Home prices, mortgage rates increase in Orlando market

Orlando’s real estate industry emphasized two things as it summed up recent market conditions for a slow time of year: prices are up and so are interest rates.

Compared with a year ago, the housing market looked vibrant last month with the median price of $200,000 up about 9 percent and the area’s 2,481 sales up 7 percent, according to a report by the Orlando Regional Realtor Association. The group compiles a report based on activity mostly in Orange and Seminole counties.

But both prices and sales volume slid from October to November, which is typical for that time of year.

“I think the market has slowed down some,” said  Allyn Maycumber Keller Williams  in Lake Nona. “It could be because of the holidays. It’s turning back into a buyers’ market for anything over $250,000.”

Allyn said she has seen builders’ inventory of new homes increase in southeast Orlando and they are offering higher commissions to real estate agents to help drive sales.

Within Central Florida, year-over-year sales were up in Lake, Osceola and Seminole counties but down about 3 percent in Orange County.

In hopes of boosting sales by engaging previously reluctant buyers, the residential real estate association’s monthly report underscored an increase in mortgage rates from 3.57 percent in October to 3.82 percent in November. Economists forecast those rates will climb higher during the upcoming year.

A year ago, the supply was about 4.9 months and even that was considered low since a six-month supply has long been the tipping point between a buyers’ and sellers’ market.

With scant affordable listings available, challenges are likely to increase for first-time buyers because of the anticipated rising interest rates.

Based on Orlando-area income levels, the Realtor association has determined that first-time buyers have 14 percent more income than necessary to purchase a typical starter home. A year ago, they had about 20 percent more.

Nationally, buyers’ confidence in purchasing waned slightly in recent months, according to a housing trends survey released Wednesday by the National Association of Realtors. The share of renters who said now is a good time to buy declined from 68 percent a year ago and 60 percent in September to 57 percent in October.

How to Keep Your House Bandit-Free

Home burglaries resulted in $4.6 billion in lost property in 2010, and the average dollar loss per burglary was $2,119, according to the FBI. While the cost of lost property is significant, even more significant is the emotional toll it takes when your home’s security is compromised.

It’s impossible to completely safeguard yourself from becoming a victim of burglary, but there are ways to reduce your risk. Employ these eight tactics to help keep your home safe from thieves.

1. Install exterior lighting. Make sure the outside of your home is sufficiently lit, and consider installing lights in shadowed areas. Better yet, install motion sensor lights. Parts and labor run about $1,000 for full installation, and they use less energy than fixtures that are always on. Plus, motion sensor lights are more likely to scare off a would-be burglar when they click on.

2. Reach out to law enforcement. It’s obvious you should call 911 if someone is breaking into your home, but did you know you can request to have a police officer inspect your home for home safety shortcomings? While you shouldn’t call the emergency number to place this request, the direct line to your local precinct should do the trick. It’s a great way to get advice on where your home protection strategy could use improvement.

3. Get involved with your community. Start or join a neighborhood watch group to lower the risk of home burglary and crime throughout your neighborhood. Understand that starting a group takes time, so it’s important to prepare for the commitment. Also, notify your local police department that you’re starting a watch group, and request their assistance for tips on safety and participation. Finally, make sure everyone in the group understands that they should never approach a suspicious individual themselves, but should call the local police to handle the situation.

4. Become a dog owner. Although this shouldn’t be your only line of defense, adopting or buying a dog can help prevent home burglaries, since some burglars might be deterred from breaking in if they hear barking.

5. Consider a home alarm. Home alarm systems are great, but they’re also expensive. Weigh the pros and cons, and consider your neighborhood’s crime statistics before requesting an installation. If you’d like one for added protection and peace of mind, consider getting one without monitoring. The noise of a tripped alarm is usually all you need to keep a burglar at bay.

6. Install a fence. Installing a fence is another way to keep your home safe, and the higher the fence, the better. If you’re handy, you can actually install a 6-foot privacy fence for a reasonable price. You can find some for under $500.

7. Maintain landscaping. Keep all your bushes and shrubs trimmed, cut your grass regularly and maintain the rest of your landscaping. There are two reasons for this: First, you eliminate areas where a burglar could lie in wait, and second, a maintained exterior is a psychological deterrent to a potential thief. He or she knows you spend time caring for your home and are therefore more likely to take steps to protect it.

8. Make your home look occupied. are prone to burglary when thieves have reason to believe the owners are on vacation. Reduce obvious signs of an empty house by asking a friend or family member to pick up your mail and newspapers each day, and pop inside to open and close a few curtains and drapes. If you’re going on a road trip, ask a neighbor to park his or her car in the driveway, and always be sure to leave a few lights on. If your house looks maintained and full of activity, burglars are less likely to make it a target.

Hurricane, Politics Blamed for Home-Sales Downturn

Orlando neighborhoods saw a continued decline in for-sale signs last month, driving greater competition among buyers and holding prices steady at time of year when they usually soften, a new report shows. — flat from a month earlier and up 14 percent from a year earlier, according to the Orlando Regional Realtor Association. Sales declined sharply for a month that was defined in part by weather and politics. Association members sold 2,654 houses in October — down 15 percent from a month earlier and 8 percent from a year earlier. “Immediately after even a mild hurricane without much damage, scheduled closings can be delayed by the need for additional appraisals or inspections, while sellers can put off listing their for a week or more,” said John Lazenby, president of the association and an with Colony Realty Group. “And of course an election year brings a natural state of uncertainty to the housing market as both buyers and sellers wait to see what the future brings,” he added. Two months ago, the core Orlando market had 10,362 listings, which was the lowest amount since March 2014. And listings dropped even further from September to October, declining by about 3 percent. Interest rates for a 30-year mortgage were 3.57 percent in October. That figure is expected to rise during the upcoming year. Debra Wingo, broker for the Selby Group, said rates have risen in the last week. She said an Orlando couple was shopping for houses as rates went from 3.5 percent to 4 percent in recent weeks, capping her buyers at $250,000. “A half point does make such a difference, especially for first-time buyers,” Wingo said. “We thought we could go $265,000 to $270,000.” For October sales in the core Orlando market, it took an average of 60 days for a house to land a contract. And while that two-month time frame held steady from the month before, it was 11 days faster than a year ago. It also marked the fastest selling window for any October since 2004, when houses came under contract in an average of 44 days.

Sanford Burnham’s shortfall

dry cleaners, day cares, and real estate offices are among businesses that would have benefited from a $4.8 million economic boost if Sanford Burnham had met job goals, according to a new analysis.

Lured to Orlando a decade ago with more than $350 million in incentives, the California-based medical-research institute fell short of its goal to create 303 relatively high-paying jobs. The institute’s shortfall of 64 relatively high-paying jobs takes a multi-million-dollar toll on the local economy annually, according to regional economic analysis by economist Sean Snaith, of the University of Central Florida.

Much of that is money that would have flowed through businesses in the burgeoning area.

“The impact here is on the household sector,” said Snaith, who sees incentives as worthwhile in some cases. “The employees who weren’t hired don’t spend on consumer goods, retail, restaurants, day care, doctors, transportation and mortgages.”

The state has demanded $77 million — half of its $150 million contribution to the incentives package — back from Sanford Burnham. But institute officials have said they owe nothing because their agreement only required attempting to create 303 jobs.

Orlando businesses aren’t alone in missing out on new customers, orders and commerce lost when incentivized companies fail to deliver on promised jobs. Eight research companies won $444 million in state innovation incentives from 2006-2008 — three times more than incentives awarded to 440 companies with Florida operations. The eight heavyweights of incentives are in Palm Beach, St. Lucie, Miami-Dade, Pinellas and Hillsborough counties. Only one met or exceeded job goals, according to data from the state Department of Economic Opportunity.

“They all fail and it’s at a cost to the taxpayers,” said new House Speaker Richard Corcoran, who has vowed his chamber will fund no incentives. “It’s the taxpayers’ money and it could easily be going to something that would have a terrific effect on our state, such as world-class education.”

State officials say Gov. Rick Scott has reformed the incentive process by requiring companies to meet job goals and other measures before they get any payments.

Even without Sanford Burnham hitting full stride, Lake Nona is among Orlando’s fastest-selling developments. Where cow pastures had been just a decade ago, Lake Nona now claims a VA Hospital, the University of Central Florida Medical Center, the University of Florida Research Center and Nemours Children’s Hospital. Most had been discussed for various Central Florida locations before Sanford Burnham located in Lake Nona.

In the corner offices of a stone-trimmed shopping center near the entrance to Lake Nona, Keller Williams broker Allyn Maycumber speaks with a walk-in customer about Lake Nona’s vibrance and strong schools. But the broker is so busy he cuts the conversation short to leave for a client meeting.

Maycumber said the unfilled jobs at Sanford Burnham are still important because Lake Nona home prices, combined with Orlando taxes, community development fees and homeowner association fees put purchases out of reach for many buyers. Higher-paying jobs from Sanford Burnham would have brought in more buyers who could afford to purchase there, she added.

“I think it’s important to have that anchor [Sanford Burnham] because the houses are so expensive,” said Maycumber. “Prices are steadily going up to where it’s almost out-priced the first-time buyers. You have young people who have been priced out of the market here.”

In June, Sanford Burnham reported that salaries for its Orlando operations averaged about $64,000. Even though that surpassed Metro Orlando’s most recent median of salary of $51,077, the institute’s average paycheck is still not enough to afford a typical house in the Lake Nona postal zone, mortgage calculators show. Average October sale prices there averaged $375,000, far exceeding the Orange County average of $264,000 for that month, according to the Orlando Regional Realtor Association.

Housing would have been one of the biggest local beneficiaries if Sanford Burnham had succeeded with its jobs mission, said Owen Beitsch, senior director of economic and real estate advisory services for Community Solutions Group. But many types of also would have benefited, he said.

“When money has been misallocated, it leads to benefits not realized,” said Beitsch, who also teaches economics at UCF. The “opportunity cost” of jobs not realized “begs the question of how closely we make these evaluations initially, he said.

Situated on a Lake Nona street named for Nobel Laureate Frederick Sanger, Sanford Burnham is credited with forming the Translational Research Institute with Florida Hospital. It also helped cultivate a spin-off company, micro-gRx, which develops a “lab on a chip” for scientists to study live human cells in space.

In response to the state’s demands, the institute’s attorney wrote last week that Sanford Burnham had worked “very, very hard over the years” to live up to its agreement with Florida. And even though the institute worked for months to transfer its Orlando operations to the University of Florida, the letter stated it does not intend to cease operations in Florida in the coming months.

Snaith used modeling used by other universities and government agencies, with Sanford Burnham salaries and job numbers. He said incentives sometimes get compared to the parable of a farmer scattering seed and only some of it germinating while the rest goes to waste.

“I don’t think this is a seed that got trampled,” he said. “I just don’t think it bore as much harvest as expected.’

 

Mortgage rates keep rising after Trump’s election win

Mortgage Rate Trend Index

WASHINGTON (AP) – Nov. 28, 2016 – Long-term U.S. mortgage rates continued to surge last week in the aftermath of Donald Trump’s election win.

Mortgage giant Freddie Mac said Wednesday that the average rate on a 30-year fixed rate loan shot up to 4.03 percent, the highest since July 2015 and up from 3.94 percent a week earlier. The rate on 15-year home loans climbed to 3.25 percent, up from 3.14 percent last week and highest since January.

Long-term U.S. interest rates have climbed since Trump was elected Nov. 8. That is largely because bond investors believe the president-elect’s plan to cut taxes and spend massively on roads, bridges, airports and other infrastructure could ignite inflation. When they foresee rising inflation, investors demand higher long-term rates and pay lower prices for bonds.

The yield on 10-year Treasury notes has risen from 1.87 percent on Election Day to 2.38 percent Wednesday.screen-shot-2016-11-19-at-8-20-36-am

The expectations of economic stimulus from tax cuts and higher infrastructure spending that are driving up interest rates have also pushed stocks higher. On Wednesday, the Dow Jones industrial average closed above 19,000 for the first time.

Still, rising mortgage rates pose a threat to the housing market. Low mortgage rates have helped fuel a rally in home sales. The National Association of Realtors said Tuesday that sales of existing homes rose 2 percent in October to a seasonally adjusted annual rate of 5.6 million – strongest pace since February 2007.

That’s also helped lift home prices. The median price of a previously occupied U.S. home has risen 6 percent over the past year to $232,200.

Higher mortgage rates, along with rising house prices, could eventually reduce demand for housing.

Typically, as mortgage rates rise, buyers feel more of an urgency to purchase a home before rates rise further. That can lead to a short-term spike in sales. But if rates continue to climb, many buyers, particularly those living in pricier coastal markets, could find it tough to qualify for a loan.

“Certainly there are households on the margin where the difference between 3.5 and 4 percent is the difference between qualifying for a loan and not qualifying for a loan,” said Ralph McLaughlin, chief economist at housing data provider Trulia.

Mortgage rates will likely keep rising until there’s some more understanding of where the economy and housing policy are headed, McLaughlin said. But he doesn’t expect U.S. home sales to weaken dramatically unless rates rise to 5 percent.

The Commerce Department reported Wednesday that fewer Americans bought new homes in October, though they are still 12.7 percent higher than they were a year ago. A tight supply of new homes has limited sales.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week.

The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged at 0.5 point. The fee on 15-year loans stayed at 0.5 point.

Rates on adjustable five-year loans climbed to 3.12 percent this week from 3.07 percent. The fee was unchanged at 0.4 point

Trump’s Presidency Impact the Commercial Real Estate Industry?

The commercial real estate industry has long been a major force in local and national politics, but that relationship has reached a new height on Tuesday, when a commercial real estate developer with little track record in public service won the election to be the 45th President of the United States. Aside from the choice of his economic advisors, that created him? Here are some predictions.

Kissimmee development

Kissimmee development

A Risk of Recession Has Just Gone Up

This may not be a phenomenon exclusive to Donald Trump, but data collected over the past 70-plus years shows that whenever a new president enters the Oval Office, a recession tends to follow within the first year of his administration, according to Victor Calanog, chief economist and senior vice president of research with New York City-based research firm Reis Inc. This is often due to the eagerness to implement fiscal policy changes in a hurried fashion, using “rather blunt instruments.” Given that the U.S. economic growth is currently far from robust and that Trump ran on promises of a number of economic changes—renegotiated trade deals, lower taxes and the like—the new administration will have to be extremely careful to avoid inadvertently bringing on a recession. “If the economic environment is fragile, which it is today, it may not take much to push our economy into a downturn,” Calanog said during a third quarter briefing on the state of the market. “President Trump has his work cut out from him.”

The Chances of a Fed Rate Hike in December Have Gone DownNona parking garage 2

While a strong jobs market and generally positive economic indicators made it likely that the Federal Reserve would raise its key interest rate in December, the election’s unexpected results may postpone the decision to hike rates, notes John Kevill, principal and managing director of U.S. capital markets with real estate services firm Avison Young. While previously the chance of a December increase was estimated at 85 percent, “consensus by traders already… is down to 25 percent,” Kevill writes. The interest rate will “probably move upward only one out of the next three meetings as opposed to all three…”

Short-Term Volatility in the CMBS Markets

As was made clear earlier this year, the CMBS markets don’t respond well to any perception of uncertainty in the general economy. At this point, it’s anyone’s guess what Trump’s economic policies may look like, says Greg MacKinnon, director of research with the Pension Real Estate Association (PREA). And that means more volatility is likely to be expected. “It’s really going to take a while to see how things will actually unfold,” MacKinnon notes. “In the short term, of course, that leads to uncertainty in the capital markets and I would not be surprised to see periods of volatility over the next couple of months as people come to grips with the election results. In the short term, capital market volatility could lead to a drop off in CMBS issuance from what it otherwise would have been through the end of the year.”

A Likely Pullback on New Construction

If the capital markets do experience a shock to the system, the difficulty of obtaining construction financing coupled with a muddy economic outlook may push some developers to abandon plans for new projects, MacKinnon adds.

A New Foreign Money Rush

While some investors may take a wait-and-see approach to betting their money on U.S. commercial real estate assets in the short term given the uncertainty surrounding U.S. economic policy under the new President Elect, “capital formation globally continues to grow and increase allocations to real estate,” according to Byron Carlock, real estate practice leader with consulting firm PwC, who is currently in London for an investment conference. Overall, “we will continue to be viewed as a safe haven and a popular investment destination,” he says. In fact, some foreign investors may expedite deals stateside in the coming months to protect against the possibility of potential barriers to foreign investment in the future, given all the anti-globalization talk during Trump’s campaign, noted MacKinnon. The long-term impact on global capital flows into U.S. real estate won’t be apparent until next year, however, according to Raymond G. Torto, lecturer with the Harvard Graduate School of Design and retired chief economist with real estate services firm CBRE. Post-Brexit “everybody is cautions, moving slowly and not in a knee-jerk manner,” he writes. “Most 2016 strategies are being implemented now. The election will affect 2017 strategies.”

Cap Rates Might Start Rising

If Trump does start to enact some of the anti-trade policies that he has talked about during the campaign, that would likely lead to higher inflation and, by extension, to higher cap rates on commercial properties, notes MacKinnon. The higher inflation will “likely lead to a steepening of the yield curve as long-term rates incorporate higher inflation expectations. Further, expectations of higher budget deficits going forward will tend to increase real long-term U.S. bond yields. Combined, you would then see a further steepening of the yield curve, which could drive cap rates higher—without a concomitant increase in economic activity this could be a major negative for property values,” he says.

Primary Markets Might Come Back in Favor before Cap Rates Might Start Rising

Over the past year or two, real estate investors, including those from overseas, have shown a bigger appetite for risk by entering secondary and tertiary markets. Depending on whether the new administration will soften its stance on trade policies, immigration and other global issues once in office, there might be a pullback from those markets back to first tier, coastal cities like New York, according to Sam Chandan, Larry and Klara Silverstein chair in real estate and associate dean of the Shack Institute of Real Estate at New York University. If the anti-globalization stance doesn’t soften, it will result in much greater risk aversion on the part of investors and a subsequent desire to stay in markets perceived as safe and highly liquid, he notes.

Uncertainty Will be Certain

Ultimately, the immediate impact of Trump’s presidency on the market is uncertainty—about his policy decisions, about his impact on the economy and about how he might influence the Federal Reserve, industry sources say. There is not enough information currently available to drive changes in investment strategy, according to Torto. “The Trump victory was unexpected and will lead to two immediate reactions among financial securities. One, portfolios will be adjusted to meet reality today—Trump’s win,” he writes. “And two, the Trump presidency has a high level of uncertainty as policies under Trump are an unknown. These factors do not impact commercial real estate, but do impact economic growth therefore commercial real estate indirectly. At the moment, we do not know if the impact will be big or small. And whether it will be… worth watching.”

According to Chandan, “I think the markets understand that during the lead-up to the election the rhetoric and the policy proposals tend to be more extreme, but the Presidents Elect historically have historically moderated their position once they are not having to mobilize their base. Part of the challenge for us is the finer points of [Trump’s] policies are not entirely clear. Overall, I think investors will be looking for a shift in language to see if some of the policy proposals that were viewed as more extreme are softened in a way that would be supportive of trade and continued capital flows.”

Short-term rentals come with risks and rewards

ORLANDO, Fla. – Nov. 9, 2016 – Home sharing is increasingly popular with travelers and homeowners, and Realtors® should understand the opportunities, intricacies and risks when helping clients purchase property intended for short-term rentals.

A recent panel discussion at the 2016 Realtors Conference & Expo focused on the short-term rental topic at a time when state and local governments are actively discussing it. Brian Copeland, 2016 president-elect of the Tennessee Association of Realtors, and Realtors Dawn Thomas and Raziel Ungar, both top producing agents in California’s Silicon Valley, served as panelists. All three speakers own short-term rentalsmortgages for real estate

Thomas emphasized one fact upfront: It’s absolutely critical to understand the legal, zoning and tax rules about owning a short-term rental, which is considered any property rented for less than 30 days. She also recommended that clients talk to an attorney about the tax implications if purchasing a second home using mortgage financing.

Copeland agreed with Thomas and stressed the importance of knowing the federal and local laws that apply, and to communicate them thoroughly to clients exploring a home purchase for short-term rentals. He said that a growing number of local governments are creating regulations and laws, including some that limit the amount of vacation rentals within a certain census tract. In some popular areas, the wait list to get a permit can be several years.

Realtors need to be abreast of the laws and regulations in their market and watch what’s happening at the state and local level,” said Copeland. “Furthermore, fair housing laws still apply in the short-term rental market. It’s a violation of the law if a client has expressed a desire to only rent out their property to certain individuals or intends to use language in their listings that outlaw activities such as bachelorette parties.”

Ungar had advice for the owners of short-term rentals or those planning to be: Make sure you’re well versed on the popular home sharing platforms to attract potential tenants. He said tenants looking at these sites pay close attention to photos, pricing and online reviews.

“Deliver on a memorable experience and pay attention to the reviews,” Ungar said. “Hiring a professional photographer to highlight the features of the home will go a long way in garnering interest from renters.”

The speakers all took turns sharing the financial rewards, potential traps and horror stories they’ve experienced as short-term rental property owners. They summarized the seven key things to know:

  • Understand what a short-term rental is (and the rules)
  • Familiarize yourself with popular social platforms
  • Your guests expect certain amenities – deliver them
  • Prepare yourself for liability
  • Heed pitfalls and warnings
  • Understand supply and demand and how to price appropriately
  • Know the strategies that exist to attract a short-term rental investor

Selling a short-term rental property

The session also focused on the approaches Realtors can use to attract investors interested in purchasing a short-term rental property. Thomas said a thorough understanding of the local laws, pitfalls, expenses and opportunity will go a long way in building trust with investor clients. A buyer shouldn’t be surprised by any local fees and taxes a short-term rental owner must pay.

“Make sure they understand that they may have to buy in areas that are more expensive for the potential for a higher yield,” said Thomas. “Ask clients what they want to achieve and help deliver on it.”

Even with the potential dangers and expenses involved, the panel all agreed that being a short-term rental owner can be extremely profitable.

“Especially in markets where hotel occupancy is limited or pricey, seeking out residential properties for vacation and weekend getaways is becoming more popular among travelers,” said Copeland. “Homeowners interested in renting out their property will succeed by marketing and pricing accordingly and staying attuned to big events such as sports, concerts and festivals.”

Data from NAR’s 2016 Investment and Vacation Home Buyers Survey show that homeowner interest in renting out their property for a short period of time is rising. According to the survey, 42 percent of recent investment buyers did or tried to rent their property in 2015 for less than 30 days and plan to do so again this year.

NAR recently released a white paper on residential rentals that’s available online (password required). The paper analyzes the issues raised by different regulatory approaches, provides Realtors with ways to address short-term rental obstacles, and outlines best practice approaches to rental housing that Realtors can use in discussions with local government officials.

Economy and housing market under Trump

What happens when the leader of the free world is a property industry tycoon for the first time in history?

While the financial market volatility in the immediate aftermath of Trump’s victory is being chalked up to some Brexit-like jitters, the President Elect’s lack of political history and policy plans leave much room for speculation.

The many moving parts of the U.S. housing market — mortgage rates, buyer and seller sentiment, home building and more — influence the strategies agents and brokers will deliver to clients on a grassroots level.

Here’s what industry experts had to say about the future now that it’s officially decided: One of real estate’s very own will soon occupy the prime location of 1600 Pennsylvania Avenue.

Misty crystal balls

Those scanning America’s economic horizons are seeing a lot of fog. As they flash their headlights for clues of what the future holds, the one thing that appears to be clear is that nothing’s quite clear yet.

Selma Hepp, chief economist at Pacific Union International, said: “The outcome of the election brings something to the equation that nobody likes, and that’s uncertainty. Consumers get wary and businesses get wary, and investors will be pricing the uncertainty into their decisions.

“Additionally, Trump has not offered a plan for the housing market other than rhetoric. In the least, we know his administration does not agree with the current state of the Dodd-Frank reform and will try to change that. But how it all plays out — it’s too early to tell.”

Russ Cofano, President and General Counsel of eXp World Holding, added: “I am not a housing economist and would not relish that job after the events of yesterday.

“There appears to be a lot of general consumer uncertainty as to what his election will mean, especially from his non-supporters, who believe his policies may cause them economic harm (for example, repeal of the Affordable Care Act).

“I believe a large part of the housing market is influenced by consumer confidence and this may offset the demand caused by continued low rates. Longer term, Trump did not say much directly on housing during his campaign so, hard to tell.

“If he is able to gain the confidence of the global markets based on actions taken in the coming months, I would expect positive things for the housing market.”

At the same time, Trulia’s Ralph McLaughlin made the case in a statement released this morning that uncertainty can actually equal stability: “A rocky road is no fun to tread on, but at least we know where the obstacles lay,” he said. “Uncertainty tends to drives investors towards safe bets, such as U.S. bonds, which pushes down mortgage rates and makes borrowing cheaper.”

The storm before the calm?

What’s to be done in times of uncertainty? Stay calm.

“First and foremost I would say that we should all take a deep breath,” Windermere’s Chief Economist Matthew Gardner told Inman.

Indeed, Americans glued to John King’s magic map last night weren’t the only ones who went to bed (and woke up in the morning) surprised. The shockwaves resonated around the world as the entire globe watched the United States’ wild politics unfold.

In a comparable push for drastic change (that appeared to be embedded in yesterday’s voters), the Brexit decision less than five months back caused a panic that we see mirrored in the aftershocks of this election. But it was temporary.

As swing state surprises rolled in last night, stocks were down, the Dow Jones industrial average dropped 4 percent (more than 700 points), and Futureson both the Nasdaq and Standard & Poor’s 500 dropped 5 percent.

“In a similar fashion to the UK’s ‘Brexit,’ there will be a ‘whiplash’ effect, as was seen in overnight trading across the globe,” Gardner noted. “However, at least in the U.S., equity markets have calmed as they start to take a closer look at what a Trump presidency will mean.”

He added: “On a macro level, I would start by stating that political rhetoric and hyperbole do not necessarily translate into policy. That is the most important message that I want to get across.

“I consider it highly unlikely that many of the statements regarding trade protectionism will actually go into effect. It will be very important for President Trump to tone down his platform on renegotiating trade agreements and imposing tariffs on China. I also deem it highly unlikely that a 1,000-mile wall will actually get built.”

In this murky zone, Trulia’s Ralph McLaughlin made note of a “rocky but predictable foreground.”

“This happened during Brexit as the world looked to a stable U.S. economy for safe harbor, but there’s an important difference between Brexit and a Trump victory: the U.S. economy now looks less safe because we don’t know Trump’s policies towards trade. This is actually pushed bond yields higher this morning as investors hold off on purchasing U.S. bonds.”

What comes after a shakeup? A mixed bag

John L. Heithaus, an advisor to a real estate buyer database and analytics company, has a pros and cons list after last night’s results, which he shared in a Facebook discussion on Inman Coast to Coast.

“It’s a conflicting ‘basket’ of pluses and minuses,” he said. “Rate rise has obvious impact (mostly psychological unless rates get past 6 to 7 percent), tax cuts can be bullish, more jobs is usually good for real estate.

“Foreign Direct Investment (FDI) could take a huge hit, uncertainty sucks for any financial marketplace, ‘rebuilding inner cities’ could mean more housing for all from homeless to aspirational renters.”

In the same conversation, agent Rich Shearrow described himself as extremely optimistic: there may be a very short period of reduced activity, he said, but we can expect the usual holiday lull and individual consumers’ financial positions will remain unchanged, along with interest rates.

He also mentioned Trump’s potential to make inner-city revitalization happen — because he understands how it can progress.

“I would foresee [the Department of Housing and Urban Development] (or a combination of agencies) taking on an enhanced role in addressing quality-housing deficiency,” Shearrow commented.

“Public resources will be sorely needed in the area of addiction treatment… as that is (in my opinion) the first step in restoring hope and optimism in the urban areas. I TRULY believe that THE biggest priority to get the country on the right track will be to address the untapped potential of the inner-cities. Unleash that potential, and I believe that the results will cascade exponentially.”

The million dollar mortgage rate question

Though historically low mortgage interest rates haven’t brought out buyers in hoards as one might expect (thanks to tight inventory and strong home prices), any change in that could have a ripple affect on housing.

An imminent Fed meeting always brings out the speculators, but with the Trump wild card, economists are weighing a couple of different scenarios.55986706-21-february-2016-republican-presidential-candidate-donald-trump-speaks-to-several-thousand-supporte

Pacific Union’s Hepp says we may be looking at a faster increase in rates than we would have seen otherwise, as investors account for Trump’s potential volatility with extra cushion.

Realtor.com’s Jonathan Smoke noted that with five weeks before the Fed convenes, the market still has time to “digest the potential outcomes.”

“While the market is now indicating a reduced probability of a short-term rate hike at that meeting, the Fed has repeatedly indicated that they would be data-driven in their decision, he said in a statement. “Thus if markets calm down and November employment data look solid on December 2, a rate hike could still happen.”

ExP’s Cofano added: “In the short term, seems to me that the Fed will likely stay pat until they know how the election plays out on a more macro basis. So, that may be good for current buyers and refinancers.”

Where’s your head at, consumers?

High-level industry leaders have their take on the housing market, but equally important are those selling their biggest financial asset or making the biggest purchasing decision of their life.

McLaughlin of Trulia could see the polarization between traditionally Republican and Democratic states spilling over into home sales — with a Trump win acting as “both a boon and a drag” on buyer confidence.

“Homebuyers in economically healthy blue states will likely be rattled and more hesitant about the future the U.S. economy, which will curb their interest in making large investments,” he said.

“In economically stagnant red states, on the other hand, homebuyers will likely feel a surge of confidence that could bolster demand.”

Hepp expressed how a Trump presidency could impact young homebuyers specifically, “with so much emphasis on millennials who are expected to carry the market forward,” but indicated that buyer numbers overall should be in the housing market’s favor.

Concerned about the message millennials received, given that they predominantly voted for Hillary Clinton, she said: “as a result, we may see some stalling in the market activity. Nevertheless, when the dust settles, we are still looking at strong housing fundamentals with a sheer volume of young people becoming of age when they are thinking of homeownership and many of them being educated and earning solid incomes. As long as the employment stays on course, the housing market will flourish.”

Meanwhile, Redfin’s Chief Economist Nela Richardson made the case that housing is of universal interest — and we’ve got work to do when it comes to affordability, an issue that, though largely absent from the campaign, cuts across all voter segments.

“Where people live affects their job opportunities, the quality of the schools their kids attend, and in turn, the economic mobility and productivity of our country and its citizens,” she said. “As a country we need to enter a new chapter in housing policy, one that disrupts old ways of thinking and embraces a path of inclusionary growth and shared prosperity. America’s electorate requires nothing less.”

HomeUnion, a property investment solution provider, forecasts that Trump’s resilient success in real estate that defied a housing market cash and several bankruptcies could inspire more capital investment.

“Trump leveraged real estate laws to create and maintain a fortune. That investment vehicle is available to everyone, and is likely to attract more capital as investors envy Trump’s path to wealth,” the company said.

And what does the nation’s largest trade organization have to say about Trump’s win?

It appears that at least one housing stakeholder is ready to roll up its sleeves.

“NAR doesn’t get involved in presidential elections, but we congratulate the President-Elect on his victory. NAR looks forward to working with the new House, Senate, and presidential administration in support of homeownership.”

How To Choose a Trustworthy Lawn Care Company

There are a number of reasons why you would want to hire professionals to care for your lawn. Hiring a lawn care company will save you time, ensures you won’t destroy your lawn by doing the wrong thing, and can actually save you money by providing all the equipment needed for a beautiful landscape.

When you decide to work with a lawn care company to improve or maintain your lawn, your primary concern is choosing a team that you can trust. You want to work with someone who will get results for your lawn, but you also need to feel safe with the team who will be regularly visiting your lawn and treating areas where your family and pets spend time.

We asked the lawn care experts in Lake Nona for some advice on what homeowners should be looking for in an high quality lawn care company, and what questions they should ask before agreeing to a lawn care program.

Is the company experienced in the area?

A big-name corporation might tout their reputation, but typically a smaller, locally-owned lawn care company is more invested in the community. They also have specific expertise on what lawn care techniques work well in your environment. A larger company likely uses the same methods across the country, which can be detrimental to your lawn if not tailored specifically to your soil pH and grass seed.

Family Enjoying Outdoor Barbeque In Garden

Family Enjoying Outdoor Barbeque In Garden

Are the technicians certified and licensed?

Every state has different laws and regulations, but you should never work with a company that doesn’t have the proper certification and licensing. They may not have the proper experience and knowledge to do a good job, and you may actually be held liable if one of their technicians is injured on your property.

Is the company reputable?

Word of mouth is a powerful thing. If you’re considering a lawn care company, it may be worth a quick check on Yelp or Google+ to see what other homeowners in your area have to say about them.

Is there a service guarantee?

While lawn care technicians can’t control the weather or how quickly your grass grows, there are elements they should be able to guarantee. You should be able to count on your technician arriving promptly, cleaning up after they finish their work, and that you won’t be billed more than the agreed upon amount.

And if they don’t meet your expectations, they should be willing to come back and do the job again – for free.

Are their treatments family-friendly?

Look for signs that your lawn care company doesn’t use lawn maintenance chemicals and powerful fertilizers that put your family at risk. If a company does use techniques that may be harmful to pets or children playing in your yard, that’s not necessarily a dealbreaker – but they should warn you and provide you with safety information.

Trust The Experts!

If you put your grass in the wrong hands, you risk seriously damaging your landscape. Some homeowners find themselves with damaged and dying trees, or with a completely dead lawn.

Not doing your research can also rack up expensive bills for services that don’t work, or on services you didn’t need in the first place.

When you decide to work with a lawn care company, make sure you’re putting your trust in a reliable team that will get the job done right.

Why is housing inventory so low?

There has been a great deal of discussion regarding the consistently low housing inventory levels throughout the nation. Very little, however, has been written about the reasons why inventory levels are so low, especially following the economic disruption of 2008-2011.

Understanding the why can be helpful in predicting how these factors might influence longer-term supply levels and future appreciation potential. This knowledge might also shed light on why inventory might remain constrained over the long run.

In the second half of 2011 we began to see an acceleration in the decline of inventory levels nationally, and since that time the available housing inventory has continued to remain historically low. The graph (figure 1) below highlights the continuous low-inventory environment.

Inman Inventory chart 1

Why is this so? There are numerous conditions that have contributed to this phenomenon and bundled together have created an inventory control dynamic that, as prices rise, only serves to limit the number of homes available for sale.

Capital gains exclusion on primary residence:

Prior to May 7, 1997, the only way you could avoid paying taxes on your home-sale gain was to use the funds to buy another, equal or more-expensive house within two years. I recall my father being motivated by a “move up” mentality. Every few years, he would sell our existing home for a bigger, more expensive property. He would explain to us that he was using tax-free money or “playing with the house’s chips” to leverage into a bigger home that only “someday” he would owe capital gains on. By leveraging his gains, he contributed to the health of the local real estate market. This dynamic created a steady supply and demand equilibrium not only in our local market, but in markets throughout the country.

When he turned 55, another option became available. He could take a once-in-a-lifetime tax exemption of up to $125,000 in capital gains. However, when the Taxpayer Relief Act of 1997 became law, the rollover or once-in-a-lifetime options were replaced with the current per-sale exclusion amounts.

The Taxpayer Relief Act allows homeowners to take a $250,000 (for singles) or a $500,000 (for married couples) capital gains/appreciation exclusion, which could be used under certain conditions every two years. While the Taxpayer Relief Act eased the home-sale tax burden for millions of homeowners, higher-priced real estate markets experienced an unintended outcome: fewer move-up buyers because their gains on their existing home exceeded the $250K/$500K maximum, thereby creating an unwanted tax burden.

This frozen segment of the real estate pipeline has upset the flow of buying and selling activity. The typical move-up buyer has caused a bottleneck by remaining in place thereby reducing available supply to new entrants. The current law does not create the compelling motivation for individuals to continually move up into “bigger and better” higher-priced properties.

In areas such as Silicon Valley, it is not uncommon for homeowners to exceed the $250K/$500K exclusion amounts if they have owned their primary residence for a period of time. Once a homeowner eclipses this threshold, their motivation to sell in order to move up diminishes as the possibility of a financial tax consequence looms. Many move-up buyers have begun their research only to discover they would be subject to capital gains tax on a portion of their gain — another sacrifice they are not willing to make in order to buy that bigger, better property.

Step-up in basis:

This factor is one of the least understood. Mainly because most people do not have large enough real estate gains to care or they are not old enough to begin pondering their longer-term estate plans and how the timing of their home sale might be impacted by capital gains tax exposure.

For couples, upon the death of one spouse the tax basis of the ownership interest that belonged to one spouse is stepped up, the tax basis of the entire asset might be stepped up to “Fair Market Value” (FMV).* This means a surviving spouse can potentially sell their property and owe only federal capital gains tax on the property’s appreciation after the death of the spouse, which might drastically reduce the tax consequence of the sale.

It is very likely that a good percentage of longtime married homeowners in the higher-priced areas of the U.S. understand this dynamic and will opt to stay and wait, surprisingly to some, for one or the other to pass away before a move makes practical financial sense.

If so, this would mean that potentially thousands of multimillion-dollar properties with swollen appreciation are being held off the market until an unfortunate family loss occurs at some point down the road.

Sustained low-rate environment:

Given the sustained low interest rate environment, many homeowners and investors have either purchased or have now refinanced and are locked into tremendously low interest rates over the past six years. It is highly unlikely that these homes will be coming up for sale anytime soon as a result of this favorable financing.

Value disruption/reset in 08/09:

In addition to the sustained low interest rate environment and its potential damper on those properties actually coming up for sale anytime during the life of their loans, we should mention the “value disruption” factor that occurred between 2007 and 2010.

A number of areas experienced a complete “reset” of values and in some cases to nearly half their peak values. Buyers purchased properties in these marketplaces at significant discounts from the high point, resulting in additional “frozen inventory.”

If you combine the sustained low interest rate climate with the thousands of homes purchased at up to 50 percent discounts or more, it’s unreasonable to expect that these homes will be coming up for sale anytime soon.

In addition, an unprecedented number of institutional investors entered the residential real estate market acquiring large pools and blocks of properties. This inventory is now also frozen and held.

Values not at peak levels across the country:

In some regional areas sales prices have reached or even surpassed the peak levels in 2007. However, this not a national phenomenon; some cities and regions across the U.S. are still below the historical highs of the mid-2000s. Until prices reach peak levels across the board these homeowners won’t be listing their homes for sale.

Sense that values will continue to climb:  

Additionally, there is the current mentality among some homeowners that home values will continue to rise. Very similar to the mindset of people holding on to a stock because they expect it to rise, people believe their properties will increase over time. Right or wrong, this mindset has become another factor in the tightening of inventory. What typically happens is that once homeowners realize the up cycle has turned, they electively decide or are forced to sell due to job loss or other negative economic pressures. This would result in a significant inventory increase.

Where would I go? Move up:

We have already mentioned a few of the constraints on the move-up buyer. The aforementioned forces feed on each other and further exacerbate the move-up opportunity. Lower inventory begets lower inventory; a downward pressure cycle continues. If one cannot find properties to move up to, they will not list or sell their current homes.

This same dilemma plagues retirees finding limited or no options for retirement communities in their local area. This also limits housing supply on the top end of the market since seniors are not motivated to sell unless they know exactly where they are going.

Stunted new development:  

Over the past seven years (since the beginning of 2008) there has been an unparalleled low level of new housing starts (figure 2). This prolonged decrease in new home development dramatically multiplies the low-inventory gap. To further the dilemma, the start-to-finish build cycle is lengthy, often requiring multiple years to plan, approve, build and market, which slows market momentum. Until the new housing development engine gets moving at an accelerated pace it will continue to have a lingering impact.

Inman Inventory chart 2

These major factors have created this extraordinary nationwide low-inventory environment we are currently experiencing. Given the factors above, inventory will remain low for an extended period of time, the natural solution of which remains unknown.

*This depends/varies by state of residence and ownership.virtual-tour-220601-03-1474443383

References:

Figure 1 & 2 – National Association of Realtors, Lawrence Yun, Ph.D., NAR chief economist, presentation at Residential Real Estate Forum at the 2014 Realtors Conference & Expo in New Orleans, Louisiana, on Nov. 7, 2014. Retrieved from: www.realtor.org