Tandy On Real Estate

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Realtors

The Impact of Investors on Single-Family Homes

Last year the number of home sales bought by investors was at a two-decade high. Interestingly, this growth was not from large institutional investors according to CoreLogic, but by small investors getting into the real estate investment game purchasing starter homes.

We are in a new era of investors being a bigger player in the US housing market. As we enter 121st month of an expansion, it’s reasonable to project we may be nearing the end before we have some type of economic correction. Normally investors begin to pull back their activity but instead, we see they are buying 1 in 5 starter homes.

Here is an investor snapshot provided by CoreLogic:

  • By the end of 2018, the investment rate in the U.S. housing market reached 11.3% – the highest rate since CoreLogic started tracking these data in 1999. 
  • Smaller investors are responsible for increasing investor homebuying activity. This is in sharp contrast to the rise in large institutional investors in the years following the recession. These so-called “mom-and-pop” investors grew from 48% of all investor-purchased homes in 2013 to more than 60% in 2018.
  • Large investors – those who purchased more than 101 homes – nearly doubled their activity between 2000 and 2013 but have pulled back since the foreclosure crisis and now sit at 15.8% of purchases. 
  • Real estate investment heads east. Investor homebuying rates vary sharply across the country, with the highest rates east of the Mississippi River and the lowest rates to its west. Each of the top 10 metros with the highest investor purchase rates is in the eastern half of the country, with Detroit, Philadelphia and Memphis, Tennessee leading the pack at 27%, 23.3%, and 19.7%, respectively. Just two of the top 10 are western markets, with Des Moines, Iowa and Oklahoma City, Oklahoma at 18.7% and 17.2%, respectively.
  • The five markets with the least amount of investor activity are all west of the Rockies, including Ventura, California, Boise, Idaho, Oakland, California, San Jose, California and Sacramento, California at 4.8%, 4.8%, 5.1%, 5.2% and 5.3%, respectively.
  • Not surprisingly, Investors are attracted to high-rent markets.
  • Markets that witnessed an increase in the share of active investors also experienced a similar increase in how fast homes were selling. Does this mean investors snapped up supply that would have otherwise been bought by owner-occupiers? Maybe, but the evidence isn’t conclusive because there’s a possible chicken-or-egg relationship between the two. While an uptick in investors into a market perhaps increases competition and lowers supply relative to demand, the opposite is also possible: markets with tightening supply could draw investors as they perceive markets with a dwindling supply to be safer bets than those with more plentiful supply.

As investors continue to purchase more properties, home prices increase. In May, the median price of existing homes was $277,700, up 4.8% from a year earlier, the National Associations of Realtors reported. For single-family homes, the median price was $280,200, up 4.6%.

NPR recently reported, “The pool of smaller, affordable starter houses is low. And increasingly, first-time homebuyers are competing with investors who are buying up these homes. Investors tend to buy cheap homes with the goal of renovating them and putting them back on the market at a higher price, or renting them out.”

At the National Association of Real Estate Editors Conference in Austin, TX, Ralph McLaughlin of CoreLogic explained that Investors are targeting the starter homes. CoreLogic cannot determine from the analysis they did if Investors are in fact displacing first-time homebuyers as many news outlets are reporting. Investors may be taking the homes that the first-time homebuyer wouldn’t actually buy. They may require too much work. The only time there would be competition with first-time homebuyers would be on a turnkey home, and for those that are buying and holding the home. If they are putting a property in circulation for rental, that is still putting a home in the supply and increasing the supply, which is a good thing for the housing market. Detroit and Philadelphia, Baltimore and Memphis have seen the biggest increase in real estate investment.

Do you see your home as an investment?

For most of my career, I have said that a home purchase is the largest investment you will make in your life, and here in Texas, for the most part this remains true as we have a relatively stable market with continuing, reasonable home value increases. MoneyUnder30.com gives us 7 reasons we should consider our homes as their primary function, shelter, versus an investment. Here are their reasons why a home is not an investment:

  1. It’s not an investment just because it appreciates. A true investment requires more than the prospect of an increase in value.
  2. A house has a more primary purpose – shelter. With a true investment you can generally control the timing of your sell, but with a home as an investment you have many factors to consider and often have no control over your timing of buying and selling. Life happens.
  3. A house cannot be an investment if you never plan to sell it. The most effective and efficient way is to sell the house after it has experienced a significant amount of price appreciation. However, selling a house is highly disruptive because it means you have to move. More significantly, when you do sell, you will most likely have to use the equity from the sale to purchase the next house. After all, you will be moving from one residence to another. This means that in a real way, home equity is trapped equity.
  4. Thinking of your house as an investment can lead to equity stripping. Many borrow money out their homes in the form of HELOCS, taking equity out of their home/investment.  This is a great tool for leveraging your equity, but as many saw in the housing decline, when home values are flat or decline, homeowners will no longer have equity in their homes. Placing them in a negative position.
  5. The carrying costs of a house are too high for it to be an investment.
  6. Your house won’t generate cash flow, unless it is a rental or multi-family.
  7. Appreciation is the magic ingredient, but it’s not guaranteed.

With the rise and fall of future home valuations, when the homes values increase people see their homes as investments, but as we remember from the past housing crisis, those areas that saw significant home value declines, the homeowners saw their home as more of a liability than an investment.

No matter, how you see your home, as a wonderful home to raise your family or as an investment, or if you see yourself as a potential real estate investor, it is important to understand the market and the economics of the house, and to approach home ownership from a place of understanding. To receive more posts like this from Tandy on Real Estate updates direct to your inbox, please subscribe.

SOURCES:

CoreLogic – https://www.corelogic.com/blog/2019/06/special-report-investor-home-buying.aspx

NPR – https://www.npr.org/2019/06/21/734357279/1st-time-homebuyers-are-getting-squeezed-out-by-investors

National Association of Realtors – https://www.nar.realtor/newsroom/existing-home-sales-ascend-2-5-in-may

The Week – https://theweek.com/articles/848222/making-house-investment-social-poison

CNBC – https://www.cnbc.com/video/2019/06/24/are-investors-pricing-out-first-time-home-buyers.html

Wall Street Journal – https://www.wsj.com/articles/investors-are-buying-more-of-the-u-s-housing-market-than-ever-before-11561023120

MoneyUnder30.com – https://www.moneyunder30.com/why-your-house-is-not-an-investment

Now Is The Time To Buy In Austin

The time to buy a home in Austin is right now. With low interest rates and potentially climbing home prices, there is a limited window of opportunity in our hometown to capture a great deal, whether you are buying or refinancing.

Low rates

Interest rates will NEVER be lower than they are now. The 3.5% historically low interest rates we have been experiencing were artificially created by the Fed’s quantitative easing, and this has been terminated. According to Freddie Mac, they expect to see the 30-year fixed-rate mortgage to continue its downward trend, averaging 4.3% in 2019, before increasing to 4.5% in 2020.

With this, we are projecting a steadily growing housing market. Freddie Mac reports, “After increasing throughout April, mortgage rates declined at the start of May. The combined positive impact of low mortgage rates, a strong labor market, low unemployment, and modest wage growth supports our forecast for a steadily growing housing market in 2019.”

Lower rates should give a boost to the housing market, as seen with an upswing in both existing and new home sales. 

Rising demand

Austin typically has a high home demand, but we will be seeing an even bigger increase in housing demand as tech companies continue to increase their hiring over the next three years. With Austin’s unemployment rate at an all-time low of 2.3%, job postings continuing at their historic high and the many announcements of relocations and expansions including Apple’s 15,000 employee expansion and Google’s 5,000 employee expansion, demand for housing and therefore the home prices will continue to increase over the long term. 

According to AustinHomeSearch.com, “Central Texas REALTORS® remained busy after strong first-quarter sales, with the number of April home sales skyrocketing almost 15% in the Austin-Round Rock Metropolitan Statistical Area (MSA) over the same period last year. However, because the median sales price increased by a much narrower margin, results signal market prices stabilizing, according to the Austin Board of REALTORS® April 2019 Central Texas Housing Market Report. In April, the median home price in the five-county Austin-Round Rock MSA increased 1.6% to $320,000. Home sales increased year over year by 14.9% to 3,035 sales; sales dollar volume increased 14.1% to $1,207,238,711. During the same period, new listings decreased 1.8% to 4,018 new listings, while active listings increased 1% to 6,217 active listings. Pending sales jumped 14.3% to 3,588 pending sales. Housing inventory in April remained unchanged at 2.4 months of inventory.”

If you are sitting on the fence, now is the time to make the move.

To receive more posts like this from Tandy on Real Estate updates direct to your inbox, please subscribe.

SOURCES:

Freddie Mac – http://www.freddiemac.com/pmms/

Freddie Mac – http://www.freddiemac.com/research/forecast/20190515_steady_growth.page?

Austin Chamber of Commerce – https://www.austinchamber.com/economic-development/business-climate/relocation-expansions

AustinHomeSearch.com – https://www.austinhomesearch.com/pages/austin-market-update

Real Estate Agent and Broker are Found Liable for Wire Fraud Loss

A Federal Court upheld a jury’s finding that a real estate agent and broker were 85% responsible for a wire fraud that cost their client $196,622.67 (Bain v. Platinum Realty, LLC, Dist. Court, D. Kansas 2018).

Jerry Bain was working with a real estate agent to purchase a property. To fund the purchase, Bain was instructed to wire $196,622.67 to the title company. Unbeknownst to the parties involved, a criminal was intercepting e-mails exchanged between the title company, agent, and Bain. Bain had actually been sent hacked wiring instructions, which instructed him to wire funds straight to the criminal’s account. Once the funds were sent they could not be recovered and so Bain sued the agent, broker and others.

In finding the real estate agent and broker liable, the court emphasized several points which can provide valuable lessons to all agents:

  • The real estate agent was serving as the middleman between the settlement agent and her client. Serving in this role made her responsible for the delivery of accurate instructions to her client.
    • Real Estate agents should not be involved with wire transfer instructions!  Buyer’s and Seller’s should communicate directly with the title company.
  • The agent did not alert the other parties to the transaction when she learned her e-mail account had been compromised.
    • If your email account is compromised, you have an obligation to notify the parties involved.  Make sure you notify clients, title companies and lenders promptly.

Wire fraud criminals continue to improve their approach to tricking buyers and other parties into wiring funds to them by a variety of schemes.  These include phishing emails, compromised email accounts, and impersonating title companies and agents on email, text and by phone.  Real Estate agents must implement best practices regarding their clients wiring funds.  Learn more about how to protect yourself at the following links:

Austin Ranks No. 1 on Nation’s Best Places to Live

Two years running Austin is number one on the nation’s Best Places to Live according to U.S. News and World Report. For those of us who are Austinites and who are working in real estate, we know this to be true.

Austin took the lead again in the magazine’s 2018 edition of its Best Places to Live in the U.S. list, which ranks 125 major metro areas in four categories including desirability, value, job market, quality of life and net migration.

Check out the Top 10 cities.

2018 Top 10 “Best Places to Live”

  1. Austin
  2. Colorado Springs, Colorado
  3. Denver
  4. Des Moines, Iowa
  5. Fayetteville, Arkansas
  6. Portland, Oregon
  7. Huntsville, Alabama
  8. Washington, D.C.
  9. Minneapolis-St. Paul, Minnesota
  10. Seattle

“When deciding on a place to settle down, it’s important to understand that where a person lives can impact their well-being,” said Kim Castro, executive editor at U.S. News. “U.S. News created the Best Places to Live to highlight areas across the country that have the characteristics residents are looking for, including steady job growth and affordability. The top-ranked places are areas where citizens can feel the most fulfilled socially, physically and financially.”

And, Austin is not stopping it’s growth, according to the Austin Business Journal Austin’s population keeps growing. In fact, there were 151 additions to the population a day in 2017, down only slightly from 159 in 2016.

To receive more posts like this from Tandy on Real Estate updates direct to your inbox, please subscribe.

SOURCE:
https://www.cnbc.com/2018/04/10/us-news-world-report-the-10-best-places-to-live-in-the-us-in-2018.html
https://realestate.usnews.com/places/texas/austin
https://www.bizjournals.com/austin/news/2018/04/10/austin-no-1-again-on-revered-best-places-to-live.html?ana=e_ae_set1&s=article_du&ed=2018-04-10&u=CuOUKGCJY978Qy2wnhw9SA0f338830&t=1523397950&j=80955401
https://www.bizjournals.com/austin/news/2018/03/22/austins-population-keeps-popping-heres-how-many.html

How industry professionals can avoid and respond to wire fraud

Wire fraud has become rampant in our industry. The FBI has estimated that there are over 4,000 hack attempts per day nationwide. According to the Financial Crimes Enforcement Network (FinCEN) there have been 22,000 cases of reported wire fraud involving losses of over $3.1 billion dollars since 2013.

The real estate industry has been targeted by fraudsters because our business moves at a quick pace with a lot of funds on a regular basis. The criminals continue to strengthen their efforts to abscond with buyer, seller and REALTOR money. Below are some tips for how we can help educate our buyers and sellers about how important it is to be cautious in their transactions.

1. Consumer education.

The biggest key to prevention is education of your customers. As a REALTOR you should be laser focused on educating the buyers and sellers about the growing risks of wire fraud. At every opportunity take the time to explain that wire fraud has become prevalent and explain how we, the title company, will deliver wiring instructions. Buyers and Sellers should understand that if they receive a phone call, fax or email regarding wiring of funds, they must call a previously validated phone number to verify the funding information. Always caution the client about contacting the title company from an email signature. Criminals have become sophisticated at sending fraudulent communications pretending to be the REALTOR, the title company and the lender. criminals send emails with identical looking signature blocks of one of the parties to the transaction but replace with phone numbers the criminal will answer if someone calls. A good tip is to ask your clients to program our phone number into their cell phones when they go under contract. This way they are only calling us on a trusted phone number and not from any other resource.

Buyers should be forewarned by their REALTOR that no one in the transaction should send them wiring instructions other than the title company. Even when the title company sends wiring instructions it should be only upon request from the customer and the customer should never initiate a wire without personally calling the title company from a verified phone number to verify the wiring instruction data.

A REALTOR should never take on the responsibility of sending wiring instructions to their clients. After having the conversation with your client to educate them on the red flags of wire fraud it is highly advisable that you have a disclosure signed by them confirming your conversation that includes a reminder to never send funds without contacting the title company first at a trusted number to confirm the instructions.

On the seller side of the transaction, you should counsel the clients to bring a physical copy of their wiring instructions to closing. The sellers should not email their account information out. Instead they should bring the instructions to closing. All sellers should be counselled to not respond to email inquiries requesting their account number or wiring information.

Also, make sure that we have your buyer or seller’s phone number. When we receipt the contract we will call your buyer and seller to talk to them about the transaction. We will reiterate the warnings that you are giving them and we will help remind them how important it is to follow our instructions.

2. Contacts Log.

Before you go under contract create a log of all approved parties’ phone numbers to give to your buyer or seller. Providing the clients with a verified phone number to use at the beginning of the transaction is a must. Programming the title company number into their phone should help minimize the possibility of a fraudster sending them a different phone number to use via email.

3. Confirmation of wire instructions for REALTORS.

Many REALTORS today have a portion of the commission wired. If you fall into that group make sure you are available by phone to verify the wiring instructions. Criminals are hacking emails and sending in fake wiring instructions for commissions too!

4. Two-Factor Authentication.

You should implement Two-Factor Authentication. All parties to the transaction, especially real estate agents, should be encouraged to enable Two-Factor Authentication on the email service they utilize, especially real estate agents using public domain email systems such as Yahoo and Gmail. This site lists systems that implement Two-Factor Authentication: https://twofactorauth.org/. After you have turned on your Two-Factor Authentication make sure to change your password one time to clear out any prior access.

5. Secure email.

All email involving nonpublic, private and confidential client information should be sent utilizing secure email systems. Here is an article from the National Association of REALTORS (NAR) regarding NAR Best Practices https://www.nar.realtor/articles/internet-security-best-practices.

6. Cyber protections.

REALTORS should implement industry standard IT security and cyber protections of their email and computer systems including but not limited to: 1) utilizing strong antivirus software, 2) installing security patches for all operating systems and software applications, 3) logging out or locking their computer when leaving their computer unattended, 4) avoid clicking on suspicious links on websites or within emails and 5) avoid using free WIFI or free charging stations. Free WIFI pretending to be legitimate businesses is often operated by criminals and allows them to access everything being transmitted over WIFI.

When fraud happens. If you suspect a fraud is underway or has happened, act immediately! Contact as many people in your management team as well as at the time company. The bank and FBI need to be contacted immediately among other steps that must be taken. The Cybersecurity unit of the Department of Justice has published the following guidelines for reporting cyber incidents: https://www.justice.gov/sites/default/files/opa/speeches/attachments/2015/04/29/criminal_division_guidance_on_best_practices_for_victim_response_and_reporting_cyber_incidents2.pdf

Sources:

ALTA Wire Fraud Resources:
http://www.tlta.com/TLTA/News_Articles/ALTA_Releases_Several_Resources_to_Help_Protect_Title_Companies_and_Customers_From_Wire_Fraud.aspx
ALTA notice about phishing emails: https://www.alta.org/news/news.cfm?20170801-Phishing-for-Wire-Transfers
ALTA Wire Fraud Red Flags: https://www.alta.org/news/news.cfm?20170725-Red-Flags-to-Protect-Your-Company-Against-Wire-Fraud
ALTA Sample Wire Fraud Warnings: https://www.alta.org/news/news.cfm?20170725-Sample-Wire-Fraud-Warnings-You-Can-Use
FBI’s Public Service Announcement regarding Business Email Compromise: https://www.ic3.gov/media/2017/170504.aspx

Our executive team at Texas National Title is committed to helping our clients talk to customers about preventing wire fraud. David Tandy (CEO) and Latra Szal (COO/Counsel) have been teaching many classes on the topic to local REALTOR groups. If you would like to schedule a class or conference for your office to discuss further please let me know and we will get something scheduled.

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Is public WIFI too good to be true?

We love the idea of public WIFI. It is everywhere. It is free. It is easy to connect to. It is convenient. But, is it too good to be true? According to Harvard Business Journal, “over half of the adults in the U.S. have their personal information exposed to hackers each year.” And, 89% of all cyber attacks involve financial or espionage motives according to Verizon’s annual Data Breach Investigation Report.

Hackers love free WIFI
Those same reasons why we love public WIFI are also why hackers love it too. With public WIFI, hackers can get unfettered access to unsecure networks full of personal information they can then use to hack into your life and business. They position themselves between you and your connection point. They then see everything you are sending to the hotspot and pass it on. In this position, they will see anything you transmit over the WIFI network, your email, username and passwords, credit card information, business network credentials… Once they have access to this information they can use it at their leisure and access your systems. Hackers also use unsecure networks to distribute malware which can infiltrate your computer.

One mistake people make using public WIFI

According to USA Today, “If I’ve said it once, I’ve said it a thousand times: Avoid doing anything you would not want anyone in the world to know on public WIFI. You may think you’re safe in that busy café or big-name hotel, but public WIFI is a major liability.” You never know when someone has spoofed a reputable brand’s WIFI network. USA Today’s Stephen Petrow was hacked on a plane, click here for his story. This could happen to anyone.

REALTORS® Beware

Jessica Edgerton, National Association of REALTORS Associate Counsel, warns REALTORS®, “Do not do business over free WIFI” in the NAR training “Wire fraud scams: how to protect your buyer clients”. There is just too much at risk in a real estate transaction to take a chance on an unsecure network.

Below are some steps to help safeguard yourself.

How to safeguard yourself and your business when using public WIFI
The vast majority of hackers are simply going after easy targets. Taking the following precautions should help to keep your information safe.

  1. Be aware

Now that you know that public WIFI is not secure – be cautious and remember that any device can be at risk. This includes your laptop, smartphone or tablet. Be suspicious of wireless networks, and refrain from connecting to unknown or unrecognized wireless access points.

  1. Use a VPN

Make sure to use your Virtual Private Network (VPN) that most businesses use for corporate email and Internet access through an unsecured connection, like public WIFI. This is your first line of defense when on public networks. If hackers do manage to get between you and your connection, the data will be heavily encrypted through the VPN and you will not be an easy target.

  1. Use SSL connections

When you are web browsing make sure you enable to “Always use HTTPS” option on websites you use frequently or that require you to enter credentials. Hackers are smart and if they catch a username and password they will try all of the variations knowing that it will more than likely lead to a password to your online banking, corporate network, or other accounts. Remember, you never want to enter your usernames and passwords in an unencrypted manner. This opens the door for hackers.

  1. Turn off sharing

When using the Internet on public WIFI, turn off your sharing in System Preferences or in your Control Panel. It is unlikely that you will want to share, so best to be safe. You can also let Windows do this for you by choosing the “Public” option when you first connect to the new network.

  1. Avoid using specific types of websites

In the event that you do use public WIFI, avoid going to sites where a cybercriminal could capture your information, i.e. online banking, social media sites, online shopping… If you have to access one of these sites, then use your mobile phone network versus the public WIFI to help protect yourself.

  1. Turn off WIFI when you are not using it
    Even if you are note actively connected to a network, the your WIFI hardware is still transmitting data between any network within range. To be safe, when you are not on the Internet, turn your WIFI off. Work offline until you need to connect. Another benefit to this is you can help to save your battery life too.
  2. Protect yourself

Keep an Internet security solution running on your laptop to constantly scan for malware.

Secure your home wireless network

Having a home wireless network is awesome. You can work from anywhere in your home. It is easy, and becoming a standard in new smart homes. Make sure that you protect yourself at home too.

  1. Don’t use the default password.

Make sure to change from the default password and use a complex password. Click here for tips for creating strong passwords.

  1. Turn off SSID (Service Set Identifier) broadcasting.

This will keep your wireless device/network from announcing its presence to your neighbors and the world.

  1. Change your device’s SSID name.

Change the default SSID name of your device. It is easy for hackers to guess your manufacturer’s default SSID name of your device. Make is harder by changing the default SSID name. And, remember to pick a name that is not easily identified.

  1. Use encryption.

In your connection settings, enable encryption. WPA encryption was the best, but even WPA2 was recently cracked. For the time being there is no safe public WIFI. To protect yourself, you must use a VPN service if you want to hide unencrypted traffic.

  1. Protect yourself.

Make sure you have a great anti-malware product on all of your home computers and devices. When you set this up, remember to set it up to auto-renew so you do not go unprotected. Also, find a great IT resource to help you routinely review your computer and devices to ensure you are running optimally and that you do not have anything running in the background on your computer to compromise you or your network.

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SOURCE:
https://hbr.org/2017/05/why-you-really-need-to-stop-using-public-wi-fi
http://www.verizonenterprise.com/verizon-insights-lab/dbir/2017/
https://www.usatoday.com/story/tech/columnist/2017/08/18/one-mistake-people-make-using-public-wi-fi/577791001/
https://www.usatoday.com/story/tech/news/2016/02/24/public-wifi-gogo-steven-petrow-hack-airplane-email-columnist-vpn/80873010/
http://rebac.net/sites/default/files/Wire%20Fraud%20Scams%201.pdf
https://www.howtogeek.com/204697/wi-fi-security-should-you-use-wpa2-aes-wpa2-tkip-or-both/
https://tandyonrealestate.com/cybersecurity-creating-strong-passwords/
https://www.gizmodo.com.au/2017/10/wi-fis-most-popular-security-method-might-be-broken/

 

 

Tax relief for victims of Hurricane Harvey

The IRS has provided tax relief to victims of Hurricane Harvey. Those in Texas who have been affected by the storm have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions through October 16, and businesses with extensions through September 15.

Currently, the IRS has said individuals who reside or have a business in Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton Counties may qualify for tax relief. For up-to-date information, please see IRS News Release: Tax Relief for Victims of Hurricane Harvey in Texas.

REQUIREMENTS FOR POSTPONEMENT OF 1031 EXCHANGE TIME PERIODS
If the taxpayer is considered an “affected taxpayer,” then additional guidance concerning their 1031 exchange is provided in Revenue Procedure 2007-56. Section 17 of Revenue Procedure 2007-56 provides postponement provisions specific to 1031 exchange deadlines that apply in the case of Presidentially-declared disasters. Section 17 extends the 45- and 180-day periods in forward and reverse exchanges that fall on or after the date of a Presidentially-declared disaster by the later of 120 days or the date specified in the relevant IRS News Release, but not beyond the due date for filing the tax return for the year of the transfer.

To qualify for an extension of the IRC Section 1031 deadlines, the relinquished property must have been transferred on or before the Presidentially-declared disaster, and the taxpayer is an “affected taxpayer” or has difficulty meeting the 45-day identification period or 180-day exchange deadline. For these purposes, “difficulty” generally includes, but is not limited to, the following:

  • The relinquished property or the replacement property is located in a covered disaster area;
  • The principal place of business of any party to the transaction (for example, a qualified intermediary, exchange accommodation titleholder, transferee, settlement attorney, lender, financial institution, or a title insurance company) is located in the covered disaster area;
  • Any party to the transaction (or an employee of such a party who is involved in the section 1031 transaction) is killed, injured, or missing as a result of the Presidentially-declared disaster;
  •  A document prepared in connection with the exchange (for example, the agreement between the transferor and the qualified intermediary or the deed to the relinquished property or replacement property) or a relevant land record is destroyed, damaged, or lost as a result of the Presidentially-declared disaster;
  • A lender decides not to fund either permanently or temporarily a real estate closing due to the Presidentially declared disaster or refuses to fund a loan to the taxpayer because flood, disaster, or other hazard insurance is not available due to the Presidentially-declared disaster; or
  • A title insurance company is not able to provide the required title insurance policy necessary to settle or close a real estate transaction due to the Presidentially-declared disaster.

Every taxpayer should be directed to their tax advisor to determine whether they are eligible for the relief and to obtain additional information with respect to their particular circumstances. Learn more @ https://apiexchange.com/tax-relief-victims-hurricane-harvey/.

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SOURCE:
IRS News Release: Tax Relief for Victims of Hurricane Harvey in Texas
https://www.irs.gov/irb/2007-34_IRB/ar13.html#ad83e14
https://apiexchange.com/tax-relief-victims-hurricane-harvey/

Millennials dive into home ownership

I believe that there are many misconceptions when it comes to Millennials. We have all heard that Millennials are renting longer or live with their parents for a longer amount of time than previous generations, and that they have issues with student debt. These factors, to the general eye, would make it appear that Millennials are not interested in home ownership. But, from my research and experience, this is only part of the story.

So, what gives? According to NerdWallet and their review of recent industry surveys and data from government agencies and corporations “a majority of millennials would prefer owning to renting, but they appear to be postponing homeownership because of real and perceived difficulties in affording it. In fact, our analysis found that millennials, those born from 1981 to 1997, look upon owning a home just as favorably as previous generations.”

Here are a few facts on Millennials and homebuying from NerdWallet:

  • U.S. millennials total 66 million individuals and 24 million independent households.
  • The median age for first-time homebuyers has remained virtually unchanged for the past 40 years: In 2015 it was 31 years old, compared with 30.6 in 1970-74.
  • Two-thirds of millennials haven’t reached that homebuying age of 31, and 22% are under 25 years old.
  • Millennials are renting for a median of six years before buying, compared with a median of five years for renters in 1980.
  • Millennials are expected to form 20 million new households by 2025.
  • The median income for a millennial older than 25 is $38,220.
  • Meanwhile, the number of millennials living with their parents has increased nearly 15% from 2006 to 2013.

Here are a couple positive signs:

  • According to Javier Vivas, manager of economic research for Realtor.com, “Millennials’ home search is on.” Millennials recently became the dominant group of users searching for homes on Realtor.com.
  • Both the National Association of REALTORS® and Gallup Poll surveys of Millennials have shown that Millennials believe real estate is a good long-term investment, that they intend to become homebuyers and are increasingly choosing to buy a home.
  • Americans owe over $1.4 trillion in student loan debt with the average Class of 2016 graduate having $37,172 in student loan debt, up six percent from last year according to com. This can be a contributing factor to delaying home ownership as just released by CNN Money. This, of course, is not good news. The positive side of it is that “with student debt on the rise, there’s been a lot of speculation about whether the cost of a college degree hurts an individual’s ability to buy a home,” says NerdWallet’s Ling. “From what we’ve seen, getting a four-year degree or higher is actually positively associated with homeownership — even when accounting for debt.”
  • CNN Money reports that, “Millennials are the largest group of homebuyers. In January, Millennials represented around 45% of all purchase loans, up from 42% the same month in 2016.” Per CNN Money, Millennials are diving into home ownership, but “the struggle can be real”.

When NerdWallet asked Millennials what they believed were the biggest obstacles to getting a mortgage, millennial renters gave these answers, in order:

  • Insufficient credit score or history
  • Affording the down payment or closing costs
  • Insufficient income for monthly payments
  • Too much existing debt

For many millennials, the data NerdWallet analyzed reveal that these reasons may be more perception than reality. The important thing is to look at your financial position, make positive changes/plans to prepare for responsible home ownership through personal fiscal responsibility.

Millennials have a few things to consider when buying a home:

  • Increasing rents make home ownership more attractive. Money saved was the reason 21% of millennials chose to buy a home per Ellie Mae’s Owners’ Key Insights.
  • This buying season Millennial first-time homebuyers will be up against seasoned repeat homebuyers who have already started their home search last year, so it is good to start the search early and be prepared. Make sure you set your budget and get pre-qualified. Check out the Consumer Financial Protection Bureau(CFPB) Home Loan Toolkit to get started.
  • The home inventory shortage means rising home prices which bring into account home affordability. In response to what is stopping you from buying a home 45% haven’t saved enough for a down payment per Ellie Mae’s 2017 Borrower Insights Survey. CNN Money recommends that Millennials move home for two years to save money, reduce their debt and save for down payments.
  • Lending requirements have tightened. Understand your budget and what you will need to save for your down payment. Click here for Zillow’s Home Affordability Calculator.
  • Interest rates are great for home buying. Rates have gone up 3 times since 2015, but even with these increases rates still make home ownership very attainable.

I am excited to see the rise in home search and ownership in millennials. As with anyone approaching home ownership, it is good to make sure you are an educated buyer, that you understand what you are getting into, and that you have someone you trust to work with as you embark on your journey.

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SOURCE:
http://money.cnn.com/2017/04/03/real_estate/millennial-homebuying/index.html
http://www.gallup.com/poll/190850/americans-say-real-estate-best-long-term-investment.aspx
https://www.nar.realtor/sites/default/files/reports/2017/2017-home-buyer-and-seller-generational-trends-03-07-2017.pdf
https://www.nerdwallet.com/blog/mortgages/millennials-and-homebuying/
http://elliemae.com/millennial-tracker
http://elliemae.com/borrower-insights
http://elliemae.com/about/news-reports/press-releases/homeowners-seeking-both-a-high-tech-and-human-touch-mortgage-experience-ellie-mae-2017-borrower-insights-survey-finds
https://www.zillow.com/mortgage-calculator/house-affordability/
https://s3.amazonaws.com/files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf
http://www.realtor.com/realestateagents
https://studentloanhero.com/student-loan-debt-statistics/
http://money.cnn.com/2017/07/13/pf/college/student-debt-home-ownership/index.html

A vision for homebuilding

At the National Association of Real Estate Editors (NAREE) Conference in Denver, Douglas Yearley, CEO of Toll Brothers presented the Keynote Address “A Vision for Homebuilding”. Here is a snapshot of his state of builder/buyer.

Business is good
Toll Brothers announced earlier this summer that they had the best spring selling season that it has had in the past ten years. This can be attributed to many things:

  • Low interest rates
  • Rising home values
  • Consumer confidence
  • Improving job growth, along with wage growth

There are low inventories in most markets in used homes, and we finally have release of pent up demand. As the economy improves and personal balance sheets improve, pent up demand could bring people off the sidelines.

A slow recovery
According to Toll Brothers, we have seen a slower recovery than past cycles:

  • Key metrics are improving
    • Number of households has grown 98% since 1970.
    • 1980 – 1989 – 1.49 million housing starts
    • 2008 – 2016 – .85 million housing starts
    • Home ownership peaked in 2004 at 69%.
    • Today’s home ownership rate is at 63.6%.

We are not quite where we should be. We are still behind the demand, but this only leave room for growth.

Buyers buying new and where the sun shines
There is a 32% premium from a new home to used home. The average is 18%. People are gravitating to buying new homes as the used inventory is older. And, energy efficiency and the opportunity to customize home is driving the premium.

More than 50% of Toll Brothers’ business in done in the West. Denver to the West is where builders are focused. Builders are focused on pro-business states, where land is available and where people want to live – where the sun shines. Boomers are buying in Florida, no big surprise here. And, Texas, a pro-business state, is doing very well in Dallas.

Demographics – the Boomer is driving growth
Baby boomers continue to drive Toll Brothers’ business. As they did for years when they moved to suburban areas to “move up”, and still today as they downsize and prepare for the next stage of their life. Many are buying into active-adult communities or are buying second homes in Palm Springs, Florida and Scottsdale, Arizona.

Design trends – casual family-friendly spaces
According to Toll Brothers the open, casual living with free flow indoor and outdoor space has completely caught on. People want casual environments where living space is connected. And, where the outdoors is a continuation of the home. Where the back of the home will be one big wall of glass making the outdoors, the indoors.

There is also a trend for multi-generational living. With additional living space with a sitting area, little kitchen area, direct access outside and separate entry in the home for older generations living with their family.

And, smart home solutions are evolving and expanding with the ability to remotely control the home.

Labor on the rise
We went from two million houses a year to 500,000. Labor dramatically went away. And, every market has a different issue; there is no national plumber. As we get further into recovery, we are seeing improvements and a return of the builder labor market. Contractors are ramping up their businesses. There is still cost pressure, but according to Yearley, it is definitely less now than it was a year or two ago.

Getting creative with land acquisition
For Builders it is all about the land – whether you are building one home or a master-planned community. You are stuck with the land once you buy it. Builders have to be much more creative in how they look for buy land because people want to live differently. Buyers want to live in a more connected community. And, creativity comes into play due to the availability of land in urban areas. An example of this creativity in land acquisition is buying a car dealership and renovating it. Or, building a park with the mixed use and condo development as part of the sales price for the land, like Maxwell House, former Maxwell House Coffee plant, in Hoboken, NJ. This was the largest in the world and a landmark on the Hudson River since 1939. What was a tragedy for Hoboken is now a trendy redevelopment leveraging both the best of the outdoor and the indoor space.

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SOURCE:
National Association of Real Estate Editors (NAREE) Conference
Toll Brothers
https://www.upi.com/Archives/1990/06/27/Landmark-Maxwell-House-plant-to-shut-down/2261646459200/

 

 

 

CFPB finalizes updates to “Know Before You Owe” Mortgage Disclosure

On July 7th, the CFPB announced the finalized updates to the “Know Before You Owe” Mortgage Disclosure rule. Their announcement states that the “changes will provide more clarity, and preserve protections for consumers.” According to CFPB Director Richard Cordray, “A mortgage is one of the largest financial decisions a consumer will ever make, and CFPB’s rules help ensure consumers have the easy-to-understand information they need before making a decision that will significantly impact their financial lives. Our updates will clarify parts of our mortgage disclosure rule to make for a smoother implementation process for lenders and consumers.”

The National Association of REALTORS®, states that “as advocated for by NAR, the final rule clarifies the ability to share the Closing Disclosure (CD) with third parties – a victory for real estate professionals nationwide.” Click here for more information.

Click here for the full press release from the CFPB.

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SOURCE:
https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-updates-know-you-owe-mortgage-disclosure/ 
https://www.nar.realtor/articles/cfpb-final-rule-clear-on-ability-to-share-cd
http://files.consumerfinance.gov/f/documents/201707_cfpb_Final-Rule_Amendments-to-Federal-Mortgage-Disclosure-Requirements_TILA.pdf

 

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