April 10, 2018

Millennials who keep renting will pay $92K by age 30

NEW YORK – April 9, 2018 – By the time millennials turn 30, they'll have paid $92,600 in rent, according to a new study by RentCafe, a nationwide listing service for rentals – more than previous generations paid when they were between the ages of 22 and 30.

RentCafe researchers studied how much millennials, Generation X members and baby boomers spent on rent during that eight-year time period of their life by using U.S. Census Bureau statistics dating back to 1974.

Millennials have been hit the hardest by rising rents, and Generation Z – the generation following millennials – may have it worse, according to the analysis. Researchers estimate that by the time Generation Z reaches age 30, its members will have paid more than $102,000 in rent.

Millennials earn more compared with previous generations ($206,600 in the eight-year period), but they also spent 45 percent of their income on rent between the ages of 22 and 30 – more than the 30 percent that most financial advisers recommend.

The two previous generations weren't able to keep their rental costs under 30 percent of their income either, but they did fare better than millennials: Baby boomers spent 36 percent of their income on rent between the ages of 22 and 30 and Generation X spent 41 percent.

April 9, 2018

4 demographic shifts worth watching

IRVINE, Calif. – April 6, 2018 – The aging of America, more immigrants and a population that's heading south are a few big trends to watch that will likely have a great impact on the housing market over the next decade, writes John Burns, CEO of John Burns Real Estate Consulting, in a column for ATTOM Data Solutions.

Burns' team spent more than 9,000 hours researching demographic shifts that will occur over the next decade. In his column, Burns highlighted some of his findings from a book that he and Chris Porter published, Big Shifts Ahead: Demographic Clarity for Businesses.

Here are some of the demographic trends Burns says to watch over the next 10 years:

  1. More people over the age of 65: 38 percent of the population will be over the age of 65 within the next decade – and the number will hit 66 million people by 2025. Burns says this will spark even greater demand for high-density, low-maintenance living and what he calls "surban" (urban living in suburban environments). Burns also predicts that more of these baby boomers will help their children with downpayments on a home in order to keep their children living nearby.
  2. More affluent immigrants: Burns estimates there will be 8 million increasingly affluent immigrants over the next decade. "Today's immigrant tends to arrive on an airplane from China, Brazil and other countries where the economies have been booming," Burns writes. "While most expect some slowing in those economies, the pent-up demand to move to the U.S. remains large."
  3. More people heading south: 62 percent of the population growth over the next decade will likely be in the South where 42 percent of the nation already lives, Burns says. "Plenty of jobs, affordable housing and warm weather will make Texas, Arizona, Nevada, Florida, Georgia, North Carolina, and surrounding states the growth engine."
  4. More people passing away and leaving a household behind: Burns estimates there will be 25.8 million newly formed households in the next 10 years, and 13.3 million of those will move to a household abandoned by someone who passes away or moves into an assisted living facility. "The record number of people passing away has been one big reason that net household formation has been slow," Burns writes. "Nonetheless, these 25.8 million want to live differently than prior generations, and will fill their homes up with all sorts of technology."
Posted in National News
April 9, 2018

Are prepaid property taxes deductible?

WASHINGTON – April 6, 2018 – April 17 is the deadline for paying income taxes, but tax advisers still can't agree on whether homeowners who prepaid their 2018 property taxes in 2017 can fully deduct them.

Congress passed a tax reform bill late last year, capping write-offs for state and local taxes at $10,000 per return for single filers and married couples. The move set off a rush of homeowners to prepay their property taxes for 2018 at the end of the year before the tax bill took effect this year.

The overhaul "barred deductions for many prepayments of 2018 state and local income taxes, but it was silent on deductions of prepaid property taxes," The Wall Street Journal reports.

On Dec. 27, the IRS warned prepaying owners that not all prepayments of 2018 property taxes would be deductible on 2017 returns. To be eligible for a write-off, the owners must have known their tax liability at the time of payment, the IRS stated.

But some tax specialists disagreed with the IRS' reasoning that property owners could only deduct the portion that was known or determined at the time. They argued that owners could still make the prepaid deductions as long as they were based on reasonable estimates. They asserted that prior tax rulings and regulations support this argument.

"If the amount is a reasonable estimate made in good faith, it's deductible," asserts Stephen Baxley, who heads tax planning for Bessemer Trust, a multifamily office.

But other tax officials say they're closely following the IRS' guidance. "We think the amount due must be determined for a prepayment to be deductible," says Brian Lovett, a certified public accountant with WithumSmith+Brown in New Jersey.

Some accountants say they're doing both. David Lifson, a CPA with Crowe Horwath, says he recommends clients deduct prepayments of known amounts. But he will allow a deduction of an estimate "if I feel the client understands the risk that the IRS will disagree."

Source: "The Hot Debate: Can You Deduct Prepaid Property Taxes?" The Wall Street Journal (April 3, 2018) [Login required.]

Posted in National News
April 6, 2018

Long-term mortgage rates fall as 30-year hits 4.40%

WASHINGTON (AP) – April 5, 2018 – Long-term U.S. mortgage rates fell this week, benefiting potential homebuyers with the spring buying season underway.

Mortgage buyer Freddie Mac said Thursday the average rate on 30-year, fixed-rate mortgages dipped to 4.40 percent from 4.44 percent last week. The benchmark stood at an average 4.10 percent a year ago.

The decline followed scant movement in long-term rates last week and a months-long stretch of increases in January, February and early March as interest rates generally rose.

The average rate on 15-year, fixed-rate loans declined to 3.87 percent from 3.90 percent last week.

As trade tensions have escalated in recent weeks between the U.S. and China, investors have been switching into safer assets like bonds. That has pushed bond prices higher and suppressed their yields, which move in the opposite direction and tend to influence mortgage rates. The yield on the closely watched 10-year Treasury note fell this week amid trade anxiety, then steadied Wednesday at 2.80 percent, the same as last week. The 10-year note was back up at 2.82 percent Thursday morning.

Reflecting the demand for homes, applications for new mortgages fell 3.3 percent in the week ended March 30 from a week earlier, the Mortgage Bankers Association reported.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. The fee on 30-year fixed-rate mortgages averaged 0.5 percent, unchanged from last week. The fee on 15-year fixed-rate loans fell to 0.4 percent from 0.5 percent last week.

The average rate for five-year adjustable-rate mortgages eased to 3.62 percent from 3.66 percent last week. The fee held steady at 0.4 percent.

April 5, 2018

More buyers are busting budgets to become homeowners

NEW YORK – April 4, 2018 – Homebuyers are busting budgets – and in some cases selling things they love – to snag their dream houses.

By the numbers

  • 6.2%: Average rise in price of U.S. homes from January 2016.
  • 50%: How much the price of U.S. homes has gone up since their 2012 bottom.
  • 40%: of Millennials are most likely to splurge.
  • $24,545: Average amount Millennials are going over their budget.
  • $16,510: Average amount one-third of overall buyers spent over their budget cap.

A third of home buyers blew through the upper limit of what they planned to spend, topping that cap by an average $16,510, according to a Owners.com survey of 1,214 Americans who purchased a house within the past four years. The survey was conducted Jan. 31 to Feb. 8.

The main reason? Price. Price. Price.

"Clearly, we're in an environment of rising prices," especially for starter homes, says Daniel Maloney, national head of sales for Owners.com, a real estate brokerage. Many houses on the market are drawing multiple offers, forcing buyers to bid up.

In January, home prices nationally were up an average 6.2 percent from a year earlier, according to the S&P CoreLogic Case-Shiller home price index. Prices have risen nearly 50 percent from their 2012 bottom. Supply shortages, combined with a healthy job market that's fueling demand, are blamed for the recent price run-up.

Many house hunters who set a price range think little of going beyond it to be closer to work or in a desired neighborhood, says Dario Cardile, vice president of growth marketing at Owners.com.

Millennials are most likely to splurge, with 40 percent going over budget and by $24,545 on average. Thirty-four percent of Gen Xers raced past their limits, by $13,096 on average. And 19 percent of Baby Boomers topped their parameters, by an average $8,024.

Millennials are most likely to go over budget and by a larger amount because they're first-time home buyers and the least knowledgeable about setting a realistic price target and meeting it, Maloney says. Gen Xers and Boomers are progressively savvier.

Also, supply shortages and sharp price increases are most acute among the starter homes Millennials favor, Maloney says. And, he says, young adults may feel more urgency to buy a house because they're living with parents or renting. Members of the other age groups, many of whom already own homes, can simply stay in them until they find something close to their price range.

Caron MacDonald, 29, of Hanover, Mass., planned on spending $250,000 to $280,000 on her first home purchase but found that houses in that range needed work or weren't in safe neighborhoods.

So she wound up buying a two-bedroom house for $300,000 about a year ago.

Since MacDonald wanted to make a 20 percent downpayment to avoid the cost of mortgage insurance, the higher price tag forced her mother to chip in half of the $60,000 downpayment instead of the $10,000 to $20,000 she originally planned.

MacDonald is paying $1,600 a month in mortgage and other costs, about $400 more than she intended. To make it work, the lifelong equestrian had to sell her horse to shed roughly $700 in monthly stable fees and has given up her annual vacation to the Caribbean.

"It was tough," she said of the horse sale.

And, "It is a little disappointing to not go away as much."

But noting that her monthly house payment is now an investment in her future, she says, "I can do without a vacation if it means I'm actually a homeowner."

April 2, 2018

24 Long-term U.S. mortgage rates move little

WASHINGTON (AP) – March 29, 2018 – Long-term U.S. mortgage rates moved little this week after a months-long stretch of increases.

Mortgage buyer Freddie Mac said Thursday the average rate on 30-year, fixed-rate mortgages ticked down to 4.44 percent from 4.45 percent last week. The benchmark rate averaged 4.14 percent a year ago.

Rates are relatively low by historical standards, but they have shot up from an average that remained below 4 percent last year. Mortgage rates rose steadily in January, February and early March, as interest rates generally increased in response to higher levels of government debt and expectations of rising inflation. Last week's slight gain was the 10th increase in 11 weeks.

The average rate on 15-year, fixed-rate loans slipped to 3.90 percent this week from 3.91 percent last week.

The Federal Reserve last week raised its key short-term interest rate that banks charge each other, and rates could continue to climb. The Fed's action caused yields to rise for U.S. Treasury notes, which could push the cost of home loans higher.

Bond yields fall when their prices rise. The yield on the closely watched 10-year Treasury note fell below 2.8 percent this week for the first time since early February. Investors have been switching into safer assets like bonds as trade tensions have escalated between the U.S. and other countries. The 10-year note was at 2.76 percent Thursday morning.

Higher mortgage rates have yet to dampen demand for homes. In fact, the pace of Americans signing contracts to buy homes picked up last month, rebounding from a drop in January, according to data issued Wednesday by the National Association of Realtors. But mortgage rates have been rising as prospective buyers fight over fewer listings and as price gains for properties outpace wage growth.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. The fees on 30-year and 15-year fixed-rate loans were 0.5 percent, unchanged from last week.

The average rate for five-year adjustable-rate mortgages fell to 3.66 percent from 3.68 percent last week. The fee held steady at 0.4 percent.

March 28, 2018

U.S home prices post 6.2% annual gain in January

WASHINGTON (AP) – March 27, 2018 – U.S. home prices posted another big gain in January, pushed higher by a shortage of homes for sale.

Standard & Poor's said Tuesday that its S&P CoreLogic Case-Shiller national home price index climbed 6.2 percent in January from a year earlier. That nearly matches December's 6.3 percent gain, which had been the fastest 12-month growth in almost three years. The January increase was in line with economists' expectations.

"The home price surge continues," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

As the spring home-buying season begins, house shoppers are facing higher prices and fierce competition for a limited inventory of available homes. But a strong job market has given American consumers, including an influx of younger millennials, the confidence to shop for homes anyway.

Prices rose 12.9 percent in Seattle, 11.1 percent in Las Vegas and 10.2 percent in San Francisco. Chicago and Washington D.C. posted the weakest annual gains: 2.4 percent each.

The increase in house prices is easily outpacing wage growth and inflation.

Homes for sale are scarce. It would take just 3.4 months to snap up the supply of available homes at the current sales rate, down from an average since 2000 of 6 months.

"Limited supply, fierce competition and rising prices are forcing many buyers to stay on the market longer in hopes of finding the right home at the right price," said Aaron Terrazas, chief economist at the real estate company Zillow. "More inventory is really the only cure for those pressures right now."

Overall, home prices are 6.3 percent higher than their peak in July 2006. Prices plunged when the housing bubble burst, hitting bottom in February 2012. Since then, prices have rebounded 46.5 percent.

Mortgage rates have now risen 10 of the past 11 weeks. But higher interest payments have yet to do much damage to demand for homes. The National Association of Realtors reported last week that sales of existing homes rose 3 percent in February. New-home sales dropped for the third straight month in February, the Commerce Department reported Friday, but are up 2.2 percent year-to-date from 2017.

March 26, 2018

Gov. Scott signs real estate-related bills into law

TALLAHASSEE, Fla. – March 23, 2018 – Gov. Scott signed a number of bills into law within the past week including a few that could impact Fla. Homeowners:

CS/HB 935: Mortgage regulation
The new law revises Ch. 494, Florida Statutes, governing non-depository loan originators, mortgage brokers and mortgage lender businesses subject to regulation by the Office of Financial Regulation to provide greater consumer protections. In some cases, the changes could impact the way home flippers finance repairs using a short-term loan before re-selling a property.

The new law defines the term "business purpose loan" and says that it's unlawful for anyone to misrepresent a residential mortgage loan as a business purpose loan. It also defines the term "hold himself or herself out to the public as being in the mortgage lending business." It's currently acceptable for an individual investor to make or acquire a mortgage loan with their funds, or to sell a mortgage loan, without being licensed as a mortgage lender, providing they don't "hold himself or herself out to the public as being in the mortgage lending business."

The law is the Florida Legislature's response to alleged unlicensed mortgage lending activity in South Florida. According to reports, some lending entities provided residential loans with usurious interest rates and high fees made under the guise of business purpose loans in order to avoid licensure and disclosure requirements under Ch. 494, F.S., as a mortgage lender. In some cases, they allegedly forced the borrower to form a limited liability company if they wanted the money.

Effective date: July 1, 2019.

CS/CS/HB 1011: Homeowner's insurance policy disclosures
This law requires homeowner insurance policies to disclose in bold, 18-point font that the policy does not cover flood damage. It expands the current required notice regarding flood insurance to include notice that the purchase of homeowner's insurance does not cover floods, even if hurricane winds and rain caused the flood to occur. The notice will appear upon initial issuance and in each policy renewal.

Effective date: Jan. 1, 2019.

HB 617: Covenants and Restrictions
This 28-page bill expands and modifies laws related to association covenants and restrictions.

Effective date: Oct. 1, 2018

HB 193: Mortgage brokering
This law reduces certain mortgage business regulations on securities dealers, investment advisors, and associated persons under certain conditions.

Effective date: July 1, 2018

March 22, 2018

Florida's housing market continues positive track in February 2018

ORLANDO, Fla. – March 21, 2018 – Florida's housing market reported more closed sales, more new listings and higher median prices in February even as for-sale inventory remained tight, according to the latest housing data released by Florida Realtors®.

"Florida's economy continues to grow, with more jobs being created – the state's unemployment rate was 3.9% in January," said 2018 Florida Realtors President Christine Hansen, broker-owner with Century 21 Hansen Realty in Fort Lauderdale"A strong economy is good for Florida's housing market. Statewide sales increased in both the existing single-family homes and the townhouse-condo sectors in February, yet many local markets are still facing a tight supply of available homes at a time when buyer demand is rising. Those factors are putting pressure on home prices and affordability.

"There is some good news for buyers: In February, new listings for single-family homes rose 6 percent year-over-year, while new townhouse-condo listings increased 6.9 percent."

Sales of single-family homes statewide totaled 18,620 last month, up 3.3 percent compared to February 2017. Meanwhile, the statewide median sales price for single-family existing homes was $246,500, up 9.6 percent from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Thestatewide median price for townhouse-condo properties in January was $179,500, up 7.2 percent over the year-ago figure.

February marked 74 months-in-a-row that the statewide median sales prices for both single-family homes and townhouse-condo properties rose year-over-year. The median is the midpoint; half the homes sold for more, half for less.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in January 2018 was $241,700, up 5.7 percent from the previous year; the national median existing condo price was $231,600. In California, the statewide median sales price for single-family existing homes in January was $527,800; in Massachusetts, it was $369,000; in New York, it was $266,000; and in Maryland, it was $264,016.

Looking at Florida's townhouse-condo market, statewide closed sales totaled 8,457 last month, up 6.4 percent compared to February 2017. Closed sales data reflected fewer short sales and foreclosures last month: Short sales for townhouse-condo properties declined 24.4 percent and foreclosures fell 51.8 percent year-to-year; short sales for single-family homes dropped 43.3 percent and foreclosures fell 51.3 percent year-to-year. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

"The latest figures from Florida Realtors show sales of existing homes rose modestly in February, while sale prices continued to climb at a very brisk pace," said Florida Realtors®Chief Economist Dr. Brad O'Connor.<span< p="" style="margin: 0px; padding: 0px; border: none; border-spacing: 0px; border-collapse: collapse;"></span<>

February's for-sale inventory remained tight with a 3.9-months' supply for single-family homes and a 6-months' supply for townhouse-condo properties, according to Florida Realtors.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 4.33 percent in February 2018, up from the 4.17 percent averaged during the same month a year earlier.

To see the full statewide housing activity reports, go to the Florida Realtors Research & Statistics section on floridarealtors.org. Realtors also have access to local market stats (password protected) on Florida Realtors' website.

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© 2018 Florida Realtors®

March 12, 2018

Florida Legislature 2018 wins

Business Rent Tax, affordable housing and environmental funding

TALLAHASSEE, Fla. — March 11, 2018 — Despite a very tight state budget, Realtors® and their communities throughout Florida are walking away from the 2018 session of the Florida Legislature with several key victories: a $31 million cut to the Business Rent Tax, $110 million for affordable housing projects and more than $400 million for Florida's natural resources.

"Great job, Realtors, for making the 2018 legislative session a big success," says Christine Hansen, 2018 president of Florida Realtors. "We knew this was going to be a tough session to work through given the status of the state budget. With the help of our members, we managed to keep the momentum going to further reduce the Business Rent Tax. We also scored victories on a number of other issues that will benefit Realtors and property owners alike."  

"I'm so proud of our membership for responding to our Call for Action to cut the Business Rent Tax," says Bill Martin, chief executive officer of Florida Realtors. "They sent in thousands of letters to their legislators urging them to support a cut to the tax, and they stayed engaged throughout the process on this and many other of our key issues. Realtors absolutely rock!"

This end-of-session report covers key real estate legislation filed for the 62-day session that ended Sunday. The governor will consider all bills passed by both chambers in the coming weeks.

"We continue to chip away at the Business Rent Tax, and we successfully pushed for funding for the environment, housing trust funds and other Realtor priority issues, all the while working under a constricted budget and many competing priorities in the Legislature," says Carrie O'Rourke, vice president of Public Policy for Florida Realtors. "But none of this would have been possible without the voices of our members who spoke loudly and frequently in defense of property owners and Florida's thriving real estate market."

Let's start with a recap of some of Florida Realtors more significant legislative victories:

Additional reduction in the Business Rent Tax — HB 7087 included a cut to the Business Rent Tax, and businesses throughout Florida will save an additional $31 million each year due to the second reduction in the tax rate in as many years. The new state tax rate businesses will pay on their commercial leases will be 5.7 percent. Effective: Jan. 1, 2019.

Tax credits for businesses that pay the Business Rent Tax — HB 7055 is a broad education bill that addresses several education-related matters. Included is a measure that allows businesses to receive tax credits for a portion of the Business Rent Tax they pay, which will go toward certain scholarship funds. Effective: July 1, 2018.

More than $400 million for Florida's natural resources — Everglades restoration, beach renourishment and springs protection received significant amounts of funding this year. A large amount of funding was also allocated to expedite repairs to the Herbert Hoover Dike around the southern boundary of Lake Okeechobee. Effective: July 1, 2018.

Nearly $110 million for affordable housing projects — Affordable housing programs will receive close to $110 million from the state and local government housing trust funds. These funds go a long way in helping Floridians achieve the dream of homeownership with down payment assistance. They also provide rental assistance and housing rehabilitation to Florida's homeless population, veterans and persons with disabilities.

Strengthening flood insurance notices to protect homeowners — Many property owners forgo flood insurance because they mistakenly believe their standard homeowner policies include flood damage coverage. HB 1011strengthens the current flood insurance notice included in their property insurance policy. Insurers must include the notice in the initial policy and when the policy is renewed. Effective: Jan. 1, 2019.

Creating an accurate 3D map of Florida — Included in the state budget is $15 million to fund LIDAR (light detection and ranging) mapping that would produce a complete and accurate 3D map of Florida for use in emergency management, infrastructure planning and other purposes. LIDAR is a next-generation mapping technique and has the potential to lower flood insurance rates throughout Florida.

Preventing unlicensed real estate activity — The Legislature allocated up to $500,000 from the Professional Regulation Trust Fund to the Department of Business and Professional Regulation to combat unlicensed real estate activity.

Key appointments/reappointments to real estate boards/commissions — The Florida Senate officially confirmed several Realtors and a former Florida Realtors staff member to the Florida Real Estate Appraisal Board (FREAB) and the Florida Real Estate Commission (FREC). Armando del Valle was confirmed to serve on FREAB, and Dick Fryer, Guy Sanchez and Randy Schwartz, former Florida Realtors General Counsel, were confirmed to serve on FREC. 

The Legislature also passed several other bills of interest to Realtors.

Creation and increase of state taxes and fees — House Joint Resolution 7001, which will appear on the November 2018 ballot, raises the bar on legislative support required for state tax or fee increases. Specifically, it requires a two-thirds majority vote of both chambers to approve a tax increase. It also requires that proposed changes to taxes or fees be part of a separate bill that contains no other subjects. If voters approve the amendment, it will take effect in 2019.

Regulating mortgage lenders — Currently, lenders that make residential mortgage loans for personal, family or household purposes are regulated by the Florida Office of Financial Regulation (OFR). HB 935 extends this licensure requirement to lenders making residential mortgage loans for business purposes. These loans are most often offered to purchasers who are renovating or remodeling a home for resale. Effective: Jan. 1, 2019.

Allowing apartment doorstep garbage pickup to continue — Apartment renters with doorstep waste collection services continue to be hamstrung by broad-ranging fire code restrictions. HB 529 resolves this issue in a safe manner by providing limitations on the placement of waste containers in hallways until Florida's Fire Prevention Code is revised. Effective: July 1, 2018.

Issues up for consideration in 2019 and beyond

Although Assignment of Benefits (AOB) reform did not happen this year, the momentum is building for a successful outcome to this escalating problem. AOB reform remains a serious issue for Florida's property owners. The business community and the Legislature will continue to work to find the right path forward.

Vacation rentals is another issue that will be addressed in subsequent legislative sessions. This session, an incredible amount of discussion occurred among stakeholders on the issue, and several bills made it very close to passage. The progress made this year will provide a good starting place for continued discussions during the 2019 legislative session.

A new issue brought up at the Florida Realtors Board of Directors meeting in January concerned open and expired permits. These permits often interfere with the closing of real estate transactions. Florida Realtors will be working with stakeholders to push for a bill that will help solve the problem in 2019.

The issue of remote notaries will resurface next session. The goal is to allow documents to be notarized even when the notary and the person signing the documents are not physically in the same room.