After bouncing back in July, pending home sales cooled in August for the third time in four months and to their lowest level since January.
The National Association of REALTORS Pending Home Sales Index declined 2.4 percent to 108.5 in August from a downwardly revised 111.2 in July.
The association’s chief economist, Lawrence Yun, says suffering supply levels have taken the wind out of the momentum the housing market experienced earlier this year.
According to Yun, evidence is piling up that without more new home construction the current housing recovery could stall.
Earlier this month, NAR released a new study that revealed single-family home construction is not keeping pace with job creation and is lacking overall in 80 percent of measured metro areas. When combined with the scant supply levels for existing homes, these tight inventory conditions continue to hamper affordability in many of the largest cities in the country – especially those in the West.
Tips to Help You Find a Home in a Low-Inventory Market
Follow these tips to help find a home sooner rather than later.
Follow the inventory: Inventory varies by location, property type and price range. You will have more to choose from, and probably get more bang for your buck if you search for a house in an area with more availability.
Look for homes investors avoid: Investors tend to steer clear of homes that cannot be flipped or rented, such as those in gated communities. Some of these communities let investors get away with flipping and renting when the market was hurting, but with the housing market recovery, homeowner associations are cracking down on investor activity.
Don’t forget “expired” and “canceled” listings: Many people try to sell their house by listing it on an MLS—but fail to complete a sale. Those listings become “expired” or “canceled.” Have a REALTOR® assist you in finding a home that is not currently on the market.
Seasonal patterns can favor buyers: Remember there are clear seasonal patterns for housing inventory. Identifying these patterns with a REALTOR® in your area can open up more opportunity for a great home purchase.
Fast Fact: Hopes of a meaningful sales breakthrough as a result of this summer’s historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the sidelines.
Existing-home sales eased up in August for the second consecutive month despite mortgage rates near record lows as higher home prices and not enough inventory for sale kept some would-be buyers at bay. Only the Northeast region saw a monthly increase in closings in August, where inventory is currently more adequate.
Lawrence Yun, NAR chief economist, says recent job growth is not yielding higher home sales. “Healthy labor markets in most the country should be creating a sustained demand for home purchases,” he said. “However, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold.”
Added Yun, “Hopes of a meaningful sales breakthrough as a result of this summer’s historically low mortgage rates failed to materialize because supply and affordability restrictions continue to keep too many would-be buyers on the sidelines.”
“Given the inventory shortages in most markets, new listings at affordable prices are receiving multiple offers and going under contract almost immediately upon becoming available,” NAR President Tom Salomone said. “Home shoppers serious about buying need to be ready with a pre-approval. This allows a Realtor® to hone in only on homes within the buyer’s price range and ensures any offer presented to the seller is taken seriously.”
The median existing-home price for all housing types in August was $240,200, up 5.1 percent from August 2015 ($228,500). August’s price increase marks the 54th consecutive month of year-over-year gains.
Fast Fact: Short-term residential rentals are the best thing since sliced bread for folks who use them. But not everyone shares that view.
Travelers who use short-term residential rentals as an alternative to traditional hotels enjoy cost savings and “living like a local.” Property owners, or “hosts,” enjoy extra income generated by renting out a spare bedroom they’re not using anyway. In fact, countless hosts have come to count on this added income to help pay for repairs, their mortgage, and other costs of daily living — exactly the initial purpose of short-term rentals.
But in some communities, short-term rentals are exacerbating efforts to ensure housing is affordable for the folks who live locally — especially in regions where affordable homes for rent or purchase by actual long-term residents are already in short supply (for the most extreme examples, think New York City and San Francisco, but perhaps you’re seeing this in your own community as well).
Leaders in these communities say that’s because homes, that could be available for rent or sale to local residents, are instead being bought by investors and listed on short-term rental company websites (think, for example, Airbnb, VRBO, FlipKey, or HomeAway).
In fact, rental rates for long-term residents appear to be rising faster in neighborhoods where short-term rentals are most prevalent. And this trend is anticipated to grow, as more investors begin specifically seeking to buy homes they can rent out short-term. The cold hard fact is that an investor can make more money renting properties out by the day than by the month or year. This business model has grown so large that it’s now an industry influencer; Vacation home sales have jumped by over 50% in the past few years alone, in part due to the short-term rental phenomenon. And, since its founding in 2008, Airbnb, for example, has grown to over 2 million listings in 34,000 cities, and 190 countries!
This trend is now raising yet another concern. Critics are calling short- term rentals rogue hotels, because, unlike hotels, short-term rentals have virtually no oversight or accountability, potentially creating a public safety issue.
And, in some instances, folks who own or occupy homes nextdoor to short term rentals are not happy. They resent the constant strangers, noise, and other nuisances associated with living next door to a short-term renters who may not abide by the same common courtesies they apply in their own permanent residences.
As a result, short-term rentals have become a political hot potato in communities across the nation. Many fear that individual homeowner rights will be lost in the effort to prevent investors from buying up homes in an already tight inventory market. For example, in New Orleans’ French Quarter, where short-term rentals under 60 days are already prohibited, the law is seldom enforced, as property owners in New Orleans (and other cities) have been taking in lodgers long before the internet made it a global business.
So how will this issue resolve? Here’s what some communities are trying:
Some state and local governments are considering legislation that would prohibit advertising multiple short-term listings. Other proposals, for example, as in New York, limit the number of days a property can be rented each year, limit hosts to just one listing, require that hosts reside on-site during guest stays, or make it illegal to advertise a residential rental with three or more units for less than 30 days.
In Washington, D.C., where over 200,000 short-term rental guests stayed last year, hosts are required to buy licenses, and intermediaries are required to collect and remit taxes.
Virginia recently postponed new rules, which would’ve created the first statewide system to collect short-term rental taxes for local governments. But both local governments and hotels had concerns, such as apartment owners renting out units in entire buildings as short-term.
In Florida and Illinois, short-term rental guests pay state taxes, and Louisiana extended its 4% sale tax to include short-term rentals. Connecticut collects a 15% hotel tax. Almost 2,000 hosts in Connecticut rent out their homes, and over 50,000 guests have used them.
Both Arizona and Wisconsin are seeking to limit local restrictions on room rentals.
Austin, Texas, wants to prohibit short-term rentals for parties or concerts — also a problem in vacation spots like Beverly Hills and Fort Lauderdale.
Other cities, such as Portland, appear to welcome short-term rentals, getting in front of the issue by passing rules that required hosts to buy a permit, and, in turn, generating about $500,000 annually for the city.
One thing’s for sure, the future of short term rentals will impact many of us in one way or another.
For most Hawai’i homeowners the idea of living on the island without flood insurance is unthinkable. Being surrounded by water, and vulnerable to tropical storms, means that flood insurance is an important and necessary safety measure. In fact, approximately 109,5822 acres of island land are in a Special Flood Hazard Area (SFHA).
However, homeowners on the Islands who rely on the National Flood Insurance Program (NFIP) to protect their property from flood-related damage may soon find themselves without any protection if the state government doesn’t act soon.
The State of Hawai’i and its four major counties are considered “Participating Communities” in the NFIP. Participating communities are required to enter into an agreement with the Federal Emergency Management Agency (FEMA). This agreement requires that Hawai’i adopt and enforce floodplain management ordinances that meet or exceed the minimum regulations set by the federal government.
Though this agreement with FEMA sounds straightforward enough, the island is running into a problem. Construction requirements were recently revised in order to provide permit and building code requirement exemptions for certain types of agricultural buildings. This change means that Hawai’i is now in conflict with FEMA’s floodplain management regulations. As a result, the island now has until July 31, 2017 to resolve the issue or risk losing access to NFIP protection.
Should the state and FEMA fail to reach agreement, the impact would be significant. There are currently 60,199 NFIP-backed policies in the state, with insurance coverage exceeding $13 billion.
And the consequences for Hawai’i if they lose the NFIP extend far beyond just flood insurance. State and local participating communities are eligible for Federal Disaster Assistance in the event of a Presidential Disaster Declaration.
However, if the State of Hawai’i is no longer participating in the NFIP, certain forms of Federal Disaster Assistance may not be available to government, businesses, and individuals to aid in recovery. This would be a devastating loss of support since it estimated that Federal Disaster Assistance has been made available to the State of Hawai’i since 1980, and has totaled over $400 million dollars.
Hawai’i Association of REALTORS® (HAR) Government Affairs Director Myoung Oh spoke to the seriousness of this issue, “If Hawai’i no longer has the shoulder of the Federal government, it will be devastating for current and new homeowners as they will be without flood insurance. In cases where flood insurance is mandated by the mortgage, it may likely be a forced placed insurance or skyrocketed premiums through private insurers.”
The state’s Department of Land and Natural Resources will be proposing amendments to relevant statutes in order to ensure that federal flood insurance and federal disaster assistance will continue to be made available in the State of Hawaii.