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Did Tax Reform Kill the Luxury Market? NOT SO FAR!

22 Jun 2018 Posted by NooshiAdmin in Blog

The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000. When the tax reform legislation was put into law at the beginning of the year, some experts felt that it could have a negative impact on the luxury housing market.

Capital Economics:

“The impact on expensive homes could be detrimental, with a limit on the MID raising taxes for those that itemize.”

Mark Zandi of Moody’s Analytics:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

The National Association of Realtors (NAR) predicted price declines in “high cost, higher tax areas” because of the tax changes. They forecasted a depreciation of 6.2% in New Jersey and 4.8% in Washington D.C. and New York.

What has actually happened?

Here are a few metrics to consider before we write-off the luxury market:

1. According to NAR’s latest Existing Home Sales Report, here is the percent change in sales from last year:

  • Homes sales between $500,000 – $750,000 are up 11.9%
  • Homes sales between $750,000 – $1M are up 16.8%
  • Homes sales over $1,000,000 are up 26.7%

2. In a report from Trulia, it was revealed that searches for “premium” homes as a percentage of all searches increased from 38.4% in the fourth quarter of 2017 to 41.4% in the first quarter of 2018.

3. According to an article from Bloomberg:

“Median home values nationally rose 8 percent in March compared with a year earlier, while neighborhoods of San Francisco and San Jose, California, have increased more than 25 percent.

Prices in affluent areas in Delaware and New York, such as the Hamptons, also surged more than 20 percent.”

Bottom Line

Aaron Terrazas, Zillow’s Senior Economist, probably summed up real estate’s luxury market the best:

“We are seeing the opposite of what was expected. We have certainly not seen the doomsday predictions play out.”

Source: KCM.com

Don’t Wait to Sell Your House! Buyers Are Out Now

20 Jun 2018 Posted by NooshiAdmin in Blog

Recently released data from the National Association of Realtors (NAR) suggests that now is a great time to sell your home. The concept of ‘supply & demand’ reveals that the best price for an item is realized when the supply of that item is low and the demand for that item is high.

Let’s see how this applies to the current residential real estate market.

SUPPLY

It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.

Supply is currently very low!

DEMAND

A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report(which sheds light on the number of buyers who are actually out looking at homes) disclosed that “foot traffic grew 10.5 points to 52.4 in March as the new season approaches.”

Demand is currently very high!

Bottom Line

Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, contact a local real estate professional who can explain the conditions in your market.

Source: KCM.com

Parents Say Kids’ Opinions Matter Big When Buying a Home

18 Jun 2018 Posted by NooshiAdmin in Blog

A recent survey conducted by Harris Poll and released by SunTrust Mortgage found that “55% of homeowners with a child under the age of 18 at the time when they purchased their home said that the opinion of their offspring played a major role in their home buying decision.”

When the results were broken down by the parent’s age, millennials (those 18-36) led the way with 74% of homeowners saying that their child’s opinion was a factor in choosing which home to buy. Eighty-three percent of renters believe that their child’s opinion would be a deciding factor when looking to purchase a home.

So what features in a home are most important to kids?

Coming in at 57%, it should come as no surprise that gaining their own bedrooms was the top most-desirable feature of any home for kids, followed by a large back yard to play in at 34%.

Todd Chamberlain, Head of Mortgage Banking at SunTrust explained the reasoning behind the survey,

“As a parent of two kids, I know from experience that including children in the home buying process is not only fun for the whole family, but also educational for our homebuyers of tomorrow.”

Bottom Line

If you’re thinking about selling your home this year, make sure to highlight all the kid-friendly features your home has to offer so that you can sway the real decision makers.

Source: KCM.com

Renters Under 50 Want to Buy a Home!

16 Jun 2018 Posted by NooshiAdmin in Blog

Every year, the New York Federal Reserve publishes the results of their Survey of Consumer Expectations (SCE). Each survey covers a wide range of topics including inflation, labor market, household finance, credit access and housing.

One of the many questions asked in the housing section of the survey was:

Assuming you had the financial resources to do so, would you like to OWN instead of RENT your primary residence?

Over three-quarters of respondents under the age of 50 said that they would prefer to own their home, rather than rent. While only 52.6% of those over 50 would prefer to own. The full breakdown can be found in the chart below.

When renters were asked what the average probability of owning a primary residence at some point in their future was, 66.4% of those under 50 believed that they would eventually own their home, while only 23% of those over 50 did.

Bottom Line

Many had wondered if young Americans had lost their desire to own a home, but for those renting now, that dream is still alive.

Source: KCM.com

Cream Of The Crop: A Forgotten Dairy Barn in Jackson, Wyoming gets a Showstopping Reinvention

04 Jun 2018 Posted by NooshiAdmin in Blog

It’s not every busy architecture firm that would delight in fielding calls about tumbledown structures, but JLF Architects isn’t your typical enterprise. “Our philosophy is making contemporary spaces with reclaimed materials— the parts and pieces of old buildings,” says firm partner Paul Bertelli, who notes that they occasionally drive around the country searching for old, neglected—and stunning—architecture, often in areas where the air is dry enough that logs are perfectly preserved. “As architects, we identify as critical regionalists, which essentially implies that all of our work identifies with the place. Anything we build, you would be able to say, ‘Oh that belongs in Pennsylvania,’ or ‘That’s Northern California.’”

Or the Wild West. When one of JLF’s masonry suppliers phoned their office one day to say he’d come across a roofless limestone dairy barn in an uninhabited agricultural community in far north Montana, they knew it was something special. “I saw the picture he took of it and said ‘don’t show it to anybody else!’” recalls Bertelli. “We flew up to Great Falls, got in a pickup truck, bounced around fields for thirty miles, and there it was, in the middle of nowhere in a cow pasture.”

All the legwork was well worth it, because, as the saying goes, they just don’t build them like they used to. This particular dairy barn was hewn of local stone in the 1880s and 1890s by a German Hutterite community. Bertelli says the residents likely immigrated to Canada and then down into the United States fleeing persecution, where they created their own self-supporting world, much like the Amish or Mennonites. “These were some very skilled masons, unbelievable,” says Bertelli, pointing to the hand-chiseled corners, window openings, and finished planes in the original dairy barn. “It’s rare to see something of that quality. We’re a very young country. You go to Europe and that stuff is ubiquitous, so we are very lucky to have something on our soil that really represents eighteenth-century architecture.”

The entire team at JLF Architects knew they had to have it; they called a client they’d been working with for seventeen years and convinced her to help them buy it. “She’s an antique collector, and we thought this could be the ultimate antique,” says Bertelli. The client too fell instantly, head-over-heels in love. The trouble was, where would they put it? It couldn’t stay on its current Montana plot, where cows were using it as a scratching post. They eventually moved the entire barn, stone by stone, rebuilding it nearly exactly the same way on a spot the client and her son purchased for it. The new location, just outside Jackson, Wyoming, features the mountains of the Teton Range rising like a postcard sprung to life in the distance. “I’m guessing it was about 30,000 pieces of stone, and at least a third of them we labeled so we’d know where to put them back,” says Bertelli. It was no easy feat, according to JLF Architects partner Logan Leachman. “The masons we worked with were probably feeling like, ‘Jeez, I could go work somewhere else for a lot less stress!’ It’s a testament to the team of people that got it back together.”

Now the antique has been remade into a modern 7,919-square-foot home with decidedly twenty-first-century technology, yet reclaimed-fir floors, steel windows, original limestone, and a long glass-walled hallway bring the outside in. The home’s interiors are filled with timeless, neutral pieces—Chippendale chairs, a French refectory table—that while beautiful, keep the spotlight on the natural stone and the cinematic natural beauty beyond the windows. Only the fireplace hearths detract the eye from the lush fields and snowcapped mountains beyond. “We oriented the tall slice in the gable so that when you stand in the hallway and look out the window, you see the Grand Teton,” says Bertelli. “We didn’t make it this huge, big, grand window; we wanted to create a more interesting form.”

One of Bertelli’s favorite things about the building? How little they did to it. “You’re looking across a beautiful field of grass and all you see is the little stone building, and the nature formed the frame,” recalls Bertelli. “Normally, someone would come to us and say, ‘I own a piece of ground and want to build a house.’ This project was inspired by the simplicity of the building, and then we found the right piece of property. It may never happen again. It took such courage for the owner to show such restraint and respect for the original form. It was faith and love of the process that drove us to something like this, and it’s probably the most extraordinary building we’ve ever done.”

Homeownership: “A Man Is Not a Complete Man, Unless He Owns a House”

30 May 2018 Posted by NooshiAdmin in Blog

The famous quote by Walt Whitman, “A man is not a whole and complete man, unless he owns a house and the ground it stands on,” can be used to describe homeownership in America today. The Census revealed that the percentage of homeowners in America has been steadily climbing back up since hitting a 50-year low in 2016. The homeownership rate in the first quarter of 2018 was 64.2%, higher than last year’s 63.6%.

Chief Economist, Dr. Ralph McLaughlin, in his VUE Blog gave these new homeownership numbers some context:

“The trend is clear: the homeownership rate has been ticking up for five consecutive quarters, and the number of new renter households has fallen for four consecutive quarters. Owner-occupied households grew by 1.345 million from a year ago, while the number of renters actually fell by 286,000 households.

The fact that we now have four consecutive quarters where owner households increased while renter households fell is a strong sign households are making a switch from renting to buying. This is a trend that multifamily builders, investors, and landlords should take note of.”

In a separate article comparing the rental population in America to the homeowner population, Realtor.com also concluded that the gap is now shrinking:

“The U.S. added 1.3 million owner households over the last year and lost 286,000 renter households, the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier. That could pose challenges for apartment landlords, who are bracing this year for one of the largest infusions of new rental supply in three decades.”

America’s belief in homeownership was also evidenced in a survey conducted by Pew Research. They asked consumers “How important is homeownership to achieving the American Dream?”

The results:

  • 43% said homeownership was essential to the American Dream
  • 48% said homeownership was important to the American Dream
  • Only 9% said it was not important

Bottom Line

Homeownership has been, is, and always will be a crucial part of the American Dream.

Source: KCM.com

What If I Wait Until Next Year to Buy a Home?

28 May 2018 Posted by NooshiAdmin in Blog

We recently shared that national home prices have increased by 6.7% year-over-year. Over that same time period, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Reporthome prices will appreciate by 5.2% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 5.2% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for this year, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

Source: KCM.com

4 Reasons Why Today’s Housing Market is NOT 2006 All Over Again

21 May 2018 Posted by NooshiAdmin in Blog

With home prices rising again this year, some are concerned that we may be repeating the 2006 housing bubble that caused families so much pain when it collapsed. Today’s market is quite different than the bubble market of twelve years ago. There are four key metrics that explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Mortgage Debt
  4. Housing Affordability

1. HOME PRICES

There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.

Frank Nothaft is the Chief Economist for CoreLogic (which compiles some of the best data on past, current, and future home prices). Nothaft recently explained:

“Even though CoreLogic’s national home price index got to the same level it was at the prior peak in April of 2006, once you account for inflation over the ensuing 11.5 years, values are still about 18% below where they were.” (emphasis added)

2. MORTGAGE STANDARDS

Some are concerned that banks are once again easing lending standards to a level similar to the one that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a Housing Credit Availability Index (HCAI).According to the Urban Institute:

“The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

The graph below reveals that standards today are much tighter on a borrower’s credit situation and have all but eliminated the riskiest loan products.

3. MORTGAGE DEBT

Back in 2006, many homeowners mistakenly used their homes as ATMs by withdrawing their equity and spending it with no concern for the ramifications. They overloaded themselves with mortgage debt that they couldn’t (or wouldn’t) repay when prices crashed. That is not occurring today.

The best indicator of mortgage debt is the Federal Reserve Board’s household Debt Service Ratio for mortgages, which calculates mortgage debt as a percentage of disposable personal income.

At the height of the bubble market a decade ago, the ratio stood at 7.21%. That meant over 7% of disposable personal income was being spent on mortgage payments. Today, the ratio stands at 4.48% – the lowest level in 38 years!

4. HOUSING AFFORDABILITY

With both house prices and mortgage rates on the rise, there is concern that many buyers may no longer be able to afford a home. However, when we look at the Housing Affordability Index released by the National Association of Realtors, homes are more affordable now than at any other time since 1985 (except for when prices crashed after the bubble popped in 2008).

Bottom Line

After using four key housing metrics to compare today to 2006, we can see that the current market is not anything like the bubble market.

Source: KCM.com