Author: Ted Ihde

An owner-occupying home buyer – or a real estate investor – looks to acquire a good, clean property. A property which can be financed by the purchaser. When assessing potential properties to acquire, due diligence for owner-occupying buyers and for investors is a wise undertaking, especially when the closing date for the property could extended to a future date. I.e.: an extended closing.

An extended closing occurs when the acquisition of the property is not the immediate objective of the buyer. In this instance, the buyer could consider utilizing an option contract to “tie up” the property at the determined sale price, for an established period of time.

The option contract creates an opportunity for the buyer to acquire the property from the seller at an agreed-to sale price, accompanied by agreed-to sale terms, within a set period of time. This is offered to the buyer in exchange for a specific amount of money. The sale price the buyer locks into is negotiated within the option contract. Once the option contract is in place, the buyer has the exclusive right to acquire the property within the time frame agreed to through the option.

In an option contract, while the seller is not permitted to sell the property to other prospective buyers, the buyer is not obligated to purchase the property. Within the period of time established by way of the option, the buyer will line up financing, assemble estimates to update the home, and schedule an appraisal, and a home inspection.

Speaking to a home inspection, the buyer in an option contract will conduct inspections, adn this could include a tank sweep. A tank sweep lets the buyer know whether there is an underground storage tank (“UST”)on the property the buyer. An Open Public Records Act (“OPRA”) request can also be submitted by the buyer to the township so as to determine whether there may be a UST. The OPRA request enables the buyer to review public records for the property.

The Environmental Protection Agency (“EPA”) does not in most cases regulate underground oil tanks for residential homes, and a UST is an underground tank where at least 10% of the piping is located underground. If UST storage capacity consists of less than 110 gallons, the UST for residential properties falls outside of federal oversight altogether.

While federal oversight of UST’s does not consist of a nationwide standard, states and municipalities can enact local policies regarding UST’s. A municipality may elect to do so because storage tanks built prior to the ‘80’s were regularly constructed with steel. Over time steel can corrode. If corrosion of an older steel UST occurs, oil that had been stored in the UST could could leak. An oil leak from a steel UST could contaminate the surrounding soil, and, potentially, it could contaminate water sources too. This could be an environmental hazard.

Within the due diligence phase of an option contract, as home inspections are conducted, in the event a UST is discovered by way of a tank sweep (or an OPRA request), the option contract essentially permits the buyer/investor to still put the property “on hold” for the specific period of time. If area real estate values have increased during the time frame established within the option contract, defects to the subject property could negatively affect the property value. A “plus” – area property values have increased, and “minus” – defects to the property – which affect the value of the property.

When obtaining a home loan used to finance a property, the home becomes collateral for the lender. In our example, the UST could alter the value of the home for the buyer, while affecting lender collateral. The UST alters the marketability of the home. A reduced property value is important in relation to the loan to value (“LTV”) used by the lender for the buyer’s financing.

If a UST is discovered, the lender may opt to schedule a Phase 1 Site Assessment. A Phase 1 is a detailed report which speaks to environmental conditions of the subject property. The lender may elect to schedule a Phase I prior to issuing a loan commitment.

In order for an option contract to be in place, consideration – i.e.: money – is often paid by the buyer to the seller. Consideration becomes kind of like an earnest money deposit which can be applied towards the purchase price.

The Great Inflation was a macroeconomic period during the second half of the Twentieth Century. The Great Inflation lasted from 1965 to 1982. Simplistically-speaking, looking back quickly, at or around this time in American history, inflation in the United States had at times been blamed on “high oil prices”. Yet blaming “high oil prices” would be an inaccurate, overly-simplistic, assessment for inflation. At that time.

During the Great Inflation, credible arguments have been made that United States monetary policy had been designed to finance increasing (and potentially further increasing) annual debt levels. And annual deficits too. Those annual budget deficits (and debt levels) it can be argued, were a prime catalyst for the aforementioned noted inflationary cycle. The period of time in American history I am going to look at here might be considered one “shining light”, so to speak, found within this difficult inflationary period.

Debt, incurring additional debt, financing that debt, and then, potentially having unmanageable debt… Looking at debt management, outside of federal policy, two American policy architects – one during the period of the Great Inflation, and one a former United States President – had interesting personal experiences with “debt.”

Individuals – and businesses – may choose to utilize bankruptcy laws to their benefit when decisions, the market, or uncontrollable circumstances lead to a disadvantageous shift in financial conditions. Those changing financial conditions affect the servicing of debt.

As we know, President Trump utilized bankruptcy laws six times for his companies, prior to becoming president. President Trump was a noted proponent of a low interest rate environment, often speaking to how the Federal Reserve should maintain low interest rates.

Moving on from President Trump, one of our United States Presidents, a President who held office during the period of the Great Inflation, was Richard Nixon.

In 1971, President Nixon appointed former Texas governor John Connally to the position of United States Secretary of the Treasury. As Secretary, John Connally defended increases in the U.S. debt ceiling, viewing debt as a fiscal stimulus. While at the same time, presiding over policies which led to the dollar being devalued. Secretary Connally filed personal bankruptcy in 1986.

In 1971, 1971 being the year Secretary Connally was appointed as Treasury Secretary by President Nixon, the annual deficit of the United States totaled $23 billion. George Shultz took over as President Nixon’s Treasury Secretary in 1972. In 1972, the total federal debt of the United States held relatively steady, at $427 billion. While the federal deficit remained unchanged, at $23 billion.

The following year, the federal budget deficit of the United States fell to $15 billion under Secretary Schultz. By 1974, the federal budget deficit was further reduced to $6 billion, while the federal debt of the United States grew to $475 billion.

President Trump took office in 2016. In 2016, the total federal debt of the United States exceeded $19 trillion. That same year – 2016 – the debt of the United States totaled 105% of annual GDP.  By 2020, President Trump’s last year in office, the federal debt of the United States reached $27 trillion – 129% of annual GDP. The debt-to-GDP ratio for the United States first hit 100% in 1945, at the end of World War II. From 1948 to 2014, the annual debt level of the United States remained under 100% of annual GDP, reaching 100% of GDP once again in 2014. The annual debt of the United States was 124% of GDP in 2021.

It is arguably rather difficult to project interest rate policy today, by merely looking back to this period of time that Secretary Connally, then later, Secretary Schultz, headed the Treasury. This is so because, at that time, the national debt of the United States did not exist as it does today. As such a large portion of annual GDP.

The debt of the United States, and the country’s budget deficits as well – both under the previous President, and under President Biden – are at relatively high levels. So, for perspective, integrating the period of the Great Inflation into this argument, one could look at the interest rate policy of the United States, set into motion by President Nixon’s Secretary of the Treasury, John Connally. Beginning in 1971. And continued onward, once Secretary Schultz took over for Secretary Connally, as head of the Treasury.

In 1971, the year Secretary Connally took office, the average yield on the Federal Funds Rates was 4.67%. The total debt of the United States in that same year of 1971 totaled $398 billion. And that $398 billion in U.S. federal debt made up 35% of annual GDP.

In 1972, the total federal debt of the United States was reduced to 34% of annual GDP, while the federal debt in 1972 increased to $427 billion.

What about interest rates? The Federal Funds rate remained steady in 1972…largely unchanged from the previous year.

The following year – 1973 – saw the federal debt of the United States, as a percentage of GDP, be further reduced. Total debt was reduced to 33% of GDP in 1973. This occurred, even as the total debt level of the United States rose to $458 billion (from $427 billion in 1972). In 1973, while debt as a percentage of GDP had been reduced, the average yield on the Federal Funds rate had increased substantially…to 8.74%. Interest rates rose.

By 1974, the average yield for the Federal Funds rate had reached 10.51%. The federal deficit by 1974 had been reduced to .40% of annual GDP – reduced from $15 billion in 1973, to $6 billion in 1974. Federal policy, it can be argued, was working very well at that time. A well-functioning federal fiscal policy, coupled to, increasing interest rates.

In 1974, the average yield on the Federal Funds rate reached 10.51%. A federal funds rate of over 10% will no doubt today be considered to be a “very high interest rate”. Yet no one that I have seen on news channels is referencing America’s fiscal policy at that time – a time of increasing interest rates. Kind of like today? And we use this time period, where Secretary Connally, then later, Secretary Schultz, headed the Treasury. This period of time within the the Great Inflation, since “inflation” was front and center then, just as it is now.

In 1974, the annual budget deficit of the United States had been reduced to $6 billion – under Secretary Schultz. Yet I see no one on news channels today celebrating the work of John Connally (nor Secretary Schultz). Nor using the financial engineering enacted by Secretary Connally, then later Secretary Schultz, as good points of reference, as interest rates rise today. Point being, fiscal policy is, to a large degree, a-political.

It’s difficult to pin fiscal policy enacted as being either “good” or “bad”, in and of itself, looking at only one element of the fiscal policy. Only one element, such as, interest rates.

A federal funds rate of 10% might be considered to be, “bad”, correct? But what if that 10% federal funds rate is coupled to significantly reduced federal debt levels? And fiscal policy is often outside of the traditional talking points news networks like to focus on. Even though fiscal policy should be, arguably, Point “A”.

Debt, GDP, and the Federal Funds rate… So let’s look at the interest rates on 30-year fixed rate mortgages while Secretary Connally (and Secretary Shultz) served as Secretaries of the Treasury.

In 1972, the average interest rate on a 30-year fixed rate Freddie Mac home loan was 7.38%. The average yield on the Federal Funds rate in 1972 was 4.44%.

In 1973, the average interest rate on a 30-year fixed rate Freddie Mac home loan rose to 8.04%. The average yield on the Federal Funds rate in 1973 saw a sharp spike…to 8.74%.

In 1974, the average interest rate on a 30-year fixed rate Freddie Mac home loan increased further, to 9.19%. The average yield on the Federal Funds rate in 1974 increased to 10.51%.

In 2017, President Trump’s first year in office, the average Federal Funds rate was 1%. In 2017 – President Trump’s first year in office – the average interest rate on a 30-year fixed rate Freddie Mac home loan was 3.99%.

In 2020, that Federal Funds rate averaged out to be a uniquely-low .36%. In 2020, the average interest rate on a 30-year fixed rate Freddie Mac home loan was 3.11%. The total federal debt of the United States was $27 trillion in 2020 – lots of federal debt. And families took on relatively high levels of mortgage debt at this time too…facilitated by the uniquely low mortgage rates. By the end of 2021, the federal debt of the United States grew further, to $29 trillion.

So what is going to happen with interest rates going forward?

It is arguable that the low interest rate policy we just went through drove house prices to levels which are, arguably, unsustainable. These high home prices make it quite unaffordable for many first time home buyers. Those who purchased homes during this period of time? They still benefit from the low interest rates they are locked into…even at the high debt levels they have. Even if their homes do decrease in value (somewhat) going forward. Financing debt, financing deficits…each is made more doable, in a low interest rate environment. The country has a high amount of federal debt. Americans have high levels of mortgage debt.

So going forward, what happens with interest rates?

Can or should the national fiscal policy of the Fed continue to subsidize home sellers by serving as a proponent of low interest rates? Low interest rates, which in turn, lead to a correlated unsustainable increase in prices of homes? One could credibly answer, “no” to that question. So then let’s look back to Secretary Connally (and Secretary Shultz) once again.

The total federal debt of the United States was reduced under Secretary Connally’s watch. Annual deficits for the United States also decreased under Secretary Schultz’s time serving as Secretary of the Treasury.

Interest rates? Interest rates rose at the same time. Both during Secretary Connally’s watch, and during Secretary Schultz’s watch. But today, things do look quite different.

Debt levels of the United States today…are continuing to increase. Coupled to increased government spending. Coupled to, increasing interest rates. And this is where the reference point for future projections, using Secretary Connally and Secretary Shultz as examples, fractures, and becomes rather difficult.

Under Secretaries Connally and Secretary Shultz, annual deficits went down, as interest rates went up. Today? Interest rates are rising, and debt levels are rising too. And federal debt levels rose under each of the previous two Administrations…be it an Administration with a “R” heading the Administration, or be it an Administration with a “D” heading the administration. Fiscal policy, in this regard, is a rather a-political topic, one can argue.

So what about the real estate market?

Looking at values and prices of homes today (they are high), looking at federal debt levels today (they are high), looking at federal deficit levels today (they are high), it is an arguable point that interest rates could (and should) continue to rise. Ideally, with less debt incurred, and with deficits reduced. Might not happen.

If interest rates do continue to rise (they likely will) then would we be looking at a foreseeable fiscal environment where home prices decrease – then level off – while we adopt an acceptance of a “higher interest rate” environment? Then once again, looking at the “fiscal house” of the United States under Secretary Connally (then later under Secretary Shultz), such a transition to higher interest rates would not be deemed to be “bad” for the United States, overall, correct? The caveat here being, what about the debt? What about the deficits?

It’s great to have a great home – with a high mortgage balance – at a super-low interest rate. That works. Add a car loan in to the equation, with a higher interest rate. Add in some credit cards, with higher interest rates too. Then all of a sudden, the awesome home with the low interest rate is merged in with other high interest rate debt, which has to be serviced as well.

Therein lies the potential challenge we all face, as the interest rate environment changes. Taking fiscal policy into account – individual family fiscal policy, and macroeconomic national fiscal policy – as we consider our new American fiscal climate.

Today, the majority of home builders address the provision of adequate roof support with their new home-builds by using trusses. Trusses are engineered, prefabricated, triangular, wood support structures. They are used by home builders more and more today, as opposed to builder-reliance upon 2-by-8’s or 2-by-10’s…2-by-8’s and 2-by-10’s being the roof-support-ingredient of the fast-disappearing, more labor-intensive stick-built framing. By contrast, trusses are built with 2-by-4’s – as opposed to the 2-by-8’s or the 2-by-10’s used in stick-built framing – leading to a cost-saving measure for home builders (and for home buyers too).

Furthermore, the utilization of trusses by the builder leads to none of the interior walls of the newly-built home serving as load-bearing walls. This is a nice advantage for the home buyer, because there will then be more options available to the buyer pertaining to where the walls can be erected within the home, according to the build plan. And since the interior walls in the home will not then function as load-bearing – a benefit gained by building with trusses – interior walls can be taken down at a later date by the homeowner, if they so choose to later redesign the interior of their home. The key point is, trusses do not need to rest on load-bearing walls. This leads to more interior design options for the home buyer, as their new home is being designed. Coupled to more home updating options for the homeowner in the future, since trusses do not rest on load-bearing walls.

Nearly 80% of all new homes built today are built with trusses. Trusses are factory-built, then shipped to the construction site, as needed. When building a new home without using trusses, roof support calculations can be based upon an assessment provided by the individual home builder. This tends to leave much more to chance, as per roof support. Rather, trusses are designed by engineers, with design parameters formulated with building codes in mind.

In terms of roof design, trusses facilitate lots of nice options for home buyers who are considering a custom roof. Cathedral ceilings, cross gables…each would be possible, when crafting the details for your new home design, by using trusses.

Open floor plans are very popular today with home buyers. When opting for an open floor plan in your new home, your home builder will likely opt for scissor trusses. With scissor trusses, the home buyer can then select high, sloped ceilings…a very nice feature, when paired with an open floor plan.

Applicable to new home construction, the success of the project is reliant upon the provision of well-communicated – and clear – expectations to key project stakeholders, while simultaneously maintaining overall project transparency throughout the project. As such, it is important to list, to organize, to put into sequence – and to understand – each project expenditure. Labor, materials, supplies… Both as a total dollar amount. And as an individual percentage of the project as well.

Receipts and invoices for labor and for supplies – specific to work performed by contractors and subcontractors within each phase of construction – should be reviewed on an ongoing basis, in accordance with pre-project timelines and budgets. Supplies and materials used during each draw period of the build should be itemized. Itemization enables a comprehensive project supervision by stakeholders to take place as the project progresses. One example which is illustrative of how the proper categorization of receipts, invoices, and labor costs can function as a requirement in order for the success of the project to take place can be observed in looking at how a construction loan can be used to finance a new home-build.

With new home construction, when the home-build is financed with a construction loan, a detailed itemization for work performed – coupled to building supplies – is provided to the lender, by way of a draw request. Having each invoice properly organized prior to submitting a draw request to the lender is an important step to take. Doing so accurately can ensure that a timely release of funds by the lender, as per the submitted draw request, takes place.

Lenders providing financing for new home construction carefully review each draw request they receive. With a construction loan, specific itemization of expenditures, of tasks performed, and of labor allocated to the project progression within a set draw period should be communicated to the lender in a clear and concise manner. In this example – financing the new home build with a construction loan – the lender’s progress reviews could be used as an example for how project oversight can be adhered to – notwithstanding the lender’s own review process(es) – by each project stakeholder. I.e.: by the property owner, contractors, subcontractors, the architect, investors, and so on…

When a construction loan draw request is submitted to the lender, the lender’s internal loan review process begins. Documents are analyzed by the lender. Inspections are ordered by the lender…as lender inspections ensure that scheduled work is completed within the draw period…done so in line with project projections. This is all verified by the lender, prior to the release of funds, in response to the draw request.

It goes without saying that neither the property owner, nor the contractor, would be the lender. Yet home build project overview characteristics found within the lender’s construction loan review process(es), can be understood, then applied to the project’s supervision by the property owner, and/or by the contractor. So as to ensure the success of the project.

This brings us to the S.O.V. – the Schedule of Values…

As construction commences, then moves forward, the success of the project will rely upon each stakeholder being able to correlate work performed in a draw period, to money spent, to timelines established. Just as it is important for the lender to verify work completed – and verified – in the draw period, to funds released in accordance with a draw request.

When building a new home, tasks which need to be completed in order for the successful completion of the home-build to occur – tasks completed by contractors and subcontractors during draw periods – can be memorialized in the project’s Schedule of Values. Progressing in chronological order, the Schedule of Values assigns a payment value – and a percentage – to each itemization which is included in the Schedule. The Schedule of Values lists the cost of work which is to be completed, while also communicating to stakeholders what that cost represents, as a total project percentage. This takes place, with the S.O.V., in each draw period.

The property owner, contractors, subcontractors, investors, the lender, project stakeholders, the architect, as well as project managers are each individually able to stay updated on the progress of the home-build through the Schedule of Values. Inasmuch as the Schedule of Values relates to billable work performed – and to tasks completed – during each draw period in the project. As each phase of the home build is completed – i.e.: as one draw period progresses to the next draw period – the project’s Schedule of Values is updated. The updating of the S.O.V. in subsequent draw periods is directly relatable to forthcoming draw requests. For each new draw request, line items in the Schedule of Values – as per project progression in each draw period – are revised.

When discussing new home construction, it goes without saying that the in-sequence completion of project tasks – as is outlined in the Schedule of Values – by contractors and by subcontractors is tantamount in terms of importance prior to subsequent project tasks being undertaken (and financed). For example, one cannot start on the framing of the new home, without a foundation. The foundation for the home is a set project cost…as is the framing. Each would be itemized in the S.O.V. as a total dollar amount of the project. And as a percentage of the project too.

The laying of the foundation, as well as the framing, are each scheduled, within the scope of the project. Timelines for each would be established, prior to the breaking of ground. The Schedule of Values serves as a sort of “visual directional”. A “map”. “Directions”, so-to-speak… for tasks completed. And for money which is being spent to finance the completion of those individual tasks – in each draw period. When building a new home, the Schedule of Values is a good tool to use so as to ensure that each integrated-yet-separate piece of the project stays on track, with measured accountability.

Let’s look at what a Schedule of Values might look like…

With a new home build, say the plans and specs run at a cost of $3,000. So, within the Schedule of Values, that $3,000 cost for the plans and the specs would be a dollar amount allotted as a specific component in the overall project – “plans and specs”. Within the S.O.V. that same $3,000 for plans and specs would also be categorized as a percentage of the project.

If project costs are $125,000, in total, and the plans and specs run at a cost of $3,000, then within the S.O.V., the plans and specs would be categorized as 2.4% of the overall project. Itemized as a dollar amount – $3,000 – and as a project percentage – 2.4% – within the S.O.V.

We looked at how plans and specs could be included in the S.O.V. Let’s look at a second example, that second example being, rough framing…

If rough framing for the project runs at a total cost $30,000, then rough framing will be categorized within the S.O.V. as 20% of the overall project’s costs. Rough framing, within the S.O.V., will be categorized as a dollar amount – $30,000 – and as a project percentage – 20%.

Why use a Schedule of Values for a new home build…

The S.O.V. is a great management tool. The S.O.V. is very effective with regular payment applications, when payment schedules are chosen, in lieu of larger, less-frequent, lump sum payments. Furthermore, utilizing the S.O.V. provides stakeholders with flexibility, if and when changes need to be made to schedules, or to costs, within the project.

Whereas notifying each stakeholder of any changes, one-by-one, would be what could occur if the S.O.V. were not used, project changes can be encapsulated within the S.O.V., then shared with each project stakeholder, through the S.O.V. This is a cleaner way to ensure that clear and concise communication takes place among stakeholders, if and when any changes need to be made to the project’s plans, materials, or costs.

With so much public consternation today which is centered upon, A) “inflation”, and, B) high housing costs, is it plausible to consider that the magnitude of each of the two aforementioned challenges really lies moreso in how we look at each of the two problems? Rather than in the two problems themselves?

For example, when one is considering the purchase of a home today, the purchase of a home at a sale price which is at-or-above the home’s current market value, as interest rates rise (as they have been doing), then the ongoing affordability of that home being purchased can become a legitimate concern for the home buyer. A) Purchasing a home at or above the home’s current market value in a market where home prices have steadily increased, coupled to, B) higher interest rates – these are two challenges for home buyers today.

The combination of “A” plus “B” has contributed to the housing affordability conundrum – and to reduced buyer demand – that we see today. Yet, this very same housing affordability issue is arguably in many ways predicated on only considering a traditional move-in ready home purchased at-or-above the current market value of the home as the #1 option for the buyer’s home purchase. Contrast this home-purchase route, with an altogether different home buying route for the home buyer to potentially consider.

The affordability issue when purchasing a home could be much less of a challenge for the home buyer when the house being gauged for its affordability is a home that can be purchased and rehabbed, affordably. Since homes purchased that are in need of being rehabbed are often purchased by buyers at lower sale prices, as compared to the purchase of homes which are bought in move-in ready condition.

Released just this month – in November – a University of Michigan consumer sentiment survey pegs 4 out of 5 U.S. consumers as describing home buying conditions as “bad”. Gauging today’s home buyer sentiment, the University of Michigan survey results parlay the most negative perception of “housing” in the United States, going all the way back to the year of 1978. The year of 1978 being the year in which the University of Michigan survey was first conducted.

Arguably, based upon the lesser-known-yet-additional options home buyers do have available to them today, if (or when) home buyers choose to consider alternative home buying options by looking at potential homes to purchase (and rehab) through a different home buying “lens”, then the “bad” connotation for “housing” in the University of Michigan survey should be nowhere near 80%. It should be, rather, much lower.

In fact, if one were to look at the subject of “housing” through the expansive “lens” which includes a home rehab as a purchase option for the home buyer, then “housing” could very well be deemed to be a positive today. Not a negative. Which would then lie in stark contrast to the 4/5 consumers in the University of Michigan survey who view housing conditions today as “bad”.

In October, sales of existing homes – “existing homes” being the key point to think about in relation to housing inflation – fell by 28.4%. A steep decline. Yet, while home sales declined by 28.4% in October, what has been further creating added pressure on home buyers has been the steadily increasing prices of homes, coupled to the higher interest rates. In October, the average sale price of existing homes – i.e.: of home resales – actually increased. Increased by 6.6%. Home prices went up.

So, we have, A) home sales declined, B) home prices went up, coupled to, C) interest rates have been holding steady at their perceived-to-be-high levels (although interest rates are not “high”, by any means, relatively speaking, looking at any measured history of interest rates). The combination of which, creates a tough environment for home buyers today (and for home sellers). A tough time for home buyers, that is, who predominantly only look to buy move-in ready homes.

With most home buying metrics speaking to assessments of predominantly what constitutes owner-occupying home buyers – the sentiments of these owner-occupying home buyers (i.e.: the University of Michigan study), correlated to housing affordability for owner-occupying homebuyers – the University of Michigan consumer sentiment survey also shed light upon a different buyer group in the market. As well as on this separate buyer group’s confidence (or lack thereof) in “housing” today. The additional buyer group the University of Michigan survey evaluated was…institutional investors.

In the third quarter of 2021 – last year, when mortgage rates were notably lower than they are today – institutional investors purchased in excess of 94,000 total properties. Fast forward one year, to 2022.

In the third quarter of 2022, institutional investors purchased 66,000 total properties – nearly 30,000 fewer properties purchased than had been purchased by institutional investors in the third quarter of 2021. Institutional investors’ purchase totals of properties in the third quarter of 2022 came in 30% lower than purchase totals for the third quarter of the prior year. A steep decline.

The Fed, inflation, mortgage rates, home buyer sentiment, institutional investors, consumer surveys, and so on, and so on, and so on, and so on… Yet at the core of each of these aforementioned talking points, we can (arguably) find a property purchase platform based predominantly upon, move-in ready resales. Move-in ready home resales – the sales of (and the purchase of) existing homes that are purchased by buyers at, in most cases, higher prices…these are homes which in most cases do not need to be rehabbed, upon acquisition. These are homes which had been purchased at an earlier date by the now-sellers. Homes now being sold (i.e.: resold) to another home buyer today – homes being sold at higher sale prices. Correlation: A) Move-in ready home resales – higher home prices, B) Housing inflation – affordability (or a lack thereof).

If Americans continue to purchase (and purchase again, and again and again and again…) the very same move-in ready homes, from a limited stock of housing which is not adequately increasing every year in order to meet ever-increasing home buyer demand – more homes need to be added to the market each year, just to cover the higher number of buyers entering into the market every year – then we would have, housing inflation. And we have just that.

Then interest rates go up…and the housing affordability problem we face today becomes even more pronounced. But the problem is not really found in the higher interest rates. Not at all. The real problem is inflation – housing inflation, to be more specific. Housing inflation, linked to, too few homes which are available to too high a number of home buyers. Every year. Year after year. Which again traces back to, too few homes are being added to the market each year, in order to meet increasing buyer demand. And a good portion of the homes which could be added to the market every year – then existing on the market as suitable, affordable housing options for home buyers – could come through considering a home rehab as one good purchase option.

It can be argued that an industrywide overreliance on traditional move-in ready home resales, with a lessened focus on creating more housing stock – i.e.: an industry reliance built mostly upon selling move-in ready homes which are already built, which are already owned, and which are already lived in – is part of our housing inflation challenge today (as it is too, to reduced buyer demand).

An industry model, and an over-reliance, on selling predominantly move-in ready home resales, coupled to a potential lack of focus on, a lack or prioritizing for, and a lack of specialization by professionals in, creating more housing stock that can be added to the market (affordably) every year, then made available to a higher number of home buyers. Facilitating an ongoing national affordability-in-housing challenge. Creating inventory is the solution, whereas ignoring the creation of inventory further contributes to the housing inflation problem we face.

Let’s use but one, singular example for how an inadequate amount of housing inventory is being added to the market…while at the same time, across the country, homes are being sold, and resold, and resold yet again (at higher and higher sale prices). Thus creating – and compounding – a nation’s housing inflation. The very same housing inflation that the Fed is looking to curtail by raising interest rates.

The singular example spoken to in the last paragraph that we could look at is New York City.

New York City issued fewer new housing permits in the 2010’s than the City issued in the 1960’s. Think about that for a moment. There were 400,000 fewer residents in New York City in 1960 than there were in New York City in 2010. And there were 1,000,000 fewer New Yorkers in the city in 1960 than there were in 2020 – one million. Yet, there were more new housing permits issued in New York City in the 1960’s – when there was a much lower city population total – than there were in the 2010’s. It goes without saying that that is, essentially, utterly unsustainable, in relation to limiting housing inflation.

If we would like to identify housing inflation in one city, the issuance of new housing permits issued in New York City – in the 1960’s, then in the 2010’s – would be one route cause for city-specific housing inflation. Free market economists often tend to argue that “the market” solves all problems. In relation to the subject of housing, reliance upon the free market as a good solution to nation’s housing affordability challenges is not uniformly accurate, since looking at numerous factors today, once can argue that there is little evidence to support the premise that the “free market” has been working well in relation to housing affordability. And in relation to limiting housing inflation. Rather, “the market” has witnessed an over-expansive build-out in the real estate industry, based mostly upon selling move-in ready homes. While at the same time, “the market” has not, arguably, met market housing demand in relation to the creation of additional housing options for home buyers to consider.

But again, the challenge we have today – reduced buyer demand, lack of housing affordability, a decline in home sales – is found mostly when speaking to topics relegated only to move-in ready home resales, to higher interest rates, to the Fed, to mortgage rates, to inflation, and to “inventory” – the conventional real estate group think, that is. It’s essentially a self-limiting – albeit a self-fulfilling – national challenge. A challenge, that is, when one limits one’s home buying options predominantly to move-in ready home resales. But it’s not an altogether unsolvable challenge for home buyers.

When we look at these same housing challenges, when we look at these challenges through a different housing “lens”, then do we really need to accept the “reality” that 4/5 Americans cited in the University of Michigna study should view the housing market as “bad”? It’s just not true. Not true at all, that is, when and if we look at the topic of “housing” (and housing affordability) through the different “lens”.

One such “lens” could be found in looking at the subject of “housing”, then adding in the possibility (as an option for home buyers) of buying and transitioning now non-performing, distressed, vacant (affordable) homes back into the marketplace. Doing so, with the end product then being, a quality, affordable home. To live in.

So, then, are there properties in the United States to buy (and to rehab) affordably, in scale? Or does the home rehab space need to be a one-at-a-time limited exercise?

In the City of Los Angeles, there are an estimated 70,000 vacant housing units. That is, 70,000 vacant housing units spread throughout the city. With city leaders in Los Angeles continually looking to identify good ways to address their substantive, ongoing challenge of too-few affordable housing options available to families, voters in Los Angeles this month approved – approved by a measure of 70%, supporting the measure, with 30% opposing the measure – Measure LH.

Measure LH in Los Angeles provides the city with the authority to use public funds to build 5,000 units of affordable housing within each of the city’s 15 council districts – 75,000 newly constructed affordable housing units which will be added to the existing housing stock in the city of Los Angeles.

While transitioning vacant, distressed, and now non-performing properties back into the market as performing, habitable, affordable properties, challenge-duplicity may arise when additional now-performing properties go unmaintained, enter into foreclosure, fall into disrepair, become non-performing, furthering compounding a city’s vacant housing problem.

To address this issue, in New York, a state law passed in 2016 requires mortgage lenders to check for the potential vacancy of homes when mortgagors go into default on their home loans. One reason for this state law being in effect in New York today is, while a mortgage lender has the objective of continuing to receive mortgage payments from the borrower, the city in which the property is located has a goal to prevent properties from becoming abandoned, falling into disrepair, and entering into foreclosure.

In Kansas City, MO, a $50 million housing bond was recently approved by Kansas City voters – approved by a vote count of 71% supporting the measure, with 29% opposed to the measure. The $50 million in bond funds will be allocated towards the construction of, the renovation of, and the rehabilitation of what is intended to become 2,000 affordable housing units in Kansas City, Missouri.

In Colorado, Proposition 123 was recently approved by Colorado voters. Proposition 123 in Colorado is projected to be a good vehicle which could enable the partitioning of $290 million per year to be used for the construction of affordable housing in Colorado. Whereas in Kansas City, the voter-approved $50 million in funds is coming through the issuance of a city bond, where bond funds to be injected into Kansas City’s housing trust fund, in Colorado, the projected nearly $300 million per year in revenue will be funded through the partitioning of .1% of state income tax revenue.

In relation to creating policies, procedures, and methodology on the national level which could stem housing inflation, one feature of President Biden’s Housing Supply Action Plan calls for government-owned homes to be made available to owner-occupying home buyers, rather than to investors. Often times, homes buyers acquire from a municipality can be acquired at relatively low sale prices. These city-owned homes could be affordably rehabbed by home buyers. A good idea…and a counter-inflationary measure – in relation to housing – as well.

The overall vacancy rate of properties located within the United States is 11.6%. Out of 138,432,751 total housing units in the United States today – these are housing units both intended for owner occupancy, as well as rental units – 122,354,219 of the total housing units are now occupied. Which means, one out of every eight properties in the United States today is vacant. Throughout the United States, there are an estimated 16 million vacant housing units, in total.

Striking a balance – in most things – is typically considered to be a good attribute. Whereas going to extremes, often can lead to an imbalance, and to future challenges. So then, if striking a balance by considering the purchase of – and the rehab of – a vacant or a distressed home (and doing so affordably) is a novel, oft-overlooked idea when interest rates are low, when inflation is low, and when housing demand is high, then maybe considering the very same idea when inflation is high, when interest rates are perceived to be (relatively) “high”, and when home buyer sentiment is notably low – as 4 out of 5 consumers in the University of Michigan survey consider housing conditions to be “bad” – is one good option to think through, when buying a home today.

One factor which has greatly contributed to – a factor which, on an annual basis, continues to contribute to  – challenges Americans face today in regard to choosing from a limited housing inventory…a housing inventory which, by any metric used, would be considered inadequate, would be the 2007-2008 Financial Crisis.

America is simply not building enough new homes to satisfy demand. This leads to inadequate supply levels. This contributes to affordability challenges. This contributes to escalating home prices. This contributes to the naggingly-stubborn inflation that the Federal Reserve is combating with higher interest rates.

When the Financial Crisis took hold in 2007-2008, home builders stopped building homes. Home builders closed their doors. Home builders shut down. Home builders went out of business. As home builders exited the marketplace, the tradespeople that home builders relied upon to get their new homes built – and positioned, for sale, in the market – simply found other careers. Tradespeople found new ways to make a living. Tradespeople exited the housing industry. They left the construction business. This left a void in the market, which has contributed to an inability on the part of home builders to build enough homes each year, to satisfy demand.

Post-Crisis, as the real estate market began to stabilize, and as home purchase numbers began to climb once again – albeit very, very slowly – the new home construction industry was simply ill-equipped, not rightly-sized, and understaffed. Thus, the new home construction industry was unable to keep up with the increasing (albeit, a slowly increasing) demand for new homes. That inability of home builders to keep up with increasing demand levels for new homes continued. Each year. Year by year. Every year. Last year. This year. All leading to the housing inventory shortage we have today. And to inflation. And to an inadequately-functioning housing market. And to the imbalance we have in the housing market today between supply and demand. And to the challenges Americans face everyday, in regard to housing affordability (or lack thereof).

Let’s look at some data, to see how we arrived at this inadequately low number of new homes which are available to buyers in the marketplace.

We simply have an inadequately low number of new homes being built and added to the market each year. The number of new houses built and added to the market each year is continually contributing to the challenges we see in housing affordability (or lack thereof). This low supply level of new homes in the marketplace is continually contributing to inflation.

In the year 2000, the number of new housing permits for privately owned homes totaled just about 1.6 million for the full year. This, as the number of new housing starts for privately owned homes also approached 1.6 million for the full year in 2000. While in 2000, the United States population was a tad over 282 million.

Fast forward from the year 2000, to 4 years later… 

Taking place in back-to-back years – in 2004 and once again in 2005 – housing permits obtained for privately owned homes topped 2 million each year – in 2004, and again in 2005. The year 2004 had been the first year that permits obtained for privately owned homes exceeded 2 million in a year. That 2 million level of housing permits issued for privately owned homes had been reached in back-to-back years in 2004 and 2005. The trajectory of new home builds in the United States had been on an upward swing, in the mid-2000’s.

Housing starts for privately owned homes surpassed the 2-million threshold in 2005. Housing starts for privately-owned homes fell just short of 2 million during the prior year, in 2004. At that point in time, the market had been absorbing just about 2 million new homes a year.

Permits for privately owned homes – as well as actual housing starts for privately owned homes – in 2004 and in 2005 as well – had reached a level which was just about 400,000 higher each year – higher in both 2004 and 2005 – than the level of permits and housing starts reached in 2000. While at the same time, the population of the United States was approaching 297 million by 2005.

Between the years 2000 and 2005, there had been an increase in population in the United States which totaled just about 14 million. That would be, fourteen million people added to the population of the United States over those five years (2000 to 2005). While at the same time, the number of housing permits for privately owned homes – and the number of housing starts for privately owned homes – had been just about 400,000 higher each of these two years – 2004 and in 2005 – as compared to the number of housing permits and housing starts for privately owned homes in 2000.

Let’s look at the effect the Financial Crisis had on the number of new homes that were being built in the United States…

Between the years 2008 and 2013, in each of these six years, the number of new housing permits for privately owned homes – in 2008, 2009, 2010, 2011, 2012, and once again in 2013 – failed to reach 1 million in any given year. Too few new homes were being built…

In 2009, new home starts for privately owned homes fell to just about 550,000 for the full year. This level of 550,000 new housing starts for privately owned homes in 2009 encompassed nearly 1.5 million fewer new home starts for privately owned homes than the marketplace had absorbed four years earlier, in 2005. While there had been just about 1.5 million fewer new homes built in 2009 than had been built in 2005, the population of the United States increased by 12 million over that same four-year period, between 2005 and 2009. 

The United States has an increasing population, which is coupled to a highly inadequate number of new homes which are built each year, and added to the marketplace.

There is so much discussion today about the topic of inflation. No matter which news channel you prefer, we see that inflation is a problem that we all face. If we de-politicize the topic of inflation, and just focus on the topic of housing in relation to inflation, we see a significant imbalance that exists between supply and demand for new homes being added to the market. We also see how this imbalance in housing contributes to inflation. The imbalance we have – an imbalance which compounds annually – is compounded by the inadequate supply levels. This leads to escalating home prices, further complicating the task the Fed has in combating inflation.

The Fed is correct in ratcheting up interest rates to squelch overall demand in the economy. The Fed’s approach of higher interest rates is correct in combating inflation. The inflation challenge we have, and the demand level in the marketplace which contributes to inflation – each of which is being addressed by the Fed – are unfortunate ancillary consequences of an imbalanced housing market. A market imbalance which traces its origin to the limited supply of new housing which is being added to the market each year. A problem, which is coupled to higher demand levels for homes, each and every year.

The housing supply and demand challenges we face today lead to a situation where, each year, starting in 2006, we have continued to see too few homes being built and added to the market. To simplify our housing and inflation challenge, too few homes are being built each year. This leads to our housing problems. A housing problem which is present, which is current, and which is ongoing. Ongong, a full sixteen years after the number of new homes built each year drastically fell, on an annual basis, as a result of the Financial Crisis. 

One point to consider when assessing the condition of today’s housing market would be the aggregated, annual, compounding, ongoing, every-year challenge one would find in any supply-and-demand equation, when supply – every year – is inadequate, in relation to demand. The topic of housing just happens to be the largest, most relevant, most highly-visible example of supply-and-demand that we have – that we can see – each and every day. So let’s look further at our inadequate housing supply levels…

New housing starts fell from a level whereby 2 million privately owned homes were built in 2005, to the much lower level of 1.3 million privately owned homes built two years later, in 2007. Seven hundred thousand fewer new homes were built in 2007 than had been built two years earlier, in 2005. While at the same time, the population of the United States increased by 6 million people during that same two year period – 2005 to 2007. This is an inadequate supply of new housing created, which was not satisfying demand.

One year later – in 2008 – new housing starts for privately owned homes fell further…dropping by another 400,000 for the year, to just over 900,000 new housing starts. In 2008, there were 1.1 million fewer new privately owned homes built than had been built three years earlier, in 2005. While at the same time, the population of the United States increased by 3 million people. A supply of new housing created, which is inadequate, in relation to home buyer demand.

As has been previously cited, new housing starts for privately owned homes fell to the very low level of 550,000 in 2009. New housing starts remained at a sub-600 million level, each year, through 2010. 

In 2011, new housing starts for privately owned homes finally crept back up to over 600,000 for the year. Six hundred thousand new homes built in 2011…the 600,000 new homes built, still being an inadequate number of new privately owned homes added to the marketplace for the year, in relation to buyer demand levels. 

Three years later –  in 2014 – the market would finally once again absorb one million new home builds for the year. One million privately owned homes were built in 2014…a new home build total which still had been one million fewer than 2005 levels.  

In 2021, the market absorbed 1.7 million new permits for privately owned homes, while the market also took on 1.6 million new privately owned homes which had been built. The 1.7 million new permits, and the 1.6 million new housing starts…each total representing annual figures which were three-hundred thousand fewer (permits) and four-hundred thousand fewer (housing starts) than the market absorbed 16 years earlier.

According to U.S. census data, the total number of new homes built between 2012 and 2019 would be a new home build total representative of 3.9 million homes less than the total number of new households created in the United States during that same seven year time frame. The country is just about 4 million new homes short over the past seven years…and that is 3.9 million homes short, only taking into account housing demand coming through the creation of new households. This 3.9 million new home construction shortfall does not even take into account home buyers who have older homes, who would like to trade up, to a new construction home.

During the latter part of the 19th Century, a substantive portion of westward-moving American settlers had been able to acquire their land as a result of benefits they found within the Homestead Act. The Homestead Act was signed into law by President Abraham Lincoln on May 20, 1862. Of note is the year the Homestead Act was signed into law – 1862.

As a precursor to the onslaught of the Civil War, southern states seceded from the Union in 1861. With the southern states’ secession from the union having already taken place in 1861, the Homestead Act was likely not able to viably have become a law in the United States prior to the secession of those southern states from the union. Furthermore, the Homestead Act likely may not have indeed become law in the United States at all, had it not been for the breakup of the union, through the southern states’ secession.

Among southern states’ political objectives in the early-to-mid-1860’s – political objectives which could be advanced through members of Congress who represented their very own southern states – had been advancing the institution of slavery in America. In relation to the planned westward expansion of the United States, and by association, in relation to homesteading, interests held by members of Congress who represented the South had been intently focused upon enabling their constituents to purchase additional land in what would soon become the western United States. At which time, if upon acquisition of land in the west by present-day slave owners, slavery as an institution would then have become a foundational pillar to the rural economy for western land acquired. Put into “institutional motion”, through Congress, at the direction of, slave owners. Since that land, ideally, in the eyes of Southern delegates, would then be owned by United States citizens who would want to sustain (and thus, also advance) an American economy based upon the institution of slavery. Within their new American states.

As to what the west ultimately could, or would then in time become, there was quite a bit of disagreement in 1860’s America. Disagreement, that is, which was actively being debated in Congress by very conflicted interests – slave owners, and free-staters.

Needless to say, there was quite a bit at stake, relating to an American path westward in the 1860’s. Both in terms of potential land in the west that could be and would be settled, and in terms of political sway as well. This was so, because as the United States pushed westward, and as the 20th Century dawned, in excess of 10% of the total land area of the United States as a whole would come to be conveyed to what would in time become, over 1.5 million American homesteaders. This million-plus member American citizenry, who would then make up a formidable voting block. A newly-formed voting block, which would soon, and which indeed did, join the union. Able, to cast their votes. Able, to dictate individual state policy, in the new American west.

Prior to the establishment of the Homestead Act, which, signed into law by President Lincoln in 1862, and having gone into effect the following year – in 1863 – the Preemption Act of 1841 allowed American settlers to claim up to 160 acres of federal land…at a cost of $1.25 per acre. So the concept of inexpensive land acquisition, and westward expansion for that matter, was already formal American policy…some twenty years before the Homestead Act became law.

The Preemption Act…

Acquisition of land in the American west – thanks to the Preemption Act – took place. According to provisions of the Act, the land acquirer was mandated to be either 21 years old, or serve as the head of a household.

As the topic of immigration often is brought into public debate today, through the Preemption Act, interestingly, an immigrant who intended to become a citizen of the United States, yet who would not have been a citizen of the United States at the time they acquired their land through the Preemption Act, was also eligible to acquire land at the cost of $1.25 per acre.

Upon acquiring land through provisions set forth by the Preemption Act, individuals who acquired land – be they United States citizens, or be they immigrants who were not yet citizens of the United States – were then required to make improvements to their homestead property. While also living on the property, for at least five years.

Progressing forward, intent written into the Homestead Act traces its thesis to a planned reduction in the cost of land in the west – at that time, available for $1.25 an acre – accompanied by the ancillary reduction in the cost of homesteading, overall. Homesteading that is, which had already been established and put into effect in America, through the Preemption Act.

Opposition to both the Preemption Act and to the Homestead Act festered in wealthy landowners, a large concentration of whom, resided in the southern states. Those being the same southern states that seceded from the westward-expanding union…in 1861.

Opponents of the Preemption Act – and of the Homestead Act, for that matter – feared that land acquired (inexpensively) in the west would come to be held by immigrants. And by farmers who possessed little economic viability. Each group, thus not being natural advocates for the advancement of the institution of slavery in the west. Immigrants, and farmers of little economic means, it had been surmised by wealthy southern land owners, would not hold the same political (nor economic) ideals as those ideals espoused by wealthy southern plantation owners. This really came down to, the institution of slavery in the west. Slavery, that is, being the bedrock on which the economy (and the political power) of the southern states comfortably and profitably lay.

Whereas the Preemption Act liberalized land ownership in America, so to speak, by making land available to non-United States citizens (and small farmers), through homesteading, the Homestead Act further opened up the gateway to land ownership in America by allowing individuals who were under the age of 21 – yet who had served at least 14 months in the United States army or navy – to acquire land, through the Act.

As the southern states did elect to secede from the union – in 1861 – the Homestead Act restricted conveyance of land in the American west, by way of the Act, for any individual who fought against the United States. Accordingly, within its very wording, citizens of the southern states – since those southern citizens resided in states which had seceded from the union (and fought against the United States) – were thus excluded from acquiring land as homesteaders, by way of the Act.

Interestingly, as owner occupancy is often one stated objective held by Land Banks in American cities today, in their conveyance of inexpensive city-owned properties to owner-occupying home buyers, land conveyed to land acquirers through the Homestead Act – i.e.: to homesteaders – was conveyed in accordance with an intent for that land to be settled, resided upon, and cultivated – i.e.: improved – by the individual acquiring the land. Owner occupancy of land, and the development of that acquired land for the benefit of the owner-occupant through homesteading, lay at the core of land conveyance policy, resulting from, the Homestead Act. As well as the Preemption Act. Similar in some ways, to property conveyances which take place today, through Land Banks.

Homesteading continued on as American policy up through the 1970’s. In 1976, as a result of the passage of the Federal Land Policy and Management Act, homesteading as a federal exercise ceased to exist. The Federal Land Policy and Management Act governs the way in which public land administered by the Bureau of Land Management is managed. The Federal Land Policy and Management Act was signed into law by President Gerald Ford. In 1976.

So, is homesteading long since gone in the United States today? Not exactly…

In 1873, a budding settlement which would later go on to become Marquette, Kansas, took hold.

Marquette is a small town in McPherson County, Kansas…it’s home to the Kansas Motorcycle Museum. By 1890, the population of Marquette stood at 367 people. Today, that population in Marquette is still far fewer than 1,000 residents.

Marquette is one of a handful of quaint Kansas towns that has provided modern day homesteading opportunities to those who elect to call small town Kansas – Marquette in this case – “home”.

Homesteading – i.e.: free land, with conditions – has been a unique benefit made available to those who elect to relocate to Marquette. And build a house, that is, upon relocating.

In Marquette, lot sizes which have been made available to modern day homesteaders have ranged from between 11,000 square feet per lot to 25,000 square feet per lot.

Lincoln is a small Kansas town found within Lincoln County. Home to Crispins Drug Store Museum, Lincoln was founded in 1870. Ten years later, in 1880, the population of Lincoln stood at just over 400 residents. By 2020, the population of Lincoln was still fewer than 1,500 residents.

In Lincoln, Kansas, free land (with conditions), by way of homesteading, has also been made available to those who elect to relocate to this town in the Sunflower State…relocate that is, and then build a home.

Residential lots in Lincoln which have been made available to “homesteaders” range from between 14,000 square feet per lot to 35,000 square feet per lot. One condition in Lincoln for land conveyances enacted in this manner has been for the acquirer of the land – i.e.: for the homesteader – to build a 1,300 square foot home on their lot, once they acquire the land.

Tracing back once again to the Homestead Act, one specific provision of the Act itself was the inclusion of a condition whereby the homesteader, once they were able to illustrate that their homestead property had been sustained for a period of at least five years, would be required to pay a $18 filing fee. Upon paying their filing fee, the homesteader would then receive their deed to the land.

One-hundred sixty acres had been available to an American homesteader through the Homestead Act. The 160 acres, that is, which would be accompanied by a commitment made by the homesteader to build a home on their homestead property. Similar to Lincoln, Kansas today. Similar to Marquette, Kansas today.

Looking back, revisiting history, if the secession of the southern states had not taken place as it did, then the future westward expansion of the United States at that time…if it went on to occur at all…might have looked quite different. And that westward expansion in America (if it even occurred) would have had quite a different set of progressions…with varying settlement timelines as well. Homesteading, existing as a necessary byproduct of American westward expansion, might not have occurred. And if homesteading in America had not occurred when it did, maybe then, westward expansion for America would not have taken place.

Had Abraham Lincoln not been president… Had members of Congress who were domiciled in the southern states not been extricated from their membership in Congress… Had the Civil War not taken place… Had the Confederate States won the Civil War… Had one or more of these aforementioned historical circumstances ended up with a different outcome, then too, homesteading in the American west might not have taken place. Then too, without such a catalyst to westward expansion – i.e.: homesteading – the United States as we know it today, accordingly, might have looked, quite a bit different.

By the end of the Civil War – in 1865 – some 15,000 American homesteaders had claims in territories that we now know to be the states of Kansas, Colorado, Nebraska, Montana, and Wyoming.

By 1890, nearly 80 million acres of what is now the United States had been conveyed to westward-looking American homesteaders. Millions of acres conveyed – conveyed, that is, inexpensively. Millions of conveyed and developed western American acres that went on to become the structure for, and the formation of – very much the “DNA” for – countless American towns, American cities, and American states. Those very towns, cities, and states now being well known destination points and centers of American life, in 2022. The origins, for which, owe at least a decent portion of their very existence to…late 19th Century homesteading.

The 2-1 buydown is a real estate financing technique…an attractive home loan provision whereby funds are set aside in an escrow account at the closing, for the benefit of the buyer. These escrowed buy down funds permit the home buyer to “buy down” the interest rate on their home loan…as the buyer’s interest rate is “bought down” for the two-year period.