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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April 8, 2020

The Importance of Inflation

Inflation, inflation, inflation. This year, rates have been headed up and we keep hearing this word being uttered again and again. Rates have been rising because there is an elevated threat of inflation. The question is – why are these two concepts linked together so often? Today, we would like to reintroduce our simple but hopefully effective explanation.

Suppose you lend someone $100,000 for one year. During that year, the inflation rate rises 10%. When you get paid back at the end of the year, what will your $100,000 be worth? The answer is $90,000 because you can only purchase $90,000 worth of goods with that money. Thus, you would have to charge 10% interest just to break “even.” And banks who lend money are not in business to break even, especially when you figure in the risk of not being paid back.

Thus, the inflation rate becomes the “base” for interest rates. Again, an oversimplification.  Next we must ask whether rising inflation is a threat.  For that we look at economic indicators. We just saw a most important indicator – the jobs report.  The increase of almost a million jobs last month could be interpreted as a potentially overheating economy. But we must remember that we are still catching up with regard to the number of jobs lost since last year.  Overall, the report represents great news – with still a way to go before the economy overheats.

Scott Robinson, Gateway Mortgage Group

 

REAL ESTATE NEWS

Typically, home sellers wait for a potential buyer to make an offer and then allow the buyer to pay for an inspection of the home before the transaction closes. But that could cause a lengthier closing process and negotiations over repair costs. As such, some home sellers are considering a pre-listing home inspection to try to resolve any potential hang-ups before they list that could hamper their closing. This can help many sellers who have tight deadlines to meet if they’re purchasing a new property themselves. Home sellers who do a pre-listing inspection will have a home inspector review their home and suggest any repairs that may need to be made in advance. “With a home inspection, you will have a much better understanding of any flaws or damage your house has and can price accordingly,” Redfin notes on its blog. “Maybe the house needs a new garage door, or there are issues with leaky pipes. If you decide not to fix the issues revealed during a pre-listing inspection, you can factor the repair costs into the asking price of the home.” Sellers who have a pre-listing inspection need to share the information with the buyers, typically on the disclosure form before they list that indicates their knowledge of any potential issues with the home. Sharing the full pre-listing inspection report with buyers will give more information about the home. Real estate professionals who suggest pre-listing inspections could help accelerate the transaction and avoid last-minute negotiations over repairs.
“If the seller needs a quick timeline to close or is putting in an offer that will be contingent and with tight deadlines, a pre-listing inspection may help them stay a few steps ahead in the process,” Angelica Olmsted, a broker associate with Team Denver Homes of RE/MAX Professionals indicated. Source: Redfin

First-time home buyers are swooning over housing. Millennials are comprising the largest share of buyers at 37%, shows the National Association of Realtors®’ 2021 Home Buyer and Seller Generational Trends report. The youngest buying generation–Gen Z—is also starting to emerge. The majority of millennials and Gen Z buyers are first-time home buyers and are increasingly relying on real estate professionals to navigate their homebuying debut in what has become a very competitive housing market during a pandemic. In particular, younger millennial buyers—ages 22 to 30—were the most likely to cite a real estate agent as a prime information source they used during their home search at 91%, according to NAR’s survey. “Buyers used all tools available to them—whether it be a mobile device, yard sign or an online video–but at some point, nearly all buyers turned to an experienced agent to assist with the transaction,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “This is especially true among younger millennial consumers as they are likely first-time buyers and need help navigating the market and all steps involved in the process.” The use of virtual tours for in-home shopping has skyrocketed since the pandemic, particularly among 22- to 40-year-old buyers. “Home buying aside, this segment of the population was already accustomed to doing research online,” Lautz says. “So, to see them really embrace virtual tours and virtual open houses was a given, nonetheless, real estate agents are the top information source, and the data shows these buyers ultimately used agents to purchase a home.” Source: NAR

Want to buy a new home? Get ready to pay a premium of $24,000 thanks to escalating softwood lumber costs, according to the National Association of Home Builders (NAHB). NAHB chief economist Robert Dietz reported the estimated extra cost tacked on to the price of a new single-family home while commenting on the group’s latest Housing Market Index, which gauges builder confidence in the market. Elevated material prices pushed the index lower despite high demand and stout homebuyer traffic, bringing the index down two points to a reading of 82 in March. “Builder confidence peaked at a level of 90 last November and has trended lower as supply-side and demand-side factors have trimmed housing affordability,” said NAHB Chief Economist Robert Dietz. “And mortgage interest rates, while historically low, have increased about 30 basis points over the last month.” “Supply shortages and high demand have caused lumber prices to jump about 200% since last April,” added Chuck Fowke, chairman of the NAHB. “Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.” Source: Scotsman Guide