In this week’s Real Estate News in Brief… we have taxpayer sticker shock, single-family rent increases, and a misunderstood deal between Amazon and New York.
We begin with economic news from this past week that shows a drop in the gross domestic product for the fourth quarter of last year, but that number is better than economists expected. The government says the GDP was 2.6% for a full-year average of 2.9%. MarketWatch economists say the partial government shutdown that started right before Christmas may have kept the economy from reaching the 3% target.
The government shutdown is still causing data reporting delays. Reports on new home sales, construction spending, consumer spending, and core inflation are all delayed. But the National Association of Realtors did report on pending home sales. They jumped 4.6% in January with an increase in all four U.S. regions but they jumped a big 8.9% in the South. Realtors say some of the activity is due to the reopening of the government after the partial shutdown.
Government data also shows that builders applied for more permits in December, but that housing starts sank 11%. MarketWatch economists say that December was a difficult month for the housing industry because of the stock market sell-off, talk of a recession, and the government shutdown. But those issues have subsided, and strong numbers for pending home sales and building permits point to a rebound in housing activity this spring.
Consumer confidence bounced back after the shutdown was over. The Conference Board says it jumped from about 89 to 103 in February. There was also a rebound for the University of Michigan’s Consumer Sentiment Index. Economists say the 93.8 reading is strong, but it’s still below the average for 2018.
More and more millennials are buying homes. The Commerce Department says the homeownership rate was up 0.2% at the end of last year due to a high number of millennial home buyers. The homeownership rate is now 64.6%. That’s the highest it’s been since the third quarter of 2014.
Long-term mortgage rates didn’t change very much this last week. The average for the 30-year fixed-rate mortgage is still 4.35%
In other news making headlines…
Taxpayers Getting Smaller Refunds
The new $10,000 limit on SALT deductions is reducing tax refunds for some taxpayers, and prompting calls to lift those limits. The Hill reports that a group of Democrats from the West Coast and the Northeast are pushing Congress to restore the full SALT deduction.
Data on tax refunds is still coming in but the first three weeks of IRS data show that the average tax refund is lower. Tax experts believe that many of the individuals getting the lower returns are those impacted by the SALT deduction cap. New Jersey Governor Phil Murphy says the SALT deduction cap is “gutting our middle class.” New York Governor Andrew Cuomo calls it a “terrible political injustice” that “hurt millions of people.”
According to the Hill, President Trump may be willing to renegotiate that part of the tax law. He had said to reporters that he is “open to talking about it.”
Single-Family Rents Rise Across the U.S.
New data shows that single-family rents gained an average 3.1% in the U.S. last year. The Core Logic report shows that rent growth was the strongest for low-end rentals which are properties that rent for less than 75% of the median rent in their region.
Phoenix topped the list for rent growth at 6.9%. Las Vegas was second with rent growth of 6.8%. Orlando came in third but also ranked for the strongest year-over-year job growth among the 20 cities analyzed. Orlando had a 5.1% rent growth and employment gains of 4.8%. The slowest rent growth was in Houston. (1)
California Considers Wildfire Insurance Fund
State officials may create a new kind of insurance fund for utilities accused of starting wildfires. Lawmakers introduced legislation for a wildfire insurance fund at the end of January to help California utilities sued for equipment that sparks a wildfire.
PG&E filed for bankruptcy after the wildfire that destroyed the town of Paradise, California, and lawsuits associated with that fire. The official cause is still under investigation, but PG&E is now saying that its equipment is likely the cause of the fire. The S.F. Chronicle reports that PG&E is anticipating as much as $30 billion in liabilities from wildfires in 2017 and 2018. (2)
It’s not clear yet how the insurance fund would be funded. It’s still a work in progress. The legislation currently says that utilities would pay into the fund, but the Chronicle says there’s talk of shifting that burden to property insurance. In the meantime, Governor Gavin Newsom’s office is working on a strategy to help with the PG&E issue, and could release details on that soon.
N.Y. Tax Perks for Amazon Were Normal
The people who drove Amazon out of New York may not have been well informed about the nature of the tax incentives the city was offering. Amazon was ready to build an HQ2 campus in Queens but a contingent of noisy protestors made it known that they were opposed to the tax breaks and other potentially detrimental impacts, like gentrification, so Amazon pulled out.
Billionaire New York City developer William Rudin told CNBC that Amazon wasn’t getting special treatment. He says most of those incentives are offered to every newcomer in the four boroughs outside of Manhattan. He also says that opponents didn’t understand the benefits that Amazon would bring to New York including jobs, economic activity, and improvements to infrastructure and nearby schools. (3)
The Wall Street Journal reports that Governor Andrew Cuomo has appealed to Amazon to reconsider its decision. So far, there’s no sign that Amazon will restart this deal.
(3) CNBC Article