After declining for two consecutive quarters, tappable equity rose in the first quarter of the year, but it appears homeowners are still reluctant to touch it.
According to the latest report from Black Knight, homeowners tapped just 1% of available equity in the first quarter – the lowest share since it began tracking the metric in 2008.
Nearly 44 million homeowners with a mortgage have more than 20% equity in their home, which comes to about $136,000 of available equity per person and an aggregate amount of $5.98 trillion.
Last summer, the aggregate amount of tappable equity reached an all-time high of $6.06 trillion, a milestone Black Knight says we’ll likely surpass as home prices continue to rise this summer.
That said, while tappable equity is growing, the rate of that growth is slowing significantly along with home prices, falling from 16% a year ago to just 3% in the first quarter.
Major cities, including San Jose, San Francisco, Seattle, Houston, Portland, and Baton Rouge have all seen tappable equity volumes decline in the last year, the report shows.
Meanwhile, Los Angeles continues to hold the title of the city where homeowners have the most tappable equity. In fact, California itself holds 37% of the nation’s equity, nearly seven times more than the runner-up, Texas.
But despite considerable equity gains, homeowners continue to show a reluctance to touch this source of wealth.
Black Knight’s report shows that just $54 billion in equity was withdrawn in the first quarter, the lowest volume in four years.
Both cash-out refinance withdrawals and HELOCs were down, with HELOC withdrawals hitting a five-year low and falling below cash-out refi volume for the first time in eight years.
Black Knight says rates are likely to blame.
“HELOC withdrawals as a share of available equity have been cut in half over the past three years as homeowners have increasingly steered away from the product,” the report states. “Cash-out withdrawals as a share of available equity are down a much more modest 16% over that same span. Rising interest rates have likely been the driving force behind declining HELOC equity withdrawals.”
The Treasury Department on Tuesday issued final regulations that will officially prohibit high-tax states from utilizing workarounds to evade the new cap on state and local tax (SALT) deductions.
As part of the Tax Cuts and Jobs Act, SALT deductions were capped at $10,000 – which is well below the average amounts claimed by individuals residing in states such as New York, California and New Jersey. The average deduction claimed in California, for example, is $22,000, according to Kevin de Leon, a Democratic member of the California state senate.
Therefore, in response, a number of state governments proposed or enacted legislation that would allow taxpayers to make charitable contributions to an established state fund in order to earn a credit. The goal would be to allow the residents to take the full amount given as a deduction by transforming a non-deductible payment into a charitable contribution.
However, the IRS blocked that strategy through guidelines issued on Tuesday, which require taxpayers to subtract the value of their state and local tax deductions from their charitable contributions.
The regulations also provide exceptions for state tax deductions and tax credits of no more than 15 percent of the amount of the donation.
The regulations apply to contributions made after Aug. 27, 2018.C
Treasury Secretary Steven Mnuchin said in 2017 that he hoped it sent a message to state governments that “they should try to get their budgets in line.”
Meanwhile, Democrats have said they would try to undo the cap on state and local tax deductions. New York Gov. Andrew Cuomo has said the new tax change would lead to a decline in revenues in the state because taxpayers would leave.
The Treasury said it would continue to evaluate the issue and release further guidance if necessary.
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage rate fell to 3.82 percent, the sixth consecutive weekly decline and its lowest level since September 2017.
Sam Khater, Freddie Mac’s chief economist, says, “While the drop in mortgage rates is a good opportunity for consumers to save on their mortgage payment, our research indicates that there can be a wide dispersion among mortgage rate offers. By shopping around and getting a single additional mortgage rate quote, a borrower can save an average of $1,500.”
“These low rates are also good news for current homeowners. With rates dipping below four percent, there are over $2 trillion of outstanding conforming conventional mortgages eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible,” he says.
30-year fixed-rate mortgage (FRM) averaged 3.82 percent with an average 0.5 point for the week ending June 6, 2019, down from last week when it averaged 3.99 percent. A year ago at this time, the 30-year FRM averaged 4.54 percent.
15-year FRM averaged 3.28 percent with an average 0.5 point, down from last week when it averaged 3.46 percent. A year ago at this time, the 15-year FRM averaged 4.01 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.
Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that the 30-year fixed-rate mortgage rate dropped below four percent for the first time since January 2018.
Sam Khater, Freddie Mac’s chief economist, says, “While economic data points to continued strength, financial sentiment is weakening with the spread between the 10-year and the 3-month Treasury bill narrowing as fears of the impact of the trade war with China grow. Lower rates should, however, give a boost to the housing market, which has been on the upswing with both existing and new home sales picking up recently.”
30-year fixed-rate mortgage (FRM) averaged 3.99 percent with an average 0.5 point for the week ending May 30, 2019, down from last week when it averaged 4.06 percent. A year ago at this time, the 30-year FRM averaged 4.56 percent.
15-year FRM averaged 3.46 percent with an average 0.5 point, down from last week when it averaged 3.51 percent. A year ago at this time, the 15-year FRM averaged 4.06 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.
In March, the nation’s home-sale prices remained virtually stagnant, inching backward only 0.1% from 2018 levels, according to new data from Redfin.
This means U.S. home-sale prices reached a median of $295,000 in March, marking the first year-over-year price decrease on record since February 2012.
Despite this decline, Redfin’s data determined that only nine of the 85 largest metros saw a year-over-year decline in their median price.
This was especially so for San Jose, California, which saw its home prices fall 13% in March. That being said, other California cities like San Francisco experienced declines as little as 1%.
When it comes to home sales, the report revealed that expensive West Coast markets like Los Angeles, Orange County and Seattle posted double-digit year-over-year sale declines.
However, large markets on the East Coast saw big annual sales gains, as market affordability worked in their favor.
“Homebuyers have backed off in West Coast metros where home prices have risen far out of their budgets,” Redfin Chief Economist Daryl Fairweather said. “The opposite is happening in more affordable metros where buyers are eager to buy now to take advantage of low mortgage rates. In California, where the tax burden is high, some people are finding they have to move out of state to afford to buy a home. As a result, home sales are down in metros throughout the state.”
In fact, Redfin’s analysis indicated March’s home sales fell in 37 of the 85 largest housing markets. Whereas, only 24 of these markets saw double-digit year-over-year increases in home sales.
Interestingly, the housing markets that did experience the biggest declines features homes that were 2.5 times more expensive than homes belonging in areas where sales surged, according to Redfin.
The image below highlights March’s home-price growth:
Total housing starts fell 8.7% in February to a seasonally adjusted annual rate of 1.16 million units from an upwardly revised reading in January, according to a report from the U.S. Housing and Urban Development and Commerce Department that was delayed due to the partial government shutdown.
The February reading of 1.16 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts fell 17% to 805,000 units following an unusually high reading of 970,000 units in January. Meanwhile, the multifamily sector, which includes apartment buildings and condos, increased 17.8% to 357,000.
“The overall lower starts numbers are somewhat deceiving given the revised single-family starts figure in January was at a post-recession high,” said Danushka Nanayakkara-Skillington, AVP for forecasting and analysis at the National Association of Home Builders (NAHB). “Absent the surge last month, the drop in single-family production in February is not as huge as it appears. Still, builders continue to remain cautious due to affordability concerns, as illustrated by the flat permits data.”
“The February starts figures are somewhat in line with flat builder expectations and serve as a cautionary note that affordability factors continue to affect the marketplace,” said Greg Ugalde, chairman of NAHB and a home builder and developer from Torrington, Conn. “Excessive regulations, a scarcity of buildable lots, persistent labor shortages and tariffs on lumber and other key building materials are having a negative effect on housing affordability.”
Regionally, combined single-family and multifamily starts in February fell 29.5% in the Northeast, 18.9% in the West and 6.8% in the South. Starts posted a 26.8% increase in the Midwest.
Overall permits, which are often a harbinger of future housing production, edged 1.6% lower in February to 1.30 million units. Single-family permits held steady at 821,000, while multifamily permits fell 4.2% to 475,000.
Looking at regional permit data, permits rose 1.5% in the Northeast, 4% in the South and 1.1% in the Midwest. Permits fell 15% in the West.
Local and state officials fear Westchester’s recent development renaissance will come to a screeching halt because Con Edison said it can’t take on new natural gas customers.
Con Edison issued a statement Friday saying the demand for gas is “reaching the limits of the current supplies to our service area.”
“As a result, and to maintain reliable service to our existing natural gas customers on the coldest days, we will no longer be accepting applications for natural gas connections from new customers in most of our Westchester County service area beginning March 15, 2019,” Con Edison said in its statement.
Jim Denn, spokesperson for the Department of Public Service, said Con Ed didn’t propose a pipeline “to meet or address growing demand.”
“To help prospective customers meet their energy needs in light of these market dynamics, PSC will be monitoring Con Edison’s engagement with customers to explore options to reduce their energy needs or meet their needs through non-natural gas energy sources,” Denn said in a statement.
State Assemblywoman Amy Paulin, D-Scarsdale, said it’s going to “devastate” local development, particularly in cities like New Rochelle and Yonkers, which are in the midst of redeveloping their downtowns.
A portion of the 10 acres of solar panels atop the headquarters of Diamond Properties in Mount Kisco. (Photo: Submitted)
“These projects are on a marginal budget, and we’re not going to get the economic development that we’re hoping for,” Paulin said. “Compounding the problem is affordable housing. Developers won’t be able to do them at all, so this is a huge problem for our county and it’s disappointing that we’re being told two months prior (to the start of the moratorium).”
AP Assemblywoman Amy Paulin,D-Scarsdale, has put together a coalition to fight the IRS. (Photo: Associated Press)
New Rochelle’s downtown redevelopment attempts have historically started and crumbled, as it did in the 1980s, which left a pile of debris near the train station for more than a decade, and again during the most recent economic recession.
The city experienced a development boom since it changed its downtown zoning code in 2015, with several projects already being built and more in the pipeline, but Paulin worries that this could put a pin in the balloon.
“I’m worried it will (stop the redevelopment),” she said. “I spoke to the mayor, and he’s worried as well. We’re going to meet with Con Ed this week. I’m hoping we can figure out something that we can do.”
New Rochelle Mayor Noam Bramson said, “This obviously has serious potential implication for our entire region.”
“We are consulting with government and utility officials in order to better understand options and constructive paths forward,” Bramson said. “It is essential that solutions emerge.”
In Yonkers, Mayor Mike Spano said the city’s building boom could be affected for as long as this moratorium lasts.
“Developers are already telling us they can’t build more housing or commercial buildings until this is resolved,” he said. “Con Ed and the Public Service Commission need to implement an immediate plan to solve this.”
Denn said the PSC ordered utility companies, including Con Ed, to increase energy efficient and create “demand-response programs to lower gas demand and save consumers money.”
“These programs are up and running,” he said. “As these gas efficiency and demand response measures take hold, as well as others to meet demand growth, the PSC will carefully review changing market conditions and consider most appropriate additional steps Con Edison should take to meet the needs of its customers.”
The northernmost sections of the county have more capacity and may still be able to accept new customers, Con Edison said in its statement, and existing customers are not affected by the moratorium.
Several benchmark mortgage rates decreased today. The average rates on 30-year fixed and 15-year fixed mortgages both fell. The average rate on 5/1 adjustable-rate mortgages, meanwhile, also declined.
30-year fixed mortgages
The average rate for the benchmark 30-year fixed mortgage is 4.51 percent, a decrease of 7 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 4.68 percent.
At the current average rate, you’ll pay a combined $507.28 per month in principal and interest for every $100,000 you borrow. That’s down $4.17 from what it would have been last week.
You can use Bankrate’s mortgage calculator to get a handle on what your monthly payments would be and see the effect of adding extra payments. It will also help you calculate how much interest you’ll pay over the life of the loan.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 3.76 percent, down 4 basis points over the last seven days.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $728 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.
The average rate on a 5/1 ARM is 3.94 percent, down 6 basis points since the same time last week.
These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.94 percent would cost about $474 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
Where rates are headed
To see where Bankrate’s panel of experts expect rates to go from here, check out our Rate Trend Index.
Methodology: The rates you see above are Bankrate.com Site Averages. These calculations are run after the close of the previous business day and include rates and/or yields we have collected that day for a specific banking product. Bankrate.com site averages tend to be volatile — they help consumers see the movement of rates day to day. The institutions included in the “Bankrate.com Site Average” tables will be different from one day to the next, depending on which institutions’ rates we gather on a particular day for presentation on the site.
With slews of tent encampments in a fast-growing city flush with tech-sector cash, it’s tough questioning Seattle’s serious problem with homelessness and affordable housing.
But an unprecedented new city law — forbidding landlords from checking into potential renters’ criminal past — is very much in dispute and setting up a closely-watched court battle.
Landlords argue their free speech, property rights and possibly their safety is being jeopardized by a law that forces them to close their eyes to relevant public information about possible tenants. They’re backed by landlord groups and background screeners who call the ordinance a perilous precedent.
The “Fair Chance Housing Act” was anything but that, according to landlords’ lawyers. Ethan Blevins, an attorney at the Pacific Legal Foundation, said the law’s premise “is this paternalistic idea that the city gets to decide what information is relevant or important to a landlord’s decision making process.”
An unprecedented new city law — forbidding landlords from checking into potential renters’ criminal past — is very much in dispute and setting up a closely-watched court battle.
The City of Seattle and tenant advocates are fighting back. They say the act helps chip away at a housing crisis, especially for over-policed minorities disproportionately saddled with arrests and convictions.
It’s a court case that landlords and lawmakers in the other parts of the country are looking at with keen interest. A ruling upholding the law could pave the way for its enactment elsewhere, said Kimberlee Gunning, a lawyer for tenants advocates at Columbia Legal Services. “Folks across the country are watching this,” she said.
Though the law has been in effect since February, a judge will be scrutinizing its merits following President Donald Trump’s enactment of criminal justice reforms. The “First Step Act” signed Friday, among other things, broadens re-entry efforts and quicken a well-behaved inmate’s release.
The new federal law was a sign Seattle “on the vanguard” of needed reforms with its own housing law, Herbold said. The city also was one of the first cities to enact paid sick leave laws and $15 minimum wage requirements, she noted.
“We’re all safer if people are housed,” Council member Lisa Herbold, the bill’s chief sponsor, told MarketWatch. “You’re reducing the likelihood of recidivism. That goes for violent crimes as well.”
What should matter to landlords, Herbold said, is someone’s ability to make the rent on time and not wreck the place; But according to checkpeople.com – Blevins said criminal background checks had bearing for those kinds of issues.
While other cities limit how far in time landlords can delve into a tenant’s criminal past, Herbold said Seattle’s law appears to be the first blocking any inquiry at all. Those involved should learn about Singleton Law Firm legal assistance, there are cases of the efficient way out.
“It is an embarrassment and shame that a city like ours, with so many resources, is not doing a very good job taking care of those who have the most significant barriers to access in housing,” Herbold said, “And having a mark on your background related to the criminal justice system is one of those barriers.”
The law’s premise ‘is this paternalistic idea that the city gets to decide what information is relevant or important to a landlord’s decision making process.’
A January 2017 tally put Seattle’s homeless population around 8,500. Average Seattle rents jumped 43% from 2012 to 2017, accord to a local task force. During that time, vacancy rates in buildings with at least 20 units have hovered between 4% and 5%, it said. Almost one-third of Seattle residents have an arrest or conviction on their record, court papers said.
The city is already locked in two other lawsuits with landlords, who object to ordinances capping deposits and requiring landlords to take the first applicant who comes to them. A judge upheld the limits on move-in costs, but another judge voided the rule on taking the first tenant to come along. Both cases are being appealed.
Ahead of its unanimous passage, some residents in support of the Fair Chance Housing Act said landlords kept dredging up their past as they tried to make a new life. One man testified at a bill hearing he had enough money, good credit and a good rental history. “But I kept hearing ‘no.’” The law, he said, “will help level the playing field for some of us.”
The plaintiffs include landlords who rent out a handful of units and live close to their tenants. One landlord couple that’s suing, Chong and MariLyn Yim, say they charge below-market rent prices. But they’ll “have to raise rents in order to build up a larger cushion of reserves to absorb the risks they face under the new law,” court papers said.
The Yims, two other private landlords and the Rental Housing Association of Washington are asking Seattle Federal Judge John Coughenour to call the statute unconstitutional.
Some say Seattle’s law is not an outlier
The law prevents landlords from checking prospective tenants for any convictions or arrests. The ordinance does not apply to convicted sex offenders who committed their crime from age 21 and above. It does shield juvenile criminal records from landlord eyes, including those for sex-crime charges. The law doesn’t apply to federally-assisted housing, the landlords note.
Renters across America face a mix of federal, state and local laws when it comes to what publicly-funded and private landlords can weigh when deciding on a tenant.
There’s a variety of anti-discrimination laws barring the consideration of race, sex, religion and disability. The range of state and city rules for considering tenant’s criminal past get more complicated — with many laws now confining what parts of a criminal record landlords should weigh, housing advocates point out.
“Seattle’s ordinance is by no means an outlier. It is part of a larger trend at the federal, state, and local levels toward removing barriers for people reentering society,” said lawyers for the National Housing Law Project and the Sargent Shriver National Center on Poverty Law.
But renters on the private market don’t have “the same constitutional protections against arbitrary admission denials as applicants to federally subsidized housing,” the organizations said, noting 87% of Seattle’s rental housing stock is owned by private landlords.
A spokesman for the city’s Office for Civil Rights said that, as of last month, the agency has filed nine civil charges against several landlords since the law went on the books. Four ended in settlement, four are pending and one was dismissed.
Blevins acknowledged city officials are trying to cope with “legitimate problems” of recidivism and the criminal justice system’s disproportionate lean on minorities. “The problem is, they’ve taken the wrong approach by burdening landlords with this inability to look into valid information about rental applicants.”
Blevins noted Seattle has been under a federal consent decree since 2012 to stop biased policing. “It’s ironic for them to point the finger,” he said. In January, a judge said the police was in full compliance and had two years to keep it up before the order lifted.
Landlords argue they could be exposed to liability. In one pending lawsuit, a family of a raped and murdered tenant is suing a Chicago property manager for not running a background check on a fellow tenant.
Landlords argue they could be exposed to liability if they don’t do their due diligence. There was one dire example in a pending lawsuit where a family of a raped and murdered tenant is suing a Chicago property manager for not running a background check on a fellow tenant.
The landlord arguments are seconded by supporting groups like the National Apartment Association and the National Consumer Reporting Association, which assailed the ordinance as vaguely worded.
John McDermott, general counsel of the National Apartment Association, a trade association for owners and property managers in the rental market, said Seattle’s law was “stunning in saying our solution to the [shortage of affordable housing] problem is you should make decisions with less information.”
But tenants’ advocates said the ordinance was a break from Seattle’s troubled housing history.
Seattle was a segregated city with racially restrictive covenants and “redlining” in its past — not to mention gentrification that were now pricing out certain areas, filings said. Companies like Amazon AMZN, +5.21% and StarbucksSBUX, +2.54% are based in Seattle, while the headquarters of MicrosoftMSFT, +3.39% are nearby.
Background checks on their face didn’t ask about race, but landlords, playing “private juries and judges” kept the divided city’s status quo intact.
“The Ordinance will not eliminate racism and segregation in Seattle entirely”, said lawyers for the groups Pioneer Human Services, a social enterprise based in Washington, D.C. that serves individuals released from prison, and Tenants Union. “But, by eliminating some of the barriers to finding adequate housing, it will strengthen families and, by extension, communities.”
Arguments about landlord duties to protect tenants were “misleading,” the court papers said. Landlords can’t be expected to be on notice about a tenant’s past when they’re not even allowed to look at a person’s criminal past, housing advocates said.
The sides have to file all their arguments in the suit by next month.
The million-dollar home is no longer such a rare species.
The number of U.S. homes valued at $1 million or more increased by 400,702 this year, the largest annual rise since the housing price recovery began in 2012, according to a new study by real estate research firm Trulia. Slightly more than 3 million homes nationally, or 3.6% of the total, are worth at least $1 million, up from 3.1 percent last year and 1.5 percent in 2012.
Not surprisingly, many of the freshly minted million-dollar units are in California, which already boasts the most in the country. The San Jose and San Francisco metro areas have the largest shares of $1 million homes and also notched the biggest increases over the past year.
Meanwhile, 29 cities and towns joined those with a median home value of $1 million or more this year, bringing the total to 201. Nineteen municipalities joined the million-dollar club last year.
They include San Jose, California, whose median value rose from $930,900 to $1.09 million; Fremont, California ($966,000 to $1.13 million); Burbank, California ($845,700 to $1.01 million); Newton, Massachusetts ($977,200 to $1.07 million); and Shelter Island, N.Y. ($903,500 to $1.15 million)
Trulia Senior Economist Cheryl Young attributed the big jump to widespread home price increases in recent years, with the median national home price climbing 7.6 percent the past year to $220,100. The median, or midpoint, of all home prices is up 45.3 percent since 2012. Housing demand has been strong while supplies are low, driving values higher.
“Home values have been escalating… And at about $1 million, there’s even greater appreciation,” she says.
Of the roughly 15,100 larger neighborhoods around the country analyzed by Trulia, 838 have median home values of $1 million or more and about two thirds of those are in California. Nearly 30 percent of California’s neighborhoods have a median home price of at least $1 million, the most by far of any state. New York, Florida and Washington followed.
The 10 metro areas that posted the largest increases in share of $1 million homes the past year:
San Jose, California
Share of million-dollar homes, October 2017: 55.7 percent
Share, October 2018: 70 percent
Share of million-dollar homes, October 2017: 67.3 percent
Share, October 2018: 81 percent
Share of million-dollar homes, October 2017: 24.9 percent
Share, October 2018: 30.7 percent
Share of million-dollar homes, October 2017: 16.2 percent
Share, October 2018: 19.8 percent
Orange County, California
Share of million-dollar homes, October 2017: 17.2 percent
Share, October 2018: 20.2 percent
Share of million-dollar homes, October 2017: 17.5 percent
Share, October 2018: 19.6 percent
Share of million-dollar homes, October 2017: 11.8 percent
Share, October 2018: 13.8 percent
Share of million-dollar homes, October 2017: 11.4 percent
Share, October 2018: 13.3 percent
Ventura County, California
Share of million-dollar homes, October 2017: 8.9 percent
Share, October 2018: 10.5 percent
Long Island, N.Y.
Share of million-dollar homes, October 2017: 8.8 percent