Real Estate Market Update
By: Real Estate Hotline
Summer 2019 (Vol. 37, No. 2)
In the Residential sector, most metro areas saw price gains under marginal inventory growth in the second quarter of 2019, according to the latest quarterly report by the National Association of Realtors®. Single-family median home prices increased year-over-year in 91% of measured markets in the second quarter, with 162 of 178 metropolitan statistical areas showing sales price gains.
Affordable housing continues to be a problem in 2019. Lawrence Yun, the chief economist for the National Association of Realtors, said home builders must bring more homes to the market. “New home construction is greatly needed; however, home construction fell in the first half of the year,” he said. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.”
According to NAR, the five most expensive housing markets in the second quarter were the San Jose-Sunnyvale- Santa Clara, Calif., metro area, where the median existing single-family price was $1,330,000; San Francisco- Oakland-Hayward, Calif., $1,050,000; Anaheim-Santa Ana- Irvine, Calif., $835,000; Urban Honolulu, Hawaii $785,500; and San Diego-Carlsbad, Calif., $655,000.
The five lowest-cost metro areas in the second quarter were Decatur, Ill., $97,500; Youngstown-Warren-Boardman, Ohio, $107,400; Cumberland, Md., $117,800; Binghamton, N.Y., $119,300; and Elmira, N.Y., $119,400.
Even though the national median income increased to $78,3662 in the second quarter, increasing home prices made it harder to afford a home. On a positive note, exceptionally low mortgage rates may help in the short run. Based on the national median home price of $279,600, a buyer making a 5% down payment would need an income of $62,192 to purchase a single-family home.
Foreclosures have mostly vanished from many markets across the country, with filings down 82% from their peak in the first six months of 2010. But a handful of markets are bucking the trend.
Thirty-six of 220 of the largest metro areas have posted year-over-year increases in foreclosure activity, according to ATTOM Data Solution’s 2019 U.S. Foreclosure Market Report. Some of those markets seeing an uptick include Buffalo, N.Y. (up 33%); Orlando, Fla. (up 32%); Jacksonville, Fla. (up 18%); Miami, Fla. (up 7%); and Tampa-St. Petersburg, Fla. (up 5%).
It is important to note that foreclosure ‘activity’ doesn’t necessarily mean these homes linger on the market or end up in REO status. Many are snapped up by savvy buyers.
The cities with the highest foreclosure rates so far in 2019:
- Atlantic City, N.J.
- Jacksonville, Fla.
- Trenton, N.J.
- Rockford, Ill.
- Lakeland, Fla.
- Columbia, S.C.
- Ocala, Fla.
- Fayetteville, N.C.
COMMERCIAL AND INVESTMENT
Purchasing properties in a Qualified Opportunity Zone continues to be a great opportunity to defer capital gains taxes. The Federal Housing Administration (FHA) recently announced a package of incentives to encourage multi-family property owners to invest in thousands of neighborhoods located in Opportunity Zones across the nation.
FHA is introducing reduced application fees paid by property owners applying for certain multifamily mortgage insurance programs for the development or rehabilitation of apartment units located, or proposed to be located, in Opportunity Zones. In addition, FHA is designating teams of senior underwriters to review these applications to ensure the most attentive and timely processing.
Applicants to FHA’s New Construction and Substantial Rehabilitation (Section 221(d)(4)), Urban Renewal and Concentrated Development (Section 220), and Purchase or Refinance of Existing Multifamily Property (Section 223(f)) multifamily mortgage insurance programs will be eligible for significantly lower application fees provided the property is located within qualified Opportunity Zones.
For transactions that are defined as ‘broadly affordable,’ FHA’s application fee will be reduced from the current $3 per thousand dollars of the requested mortgage amount to $1 per thousand dollars of the requested mortgage amount, resulting in an average cost saving to applicants of approximately $28,000. ‘Broadly affordable’ is defined as developments in which at least 90 percent of the units are Section 8-eligible or deemed affordable under the Low- Income Housing Tax Credit (LIHTC) program.
�When more investors can apply for benefits in Opportunity Zones, more investors can supply benefits in Opportunity Zones. And that�s exactly the intention of today�s Notice,� said Secretary Ben Carson. �These FHA incentives, combined with the preference points HUD already offers grantees for activities in Opportunity Zones, show how this Administration is maximizing the power of public-private partnerships to never forget - and always lift up - our nation�s �forgotten men and women.�
EB-5 Investor Visa. According to the US Citizenship and Immigrations Services (USCIS) the EB-5 Immigrant Investor Program is being updated. Under a new rule published by the U.S. Department of Homeland Security, several changes to the EB-5 Immigrant Investor Program will go into effect on Nov. 21, 2019.
THE EB-5 INVESTOR VISA PROGRAM
This program was created almost 30 years ago as an incentive to foreigners to invest in real estate and create jobs in the United States. Under the EB-5 Program, foreign investors (and their dependents) may apply for permanent residence and, eventually, citizenship — if they make the necessary investment in a commercial enterprise in the United States and create or preserve at least 10 permanent full-time jobs for U.S. workers. A certain number of these visas are set aside for individuals who invest in enterprises in designated areas that have been identified as having high unemployment. The EB-5 Program has been used effectively by many real estate developers. Historically, the program is most popular among Chinese investors, but there are increasing numbers of applicants from Vietnam, South Korea, India and Brazil. A total of 10,000 EB-5 visas are issued every year with the limit capped at 700 per country.
The updates to the EB-5 program include:
- Priority date retention. Certain immigrant investors will keep the priority date of a previously approved EB-5 petition when they file a new petition.
- Increased minimum investments. The standard minimum investment amount increases to $1.8 million (from $1 million) to account for inflation. The minimum investment in a TEA increases to $900,000 (from $500,000) to account for inflation. Future adjustments will also be tied to inflation (per the Consumer Price Index for All Urban Consumers, or CPI-U) and occur every 5 years.
- Targeted employment area (TEA) designations. The USCIS will now directly review and determine the designation of high-unemployment TEAs and will no longer defer to TEA designations made by state and local governments. These changes will help direct investment to areas most in need and increase the consistency of how high-unemployment areas are defined in the program.
- Clarified procedures for the removal of conditions on permanent residence. This rule specifies when derivative family members who are lawful permanent residents must independently file to remove conditions on their permanent residence, flexibility in interview locations; and updating the regulations to reflect the current process for issuing permanent resident cards (Green Cards).