Finally the end of cheap mortgages?

Posted on February 13, 2018 by grim

From CNBC:

Here’s how a 5% mortgage rate would roil the US housing market

Mortgage rates are now at their highest level in four years and poised to move even higher. The timing couldn’t be worse, as the usually busy spring housing market kicked into gear early this year amid higher home prices and strong competition for a record low supply of homes for sale.

Add it all up, and affordability is starting to hurt.

The average rate on the popular 30-year fixed is now right around 4.50 percent, still low when looking historically, but buyers over the past six years have gotten more used to rates in the 3 percent range. Mortgage rates have not been at 5 percent since 2011.

A 5 percent rate would cause more than a quarter of today’s homebuyers to slow their plans, according to a Redfin survey of 4,000 consumers at the end of last year. Just 6 percent said they would drop their plans to buy altogether. About one-fifth of consumers said 5 percent rates would cause them to move with more urgency to purchase a home, fearing rates would rise even further. Another fifth said they would consider more affordable areas or just buy a smaller home.

Despite rate concerns, the bigger issue for buyers is changes to tax laws that had lowered the cost of homeownership. Specifically, the deduction on property taxes is now limited to $10,000. While that does not affect homeowners in the majority of the country, it does hit those in high-cost states like New York, New Jersey and Illinois, and those in higher-priced housing markets like California.

Posted in Economics, Mortgages, National Real Estate | 137 Comments

Looking good, Billy Ray! Feeling good, Louis!

Posted on February 12, 2018 by grim

From HousingWire:

Americans gain confidence in housing as home prices rise

Americans continue to gain confidence in the housing market, not just despite, but even because of rising home prices, according to the latest Home Purchase Sentiment Index from Fannie Mae.

Over the past year, home prices have continued to rise, threatening affordability, and housing inventory is falling dangerously low. However, despite these setbacks, Americans continue to hold a positive view of the housing economy.

Fannie Mae’s HPSI rose 3.7 points in January to 89.5, reversing the decrease seen the month before and an all-time survey high. This rise is due to increases in five of the six HPSI components.

The share of those who said now is a good time to buy a home increased three percentage points to 27% in January, reversing some of last month’s decline. The share of those who say now is a good time to sell a home also increased, rising four percentage points to 38%.

“Over the past year, continued home price growth has helped spur a sizable increase in the net share of consumers who say it’s a good time to sell a home but also a modest weakening in the net share who say it is a good time to buy,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

Americans are increasingly expecting home prices to rise as those who said they expect home prices to go up over the next 12 months increased eight percentage points in January to 52%, a new survey high. But even as they expect home prices to rise, the share of Americans who say mortgage rates will fall in the next 12 months increased two percentage points to -50%.

When it comes to personal finances, the share of Americans who say they are not concerned about losing their job increased five percentage points to 73% and the share who say their household income is significantly higher than it was 12 months ago remained flat at 16%.

Posted in Demographics, Economics, Employment, National Real Estate | 61 Comments

Net net … nothing?

Posted on February 9, 2018 by grim

From the Washington Post:

Predictions of a crash in housing prices have not come true

Were fears overblown that changes to the federal tax law would trigger plunging home values?

You might recall the scary predictions that began coming last fall from the realty industry and some independent economists: Cutting tax benefits for homeowners would inevitably lead to declines of 4 to 10 percent in home prices, and maybe even more for upper-bracket properties in high-tax areas.

So how are those dire warnings holding up? It’s still early in the game for hard statistical answers. But it’s not too early to gather anecdotal evidence on whether buyers — citing higher tax burdens — are pushing asking prices downward and whether sellers are caving or resisting.

To get answers, I contacted realty agents and economists who keep a close eye on consumer behavior in markets around the country. The consensus was summed up best by Ralph McLaughlin, chief economist of Trulia, a San Francisco company that tracks prices and local market trends in hundreds of communities.

Price declines are nowhere in sight yet and cannot be totally ruled out, he said, but “we think the potential negative impacts [of the tax bill] will be muted by the likely fact that most households will actually have more money in their bank accounts at the end of the year because of the tax plan.”

That, plus the ongoing shortage of homes for sale, strong buyer demand, low unemployment and growth in wages, may offset any whatever tax-deduction concerns. Cheryl Young, senior economist at Trulia, cited the latest Standard & Poor’s Case Shiller index, which documented steadily rising prices in most markets.
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Noah Goldberg, an agent with Redfin in Jersey City, says clients “were waiting on the sidelines at the end of the year due to the uncertainty around tax reform.” But “now that [they’ve] had a chance to calculate the monthly costs, income taxes and deductions,” they’re streaming back. Some buyers have told Goldberg that the lower federal income taxes they’re likely to owe will offset the real estate deductions they’re likely to lose. So the net effect could be a wash.
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Chicago real estate broker Alexis Eldorrado says some sellers of upper-bracket properties have become more flexible on their initial asking prices, knowing that buyers may come in with Excel spreadsheets detailing how their tax bills are going up. Jill Eber, a broker in Miami, told me that tax law may actually be driving some owners from high-tax states to tax-friendlier Florida.

“We’re hearing from more people from New York, the Northeast and California than usual,” she told me in an interview, and some are specifically citing the tax bill as a reason for considering switching domiciles. What impact that might have on pricing isn’t yet clear, however.

Posted in Demographics, Economics, Employment, Housing Recovery, Politics | 213 Comments

Downtown JC going to pay up

Posted on February 8, 2018 by grim

From the Jersey Journal:

10 homes socked with huge tax hikes thanks to Jersey City reval

Jersey City is conducting its first complete property revaluation since 1988 and the new assessments have started rolling in.

Appraisal Systems, the company hired to oversee the process, has been uploading the new assessment information online, thousands of properties at a time. The company expects to release a new wave of assessments each week for the next month.

Revals are intended to square each property’s assessment — the value on city tax rolls — with its true value. Because many properties have not been assessed since 1988, the average city property is assessed at less than 24 percent of its true value.

As expected, the city’s Downtown, where property values have soared since the last reval, is home to many of the large assessment hikes — and tax increases. Excluding tax abated properties, the 500 properties with the highest tax hikes have Downtown addresses.

Property owners are still able to make informal appeals to Appraisal Systems and then formal appeals to the Hudson County Board of Taxation, so the new assessments are still only proposed. And there is no 2018 budget yet for the city, county or school district, so the tax hikes are tentative as well.

The city is predicting a new tax rate of 1.62 per $100 of assessed value.
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$36,066 tax hike: 203 Washington St. (middle), 5,972 square feet
Current assessment: $175,000
New assessment: $3,068,900
Current taxes: $13,650
New taxes: $49,716
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$29,480 tax hike: 104 Morris St. (right), 4,488 square feet
Current assessment: $125,000
New assessment: $2,421,600
Current taxes: $9,750
New taxes: $39,230
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$29,115 tax hike: 69 Sussex St., 4,696 square feet
Current assessment: $135,000
New assessment: $2,447,200
Current taxes: $10,530
New taxes: $39,645

Posted in New Jersey Real Estate, Property Taxes | 75 Comments

“Homeownership has lost its allure”

Posted on February 7, 2018 by grim

From the Star Ledger:

Who wants to buy a home in New Jersey? And what happened to the American Dream

It used to be part of the American Dream — the cute house in the suburbs with a garage and a big yard for the kids.

Now, however, more and more New Jersey residents are opting out.

In the last ten years, there are fewer homeowners and more renters in New Jersey, according to an analysis of Census housing data.

Of the 3.1 million housing units, about 64.1 percent are owned by their occupants while 35.9 percent are rented – about 2.5 percentage points less than it was about 10 years ago.

In terms of numbers, there are now about 318,000 new residents living in rental units in New Jersey and about 156,000 fewer living in a purchased home.

The Census compares the 2012-2016 five-year American Community survey to 2007-2011 and provides a snapshot on how homeownership and rental rates have changed in the last decade.

A closer look at county data shows that all counties in New Jersey, except for Cape May, have lost homeowners. Atlantic, Passaic, Hudson and Salem counties lost more than four percent of homeowners over the last 10 years.
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If you add in rising house prices and property taxes, it has pushed more and more people out of homeownership, according to Riordan.

Millenials who are just getting into the age of considering homeownership have been especially affected.

“They are saddled with [student loan] debt.” James Hughes, dean emeritus of the Edward J. Bloustein School of Planning and Public Policy at Rutgers. “Their credit ratings are not that high so banks are reluctant to loan to them.”
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Even though Hughes said these millennials might be starting to get out of it, the trend will probably continue. “They’ll probably be replaced by Generation Z,” he said.

In addition, they prefer to stay more mobile so that it’s easier to move when they find better job opportunities in a tough job market.

Perhaps due to all this, the current crop of young people has delayed settling down and starting families.

“They think, ‘If I don’t have kids, I don’t have to have a house,” Kevin Riordan of Rutgers Center for Real Estate said.

Along with this, younger people are opting to live in cities where there are more rental units, instead of moving to the suburbs.

Posted in Demographics, Economics, Employment, New Development, New Jersey Real Estate | 85 Comments

We like it here … but

Posted on February 6, 2018 by grim

From the Star Ledger:

N.J. is a good place to live but the taxes stink, residents say

New Jerseyans are conflicted.

A vast majority love their neighborhoods and most say the state is a good place to live, according to a new poll. But when it comes to the economy, they’re angry about the economic climate, pessimistic about the future and have grown increasingly likely to have an itch to move away.

It’s a mixed bag living in New Jersey, according to Rutgers-Eagleton’s 2018 State of the Garden State report.

Nearly 80 percent say their neighborhoods or “excellent” or “good” while 70 percent say the same about their towns.

Overall, 61 percent say New Jersey is an “excellent” or “good” place to live, compared to 39 percent who rate it “fair” or “poor,” according to the survey.
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Ask New Jerseyans to consider their financial concerns with the state and majorities say they have grave misgivings.

Eighty-two percent are dissatisfied with how state government has handled taxes, including a majority, 61 percent, who are “very dissatisfied,” according to the poll. Three quarters say the same about cost of living and government spending

That could explain why the number of people who consider leaving the state has increased over the last decade: 30 percent — up from 22 percent in 2010 — say they have an itch to move.
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“In a state that ranks near the top when it comes to outbound migration and taxation, it’s no surprise that New Jerseyans are upset with how state government is handling important financial matters – most of all, taxes,” Ashley Koning, director of the Eagleton Center for Public Interest Polling at Rutgers University-New Brunswick, said.

Posted in Demographics, Economics, New Jersey Real Estate, Property Taxes | 114 Comments

Mortgage rates going up

Posted on February 3, 2018 by grim

From CNBC:

Mortgage rates jump even higher after positive jobs report

The good news is Americans are making more money – because they’re going to need it, especially people thinking about buying a home.

While the just-released January employment report showed job growth that topped expectations, to go along with a nice gain in wages, it also sent bond yields soaring. Mortgage rates loosely follow the yield of the 10-year Treasury. Bond yields have been rising for weeks on strong economic data domestically as well as changes in international monetary policy, but this move was the most dramatic.

The average rate on the 30-year fixed-rate mortgage is at its highest level in four years, about 4.5 percent, and for some lenders, it is even higher.

“This isn’t a knee-jerk reaction to some headline event. It’s a broad-based, deliberate move,” said Matthew Graham, chief operating officer at Mortgage News Daily. “A quick return to December’s levels is unlikely, even though we may get some relief on the way higher. How much higher is hard to say, but at a certain point, high rates are self-correcting. We’re probably at least half-way to that magic line in the sand.”

Boiling the change so far down to a monthly payment, if a borrower took out a $200,000 mortgage in the middle of December, when the average rate was around 3.875 percent, they would have had a monthly payment of $940 (that’s not including taxes and insurance). If they were to take out that same loan today, the monthly payment would be $1,013.

While $73 a month may not sound like a lot to some, this is just a best-case scenario. Depending on your creditworthiness, it could be a bigger difference. For some borrowers on the margins, they may no longer even qualify for the loan. Lenders today are required to make sure the borrower has the ability to repay a loan, based on income and other expenses. If the monthly payment is even slightly higher, some borrowers may not make that ability-to-repay standard.

For those out house hunting already, the higher rates will only add to the weakening affordability in the market. Home prices continue to move higher at three times the rate of wage growth. In some large metropolitan markets, annual price gains are in the double digits.

Posted in Economics, Employment, Mortgages, National Real Estate | 122 Comments

January MarketNews

Posted on February 1, 2018 by grim

From Otteau Group:

This topic has caused quite a stir, with some forecasters predicting ‘Armageddon’ and that the ‘The Sky is Falling’! Contrary to these claims, our analysis indicates that most existing homeowners and homebuyers in New Jersey and New York will realize a net tax savings under the new tax code. Even more surprising is that those who will be adversely affected consist primarily of high-income households in the luxury home market.

As with all major policy changes there will be winners and losers, but the big picture is that the housing market will remain viable in the years ahead. The hysteria that has ensued due to misinformation is however likely to cause home sales to be sluggish during the early part of 2018 resulting in a delayed Spring-Surge. Because of this, Right Pricing! marketing strategies are more important than ever in the coming months to offset this adjustment as normal marketing times lengthen and unsold inventory increases. Looking ahead, while home sales are expected to regain their footing by late Spring once the facts about the tax reform become known, rising mortgage interest rates will serve to limit the number of home sales in 2018. All of this is likely to result in fewer home sales in 2018 following last year’s record breaking performance.

Over the longer term, the changes to the tax code will have some adverse effects on local housing markets by weakening the financial incentives of home ownership and reinforcing out-migration patterns for people and businesses from high tax states like New Jersey and New York. But these are largely self-induced problems rooted in policy that will take years to address. In the short term, the local housing markets will remain viable and home prices are expected to continue to rise.
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After two consecutive months of increases, home purchase contracts in New Jersey were basically unchanged in December. This is compared to a 4% increase one year ago in December of 2016. Despite a stagnant end to the year, purchase contracts in New Jersey hit a 12-year high in 2017, with 115,237 contracts recorded. This reflects a 5% increase compared to the 109,471 home sales that occurred during 2016. It is anticipated, however, that the hysteria that has ensued due to misinformation on the Tax Reform is expected to cause sluggish home sales in the early part of 2018 resulting in a delayed Spring-Surge. Looking ahead, home sales are expected to regain their footing by mid-year once the facts become known, but it is also likely that mortgage interest rates will rise faster in response to continued economic growth. All of this is likely to result in fewer home sales in 2018 following last year’s record breaking performance.

While the number of home sales has increased across all price ranges in 2017, the largest gain occurred for luxury homes priced over $2.5-Million, rising by 11%, while homes priced under $600,000 experienced the smallest increases. It’s important to note that home sales in excess of $2.5-Million are increasing for the first time in more than a decade. The improvement has however been primarily concentrated in towns with direct rail service to Manhattan.

Shifting to the supply side of the equation, the supply of homes being offered for sale remains constricted, which is limiting choices for home buyers. The number of homes being offered for sale today in New Jersey has fallen to its lowest point of the past 12 years, having declined by 5,000 over the past year. This is also about 40,000 (-55%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 5.0 months of sales (non-seasonally adjusted), which is lower than one year ago, when it was 5.8 months.

Currently, 17 out of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Essex County has the strongest market conditions in the state with 3.0 months of supply, followed by Middlesex, Hudson, Somerset, Bergen, Passaic, Morris and Union Counties, which all have 4.5 months of supply or less. The counties with the largest amount of unsold inventory (8 months or greater) are concentrated in the southern portion of the state including Cumberland (9.3), Atlantic (9.3), Salem (10.1) and Cape May (12).
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Sales of residential real estate in New Jersey rose to $38.3-Billion in 2017, which is a 10%increase from the prior year. Also noteworthy is that this was the highest residential transaction volume since 2005. Single family dwelling transactions accounted for the largest share in 2017 with $29.5-Billion in sales or 77% of all transactions, followed by Condo/Townhouse properties, which accounted for 19%, and Age-Restricted dwellings, which accounted for only 4%.

Posted in Demographics, Economics, New Jersey Real Estate | 192 Comments

Case Shiller up 6.4% yoy

Posted on January 31, 2018 by grim

From HousingWire:

Case-Shiller: Home prices rising three times the rate of inflation

The S&P CoreLogic Case-Shiller U.S. National Home Prices NSA Index, which covers all nine U.S. census divisions, reported an increase of 6.2% in November. This is up from the annual increase of 6.1% the previous month.

The 10-City Composite held an annual increase of 6.1%, up from 5.9% the previous month. The 20-City Composite increased 6.4% year-over-year, up from the annual increase of 6.3% in October.

“Home prices continue to rise three times faster than the rate of inflation,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the index committee. “The S&P CoreLogic Case-Shiller National Index year-over-year increases have been 5% or more for 16 months; the 20-City index has climbed at this pace for 28 months.”
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Some cities saw higher increases than others. Seattle, Las Vegas and San Francisco reported the highest annual gains among the nation’s top 20 cities with increases of 12.7%, 10.6% and 9.1% respectively.

And one factor stands above the rest as being the main factor to the continually rising home prices.

“Given slow population and income growth since the financial crisis, demand is not the primary factor in rising home prices,” Blitzer said. “Construction costs, as measured by national income and product accounts, recovered after the financial crisis, increasing between 2% and 4% annually, but do not explain all of the home price gains.”

Posted in Economics, Housing Bubble, Housing Recovery, National Real Estate | 79 Comments

Yeah yeah, be priced out forever, we’ve heard that before.

Posted on January 30, 2018 by grim

From Forbes:

2018’s Housing Market Looks Good Unless You’re A First-Time Millennial Buyer

The nation’s housing market for 2018 continues to look good, according to two recently released reports. But first-time millennial buyers will continue to struggle with affordability, especially in high-priced areas like Los Angeles, San Francisco, Boston, New York and Washington DC.

Listen to Ralph G. DeFranco, Ph.D, global chief economist, Mortgage Services, Arch Capital Services Inc.: “With interest rates and home prices both on the rise, first-time homebuyers – largely millennials – may want to consider making the jump from renting to owning sooner rather than late.”

DeFranco further said: “Our research shows few signs of a housing bubble because the typical warning signs aren’t present. Overall, the shortage of housing paired with a robust job market should keep the housing market strong and growing, short of an unexpected event and despite the contrary pressures that may be created by the tax bill.”
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The HaMMRSM also makes market predictions to 2020. Among them: Home prices will continue to increase around the country in most markets. Look to annual increases of 2-6%, with most housing markets currently at low risk for a downturn.

Mortgage rates will rise, causing people to move less often. According to the report, “rising rates give existing borrowers with fixed-rate mortgages a financial incentive to stay put.” In addition, “homeowners will have more incentive to seek second liens or home improvement loans rather than move to a new home or refinance.” Makes sense since a new mortgage would likely be a higher rate cutting into the key affordability factor.

Posted in Demographics, Economics, Housing Bubble, Housing Recovery, National Real Estate | 113 Comments

So what’s in store for NJ?

Posted on January 29, 2018 by grim

From the APP:

Real estate forecast: Partly sunny, with mix of clouds

How would you characterize the health of New Jersey’s residential housing market, from the perspective of homeowners and potential home buyers and sellers?

In a word, uncertain. The basic economic measures are reasonably good. The job market is growing, albeit slower than some would like, but growing. The lower inventory of homes for sale remains low. This should be good for sellers, but the uncertain impact of the new tax laws may give potential buyers pause and thus reduce demand. There is much noise currently about the negative impact of the new tax laws on housing prices that may lead buyers to offer lower prices to sellers. Sellers may be reluctant to lower their asking prices until there is more certainty on the tax law impact. I believe that strong market towns will continue to be strong as the community characteristics, school system reputation, proximity to transit and other features will offset the tax law impacts. On the other hand, towns that do not have those advantages may suffer greater reductions in home prices as there is little to offset the tax law impacts.

What kinds of housing are in greatest demand in New Jersey, and does that match what is being built?

The greatest demand is for higher-density townhomes, condominiums and rentals near mass transit. That housing is being built in those towns that have undergone a redevelopment analysis and revised their zoning to allow it. In those towns that have not undertaken to amend their master plans and zoning to attract the younger generations, that type of housing is not being built. The belief that higher-density housing is bad for a suburban town because it brings in too many schoolchildren persists despite a decline in pupil enrollment in many towns. There are a sizeable number of commercial and other non-residential structures that have outlived their usefulness but are in desirable locations and could be converted into residential uses. All towns should take a look at their inventory and take steps to allow the conversion of these buildings to residential.

Average home values in most municipalities in New Jersey remain well below what they were more than a decade ago. Do you see that changing any time soon?

Average is a dangerous term here. In those municipalities with the advantages of market-favored locations, good school system reputations, proximity to mass transit, home values have largely recovered or surpassed the pre-recession values. Other towns not fortunate to have those advantages will continue to struggle. The new tax laws will only make the home value recovery more difficult. The type of home also has a large impact on the value recovery analysis. Older homes that have not been upgraded will continue to decline in value. Location is still the major factor in value analysis. Look at the steep increase in home values in some older towns in close proximity to transit. During the latter part of the 20th century, most new development was in the outer suburbs. Now, the more desirable locations and most new housing is in the municipalities close to mass transit. We have also benefited from a low interest rate for many years. Interest rates are likely to rise in the next two years, which will likely not help values. And, by the way, those pre-recession home values were not sustainable and the frothiness was the result of speculators and horrible lending practices.
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What kinds of policies would you like to see Gov. Phil Murphy implement that would benefit homebuyers and developers?

I think the allowance of full deduction of property taxes on state income tax returns would be of some help. In addition, a full review of the entire state tax structure should be undertaken. Taking a holistic view of all revenues and expenses at all levels of government has not been done since the 1980s. That is long overdue. A review of the overall land use process from the Municipal Land Use Law through the county and state administrative policies and regulations would also be helpful in finding ways to shorten the regulatory process and align with market needs without sacrificing environmental safeguards. A comprehensive plan to better coordinate the needs of businesses and residents is needed. New Jersey is in competition with the rest of the country for jobs and talent and cannot afford to allow outdated laws and regulations at all levels of government to hurt us in that competition. The Murphy administration’s support for housing for all income levels will be very important in allowing the state to compete favorably. Nimble and flexible are not terms normally associated with government. But the state needs to be more nimble and flexible to compete.

Posted in Demographics, Economics, Employment, New Jersey Real Estate, Property Taxes | 93 Comments

Taxing to fix the tax problem

Posted on January 26, 2018 by grim

From City Journal:

New Jersey’s Tired Tax Tricks

“New Jersey needs tax reform to guarantee relief from soaring taxes.” That was the plea Brendan Byrne, a Democratic former governor of the Garden State, made 43 years ago to a group of mayors. Byrne, who died on January 4 at 93, has been widely mourned as a man who could work across the aisle to get things done. A prosecutor and World War II bomber-navigator, Byrne will be remembered by some for his life of public service, but for many New Jersey residents his legacy is evident whenever they look at their tax bills.

In 1975, with the state facing a budget shortfall, Byrne told mayors that the state would need a “large revenue package” to close a looming $413 million budget gap and raise the $300 million required to meet a state Supreme Court order for refinancing New Jersey’s public schools. The heart of the package would be a new statewide income tax, which went into permanent effect in 1977. Byrne promised that the additional money would help relieve the high property-tax burden on New Jersey’s citizens and reduce the disparity between rich and poor school districts.

Four decades later, the plan has failed on both counts. New Jersey’s property taxes have continued to climb at alarming rates, and the gap in quality between rich and poor school districts is, if anything, worse.
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Two useful lessons emerge from this experiment. First, politicians and special interests don’t see new streams of tax revenue as a means to replace or eliminate an existing stream, but rather as a way of adding to the public coffers. (For those who entertain fantasies of a value-added tax replacing the federal income tax, take heed.) New Jersey’s income tax started with a top rate of about 2.5 percent; it’s now around 9 percent. Even with such an increase, the income tax has never had much of an effect on the property-tax burden. The Census Bureau reports that the average property-tax bill in New Jersey was $4,820 in 1992; by 2014 (the most recent year for which data are available), it had grown to $12,960, among the highest in the nation.
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The second lesson is that education spending is not correlated with educational quality. When politicians demand more money for education funding—usually at the behest of teachers’ unions—schools are not likely to improve. Take Newark, which spent more than $22,000 per pupil in 2016. For all this largesse, the percentage of third-graders who met or exceeded expectations on state exams that year was less than 28 percent in math and 24 percent in reading. In nearby Maplewood, meanwhile, where the school district spends only $18,351 per pupil, more than 70 percent of third-graders are meeting or exceeding expectations in reading and more than 60 percent in math.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 157 Comments

Wrong way people

Posted on January 25, 2018 by grim

From Newsweek:

WHY ARE PEOPLE LEAVING CITIES? U.S. MAYORS BLAME HOUSING COSTS

Mayors across the United States say that housing costs are the biggest reason that people are moving away from cities, according to a new survey released Tuesday. According to the Menino Survey of Mayors, 51 percent of leaders in 115 cities said housing affordability is the most common reason that people move away from cities, followed by jobs, schools and public safety concerns.

A dismal 13 percent of mayors said the current housing stock fits the needs of their city constituents “well” or “extremely well.” Both mayors of expensive and inexpensive cities, with populations of over 75,000, shared concerns about low housing stock, according to the survey conducted by the Boston University Initiative on Cities.

Maxwell Palmer, assistant professor of political science at Boston University and one of the three principal investigators in the survey, told Newsweek that the consensus from mayors about housing stock is significant because “usually we think of the affordable housing crisis as a coastal problem, but it’s really a problem around the country.”

Posted in Demographics, Economics, Employment, National Real Estate, New Development | 58 Comments

Looks like we got a loophole

Posted on January 24, 2018 by grim

From Bloomberg:

State Tax Workarounds Could Mean $154 Billion Lost to Treasury

New York state lawmakers could punch a $50.6 billion hole in the federal government’s budget by revamping their state income tax.

If California followed the same approach, its legislature could keep $66.8 billion out of the U.S. Treasury. And in New Jersey, state lawmakers could hold back $12.5 billion more.

Their plans face obstacles, and not every state is pursuing the same strategy. But five Democratic-leaning states that are exploring ways to change their tax laws could remove roughly $154 billion from federal coffers over the next eight years, adding to anticipated deficits, according to an analysis compiled by Bloomberg in conjunction with Daniel Hemel, a professor at the University of Chicago Law School.

The potential drop in federal revenue reflects a furious burst of creativity among state lawmakers and tax experts in response to the Republican-sponsored federal tax-overhaul legislation that President Donald Trump signed last month. One controversial piece of the new law caps a previously unlimited federal tax benefit that individuals in high-tax states get by deducting the state and local taxes they pay. The new cap is $10,000.

Now, various states are considering circumventing that limit by switching from a state personal income tax to an employer-paid state payroll tax calibrated to produce the same amount of revenue. Employers can deduct payroll taxes fully on their federal returns.
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Talk of a payroll tax maneuver is loudest now in New York. On Jan. 17, the state’s Department of Taxation and Finance released a preliminary report outlining its options for tax changes. The report includes analysis of workarounds such as “a statewide employer compensation expense tax,” or payroll tax. New York state budget director Robert Mujica says lawmakers will have draft legislation to debate within 30 days.

“What we are trying to accomplish here is to put [New Yorkers] back to where they were” before the new tax law, said Mujica. “The federal tax law aimed at the heart of New York and California, and we produce 25 percent of GDP for the nation.”
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If states’ shifting to payroll taxes becomes a “large enough trend, [it] could wipe out all the savings from the repeal of the SALT deduction — and then some,” wrote the authors.

That’s because most federal taxpayers don’t itemize their deductions — meaning they don’t benefit from the SALT write-off for state income taxes. But all employers could deduct payroll taxes as expenses, the paper notes, making “a sizable portion of all current state income taxes deductible.”

Posted in New Jersey Real Estate, NYC, Politics, Property Taxes, Unrest | 88 Comments

NJ about to become more affordable

Posted on January 23, 2018 by grim

From the Record:

Wall Street warns New Jersey home values could tumble 7.5 percent

A pair of federal and state tax policy decisions could deliver a double whammy to New Jersey and its homeowners, a Wall Street credit-rating agency warned on Monday.

Just days after outgoing Gov. Chris Christie’s administration proclaimed that it was leaving New Jersey in good fiscal health, Moody’s said reductions in the state sales tax and federal tax reform signed at the end of the year could deliver punishing blows to the state’s finances.

The reduction in corporate and personal income taxes backed by congressional Republicans and signed into law by President Donald Trump could result in the average value of a New Jersey home dropping by 7.5 percent, Moody’s said in a report.

The tax reform limits federal deductions for state and local tax payments to $10,000, well below the average $17,850 deduction claimed by New Jersey taxpayers in 2015.

The loss of home values will leave New Jersey homeowners with less wealth and disposable income, depressing retail sales, Moody’s said.

On top of that, a Christie-backed reduction in the state sales rate that took effect Jan. 1 will cut $400 million from collections in the year ended June 30 and $500 million the following year, according to the rating agency’s report.

Posted in Demographics, Economics, New Jersey Real Estate, Property Taxes | 83 Comments