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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May 15, 2018

Another Milestone

The economic recovery recently hit an important milestone. It is now officially the second longest expansion in our history. For much of the expansion, the recovery has felt more painful than others. For one, the Great Recession was extremely deep and painful. Therefore, most Americans needed a long-term for their personal recovery from the recession. Secondly, the recovery was quite slow. Sometimes it was so slow it did not seem like a recovery at all.

On the other hand, the slow pace of the recovery brought some major advantages to the equation. Interest rates were able to remain low for a longer period of time. We had a sale on money that has lasted most of the previous decade. Additionally, the long life of the recovery can be attributed to the fact that the economy has not overheated during the recovery.

Overheated economies bring inflation and rapidly rising interest rates which can turn the economy south in a hurry. Even as rates have risen in the past two years, it has been a slow and gradual process. As a matter of fact, long-term rates have taken their time to react to the Federal Reserve Board’s short-term rate hikes. Of course, the next question is–how long will the recovery keep going? We know it can’t last forever. Our hope is that when the recovery does pause, it does so in a very mild way, in contrast to the last recession. For now, the old guy is just trudging along.


 Scott Robinson, Gateway Mortgage Group

 

 

 

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REAL ESTATE NEWS

It used to be that homebuyers had to pay off their past-due federal taxes to obtain financing. But no more, at least not when the home loan is being purchased by Fannie Mae. Under new rules from the government-sponsored company, as long as you have an approved payment plan with the Internal Revenue Service, you can qualify for a home loan. But realize that the monthly payments under the IRS plan will be counted as debt when your lender calculates your all-important debt-to-income ratio. Consequently, you may not be able to borrow as much as you would like. It may help to try to renegotiate your agreement with the IRS, so you have smaller payments and a longer payoff period. It’s the monthly debt that counts against you, not how long you have to pay it, so this step should allow you to borrow more. Alternatively, pay your entire tax debt off as soon as possible before entering the housing market. Unless you have the cash on hand right now, you may have to wait a while to buy, but it could be worth it. As usual, there are rules that come with Fannie Mae’s new guidelines: First and foremost, a Notice of Federal Tax Lien cannot have been filed against you in the county in which the property is located. Also, at least one payment under the IRS agreement must have been made prior to closing. The lender must obtain extra documentation, including: An approved IRS installment agreement with the terms of repayment and proof the borrower is current on that contract. Source: Lew Sichelman, uExpress

CoreLogic released its latest Single-Family Rent Index, which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for January 2018 shows a national rent increase of 2.8 percent, compared to 2.6 percent in January 2017. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The Rent Index shows that single-family rent prices have climbed between 2010 and 2018; however, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.1 percent. National rent growth in January 2018 was pulled down by high-end rentals, which are defined as properties with rent prices 125 percent or more of a region’s median rent. High-end rent prices increased 2.4 percent year over year in January 2018, up from a gain of 1.5 percent in January 2017. Rent prices among low-end rentals (properties with rent prices less than 75 percent of the regional median) increased 3.8 percent in January 2018, down from a gain of 4.7 percent in January 2017. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. “Single-family rent price growth remained solid in January,” said Molly Boesel, principal economist for CoreLogic. “High demand and low supply for entry-level properties drove lower-priced rentals to have faster price growth than higher-priced rentals, revealing affordability pressures in this segment of the rental market.” Source: CoreLogic

In the absence of legislative reform by Congress, there’s only so much the Federal Emergency Management Agency can do to encourage the growth of private flood insurance. But FEMA, which oversees federal flood insurance, has come up with a few small but meaningful program changes that will make it easier for households to switch to private insurance if they can get a better deal that way. First, the agency has lifted the requirement that households retain their federal coverage if they switch to private insurance before their coverage term is up. Prior to this change, households had to maintain their federal coverage even after switching to private coverage, which meant they had to pay two sets of premiums if they made the switch. And second, insurance companies that offer federal coverage can now also offer private coverage as well, either their own or another company’s. Prior to this change, if a company offered the federal option, it was prohibited from providing a private alternative. The agency has also made two other small changes to make life easier for homeowners who appear to be in a flood zone. First, if a homeowner’s state uses what’s known as LiDAR technology to collect elevation data, owners can now use that data to demonstrate they don’t need flood insurance. That can save them as much as $2,000 on the cost of a separate elevation certificate. And second, FEMA’s procedures for newly mapped flood areas will be extended to apply to more properties. That means more owners will be able to start their premiums at a lower rate and only gradually reach responsibility for full premiums. Source: REALTOR® Magazine