As February ~ the month of love~ comes to a close, the AARC wants you to know that we love having you at the heart of our organization. Whether you’re a current or future member, annual conference attendee, or just plain friend, you are vital to our success.
A big thanks to Andy Windham of Crawford Strategy for hosting our February webinar – and thank you to all who participated! Stay tuned for details on the next webinar opportunity.
An index of national house prices is showing a 6.2% year-to-year increase in November. The S&P/Case-Shiller index is a rolling three-month average of house prices, and the November reading was nearly the same as the 6.1% annual increase in October. The highest year-to-year gains were in Seattle, Las Vegas, and San Francisco, which had house prices rise by 12.7%, 10.6%, and 9.1% respectively. Source: S&P Dow Jones
New home sales for January were reported at 593,000, far below the consensus forecast, and 7.8% below a revised December rate of 643,000. Analysts note January is usually one of the weakest months of the year for new home sales, on a not seasonally adjusted (NSA) basis – and poor weather this year might have impacted sales a little more than usual. It’s too early to blame higher interest rates, or a negative impact from the new tax law, as the cause of slower sales – but February and March data will help sort it out. Source: Census Bureau
In the next few weeks, we’ll spring forward and celebrate the first day of Spring. The flowers and trees have begun to bloom and just like tending the garden, we want you to help us continue to grow!
Rachel Baker Chair, The AARC
Housing starts soar in January, and building permits hit 10½-year high
Jeffry Bartash & Andrea Riquier, MarketWatch.com | February 17, 2018
The numbers: Construction on new homes in the U.S., as measured by housing starts, jumped almost 10% in January to an annual rate of 1.33 million. That’s the second highest level since the recession following the financial crisis and it easily exceeded the 1.24 million forecast of economists polled by MarketWatch.
Permits to build new homes also hit a 10½-year high, rising 7.4% to an annual rate of 1.4 million.
What happened: Housing starts bounced back in January after a sharp decline in December tied to poor weather.
Building increased in the North, South and West. And two-thirds of the new units on which construction began were single-family homes, the bread-and-butter of the housing market.
Big picture: Housing starts are 7% higher compared to one year ago, reflecting a vibrant real estate scene that shows no sign of slacking off against the backdrop of the strongest economy in years.
Market reaction: U.S. stocks opened higher on Friday. Such strong demand for housing has buoyed shares of big publicly-traded builders. The iShares U.S. Home Construction ETF ITB, +0.20% is up nearly 38% over the past 12 months, more than double the gain for the S&P 500 index SPX, +1.18% .
What they’re saying: “With home ownership turning higher for the first time in 13 years, a record-low number of single-family homes on the market, and builders more upbeat than during the housing bubble, residential construction should track higher regardless of what Mother Nature throws at it,” said Sal Guatieri, senior economist at BMO Capital Markets.
Stephen Stanley, chief economist at Amherst Pierpont Securities, noted that most of the starts gain came from multi-family buildings.
“The more reliable single-family starts figure posted a decent gain of 3.7% to 877,000 in January, in between the November blowout reading of 946,000 (which likely reflected a catch-up after hurricanes disrupted construction in September and October) and December hangover reading of 846,000,” Stanley said.
“To put the figure more in perspective, the 2017 average for single-family starts was 849K, so January’s level represents a continuing solid uptrend, especially considering that weather may have held activity down somewhat last month. The single driving fundamental in the housing market remains that demand is outstripping supply, so upside surprises on housing starts are just what the doctor ordered.”
Tax Reform Law Will Benefit Builders, Small Businesses
J.P. Delmore, National Association of Home Builders | January 19, 2018
The landmark tax reform legislation took effect for the tax year starting Jan. 1, 2018. After significant improvements made during the legislative process, and due to the robust engagement efforts of NAHB and its membership, NAHB supports this final tax legislation.
The changes made to the tax code will help middle-class families, maintain the nation’s commitment to affordable housing and ensure that small businesses are treated fairly relative to large corporations.
Watch video highlights of NAHB’s influence during the tax reform debate.
HIGHLIGHTS OF TAX REFORM LEGISLATION
Supports Middle-Class Families
The legislation supports the American Dream of homeownership and strengthens opportunities for Main Street home builders to add much-needed housing inventory to the market.
- Retains the mortgage interest deduction and the deduction for second homes, but reduces the mortgage interest cap from $1 million to $750,000.
- Allows taxpayers to deduct up to $10,000 of state and local taxes, including property taxes and the choice of income or sales taxes.
- Maintains existing law that allows home owners to exclude up to $250,000 (or $500,000 for married couples) in capital gains on the profit from the sale of a home if they have lived in the house for two of the last five years.
- Retains seven tax brackets, with rates ranging from 10% to 37%. This will provide tax relief for individuals and small businesses and represents a tax cut for most taxpayers.
Protects Affordable Housing Options
The new tax law retains private activity bonds (PABs), which will enable the Low-Income Housing Tax Credit to maintain its effectiveness as the most indispensable tool for the production of affordable housing. Without PABs, we would face the loss of more than 788,000 affordable rental units over the next decade.
Expands Economic Growth
NAHB economists predict that the new law will boost GDP growth over the next 10 years, while also rewarding work and promoting labor supply and wage growth.
Importantly, the bill helps address the housing market’s severe inventory shortage with its reformed rule for businesses, allowing for greater investment and growth. This will help small builders buy land, obtain financing and build more homes over the next 10 years.
A healthy housing industry means more jobs and a stronger economy. Fully 15 percent of the U.S. economy relies on housing and nothing packs a bigger local economic impact than home building. In fact, three jobs are created with the construction of each new single-family home.
Small business provisions in the tax bill include:
- Retains existing carried interest rules, but assets must be held for three years.
- Allows most taxpayers with pass-through income to deduct 20% of that income based on wages or on wages plus a capital element.
- Provides real estate businesses a choice between the following:
- Limiting their interest deduction to 30% of net income without regard to depreciation, amortization, and depletion. This distinction makes the limitation less restrictive than one based on adjusted gross income.
- A 100% deduction for business interest, but with certain tradeoffs.
- Preserves the benefit for real estate investors to make tax-free exchanges of property, commonly referred to as “like-kind” exchanges.
- Gives the taxpayer the choice of taking 27.5- or 30-year multifamily depreciation, depending on how they elect to treat their business interest.
Disclaimer: NAHB is providing this information for general guidance only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of this tax information is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.