Rising rents and home prices forced California’s housing crisis to the front of Gov. Jerry Brown’s and lawmakers’ agenda in 2017.
Legislators passed the most comprehensive package of housing bills in recent memory designed to increase spending on low-income development and encourage more construction in general.
But the bills, according to independent analyses, won’t do much to make housing cheaper in the state.Expect more focus on housing issues at the Capitol and on your statewide ballot in 2018.
Here are three to watch.
1. A rent control battle
2. The future of Proposition 13
3. How lawmakers will follow up on this year’s housing efforts.
The Republican tax bill that appears headed for President Trump’s desk reduces the ability of home buyers to deduct mortgage interest, which will be a hit to home shoppers in Southern California and the Bay Area, where housing costs are sky-high.
But the interest provision is far more limited in scope than a previous proposal. Real estate experts and professionals said Tuesday that they don’t expect a big effect on home buying in the region, and that any ramifications will be largely restricted to well-to-do neighborhoods.
Making sense of the story:
Under the new plan, which passed the House on Tuesday and was headed for a late vote in the Senate, buyers can deduct interest on mortgages up to $750,000, for homes bought after Dec. 15. (Homes purchased on that date or before then aren’t affected.) That’s down from the current $1-million limit, but an increase from a $500,000 cap that previously passed the House.
That means a home buyer with a 20 percent down payment can purchase a $930,000 home and still deduct all the interest. Even for a borrower who took out a $1-million loan at 4 percent interest, $30,024 of interest payments are deductible in the first year, leaving $9,656 that isn’t.
The bill also caps property and state income tax deductions at a combined $10,000 — about $8,500 less than the average deduction taken by Californians in 2015, according to the Tax Policy Center. Combined with the new cap on mortgage interest deductions, that could mean some households will have less to spend on housing, leading to price declines in some wealthy areas.
The tax bill doubles the standard deduction, which means fewer households will itemize. That may result in people buying a less expensive house because they couldn’t write off any interest
Some experts predict that by adding an estimated $1.5 trillion to the federal budget deficit over 10 years, the tax bill will put upward pressure on interest rates — including mortgage rates, which have remained under 5 percent for the last six years.
Because there’s strong demand for affordable residences in markets that are seeing home prices surge, some homes sold at foreclosure auctions are netting more than what the lender is owed. Once debts, liens, and fees are paid off, the home owner who’d fallen behind in their mortgage payments is entitled to the remainder. But here’s the kicker: Many home owners don’t realize their rights, which means much of the money is going uncollected.
For example, Denver County, Colo., officials say they have nearly $1.5 million in uncollected surpluses from the sale of about 50 foreclosed homes.
“In the past, people who lost their homes to auctions were typically underwater. [Now] prices have risen so that real estate investors, especially at auctions, are sometimes willing to pay more than what the [homeowner] lost it for,” says Brandon Turner, author of “The Book on Rental Property Investing.”
Portland, Ore., Denver, Seattle, and Miami are all places where home prices are rising fast, and struggling homeowners may find more windfall profits in foreclosure auctions.
“Denver is one of the hottest real estate markets in the nation right now,” says Mica Ward, spokeswoman for the public trustee of Denver County. “So when a home does have to sell at a foreclosure auction, we’re consistently seeing that the home is selling for more than what is owed.” She estimates that about 80 percent of foreclosure auctions in Denver County result in surpluses over the original debt. She returned up to $169,000 to one foreclosed homeowner this year following an auction.
Photo courtesy of http://nobodynoonenothing.blogspot.com/
Andy Rooney’s Longtime New York Home Sells for $2.225 Million
For a bushy-browed and curmudgeonly old coot of a commentator, Andy Rooney had another calmer and more streamlined side.
Four years after Rooney’s death, the Upper West Side co-op apartment has been listed for sale by his heirs for $2.385 million.
According to the Wall Street Journal, Rooney and his wife, who preceded him in death in 2004, bought the 2-bedroom, 2-bathroom apartment 15 years ago as a pied-a-terre to use in conjunction with their primary residence in Connecticut. However, Rooney wound up using the apartment more consistently in the last years of his life in order to be closer the CBS studio. Rooney provided a running feature of cutting social commentary on the program for 33 years.
Help keep this blog going
Call or write today for all your real estate needs
John J. O’Dell Realtor® GRI
O’Dell Realty
(530) 263-1091
BRE#00669941
Chinese home buyers, in particular, may be more cautious in entering the U.S. housing market following Monday’s massive stock market sell-off that sent stocks tumbling, according to housing analysts. The sell-off began in Beijing on Monday and sent shares plunging by record amounts across the globe. Chinese media dubbed it “Black Monday” as markets fell nearly 8.5 percent there.
In the U.S., the Dow Jones industrial average plunged more than 1,000 points just minutes after the opening bell alone on Monday. The Dow made up some ground later in the afternoon but still closed nearly 600 points in the red.
John Burns, CEO and owner of John Burns Real Estate Consulting, explained in a blog post that Chinese home buying will likely be under a cloud of uncertainty.
“While the recent Chinese stock market correction has caused a decline in sales (one of my builder clients has noticed a sharp pullback, another just told me about a home sale cancelation specifically due to the buyer’s stock market losses, and one publicly traded home builder even mentioned the pullback on their earnings call), our research has convinced us of tremendous Chinese demand to buy US real estate for their families and as investments,” Burns says.
However, Burns says there is some doubt over whether the Chinese will continue their big U.S. buying spree. He questions the number of people who will still be able to afford to purchase a home in the U.S. after the stock market correction and currency devaluation.
Chinese home buyers have been strong in the U.S. market lately. Sixteen percent of international home buyers come from China, according to the National Association of REALTORS®. The Chinese spent $29 billion last year on U.S. real estate, surpassing Canada as the top spenders.
Existing-home sales dropped in January to the lowest rate in nine months, according to the National Association of REALTORS®’ latest housing report. All regions across the country saw declines in sales in January, with the Northeast and West posting the largest losses.
Still, the pace of sales was higher than a year ago – at a 4.82 million seasonally adjusted annual rate remains up 3.2 percent compared to a year ago.
“January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales, despite interest rates remaining near historic lows,” says Lawrence Yun, NAR’s chief economist. “REALTORS® are reporting that low rates are attracting potential buyers, but the lack of new and affordable listings is leading some to delay decisions.”
5 Stats to Gauge the Market
Here’s a closer look at where the housing market stands, based on NAR’s existing-home sales report for January.
1. Inventory: Total housing inventory at the end of January rose 0.5 percent to 1.87 million existing homes available but sale. Unsold inventory is at a 4.7-month supply at the current sales pace.
2. Home prices: The median existing-home price for all housing types was $199,600 – 6.2 percent above year ago levels. “Although sales cooled in January, home prices continued solid year-over-year growth,” Yun notes. “The labor market and economy are markedly improved compared to a year ago, which supports stronger buyer demand. The big test for housing will be the impact on affordability once rates rise.”
3. Distressed sales: Foreclosures and short sales comprised 11 percent of sales in January, down 15 percent from a year ago. Broken out, 8 percent of sales in January were from foreclosures and 3 percent were short sales. The average discount that a foreclosure sold at was 15 percent below market value, while short sales were discounted, on average, 12 percent.
4. Days on the market: Properties tended to stay on the market slightly longer in January – 69 days compared to 66 days in December. Short sales remained on the market the longest at a median of 128 days, while foreclosures tended to sell in 63 days. Overall, 30 percent of homes sold in January were on the market for less than a month.
5. Cash sales: All-cash sales made up 27 percent of transactions in January, down from 33 percent a year ago. Individual investors, who account for the bulk of cash sales, purchased 17 percent of homes in January, below the 20 percent in January 2014.
Regional Breakdown
Here’s a closer look at existing-home sales in January across the country:
Northeast: existing-home sales dropped 6 percent to an annual rate of 630,000. Sales are 3.3 percent above a year ago. Median price: $247,800, up 2.7 percent from a year ago
Midwest: existing-home sales fell 2.7 percent to an annual level of 1.08 million in January. Sales are still 0.9 percent above January 2014 levels. Median price: $151,300, up 8.2 percent from a year ago
South: existing-home sales dropped 4.6 percent to an annual rate of 2.07 million in January, but are still 5.6 percent above year ago levels. Median price: $171,900, up 7.4 percent from a year ago
West: existing-home sales fell 7.1 percent to an annual rate of 1.04 million in January, but are still 1 percent above a year ago. Median price: $291,800, up 7.2 percent from a year ago
Spring is traditionally considered the best season to list a home, but it doesn’t inch out the other seasons by much, according to a new analysis by the real estate brokerage Redfin.
Redfin’s research team analyzed 7 million homes listed from 2010 through 2014 to gauge how important the season is in listing a home. It examined how many of the homes went under contract within 30 days and how often they sold for more than their list price.
Here’s how the seasons stacked up:
39% of the homes listed in the spring (between March 21 and June 20) in the past five years went under contract within 30 days, and 15 percent sold for more than the list price.
38% of homes listed in the winter (Dec. 21 – March 20) sold within 30 days and 14 percent sold for more than the list price.
36% of homes listed in the summer (June 21 – Sept. 20) were under contract within 30 days and 12 percent sold above the list price.
34% of homes listed in the fall (Sept. 21 – Dec. 20) went under contract within 30 days and 11 percent sold at a premium.
“Just as buyer demand follows a seasonal pattern, so do home prices,” says Nela Richardson, Redfin’s chief economist. “Over the past five years prices have increased by an average of 3 percent month over month in the spring and ticked down by about 1 percent each month during the fall. To get the best of both worlds, sellers need be informed on both local buyer demand and recent sale prices in their neighborhoods before deciding when to list their homes and for what price.”
Live in Nevada County? Call or email today
for a your free home market anaylsis
John J. O’Dell Realtor® GRI
O’Dell Realty
(530) 263-1091 Email John
Photo courtesy of http://funny-pics-fun.com/funny-compilations/home-sweet-home
More prospective home buyers would likely qualify for down payment assistance than they think. Indeed, more than 68 million single-family and condo households – or about 87 percent — would qualify for a down payment program available in the county where they are located, according to a new study by Down Payment Resource and RealtyTrac in an analysis that included a look at nearly 2,300 down payment programs nationwide.
“Many homebuyers, especially Millennials, haven’t fully investigated their home financing options because they are pessimistic about qualifying for a mortgage,” says Rob Chrane, president and CEO of Down Payment Resource. “Our Homeownership Program Index highlights the wide range and availability of down payment programs available to today’s homebuyers. In fact, 91 percent of the 2,290 programs in our registry have funds available to lend to eligible buyers. Plus, income limits vary depending on the market and programs extend beyond just first-time homebuyers. It’s important for buyers to research down payment programs as part of their loan shopping process.”
The drastic drop in oil prices could put downward pressure on mortgage rates.
The U.S. Energy Information Administration reported that the price of regular gasoline was $2.20 per gallon, its lowest point since a peak of $4 per gallon in May 2011. EIA estimates that the savings could amount to $550 per household in 2015.
“Lower oil prices mean a lower inflation rate, which pushes down mortgage rates,” economists note at the National Association of REALTORS®‘ Economists’ Outlook blog. Indeed, the 30-year fixed-rate mortgage averaged 3.73 percent last week — the lowest average in 20 months — according to Freddie Mac’s weekly mortgage market survey. Taking into account the median home price of $205,300, a 0.75 percentage point drop in mortgage rates could yield a savings of about $1,000 annually, according to NAR researchers.
“What this means for REALTORS®: The decline in oil prices is generally positive to households by way of the gas savings and lower mortgage payments,” economists note. “That savings will boost consumer spending in other areas. But there may be some layoffs in oil-producing states.”
The lower oil prices may prompt revenues to flatten out in some oil-boom areas, notably North Dakota and Texas.
Still, the overall impact to national employment likely will be minimal, since most of the employment growth is coming from many economic sectors. Those employed in oil and gas extraction represent just 0.14 percent of the U.S.’s 138 million workers, according to data from the Bureau of Labor Statistics. Most state economies are diversified enough, too. Even in Texas, which is the biggest state for oil production and accounts for about half of U.S. oil and gas extraction workers, the oil industry covers less than 1 percent of its workers.
That said, some smaller counties may feel the impact more, since they do have higher employment in the oil sector. Those counties include Washington County, Okla.; Upton County, Texas; Woods County, Okla.; Crockett County, Texas; Hutchinson County, Texas; Yoakum County, Texas; and Gilmer County, W. Va.
With lingering concerns about the recovery of the housing market, there are several key factors to watch in 2015, including affordability. It remains to be seen whether sales will pick up in 2015 if there’s more available for sale, and if those sellers realize prices aren’t rising the way they were one or two years ago. Slight loosening in access to credit may make the process of obtaining a mortgage less burdensome, but without an increase in incomes, there may not be sufficient buyers. Interest rates, inventory, and new construction are also important to monitor. Read the full story
Source: Wall St. Journal
Live in Nevada County?
Call or email for a Free Market Analysis of Your Home
John J. O’Dell Realtor® GRI
O’Dell Realty
(530) 263-1091