WASHINGTON – Dec. 2, 2016 – What fall slowdown? In many markets across the country, the housing market is showing anything but the typical seasonal slowdown. In fact, a report released by the National Association of Realtors® (NAR) finds just the opposite.
Existing-home sales eclipsed June’s cyclical sales and, in October, zoomed to the highest annualized pace in nearly a decade, according to NAR. All major regions saw an increase in sales last month as well.
It’s a good time to be in the real estate business. And NAR says that Realtors have a lot to be thankful for this holiday season:
The economy is improving: In 2017, the economy is expected to continue growing, at least at a moderate pace, next year, and growth will lead to even lower unemployment, which can help boost consumer confidence. What’s more, a growth in jobs often translates into more households looking for homes.
Powerful buying forces emerge: Two major demographic shifts at play in the current housing market could profoundly drive sales in the coming years: millennials and retiring baby boomers.
We are now in the midst of two massive demographic waves that will power above-average demand for homes for at least the next 10 years,” says Jonathan Smoke, realtor.com’s chief economist. The median age of a first-time buyer this year was 32, according to NAR’s 2016 Home Buyer and Seller Report. Next year, 4.4 million people in the U.S. will turn age 32.
Further, the nation’s second-largest generation, the boomers, is now moving into retirement. Americans age 65 to 74 are in a key age range where housing decisions are being made, which typically involve a home sale and a purchase. Over the next five years, the number of people in the U.S. over the age of 65 is expected to increase 18 percent as the population overall grows only 4 percent.
Foreclosures are plummeting: The foreclosure inventory fell 31 percent in September and completed foreclosures dropped 7 percent year over year, according to data from CoreLogic. What’s more, the number of seriously delinquent mortgages (ones 90 days or more past due, including loans in foreclosure or REO) dropped by 25 percent in September year-to-year to the lowest level since August 2007.
Completed foreclosures have fallen by a total of more than 100,000 homes during the 12 months prior to September 2016,” says Anand Nallathambi, president and CEO of CoreLogic. “The decline in foreclosures is one of the drivers in the drop in vacancies, which is positive for homeowners and communities. Heading into 2017 we see that prices, performance and production – the three most important drivers of the real estate market – are all improving.”
More new homes are in the pipeline: Housing starts rose 25.5 percent in October, reaching a seasonally adjusted annual rate of 1.3 million, the Commerce Department reported. It’s the highest pace since August 2007. Single-family housing starts reached a nine-year high in October, reaching a rate of 869,000.
These robust figures correlate with strong builder optimism in the housing market,” says Ed Brady, chairman of the National Association of Home Builders. “A firming job market, a growing economy and rising household formations will keep the housing recovery on track into next year.”
Drones are flying: Long-awaited guidelines were released in June that allow more real estate professionals to incorporate drones into their marketing, and they’re capturing aerial pictures and videos of properties to lure buyers.
The Federal Aviation Administration released its final rule on commercial drone use in June, though guidelines must be followed: Operators are required to obtain a Part 107 certificate, which replaced the previous Section 333 waiver. Operators also no longer are required to hold a pilot’s license. Still, operators must take a test before flying, and they must retake that test every 24 months in order to operate drones. Also, there are restrictions on the number of activities you can do with a drone (such as FAA prohibitions against flying a drone over a person or flying at night).
“Businesses are more and more finding opportunities to utilize drones as a way of cutting costs and better serving customers,” says Tom Salomone, NAR’s immediate past president. “That’s true in real estate and other industries as well. As application of this technology picks up, the regulatory landscape will likely continue to evolve.”
Source: Melissa Dittmann Tracey, REALTOR® Magazine’s Daily News
© 2016 Florida Realtors®
A downpayment gift? Be careful
CHICAGO – Dec. 2, 2016 – Many first-time homebuyers receive downpayment assistance from a family member or close friend, but many don’t realize there are specific guidelines they must follow for a home purchase to avoid trouble down the road.
First off, the downpayment must be a gift. If it’s considered a loan, the lender must then factor that into the mortgage approval amount, and buyers may then qualify for less mortgage money than they need.
Buyers need a gift letter from the person or persons who gave them the money. The person who gifted the money must state in writing that he or she does not plan on asking for the money back, and that it is, indeed, an actual gift.
“The gift letter is very serious,” says Casey Fleming, mortgage adviser and author of The Loan Guide: How to Get the Best Possible Mortgage <https://www.amazon.com/Loan-Guide-Best-Possible-Mortgage/dp/0615980708/ref=sr_1_1?s=books&ie=UTF8&qid=1411650135&sr=1-1&keywords=loan+guide+first+time+home+buyer>. “While it is doubtful that a lender would ever audit a file after the fact to see if the recipient is paying the donor back, if the transaction goes bad, you might very well find yourself with a subpoena in your hand.” Remember, you cannot lie on a mortgage application. It’s a felony.
The gifter may also be required to provide bank statements – possibly two months’ worth.
Buyers should also secure the downpayment, including any gift portion, during the early planning stages of a house hunt to save them from unexpected delays later on.
“If the funds are ‘seasoned’ – meaning that they’ve been in the account long enough so that the last two bank statements don’t show the deposit – the gift does not have to be addressed,” Fleming says.
Also, there is a limit to how much a buyer can be gifted tax-free, according to IRS rules. Any gift of $14,000 and up will face a tax bill under current guidelines.
That said, “it is $14,000 per year per donor, so a couple could give $28,000 ($14,000 from each) to their child,” Fleming explains.
Source: “Getting a Down Payment as a Gift? Avoid the Mistakes That Could Mess You Up,” realtor.com® (Nov. 28, 2016)
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