Real Estate Articles

Study: More housing markets ‘sustainable’ – first time in a year

Nationwide's latest Health of Housing Markets Report (HoHM Report) found that house price appreciation is slowing, mostly in response to higher mortgage rates.

For the first time in a year, the report's proprietary Leading Index of Healthy Housing Markets (LIHHM) is forecasting a positive outlook for the national housing market.

"The last few years have been difficult for homebuyers," said David Berson, Nationwide senior vice president and chief economist. "From unsustainably rapid price gains to higher mortgage rates to tight supplies of homes for sale, it's been an increasingly difficult time to buy a home. But, with slower house price increases and recent declines in mortgage rates, coupled with a still solid job market and rising wages, the spring homebuying season looks pretty positive."

LIHHM is unusual among housing market indices as it is a forward-looking measure of housing market sustainability. The demand metrics within the LIHHM remain positive with an ultra-low unemployment rate, continued solid job gains and a steady mortgage market.

Regionally, more than half of the LIHHM performance rankings were positive, an improvement from the last six months. Income growth is more aligned with house price appreciation, and household formations are strong in most markets. However, low housing supplies continue to hold back sales, even with stronger demand.

Tax reform affecting the high-end market?

New limits for the state and local tax (SALT) deduction and mortgage interest deductions in the Tax Cuts and Jobs Act of 2017 were expected to have a negative impact on the upper-end housing market.

Data from 2018 suggests that this has occurred. Price gains slowed the most for the highest-priced tier of homes, from 4.7 percent at the end of 2017 to 2.1 percent in December 2018, according to data from Black Knight.

By comparison, the lowest-priced tier slowed more modestly – from 8.8 percent...

After the fall: Taking advantage of lower interest rates

So much for those worries about rising interest rates.

Just a few months ago, rising rates were bearing down on everyone from homebuyers to stock investors after the Federal Reserve put through seven quarter-point increases in 2017 and 2018. But some rates began easing early this year after the Fed opened the door to a "patient" approach to further rate increases. Last Wednesday, the central bank surprised the market when it said it may not raise rates at all during 2019.

The move – or anticipated lack of moves – reverberated immediately through the bond market, and the yield on the 10-year Treasury note tumbled to its lowest level in more than a year. It fell as low as 2.52 percent, down from 2.61 percent late Tuesday and from more than 3.20 percent as recently as November.

The impact should soon filter out to consumers across the economy, and the effects will likely remain for a while. The yield on the 10-year Treasury, which influences rates for all kinds of consumer loans, could drift higher over the next year, but it's not likely to cross above 2.75 percent, said Ed Al-Hussainy, senior currency and rates analyst at Columbia Threadneedle Investments. That would mean rates for the next year would remain lower than they've been for much of the past year.

"The Fed no longer has an appetite for tightening rates above" a level that would slow the economy, Al-Hussainy said. "That signal is quite strong right now and lowers the ceiling for 10-year yields."

Here's a look at some of the move's beneficiaries:

Borrowers

When the Fed was busy raising interest rates for much of the last few years, rates on credit-card borrowing were quick to follow. Experts say these rates are the most sensitive to changes in the federal funds rate, so the Fed's move Wednesday should bring relief, at least from further increases.

The average rate on credit-card accounts that were charged interest was 16.86 percent...

HUD’s multifamily inspectors have weak spots

The Government Accountability Office has issued a report on the Real Estate Assessment Center's policies and processes. The report (GAO-19-254) is titled "Real Estate Assessment Center: HUD Should Improve Physical Inspection Process and Oversight of Inspectors."

The report was sent to Sen. Susan Collins, R-Maine, chairman, Sen. Jack Reed, D-Rhode Island, ranking member of the Senate Appropriations subcommittee on Transportation, Housing and Urban Development and Related Agencies, Rep. David E. Price, D-North Carolina, chairman, and Rep. Mario Diaz-Balart, R-Florida, ranking member of the House Appropriations subcommittee on Transportation, Housing and Urban Development, and Related Agencies, on March 21.

Here are excerpts of summaries associated with the report.

What GAO Found: "The Department of Housing and Urban Development's (HUD) Real Estate Assessment Center's (REAC) standardized process to identify physical deficiencies at HUD multifamily properties (including public housing) has some weaknesses. For example, REAC has not conducted a comprehensive review of its inspection process since 2001, even though new risks to its process have emerged, such as property owners misrepresenting the conditions of their properties. A comprehensive review could help REAC identify risks and ensure it is meeting the goal of producing inspections that are reliable, replicable, and reasonable.

"In addition, REAC does not track its progress toward meeting its inspection schedule for certain properties, which could hinder HUD's ability to take enforcement actions. Finally, in the wake of concerns that inspections were not always identifying troubled properties, REAC and other HUD units, including the Office of Multifamily Housing, made eight recommendations in January 2017 to enhance the inspection process,...

Top spring homebuyer concern? Their budget

This spring's home shoppers expect less competition overall as more inventory continues to hit the market nationwide, but will struggle with affordability as home prices continue to rise, according to new survey data released today by realtor.com. The survey also found that nearly half of shoppers this spring are looking for homes at or under $200,000, which despite less competition will prove difficult to find, as this one segment of housing has actually experienced the largest inventory decline year-over-year.

Realtor.com conducted the online survey earlier this month in conjunction with Toluna Research. It was conducted online with respondents who said they plan to purchase a home in the next 12 months.

"The 2019 spring home buying season will be characterized by rising home prices, a moderate pace of home sales, and an influx of inventory," says Danielle Hale, realtor.com's chief economist. "More homes on the market and lower mortgage rates will help offset some difficulties associated with price gains, but affordability will remain the primary challenge for shoppers, particularly in lower price segments."

When survey respondents were asked whether falling mortgage rates or higher home prices had the greater impact on their search, 38 percent of respondents indicated the rising home prices, 26 percent said falling interest rates, and 35 percent said neither.

The largest segment of shoppers heading into this spring have been searching for a home for seven months or more – nearly identical to last year – while 26 percent have been in the market four to six months, and 34 percent entered the market in the last three months. The numbers largely flipped since last year when 34 percent had been searching four to six months, and 26 percent had been searching three months or less.

When asked how much competition shoppers expect to face this year, just over 60 percent indicated at least some competition compared to 70 percent last year.

...

FREC approves change to team advertising rules

The Florida Real Estate Commission (FREC) met in Orlando and addressed advertising rules.

FREC revisited the team ad rule finalized in June 2018. While the rule became official last summer, it gave real estate teams one year to comply with the new regulations. The effective date of compliance – July 1, 2019 – has not changed.

Team ad rule change

FREC commissioners approved a change to the first sentence of subparagraph (6), which addresses the size of team names compared with brokerage names in advertising. The change will assist licensees with compliance and with enforcement of the rule by the Division of Real Estate.

If the change is unopposed as it winds its way through Florida's rulemaking process, it will replace the existing first sentence of this subparagraph.

"The rationale behind the change is the word 'appear' is vague in the current version, given the number of questions raised by brokers and teams," says Juana Watkins, Florida Realtors vice president of law and policy and general counsel. "In addition, comparing the logo of the brokerage to the printed name of the team presented difficulties as well. For these reasons, FREC hopes to eliminate the confusion caused by the team ad rule."

New subparagraph 61J2-10.026(6)In aAdvertisements containing the team or group name, the team or group name shall not be appear in larger print than the name or logo of the registered brokerage. All advertising must be in a manner in which reasonable persons would know they are dealing with a team or group.

The rule now winds its way through Florida's rulemaking process...

New mapping tool finds land for affordable housing

Most real estate developers will cite scarcity of land as one of the biggest hurdles to building affordable housing around Miami-Dade County.

But according to a new GIS mapping tool unveiled last week by the University of Miami, there are actually 500 million square feet of vacant or underutilized land scattered across Miami-Dade County. The land is either publicly or institutionally-owned.

The Land Access for Neighborhood Development tool, or LAND for short, was developed by UM's Office of Civic and Community Engagement (CCE) as part of its Miami Housing Solutions Lab, a free website that provides data and resources to community groups and affordable housing developers.

"We often talk about the fact that land in Miami-Dade is unaffordable or that we don't have any land left," said Robin Bachin, director of the CCE. "But we do have land. This tool allows us to identify it and shows us exactly where it is and who owns it."

The program, which is free to use and available to the public, collects and visualizes data from the Miami-Dade County Property Appraiser. It allows users to apply various filters to searches, so they can distinguish vacant, available city lots from county-owned land previously used but no longer needed by government agencies. (They're called surplus lots.)

Another filter allows users to identify underutilized land owned by institutions such as UM, Baptist Health, Miami Dade College and Habitat for Humanity. It also identifies property owned by faith-based organizations, linking into a national trend of church partnerships with developers to provide affordable housing for their communities.

"With LAND, you can ask questions you couldn't ask before," said Jorge Damian de la Paz, the programs manager for CCE. "Real estate developers already have this data. But now community advocates can directly ask their commissioners 'Why is this land not being used?'"

De la Paz said that many of these lots are too small or scattered to...

$290,900 vs. $300,000: Which is better for pricing a listing

Price a can of beans too low and it hurts profits. But price it too high and the drop in sales will offset any additional profit per can. As a result, proper pricing is both science and art in the retail world.

In real estate, however, it’s not always so simple. However, online searches have changed some of those dynamics. Buyers now have price options when they do a listing search, and those often end on even numbers, such as $300,000-$350,000. In these cases, a listing agent pricing a client’s home using the drop-down method might advertise at $299,000. But a homebuyer using the noted range would then never see it.

As a result, homes with a recommended listing price close to natural break numbers offered in online searches can expand the number of people who will see the listing by using an even number. If that $299,000 listing is advertised at $300,000, the people looking for homes in the $250,000-$300,000 range will also receive it in their results.

Robert McTague suggests four ways psychology can influence price in a recent Inman article:

1. The nine-at-the-end price

Beyond the online search reason to use round numbers, what should be done for a home recommended at $310,000? List it at $309,900?

A nine at the end seems to make sense psychologically when trying to attract buyers. A 99¢ can of beans is somehow cheaper than its $1 competitor, for example. In home sales, agents may think it makes a home sound more affordable.

McTague writes that smart people aren’t fooled by this, however, and “You should position your client’s home as luxury brands do, not as discounters.” In the retail world, rounding down by a few cents suggests bargain shopping. Using an even number – a tactic used by Godiva Chocolates and Ferrari – suggests a luxury, top-notch item.

2. Odd prices seem more legit

McTague called the “power of four and seven …...

You can steer boats and cars – but not buyers

Buyers have wish lists – like four bedrooms, a pool, granite countertops and “near good schools” – and it’s a Realtor’s job to make those wishes come true.

However, real estate agents need to avoid “steering” – the use of words or actions that influence a buyer into making a housing decision – because it could be a violation of the fair housing provisions that prohibit discrimination of certain protected classes in the sale or rental of housing.

Buyers have a lot of questions, and while buyers may ask any question they wish, Realtors’ hands can be tied with providing certain answers. That sometimes creates awkward situations if agents don’t have a way to handle it.

The textbook example of illegal steering is showing only homes in predominantly black neighborhoods to black buyers. But in the real world, steering is often subtle. A neighborhood’s crime statistics, for example, could be a code word for steering clients to “safe neighborhoods.”

In general, Realtors can sidestep answering questions that could violate the Fair Housing Act by giving buyers a way to research information directly. You should not tell buyers the demographic breakdown of specific neighborhoods, but the U.S. Census Bureau knows that information and posts it online. You should not say which neighborhoods have high crime rates, but a number of online providers and local sheriff offices can do that for buyers.

The National Association of Realtors® created a list of acceptable behaviors that Realtors may legally do without potentially violating the Fair Housing Act.

  • Ask about hobbies
    This information can help you find a locale that fits their lifestyle. Someone who likes to run may want to be near a park or running trail; someone who loves to fish may want to be closer to an ocean, lake or inlet.
  • Don’t discuss local schools
    If...

Fla. lawmakers chip away at land preservation money

 Florida lawmakers are pushing forward with plans to continue carving up millions of dollars voters generated by doc stamp taxes earmarked for land and water protection, despite environmentalists' concerns about the way the money is being used to help the Indian River Lagoon and Apalachicola Bay.

Backers of the 2014 Florida Water and Land Conservation Initiative continue to challenge how lawmakers have used the money in the past. They contend that some of the projects outlined in bills advanced by the Senate Environmental and Natural Resources Committee on Tuesday "chip away" at the intent of a constitutional amendment passed four years ago.

Aliki Moncrief, executive director of Florida Conservation Voters, said the septic-to-sewer conversion outlined in a measure to protect the Indian River Lagoon (SB 368) is needed. But the proposal goes beyond what voters approved, she argued.

"There are natural solutions and there are engineered solutions," Moncrief said. "And the Water and Land Conservation amendment, absolutely voters who stood up for that expected the natural solutions, like buying buffer lands to protect water bodies, that those natural solutions take priority when it comes to this specific pot of money."

Sen. Gayle Harrell, a Stuart Republican who sponsored the bill, argued the ballot initiative, known as Amendment 1, didn't explicitly prohibit septic-to-sewer conversion.

"It makes a whole long litany of things the funds can be used for, including acquisition of land," Harrell said. "It doesn't say only acquisition of land. I believe there are many other uses for the Amendment 1 money. And I think this bill meets the intent the public had with passing the Amendment 1 money."

Sen. Debbie Mayfield, a Rockledge Republican who supported the proposal, said a dedicated source of money needs to be available to replace septic tanks.

The constitutional amendment funnels money to the Land Acquisition Trust Fund, which for 20 years will get one-third...

High-tax vs. low-tax states? It’s not that simple

Do you think that New Jersey is a "high tax state" while Florida is a "low tax state"? Think again.

An individual's tax burden depends on the level of taxes, the types of taxes, and, critically, the income of the household.

State and local taxes come in all types. There are income taxes, property taxes, sales taxes and just about every other kind of tax possible. Some fall more heavily on higher-income wage earners while others hit lower-income families hardest. This differential tax impact across income groups needs to be brought into the light.

First, some definitions. A progressive tax is one whose burden or rate rises as incomes rise. The U.S. income tax is an example. In contrast, a regressive tax impact falls as incomes rise. Sales and property taxes are examples. Finally, a proportional (or flat) tax is the same regardless of income. Pennsylvania's income tax closely matches that definition.

The mixture of these types of taxes determines the extent that all taxpayers bear equal (or fair) burdens.

Creating a "fair" tax system is difficult because different taxes affect families of different incomes differently. A family earning $20,000 that pays $1,000 in taxes may find that sum burdensome. But a family earning $200,000 and paying twice as much, or $2,000, may see those taxes as modest.

Even if the higher-income household paid the same percentage as the lower-income household, or $10,000, the burden may differ. That's because the upper-income household would still have significant after-tax income to spend.

Economists argue that progressive taxes even the tax burden across income groups. Higher-income households would not just pay more in terms of dollars but also a higher share of their income. That is, tax rates should rise as incomes increase.

With that concept of "fairness" as a starting point, how do states compare?

A recent study by the Institute on Taxation and Economic Policy analyzed the burdens of state and local taxes across...