What does the AARC mean to me? Networking with colleagues and good friends, valuable resource of information, professional development, partnerships and economic development tools for my state and communities! It has been a pleasure to serve as Chair for the last 2 years and an incredible experience learning more about our industry. We are looking forward to our continued progress in reaching our target audience and delivering more resources to our members. Please join me in welcoming your 2018-2020 Chair Rachel Baker! Many of you know Rachel and her role as Executive Director at the Loudon County Visitors Bureau (TN). As she leads us into the new year, the AARC will continue to be your resource and guide to reaching our retiree markets.
Wishing you all a very happy and prosperous New Year!
The latest measure of the U.S. economy has been released: home sales. The number of homes sold in October increased from the previous month due to the waning impact of a series of hurricanes. The market remains constrained by a lack of supply, however, limiting the post-hurricane increase to 2%. This is the largest increase since June, but it leaves sales 0.9% below their level at the same time last year. Source: National Association of Realtors
New home sales increased to 685,000 in October. This seasonally adjusted number is a 6.2% increase from the September rate of 645,000 homes. This is the highest level of sales in a decade, and it also represents a year-to-year increase of 18.7%. The results were far stronger than analysts had predicted, with most expecting a fall in sales. Source: Census Bureau
Again, thanks to everyone for your continued support of The AARC and we look forward to serving you!
Andre’ Nabors Chair, The AARC
How Tax Law Will Help Some Housing Markets
Laura Kusisto, Fox Business | December 24, 2017
The tax overhaul is expected to create winners and losers among housing markets across the U.S., dealing a blow to high-cost coastal regions but potentially fueling demand in places in the middle of the country.
The law caps the amount of property and state income taxes filers can deduct, a provision that hits places like New Jersey, New York, Connecticut and California especially hard. It also limits the size of a loan on which homeowners can deduct mortgage interest to $750,000, down from $1 million, which could put a dent in pricey markets.
On the other hand, realtors and economic-development officials in less-expensive states believe they can benefit if the tax-law changes encourage people to reconsider their home address.
“At some point this draws attention to the cost gap in high-cost areas and growing areas with growing resources like Raleigh, Austin and Charlotte,” said Scott Hoyt, a realtor in North Carolina. “That’s going to be a boon.”
At peak impact in the summer of 2019, home prices in Essex and Union counties in New Jersey and Westchester County in New York could all be about 10.5% lower than they would have been without the tax bill, according to Moody’s Analytics. For roughly 80% of counties in the country, the effect of the bill on home prices is likely to be negative, the firm estimates.
But some markets could see a slight boost to their economies and to home prices thanks to the bill, including parts of North Carolina, Alabama, Nebraska, Indiana and Tennessee.
“They don’t get nailed by the elimination of the [state and local tax] deduction, but they do benefit in the change from the standard deduction and some of the manufacturers benefit from the lower marginal rates for businesses,” said Mark Zandi, chief economist at Moody’s Analytics.
Still, Mr. Zandi cautioned, the changes are modest. Even areas that are likely to see an additional increase in home prices are looking at a boost in the 1% range. Overall, the national impact is likely to be negative. “What this is going to do is it’s going to throw a wet blanket on [the housing market]. It’s still going to move forward, but more slowly,” he said.
People are already migrating from high-cost states to lower-cost areas as home prices and rents in large urban centers skyrocket and it becomes easier for people to work remotely. The tax law is likely to accelerate that trend, economists said. Idaho, Nevada and Utah saw the largest percentage growth in population in the country from July 2016 to July 2017, according to U.S. Census data released this month. New York, New Jersey and California, meanwhile, ranked below the top 20 for percentage growth in population.
Economists said the tax impact is likely to be felt more by businesses deciding to expand operations in lower-cost states, viewing local taxes as an even greater hindrance.
“There’s a neon billboard now [and] the critical mass to induce companies to leave, to induce employees to leave. 2018 is going to see a lot of pressure on this,” said Edward McCaffery, a professor of law and economics at the University of Southern California.
The average New York household that itemizes its tax return pays roughly $17,500 in state income and property taxes — well above the $10,000 limit, according to an analysis by Robert Dietz, chief economist at the National Association of Home Builders. A typical California household that itemizes pays close to $14,000 in taxes. Even in slightly less pricey states, such as Illinois, Maryland, Oregon and Vermont, the average taxpayer who itemizes exceeds the new cap.
For some homeowners, the differences can be stark. A top income earner in New York who owns a home in the top-third price tier of the metro area pays more than $23,000 in property and state income tax a year, according to an analysis by Zillow. Meanwhile, an affluent homeowner with an expensive home in Raleigh would pay just over $10,000.
A homeowner in similar circumstances in Chicago would pay about $12,000 in property and state income tax, while one in the same circumstances in Nashville would pay about one-quarter that much.
Scott Mosley, a Redfin real-estate agent in Nashville, said he has one client moving from Chicago who fast-tracked his closing to just three weeks, out of fear he will take a hit on his tax bill next year because of the cap on state and local tax deductions. Tennessee has no state income tax, although it does level a tax on investment income.
To be sure, the tax law is merely likely to nudge those already considering moving to a cheaper state. Most homeowners are likely to make other sacrifices before they uproot their lives over a modestly larger tax bill.
Steve Bellone, county executive of Suffolk County on New York’s Long Island, said he worries the law will hurt the area economically in the form of lower home values and less consumer spending. Long Island has already struggled to retain younger residents.
“The cost of living is high and that’s something we’re always grappling with to try to keep people in the region and keep young people in the region. This is really a devastating blow to all those efforts,” he said.
Felicia Fleitman, a 34-year-old who owns a consulting business, Savvy Hires, that helps companies create internships and apprentice programs, said she and her husband pay about $10,000 on property taxes and another $5,000 on state income taxes for their 1,100-square-foot home on Long Island.
The couple has two children and Ms. Fleitman is pregnant with a third. She said they would make sacrifices such as taking fewer career risks or buying fewer toys for their children, in order to stay in their home close to family and friends.
“At the end of the day, we’re just going to have to figure it out and come up with the money, which means that other things might have to give a bit, which stinks,” she said.
Home Prices Stay High, Up 6.2% From a Year Earlier, Case-Shiller Shows
Jeffery Bartash, Realtor.com | December 26, 2017
The numbers: The S&P/Case-Shiller national index rose a seasonally adjusted 0.7% in the three-month period ending in October. It was up 6.2% compared to the same period a year ago.
The 20-city index also rose a seasonally adjusted 0.7% for the month and it’s up 6.4% for the year Both indexes advanced 0.2% in raw or unadjusted terms.
What happened: Prices rose in more than half of the largest U.S. markets, led by San Francisco and Las Vegas, reflecting once again the high cost of U.S. housing, especially in tech hotbeds. The Case-Shiller national index is now 6% above its prior year-to-year peak.
The 20-city index that skews toward the biggest metro areas is still 1.3% below its all-time high, though. Big cities generally experienced even bigger booms before 2006 and the ensuing housing bust and some have not climbed all the way back.
Big picture: The U.S. housing market is in pretty good health. Sales keep rising and builders are busy as millennials enter their home-buying years. Low interest rates and the best jobs market in years have created a tailwind that’s fueling demand.
The supply of new and previously owned homes for sale, however, has not kept pace and that’s contributed to a sharp escalation in prices. Without more supply, some buyers could get frozen out.
Another potential drag in 2018 could be higher mortgage rates. The Federal Reserve raised a key interest rate in December that helps determine the cost of borrowing. The central bank could boost rates by up to another percentage point in the next 12 months, forecasts show.
What are analysts saying?: “Home prices continue their climb supported by low inventories and increasing sales,” says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. “Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth.
Yet Blitzer also offered a cautionary note.
“Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the fed funds rate three more times to reach 2% by the end of the new year. Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting,” he said.
“Data published by the Urban Institute suggests that in some West coast cities with rapidly rising home prices, renting is more attractive than buying,” he added.
Market Reaction: Stocks were mixed, with the Dow Jones Industrial Average gaining early Tuesday in light trading the day after Christmas but other indexes in the red.
|Metro||Monthly change||12-month change|