In this week’s Real Estate News in Brief… a new deadline is coming up fast in the border-wall debate, mortgage rates are looking more attractive, and seniors are being blamed for the housing shortage.
We begin with very little economic news from this past week, but the government is still at risk of a second partial shutdown over border-wall funding. President Trump has threatened a shutdown if a deal isn’t reached by February 15th. He’s also said he may declare a national emergency to get the money he wants for the wall. Politico reports that he doesn’t have enough GOP support to do either.
According to a survey by the Wall Street Journal, 59% or the economists participating believe another shutdown will hurt economic growth. 16% believe it will have a “significant” impact. Chief economist at American Chemistry Council, Thomas Kevin Swift, told the WSJ, “A second shutdown would severely erode consumer and business confidence.” (1)
President Trump met with Fed Chief Jerome Powell to talk about the economy’s performance. The meeting took place over dinner after months of criticism by the President of the central bank’s decision to raise short-term interest rates. It’s also rare that the two would meet to avoid any appearance of government influence on Federal Reserve decisions. Bloomberg reports, Powell did not discuss monetary policy with the President. He only reiterated remarks he’s given publicly — that any further rate hikes would be based on economic data.
Long-term mortgage rates dropped 5 basis points to their lowest level in 10 months. Freddie Mac says the average 30-year fixed-rate mortgage is 4.41%. That’s great news for home buyers as we head into the spring home buying season.
In other news making headlines…
Big Drop in Homes Sold Above Listing Price
Zillow reports a big drop in the number of homes sold above listing price. It says only 19% of sales were above the listing price in December. That’s the lowest level in two years.
According to Zillow, the decline is due to a larger inventory of for-sale homes, and higher mortgage rates. Zillow senior economist, Aaron Terrazas said in a press release, “Something shifted mid-summer. Sellers sitting on the sidelines joined in, increasing inventory. The balance of power began to swing marginally back toward buyers — particularly in higher-priced communities.”
He also said, it’s too soon to call it a buyer’s market. He says, it’s just that they are “no longer fighting each other tooth and nail to get in the door.“
Three 2018 Tax Breaks in Limbo
Taxpayers trying to get their returns done quickly could be delayed by three 2018 tax breaks that haven’t been approved yet by Congress. The mortgage insurance deduction is one of them, along with debt forgiveness on foreclosures, and tuition and fees for higher education.
They are temporary tax breaks that need to be reauthorized each year. As CNBC reports, taxpayers that need those deductions might want to hold off on their returns, or file now with plans to submit an amended return later.
Seniors Blamed for Housing Shortage
Freddie Mac is blaming seniors for the housing shortage. It says, seniors who are “aging in place” are keeping 1.6 million homes off the market. Freddie Mac Chief Economist, Sam Khater, says, it will increase the demand for rentals, and the need for new residential construction.
Khater says, “For scale, 1.6 million units is roughly the same as the number of new single-family and multifamily housing units built each year, and it represents more than half of the current shortfall of 25 million housing units.” He also expects the situation to get worse as more baby boomers retire, and remain in their homes.
Big Increase in Wealthy Renters
It isn’t just young folks who are filling up U.S. rentals. RentCafé says that people earning $150,000 a year or more account for the fastest growing segment of new tenants. It says more than 1.35 million of them became renters during a ten-year span from 2007 to 2017. That represents a 175% increase. (2)
But, why do they rent if they can afford to buy homes? RentCafé says, it could be due to a new millennial lifestyle choice because renting provides more flexibility. Or it might be due to a mindset that grew out of the housing crisis. Whatever the reason, more and more people with big paychecks, are also writing rent checks.
People Fleeing High-Tax States for Florida
New home search data suggests, many wealthy people are moving away from high-tax states like New York because of the 2017 tax law changes. New rules lower the amount you can deduct for mortgage interest and state and local taxes, also known as SALT deductions. Realtor.com search data, cited by the Wall Street Journal, shows the top 10 counties with the biggest increase in searches for expensive homes in Florida are from places with a higher effective real estate tax rate than Florida.
New York Governor, Andrew Cuomo, says, his state has lost $2.3 billion in revenue because of this migration. Among the cities attracting many of these wealthy transplants are the sunny southern and western cities of Miami, Las Vegas, and Phoenix. (3)
(2) RentCafé Report
(3) Moving to Florida: Wall Street Journal