Real Estate Agents Mobilize to Shield Homeowners on Tax Plan
Real Estate Agents Mobilize to Shield Homeowners on Tax Plan
For decades, the real estate industry has benefited from generous tax deductions that raise home values by making it cheaper for people to own property and shoulder their local taxes. Now, as the Republican tax plan makes its way through Congress, the industry is worried that the fallout will harm its business by making homeownership less valuable.
Around the country, real estate organizations are calling legislators, warning clients about their future tax bills and staging protests, all in an effort to keep homeowners as a favored class in the tax code. “We don’t consider ourselves to be Republicans or Democrats,” said Linda Jay, chief executive of the Bakersfield Association of Realtors in central California. “We are the Realtor party.”
“Important to this discussion is the fact that both the Senate and House tax reform proposals double the standard deduction and increase the child tax credit, allowing families to keep more of their paycheck to save for downpayment, and younger folks to rent apartments and form new households,” says Collingwood Group Chair Tim Rood. “Passage of the bill in the Senate will take some work, hopefully other key elements will be restored that will improve upon the Nation’s dismal homeownership situation.”
Last week, Ms. Jay and other agents congregated in front of the local office of Representative Kevin McCarthy, the House majority leader, holding signs and chanting, “Save homeownership.”
“We know he has a tough job to do,” she said. “But we certainly are not going to shy away from letting him know what our feelings are.”
According to some economists, real estate agents have plenty to fear. The Senate version of the tax bill would eliminate the deduction for local property taxes (the House bill caps it at $10,000), and both the House and Senate bills would effectively make the mortgage-interest deduction less valuable to many homeowners. Both provisions could raise the cost of owning a home, making homeownership less attractive for at least some families — and perhaps depressing property values
read more: NYT
Home Sales Remained Sluggish in October
Home sales in October continued to be weighed down by supply shortages and the ongoing recovery from hurricanes in Florida and Texas.
Existing-home sales increased 2% in October from a month earlier to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said Tuesday. But sales dipped 0.9% from the same month a year earlier, the second consecutive decline on an annual basis.
“The housing market largely remains stuck in the same, predictable rut it has been in for the past two years or so” of high demand and low inventory, said Svenja Gudell, chief economist at home-listing website Zillow.
Home sales in areas hit by hurricanes, including Houston, Orlando and other major markets, showed gains from previous months, helping to drive the monthly increase in October, according to Lawrence Yun, NAR’s chief economist.
Sales in the south rose 1.9% from September but remained 1.8% lower than a year ago. Economists said pent-up activity from closings that were delayed from Hurricane Harvey in August and Hurricane Irma in September helped boost sales activity.
read more: WSJ
Why Does Affordable Housing Cost So Much to Build?
Housing affordability is a problem, and building publicly subsidized housing that’s dedicated to low- and moderate-income households is so expensive that the problem won’t get easier, says Joe Cortright for CityLab.
In some cities, such as San Francisco, the cost to build is substantial. One of the largest all-affordable housing projects in the state, the 165-unit 1950 Mission Street in San Francisco, nonetheless cost more than $600,000 per unit to produce. New units in that city’s Candlestick Point development will cost nearly $825,000 each to create. Such high prices are beyond the fiscal reach of California or any state to be able to afford to build housing for all of its rent-burdened households.
Policymakers are beginning to realize this problem. As we wrote earlier this year, California Governor Jerry Brown made that point in his state budget. He’s said that he’s not putting any new state resources into subsidizing affordable housing until state and local governments figure out ways to bring the costs down. Last year, opposition from labor and environmental groups blocked the governor’s proposal to exempt affordable housing from some key regulatory requirements. Brown had offered $400 million in additional state funds for affordable housing if that proposal was adopted. Brown took that money off the table. “We’ve got to bring down the cost structure of housing and not just find ways to subsidize it,” Brown said in is budget speech.
read more: Multifamily Executive
Mortgage Volume Increasing, Along With Mortgage Risk
First-time buyer (FTBs) volume jumped another 3 percent in August 2017, as compared to August 2016, according to the latest data from the American Enterprise Institute’s International Center on Housing Risk. First-time buyer volume has increased 42 percent since August 2013. As volume increases, so has FTB risk, which has increased by 3 ppts, according to AEI’s FTB National Mortgage Risk Index (FBMRI). According to the update, “too much demand, enabled by increasing leverage, is chasing a limited supply, all of which is driving up house prices.”
The FBMRI for Agency purchase loans hit 16.3 percent for August 2017, 6.9 ppts. higher than the MRI for repeat buyers. FHA’s First-Time Buyer NMRI reached 26.5 percent in August 2017, up 1.6 ppts. from the year prior and 2.4 ppts from two years earlier. The update points out that two years ago placed it before FHA’s mortgage insurance premium cut.
Edward Pinto, codirector of AEI’s International Center on Housing Risk, said, “The home price boom that started in mid-2012 is accelerating, with year-over-year increases now running at 6-7 percent.” Pinto said that the soaring and price of entry-level homes is driving more FTBs into taking on greater levels of risk.
The FBMRI update also revealed that the median FTB puts down only $5,300, or 3.0 percent.
Tobias Peter, senior research analyst of AEI’s International Center on Housing Risk, says that an even wider credit box is not the answer. “This has been tried—and it failed,” Peter said. “For the last four years, more first-time buyer leverage in a seller’s market has gotten capitalized into higher house prices, thus crimping affordability.” So what’s the solution? Adding more supply, he says. “Especially at the lower end of the housing market,” Peter said, “where most first-time buyers are buying.”
read more: M Report
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