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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June 17, 2019

Fed Meets With Trade War Expanding

With the fronts on the trade war expanding from China to India and closer to home on our Southern Border with Mexico, the markets have become very nervous as to how increased tariffs will affect the economy, and we have seen stocks become more volatile. Obviously, the Federal Reserve Board is watching the markets as well, as they are concerned that the expansion will continue. Thus, we saw an interesting statement from Fed Chairman Powell recently:

“We are closely monitoring developments on trade. As always, we will act as appropriate to sustain the expansion,” Powell said at a monetary policy conference in Chicago. Powell did not say whether a rate cut was needed. But his comments suggest the central bank is now considering a move to support the economy. And his statement was enough to cause the markets to react positively with major gains, reversing the recent trend in the short term.

Today and tomorrow the first Fed meeting will take place after this statement was made. It will be interesting to see how the recent jobs report and the statement by Powell will affect the overall results of the meeting. More traders are betting on a rate change, but more likely for July. This is definitely a switch from earlier months when the predictions for a future rate increase were more prevalent than a rate decrease. One thing to keep in mind. The bond markets do not wait for the Fed. They act on projections. Thus, long-term consumer rates are already at their lowest point in almost two years.

Scott Robinson, Gateway Mortgage Group

REAL ESTATE NEWS

First American Financial Corp released the March 2019 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability. The index showed that nationally, affordability improved on a year-over-year basis for the first time since 2016. “What began as a modest shift toward a buyers’ market in six cities last month has expanded into a national shift in affordability,” said Mark Fleming, chief economist at First American. “The shift is a departure from the long-term trend in the Real House Price Index (RHPI), which had been steadily increasing throughout the rising rate environment that began in 2017 and continued until late 2018. Now, surging consumer house-buying power is increasing demand.” Source: First American

A majority of Americans – 65% – think it is still a good idea to invest in a home, according to the latest survey of consumer expectations of housing by the Federal Reserve Bank of New York. According to the survey, a majority of renters still think getting a home loan is difficult, but things may be improving as the share of those who considered it easy rose above 21% for the first time in at least five years. Home price expectations have fallen, though, the survey revealed, with the one-year outlook down 1% from last year and the five-year outlook down nearly the same. In contrast, rent expectations held steady, with the average one-year rent increase expectation hovering near 7.3%. When it comes to homeowners, the probability of refinancing dropped from 8.8% last year to 8%, while the probability of investing at least $5,000 in the home over the course of one and three years remained at last year’s relatively high level, the NY Fed said. Economists at the NY Fed said homeownership in the next decade will depend primarily on credit conditions. “Barring a change in the economy, the nation’s aging population will likely push up homeownership since older households are historically much more likely to own,” they wrote. “Further, the majority of current renter households would rather own; nonetheless, tight credit and other constraints, including the high prevalence of student debt, mean that many of these same renters see it as unlikely that they will ever be able to enter into homeownership.” Source: HousingWire

As we approach the end of the 2010s, the biggest cities in the United States are experiencing slower growth or population losses, according to new census estimates. The combination of city growth declines and higher suburban growth suggests that the “back to the city” trend seen at the beginning of the decade has reversed. These trends are consistent with previous census releases for counties and metropolitan areas that point to a greater dispersion of the U.S. population as the economy and housing market pick back up, perhaps propelled by young adult millennials who may be finally departing dense urban cores as they make a delayed entrance into marriage and the housing market. One consequence of big city population declines is the return of suburbanization, which was muted in the earlier years of this decade. In many respects, the city growth dominance earlier in the decade was an aberration of historical patterns— perhaps a result of the down housing market following the Great Recession, and the “stuck in place” millennial generation. Now, the new census data suggest that earlier suburbanization patterns are re-emerging. Source: Brookings

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