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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September 19, 2019

The Die is Likely Cast

The Federal Reserve Board is meeting this week with an announcement to be made on Wednesday. Many times, there is a lot of drama and speculation surrounding these meetings. We believe the die will likely have been cast before the meeting happened. The markets truly believe that the Fed must lower short-term interest rates. After all, it is the markets which have driven down long-term rates significantly over the past several weeks.

Had the jobs report came out to be a shocker on the strong side, perhaps there would be more debating. But even outside the employment numbers, we have seen evidence of a slippage in economic growth. Consumers are still spending, but business investment is weak, and the housing sector has lost its vigor over the past year. Though, it remains to be seen whether these lower long-term rates will insert some life into the housing sector. Certainly, there is some recent evidence of this happening.

One thing to keep in mind, the Fed lowering short-term rates will not necessarily cause long-term rates to fall further. The markets have made their move in anticipation of the Fed moving. If for some reason they did not lower rates, we could see long-term rates rise. This would be especially true if the Fed’s announcement indicates that the economy is on sound footing and more help is not needed. As a matter of fact, with the die likely cast, the wording of the announcement is more likely to move the markets than the rate decision.

Scott Robinson, Gateway Mortgage Group

REAL ESTATE NEWS

Although the majority of Americans favor home ownership, Fannie Mae’s latest National Housing Survey revealed many over-estimate the qualifications and what it takes to own a home. “Despite increased exposure to credit scores and online resources, consumer understanding about what it takes to qualify has not improved since our original study in 2015, potentially discouraging willing and qualified Americans from taking steps toward home ownership,” the GSE’s report stated. Fannie Mae said that a 2018 study, which included an online survey of more than 3,000 respondents, found that more consumers reported seeing their credit scores, but close to half cannot recall what it is. Also, consumers overestimate the necessary score and down payment needed to qualify for a home loan, remain unfamiliar with low down payment programs, and an overall lack of knowledge on qualification. “While viewing one’s score is a good start, consumers need to understand what to do with that information,” Fannie Mae said. “Monitoring a score is not the same as understanding how the score impacts their financial situation.” Fannie Mae added that education should be timely, customized, convenient, simple, and delivered when a potential borrower is making a decision on whether to buy or sell. Optimizing information for mobile devices will play a large role in closing the gap, especially for younger borrowers. Some mobile apps already help consumers budget, invest, and manage debt. Residential finance tools could be integrated into more of these apps to provide step-by-step advice, the Survey indicated. Source: DS News

Even as Millennials enter the home buying market, many Baby Boomers indicate they plan to stay in their homes throughout their retirements, according to a new study from PropertyShark. The study showed that almost a third of adults over the age of 45 say they struggle with the cost of housing and a third also say they don’t plan on ever fully retiring. Beyond that, the study showed that more than half of Baby Boomers (56% to be exact) said they want to age in place and stay in the home they’re in now. A situation like that could have negative impact on the housing availability for younger buyers, with fewer homes coming on the market. Of those with a yearly income of $20,000 to $40,000, 42% said they struggle with housing costs. There’s also a knowledge gap for Baby Boomers and their future housing options. According to the survey, half of the people surveyed said they lacked knowledge of government programs in relation to senior housing. What’s the main concern for housing after retirement? Keeping up with maintenance and repairs, and cost of rising property taxes. Over half of respondents said they have less than $100,000 saved for retirement, and only 4% said they have more than $1 million saved. Another option for older homeowners? A third of the survey said they wouldn’t mind cohabiting. While more than half said they would rather not have someone move in with them, 41% said they’d be willing to live with someone if they’re vetted, help around the house and pay rent. Source: HousingWire

Declining interest rates have sparked interest in investors, as they are purchasing homes at a record pace, according to analysis from Deutsche Bank Research. “With declining interest rates … they’re searching for a better return for their money,” said Lawrence Yun, Chief Economist and SVP at the National Association of Realtors, to FOX Business. According to the report, the share of investors buying U.S. homes rose to more than 11%. Yun said in the report that real estate is a “more secure return” than most investments, mostly due to a steady gain. CoreLogic’s Case-Shiller U.S. National Home Price Index (HPI) found that home prices rose 3.4% in May 2019, which is a slight decrease from the 3.5% in April. “Growth in home prices, as measured by the Case-Shiller HPI, began to stabilize in May. The more than 100 basis point decrease in rates since November has revived home sales and given buyers additional purchasing power in the market,” said Tian Liu, Chief Economist at Genworth Mortgage Insurance. A separate report by CNBC found that companies such as Taylor Morrison, Lennar, and Toll Brothers have started building single-family, rent-only communities, aimed at selling to investors. Source: MReport

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