Has Tax Reform Impacted The 2018 Housing Market?

Starting late last year, some predicted that the 2018 tax changes would cripple the housing market. Headlines warned of the potential for double-digit price depreciation and suggested that buyer demand could drop like a rock. There was even sentiment that homeownership could lose its coveted status as a major component of the American Dream.

Now that the first quarter numbers are in, the KCM Crew begins to decipher the actual that impact tax reform has had on the real estate market.

1. Has tax reform killed off home buyer demand? The answer is “NO.”

According to the Showing Time Index which “tracks the average number of buyer showings on active residential properties on a monthly basis” and is a “highly reliable leading indicator of current and future demand trends,”buyer demand has increased each month over the last three months and is HIGHER than it was for the same months last year. Buyer demand is not down. It is up.

2. Have the tax changes affected America’s belief in real estate as a long-term investment? The answer is “NO.”

Two weeks ago, Gallup released its annual survey which asks Americans which asset they believed to be the best long-term investment. The survey revealed:

“More Americans name real estate over several other vehicles for growing wealth as the best long-term investment for the fifth year in a row. Just over a third cite real estate for this, while roughly a quarter name stocks or mutual funds.” 

The survey also showed that the percentage of Americans who believe real estate is the best long-term investment was unchanged from a year ago.

3. Has the homeownership rate been negatively impacted by the tax changes? The answer is “NO.”

Not only did the homeownership rate not crash, it increased when compared to the first quarter of last year according to data released by the Census Bureau.

In her latest Z Report,Ivy Zelman explains that tax reform didn’t hurt the homeownership rate, but instead, enhanced it:

“We have been of the opinion that homeownership is most highly correlated with income and the net effect of tax reform would be a positive, rather than negative catalyst for the homeownership rate. While still in the early innings of tax changes, this has proven to be the case.”

4. Has the upper-end market been crushed by new State and Local Taxes (SALT) limitations? The answer is “NO.”

In the National Association of Realtors latest Existing Home Sales Report it was revealed that:

  • Sales between $500,000 and $750,000 were up 4.5% year-over-year
  • Sales between $750,000 and $1M were up 15.1% year-over-year
  • Sales over $1M were up 17.3% year-over-year

5. Will the reforms in the tax code cause home prices to tumble over the next twelve months? The answer is “NO.”

According to CoreLogic’s latest Home Price Insights Report, home prices will appreciate in each of the 50 states over the next twelve months. Appreciation is projected to be anywhere from 1.9% to 10.3% with the national average being 4.7%.

Bottom Line

The doomsday scenarios that some predicted based on tax reform fears seem to have already blown over based on the early housing industry numbers being reported.

via The KCM Crew

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Six Building Product Design Trends

At the International Builders’ Show (IBS), John Burns identified six new home construction and repair/remodeling design trends. For additional detail and photo examples, click here.

1. Internet of Things (IoT) technologies open the door to whole-home connectivity. Amazon’s Alexa and other personal assistants have opened the flood gates for smart home products, especially in home security, plumbing, appliances, and HVAC.

2. Labor efficient products take center stage. Building product manufacturers continue to invest in products that streamline the installation processes, with KATERRA’s large booth the poster child for potential labor disruption this year.

3. Engineered products offer great design and less maintenance. Engineered products look increasingly like their natural counterparts, often at better or comparable prices. We found many examples in commodities (decks, subfloor, siding, doors) and design finishes (countertops, surfaces, interior millwork).

4. Black is back. Black finishes dominated the appliance, plumbing, hardware, and window/door exhibits.

5. Customizing becomes simpler. Customizable product offerings this year focused on minimizing costs and complexity for the consumer. Standouts included private-label hardware options, mix-and-match handle/spout colors and finishes, and appliance panel customizing options.

6. Design has shifted to ultramodern. Exhibitors highlighted ultramodern interior designs, mirroring the home builder shift to ultramodern home elevations.

via Steve Basten: sbasten@realestateconsulting.com 

 

Florida Existing Home Sales Flatten

Prices, however, continue rising.

Florida’s housing market continued to report a tight supply of homes for sale and rising median prices in February, according to the latest housing data released by Florida Realtors®.

Sales of single-family homes statewide remained relatively flat last month, totaling 18,033, down 0.5% compared to February 2016.

“Florida’s economy is growing, with more jobs being created,” said 2017 Florida Realtors President Maria Wells, broker-owner with Lifestyle Realty Group in Stuart. “And a growing economy boosts the state’s housing sector as well. However, many local markets are reporting low inventory of for-sale homes at a time of increasing buyer demand.”

The statewide median sales price for single-family existing homes last month was $225,000, up 12.5% from the previous year, according to data from Florida Realtors research department in partnership with local Realtor boards/associations. The statewide median price for townhouse-condo properties in February was $167,500, up 11.7% over the year-ago figure. February marked the 63rd month in a row that statewide median prices for both sectors rose year-over-year. The median is the midpoint; half the homes sold for more, half for less.

via Builder Magazine

http://www.ForeSiteResidential.com

Do You Want to Buy Your Dream Home?

Want to Buy Your Dream Home?

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Ask yourself the following 3 questions to help determine if now is a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This is truly the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”

This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in December (the latest data available) was $232,200, up 4.0% from last year. This increase also marks the 58th consecutive month with year-over-year gains.

If we look at the numbers year over year, CoreLogic forecasted a rise by 4.7% from December 2016 to December 2017. On a home that costs $250,000 today, that same home will cost you an additional $11,750 if you wait until next year.

What does that mean to you?
Simply put, with prices increasing each month, it might cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long-term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors, and Fannie Mae have all projected that mortgage interest rates will increase over the next twelve months, as you can see in the chart below:

Mortgage Rate Projections

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

via Keeping Current Matters 

Case-Shiller Says the Housing Market Has Now Officially, Completely Recovered… Do You Agree?

David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee, explains the economic factors that led to this recovery and looks at the price gains seen in the top 20 cities. He also points out the uncertainty that exists following the election of President Trump.wooden-block-house-on-money

[HousingWire.com]Home prices increased in November, making the argument the housing market recovered completely from the housing crisis.

According to the latest data released Tuesday by S&P Dow Jones Indices and CoreLogic, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which covers all nine U.S. census divisions, increased 5.6% annually, up from 5.5% from the previous month.

The 10-City composite increased by 4.5% from November 2015, up from 4.3% in October. Similarly, the 20-City Composite increased 5.3% year-over-year, up from 5.1% the month before.

Source: S&P Dow Jones Indices, CoreLogic
Source: S&P Dow Jones Indices, CoreLogic

“With the S&P CoreLogic Case-Shiller National Home Price Index rising at about 5.5% annual rate over the last two-and-a-half years and having reached a new all-time high recently, one can argue that housing has recovered from the boom-bust cycle that began a dozen years ago,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee. “The recovery has been supported by a few economic factors: low interest rates, falling unemployment, and consistent gains in per-capita disposable personal income.”

“Thirty-year fixed rate mortgages dropped under 4.5% in 2011 and have only recently shown hints of rising above that level,” Blitzer said. “The unemployment rate at 4.7% is close to the Fed’s full employment target. Inflation adjusted per capita personal disposable income has risen at about a 2.5% annual rate for 30 months.”

Seattle, Portland and Denver reported the highest annual gains among the top 20 cities for each of the past 10 months. In November, Seattle came in first with an increase of 10.4%, followed by Portland at 10.1% and Denver at 8.7%.

Monthly, the National Index increased by 0.2% in November. The 10-City Composite and 20-City Composite also both increased 0.2% for the month. After seasonal adjustment, however, the National index increased 0.8% and the 10-City and 20-City Composites increased 0.9% month-over month. After seasonally adjustment, all top 20 cities saw an increase in home prices.

“The home prices and economic data are from late 2016,” Blitzer said. “The new Administration in Washington is seeking faster economic growth, increased investment in infrastructure, and changes in tax policy which could affect housing and home prices.”

“Mortgage rates have increased since the election and stronger economic growth could push them higher,” he said. “Further gains in personal income and employment may increase the demand for housing and add to price pressures when home prices are already rising about twice as fast as inflation.”

Thank you Kelsey Ramirez with HousingWire.com

Who’s Afraid of Rising Interest Rates?

While mortgage rates remain “historically low,” many first-time buyers think they’re substantially more expensive because they don’t remember high-rate years.

1st Time Homebuyers

[Move.com] Rising mortgage rates have created an urgency for Experienced Purchasers to buy before further increases. Average listing views on realtor.com surged 40% to 80% in the last 3 weeks of December 2016 compared to December 2015.

“Rising rates have made demand even more intense,” realtor.com notes. However, the demand mostly seems to be coming on stronger from repeat buyers. For first-time buyers, rising mortgage rates are having an opposite effect and they’re showing signs of beginning to shy away from the market.

The number of 1st-time buyers planning to purchase this spring has dropped sharply and the rise in mortgage rates over the past few weeks may be to blame for their retreat, according to realtor.com® study. Repeat buyers, on the other hand, want to lock in rates right away.

Forty-four percent of active home buyers who plan to buy a home this spring are first-time home buyers, down from 55% last fall who said they were planning to buy in the spring. So what’s spooking them?

Average rates today are about a half percentage point higher than they were in 2016. That means a median-priced home financed with a 20% down would cost an extra $720 per year in added interest, realtor.com.

If you want to own your first home, now is STILL the time to buy!

First-time buyers are nearly 5 times more likely than repeat buyers to say they are facing challenges qualifying for a mortgage. Affordability topped first-time buyer concerns.

In November, first-time buyers made up 32% of all buyers, according to the National Association of Realtors.

“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” adds Jonathan Smoke chief economist for realtor.com. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move up in rates is discouraging new home buyers already.”

On the other hand, repeat homebuyers realize mortgage rates – while moving higher overall – are still at historical lows. Before rates jump more, these buyers are in a rush to close before rates increase further, according to realtor.com’s study.

First-time buyers may need to lower their expectations a little and not insist on a dream home…  Their perfect home is out there, it just takes a different approach  and process to finding it.  Please give us a call, we would love to help you.

http://www.ForeSiteResidential.com

A Look at New Homes: Onward and Upward in 2017

Housing Outlook

© 2017 Florida Realtors — Fueled by a growing economy, solid employment gains and rising household formations, single-family housing production will continue a gradual, upward trajectory in 2017, according to economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show in Orlando, Fla.

“While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face supply-side constraints led by the three ‘Ls’ – lots, labor and lending,” said NAHB Chief Economist Robert Dietz.

He said that 64 percent of builders nationwide report low or very-low lot supplies; the rate of unfilled jobs in the construction sector is now higher; and acquisition, development and construction loans for builders – while on the rise – needs to grow faster to meet demand.

“The industry needs to recruit more workers and get more land in the pipeline, but it will take time,” Dietz said.

However, supply-side challenges are more than offset by continued economic growth, ongoing job creation, rising wages and favorable demographics. Moreover, builder confidence is higher because builders expect the incoming Trump administration to help to lower regulatory costs.

“Regulatory requirements make up nearly 25 percent of the cost of a new home,” said Dietz. “Given those constraints, it is hard to build a $200,000 entry-level house.”

In a sign that more millennials are getting off the sidelines and jumping into the market, Dietz noted that townhome construction, which can be a useful bridge for millennials to transition to homeownership, is showing impressive growth and now constitutes 12 percent of all single-family starts.

Solid outlook

  • NAHB expects mortgage interest rates to average 4.5 percent in 2017 and 5.3 percent in 2018.
  • NAHB projects 1.16 million total housing starts in 2016, up 4.9 percent from the previous year’s total of 1.11 million units.
  • Single-family production is expected to rise 10 percent in 2017 to 855,000 units and increase an additional 12 percent to 961,000 next year.
  • Using the 2000-2003 period as a benchmark for normal housing activity when single-family production averaged 1.3 million units annually, single-family starts are expected to steadily rise from 56 percent of “a typical market” in third quarter 2016 to 75 percent of normal by fourth quarter 2018.
  • On the multifamily front, NAHB expects multifamily starts to hold steady in 2017 at 384,000 units, which would be 1,000 units above last year’s pace. While this level is slightly above trend, Dietz said the pace is sustainable due to demographics and a balance between supply and demand.
  • Residential remodeling activity is expected to register a 1 percent gain this year over 2016.

Affordability and demographics

CoreLogic Chief Economist Frank Nothaft expects mortgage rates to rise and home prices to moderate in the coming year.

“We anticipate that a stronger economy will translate into higher mortgage rates,” said Nothaft. “Meanwhile, we expect moderation in 2017 for rent and home price growth, but it will still be higher than inflation (thanks to) tight inventory in the housing market.” He said home purchase originations should rise 5.7 percent in 2017, and credit risk for home loans is substantially lower than 10-15 years ago.

The biggest housing issue in 2017 will be affordability, Nothaft said. “Mortgage rates are up three-quarters of a point since last summer and house prices are up. That starts to pinch a household budget.”

On the flip side, demographics will be very positive for housing and home sales going forward. “As millennials age from 25-to-30, that is a big potential base to expand the home buyer market,” said Nothaft.

Supply and demand

David Berson, chief economist for Nationwide Mutual Insurance Co., also expects mortgage rates to rise in the coming year, but he said it shouldn’t have a negative impact on housing demand.

“Higher mortgage rates will be offset by stronger wage gains and job growth, which suggests that housing demand will increase this year,” said Berson. “The question is, how much will supply go up?” He said most U.S. metro areas are relatively healthy, marked by solid job growth, mortgage delinquencies down to near-normal levels and strong, but not excessive house price gains.

A major concern going into 2017, he said, is that demand will exceed supply, which puts upward pressure on home prices.

“If there aren’t enough homes on the market, that will be a problem,” said Berson. “Price gains need to moderate. We can’t have six, seven or eight percent gains. That is not sustainable.” That situation could downgrade many markets from “healthy” to “neutral.”

© 2017 Florida Realtors