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.

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December 2, 2020

Is it Already December?

We would like to say that time flies when you are having fun, however, no one in their right mind would describe 2020 as fun. Yet somehow, we have arrived at the last month of the year and it all seems like a blur. The world-wide pandemic brought us an economic roller coaster we might never match again. We had slowing economic recovery, a steep recession and a recovery — all in one year. During the Great Recession, these highs and lows took most of a decade.

Even the recovery has been very uneven. If you were in real estate or residential loans, the recovery was almost instantaneous. Other sectors, especially the leisure and travel industries, are still waiting to recover. Some may never recover because of the fundamental changes which have occurred within our economy and other industries have thrived. Even where we live and work has been affected.

Like most years, we will spend much of December and January recapping what has happened in 2020, as well as presenting predictions for 2021. And one thing that 2020 taught us is that accurate predictions of the future are just about impossible. In December of last year, did anyone predict what hit us in 2020? The question we all should be asking is — If this situation happens again, will we be better prepared? While we are all focused on healing and recovery in 2021, we must not let this last question go unanswered.

Scott Robinson, Gateway Mortgage Group

REAL ESTATE NEWS

Breaking news:  The FHFA announced new Fannie Mae and Freddie Mac conforming limits for 2021. In 2021, the maximum conforming loan limit (CLL) for one-unit properties will be $548,250, a 7.2% increase from $510,400 in 2020. The new limit for one-unit properties in most high-cost areas will be $822,375 — or 150 percent of $548,250.

Homes are selling much quicker than they did a year ago, and sales of resort and second homes are no different. “Properties are moving fast,” Gay Cororaton, senior economist and director of housing and commercial research at the National Association of Realtors®, said during the virtual 2020 Realtors® Conference & Expo. In September, 68% of vacation homes sold in less than a month, according to the Realtors® Confidence Index Survey. Historically, about 30% sell that quickly, she said. “It’s a pretty amazing uptick compared to past years,” Cororaton added. Sales of resort and second homes accounted for 6.3% of overall home sales in the third quarter, up from about 4.5% in the second quarter, according to the RCI. One consequence of the pandemic has had a clear influence on these sales. “Working from home is a positive factor in demand for vacation homes,” Cororaton said. Many people who can work remotely are choosing to do so in their second or vacation homes, she said. Price increases are following those sales. In the third quarter, prices in vacation-home counties rose by about 32% year over year. Seventy-nine percent of these counties experienced year-over-year price gains. NAR defines a vacation-home county as one in which seasonal housing accounts for at least 20% of stock. Sales in vacation-home counties increased 48% on average year over year in the third quarter; overall, 81% of vacation-home counties saw a year-over-year sales increase. Source: NAR

Another trend that has emerged from the pandemic and all this time homeowners find themselves with at home are home improvements, which are booming. Home Improvement Research Institute (HIRI) analysts expect home improvement spending by Americans to reach $439.9B in 2020, an increase of 8.7% in spending, as the desire to make residences safer, more comfortable, and more enjoyable has led to a home improvement boom. Consumer led improvements saw the biggest jump with an 11% increase in 2020 while professional contractor purchases are estimated to increase by 3.8%. But the boom isn’t expected to last into the New Year. HIRI expects growth in home improvement product sales to ease in 2021 as many homeowners brought forward planned projects to this year. The total market is expected to grow by 1.5% in 2021, with the consumer market declining by 0.1% and the professional market growing by 5.3%. What are the hottest improvements being made? Houzz reports that demand for kitchen and bath remodeling was up 40% YTD in June 2020, while home additions increased 52% and fencing projects jumped 166%. Source: Rise and Shred

The term “starter home” often relates to first-time buyers or fixer-uppers, and a recent article by The American Genius for Real Estate suggests real estate pros may not want to use the phrase too much. The definition of a “starter home,” according to the Collins English Dictionary, is a “small, new house which is cheap enough for people who are buying their first home to afford”—which assumes the owner intends to trade up in the future. But some buyers see their first home as their dream home. “Don’t call cheaper houses ‘starter homes,’ but just a home,” says The American Genius for Real Estate. If you search Google for the phrase, you’ll find plenty of other articles venting the same frustration. On a Washington, D.C.–focused chat site for parents, one user says: “Seems like people who use the term ‘starter’ in a listing are projecting onto buyers what their long-term goals should be, even if they’re buying small right now.” Other users on the site, however, say they’re not bothered by the phrase. One who identified as a first-time buyer shopping for an affordable rowhouse says the phrase helps clarify property type. “Whether the [real estate agent] called it a starter home or not would not have mattered one bit to us, and we wouldn’t have been thinking about whether we’d move 10 or 15 years later,” the user says. Source: Huffington Post

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