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A home warranty is a renewable home service plan that protects your home systems and appliances — like HVAC systems and hot water heaters — when breakdowns occur. While homeowners insurance policies often only cover catastrophes, warranties are designed to help pay for the things that wear out or break from day-to-day use. 

How does a home warranty work?

A home service plan is purely elective, but it’s a smart purchase, according to Raj Midha, senior vice president and general manager at American Home Shield, a home warranty company. A typical policy will run a homeowner between $50 to $75 a month. Even with that low price tag, Midha says they can pay off big in the end. “Let’s say your HVAC system stops working. In that case, a qualified, independent service contractor will be assigned to assess the problem,” he says. “If it’s determined that the system is no longer working because of age or wear and tear, and the breakdown is covered under the terms of your service contract, the repair professional will make the repair, or if necessary, replace the appliance or system component for just the cost of your service call.” 

With Midha’s company, that savings could vary based on the coverage you’ve selected for your policy. “A one-time service call costs either $75, $100, or $125 based on the amount you choose in advance when you become a member, and American Home Shield pays the remaining amount for the repair or replacement based on the plan that you have selected.”

Here’s what it won’t cover.

Each plan is different, which is why Midha says it’s important to understand the specific coverage limitations of your policy. “In general, a home warranty does not cover events like fire, smoke, theft, fallen trees, or damage caused by weather, which are covered by home insurance,” he explains. 

Who benefits most from a home warranty?

People with new construction properties or recently updated homes may think that there’s no reason for them to purchase a home warranty for their home since their appliances are new, but Midha says they’re a great investment for any homeowner. “They are suitable for any type of customer, due to the wide range of options for customization and add-on coverage, but may be an especially wise decision for homeowners on a set budget, owners of older homes, or recent home buyers who opted to waive their inspection contingencies,” he explains. “The protection of a home service plan can save you hundreds or even thousands of out-of-pocket dollars, as well as the headache of finding a trusted service contractor to make the repairs.”

Who doesn’t benefit from a home warranty?

Of course, not everyone will get the most bang for their buck with a home warranty. Because most warranties are contingent upon the homeowner having properly maintained the items, some of your most expensive appliances may not be covered due to a previous owner’s neglect. Additionally, when you opt to use a home warranty to cover your appliances, you may not get a say when it comes to picking the brand used to replace items that are damaged beyond repair. And lets not forget, similar to an insurance policy, you’ll pay your annual premium for your warranty regardless of whether you need any repairs or replacements. Some people may feel like that money could be better spent being tucked into an emergency savings account to be applied to a wider range of emergencies. 

How does a home warranty differ from a home insurance policy?

An easy way to differentiate a warranty from insurance is that homeowners insurance protects against things that might happen, explains Midha (like fires, theft or natural disasters). Warranty plans, on the other hand, protect against things that will happen due to normal wear and tear (like broken down ovens and air conditioning units that have cooled their last hot afternoon).

Here’s how to get your own.

While they’re often advertised as a perk when you’re looking to purchase a new home, you can purchase a policy at any time. “Once you purchase a plan, you can start using your home warranty after the 30-day waiting period, which is an industry standard,” Midha says, adding that if you’re looking to purchase a plan yourself, you should look for a well-established provider committed to transparency in coverage terms, service procedures, and pricing.

Source: Apartment Therapy, Lauren Bank

The coronavirus pandemic brought unprecedented hardship to renters, at one point leaving as many as 40 million people at risk of losing their homes.

That the situation got so bad, so quickly for tenants revealed long-lasting issues of housing instability in the U.S., caused by rapidly rising rents and stagnant wages, advocates say.

It also led to action.

Over the last two years, states and cities have passed dozens of laws granting tenants additional rights.

“The Covid pandemic has seen a new era of renter protections across the U.S.,” said Kshama Sawant, a member of the Seattle City Council.

“Facing this mountain of debt and a likely tsunami of evictions, tens of thousands of renters have responded by fighting back – organizing their buildings and uniting with tenants across cities and across the country,” she said.

Pandemic interventions

Eviction rates were expected to balloon to historic levels during the public health crisis. Instead, they dropped off.

That reversal is due to the $45 billion pot of rental assistance allocated by Congress – for perspective, just $1.5 billion was earmarked for renters during the Great Recession – as well as the federal and local moratoriums on evictions, experts say.

The Centers for Disease Control and Prevention announced in September 2020 a nationwide ban on most evictions, and despite many legal challenges, that policy mostly remained in effect until this past August.

In the absence of a federal eviction ban, many states and cities have kept their own limits on the proceedings in place, currently leaving half of renters in the U.S. with some protections against displacement.

New Jersey and New York’s eviction moratoriums will last until January 2022. Los Angeles, Seattle and Austin also still have citywide bans in effect.

Meanwhile, since federal rental assistance has been slow to reach people, Oregon, Massachusetts, Michigan, Minnesota, Nevada and Washington, D.C., allow renters to temporarily pause an eviction against them if they can show that they’re in the process of applying for the aid.

Before the pandemic, the federal government had never issued a countrywide ban on evictions. Locally, after certain natural disasters and the Sept. 11 terror attack, governors and courts announced just one week or two week-moratoriums.

A new era for renters

Other nascent policies will likely outlive the pandemic, and aim to address deep-rooted problems for renters.

Before Covid, 1 in 2 renters in the U.S. were considered rent-burdened, meaning a third or more of their income went to their housing, according to the Government Accountability Office. Many tenants spent over half of their earnings on their rent, research shows.

Vicente Sarmiento, the mayor of Santa Ana, California, said his city has lost more than 20,000 residents over the last decade, largely due to rising housing costs. The current population is around 330,000.

“People are still working here, but they can’t afford to live here,” Sarmiento said.

The city in October passed a bill limiting rent increases in most buildings to no more than 3% during any 12-month period, or 80% of the consumer price index change for the year, whichever is less. (If there’s no inflation in a year, rents can’t go up at all.)

Tenant advocates had been rallying support for the policy, which went into effect Nov. 19, for years, Sarmiento said. The hardship caused by the pandemic, he said, was the final push.

“I saw this desperation from residents who realized they couldn’t sustain these increases,” he said.

Meanwhile, residents in Saint Paul, Minnesota, voted this month in favor of a rent control policy that will also limit increases to 3% a year.WATCH NOWVIDEO13:26How evictions work in the U.S.

In September, legislators in Seattle passed a bill requiring landlords to pay the moving costs for tenants who can’t afford to stay in their homes after their rent is increased by 10%, or more. The policy, which was modelled after a similar one in Portland, Oregon, will go into effect in July.

“The new law will become a bulwark against the epidemic of what’s known as ‘economic eviction’ – a landlord pushing a tenant out by increasing rent by outrageous amounts ,” said Sawant, whose office introduced the bill. Rents have soared by nearly 70% in Seattle since 2010.

“This just shows that the private market has utterly failed to meet the needs of ordinary people,” she said.

Her office has also introduced legislation to cap rent increases in Seattle. “We won’t stop until we win full rent control,” Sawant said.The Covid pandemic has seen a new era of renter protections across the U.S.Kshama SawantMEMBER OF THE SEATTLE CITY COUNCIL

Landlord groups and some economists criticize rent control.

“These policies interfere with a housing provider’s ability to respond to economic and operational needs and hurt local communities by driving out existing housing providers and dis-incentivizing development of new housing,” said Greg Brown, senior vice president of government affairs at the National Apartment Association.

But it’s rising rents, Sarmiento said, that is most endangering Santa Ana.

“It really destabilizes our economic health,” he said. “If you’re having to spend 70% of your wages on rent, you’re not buying goods and services in the community. People aren’t shopping.”

The pandemic has also accelerated the movement to get renters free legal representation.

Housing advocates have long complained that most landlords show up to eviction hearings with a lawyer, while tenants usually can’t afford one.

Over the course of the pandemic, seven cities (Boulder, Baltimore, Denver, Seattle, Louisville, Minneapolis and Toledo), and three states (Washington, Connecticut and Maryland) passed legislation guaranteeing renters at risk of eviction the right to legal representation.

“It was an unbelievable confluence,” said John Pollock, coordinator of the National Coalition for a Civil Right to Counsel.

Source: CNBC, Annie Nova

Older buyers seeking smaller or easier-to-maintain homes are crashing into younger buyers in a housing market where the competition is fierce.

Soaring home prices and new construction favoring bigger builds have interrupted traditional patterns of homeownership for buyers across the country. Smaller houses, desired by aging seniors and young couples alike, are among the toughest to find. The supply of homes up to 1,400 square feet is near a five-decade low, according to data from Freddie Mac.

In 2020, about 28% of real-estate transactions could be characterized as downsizing, said Lawrence Yun, chief economist at the National Association of Realtors. The majority of these transactions are made by buyers 55 or older.

“We have a housing shortage,” Mr. Yun said. “Clearly from the age patterns, young people want to upsize, and the older generation is looking to downsize, but not greatly—only 100 or 200 square feet smaller than where they’d been living.”

The typical housing cycle for many families—kids go off to school, household sizes shrink, empty-nesters hand off their family homes to new households raising their own children—has been disrupted in recent years, said Len Kiefer, deputy chief economist at the mortgage giant Freddie Mac. The large baby boomer population outnumbers the rising Gen X-ers, who would be the ones to traditionally take over the family homes.

Many boomers want to “age in place,” meaning living in their original home independently into their later years. A 2018 survey of 2,287 adults from the AARP shows seniors would prefer to stay in the communities where they already live.

“They like their grocery store, they like their doctor, they like their local options,” said Karan Kaul, senior research associate at the Urban Institute.

Once they decide to move to a smaller home, they end up competing with first-time buyers and limited supply, Mr. Kiefer said. Price growth has been strongest for smaller, less-expensive homes. “That works against you in terms of what you can get for your buck,” Mr. Kiefer said.

If they haven’t paid off their mortgage, older buyers might find they could sell their current home at a high price but then pay more in mortgage payments on a smaller place. The share of older homeowners with debt has steadily increased over the past decade, rising to 55.4% in 2019 from 33.2% in 2007. This rise is driven in large part by mortgage debt, according to data from the Urban Institute.

After retiring from working at the New York Department of Education for 33 years, Enid Maldonado-Salgado started to make a plan to move from her current home in Flushing, in New York City’s Queens borough, to further east on Long Island, where she and her husband can be closer to family.

The 60-year-old worked with a Realtor for a year before retirement. Ms. Maldonado-Salgado said her goal was to find a home valued at 80% of her current home’s worth. She found the house-hunting process difficult, even with the money she had saved from refinancing her existing home and the substantial profit she expects from selling it.

For Ms. Maldonado-Salgado, downsizing meant finding an affordable home that wouldn’t require too much maintenance or upkeep. She wanted the freedom to travel and to be closer to her grandchildren.

Ms. Maldonado-Salgado is now in the process of closing on a new house in Smithtown. The new house is nearly equal in square footage to her house in Queens.

“It wasn’t about finding something smaller, it was about finding something that benefited my budget,” she said. “We wanted to make things simpler for ourselves.”

Source: Realtor News, Julia Carpenter

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