Housing forecast 2018

Next year could feature more money for renters but increased difficulty for potential first-time homeowners, said experts at a housing outlook conference at University of San Diego.

The shadow of pending legislation in Congress colored much of the discussion Thursday, as did continued concern over the number of homes being built.

No one gave specifics, but panelists said they expect home prices to continue to rise because of decreasing numbers of homes for sale.

The Residential Real Estate Conference put on by the school’s Burnham-Moores Center occurs annually and is typically attended by roughly 200 people. Analysts gave several predictions for 2018:

More money for renters: The standard deduction in both the House and Senate versions of the tax plan is set to double from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples.

“It’s good for renters, but bad for homeowners,” said Norm Miller, real estate finance chair at the USD School of Business.

Fewer tax benefits for homeownership: Both Republican-backed plans look to curtail the mortgage interest rate deduction. Right now, about 74 percent of San Diego city homes are valuable enough to take the mortgage interest deduction, Zillow said. After the proposed tax plan, the real estate website said that would drop to 20 percent.

Tim Sullivan, managing principal of Meyers Research, said San Diego County would be hitter harder than San Francisco if the mortgage deduction is reduced because San Diego’s market relies more on mortgages because wages aren’t as high.

“San Francisco is one of those markets that is inelastic because there is so much wealth there. They don’t rely on mortgages,” he said. “With that in mind, San Diego is still a place where incomes matter.”

Less money for subsidized housing: The Private Activity Bond Program and the 4 percent Low Income Tax Credit, both used to build subsidized housing in San Diego County, would be eliminated in the House plan. While the Senate plan leaves it untouched, panelists were preparing for the worse.

There is already a 10-year waiting list for the units operated by the San Diego Housing Commission. Deborah Ruane, chief strategy officer of the commission, said it used to see families stay in subsidized housing for around three years. Now, families are staying seven to eight years.

“There’s nowhere to go next,” she said.

Push for more homebuilding: Analysts say homebuilding has not kept up with population growth. In 2015 and 2016, the region produced roughly 10,000 homes a year. As of the first nine months of this year, San Diego County has had 18 percent less residential building permits issued compared to the same time in 2016.

“It doesn’t matter who you talk to, we’re undersupplied with housing,” said Sullivan.

Read the rest HERE.

San Diego’s homebuilding slump

San Diego County is on track to build fewer homes than it did last year, said permit records released this week.

Residential building permits for all homes — condos, apartments and single-family homes — are down 18 percent in the first nine months of 2017 compared to the same time last year, said the Real Estate Research Council of Southern California.

The only county with slower building was Orange County, which had a 21 percent reduction. All other Southern California counties had an increase in building in the first three quarters.

The findings come at a time when local and state politicians are adopting policies aimed at increasing residential construction as a way to slow rising prices or limit commute times for environmental reasons. A San Diego Housing Commission report in September, produced along with two city councilmen, said the city needed to triple its yearly housing production.

San Diego County had 6,054 permits issued, down from 7,412 permits from the same time in 2016. The county had produced roughly 10,000 units by the end of 2015 and 2016. To reach that number, the county would have to build nearly 4,000 homes in the last quarter of the year.

The slowdown is led by a drop in permits for multifamily construction, down by 2,209 permits, or 40 percent, compared to the same time last year.

Real estate analyst Russ Valone, president of MarketPointe Realty Advisors, said fewer new builders are coming to town because of land costs. He also noted that some lenders are wary of new projects because rent increases for high-end apartments has slowed.

“As those newer projects’ rents push into the mid-$2,000 a month range, we started to see a slowdown in the rate of increases,” he said. “I think you may have some lenders looking at the slowed increases and starting to take a cautious view of the marketplace.”

However, he said many of the large apartment and condo projects being built right now had permits pulled at the end of 2016, so its possible the data isn’t as significant. The county has been building more apartments than traditional homes since the end of the Great Recession.

But one increase so far this year? Single-family homes are up, producing 851 more homes than the same time last year.

Read the rest HERE.

Monthly Housing Market Overview North San Diego County

The facts of residential real estate have remained consistent in 2017. In year- over-year comparisons, the number of homes for sale has been fewer in most locales, and homes have been selling in fewer days for higher prices. This hasn’t always been true, but it has been a common enough storyline to make
it an overarching trend for the year.

Closed Sales decreased 16.9 percent for Detached homes and 20.7 percent for Attached homes. Pending Sales decreased 1.9 percent for Detached homes but increased 18.5 percent for Attached homes.

The Median Sales Price was up 12.9 percent to $700,000 for Detached homes and 11.9 percent to $436,419 for Attached homes. Days on Market decreased 14.6 percent for Detached homes and 18.5 percent for Attached homes.

Supply decreased 28.0 percent for Detached homes and 8.3 percent for Attached homes.

New tax legislation could have ramifications on housing. The White House believes that the tax reform bill will have a small impact on home prices, lowering them by less than 4 percent, and could conceivably boost homeownership. The National Association of REALTORS® has stated that eliminating the mortgage interest deduction could hurt housing, as the doubled standard deduction would reduce the desire to take out a mortgage and itemize the interest associated with it, thus reducing demand. This is a
developing story.

Market numbers overview:

Download (Nov-2017-Monthly.pdf)

FHFA increases conforming loan limits: San Diego County to $649,750

Last year, the Federal Housing Finance Agency increased the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac for the first time since the housing crisis.

For the second year in a row, and the second time since 2006, the FHFA is increasing the conforming loan limits for Fannie and Freddie in 2018.

The FHFA announced Tuesday that it is increasing the conforming loan limits from $424,100 to $453,100 for 2018.

The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Fannie and Freddie’s conforming loan limits stayed at $417,000 until last year, when the FHFA finally increased the loan limit to $424,100.

But, as the FHFA noted Tuesday, home prices are on the rise, which necessitates a second straight yearly increase in the conforming loan limit.

The FHFA’s third quarter 2017 House Price Index report, which includes estimates for the increase in the average U.S. home value over the last four quarters, showed that house prices increased 6.8%, on average, between the third quarters of 2016 and 2017.

Therefore, the FHFA said that the baseline maximum conforming loan limit in 2018 will increase by the same percentage – from $424,100 to $453,100.

Loan limits will also be increasing in what the FHFA calls “high-cost areas,” where 115% of the local median home value exceeds the baseline loan limit.

Under HERA, the maximum loan limit in those “high-cost areas” is calculated as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit.

According to the FHFA, median home values “generally increased” in high-cost areas in 2017, which drove up the maximum loan limits in many of those areas.

Therefore, the new ceiling loan limit for one-unit properties in most high-cost areas will be $679,650 (which is 150% of $453,100) for one-unit properties in the contiguous U.S.

Read the rest HERE.

Residential Appraisal FAQ’s

Why is an appraisal necessary?
The lender orders the appraisal to obtain an accurate description of the property and an independent opinion of value. The lender uses the appraisal to document that the real estate is appropriate collateral and determine whether the value of the property is sufficient to support the lending decision.

Why isn’t the consumer considered to be the client when he or she pays the appraisal fee?
Federal banking regulations require the financial institution to be the client, regardless of who pays the fee.

How does the appraiser develop the value opinion?
The appraiser researches market data, public records and talks with buyers, sellers and real estate brokers active in the market area. Data researched includes sales, leases, and current listings of similar properties. Other data include land sales and residential construction costs. After all factors affecting the value are considered, the appraiser develops an opinion of value and prepares an appraisal report.

What information should I provide to the appraiser?
The more information the appraiser has about your property, the better he or she will be able to develop a credible result. The appraiser will be interested in knowing if there are any private agreements or restrictions, easements or rights of way, encroachments, “agreed to” arrangements with abutters (e.g., fences, walls) on the property, etc. The appraiser may ask about the property’s title, sales and rental history, and occupancy. He or she might ask if the property is under a pending purchase and sales agreement or option and, if so, the details about the agreement or option. If the property sold in the past three years, the appraiser may ask about the details of the transfers. Finally, the appraiser may inquire about physical characteristics of the property, including any additions, permits, etc. If you are hiring the appraiser directly, the appraiser will want to know what the intended use of the appraisal will be. (NOTE: If you are engaging the appraiser to prepare an appraisal for a federally-related transaction, you should know that the lender or the lender’s agent is required to engage the appraiser).
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