Median asking rent has reached an all-time high, rising to a record $1,006 in the first quarter of 2019, according to recent data from the U.S. Census Bureau.
Rental properties that were lying vacant remained low at 7% in Q1, a factor that is driving up rental prices.
Meanwhile, homeownership levels across the country were relatively flatfrom last year, the data revealed, reversing a trend of eight consecutive quarters of growth.
Rents rise as increased demand takes a bite out of homeownership
It appears a surge in renters is the cause. The number of renters has changed course, rising in Q1 after falling in six out of seven previous quarters.
Skylar Olsen, Zillow’s director of Economic Research, said the data suggests the younger generation is having trouble overcoming the hurdles they face in the path toward homeownership, including securing a down payment, finding an affordable home and qualifying for a loan.
“These hurdles – combined with potential shifts in preferences and/or a simple delay in the many ‘adulting’ events like marriage and children that precipitate buying a home – can have the effect of keeping younger, would-be buyers in rental housing for a longer time,” Olsen said.
He added that the sheer size of the 20-and-30-something population is exacerbating the situation by creating competition that drives up rental prices.
Total payroll employment increased by 196,000 in March, while the unemployment rate was unchanged at 3.8%. Residential construction employment increased by 12,200 in March, after the decline of 8,100 jobs in February. The total construction industry (both residential and nonresidential) gained 16,000 jobs in March.
According to the Employment Situation Summary for March, released by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 196,000. It was a big jump from the gain of 33,000 jobs in February, which was revised up from its original estimate of a 20,000 increase. Monthly employment growth has averaged 180,000 per month for the first three months of 2019, compared with the average monthly growth of 223,000 over all of 2018. Over the past twelve months, total nonfarm payroll employment rose by 2.5 million, with the average monthly growth of 211,000.
The unemployment rate was unchanged at 3.8% in March. Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already with a job, declined by 0.2 percentage point in March, to 63.0%. The decrease in the number of total labor force reflected both a 201,000 decrease in the number of persons employed and a 24,000 decline in the number of persons unemployed over the month.
Additionally, monthly employment data released by the BLS Establishment Survey indicates that employment in the overall construction sector increased by 16,000 in March. The number of residential construction jobs rose by 12,200 in March, following an 8,100 decline in February.
Residential construction employment now stands at 2.9 million in March, broken down as 838,000 builders and 2.1 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction is 8,000 a month. Over the last 12 months, home builders and remodelers added 103,700 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 918,000 positions.
In March, the unemployment rate for construction workers decreased to 3.9% on a seasonally adjusted basis, from the 4.5% in February. The unemployment rate for construction workers dropped to the lowest rate since 2001, as shown in the figure above.
220 Central Park South. Image via Vornado Realty Trust and Robert A.M. Stern Architects.
New York’s 2020 budget was revealed this weekend; among many other items, the proposed “pied-à-terre tax” went away, but a progressive “mansion tax,”–a one-time tax on properties valued from $1 million to $25 million or more–and an attendant transfer tax when those properties sell–will reportedly raise $365 million, according to The Real Deal. The money will head straight to the MTA. The new tax will top out at 4.15 percent.
According to Bloomberg, a series of graduated tax levies, paid by the buyer, starting at 1 percent, will be added to all New York City apartments selling for $1 million or more. That rate goes up at $2 million and reaches that 4.15 percent high on $25 million properties. The projected $365 million in revenue would mean $5 billion in bonds headed for mass transit. The last iteration of the mansion tax levied a flat 1 percent on apartments starting at $1 million.
Governor Cuomo said in a statement announcing the new budget “This has five or six major, difficult long-term issues that had to be dealt with, and it deals with them in a fiscally responsible way. This is the leading state in terms of being progressive. We’ve established that. I believe with this plan we also lead the nation in terms of innovation, and building, and reform.”
Inflation Rate in the United States is expected to be 2.00 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Inflation Rate in the United States to stand at 2.10 in 12 months time. In the long-term, the United States Inflation Rate is projected to trend around 2.10 percent in 2020, according to our econometric models.
Sam Khater, Freddie Mac’s chief economist, says, “Mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year. Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”
30-year fixed-rate mortgage (FRM) averaged 4.35 percent with an average 0.5 point for the week ending February 21, 2019, down from last week when it averaged 4.37 percent. A year ago at this time, the 30-year FRM averaged 4.40 percent.
15-year FRM this week averaged 3.78 percent with an average 0.4 point, down from last week when it averaged 3.81 percent. A year ago at this time, the 15-year FRM averaged 3.85 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Despite already being one of the more heavily taxed counties in the country, Westchester homeowners and shoppers may soon see a hike in sales tax.
Westchester officials are reportedly hopeful that the state will approve an increase in local sales tax which could help steady the county’s finances. However, according to a lohud report , no formal request has been made, and it is unclear how much taxes may be increased.
The report states that Westchester County Executive George Latimer plans to first reach out to area business owners before he makes his formal cause to New York State officials.
The average Westchester homeowner paid nearly $20,000 in property taxes last year, with a sales tax rate of 3.375 percent, which is a lower rate than surrounding counties and lower than the county’s four largest cities.
In recent years, Westchester has found itself facing millions of dollars in deficits and the county has seen its reserves dwindle, leading to a downgrade of their credit rating. Westchester’s financial report card saw its credit rating cut one level by two prominent agencies.
Westchester County was notified by S&P Global Ratings and Fitch Ratings that the county’s financial outlook has been downgraded to AA+. Moody’s also assigned Aa1 to Westchester. The county has lost its AAA rating – the highest ranking available – in each of the Big 3 rating agencies.
Late last year, lawmakers approved the $1.9 billion budget, with the measure quickly signed off by Latimer. The budget was approved by a 13-4 vote, with the support of county Democrats. The budget contains a 2 percent property tax hike.
Officials said that the tax rate increase is to help offset tens of millions of dollars in deficits that the county is currently operating against. There are no planned cuts to staff or service in the approved budget, which is contingent on the county selling several parking lots that surround the County Center in White Plains. The sale of the lots is expected to net more than $20 million.
The tax levy increase is the first since Latimer took over as county exec last year. The county could have raised taxes by as much as 4.5 percent, but was able to curtail that number with certain allowances. The county was operating at a $32 million deficit to end 2017 year, which only ballooned in 2018.
As 2018 winds to a close, the housing market has shown signs of a slowdown. Wages are rising, according to the most recent figures released Friday, which economists say may give the Federal Reserve more impetus to raise interest rates later this month.
Throughout this year, observers have begun to speculate that the country’s housing market may have hit its peak. Meanwhile, millions of Americans continue to wait on the sidelines. Housing inventory remains incredibly tight, meaning that buying a home is a very expensive and difficult proposition for many. At the same time, expensive rents and low wages have constrained people’s ability to save up for a down payment.
And 2019 appears set to bring more of the same. “I would still rather be a seller than a buyer next year,” said Danielle Hale, chief economist at real-estate website Realtor.com. Here is what forecasters predict the New Year will hold for America’s housing market:
Mortgage rates will continue to rise, causing home prices and sales to drop
In the Dec. 7 week, the interest rate on a fixed-rate 30-year mortgage was hovering 4.75%,down six basis points. But by this time next year, experts predict it will be even higher.
Realtor.com estimated that the rate for a 30-year mortgage will reach 5.50% by the end of 2019, while real-estate firm Zillow estimated that it could hit 5.80% in a year’s time. Mortgage liquidity provider Fannie Mae was more moderate, predicting that rates will only increase to 5% by then.
Either way, homebuyers can expect to pay more in interest if they buy next year. And rising mortgage rates will cause ripple effects throughout the market, said Daren Blomquist, senior vice president at real-estate data firm Attom Data Solutions.
“What’s driving the slowdown in price appreciation and the rise in inventory is not so much that inventory is being created, but that demand is decreasing,” he said. “This is an extremely mortgage-rate sensitive housing market.”
Realtor.com only expects the national median home price to increase 2.2% next year and for sales to drop 2%. Zillow was a bit more upbeat, expecting home prices to rise 3.8%. (In October, the median sales price only increased 3.8% from a year earlier amid a 1.8% annual uptick in home sales, the first such increase in six months.)
Added inventory won’t make it a buyer’s market
In some of the nation’s priciest markets, housing inventory has improved in recent months, relieving some of the inventory-related constraints on housing markets.
But that’s not good news for buyers or sellers. The increase in inventory in this case is more the result of a decrease in demand because of rising interest rates than it is a sign of new homes being built.
For sellers, this shift will lead to fewer offers and bidding wars, which could in turn could cause some to feel pressure to drop their asking price. However, all of these factors won’t outweigh the price appreciation that’s occurred in recent years. “You’re still likely to walk away with a decent profit in 2019 if you sell,” Hale said.
Moreover, the uptick in inventory has mostly occurred in the pricier tier of homes, meaning that the change doesn’t directly benefit buyers. Rather, it could provide some wiggle room for people looking to upgrade their home. That in turn might marginally expand the number of starter homes on the market.
People will continue to move away from costly housing markets
That trend won’t stop in 2019, which is good news for people looking to sell homes in smaller cities. “Home buyers are going to look for affordability and, often times, that will mean moving from a high cost major market to a lower cost secondary market,” Hale said. Many of these cities, such as Raleigh, N.C., and Nashville, Tenn., have growing economies and healthy job markets, further sweetening the deal.
Another factor that could fuel migration in the future is the new tax code signed into law by President Trump in 2017, which removed the deductions for state and local taxes. Taxpayers will only fully feel the effects of that change for the first time next spring as they receive their refund checks in the mail, said Aaron Terrazas, senior economist at Zillow ZG, -1.57%
“You’ve already seen some of the backlash to the tax bill in the elections that happened in New Jersey and Orange County,” Terrazas said. “Whether or not it spurs migrations, that’s something that happens pretty slowly. People certainly get upset and vote. Actually picking up and moving is a whole other level of seriousness.”
The threat of a recession remains a big question mark
The economy is still strong, but it’s unclear for how long that will continue to be the case. Economists have predicted that a recession could come as soon as late 2019.
Whenever it occurs, the recession is sure to shrink demand for homes and cause prices and sales to drop. The magnitude of those effects will depend on how bad the recession is. In short, the more jobs that are lost, the more hard-hit the housing market will be.
And the housing market may begin to feel the recession before it even starts. With memories of the pre-2008 housing bubble still fresh in people’s minds, would-be homebuyers may be hesitant to purchase a property if they believe they’d be buying at the top of the market in doing so.
“That could be more detrimental to the housing market than the actual underlying issues,” Blomquist said.
Wall Street rating agencies gave a collective thumbs-down to Westchester County this week, downgrading its bond rating, based on its past two years of deficit spending and the use of the county’s reserves to balance its budget.
Whether the downgrade will drive up borrowing costs — and higher county spending — will be determined by market conditions when the county sells $200 million in bonds next week.
But one agency warned it could drop the rating several notches more if the county continues its practice of including phantom revenues in the budget and raiding its rainy day fund at year’s end to erase the red ink.
The downgrades by S&P Global Ratings and Fitch Ratings come as the county Board of Legislators reviews County Executive George Latimer’s 2019 budget, which would be balanced by having a county-affiliated agency borrow $22 million in a one-shot deal to pay for day-to-day expenses.
It’s not exactly the sustainable revenue stream that S&P was looking for to assure municipal bond investors.
For Latimer, and for homeowners, it is a case of pick your poison.
Go with his complex parking-lot deal to glean the $22 million one-shot, or increase county property taxes by 6 percent this year to pay the bills, and cover $98 million in new spending.
There’s also a possible move in Albany to seek an increase in the county sales tax.
Westchester County Executive George Latimer, left, speaks with Leslie Gordon of Feeding Westchester, John Ravitz, Executive Vice President of the Westchester Business Council, and Susan Fox of the Westchester Institute for Human Development during the annual breakfast of the Westchester Business Council at Tappan Hill in Tarrytown Nov. 28, 2018. Latimer was the guest speaker at the breakfast. (Photo: Seth Harrison/The Journal News)
The downgrades are the results of seven years of tax austerity under Latimer’s predecessor, Rob Astorino, who held the line on the county property tax-levy from 2011 through 2017. Latimer’s response to the Astorino era, however, has caught the bond rating agencies’ eye as well.
During his first year in office, Latimer settled the Civil Service Employees Association contract, to which no funds were appropriated in the 2018 budget. So the county expects to dip deeply into its reserves to pay for the labor settlement.
“The honeymoon is over,” declared Joe Markey, market president of KeyBank, at Wednesday morning’s Business Council of Westchester breakfast at Tappan Hill in Tarrytown.
How low can Westchester’s rating go? Certainly much lower than the AA+ rating issued on Tuesday, and the negative outlook issued by S&P. Moody’s Investor Services that downgraded Westchester in 2017.
Lower bond ratings can raise the interest rates because the investment is seen as riskier. Higher rates drive up borrowing costs on obligations that remain on the backs of taxpayers for 20 years.Exactly how much a lower bond rating increases rates depends on market conditions at the time of issuance.
“We remain concerned over the county’s ability to sustainably align revenue and expenditures and rebuild reserves to a level consistent with that of similarly rated or higher-rated peers,” the report said.
In other words, Westchester’s rating could go lower if it continues to rely on speculative revenues, and then is forced to backfill the shortfall with reserves.
Here we go again
That could happen again in Latimer’s first budget.
It remains to be seen whether the Democrat-controlled county board will back Latimer’s one-shot sale of several acres of land, located in the Bronx River Parkway Reservation, Westchester County’s first park. Latimer wants to sell the parking lots that serve patrons of the park’s Westchester County Center and provide spaces for White Plains commuters.
The Westchester County Local Development Corporation would pay $22 million for the park’s parking lots, which generate $2.5 million a year in county revenue. The LDC would sell tax-exempt revenue bonds to raise the $22 million.
It seems certain that the deal won’t be concluded by year’s end. The county has yet to make an application to the LDC for the sale. The LDC needs to change its charter to allow the deal, which requires approval by the state Attorney General. And the parkland sale must be first recommended by the Westchester County Parks, Recreation and Conservation Board, which meets Thursday to discuss the issue.
The Latimer administration wants to remove the parking lots at the Westchester County Center from a county park, and sell them to a public nonprofit. (Photo: David McKay Wilson/The Journal News)
S&P warned that including the park sale in the budget could create problems if the Board of Legislators fails to approve the final deal.
“Should this transfer not occur as planned, management may be required to fill the gap with expenditure reductions, an additional property tax increase above the planned 2 percent, or fund balance,” the report stated.
The report also warned about the Latimer administration’s rosy forecast for a 5 percent increase in sales tax revenues for 2019.
Latimer has so far said he’s not willing to raise property taxes more than 2 percent for 2019.
Sales tax could be next to go up
The S&P report notes that the county plans to seek an increase in the county sales tax during the 2019 session, though no revenue from the increase was included in Latimer’s budget plan.
The county’s sales-tax rate, which is now 1.5 percentage points – is part of the combined sales tax that’s charged in Westchester. The overall sales-tax rate includes New York state sales tax of 4 percent, 0.375 percent for the Metropolitan Transportation Authority; 2.5 percent for the cities of Mount Vernon, White Plains, and New Rochelle; and 3 percent for Yonkers.
Winning an increase in Albany could provide a revenue stream big enough to right Westchester’s fiscal ship and return S&P’s outlook to stable. But if that doesn’t happen, and Westchester does another year of deficit spending, the outlook could grow even dimmer.
“Should the aforementioned risks to the fiscal 2019 budget materialize and reserves continue a downward tend, providing limited cushion to insulate the financial position from disruptions related to tax reform or economic downturn, we could lower the rating, potentially by multiple notches,” the report said.
County used reserves to pay retroactive salary increases
S&P cuts Westchester rating to AA+ and it could go lower
New York’s Westchester County, home to the wealthy suburbs of Scarsdale and Bronxville, lost its AAA grade from S&P Global Ratings and Fitch Ratings after drawing down its cash reserves to cover retroactive raises given to government employees.
The county, which borders New York City to the north, had its grade cut one level by both companies Tuesday to AA+. S&P said there’s a one-in-three chance that it will downgrade the county’s bonds again in the next two years as the government contends with budget shortfalls, given how “narrow” its reserves were at the end of the 2017 fiscal year.
The downgrades came ahead of the county’s planned auction of $200 million of general-obligation bonds on Thursday.
“We remain concerned over the county’s ability to sustainably align revenue and expenditures and rebuild reserves to a level consistent with that of similarly rated or higher-rated peers,” said S&P analyst Nora Wittstruck.
Westchester’s general fund balance could fall to less than 4 percent of spending at the close of fiscal 2018, about half the level of reserves the county had previously maintained, S&P said.
The new federal limit on deductions for state and local taxes and mortgage interest could further strain the county’s budget. That cap could make it harder for residents who pay the the highest property taxes in the U.S. to sell their homes, while others could challenge their real-estate tax assessments, potentially weakening Westchester’s biggest source of income.
The average property-tax bill in the county last year was $17,179, the highest in the the U.S., according to a report by Attom Data Solutions. The federal tax law changes set a $10,000 limit on deductions for state and local levies and capped the mortgage-interest deduction to loans of $750,000.
There are some signs that high property taxes and the federal shift are having an impact.
The median price of single family homes in the county dipped to $675,000 in the third-quarter of 2018, a 3.6 percent decline from the previous quarter, according to an October 11 report by Miller Samuel Inc. and and Douglas Elliman Real Estate. Luxury homes prices fell even more, with a 6.4 percent decline to $2.1 million.
Westchester is New York’s third-wealthiest county by median family income, after Nassau and Putnam and has the second-highest per-capita income after Manhattan.
The county’s new executive, George Latimer, has proposed selling parking lots in White Plains to plug a $22 million hole in his 2019 spending plan, according to the Journal News.
If the parking lot sale falls through, the county would have to cut spending, raise property taxes above the planned 2 percent increase or tap reserves again. The county’s $1.94 billion proposed budget includes $453 million in sales-tax revenue, 5 percent more than the year end-estimate of fiscal 2018, based on the expectation that the state will allow collections on Internet purchases.
“We believe the revenue forecast assumes a couple of significant risks,” Wittstruck said.
In a statement, Latimer said the downgrades weren’t a surprise.
“As we have said these past few months, the county is in serious financial stress,” Latimer said. “Regardless of the many steps we are taking to improve our footing, these problems were not created overnight and they will not be solved overnight.”
With just about two weeks remaining before the midterm election, early voting has begun in many states. And as is true every year, several states will see significantly better turnout than others — sometimes twice as high. And while there are numerous reasons why people don’t vote, a recent study found that one major factor is that some states make it much harder than others to cast a ballot.
New York, which does not allow people to vote early, saw 56.2 percent of voters turn out for the 2016 election, following 29 percent in the 2014 midterm election and 53.5 percent in the 2012 election, according to an analysis of election data by the nonprofit organization FairVote. FairVote is a nonprofit dedicated to reforming America’s electoral system to achieve full participation and obtain a “truly representative democracy.”
If history is any indicator, several states will see between just 25 percent and 35 percent of voters turn out. This includes Texas, which ranked dead last in the country for voter turnout in the 2014 election with a paltry 28.3 percent. Here were the worst states for voter turnout (Washington, D.C., included) in the 2014 midterm election:
Meanwhile, some states see more than double that turnout. Maine had the highest voter turnout in the 2014 election at 58.5 percent of eligible voters. Wisconsin, Colorado, Alaska and Oregon rounded out the top five with 56.8 percent, 54.5 percent, 54.4 percent and 53.5 percent of voters casting a ballot, respectively. All except Oregon allow residents to vote up to 15 days before Election Day.Subscribe
As noted earlier, there are a variety of reasons that some states see better turnout than others. FairVote noted some of the biggest involve how competitive the races are supposed to be, the demographics of the voting population — voters tend to be older, wealthier, more educated and white — and how restrictive voting laws are.
A new study lent a lot of credence to that last factor. Researchers at Northern Illinois University, Jacksonville University and Wuhan University in China found that states are influencing who votes by either making it easier or harder to cast a ballot. They created an index and ranked each state according to the time and effort it took to vote in each presidential election from 1996 through 2016. They scrutinized the effect of more than 30 factors involving registration and voting laws.
“The study does give us some very substantive findings that we can report about the effect on voter turnout,” wrote lead author Scot Schraufnagel. “But we created this index with the idea in mind that it’s going to have a lot of interest for reasons beyond voter turnout because it helps to define an electoral climate, which might influence whether people are willing to run for public office or who is willing to run for office. There also are implications for civil rights. We know, anecdotally, states with larger African-American populations have higher ‘cost of voting’ values.”Mississippi, Virginia, Tennessee, Indiana, Texas and Michigan were ranked as the states where it’s most difficult to vote. Maine, Oregon, California and Colorado all cracked the top 10 in places where it’s easiest.
In 37 states, including three that mail ballots to all voters, along with Washington, D.C., any eligible voter can cast a ballot in person before Election Day without an excuse, according to the National Conference of State Legislatures. Colorado, Washington and Oregon use all-mail voting.
Meanwhile, 13 states, including New York, Michigan and Pennsylvania, offer no early voting and require you to provide a reason to vote by absentee ballot.
Making it easier to vote nationwide could boost election turnout by about 10 percentage points, Schraufnagel noted. This includes same-day voter registration policy, mail-in voting and, yes, early voting.