intelligence Puts Money in Seller’s Pockets

I often hear sellers say that they didn’t replace the flooring because they don’t know what buyers will like.  They don’t want to install carpet, and then someone doesn’t like the color or replaces soon after with hardwood.  Although I understand the hesitancy to spend the money, it demonstrates how most people don’t understand the […]

I often hear sellers say that they didn’t replace the flooring because they don’t know what buyers will like.  They don’t want to install carpet, and then someone doesn’t like the color or replaces soon after with hardwood.  Although I understand the hesitancy to spend the money, it demonstrates how most people don’t understand the buying process.

Sellers focus on the potential of their home and why it’s worth the money, but buyers focus on the present.  They see with more than their eyes.  They use their sense of smell, listen to the neighborhood, and look at the home with a critical eye.  For most, it’s easier to focus on what’s wrong with the home, and that limits the potential they might see.

The bottom line is that it’s an emotional purchase.  They are either feeling the home, or they are not.  Immediately upon pulling up to the home, they assess its curb appeal.  Upon entry, the odors make an impact. Then, if there are obvious updates or improvements needed, the buyers are noting them one by one.  At some point, many begin to hit their limit and tell themselves, “This home needs too much work,” and they move on to the next house.  They rarely come back!

Sellers have to take into consideration that today’s buyer is different than in years past.  When the housing market collapsed in 2008, there were a number of homeowners that had not experienced such a dramatic downturn in the economy.  They hadn’t been saving much and, when they either needed or simply wanted something, credit was an easy solution to satisfying their desires immediately by paying over time.  As a result, many people had significant debt and minimal savings.  Another factor was that, in many cases, homeowners who made a home purchase in the past five years or so had paid top dollar due to the steady demand driving up home prices.  They weren’t prepared for the series of unfortunate events that unfolded soon after.

Fast forward about five years and a number of things have changed people’s mindset.  The Millennials graduated college but couldn’t find jobs, so they moved in with their parents.  The 30-40-year-olds had ridden out the mortgage crisis, and some lost their homes, which also meant their credit tanked. For those that hadn’t over-extended themselves financially, they rode out the storm, started saving, and become increasingly conservative. On the other end of the spectrum, the Baby Boomers started downsizing if they could afford to sell and many began thinking about retirement communities.

So, when the economy started to improve in 2014, the middle-aged homeowners didn’t want to make a move at all.  They were scared and unsure of the future.  This left a gap in listings. Normally, this age group would sell their modest family home and move up to a larger place.  Meanwhile, Millenials finally got their first job and desperately wanted to move out of the parent’s home, but had minimal savings.  That means they had no money to improve a home after the purchase.  Time is also a factor because they are nervous about getting their career started and lack experience doing any sort of home improvement.  Lastly, the Baby Boomers that hadn’t already downsized are now looking to simplify life.  They’ve already done a fixer upper in the past and don’t want to do it again.
The end result is that today’s buyer doesn’t want to take on a project.  They don’t have the money or time to devote to a remodel.  Most are using up their savings just to purchase the home and don’t have the money to improve it afterward.  Others lost their equity in the recession and were lucky to break even on the sale of their current home.  Move-In Ready is their preference.

In addition to addressing defects prior to marketing a home, sellers need to consider presentation.  Staging a home to sell, means presenting it in the very best way possible. By updating the color schemes, it can make a home feel newer. Arranging the furniture to accommodate the flow of people moving through the home during showings makes a home feel larger.  As well as adding personal touches can make a home feel warmer. Essentially, it involves changing a home from living condition to showing condition.

My team includes a Professional Stager that understands what buyers want and how they view a home emotionally. Sometimes, only a consultation is required to share tips and provide guidance on what they need to do prior to entering the market. Other times, the home just needs some added décor to create a homey feel.  Still other times, the home needs to have furniture removed and the rooms de-cluttered.

We work with an investor that flips homes, who tried staging his homes with full living room, dining room, and master bedroom sets.  He even goes as far as adding blinds, curtains, and artwork.  Since he started staging his homes, they’ve been selling in weeks or even days.  In fact, one home that he had on the market for months was removed and staged.  It sold within 2 weeks after we put it back on the market.  So it works!

Whether you hire a professional stager or utilize staging tips from watching those home improvement shows, sellers need to spend money to make money.  Of course, you’ll want to get a professional opinion on what improvements will provide the best return on investment, but selling “as is” will surely cost you money in the end.

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community

Beyond the Transaction: Realtors® helping to build strong communities

What does the word Realtor® mean to you? One could argue that traditionally, Realtors® have been seen simply as part of the real estate transaction, but beyond that, there was really no love lost. An out of sight, out of mind kind of philosophy, if you will. The Greater Lehigh Valley Realtors® (GLVR) and its […]

What does the word Realtor® mean to you? One could argue that traditionally, Realtors® have been seen simply as part of the real estate transaction, but beyond that, there was really no love lost. An out of sight, out of mind kind of philosophy, if you will.

The Greater Lehigh Valley Realtors® (GLVR) and its members are aiming to change that image of yesterday’s Realtor®. As GLVR’s CEO, Justin Porembo, always says, “We’re not just here for the transaction, we’re here to help build the community. We soon hope the word ‘community’ comes to mind when you think of our Realtor® members.”

To that end, GLVR is excited to announce the creation of its Quarterly Community Events Program, which will take place in concert with charitable organizations throughout the Greater Lehigh Valley. The events are a joint effort between GLVR’s Young Professional Network, Diversity Committee, and Affiliate Committee.

The Quarterly Community Events Program came to fruition after a successful Halloween-themed scavenger hunt in October 2016 that raised money and supplies for the Third Street Alliance for Women and Children in Easton.

“After the event, many members contacted us and expressed interest in helping with future community-based events,” said Tammy Lerner, GLVR’s Sales Director. “They saw the impact that just one tiny event could have, and they wanted to continue that positive community impact, in whatever form that may be.”

For the first quarter of 2017, a blood drive was held in partnership with Miller Keystone Blood Bank. Future community outreach events will include:

  • Cleaning up parks in Carbon, Lehigh, and Northampton counties.
  • A Team walk, for the March of Dimes.
  • Game day with the Boys and Girls Club of Bethlehem.
  • A Summer art opening at the Bradbury-Sullivan LGBT Community Center of Allentown.
  • A Halloween party in partnership with Autism Speaks.
  •  A food drive for the Second Harvest Food Bank.

“The Greater Lehigh Valley Realtors® is proud to have several committee and task force members step up and take part in multiple community outreach events this year,” said Matthew Marks, GLVR’s Government Affairs Director and liaison to the YPN group and Diversity Committee. “Realtors® serve their clients and assist them in obtaining the American dream of home ownership and becoming part of a community, so it is only natural for our members to continue engaging with families and organizations throughout GLVR’s footprint.”

Charities interested in learning how to partner with GLVR can e-mail Tammy Lerner, Sales Director, at Tammy@GLVR.org.

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Open-the-Door

Opening the Door

Off the coast of the Peloponnese in southern Greece, a small island mourns.  It has lost one of its favorite sons who, while adopted, loved the island as much as it loved him.  And so this November 2016, Hydra Island mourns the great Leonard Cohen. It was my great pleasure and honor to have represented […]

Off the coast of the Peloponnese in southern Greece, a small island mourns.  It has lost one of its favorite sons who, while adopted, loved the island as much as it loved him.  And so this November 2016, Hydra Island mourns the great Leonard Cohen.

It was my great pleasure and honor to have represented Leonard Cohen and his family for several years with regard to legal matters in Greece, including his beloved house on Hydra Island.  Even now, after his death, “Cohenites” from around the world plan their annual weekend gathering on the island to celebrate his music and writings. Mr. Cohen’s enduring love for his house in Hydra Greece led me to reflect on my experience in owning a summer home in Greece.

I am fortunate to have a small home in the southern Peloponnese, nestled in olive groves and overlooking the blue Aegean. In front of my balcony is the crystal blue sea Odysseus sailed on and behind me the orange grove covered plain of Sparta. I hesitated to buy it until a good friend asked me,” What price do you put on the memories you will make with your family there?”  Also, I was moved by author Frances Mayes, after reading her book Under the Tuscan Sun, about her buying an old villa in Tuscany, in which she stressed the value of being in a place where you “walk out of your footprint.”  I have met Frances Mayes, and she gushed about how much she loved the Peloponnese region of Greece.   For Leonard Cohen, his home in Hydra Greece (off the coast of the Peloponnese), was the driving force of his creativity and inspiration.  For me, a lesser mortal, the house in Greece regenerates and revives my spirit so that I am psychically able to continue to practice law – often an extremely toxic occupation.  It is the medicine of the highest order.  Sometimes in life, we need to dare to open a new door.  Cohen valued his Greek house due to its essential “otherness” – and so do I.

And so, in 1960, Leonard Cohen was struggling to write novels, books, poems and lyrics. Exhausted, drained and desperate for inspiration, he found himself wandering the gray and rainy streets of London.  He saw the door of a branch office of the Bank of Greece and decided to go inside. Seeing the tanned clerks, he asked about the weather in Greece.  He had never been to Greece.  Upon hearing what the weather was like, he left for Greece two days later.

After arriving in the port city of Pireaus, he took a ferry to Hydra, a beautiful Greek island in the Saronic group of islands, which even today bans motor cars and motorcycles.  He discovered many artists in Hydra, including American, British and Australian writers and poets.  He spotted a house on a hill overlooking the Port of Hydra.  It was an old, traditional sea captain’s house built in the 1800’s.  With $1,500 in inheritance money from his grandmother, Cohen purchased the house.  Cohen often said that this purchase in 1960 was the best decision he ever made.  As his lawyer, more than half a century later, I can attest to that fact from a financial investment viewpoint.  However, Cohen, I know, was not reflecting on the financial return of his Hydra home.  He was reflecting on the priceless gift of sunlight, inspiration, and renewal.

It is not the easiest thing to purchase a house in a foreign country.  Even for me, a lawyer also licensed in Greece, there was red tape and tribulations.  Additionally, accessibility can be an issue for some homes overseas, although the world is getting smaller every year.

There may be currency fluctuations against the Dollar or the real estate values may plummet (as they have in Greece due to the crisis). In addition to the legal and building permit and zoning bureaucracy and uncertainty, local contractors and workers may not respect contracts or quotes leading to protracted litigation that can last for years. In Greece for example, there is no title insurance and a legal title dispute can take ten years in the courts. “Caveat emptor” is the rule and I will say, in a self-serving fashion, local trusted legal counsel is a must. On the other hand, local real estate taxes(if any)often are a fraction of the taxes on a summer home, say, in Florida or the New Jersey shore.

And so Leonard Cohen became at home with the rhythm of the small Greek island, its coffee houses, the markets, the fishing boats and the donkeys carting vegetables and fruits for sale. Ever present in Hydra in the 50’s and 60’s was a bohemian and diverse assemblage of actors, poets, musicians and painters including Sophia Loren, Alan Ladd, Melina Mercouri, Tony Perkins, Mick Jagger, Keith Richards, Joan Collins, Richard Burton and Michael Cacoyianis (of Zorba fame). Cohen immersed himself in the creative process on his sun- filled terrace overlooking the sea, finding his creative fuel and drive. He fell in love with his muse in Hydra and often said that the livable pace and tranquility of the island “made cities less frightening”. One day he was upset to see telephone poles and wires outside his window. He was distraught at this encroachment of civilization until he saw that birds came to the wires. This scene inspired him to write “Bird on the Wire.”  “Like a bird on the wire …I have tried in my way to be free”.

This Summer I will visit Hydra and like hundreds of others lay a wreath at the door of Leonard’s house. It is now owned by his also talented son Adam and his daughter Lorca. What is the value of owning a home in a foreign land?  The place itself can become the poetry of your life.  In return for the headaches, you may find your soul. In the end, few have said it better than Leonard Cohen in “Hallelujah”:

I did my best, it wasn’t much
I couldn’t feel, so I tried to touch
I’ve told the truth, I didn’t come to fool you
And even though it all went wrong
I’ll stand before the Lord of Song
With nothing on my tongue but Hallelujah.

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The Benefits of Home Ownership

Still the American Dream! TAX BENEFITS 2.5 kids and a home in the suburbs, the proverbial American Dream.  Well, there are a few excellent reasons for wanting to own your home that back this statement all the way.  The first, and in my opinion, the biggest is financial.  Forbes Magazine gives seven financial benefits of […]

Still the American Dream!

TAX BENEFITS

2.5 kids and a home in the suburbs, the proverbial American Dream.  Well, there are a few excellent reasons for wanting to own your home that back this statement all the way.  The first, and in my opinion, the biggest is financial.  Forbes Magazine gives seven financial benefits of owning your home and first and foremost among the Realtor community is the Mortgage Interest Deduction.  The IRS allows homeowners to deduct interest paid on their mortgage to be deducted from their income.  This deduction can be quite a substantial deduction in the early years of a mortgage when most of your payment is going toward interest.  It seems every year there is a proposal in Congress to remove this from the tax code and every time it is on the table, the National Association of Realtors (NAR) fights to keep it.  Any time you make home ownership harder and costlier, fewer people will be able to afford to own a home. This will have negative effects on the American economy and economic growth.   Another tax advantage of owning your home is being able to deduct property taxes on your primary residence.  These benefits are strong motivators for people who rent to seriously considering purchasing a home.

INVESTMENT

Your home is like a savings account.  Every time you make a mortgage payment on your home, you bring down the principal of what you owe.  In the early years of a mortgage, only a small portion goes to the principle, and a larger portion goes to interest. However, over the years more and more will be going to the principle which will build valuable equity for the homeowner.  At the same time, your debt is going down, and your home should be appreciating, (going up in value).  This will increase the equity in your home even greater.  We can define equity as the amount your home is worth versus the amount owed on your home.   This equity could be used for future investments like a rental property or to pay down other debt you may have accumulated.  Essentially your home becomes a bank that you can use to borrow against.

SOCIAL BENEFITS

One of the best parts of being a Realtor is helping a first time home buyer find their first home.  There is nothing like seeing the faces of a young couple, just starting out, receiving the keys to their new home.  The same could be said for a person who has rented their whole life and finally made the decision to own their first home.  They now have roots in the community.  Homeowners move far less than renters.  According to NAR’s Research Division, from 2010-2011 only 4.7 percent of owner-occupied residents moved as opposed to 26 percent of renters.  What this means for the community is that people who own their home stay in the community longer and make social ties.   There is a greater sense of belonging.  They will find themselves involved with community events, schools, local sports, and politics.  They believe the community they purchased and invested in will be a great place to raise a family, further entrenching them into the community.

LOWER CRIME RATES, EDUCATIONAL ACHIEVEMENTS, AND HEALTH BENEFITS

People who own their home are less likely to be victims of crime because they have more financially to lose. A stable neighborhood promotes less crime. The educational achievements of children whose parents own their home are much higher than those who do not. The school dropout rate is lower, and so are the teenage pregnancy rates.  Studies also show that homeowners are happier and healthier because they have higher self-esteem and higher perceived control over their lives.

You can see why owning your home is the American dream.  It helps you to become a valuable member of the community.  It gives several tax benefits, putting money back in your pocket and is an excellent investment.  Owners are happier and healthier than renters.  Their children do better in school, and owners are less likely to be victims of a crime.

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Commercial-Financing

Commercial Financing for Real Estate and Small Businesses in the Lehigh Valley

It’s been eight years since the U.S. Economy went off the tracks, along with the real estate market.  Everything just stopped working.  Business owners were being thrown out of banks, and their loans were being called since banks needed to get their capital back.  Real estate investors were not able to get loans, even the […]

It’s been eight years since the U.S. Economy went off the tracks, along with the real estate market.  Everything just stopped working.  Business owners were being thrown out of banks, and their loans were being called since banks needed to get their capital back.  Real estate investors were not able to get loans, even the best of credit borrowers could not borrow money.  Banks were closed for business when it came to lending money.  Nobody knew where the bottom was at in the marketplace.

Fast forward to 2016, in the last year eight years the real estate market has healed for the most part. Prices of properties are in line where they should be.  Lenders are back to lending for good pieces of real estate and to good business owners.  Today’s lenders do a lot more due diligence on borrowers and businesses.  Lenders want to lend, but they want good loans on their books. After all, the regulators are all over the banks today with audits and questions on every loan.

The Lehigh Valley continues to be a great area for real estate investors and business owners to invest.  Our economy in the Lehigh Valley is strong, no matter what is going on in different parts of the United States.  The Lehigh Valley is 1 hour to Philly, 1 ½ hours to NYC, 3 hours to Washington DC and 5 hours to Boston.  The Northeast is the wealthiest part of the United States, and that helps all of us right here in the Lehigh Valley.

Major corporations, large and small what access to our real estate market.  That, in turn, helps our property values and local businesses.  Banks want access to our marketplace, and that’s why banks are buying banks.  There has been a huge separation in banking.   You have larger banks and smaller banks, no middle size banks, which is a problem.  You also have credit unions stepping up and doing their share to help with commercial lending.  All signs show that the money is flowing in the Lehigh Valley again.

If a borrower has good credit, good financials and experience in real estate or business, they can purchase almost anything they want.  If you’re someone that has credit issues and cannot verify your income, it’s going to be a little more challenging for you to obtain financing and if you can get funding in place, you will pay higher rates and fees, since you’re considered a risk.

Overall, all parts of the Lehigh Valley businesses and commercial real estate markets are prospering, which in turn makes for good commercial lending.   Allentown is coming back to life because of the NIZ Zone and committed developers. Bethlehem was the first in the Lehigh Valley to understand the importance of economic revitalization, which continues to grow. Easton has been doing well for the last ten years with their restaurant scene along with its committed group of real estate investors.  Not to mention, people are moving back into the cities at a record number after 30+ years of moving to the suburbs.  We will continue to attract families and businesses from New York and New Jersey, because of lower real estate taxes and affordable properties, compared to where they’re coming from.  It also seems that the townships and boroughs are growing, but at a slower pace, but they will all continue to prosper as long as the Allentown, Bethlehem, and Easton stay on the right path to growth.

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Politics-of-Homeownership

The Politics of Homeownership 2.0: Post-Election

Earlier this year I was approached about my opinion on the presidential election and the impact it would have on the real estate market. Since REALTORS® do not focus on donkey vs. elephant – instead, we focus on issues that affect the industry and homeowners – I was more concerned about the pending public policy […]

Earlier this year I was approached about my opinion on the presidential election and the impact it would have on the real estate market. Since REALTORS® do not focus on donkey vs. elephant – instead, we focus on issues that affect the industry and homeowners – I was more concerned about the pending public policy that could be implemented by the winner of the presidential election. And, more importantly, I was concerned about how that pending policy could affect private property rights.

Before the election in November, our primary focus was on the president-elect’s stance on tax reform and, more specifically, the mortgage interest deduction that homeowners have come to rely on and is a needed incentive for many first-time homebuyers. Action from our new president can also impact the future of Fannie Mae and Freddie Mac and the status of reauthorizing the National Flood Insurance Program.

Tax Reform and Mortgage Interest Deduction

Mortgage interest deduction is an important part of homeownership as it allows taxpayers who own their homes to reduce their taxable income by the amount of interest paid on the loan, which is secured by their principal residence. The amount of deductible mortgage interest is reported each year by the homeowner’s mortgage company and is a key deduction offered as an incentive for homeowners. This deduction adds yet another benefit to being a homeowner and is a key factor on how the housing market impacts the economy. It is extremely important to have this deduction offered, as it puts consumers in a position where it is more beneficial to own a home than it is to rent a home. It is imperative to have this available to consumers and is a key benefit for all homeowners.
We are confident that President-Elect Donald Trump will have an active discussion on tax reform. The only question is: Will he simplify it or make it more restrictive?  In simplifying, there could be a trimming of the mortgage interest deduction, a reduction of property tax deduction, and a cut to exemptions on capital gains from the sale of a home.

For commercial real estate practitioners, the like-kind exchange tax deferral (also known as 1031) could easily be on the chopping block.

Research has consistently shown how valuable these tax preferences are for homeownership, in protecting private property rights, and for economic growth. People in real estate and property owners across the country should, therefore, be on alert for any policy discussion on these matters.

Commercial real estate depreciation is another tax code item to note with Trump, who has acknowledged that he used this depreciation to not pay taxes. For years, high-income professionals bought real estate at the recommendation of their tax advisors to lower their tax obligation. But in 1986, a new tax code prevented these “passive losses” of depreciation. It initially also tried to limit depreciation to real estate investors who are active in the real estate business. That would have been equivalent to not being able to depreciate expensive medical equipment by doctors in their business. That is why the National Association of REALTORS® (NAR) has made it known that depreciation should be allowed as an “active loss” for those who practice real estate as their profession. The current tax code makes this distinction and is unlikely to be on the chopping block in the tax reform discussion.

Fannie Mae and Freddie Mac

We don’t expect reorganization and reform of Fannie and Freddie to be a priority in the first two years of Trump’s term. However, he is known for being unpredictable. Our main objective is to begin the discussion with members of Congress about the importance of these lending entities.

National Flood Insurance Program

A top priority next year for REALTORS® will be reauthorizing the National Flood Insurance Program (NFIP), which is due to sunset in September 2017. The last time the program was reauthorized, a bill had already passed the House and Banking Committee. As of now, no bill on this program has been introduced in either the House or the Senate.  This issue is critical to the real estate industry, and a delay in reauthorizing the NFIP could cost the industry 40,000 lost home sales. NAR has testified twice on this issue and has a three-pronged approach to the issue: push for long-term reauthorization, attempt to address issues through FEMA regulations if possible, and urge states to authorize private flood insurance.

Donald Trump and Republican Control: How Will the Real Estate Market Fare?
Now, with all of that being said, the big question is: How will the real estate market be impacted by Donald Trump’s victory and with Republicans controlling both chambers of Congress? Even though Trump’s background is in construction and real estate, his policy platform has been largely vague.

According to many leading real estate experts and economists, many questions linger about a short or long-term stimulus to our economy from proposed tax cuts and government spending on upgrading the nation’s eroding infrastructure. Our GDP growth and higher interest rates will also plan into future tax revenue and the future of the national debt.

Many people have questioned how Trump’s victory will impact the stock market and how individuals will look to the future regarding investments and wealth management, all of which can impact the buying and selling of real estate. Decreased government oversight and regulation could make investors feel more comfortable, but Trump’s future actions with the Federal Reserve could impact the market in a negative way due to his unpredictability, and this could leave the financial market unsettled and hesitant to spend big.

Dodd-Frank Financial Regulation

Many perceive that a change to the Dodd-Frank financial regulation will occur in some form. A clear positive would be the lifting of compliance costs imposed on small-sized banks. Around 10,000 local and community banks have traditionally been the source of funding for construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity, something that is needed in the current housing shortage situation. However, changes to financial regulations on large banks could again lead us back to the days of a market collapse.

Is Over-conservative Lending Here to Stay?

During Trump’s presidency, there could be a move away from stringent mortgage underwriting to more normal lending. Credit is still tight for mortgages as evidenced by very high credit scores among those who are getting approved. An important reason for overly-conservative lending is due to the exposure of random lawsuits by the government on lending institutions in recent years. To the degree that Trump makes it very clear as to what is and what is not an infraction, then more mortgages will be provided to consumers. Should the Trump Administration create an environment of, “we will sue you,” then the lending institutions will retrench and shut off mortgage access to many consumers.

New Construction

Regarding new construction, Trump could push for less regulatory land-use and zoning burdens, thereby lowering the cost of building. In recent years, newly constructed home prices have been much higher than existing home prices. Homebuilders say that is due to all the extra cost of regulation and not necessarily from material and labor costs. There have been discussions in the current Administration about lifting these burdens, and Trump will most likely attempt to address this issue, but jurisdictional issues of Federal versus local rules and regulations could be contested.

Several other issues are impacting the real estate industry, and we are curious to see how the Trump Administration will handle them. A few are the ever-increasing student debt many potential homebuyers face, how Trump’s immigration restrictions could impact home buying and the market as a whole, and the Environmental Protection Agency’s policies and regulations related to land use.

These are projections and thoughts from some of the leading minds in our industry, including Lawrence Yun, Chief Economist and Senior Vice President of research for the National Association of Realtors®. Our expertise, experience, and opinions may not be seen or heard by Trump’s inner circle, though. The future of our housing market and industry are much like our new leader – unpredictable.

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