Eye on Santa Fe

The Tax Cuts and Jobs Act – What it Means for Homeowners and Real Estate Professionals

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.

>>>>>> CONTINUE TO THE NAR WEBSITE FOR THE COMPLETE ARTICLE>>>>>

unnamed

 

 

 

 

August 18, 2020

The Housing Market Losing Steam?

The one area of obvious strength for the economy during the pandemic has been real estate. We have mentioned many times that a collapse of the real estate market helped cause the Great Recession and the real estate market has bolstered the economy during the pandemic. The market has been characterized by rising prices and bidding wars for scant inventory.

Record low interest rates have bolstered the market. Rates were supposed to rise this year, but instead rates have stayed near these historic lows recently. These low rates have kept homes affordable despite sharply rising prices. Regardless of these low rates, the market seems to have cooled, or at least stabilized, in the past few months. Is this period indicative of a temporary pause, stabilization, or the start of a downturn?

On one hand, the demographics tell us that we have a shortage of homes. The National Association of Realtors has indicated that the supply gap is as much as 6.8 million units. On the other hand, we know that home prices can’t continue to rise at double digit percentages every year. Thus, we expect the market to continue to cool somewhat, but demand should support the market and prices for some time in the future. Of course, the rise of the Delta variant could have an effect upon the economy and real estate, but we are not expecting these basics to change.

Scott Robinson, Gateway Mortgage Group

 

REAL ESTATE NEWS

One in three consumers believes their dream home is financially attainable one day, according to a new survey from Buildworld, an international company that offers building materials. Millennials are the most optimistic, with about 38% believing they’ll one day buy their dream home, while Gen Z is the least optimistic at about 19%. What makes a dream home? Buildworld recently surveyed 1,000 consumers to find out. Modern farmhouse exterior styles and a rustic modern interior were among the most popular. One in five consumers called the modern farmhouse their “dream home.” A modern farmhouse combines contemporary style with a farmhouse aesthetic. Inside, rustic modern was the most popular interior style. It includes modern furniture with preserved and natural architectural features, an open floor, and lots of light, Buildworld notes. Age groups tended to show slightly different preferences for interiors and exteriors. Source: Buildworld

A rising number of homebuyers are buying larger residences than previous years, including millennials who make up the largest share of homebuyers at 37%. In today’s heated market, many of them face intense competition and bidding wars to pay double the listing price on their house. However, baby boomers have been making out like bandits, controlling 43% of the seller’s market. Sellers have all the advantages in today’s market. Swelling price inflation allows sellers to reap bigger profits from selling their house, making it easier to afford a new home. Those who sold their home during the pandemic made a median of $66,000, which is $6,000 more than the year prior. Sellers aged 55 and younger were more likely to upgrade to a larger, more expensive home while staying in close proximity to their old home. Sellers aged 56 and older were more likely to move into a similar-sized home, but less expensive than their previous home because they moved farther away. Sellers stayed in their previous home for a median of 10 years, while those between the ages of 31 to 40 stayed for a median of six years. For sellers aged 66 and older, they stayed in their previous home a median of 16 years. These homes were on the market for about three weeks before being sold. Chief economist at Realtor.com, Danielle Hale said, “In a real estate market that is tipped in the favor of sellers, boomers and older homeowners are really the ones holding the cards. Those who are selling homes can use the profits to help them buy new ones,” she adds, pointing out that they’re “generally better equipped to deal with market conditions.” The combination of low mortgage rates, low inventory, and high demand for a new abode has sent prices skyrocketing for the past year and a half. As a result, sellers got 99% of what they asked for, or more. Source: Realtor.com

Tight housing inventory forced more prospective homebuyers into the rental market in June 2021, driving the nationwide median rent price to a new high of $1,575, an 8.1% increase year-over-year, according to Realtor.com’s Monthly Rental Report. Additionally, rental prices in 44 of the 50 largest metros broke new records. The report found that the U.S. median rent is now $118 more than it was two years ago. “The surge we’re seeing in rental prices is likely to exacerbate the K-shaped, or uneven, nature of the pandemic recovery in the U.S.,” said Realtor.com Chief Economist Danielle Hale. “Rents are rising at a faster pace than income, which is adding to the challenges faced by lower-income Americans as they struggle to recover from job losses and other hardships brought about by COVID. Looking forward, rents aren’t expected to slow unless we see a fundamental shift in the number of homes for sale and for rent. The 3.2% price growth in June over the month of May was more than just the usual seasonal trend of increasing summer rents. Rents typically fluctuate by less than 1% on a monthly basis. In June, rents in all but two of the 50 largest U.S. metros posted month-over-month gains of 1% or higher. The desire for larger living spaces increased during the pandemic, as remote workers sought work spaces and spots with larger square footage for the family. This trend continued to play out in June as two-bedroom rents increased at the fastest pace of all unit sizes, up 10.2% year-over-year to a new high of $1,770. Two-bedroom rents were up 13.6% in June compared to 2019, rising $212 per month in just two years. Source: DS News