Real Estate News and Auction

Wondering whether you should invest in single-family or multifamily rental properties? Make sure you understand these pros and cons of each!

Then, there’s the uncertainty around the issue that we're all hyper-focused on: the virus. As everyone watches and waits for clarity on housing policy, the potential for a large amount of distressed inventory and a cure for the virus, the word uncertainty in a housing forecast is starting to be the most certain thing the industry can rely on. HW+ Premium Content

In the history of the world, perhaps nothing has killed more real estate ambitions than the belief that one does not have enough money to get started. Not so! Enter leverage. Leverage is a financial term that simply means applying a small amount of force to achieve far greater results. Here I explain.

The New Home Company announced that sales are off to a quick start at Mosaic in the master-planned community of Layton Lakes in Gilbert.

Real estate investors can use cash-on-cash return to quickly evaluate a property's potential. However, this metric still has flaws. Learn more here.

What is virtual property management and can you do it? Here are our tips for going remote with your property managment company.

The current health crisis is undoubtedly changing homebuyers’ needs and priorities and while this process is still ongoing, the 2020 American and Phoenix homebuyer profile is already taking shape.

After analyzing homebuyer searches on real estate marketplace Point2Homes.com before and after the pandemic hit, researchers discovered that the typical post-lockdown homebuyer is a millennial woman, looking for more space and willing to pay more for the right home.

Zooming in at city-level, here’s what Point2Homes.com found about homebuyers in Phoenix:

• Compared to the pre-pandemic period, searches for houses have increased by 5%, while condo searches have lost steam;

• While homes in the $200,000-$300,000 price range remain the most popular after the lockdown, there was an increase in interest for properties in the $300,000-$400,000 segment, which is above the city’s $292,000 median price;  

• The new golden standard in Phoenix seems to be the 3-bedroom home, which is the only type of property that has seen an increase (13%) in searches. Also, interest in properties between 1,001 and 2,000 square feet rose the most (18%).

Some of our listeners have requested a podcast on what Democratic nominee Joe Biden is proposing if he becomes president, so I thought I’d dedicate this podcast to what we know of his plan.

The president and former vice president have sharply divergent views of how to handle things like housing affordability, discrimination and homelessness

TRUMP

Affordable housing
That Obama-era regulation was also designed to support affordable housing. The Trump administration’s replacement policy required local authorities to self-certify that housing was affordable, though Politico described that requirement as “a significant scale-down of the Obama-era rule.”

Trump’s 2017 tax cuts also included incentives for builders to erect housing in low income “opportunity zones.” Trump has claimed the program was a success and that “$100 billion of new investment” poured “into 9,000 of our most distressed neighborhoods in the country.” However, The New York Times has characterized the program as a windfall for the rich, and others have questioned the accuracy of the $100 billion figure.

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Either way, though, Trump’s approach to both housing affordability and housing discrimination show that he leans heavily toward a doctrine of cutting regulation.

Rentals and evictions
The federal government imposed an eviction moratorium for federally assisted properties amid the coronavirus. Then earlier this month, Trump issued an executive order that aimed to provide “assistance to renters and homeowners.”

The order did not include a straight-forward extension of the eviction moratorium, but did instruct regulators to “consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19.”

Housing-related taxes
Among other things, Trump’s 2017 tax plan limited the amount of state and local taxes people could deduct on their federal returns to $10,000. Property taxes are among those that can be deducted, so the policy tended to favor people in states where they were paying less than $10,000, rather than people in high-tax (often coastal) states where property taxes routinely exceed the limit.

Trump also lowered the limit on the mortgage interest deduction. Previously, homeowners could deduct the interest on mortgages of up to $1 million. However, Trump’s tax changes imposed a cap at $750,000. This change, too, tended to benefit homeowners in more affordable areas rather than those in pricy markets such as New York or San Francisco, where mortgages on even middle-class housing routinely exceed $1 million.

Homelessness
Trump has focused criticism on the homelessness crisis in California, and in September reportedly sent a fact-finding team to the state and was planning a crackdown. In November, a White House spokesperson accused local governors and mayors of ignoring the issue, and promised that “President Trump is not going to sit idly by.”

A crackdown — or some other sweeping boots-on-the-ground initiative — never materialized, but the comments do indicate that homelessness is at least on the president’s radar.

More practically, the Trump administration approved nearly $3 billion in homeless assistance funding as part of coronavirus relief packages.

Mortgages
A year ago, the Trump administration released a long-awaited plan that would see Fannie Mae and Freddie Mac — which back about half the mortgages in the U.S. — privatized. The Wall Street Journal characterized the proposal as a boon for investors, but counter to long-standing promises from lawmakers on both sides of the aisle to eliminate Fannie and Freddie.

Though this proposal hasn’t yet come to fruition, it does illustrate how the Trump administration would like to seem more privatization and less government involvement in the housing market.

Binen

Affordable housing

Biden’s housing proposal identifies a lack of supply as the root of affordability issues. To solve that problem, Biden has promised to invest $640 billion over the next 10 years. Among other things, the plan would provide “financial assistance to help hard-working Americans buy or rent safe, quality housing.”

The plan also calls for increasing supply via “investments in resilience, energy efficiency, and accessibility of homes.” Moreover, it raises the possibility of building more affordable housing through investments in the federal government’s Housing Trust Fund.

It’s significant that both Biden and Trump seem to take a supply-and-demand oriented approach to housing. Biden’s plan does call for more government intervention and leans further left than Trump’s, but it’s still closer to the political center than proposals from other members of the left such as Bernie Sanders.

Housing discrimination

Biden’s housing proposal dedicates a significant amount of space to ending “redlining and other discriminatory practices.” He specifically wants to create a “Homeowner and Renter Bill of Rights,” modeled on a California law, that among other things would apply more regulations to lending and foreclosure processes. The bill of rights would also prevent landlords from discriminating against tenants who receive federal housing assistance.

Many of these ideas are the ideological opposite of Trump’s; while the president sees rolling back regulation as a center piece of his administration, Biden would use regulations to enforce fair housing policy. And indeed, Biden’s platform specifically calls for the rolling back of “Trump Administration policies gutting fair lending and fair housing protections for homeowners.”

However, Biden does want to eliminate local regulations such as exclusionary zoning, which “perpetuate discrimination.” In this way, Biden and the Trump administration actually have some overlap, with Housing and Urban Development Secretary Ben Carson saying in 2019 that he would like more cities to ditch single-family zoning.

Rentals and evictions

Biden’s plan for rentals and renters calls for local “eviction diversion programs.” He also wants to pass legislation that would help tenants facing eviction get legal assistance.

Biden has not been an elected official during the pandemic, but his proposed plan for the coronavirus does state that “no one should face foreclosure or eviction because they are affected by the COVID-19 crisis.” To that end, he is calling for mortgage and rental relief for people impacted by the outbreak.

Housing-related taxes

Biden has said that if elected he will roll back Trump’s tax cuts, presumably including deduction rules for things like mortgage interest and local and state taxes. In July, The Wall Street Journal reported that “coastal elites are salivating at the idea of again itemizing their state and local property taxes and mortgage interest.”

Additionally, Biden wants to give first-time homebuyers a $15,000 tax credit. The idea behind the credit would be to assist people in buying homes at a point in their lives when they often don’t make enough money to qualify for other kinds of tax benefits.

Homelessness

Another entire section of Biden’s housing proposal is dedicated to homelessness. The proposal calls for emergency funding for things like shelters and vouchers; policy reform to prioritize a “housing first” strategy to solving the issue; and special policies for certain groups such as veterans, LBGT individuals and the disabled.

This week’s virtual Democratic National Convention will culminate with Vice President Joe Biden accepting the Democrat’s nomination formally Thursday night. The Republican National Convention will kick off next week

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Today, existing home sales blew out estimates, coming in at 5,860,000. With new home sales, pending home sales, housing starts, housing permits, and purchase applications already in v-shape recovery mode, this last metric completes the v-shaped recovery across the board for housing.

Let’s just say this is the final nail in the coffin for the housing bear troll camps that were so sure that this time, housing would finally crash. COVID didn’t get the housing market, but it did pull a fast one on those pesky bears.

Look, I get it. For the casual observers of the market, it may seem intuitive that with all the economic chaos we suffered during the first half of 2020, the housing market would take a drastic hit – from which it would be difficult to recover. Massive job losses and stay-at-home measures seem like a perfect storm for a disastrous housing market.

That belief, however, assumes that one does not understand the two main drivers of housing: demographics and mortgage rates. All that other stuff, my friends, is just stamp collecting. For the last many years I have been writing that the years 2020-2024 would have the best demographics for housing ever recorded in U.S. history. As it happens, these fabulous demographics are accompanied by the lowest mortgage rates ever recorded in history.

This one-two punch is why housing was able to rebound so soundly and will stay stable for some years to come as long as mortgage rates stay below 4.5%.

We saw hints of a flourishing housing market prior to the COVID crisis. In February, for the first time since the start of the century, the U.S. housing market outperformed all other sectors of the economy. I have talked about this before, that the years 2020-2024 would be the time where housing could outperform. Then the massive shock of COVID-19 happened right in the first year of my working thesis.

The fear of the virus and the stay-at-home measures which curtailed the ability to even look at homes put a short-term halt on the promised growth. The floundering economy then caused the mortgage market meltdown in early March, causing mortgage rates to quickly spike. It was crazy for a minute and at that time I needed to keep reminding people that this was a temporary blip that would mostly clear up by July 15. And it did, because none of that chaos changed the fundamentals – demographics were still excellent and mortgage rates were just going lower.

The second part of this story that folks seem to forget is that the existing home sales market only needs 4 million mortgage buyers a year to remain stable. This means only 4 million folks out of the 133 million people working during the worst days of COVID-19 are needed to qualify for a mortgage to keep the market stable.

Compare this to auto sales, which require 16-18 million sales per year to remain stable – and even that sector is rebounding. Note too, that the housing market for the last many years has been composed of 15-20% cash buyers – that is a big chunk of buyers that don’t need a mortgage in order to purchase