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Most recent articles

Tax Reform – Final Bill

We knew these were coming:

The legislation preserves the deductions for mortgage interest and charitable giving, though it lowers the cap on the mortgage deduction from $1 million to $750,000.

Seeking to win over House Republicans from high-tax states, the conference committee legislation caps the state and local tax deduction at $10,000, with filers allowed to deduct property taxes and state and local income and sales taxes.

Those aren’t quite as generous as before, but a happy compromise.

What about the change from owning your home for two out of the last five years to get up to $500,000 tax-free profits?  Both the House and the Senate wanted to change the time period to owning five out of the last eight years.

I found this on page 663 of 1101 here:

http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-%20466.pdf

I’m not a lawyer, and could be a little woozy after scrolling 600+ pages, but I think they threw it out altogether!  Before I get too excited, can an attorney tell us that ‘No provision’ means nothing was included in the final bill?

If the two-out-of-five-years is still the law, then the realtor spokespeople better be running to the microphone to declare total victory, and assuring everyone that property values won’t be going down 5% to 15% now!

Posted by on Dec 15, 2017 in Frenzy, Jim's Take on the Market, Local Government, Market Conditions | 9 comments

California’s Housing Failure

We see these stories regularly now, but nothing is changing.  Even if we had another housing crash and prices retreated by 10% or 20%, homes would still not be affordable for most.  Hat tip to Richard!

LINK

For all of its claims of being an economic paradise, California is a failure when it comes to housing.

Not just low-income, affordable housing, but middle-income, working-class housing for teachers, firemen and long-time residents hoping to live anywhere near work.

“California has a housing crisis. We can’t provide housing to our citizens,” said Rita Brandin, with San Diego developer Newland Communities. “In Georgia, Texas and Florida, it can take a year and a half from concept to permits. In California, just the process from concept to approvals, is five years – that does not include the environmental lawsuits faced by 90 percent of projects.”

Numbers tell the story of California’s housing crisis.

* 75 percent of Southern Californians can’t afford to buy a home, according to the state realtors association.

* 16 of the 25 least affordable communities in the US are in California, according to 24/7 Wall Street.

* Officials this year declared a homeless emergency in San Francisco, Los Angeles, San Diego and Orange counties.

* 56 percent of state voters say they may have to move because of a lack of affordable housing. One in four say they will relocate out of state, according to University of California Berkeley’s Institute of Governmental Studies.

 * A median price home in the Golden State is $561,000, according to the realtors association. A household would need to earn $115,000 a year to reasonably afford a home at that price, assuming a 20 percent down payment. Yet, two thirds of Californians earns less $80,000, according to the U.S. Census Bureau.

* The household income needed to afford a median-priced home in the Silicon Valley town of Palo Alto is $450,000.

* In San Francisco, a median priced home is $1.5 million, according to the Paragon Real Estate Group.

* Home prices in California are twice the national average, and 70 percent can’t afford to buy a home, according to state figures.

* Median household income in L.A. is $64,000. That’s half what is necessary to buy a home.

*1 in 10 residents are considering leaving because they can’t afford a place to live, according to a state legislative study, while US Census figures show 2 million residents, 25 and older, have already left the state since 2010.

* In 2016, 30 percent of California tenants put more than 50 percent of their income toward rent and utilities, according to the California Budget & Policy Center. Economists consider 30 percent the limit.

* California needs to double the number of homes built each year to keep prices from rising faster than the national average, according to the Legislative Analyst’s Office.

“The biggest tragedy of California is we have stopped building houses for the middle class,” said Borre Winkle with the Building Industry Association of San Diego. “Think of California’s housing market as a martini class. We’re building some affordable housing at the low end. Absolutely nothing in the middle and the top end is high-income housing, which subsidizes low-income housing. So that is a broken system.”

In 2016, the cities of Houston and Dallas built more homes, 63,000, than the entire Golden State, which built 50,000, according to US Census Bureau figures.

“Supply and demands works,” said USC real estate professor Richard Green. “People want to be here and we’re not accommodating them with new housing and so the cost of the housing goes up.”

Read full article here (blaming building fees and NIMBYs):

LINK

Posted by on Dec 15, 2017 in Builders, Jim's Take on the Market, Local Government, Market Conditions | 10 comments

Tax Reform Getting Closer

Congress is expected to vote on the final version of the Tax Reform Bill next week.  The terms being bandied about:

  1. The mortgage-interest deduction will remain, but only for loans up to $750,000 for future buyers, instead of $1,000,000.
  2. State and local income and property taxes can be deducted, up to $10K.
  3. Home sellers who have lived in their home for five out of the last eight years can exclude up to $500,000 in profits, tax-free.

What I haven’t seen is the date when the five-out-of-eight requirement begins – the House and Senate each had different versions.  If you see or hear how they decided to resolve it, let us know!

Republican lawmakers are trying to release the text of a compromise bill by Friday in order to hold votes in the House and Senate early next week, said Senator John Thune, the chamber’s third-ranking Republican.

Posted by on Dec 14, 2017 in Jim's Take on the Market, Mortgage News | 12 comments

Mobile Housing Alternatives

Sell your house with Jim, and go on a world adventure!

LINK

An excerpt:

The “van life” movement has been gaining momentum for years, but it seemed like 2017 really saw a variety of intriguing new vans (and van build-outs) to inspire would-be road-dwellers to get out there and live the life. The year also saw a few very compelling motorhome introductions for those looking to go bigger and farther – without losing much homestyle comfort. The best of the best include everything from big, angry all-landers to compact, versatile everyday commuters that weekend as rolling vacation homes.

Read full article here (with 72 images!):

LINK

Posted by on Dec 14, 2017 in Jim's Take on the Market, Modular Homes | 6 comments

Fed Hikes, Mortgage Rates Drop

With the new Fed transparency, these rate hikes are telegraphed well in advance now and priced in by the market. Free enterprise is working – the competition between Chase, Wells Fargo, and Bank of America is keeping rates in check.  BofA is quoting 3.875% and no points for 30-year jumbos today – and we’ve had three Fed hikes this year (doubling from 0.75% to 1.5% today)!

From MND:

Mortgage rates fell fairly quickly this afternoon following the Federal Reserves updated economic projections.  While it is indeed true that the Fed “raised rates” this afternoon, there are two reasons that doesn’t matter.

First of all, the rate the Fed adjusts (aptly named, the Fed Funds Rate), governs only the shortest-time frames (overnight loans among big banks).  Although its effects radiate to longer-term debt like mortgages, the two are far from joined at the hip.  Short term rates often move one direction while long term rates move another.

More importantly, EVERYONE responsible for trading the bonds that govern interest rates (and I do mean every last person without a single exception) was well aware that the Fed would be hiking rates today.  No Fed rate hike has been better telegraphed during this cycle.

When bond traders know what’s going to happen in the future, they’ll trade accordingly as soon as possible.  That means rates had long since adjusted to today’s rate hike–so much so that the hike itself was a non-event.  Again, it was the update economic projections that helped rates move lower this afternoon.  Fed Chair Yellen’s press conference played a major role as well.

Even before the Fed news came out, a weaker reading on an important inflation report helped bond markets get into positive territory on the day.  The net effect of the Fed and the economic data was a moderately quick move back to last week’s low rates.

Loan Originator Perspective:

Bonds are rallying following the Fed announcement today and weaker inflation data.   As of 4pm eastern, only a few lenders have passed along any of the gains.  So, I favor floating overnight and evaluate pricing tomorrow.  Hopefully this rally can continue.

LINK

Posted by on Dec 13, 2017 in Interest Rates/Loan Limits, Jim's Take on the Market, Mortgage News | 0 comments