3 Ways to Make Your Living Room More Functional

Kevin Shirley, Associate Broker (DC), GRI, ASP, e-PRO

Whether you have a large open floor plan or a small cozy space, having a living room that you can function in is so important. What can you do to better utilize your space?

The living room is the main space in your home where people gather. It’s a high traffic room, and it has a lot of jobs. Creating a space that meets your family’s needs, but is also beautiful and desirable to be in, is no easy task. You might find yourself wondering where to even start, but with a few simple tricks, you’ll be headed in the right direction.

Here are three significant ways you can create more functional space in your living room right now:

Aim to Simplify

These days, with life spinning so fast in so many different directions, it’s easy for our home to become a drop zone for so many things. We accumulate sports equipment, hobby-related accessories, kids’ toys, pet supplies, and the list goes on. Somehow, amid all these bits and pieces, the parts we really love about our home can get lost. The number one thing you can do to create a more functional living room is to start by de-cluttering.

Start by grabbing four boxes labeled:

• Keep
• Donate
• Recycle
• Trash

Go through your living room and do your best to purge those excess items. Think creatively and remember that by letting some things go, you are making way to highlight the things in your home that really do matter to you. Consider paring down on things you have in excess; for instance, limit your throw pillows, don’t pack your bookshelves to the max, and try not to overwhelm your mantle with knickknacks.

Colleen Madsen of 365 Less Things suggests, “There is no need to make things difficult by trying to organize the hardest things first. Most likely, it will simply deter you from the task altogether. Instead, start with the easy stuff, and then as you strengthen your will to reduce, the harder decisions will become easier.” De-cluttering might seem like a daunting task, but it is worth it in the long run. Having less clutter is actually healthier for you, and it helps promote a more peaceful environment. Who doesn’t want a living room that ushers in peace?

Once you have simplified the extra stuff around your home, you can focus on the statement pieces you want to showcase. Turn your attention to details that open up and add light to your living room. Mirrors offer a great way to add dimension to an otherwise dull space. Laura Gaskill suggests, “Placing a full-length mirror between two windows tricks the eye into thinking there is another window there and helps maximize natural light. Casually propping a full-length mirror against the wall brings a relaxed mood to the room.” Focus your energy on finding pieces that inspire you, draw out simplicity, and take up minimal space.

Designate Space Wisely

Creating functionality in your living room is so much more than arranging furniture; it’s about developing an environment that works and flows with your family’s lifestyle. Instead of just placing your furniture where it fits or the best angle toward the TV, really consider the design and formation of your living room.

Try to designate areas with specific jobs in mind. Here are a few ideas to help you get started:

• a distinct sitting area
• a reading nook
• a play area
• a home office corner
• an entertainment space

Elaine Song from styleathome.com advises, “Divide your living space by designating areas for certain activities. It will allow for better organization of furniture and necessities. Whether it’s a games area with a table and proper storage for board games and toys or a TV area with seating and media storage for music and movies, your space will feel less cluttered.” If you find yourself debating over what to do with your sofa, consider what Designer Laura Casey has to say, “People often ask me my opinion on using sectional sofas. Under the right conditions, they can be functional and look great. I think their best use is in rooms with high ceilings or lots of windows and upholstered in a lighter color. Getting room and upholstery proportions correct can be a challenge. If you’ve got a smaller sized room with low ceilings, you are better off choosing a mix of a sofa and chairs to help break up the space.” The living room is where the family gathers, with specifically designated areas, giving everyone a corner of their own.

Use Furniture Creatively

One of the main reasons to use furniture creatively is that it is a great way to incorporate sentimental family pieces into your everyday life. Jan Porter of Isle Designs brings over 35 years of design experience to the table. She shared some helpful advice about how she uses pieces creatively within her own home, “I tend to use pieces that have a multi-functional purpose. One of my family heirlooms, an antique cedar chest from the 1800s not only doubles as storage, but it is used as my coffee table as well.” Another great reason to use furniture creatively is that it can offer double-duty. Some benches have excellent storage capabilities, and they also make a great window seat.

Many new sectional sofas come with ample storage inside, and the chaise lounge portion can double as a daybed. If your living room is on the smaller side, consider using a bookshelf as an entertainment storage center/room divider. You can place TV remotes and controllers in lined baskets, store games in decorative boxes, and reserve one shelf for your favorite go-to books. By using double-duty furniture, you not only create more space but you develop a room that everyone in your family feels some sense of ownership to.

 

 

Is Homeownership Still Considered Part of the American Dream?

Since our nation’s birth, homeownership has always been considered a significant piece of the American Dream. As Frederick Peters reports in Forbes:

“The idea of a place of one’s own drives the American story. We became a nation out of a desire to slip the bonds of Europe, which was still in many respects a collection of feudal societies. Old rich families, or the church, owned all the land and, with few exceptions, everyone else was a tenant. The magic of America lay not only in its sense of opportunity but also in the belief that life could in every way be shaped by the individual. People traveled here not just for religious freedom, but because in America, anything seemed possible.”

Additionally, a research paper released just before the shelter-in-place orders issued last year concludes:

“Homeownership is undeniably the cornerstone of the American Dream and is inseparable from our national ethos that, through hard work, every American should have opportunities for prosperity and success. It is the stability and wealth creation that homeownership provides that represents the primary mechanism through which many American families can achieve upward socio-economic mobility and greater opportunities for their children.”

Has the past year changed the American view on homeownership?

Definitely not. A survey of prospective homebuyers released by realtor.com last week reveals that becoming a homeowner is still the main reason this year’s first-time homebuyers want to purchase a home. When asked why they want to buy, three of the top four responses center on the financial benefits of owning a home. The top four reasons for buying are:

• 59% – “I want to be a homeowner”
• 33% – “I want to live in a space that I can invest in improving”
• 31% – “I need more space”
• 22% – “I want to build equity”

Millennials believe most strongly in homeownership.

The survey also reports that 62% of millennials say a desire to be a homeowner is the main reason they’re buying a home. This contradicts the thinking of some experts who had believed millennials were going to be the first “renter generation” in our nation’s history.

While reporting on the survey, George Ratiu, Senior Economist at realtor.com, said:

“Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have — to invest in a place of their own and in their communities and to build a solid financial foundation for themselves and their families.”

Odeta Kushi, Deputy Chief Economist for First American, also addresses millennial homeownership:

“Millennials have delayed marriage and having children in favor of investing in education, pushing marriage and family formation to their early-to-mid thirties, compared with previous generations, who primarily made these lifestyle choices in their twenties…Delayed lifestyle choices delay the desire for homeownership.”

Kushi goes on to explain:

“As more millennials get married and form families, millennials remain poised to transform the housing market. In fact, the housing market is already experiencing the earliest gusts of the tailwind.”

Bottom Line

As it always has been and very likely always will be, homeownership continues to be a significant component in every generation’s pursuit of the American Dream.

 

Should We Fear the Surge in Cash-Out Refinances?

Freddie Mac recently released their Quarterly Refinance Statistics report, which covers refinances through 2020. The report explains that the dollar amount of cash-out refinances was greater in 2020 than in recent years. A cash-out refinance, as defined by Investopia, is:

“a mortgage refinancing option in which an old mortgage is replaced for a new one with a larger amount than owed on the previously existing loan, helping borrowers use their home mortgage to get some cash.”

The Freddie Mac report led to articles like the one published by The Real Deal titled, House or ATM? Cash-Out Refinances Spiked in 2020, which reports:

“Americans treated their homes like ATMs last year, withdrawing $152.7 billion amid a cash-out refinancing spree not seen since before the 2008 financial crisis.”

Whenever you combine the terms “spiked,” “homes like ATMs,” and “financial crisis,” it conjures up memories of the housing crash we experienced in 2008.

However, that comparison is invalid for three reasons:

1. Americans are sitting on much more home equity today.

Mortgage data giant Black Knight just issued information on the amount of tappable equity that U.S. homeowners with a mortgage have. Tappable equity is the amount of equity available for homeowners to use and still have 20% equity in their home. Here’s a graph showing the findings from their report:

In 2006, directly before the crash, tappable home equity in the U.S. topped out at $4.6 trillion. Today, that number is $7.3 trillion.

As Black Knight explains:

“At year’s end, some 46 million homeowners held a total $7.3 trillion in tappable equity, the largest amount ever recorded…That’s an increase of more than $1.1 trillion (+18%) since the end of 2019, the largest percentage gain since 2013 and – you guessed it – the largest dollar value gain in history, to boot. All in all, it works out to roughly $158,000 on average per homeowner with tappable equity, up nearly $19,000 from the end of 2019.”

2. Homeowners cashed-out a much smaller amount this time.

In 2006, Americans cashed-out a total of $321 billion. In 2020, that number was less than half, totaling $153 billion. The $321 billion made up 7% of the total tappable equity in the country in 2006. On the other hand, the $153 billion made up only 2% of the total tappable equity last year.

3. Fewer homeowners tapped their equity in 2020 than in 2006.

Freddie Mac reports that 89% of refinances in 2006 were cash-out refinances. Last year, that number was less than half at 33%. As a percentage of those who refinanced, many more Americans lowered their equity position fifteen years ago compared to last year.

Bottom Line

Many Americans did liquidate a portion of the equity in their homes last year for various reasons. However, less than half of them tapped their equity compared to 2006, and they cashed-out less than one-third of that available equity. Today’s cash-out refinance situation bears no resemblance to the situation that preceded the housing crash.

 

Trees for Springtime Planting

Kevin Shirley, Associate Broker (DC), GRI, ASP, e-PRO

The best time to plant a tree was 20 years ago. The second-best time is now. – Chinese proverb

Spring is the ideal time to introduce new trees into your home environment. The gentle warmth of sunny spring days encourages the roots to spread out and grow while spring rains bring needed moisture. By planting in spring, new trees have several months to establish strong roots before the mercury plummets and winter returns.

Trees provide spring flowers, cooling shade in summer, a brilliant splash of bold color in autumn, and visual interest in winter. Trees can be used to hide an unsightly view, planted as a windbreak to reduce cold winds and lower heating bills, to define property boundaries, provide essential shelter and food for wildlife, control erosion in unstable soil, and help reduce carbon in the earth’s atmosphere.

Adding elegant, eye-catching trees to the home landscape is one of the fastest ways to add beauty and value to your property. The Arbor Day Foundation advises, “In one study, 83% of realtors believe that mature trees have a ‘strong or moderate impact’ on the salability of homes listed for under $150,000; on homes over $250,000, this perception increases to 98%.”

In the mid-west, homeowners especially appreciate the shade on hot summer days. The United States Department of Agriculture advises, “The net cooling effect of a young, healthy tree is equivalent to ten room-size air conditioners operating 20 hours a day.” The United States Forest Service notes, “Trees properly placed around buildings can reduce air conditioning needs by 30 percent and can save 20–50 percent in energy used for heating.”

Planting trees is an investment in your property that should not be taken lightly. Selecting the right trees that will flourish in your location can greatly affect the valuation of the property. The Council of Tree and Landscape Appraisers states, “A mature tree can often have an appraised value of between $1,000 and $10,000.”

When considering planting trees to beautify your home, a knowledgeable landscape contractor’s advice and services are crucial. Your landscape contractor will recommend the best trees for your site and situation; taking into consideration the height and width of the tree at maturity, the architectural style of the home and the location of underground utilities, septic or sewer systems, irrigation or sprinkler systems, and water lines that serve pools, fountains or other water features.

Tree planting should be part of a long-term landscape plan for your property that factors in terrain, soil conditions, drainage, and available light. When selecting the right trees for your home landscape, other considerations are longevity, ease of maintenance, resistance to disease, and tolerance of extremes in climatic conditions.

When adding trees to their home landscape, most homeowners prefer an “instant” landscaped-look that can only be accomplished by planting large-landscape-size trees. Although the homeowner can plant small potted trees themselves, it will be years before the tree impacts the visual appearance of the landscape.

By engaging the services of a professional landscape contractor with experience and the right equipment, trees up to 8 inches in diameter can be planted, saving labor, planting time, and years and years of maintenance of a juvenile tree. Planting a developed, larger tree also eliminates the risk of mower or edger damage that often occurs on smaller, younger trees.

Talk to your landscape designer or contractor. There are hundreds of different species of trees that do well in United States Hardiness Zones 4 through 8. Your choice of ornamental trees is only limited by your imagination. Choose trees based on personal preference, adaptability to your local growing conditions, and the limitations of your budget. Popular choices include:

Oak

The official United States national tree, the mighty oak, is one of the most planted trees in mid-west landscapes, both urban and rural. Oaks are prized for their sturdy growth, majestic size, and grand presence. A broad-crowned classic, the Northern Red Oak tree (Quercus rubra), is a winner in any spacious yard or open landscape. A deciduous tree that grows to a stately height of 50 feet high, the Northern Red Oak develops a full, broad canopy up to 60 feet wide at maturity. On sunny days, the graceful canopy is a beautiful spot under which to dine or relax.

Exhibiting fresh glossy green color in springtime, cooling shade during the hottest days of summer, brilliant fire red fall foliage, and winter interest, the Northern Red Oak is strong and hardy to withstand the cold and winds of winter. Native to the mid-west, the Northern Red Oak is tolerant of pollution and withstands the rigors of the city well. Fast-growing and hardy in United States Planting Zones 4 through 7, the Northern Red Oak tree prefers nutrient-rich, well-drained, acidic soil.

Maple

If you are looking to add a brilliant splash of color to your fall landscape, look no further than the mighty maple tree. Everyone’s favorite, the Sugar Maple (Acer saccharinum), is a dependable choice for adding breathtaking fall color. Grown throughout the mid-west, the Sugar Maple turns vivid shades of red and orange in autumn. Fast-growing, Sugar Maples develop attractive grey bark as they mature. The drought-tolerant and disease-resistant Sugar Maple reaches a height of 45-55 feet at maturity and develops around canopy 30 to 50 feet wide.

Trident maple (Acer buergerapum), Hedge maple (Acer Campestre), Paperback maple (Acer griseum), Japanese maple (Acer plamatun), Red Maple (Acer rubrum), and Norway maple (Acer platanpides) all offer vibrant fall color, grow from 30 to 50 feet tall and adapt to most soil conditions.

Considered one of the best hybrid maples, the Freeman maple tree (Acer x freeman) is best known for its magnificent display of brilliant red-orange fall foliage. At maturity, the Freeman Maple tree grows 75 to 80 feet tall and from 40 to 50 feet wide and will fare well when planted in an open area with plenty of sunlight and moist, well-drained, pH-neutral soil.

Another fast-growing hybrid maple, “Autumn Blaze,” matures to a height of 50 to 65 feet and forms a dense oval crown 40 to 50 wide.

Because of specific cultural requirements, maple trees are only dug by nurseries in the spring and may only be planted in the spring.

Zelkova

The “Green Vase” zelkova tree (Zelkova serrate “Green Vase”) is prized for strong upright arching branches that give the tree a pleasing symmetrical shape. Adding height and vertical interest to the landscape, the “Green Vase” tree reaches a height of 60 to 70 feet tall at maturity and presents a cone-shaped canopy that is 40 to 50 feet wide. The ornamental tree prefers full sun but will tolerate some shade. Hardy in United States Planting Zones 5 through 8, the Green Vase tree tolerates pollution, drought, and strong winds, making it an excellent tree for street-side planting in urban areas. Disease resistant and fast-growing, the Green Vase tolerates most types of soil.

 

6 Simple Graphs Proving This Is Nothing Like Last Time

Last March, many involved in the residential housing industry feared the market would be crushed under the pressure of a once-in-a-lifetime pandemic. Instead, real estate had one of its best years ever. Home sales and prices were both up substantially over the year before. 2020 was so strong that many now fear the market’s exuberance mirrors that of the last housing boom and, as a result, we’re now headed for another crash.

However, there are many reasons this real estate market is nothing like 2008. Here are six visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult not to get a mortgage. Today, it’s tough to qualify. Recently, the Urban Institute released their latest Housing Credit Availability Index (HCAI), which “measures the percentage of owner-occupied home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.“

The index shows that lenders were comfortable taking on high levels of risk during the housing boom of 2004-2006. It also reveals that today, the HCAI is under 5 percent, which is the lowest since the introduction of the index. The report explains:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

This is nothing like the last time.

2. Prices aren’t soaring out of control.

Below is a graph showing annual home price appreciation over the past four years compared to the four years leading up to the housing bubble’s height. Though price appreciation was quite strong last year, it’s nowhere near the rise in prices that preceded the crash.

There’s a stark difference between these two periods of time. Normal appreciation is 3.8%. So, while current appreciation is higher than the historical norm, it’s certainly not accelerating out of control as it did in the early 2000s.

This is nothing like the last time.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing an acceleration in home values.

This is nothing like the last time.

4. New construction isn’t making up the difference in inventory needed.

Some may think new construction is filling the void. However, if we compare today to immediately before the housing crash, we can see that an overabundance of newly built homes was a major challenge then but isn’t now.

This is nothing like the last time.

5. Houses aren’t becoming too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is about 3%. That means the average homeowner pays less of their monthly income toward their mortgage payment than they did back then. Here’s a chart showing that difference:

As Mark Fleming, Chief Economist for First American, explains:

“Lower mortgage interest rates and rising incomes correspond with higher house prices as home buyers can afford to borrow and buy more. If housing is appropriately valued, house-buying power should equal or outpace the median sale price of a home. Looking back at the bubble years, house prices exceeded house-buying power in 2006, but today house-buying power is nearly twice as high as the median sale price nationally.”

This is nothing like the last time.

6. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over 50% of homes in the country having greater than 50% equity – and owners have not been tapping into it like the last time. Here’s a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out almost $500 billion less than before:

During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owed was greater than their home value). Some decided to walk away from their homes, which led to a wave of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. With the average home equity now standing at over $190,000, this won’t happen today.

This is nothing like the last time.

Bottom Line

If you’re concerned that we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

3 Ways Home Equity Can Have a Major Impact on Your Life

There have been many headlines reporting on how homeowner equity (the difference between your home’s current market value and the amount you owe on your mortgage) has dramatically increased over the past few years. CoreLogic indicated that equity increased for the average homeowner by $17,000 in the last year alone. ATTOM Data Solutions, in their latest U.S. Home Equity Report, revealed that 30.2% of the 59 million mortgaged homes in the United States have at least 50% equity. That doesn’t even include the 38% of homes owned free and clear, meaning they don’t have a mortgage at all.

How can equity help a household?

Having equity in your home can dramatically impact your life. Equity is like a savings account you can tap into when you need cash. Like any other savings, you should be sensible in how you use it, though. Here are three good reasons to consider using your equity.

1. You’re experiencing financial hardship (job loss, medical expenses, etc.)

Equity gives you options during difficult financial times. With equity, you could refinance your house to get cash which may ease the burden. It also puts you in a better position to talk to the bank about restructuring your home loan until you can get back on your feet.

Today, there are 2.7 million Americans who are currently in a forbearance program because of the pandemic. Ninety percent of those in the program have at least 10% equity. That puts them in a better position to get a loan modification instead of facing foreclosure because many banks will see the equity as a form of collateral in a new deal. If you’re in this position, even if you can’t get a modification, the equity allows you the option to sell your house and walk away with your equity instead of losing the home and your investment in it.

2. You need money to start a new business

We’ve all heard the stories about how many great American companies started in the founder’s garage (i.e., Disney, Hewlett Packard, Apple, Yankee Candle, Keeping Current Matters). However, we might not realize that the garage (along with the rest of the home) supplied the start-up money for many of these companies in a refinance form.

If you’re passionate about an idea you have for a new product or service, the equity in your home may enable you to make that dream a reality.

3. You want to invest in a loved one’s future

It’s been a long-standing tradition for many households in this country to help pay college expenses for their children. Some have tapped into the equity in their homes to do that.

Additionally, George Ratiu, Senior Economist for realtor.com, notes:

It’s safe to assume a percentage of that down payment money likely came from home equity.

Bottom Line

Savings in any form is a good thing. The forced savings you can earn from making a mortgage payment enables you to build wealth through home equity. That equity can come in handy in both good and more challenging times.