Discussing awesome news about building permits and housing starts, tax reform benefiting real estate investors, home builder confidence plus much more!
US Single Family Starts and Permits Hit 10 Year High
Great news from HUD:
Building Permits: Privately owned housing units authorized by building permits in November were 1.4% below the revised October rate BUT 3.4% above the November 2016 rate. Single-family authorizations in November were 1.4% above the revised October figure.
Housing Starts: Privately owned housing starts in November were 3.3% above the revised October estimate and 12.9% above the November 2016 rate. Single-family housing starts in November were 5.3% above the revised October figure.
This is great news and a serious improvement from the previous year. Remember, slow and steady wins the race!
That being said, we are still way below where we need to be. I used a chart with a longer view into the past so you can see where we were before the housing crash compared to today.
Americans View Government as Nation’s Top Problem in 2017
Americans named dissatisfaction with government as the most important problem facing the nation in 2017, the third time in the past four years that government has been at the top of the list. The second most frequently mentioned problem in 2017 was healthcare, followed by race relations, immigration, the need to unify the country, and the economy.
These results are based on the average of 12 monthly surveys conducted in 2017 in which Americans were asked to name the most important problem “facing this country today.”
The “government” category is quite general, encompassing negative references to President Donald Trump, Congress, partisan gridlock and more general manifestations of disapproval of the way the government system works.
You have to wonder how the changes to our taxes are impacting these results. I am glad to see that unifying the country is something that other people are concerned about.
Remember, united we stand and divided we fall.
Last Minute Change to Tax Reform Bill Could Benefit Real Estate Investors
From Business Insider:
Republicans revealed the final version of their massive tax bill on Friday, and a last-minute adjustment appears to have made it easier for some real estate investors to take a huge tax break.
The change would allow owners of business that hold certain types of depreciable assets, such as real estate, to receive a significant deduction on their profits.
The deduction is a change to the tax treatment of so-called pass-through businesses. Pass-throughs are businesses in which the owner books the company’s profits as their personal income, like a limited liability corporation or a sole proprietorship.
Instead of worrying about the political he said / she said BS, let’s focus on how this can help real estate investors. With the strong demand for rentals and this change, investors could see really great returns from owning rentals.
Now with that out of the way, check out this snippet from Urban-Brookings Tax Policy Center:
Compared to current law, taxes would fall for all income groups on average in 2018, increasing overall average after-tax income by 2.2 percent. In general, tax cuts as a percent age of after-tax income would be larger for higher-income groups, with the largest cuts as a share of income going to taxpayers in the 95th to 99th percentiles of the income distribution.
Sounds like the average American is getting the short end of the stick once again…
And if you need some political BS to get your blood pressure up, consider this from the International Business Times:
When the U.S. Senate takes up the final tax bill this week, more than a quarter of all GOP senators will be voting on a bill that includes a special provision that could give them a new tax cut through their real estate shell companies, according to federal records reviewed by International Business Times.
In all, 14 Republican senators hold financial interests in 26 income-generating real-estate partnerships — worth as much as $105 million in total. Those holdings together produced between $2.4 million and $14.1 million in rent and interest income in 2016, according to federal records.
They have a list of the senators that stand to benefit from this tax break for real estate. This helps to explain why so many Americans selected government as the top problem we are facing today.
Home Builder Confidence Soars to Highest Level Since 1999
Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after a downwardly revised November reading. This was the highest report since July 1999, over 18 years ago.
NAHB Chief Economist Robert Dietz said:
The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise. With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.
While this is good news, we really need to see more affordable or starter homes being built.
72% Think Now is a Good Time to Buy a Home
Some highlights of the latest NAR Housing Opportunities and Market Experience (HOME) report:
NAR Chief Economist Lawrence Yun said:
Tight inventory and weaker affordability conditions are prompting consumers to doubt that now is a good time to buy a home. The trifecta of faster economic expansion, robust hiring, and low mortgage rates should be generating a surge in optimism and home sales as 2017 winds down.
Sadly, this is not the case. While overall demand remains high, it is not translating to meaningful sales gains. Too many prospective first-time buyers see few options within their budget and home prices that are rising much faster than their incomes. Until we start seeing a steady increase in new and existing inventory, sales will fail to deliver on their full potential, and many would-be first-time buyers will be forced to continue renting.
Once again we are hearing the low inventory being blamed for lackluster home sales. While home buyers will face frustrations, it is still possible to buy a home while mortgage rates are at historically low levels.
76% of home owners say it is a good time to sell and hopefully this will lead to more homes hitting the market.
Bank and Mortgage Associations Call on IRS to Fix Tax Transcript Issue
From ABA Banking Journal:
In a comment letter with nine trade associations on Friday, ABA urged the IRS to take immediate steps to fix problems with the tax transcript process that could result in significant delays for consumers attempting to purchase or refinance a home. The IRS recently made changes (including the incorporation of multifactor authentication) to its system for processing tax transcript requests, which lenders are often required to use to verify mortgage purchases or refinance transactions.
Apparently, the IRS implemented a new system to improve how tax information is verified when someone is buying a home. The really bad thing is the IRS told everyone on Friday afternoon about a change that was starting on Monday.
Pretty boneheaded thing for the IRS to do IMHO but that is our government at work. I am glad the ABA and these other groups are trying to get this situation fixed.
Freddie Mac Ramps Up Efforts to Support Underserved Markets
Good news from Freddie that they are are implementing new plans to deal with the affordable housing problem. Freddie said they are planning to focus on supporting underserved markets by financing more rural and manufactured housing and preserving more affordable housing for homebuyers and renters nationwide.
They say they are going to increase the availability of affordable housing in rural areas, offer a renovation mortgage to help with inventory in rural areas and provide more liquidity to the USDA’s housing programs.
This is great news and should help many areas of the US that are facing a lack of affordable homes. I shared only a little bit of the plan that I felt could improve the Anderson County housing market.
We’re Buying More Stuff We Don’t Need
Here’s a Grinchian question for the holidays: How much do Americans spend on stuff they don’t really need? A very rough analysis suggests they’re blowing more money on nonessential items than they have in more than 17 years.
Back in the 1950s, the economist John Kenneth Galbraith made a bleak argument about modern capitalism: Advertising can create artificial wants — say, for the latest gadget or skin cream — that spur ever-greater consumption without actually making people better off. As a result, economies can grow without improving the lot of humanity.
Whether or not he’s right — it remains a matter of debate — the idea raises an interesting empirical question: How much of what we consume is related to wants rather than needs?
So how are we doing? In the third quarter of this year, nonessential items (of my own subjective selection 1 ) accounted for almost 18.5 percent of total U.S. consumer spending. That’s the highest share since June 2000.
Remember that the most important things are not things! You cannot buy happiness and spending money on stuff you do not need is not the way to build your financial future!
Well that is it for today! I ran out of time before I ran out of real estate, housing and economic news so be sure to check back ASAP!
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