10 Housing Markets to Watch in the New Year

Dwindling inventory, high demand and even higher prices. Will the housing market shift next year?

According to a 2018 Housing Forecast by Trulia, the answer is contingent on many wait-and-sees. Definitive, however, is at least one indicator: the homeownership rate. In a continuation of its movement this year, the homeownership rate is expected to gradually track upward in the new year.

“Homeownership will continue its comeback story in 2018, as Gen Xers who were hard hit during the Great Recession become homeowners again, and as more millennials buy homes for the first time,” says Ralph McLaughlin, chief economist who developed the forecast, at Trulia.

A caveat: Across the board, buyers will contend with high costs, limited options and too-low wages—and millennials even more so.

“Homebuyers won’t be without challenges, as they’ll still face low inventory, slow wage growth and expensive starter homes,” McLaughlin says. “For millennials, they have the added hurdle of saving enough money to make a down payment and make competitive offers amid rising home prices.”

Buyers could fare better in some markets than in others. Considering economic indicators like employment growth, as well as entry-level supply, Trulia searches and vacancy rate, the forecast’s 10 housing markets to watch in 2018 are:

  1. Grand Rapids, Mich.
  2. Nashville, Tenn.
  3. Raleigh, N.C.
  4. El Paso, Texas
  5. San Antonio, Texas
  6. Fort Worth, Texas
  7. Austin, Texas
  8. Columbus, Ohio
  9. Madison, Wis.
  10. Cincinnati, Ohio

The forecast’s No. 1, Grand Rapids, is 11th in employment, 16th for its vacancy rate (the proportion of for-rent or for-sale supply that is vacant), and 17th in share of under-35 households—an indicator of a growing home-buying population.

Tax reform: If the mortgage interest deduction (MID) is now capped at $750,000, home equity deductions are gone and the property, sales and income tax deduction is combined and capped at $10,000, making the burden will be higher for homebuyers along the California coast and in the Northeast.  A broader consequence could include an easing of existing-home sales, home prices and housing starts, the forecast predicts.

Source: rismedia.com


Posted on January 2, 2018 at 10:06 am
Christopher DiLorenzo | Posted in Home Buyers, Home Sellers, Investors |

Marijuana’s Impact on Real Estate

While the cultivation, distribution and possession of marijuana remain illegal under the federal Controlled Substances Act (CSA), nearly all states* allow for the limited medical use of marijuana and eight states (plus the District of Columbia) allow for some recreational use. More than 17 states allow individuals to grow their own marijuana plants for personal use.

To date, the federal government has primarily targeted marijuana trafficking and distribution of marijuana to minors; however, the Trump Administration has specifically stated that there is a “big difference”* between medical and recreational marijuana, and Attorney General Jeff Sessions is strongly opposed to the legalization of marijuana.

Marijuana legalization has an impact on real estate in a variety of ways. It can affect closings, leasing, property condition, association policies and more. If you are in one of the 46 states that allows some form of legal marijuana, you should develop policies and procedures for marijuana use and cultivation in properties that you own, sell, lease or manage.

Marijuana plants require significant light and water to thrive. This affects utility usage, and, if not controlled, can cause mold due to the high humidity that encourages growth. Many growers use closets or other small spaces as grow rooms. You may want to address this type of usage in your building policies and be aware of it during inspections.

Residents can request an accommodation for medical marijuana even if your building is non-smoking. You should consider what types of accommodation you will provide. Marijuana does not have to be smoked; there are edible options, and creams that can be absorbed through the skin.

If your state permits the use of recreational marijuana, there are also decisions to make. Do you allow residents to smoke it? If your property is non-smoking, do your rules apply to marijuana in addition to cigarettes? Does your condominium or homeowners association address this in rules relating to smoking and/or growing marijuana? If you do allow smoking (either for recreation or as a medical accommodation), how do you address secondhand smoke to other residents? What about future use of a unit if the odor permeates drywall or carpeting?

Financial institutions are regulated by the federal government and are subject to criminal and administrative sanctions if they offer services to marijuana businesses. As a result, most marijuana business is conducted in cash. Business tenants are also likely to pay rent in cash. This can lead to increased security risks for properties and subject landlords to money laundering statutes. If you do lease to a marijuana business, you should clearly identify landlord and tenant responsibilities for security measures.

Recently, there have been changes in policy by some title companies, refusing to close or insure any property associated with the cultivation, distribution, manufacture or sale of marijuana. Obviously, this will complicate the settlement process for some properties. You should strive to be aware if title companies in your area have similar policies.

The biggest risk for real estate is federal civil asset forfeiture laws. If the government utilizes civil asset forfeiture, entire buildings and properties can be seized for being complicit in or failing to prevent illegal activity. This has not yet been used with respect to state-legalized marijuana; however, shifts in Trump Administration policies could change this policy by the federal government.

www.ncsl.org/research/health/state-medical-marijuana-laws.aspx

** www.whitehouse.gov/briefings-statements/press-briefing-press-secretary-sean-spicer-022317/

A summary of considerations by National Association of REALTORS® (NAR) affiliate the Institute of Real Estate Management is available here: http://irem.org/File%20Library/Public%20Policy/MarijuanaLegalizationLaws.pdf.

A brief video outlining marijuana issues is also available on NAR’s website here: www.nar.realtor/impact-of-legalized-marijuana.

Source: Megan Booth, Rismedia.com


Posted on December 27, 2017 at 9:45 am
Christopher DiLorenzo | Posted in Home Buyers, Home Sellers, Investors |

How will new tax changes impact current and prospective home-owners?

The National Association of REALTORS® (NAR) worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment, as well to ensure as many real estate professionals as possible would benefit from proposed tax cuts. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members, not only in the last three months, but over several years.

While NAR remains concerned that the overall structure of the final bill diminishes the tax benefits of home-ownership and will cause adverse impacts in some markets, the advocacy of NAR members, as well as consumers, helped NAR to gain some important improvements throughout the legislative process. The final legislation will benefit many homeowners, home-buyers, real estate investors, and NAR members as a result.

The final bill includes some big successes. NAR efforts helped save the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. Many agents and brokers who earn income as independent contractors or from pass-through businesses will see a significant deduction on that business income.

As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3% in 2018 as low inventories continue to spur price gains. However, some local markets, particularly in high cost, higher tax areas, will likely see price declines as a result of the legislation’s new restrictions on mortgage interest and state and local taxes.

The following is a summary of provisions of interest to NAR and its members. NAR will be providing ongoing updates and guidance to members in the coming weeks, as well as working with Congress and the Administration to address additional concerns through future legislation and rulemaking. Lawmakers have already signaled a desire to fine tune elements of The Tax Cuts and Jobs Act as well as address additional tax provisions not included in this legislation in 2018, and REALTORS® will need to continue to be engaged in the process.

The examples provided are for illustrative purposes and based on a preliminary reading of the final legislation as of December 20, 2017. Individuals should consult a tax professional about their own personal situation.

All individual provisions are generally effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted.

Major Provisions Affecting Current and Prospective Homeowners

  • Tax Rate Reductions

    • The new law provides generally lower tax rates for all individual tax filers. While this does not mean that every American will pay lower taxes under these changes, many will. The total size of the tax cut from the rate reductions equals more than $1.2 trillion over ten years.
    • The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
    • The final bill retains the current-law maximum rates on net capital gains (generally, 15% maximum rate but 20% for those in the highest tax bracket; 25% rate on “recapture” of depreciation from real property).

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Single Filer

Current Law Tax Cuts and Jobs Act
10% $0-$9,525 10% $0 – $9,525
15% $9,525 – $38,700 12% $9,525 – $38,700
25% $38,700 – $93,700 22% $38,700 – $82,500
28% $93,700 – $195,450 24% $82,500 – $157,500
33% $195,450 – $424,950 32% $157,500 – $200,000
35% $424,950 – $426,700 35% $200,000 – $500,000
39.6% $426,700+ 37% $500,000

 

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Married Filing Jointly

Current Law Tax Cuts and Jobs Act
10% $0 – $19,050 10% $0 – $19,050
15% $19,050 – $77,400 12% $19,050 – $77,400
25% $77,400 – $156,150 22% $77,400 – $165,000
28% $156,150 – $237,950 24% $165,000 – $315,000
33% $237,950 – $424,950 32% $315,000 – $400,000
35% $424,950 – $480,050 35% $400,000 – $600,000
39.6% $480,050+ 37% $600,000+

 Exclusion of Gain on Sale of a Principal Residence

    • The final bill retains current law. A significant victory in the final bill that NAR achieved.
    • The Senate-passed bill would have changed the amount of time a homeowner must live in their home to qualify for the capital gains exclusion from 2 out of the past 5 years to 5 out of the past 8 years. The House bill would have made this same change as well as phased out the exclusion for taxpayers with incomes above $250,000 single/$500,000 married. 
  • Mortgage Interest Deduction

    • The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.
    • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
    • The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
    • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
    • The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes.
  • Deduction for State and Local Taxes

    • The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation.
    • The final bill also specifically precludes the deduction of 2018 state and local income taxes prepaid in 2017.
    • When House and Senate bills were first introduced, the deduction for state and local taxes would have been completely eliminated. The House and Senate passed bills would have allowed property taxes to be deducted up to $10,000. The final bill, while less beneficial than current law, represents a significant improvement over the original proposals.
  • Standard Deduction

    • The final bill provides a standard deduction of $12,000 for single individuals and $24,000 for joint returns. The new standard deduction is indexed for inflation.
    • By doubling the standard deduction, Congress has greatly reduced the value of the mortgage interest and property tax deductions as tax incentives for homeownership. Congressional estimates indicate that only 5-8% of filers will now be eligible to claim these deductions by itemizing, meaning there will be no tax differential between renting and owning for more than 90% of taxpayers.
  • Repeal of Personal Exemptions

    • Under the prior law, tax filers could deduct $4,150 in 2018 for the filer and his or her spouse, if any, and for each dependent. These exemptions have been repealed in the new law.
    • This change alone greatly mitigates (and in some cases entirely eliminates) the positive aspects of the higher standard deduction.
  • Mortgage Credit Certificates (MCCs)

    • The final bill retains current law.
    • The House-passed legislation would have repealed MCCs.
  • Deduction for Medical Expenses

    • The final bill retains the deduction for medical expenses (including decreasing the 10% floor to 7.5% floor for 2018).
    • The House bill would have eliminated the deduction for medical expenses.
  • Child Credit

    • The final bill increases the child tax credit to $2,000 from $1,000 and keeps the age limit at 16 and younger. The income phase-out to claim the child credit was increased significantly from ($55,000 single/$110,000 married) under current law to $500,000 for all filers in the final bill.
  • Student Loan Interest Deduction

    • The final bill retains current law, allowing deductibility of student loan debt up to $2,500, subject to income phase-outs.
    • The House bill would have eliminated the deduction for interest on student loans.
  • Deduction for Casualty Losses

    • The final bill provides a deduction only if a loss is attributable to a presidentially-declared disaster.
    • The House bill would have eliminated the deduction for casualty losses with limited exceptions.
  • Moving Expenses

    • The final bill repeals moving expense deduction and exclusion, except for members of the Armed Forces.
    • The House-introduced bill would have eliminated the moving expense deduction for all filers, including military.

Major Provisions Affecting Commercial Real Estate

  • Like-Kind Exchanges

    • The final bill retains the current Section 1031 Like Kind Exchange rules for real property. It repeals the use of Section 1031 for personal property, such as art work, auto fleets, heavy equipment, etc.
    • The exclusion of real estate from the repeal of 1031 like-kind exchanges is a major victory for real estate stakeholders, who had fought hard to preserve the provision for several years, and against long odds.
  • Carried Interest

    • The final bill includes the House and Senate language requiring a 3-year holding period to qualify for current-law (capital gains) treatment.
    • Again, real estate stakeholders prevailed against long odds to preserve the incentive of capital gains treatment for carried interests in the final legislation.
  • Cost Recovery (Depreciation)

    • The final bill retains the current recovery periods for nonresidential real property (39 years), residential rental property (27.5 years) and qualified improvements (15 years). The bill also replaces separate definitions for qualified Restaurant, Leasehold, and Retail improvements with one definition of “Qualified Improvement Property.”
  • Qualified Private Activity Bonds

    • The final bill retains the deductibility of qualified private activity bonds used in constructing affordable housing, local transportation and infrastructure projects and for state and local mortgage bond programs.
    • The House bill would have eliminated the use of private activity bonds.
  • Low Income Housing Tax Credit

    • The final bill retains current law. However, a lower corporate rate will negatively impact the value of the credits in the future, and will result in less low-income housing being developed.
  • Rehabilitation Credit (Historic Tax Credit)

    • The final bill repeals the current-law 10% credit for pre-1936 buildings, but retains the current 20% credit for certified historic structures (but modified so the credit is allowable over a 5-year period based on a ratable share (20%) each year).
    • The House bill would have entirely eliminated the Historic Rehabilitation Credit.

Provisions Not Included in the Final Bill

  • Rental Income Subject to Self-Employment Tax

    • The House-introduced bill would have subjected rental income to self-employment taxes. This provision was dropped from the House (and final) bill.

Source: National Association of Realtors


Posted on December 20, 2017 at 12:59 pm
Christopher DiLorenzo | Posted in Uncategorized |

Housing Starts Rise in Surprise November

Home-building activity rose in a surprise November, with housing starts up 3.3 percent to a rate of 1,297,000, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). Single-family housing starts increased 5.3 percent to 930,000. Starts for units in buildings with five units or more came in at 359,000.

Permits, however, decreased, 1.4 percent from October to 1,298,000, according to the data. Single-family permits, still, were up 1.4 percent to 862,000. Permits for units in buildings with five units or more came in at 395,000.

Completions totaled 1,116,000 in November, falling 6.1 percent. Single-family completions decreased 4.6 percent from October to 752,000. Completions for units in buildings with five units or more came in at 353,000.

 “A welcoming trend is developing in the housing sector as builders are able to bring more supply to the market on a consistent basis,” said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), in a statement. “The latest monthly figure of near 1.3 million annualized housing starts is solid, and the growth is mostly coming both in the West and for single-family homes.”

“Single-family permits were up and housing starts reached a 10-year high in November, which points to continued economic strength since beginning of recovery,” said Joseph Kirchner, senior economist for realtor.com®, in a statement. “Conversely, housing completions were down last month, but this is a temporary phenomenon as the increase in permits and starts will lead to more home completions. While we are seeing continued movement in new construction, we still have a long way to go begin to meet the needs of homebuyers, especially in starter homes, where inventory levels have become significantly depleted.”

“There is still more room for improvement, as the latest figure is still not yet at the long-term 50-year average of producing 1.5 million units per year,” Yun said. “If this rising trend continues, the worst of the supply shortage could soon end, which would help slow price appreciation in 2018. That would be a huge, welcoming relief for renters seeking to become homeowners.”

Source: rismedia.com


Posted on December 20, 2017 at 10:10 am
Christopher DiLorenzo | Posted in Uncategorized |

Sales Up Despite Years of Rising Prices, Falling Inventory

November became the sixth month of 2017 to post an increase in year-over-year home sales, bucking prolonged trends of home price increases and inventory declines, according to the December RE/MAX National Housing Report.

“The end of the year is typically a slower selling season with low inventory, but our numbers are telling a different story,” says Adam Contos, co-CEO of RE/MAX. “We don’t see any sign of homebuyers slowing down their house-hunting; in fact, many are taking advantage of lower competition for available homes in the ‘slow season.’ Until we begin to see new homes being built, we won’t see much growth in available homes on the market.”

REMAX_Dec_2017

Closed Transactions 
Of the 54 metro areas surveyed in November 2017, the overall average number of home sales decreased 7.3 percent compared to October 2017 but increased 1.1 percent compared to November 2016. Thirty-six of the 54 metro areas experienced an increase in sales year-over-year, including Trenton, N.J., +21.3 percent, Augusta, Maine, +14.5 percent, Honolulu, Hawaii, +14.1 percent, and Manchester, N.H., +14.0 percent.

Median Sales Price
In November 2017, the median of all 54 metro median sales prices was $227,500, up 1.7 percent from October 2017 and up 3.7 percent from November 2016. Only five metro areas saw a year-over-year decrease in median sales price, including Anchorage, Alaska, -5.3 percent, Trenton, N.J., -4.2 percent, and Honolulu, Hawaii, -3.4 percent. Nine metro areas increased year-over-year by double-digit percentages, with the largest increases seen in San Francisco, Calif., +13.8 percent, Cleveland, Ohio, +12.9 percent, Orlando, Fla., +11.6 percent, and Seattle, Wash., +11.4 percent.

Days on Market
The average days on market for homes sold in November 2017 was 54, up three days from the average in October 2017, and down five days from the November 2016 average. The four metro areas with the lowest days on market were San Francisco, Calif., at 25, Omaha, Neb., at 27, Seattle, Wash., at 29, and Nashville, Tenn., at 30. The highest days on market averages were in Augusta, Maine, at 116, and Miami, Fla., at 86. Days on market is the number of days between when a home is first listed in an MLS and a sales contract is signed.

Months Supply of Inventory
The number of homes for sale in November 2017 was down 9.2 percent from October 2017, and down 14.5 percent from November 2016. Based on the rate of home sales in November, the months supply of inventory increased to 3.6 from 3.3 in October 2017, but decreased compared to the 4.0 of November 2016. A 6.0 months supply indicates a market balanced equally between buyers and sellers. In November 2017, 49 of the 54 metro areas surveyed reported a months supply at or less than six, which is typically considered a seller’s market. The metro areas that saw a months supply above 6.0, typically considered a buyer’s market, were Augusta, Maine, at 8.4, Miami, Fla., at 7.6, and Fargo, N.D., at 6.5. The markets with the lowest months supply of inventory continued to be in the West, with San Francisco, Calif., at 1.0, Seattle, Wash., at 1.3, and Denver, Colo., at 1.4.

Source: Rismedia.com

 


Posted on December 19, 2017 at 10:22 am
Christopher DiLorenzo | Posted in Uncategorized |

Rental Costs Are Still Surging in These Cities

Rents have been slowing in many areas, but exceptions are still giving renters sticker shock. Rents in the nation’s largest cities, in particular, continue to grow.

Nearly half of renters—or 46 percent—devote more than 30 percent of their income to rent, according to Census Bureau data. Economists consider that “cost-burdened.”

SmartAsset, a personal finance website, analyzed data median household incomes and average rents and compared them in 2013 to 2016.

Four of the top 16 cities with the largest rent increases are in California, according to the analysis. But it’s New Orleans that saw the steepest run-up in rental costs from 2013 to 2016. Rental costs increased 10.5 percent in that time, more than any other U.S. city analyzed.

Source: DAILY REAL ESTATE NEWS | WEDNESDAY, NOVEMBER 15, 2017


Posted on November 21, 2017 at 9:42 am
Christopher DiLorenzo | Posted in Investors |

Home-Buying Challenges: Report Finds Homeownership Delays

Down Payment
Many consumers aren’t aware of the various financing options available to homebuyers, or of the varying down payment requirements. On average, millennials believe the minimum down payment requirement is 21 percent, according to the survey; in reality, down payments can be as low as zero percent for VA loans, or can range from 3 to 5 percent for some Fannie Mae and Freddie Mac loans. The Federal Housing Administration (FHA) also provides loans with low down payment options.

There are various loans that cater to first-time buyers or those who don’t have a large sum of money to put down. The survey reports that 70 percent of adults don’t feel they have enough in savings for a down payment, but this may be attributed to a lack of mortgage industry knowledge. Seventy-three percent of people surveyed and 62 percent of millennial participants were unaware of down payment assistance programs for middle-income buyers.

Consumers should reach out to their local bank to find out if any loan options work for them. Making a few lifestyle changes is also a quick way to amass down payment funds.

Credit Score
The power of credit in the real estate industry is widely misunderstood among consumers. While the mortgage-qualifying rate is around the 620 range, homebuyers believe it is much higher. Twenty-one percent of non-white survey participants believe credit is their biggest home-buying challenge. The median FICO score is 700, and thus many consumers may be incorrectly assuming that their credit score is too low.

The only way to know for sure is to find out what their credit score is. Plenty of credit card companies provide free credit report monitoring, or consumers can look up their score on one of the three top credit reporting agencies: TransUnion, Experian or Equifax. If consumers’ credit is, in fact, too low for lenders, they can improve their score in a variety of ways.

Source:By Liz Dominguez at rismedia.com


Posted on November 18, 2017 at 11:21 pm
Christopher DiLorenzo | Posted in Home Buyers |

Four Ways to Jumpstart Your Credit Score

Improving your credit score can sometimes be a lengthy project. Consumer advisor Brian Acton tells Yahoo Finance if you are planning to apply for a mortgage or other major loan, there are five strategies you can use that can help bump up your credit score in as little as 30 days:

  • Become an authorized user. You can piggyback off someone else’s good credit by having them add you as an authorized user to an account they’ve had for some time. As an authorized user, you can benefit from this responsibly managed account once it is added to your credit profile. (Understand, however, that if you use the account irresponsibly, both your credit scores will suffer.)
  • Request a credit limit increase. If you have a timely payment history with your credit card issuer, the issuer will likely grant you a limit increase if you ask for it. Since your credit utilization rate figures heavily in your credit score, an increase in the limit can help your score—so long as you resist increasing your spending.
  • Pay down your cards. Because—as indicated above—a lower balance positively affects your credit utilization rate, make the effort to curb your current spending and use any extra funds you can muster to pay down existing debts.
  • Check for credit report errors. An error on your report can weigh down your score, while removing one can result in great improvement. Since most credit reporting errors are resolved in about 30 days, pull your report from AnnualCreditReport.com and go over it with a fine-tooth comb. If something seems amiss, such as an unreported debt payoff, disputing it right away can make a big difference in your credit score.

source: rismedia.com


Posted on November 18, 2017 at 3:41 pm
Christopher DiLorenzo | Posted in Home Buyers |

5 Down Payment Savings Tips

Sixty percent of homebuyers put 6 percent, or roughly $15,500, down on a median-priced house, according to the National Association of REALTORS® (NAR). Work toward that goal with these tips:

 

Source: rismedia.com.  For more information, please visit www.nar.realtor.

 

 


Posted on November 18, 2017 at 3:36 pm
Christopher DiLorenzo | Posted in Home Buyers |