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Tax reform ideas | Chappaqua Real Estate

Details leaking out about the Republican tax reform plan hint that while two popular deductions would remain intact, they’d become useless to the majority of taxpayers who now take advantage of them.

GOP lawmakers have signaled they’ll retain the tax breaks for mortgage interest and charitable contributions even as they pursue eliminating others.

Yet given that President Donald Trump today said the plan is to nearly double the standard deduction, “many current itemizers would choose that instead, so a lot less people would use those deductions,” said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center.

Currently, taxpayers choose between the standard deduction or itemized deductions and use whichever amount is greater to reduce their tax bill. For 2017, the standard deduction is $6,350 for individual taxpayers, $9,350 for heads of households and $12,700 for joint filers.

Construction on a new home.

Peter Cade | Getty Images
Construction on a new home.

In other words, if those amounts nearly double as discussed by both Trump and congressional Republicans, a married couple would need deductions to exceed $24,000 to make itemizing worthwhile.

The Tax Policy Center estimates that of the 45 million tax filers who itemize, 38 million, or 84 percent, would opt for the $24,000 standard deduction because it would exceed the combined value of other deductions available to them.

Trump is expected to deliver a speech Wednesday in Indianapolis that will offer more specifics about what plan will emerge in Congress, although it’s unclear how detailed the reveal will be.

Who uses the mortgage interest deduction, by income

Income range*
# of filings
Total amount
0 to $50,000 2.32 million $1.11 billion
$50,000 to $100,000 9.77 million $9.19 billion
$100,000 to $200,000 14.6 million $24.85 billion
$200,000 & up 7.18 million $29.78 billion
Totals: 33.87 million $64.93 billion
Source: 2016 data from Joint Committee on Taxation report. *Income ranges include AGI plus variety of untaxed items (i.e., employer contributions to health care plan, nontaxable social security benefits, etc.)

The deductions for mortgage interest and charitable contributions have been a political third rail in the past, due largely to the idea that they spur home ownership and charitable giving. Yet of all taxpayers, only about 20 percent take advantage of each deduction for mortgage interest and charitable contributions, according to the tax policy center.

Of the roughly one-third of taxpayers who do itemize, roughly three-quarters use each of the deductions. The biggest benefits tend to go to higher-income taxpayers.

For instance, the 7.18 million filers with incomes of $200,000 or more will reduce their taxable income by $29.78 billion this year from using the mortgage interest deduction, according to tax expenditure estimates from the congressional Joint Committee on Taxation.

Charitable giving deduction use by income

Income range
# of filings
Total amount
0 to $50,000 2.38 million $526 million
$50,000 to $100,000 10 million $4.37 billion
$100,000 to $200,000 15.2 million $11.93 billion
$200,000 $ up 8.2 million $40.73 billion
Totals: 35.8 million $57.55 billion
Source: 2016 data from Joint Committee on Taxation report. *Income ranges include AGI plus variety of untaxed items (i.e., employer contributions to health care plan, nontaxable social security benefits, etc.)

In comparison, the 14.6 million filers with incomes of $100,000 to $200,000 will save less: $24.85 billion. Filers with incomes below that have even smaller tax savings.

Likewise, the 8.2 million filers with incomes above $200,000 will save a collective $40.7 billion this year by using the charitable deduction. The 15.2 million filers with incomes of $100,000 to $200,000 will reduce their tax bill by $11.9 billion.

Nonprofit groups and the home building industry are concerned about what reduced utilization of those deductions would mean for home ownership and charitable giving.

“It marginalizes the mortgage interest deduction,” said J.P. Delmore, assistant vice president of government affairs for the National Association of Home Builders. “We’d see the effect where a small number of homeowners would benefit, and that’s not the direction anyone is looking to go with tax reform.”

Cost of select tax deductions

Deduction
Cost 2016-2020
Mortgage interest $357 billion
State and local taxes $368.8 billion
Charitable contributions* $230.5 billion
Property taxes $180 billion
Medical & long-term care expenses $56.6 billion
Student loan interest $11.9 billion
Teacher classroom expenses $1.2 billion
Source: Joint Committee on Taxation Jan, 30, 2017 report *Excludes education- and health-related donations

The National Association of Realtors also has expressed concern that home prices would suffer if the mortgage interest deduction were to become useless to most homeowners.

The group released a study in May showing that if elements similar to GOP’s 2016 plan went into effect, home values would fall by more than 10.2 percent on average in the near term.

The study also found that homeowners with income of $50,000 to $200,000 would face an average tax increase of $815 while non-homeowners in that range would get an average tax cut of $516.

“This is an emerging issue [lawmakers] don’t intend to create,” Delmore said. “But we hope there’s an opportunity to find a solution so that homeowners have a meaningful tax incentive that doesn’t involve being marginalized and benefiting only the wealthy.”

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https://www.cnbc.com/2017/09/26/gop-tax-plan-could-trash-the-value-of-two-popular-tax-breaks.html

Age of Housing Stock by State | Chappaqua Real Estate

According to the latest data from the 2015 American Community Survey (ACS), the median age of owner-occupied homes is 37 years. The age of housing stock is not evenly distributed across the United States. Among the states, New York has the oldest homes with a median age of 57 years old, followed by Massachusetts at 53 years. The median age of homes in the District of Columbia, which is entirely urban, is 75 years. The newest homes are in the West. The median age of homes in Nevada is only 20 years, followed by Arizona where half of all owner-occupied homes were built in the last 24 years ago.

The geographic distribution of the age of the owner-occupied housing stock is strongly correlated with population changes from 2000 to 2015. The population changes, including both natural growth and net migration, signal the rising demand for housing. States with faster population growth tend to have newer housing stock.

The age of the housing stock is an important remodeling market indicator. Older houses are less energy-efficient than new construction and ultimately will require remodeling and renovation in the future.

 

 

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http://eyeonhousing.org/2017/01/age-of-housing-stock-by-state/

US Homebuilder Sentiment Slips in July | Chappaqua Real Estate

 

U.S. home builders are feeling slightly less optimistic about their sales prospects this month, though their outlook for the new-home market remains positive overall.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday fell one point to 59.

Readings above 50 indicate more builders view sales conditions as good, rather than poor. The index had mostly held at 58 this year before rising to 60 last month.

Builders’ view of current sales and traffic by prospective buyers slipped one point this month. Their outlook for sales over the next six months slid three points.

The latest survey of builders follows a recent pullback in sales of new U.S. homes.

Sales declined 6 percent in May to a seasonally adjusted annual rate of 551,000 homes. Overall, though, sales are running ahead of last year’s pace through the first five months of this year, aided by job growth and ultra-low mortgage rates.

The average 30-year fixed-rate mortgage ticked up 3.42 percent last week, staying close to its all-time low of 3.31 percent in November 2012. A year ago, the average rate was 4.09 percent.

While new-home sales have rebounded from the depths of the housing bust, the current rate of new home sales lags behind the historical annual average of roughly 650,000 homes. New home sales figures for June are due out next week.

Many builders also continue to grapple with a stubborn dearth of skilled workers and available land parcels cleared for new construction.

Still, the NAHB expects that new-home sales will continue to grow, albeit slowly.

“Job creation is solid, mortgage rates are at historic lows and household formations are rising,” said Robert Dietz, the NAHB’s chief economist. “These factors should help to bring more buyers into the market as the year progresses.”

This month’s builder index was based on 304 respondents.

A measure of current sales conditions for single-family homes slipped one point to 63, while a gauge of traffic by prospective buyers fell one point to 45. Builders’ view of sales over the next six months slid three points to 66.

 

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http://abcnews.go.com/Business/wireStory/us-homebuilder-sentiment-slips-july-40664158

Mortgage rates at 3.71% | Chappaqua Real Estate

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing mortgage rates mixed and largely unchanged from the previous week.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 3.71 percent with an average 0.5 point for the week ending March 31, 2016, unchanged from last week. A year ago at this time, the 30-year FRM averaged 3.70 percent.
  • 15-year FRM this week averaged 2.98 percent with an average 0.4 point, up from last week when it averaged 2.96 percent. A year ago at this time, the 15-year FRM averaged 2.98 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 theDefinitions. Borrowers may still pay closing costs which are not included in the survey.

Quote
Attributed to Sean Becketti, chief economist, Freddie Mac.

“Dovish comments by Federal Reserve Chair Janet Yellen on Tuesday triggered a rally in Treasury markets and drove the 10-year yield down 13 basis points from last week’s high. Yellen’s comments came too late to affect this week’s mortgage rate survey, and the 30-year mortgage rate remained unchanged at 3.71 percent. However, if the Fed’s cautious tone persists, mortgage rates may register the impact in subsequent weeks.”

 

 

 

 

U.S. housing starts surge | Chappaqua Real Estate

U.S. housing starts in November rebounded from a seven-month low and permits surged to a five-month high, signs of strength in the housing market that could give the Federal Reserve more confidence to raise interest rates on Wednesday.

Groundbreaking jumped 10.5 percent to a seasonally adjusted annual pace of 1.17 million units, the Commerce Department said on Wednesday. October’s starts were largely unchanged at a 1.06 million-unit rate.

The strong report came as Fed officials were due to resume a two-day monetary policy meeting. The U.S. central bank is expected to raise its benchmark overnight interest rate from near zero at the end of the meeting. The first rate hike in nearly a decade is not expected to derail the housing recovery.

November marked the eighth straight month that starts remained above 1 million units, the longest stretch since 2007. Economists expect housing starts to average around 1.1 million units for 2015, which would be the highest since 2007 and up from 1.0 million units in 2014.

Robust household formation as labor market strength encourages young adults to leave their childhood homes is underpinning the housing market recovery.

But the sector remains constrained by a persistent shortage of houses available for sale. This has resulted in home prices rising faster than salaries, pushing more people towards renting.

Economists polled by Reuters had forecast housing starts rising to a 1.135 million-unit pace last month.

Single-family housing starts, the largest segment of the market, increased 7.6 percent to a 768,000-unit pace. That was the highest reading since January 2008. Groundbreaking on single-family projects rose 8.8 percent in the South, where most home building takes place.

 

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Reuters.com

It Takes 22 Subcontractors to Build the Average Home | Chappaqua Real Estate

A previous post discussed how the current shortage of subcontractors in residential construction is becoming more acute.  This is significant, because subcontractors are very important to the construction of the typical home.  Periodically, NAHB has found it worthwhile to remind the public just how important.

NAHB addressed the topic most recently in the September 2015 Special Study in Housing Economics.  The study clearly shows that builders’ use of subcontractors remains as strong as ever.   For example, 70 percent of builders typically use somewhere between 11 and 30 subcontractors to build a single-family home.  On average, 22 different subcontractors are used to build a home.

Subs UsedData for the study came from a set of special questions added to the April 2015 survey for the NAHB/Wells Fargo Housing Market Index.

The questions covered how often builders subcontract 23 specific jobs.  In every case, the job was always subcontracted by at least two-thirds of the builders.  At the low end of the scale, “only” 68 percent of builders said they always subcontract finished carpentry.  At the other extreme, subcontracting is nearly ubiquitous for some jobs.  Over 90 percent of builders said they always subcontracted concrete flatwork, masonry, drywall, foundations fireplaces, technology, plumbing, electrical wiring, HVAC, carpeting and security systems.

Particular JobsEven when builders don’t always subcontract these jobs all they time, it’s common to subcontract them out at least part of the time.

About two-thirds of the builders in the survey reported subcontracting out 75 percent of the construction cost in the average single-family home they build.  The average share of construction costs subcontracted was 77 percent.

 

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http://eyeonhousing.org/2015/09/it-takes-22-subcontractors-to-build-the-average-home/

China Home Prices Rise | Chappaqua Real Estate

Chinese cities where home prices rose exceeded those where they declined for the first time in 16 months in July, as authorities removed some property curbs and interest rates fell.

New-home prices rose in 31 cities of the 70 the government monitors, from 27 the previous month, according to data released by the National Bureau of Statistics on Tuesday. They dropped in 29 and were unchanged in 10.

Prices, led by some of the biggest Chinese cities, extended gains from the second quarter, spurred by the easing of mortgage policies at the end of March and four reductions in borrowing costs since November. The trend will continue this year as liquidity remains ample and expectations of rising prices further prompt more people to buy, overriding any potential impact from a devalued yuan and a stock-market selloff, according to Mizuho Securities Asia Ltd.

“The average price gains may accelerate in the second half as prices in the second- and third-tier cities are just starting to rise,” Alan Jin, a Hong Kong-based real estate analyst at Mizuho, said by phone. “The demand is still there.”

The average price of the 70 cities rose 0.17 percent from June, gaining for a third consecutive month, according to Bloomberg calculations of official data. Prices in Sanya, a tourist city on the southern Hainan island, climbed 0.2 percent, reversing declines since at least August last year.

 

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http://www.bloomberg.com/news/articles/2015-08-18/

How Will Cuba’s Real Estate Market Adjust to a New Era? | Chappaqua NY Realtor


Havana photo by Anton Novoselov/Creative Commons

“Come on, this is bullshit, this is for show, it can’t actually be real.”

When travel journalist Nick Watt was told that travelers to Havana’s Paseo del Prado could find not just snack vendors and tourists on the famous promenade, but a thriving, open-air real market where Cubans buy and sell homes, he was a bit incredulous. But as he discovered during filming of his Travel Channel Show Watt’s World, the promenade plays host to a key part of Cuba’s nascent real estate market, a recently unleashed aspect of capitalism in the socialist country that, as relations with the United States normalize, opens up a host of questions and possibilities.

“Consider real estate in the same way people look at classic cars on the street here,” he says. “People like me love Cuba, we think the cars held together with Band-Aids and the old colonial buildings are amazing. But once the money comes in, will Cubans want up-to-date buildings? In 20 years, will there be old, dilapidated buildings here?”


Footage of the open-air real estate market in Havana. Footage courtesy Travel Channel

Watt’s trip to the market provides just a small glimpse at a larger shift happening in Cuban real estate. In 2011, Raúl Castro allowed his countrymen to buy and sell real estate for the first time in decades, revolutionizing a socialist system that previously only allowed citizens to trade property, like for like. It set off a small boom in home renovations, as well as interest in acquiring and fixing up potential hotel properties that could house an influx of new tourists.

The prospect of a more open market, even incrementally so, raises the possibility of massive foreign investment in prime beachfront real estate and the country’s classic housing stock. Currently, Americans can invest by sending money to a Cuban relative or associate who acts as a frontman, but legally the deed remains in the name of the Cuban buyer, adding a degree of risk. A potentially bigger question around foreign investment may be the right-of-return issue; Fidel seized all foreign-owned property in 1962, and the U.S. government currently estimates that American citizens and corporations may have up to $8 billion in property claims to sort out as relations normalize

So far, Castro has held strong to his decision to limit real estate sales to Cubans only. Considering that a few years in, the market is still in a bit of an embryonic stage, that makes sense.

Screen Shot 2015-07-28 at 1.54.26 PM.png
Photo courtesy Travel Channel

The sea change in property law has also encouraged entrepreneurial activity.
Seizing the opportunity in Raul’s policy shift, Sandra Arias Betancourt decided to become a residential real estate agent in early 2013. Not surprisingly, she believes Cuba’s market is unlike any other. A lack of regular internet access means information sources American buyers and sellers use every day are non-existent, and only about half of sellers feel the need to involve an agent. Most just place handmade signs outside their property and negotiate themselves, Betancourt says. But still, she sees a booming market and increased opportunity.

“The market has exploded, especially since the beginning of this year,” she says. “We have a lot of people buying.”

Right now, transactions are 95% cash, she says, and she takes a standard five percent commission for any sales. To succeed, she says agents have to understand the people and what they really want. She sees a day coming soon when Americans will begin to buy more property.

“People have been sniffing around this for years,” says Watt. “I was being asked by my American friends 10 years ago to buy property. People have been trying to find ways for years.”

Tom Miller, author of Trading with the Enemy: A Yankee Travels through Castro’s Cubaand a writer who has made annual trips to Cuba since 1987, also believes that Cubans are just starting to get a sense of how the market functions. Its evident in new online property sites, such as EspacioCuba.com, which are still in their early days (founder Yosuan Crespo, a computer programmer, launched the site in 2012).

“There’s a certain amount of speculation,” says Miller, “but you need a certain amount of funds to do that, and Cuba’s not a country where people have the money for that kind of investment. What people are mostly talking about is foreign investment. You can buy things with a frontman, and Cuban-Americans are already doing it, but the whole phenomena hasn’t played out yet.”

Miller believes a few serious issues need to be resolved before Americans are snapping up homes. The mortgage system in Cuba is currently non-existent—it’s all “cash on the barrelhead”—and Cuba needs to push through planned reforms of its financial system (currently, prices are listed in CUC, the Cuban Convertible peso unit). Both legally and financially, it’s impossible for foreigners, he says

 

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http://curbed.com/archives/2015/07/28/cuban-real-estate-market-openair.php

Single-family housing starts down in June | Chappaqua Real Estate

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,174,000, up 9.8% (±19.9%) above the revised May estimate of 1,069,000 and is 26.6% (±19.6%) above the June 2014 rate of 927,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development.

Most of the gains in starts and permits were in multifamily, not single-family contruction.

But the problem is single-family housing starts in June were at a rate of 685,000, 0.9% (±11.5%) below the revised May figure of 691,000. The June rate for units in buildings with five units or more was 476,000.

“While the rise in housing starts was driven by an uptick in multifamily housing, there are positive signs looming for the single-family housing market,” said Bill Banfield, vice president at Quicken Loans. “Homebuilder confidence is at its highest level in almost a decade and the number of first-time homebuyers looking to enter the market is increasing – making programs like FHA even more vital to support continued growth.”

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,343,000. This is 7.4 % (±1.2%) above the revised May rate of 1,250,000 and is 30.0 % (±2.3%) above the June 2014 estimate of 1,033,000.

“Housing construction has nearly returned to pre-recessionary levels, as builders ramped up activity on multi-family projects including condos and co-ops,” saidStifel Chief Economist Lindsey Piegza. “While builders and lenders benefit regardless of the type of construction, the economic benefit, however, is significantly greater from single family construction as opposed to multi-family units, particularly rental properties; single family housing activity results in additional spending and borrowing power as a result of equity building which is not necessarily present in multi-family properties.

“The housing market continues to take steps in the right direction, however, growth remains far from robust; as we have seen in the recent decline in retail sales, consumers continue to struggle to afford purchases – particularly large ticket items – amid stagnant income growth,” she said. “Still, with the threat of rising rates on the near horizon, some homeowners are jumping in to lock in low rates. As we saw during the taper tantrum of 2013, despite a still-sluggish ability to finance a home purchase, many potential homeowners are willing to jump into the market sooner than later if it means avoiding a significantly higher mortgage rate.”

Single-family authorizations in June were at a rate of 687,000; this is 0.9 % (±1.1%) above the revised May figure of 681,000. Authorizations of units in buildings with five units or more were at a rate of 621,000 in June.

 

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http://www.housingwire.com/articles/34508-single-family-housing-starts-down-in-june

Renting: Awful for just about everyone right now | Chappaqua Real Estate

If you’ve gone through the painstaking process of renting a new apartment in the past few years, you probably faced some sticker-shock. Vacancy rates are low, really low. And despite ever-present scaffolding, construction in many cities is still slow, as new tenants move in but few move out. The result is that in almost every major metro area, the rent is, in fact, too damn high.

Basic wisdom (which was largely established by rules governing public housing eligibility) warns a healthy bank account means that one’s housing costs shouldn’t exceed about one-third of a person’s take home pay. While that might be a prudent suggestion because, after all, people do have other bills and savings goals, it’s become virtually impossible to adhere to for many who live in major metro areas.

A recent report from the Joint Center for Housing Studies (JCHS) at Harvard, puts some numbers on just how bad this problem is: About half of all renters in the U.S. are using more than 30 percent of their income to cover housing costs, and about 25 percent have rent that exceeds 50 percent of their monthly pay.

It’s not just the poorest city-dwellers who are feeling the rent pressure. As prices rise, even those who make median incomes are finding that their rent eats away at a more significant portion of their pay than it once did for those in the middle class. It’s also not just the Millennial crowd: This problem is also  evident across different age groups, including Gen X and Boomers who never left the rental market, or find themselves back in it after the housing crash.

A big part of the problem is that fewer households are making the transition from renting to owning, which means more competition for limited inventory—driving rental prices up. Renters who would previously be able to qualify for mortgages are either finding that mortgage lenders are still super strict post-recession, or that there simply aren’t many homes in their price range—or both. “In normal times when homeownership was achievable you could get a starter home for between $150,000 to $250,000,” says Andrew Jakabovics, a senior director at Enterprise Community Partners, a nonprofit that focuses on affordable housing. “That segment of the market is basically dead.”

So instead, households with higher incomes and dreams of white picket fences remain in the rental market. Those households take up available units in the mid-to-high price ranges, for which they can afford to pay a premium. In fact, renters with incomes that top $75,000 are among the fastest growing group in the market, says Chris Herbert, the managing director of the JCHS. “Developers will be drawn to build the houses that provide the highest returns,” he says. That means not enough new apartments are affordable apartments that can accommodate low- and middle-income residents. Instead, high-priced luxury units get built first, pushing rents up and middle and low-income earners into apartments that are more expensive than they can afford. Sometimes this means pricing them out of cities altogether.

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http://finance.yahoo.com/news/renting-awful-just-everyone-now-115800504.html