On this week’s episode of “Mondays with Matthew,” Matthew Gardner looks at last week’s real estate and economic news and goes beyond the headlines so that you can not only stay on top of the issues that affect you and your business, but also get more detail than is generally offered by the media.
Foreign buying of U.S. homes was a driving factor in markets from California to Florida, helping prices reach new highs. Now, the pandemic, reduced travel and immigration restrictions are further undermining already weakening international demand.
Overseas residential real-estate purchases climbed steadily between 2011 and 2017, peaking at $153 billion in the year ended March 2017, according to the National Association of Realtors. About 60% of foreign buyers are recent immigrants or foreigners who live in the U.S., while others buy U.S. homes as investment properties or vacation homes, according to NAR.
Foreigners represent a tiny percentage of overall buyers. But because they have tended to cluster in coastal cities like New York, Miami and the Los Angeles area, they sometimes have had an exaggerated influence in these markets, especially at the higher-price end. Foreigners also were more likely to pay cash, making their offers more attractive to sellers.
Foreign appetite fell sharply in 2018 and 2019, according to NAR. Much of the buying came from China. It slowed in 2019 after the Chinese government implemented new controls over foreign currency purchases and as the country’s trade dispute with the U.S. heated up. A stronger dollar, which makes U.S. homes more expensive in foreign currencies, and concerns about global economic growth slowed overseas buying more broadly.
This year, demand looks likely to be even weaker, real-estate agents say.
Limited travel between the U.S. and other countries, worries about virus transmission and new restrictions on immigration could weigh on international investment in U.S. housing this year.
While the lack of overseas demand may disappoint homeowners in major coastal cities that attracted much of the foreign demand, local buyers who have lost out in bidding wars to deep-pocketed foreigners might be relieved.
“Some decline in international buying activity I don’t think necessarily harms the U.S. housing market,” said Lawrence Yun, NAR’s chief economist. “If anything, it doesn’t put any additional upward pressure on home prices, which have been a major concern for buyers on the affordability front.”
Home prices have continued to rise during the pandemic, even as the rate of home sales has dropped. The supply of homes for sale remains limited in many markets, and demand from buyers has increased in recent weeks as business activity has opened up in many states and mortgage rates have stayed low.
Foreign investment in U.S. housing can push up local home prices in select markets, according to a working paper released last monthby Caitlin Gorback and Benjamin Keys of the University of Pennsylvania.
The paper found that in ZIP Codes with a high proportion of foreign-born Chinese, house prices between 2012 and 2018 grew by 8 percentage points more than in comparable ZIP Codes. These areas, which in many cases also attracted strong local demand, could be vulnerable to price erosion as both domestic and foreign buying pulls back.
“The neighborhoods that are highly exposed to foreign investment on the upside are also exposed on the downside,” Mr. Keys said.
Many foreign investors buy homes for their children to live in while attending school in the U.S., and those purchases are on hold while families wait to see whether schools will be open in the fall, said Vicky Silvano, broker at Baird & Warner in Chicago.
“Because of the pandemic, the people that I work with are just on a ‘wait and see’ right now,” Ms. Silvano said. For foreign investors who own homes in the U.S., “I think there’s going to be more selling if the kids don’t come back to school” this year, she said.
Indiana University has drawn many foreign buyers to Bloomington, Ind., in the past decade, said Tracee Lutes, broker owner at Re/Max Acclaimed Properties.
“I think we will have a lot fewer foreign investment buyers here this year…with the uncertainty in the university plans and the uncertainty in the Covid situation,” she said.
Indiana University said in May that it plans to open in the fall for a mix of in-person and online classes.
Housing demand is strong in Bloomington, and a decline in foreign investment could be a boon to local shoppers, Ms. Lutes said: “I think you would see more in-state people, local people, that would take advantage of the ability to buy.”
Still, some see foreign buying picking up once normal travel resumes. In New Jersey and New York, Grace Tan of Prominent Properties Sotheby’s International Realty said her international clients in countries like China are already planning to shop for homes in the U.S. once international travel picks up.
“These clients are still not comfortable buying virtually,” she said. “They will come back. I already get the phone calls.”
Life as we know it has changed dramatically in the coronavirus era, affecting work, school, travel, and more. And it’s shed light on the way we live at home, underscoring the fact that there’s nothing more important than safe shelter for our family.
To that end, COVID-19 is influencing what people want to see in home design.
“After the pandemic, our homes are going to reflect the lessons learned during this painful period, such as ways to disinfect ourselves and our possessions,” says Jamie Gold, a wellness design consultant and author of “Wellness by Design.”
In a postvirus world, we won’t soon forget our shelter-at-home memories. Going forward, if there’s even the slightest chance (god forbid) that we’ll need to repeat this awful practice, homeowners may want to prepare by buying or renovating a house with amenities that’ll make it just a bit more bearable.
To help, here are 10 features to look for in a new home—or demand in your current one—once we’ve bid the coronavirus adieu.
A family member who’s caught a virus needs his own loo to keep germs in one place, so the addition of a second (or third or fourth) bathroom in homes will be important.
“This option used to be about convenience, but in the age of quarantines, sharing a bathroom could be dangerous,” says David Sipp, owner of two Mr.Handyman franchises in Indiana.
And since hand-washing is a constant nowadays, a half-bathroom or even just a sink right by a home’s entrance may become fairly standard.
“There’s renewed focus on [sinks near front entrances] in an attempt to get people to wash before entering the home,” says architect Kobi Karpof the eponymous firm.
Taking off your shoes before entering the house has long been recommended to cut back on grime and germs. But now that a recent study found that the novel coronavirus can cling to shoes’ soles and then get tracked inside, even more people may start removing their shoes right as they enter a house. This could make the presence of mudrooms—including larger, souped-up versions with seating areas and cubbies—more appealing than ever.
You probably weren’t alone if you found your food storage was lacking in the early days of the coronavirus—and the fix will be bigger and better pantries. Room for nonperishables is key so you can cut back on the number of grocery store trips you make.
No room for a dedicated pantry? Sipp anticipates a need for more food storage like shelving and cabinets in other parts of the home, like the garage and basement.
“And larger pantries won’t necessarily live in the kitchen area, but will instead be more of an add-on in the laundry room or entryway,” says Gold. The reason: Deliveries can be made contact-free, away from living areas, and trips into the house will be reduced.
Remember the old-fashioned chest freezer your grandmother had? Look for it again, along with more built-in freezer drawers, in future home design. Panicky pandemic shoppers are snapping up all manner of foods, and the result has been a sold-out stock of freezer units.
The French know a thing or two about healthy bathroom design—and we’re finally taking notice. Bidet use was already on the rise before the coronavirus, and since toilet paper shortages have hit hard, more and more folks are looking to install this amenity.
Bidets are gentle and hygienic, and even when TP is back on store shelves, these devices will still be in demand, says Gold.
Want something cheaper than installing a whole new appliance? Consider the washlet, which is a seat fitted to an existing toilet that’s equipped with a spray nozzle.
“There’s less need for tissue with a washlet,” says Melanie Turner, an architect at Perkins & Will.
“COVID-19 has brought to light a heightened desire for discrete areas, no matter how small, and convertible spaces like guest rooms that can be used for playtime or as a homework spot,” says Turner. But open floor plans probably won’t disappear—instead, a better balance between private, semiprivate, and public spaces is coming.
“The reason is the need for homes to multitask better, which means if you have two partners suddenly working from home and a couple of kids home schooling, you’ll have more quiet, separate spaces for everyone to function effectively,” says Gold.
Adapting to a new, more germ-conscious way of living starts with a return to copper and brass (a copper-zinc combo) for doorknobs and fixtures. In fact, brass kills bacteria more effectively than stainless steel, according to research.
Brass and copper are excellent metals for the home because both are naturally antimicrobial and corrosion-resistant.
“Copper is one of the best for its antimicrobial properties and has been used for decades in plumbing—and brass and bronze are also very popular because of their inherent ability to kill germs, plus over time they give a desirable rustic look,” said Karp.
“We already have hands-free faucets, light switches, and voice-control features to operate windows, showers, thermostats, and sound systems. Plus there’s a hands-free door opener that’s being introduced for homes,” points out Gold, who anticipates seeing them in homes now more than ever.
“We’ve had touchless entry and infrared detection systems in place for years in hotels, so I expect to see these technologies applied for opening home cabinets, fridges, and drawers in the near future,” adds Karp.
For people with allergies, asthma, or other respiratory issues, more sophisticated HVAC systems, including those that can be closed from the outside world for limited amounts of time, might become more common.
“We have to weigh the benefits of fresh air with the desire to temper or limit intake at very specific times,” says Turner.
This one’s obvious, and it runs the gamut from a fully equipped workspace in a separate room to smaller iterations like nooks under the stairs or a retrofitted closet.
Having a quiet area in which to work will be a must-have, and if you can include the ability to work while standing up or moving, your wellness will be enhanced, says Gold.
“As people video chat and Zoom more with colleagues from home, they’re becoming hyperaware of the changes they’d like to see in a home office, including better lighting and more storage. And since a return to the workplace will be gradual, high demand will continue for an office that’s comfortable and functional,” says Sipp.
Granted, this year, the coronavirus pandemic prompted the Internal Revenue Service to extend the usual April 15 deadline to July 15. That might have seemed like plenty of time—and yet here we are, with a mere two weeks to go and a filing window that’s closing fast.
We get it. Maybe you’re a procrastinator. Or maybe you’re a homeowner who, rather than taking the easy-peasy standard deduction, generally tries to save a bundle by itemizing your deductions instead.
Whatever your reason, if you’ve put off filing your taxes until now, don’t panic! You still have options.
Here are three last-minute tax tips for homeowners that could save you plenty of money, headaches, and more.
Tip No. 1: Grab Form 1098
Form 1098, or the Mortgage Interest Statement, is sort of like your home’s W-2: a one-stop shop for your possibly two biggest tax breaks.
Mortgage interest: “The biggest real estate tax deduction for most people will be the interest on their home loan,” according to Patrick O’Connor of O’Connor and Associates. Single people can deduct the full interest up to $500,000; for married couples filing jointly, the limit is $1 million if you purchased a house before Dec. 15, 2017. If you bought a home after that date, you will be allowed to deduct the interest on no more than $750,000 of acquisition debt—that’s a loan used to buy, build, or improve a main or secondary home. (Here’s more on how your mortgage interest deduction can help you save on taxes.)
Property taxes: This is the second-biggest deduction for most homeowners. Just remember the total amount you can deduct is $10,000, even if you pay way more—and that includes state and local income tax, property tax, and sales tax. (Here’s how to calculate your property taxes.)
You might be eligible for other real estate–related deductions and tax credits, but these are the biggies for most people. If you’re down to the wire on filing, you might just deduct these two and call it a day.
Just remember to make it worth your while. These numbers need to add up to more than the current standard deduction, which jumped to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly.
Tip No. 2: File an extension
If you still need more time to get your taxes together, it’s totally simple and penalty-free to file for an extension until Oct. 15. But don’t get too excited; the IRS still requires you to pay your estimated tax bill by July 15, or else you’ll pay interest on what you owe down the road.
The IRS makes it easy to file for an extension, either online or by mail. On the form, just estimate how much tax you owe. If you’re filing an extension because you need more time to figure out your itemized deductions, one easy shortcut is to just take the standard deduction now—or the same amount you claimed last year. All in all, it’s better to overestimate what you owe, because then you won’t pay any interest. Once you file for real, anything you’ve overpaid will come back to you.
But what if you need an extension because you can’t pay your tax bill? It’s still better to file for an extension with fuzzy numbers than to not file at all.
The IRS has payment plans that can help if you are short on cash. Just file something—blowing the deadline entirely will open you up to penalties as well as interest on your bill. And maybe an audit, too.
Tip No. 3: Hire some help
If you make less than $69,000 a year, you qualify to use free tax prep software from the IRS. Even if you make more than that, there are lots of free or low-cost online tax prep options that should work for anyone with relatively straightforward taxes.
Of course, another option is to find yourself a good accountant.
If paying for a tax preparer sounds extravagant, keep in mind that, according to the U.S. Tax Center, the average cost of getting your taxes done is only $225. This, generally speaking, is money well-spent.
A good accountant can actually save you money by spotting deductions you might not have found on your own, and helping you plan to minimize the next year’s taxes. All in all, that may add up to the best few hundred bucks you’ve ever spent!
Another timesaver: Rather than snail-mailing your accountant your tax forms, snap pictures of them on your smartphone; some apps like CamScanner can do so with scanner-style quality. Accountants don’t need the originals to file.
For next year, remember to prepare
OK, so this year you waited too long and stressed yourself out. If you don’t want a repeat ordeal next year, now is also the time to mend your ways and start tax prep early. Nobody wants to be thinking about taxes all year, of course. But as a homeowner, you can do some things to be better prepared.
So before you do any home maintenance, upgrades, or renovations, research whether there are any tax deductions you could be eligible for.
Start now, and you’ll be sitting pretty to collect on all the various tax perks that come with owning a home rather than pulling out your hair at the last minute.
For more smart financial news and advice, head over to MarketWatch.
For some homeowners who have been financially impacted by the COVID-19 pandemic, there is a high level of concern about paying their mortgage. Fortunately, there are options to aid struggling homeowners from governments, financial institutions, and loan providers. The following information is intended to provide clarity on which financial relief options are available to you during this time.
What are my mortgage relief options?
Newly placed into law, the Coronavirus Aid, Relief and Economic Security (CARES) Act, provides two protections for homeowners with federally backed mortgages:
Your lender or loan servicer may not foreclose on you for 60 days following March 18, 2020. The CARES Act prohibits lenders and/or servicers from beginning a non-judicial foreclosure, or finalizing a foreclosure sale, against you within this time period. While 60 days has passed since this was put into place, it is still important to be aware of in the event that any of these actions were taken against you.
You have a right to request a forbearance for up to 180 days if you experience financial hardship due to the COVID-19 pandemic. You can also apply for a 180-day extension beyond the forbearance period. This does not require submitting additional documentation beyond your claim, nor will you incur additional fees, penalties or interest beyond what has already been scheduled.
Forbearance is…
With forbearance, mortgage servicers and lenders allow you to pause or reduce your mortgage payments for a period of time while you get back on your feet financially.
Different types of loans beget different forbearance options, understanding the differences and which options apply to your loan is key to navigating the forbearance landscape.
Once your income is back to a normal level, contact your loan servicer and resume your payments.
Forbearance is not…
Forbearance is not a means to forgive or erase your payments. Any missed or reduced payments still require payment in the future.
Which relief options do I qualify for?
The first step in discovering your mortgage assistance qualifications is to contact your mortgage provider. If you are unsure of how to get in touch with them, look at your mortgage statement for contact information or see what contact options are available online.
After you have successfully made contact, find out if your mortgage is federally backed. To be eligible for assistance under the CARES act, your mortgage must either be backed federally, or by one of the entities in the list below. These links show the agencies’ current advise and related loan information:
For non-federally backed loans, contact your lender or servicer to learn more about their forbearance repayment options.
Today’s financial landscape can be stressful for homeowners, especially those that are struggling to keep up financially. Fortunately, these entities, institutions, and servicers have provided options to help lessen the burden. Knowing which options apply to you and your household will help you navigate through hardship as your finances recover.
On this week’s episode of “Mondays with Matthew”, Matthew Gardner provides an update on the mortgage forbearance program and what type of effect we can expect it to have on the US housing market.
Twelve weeks into the COVID-19 pandemic and we are certainly seeing the impact it has had on the housing market. Today’s episode of “Mondays with Matthew” covers home prices now, and what to expect for the rest of 2020.
This week on “Mondays with Matthew”: Now that things have settled down somewhat following the initial impact of COVID-19, Matthew dives into the topic of mortgage rates. Will they go below 3%? Matthew discusses this and the factors that have formed his updated 2020 and 2021 mortgage rate forecast.
This is a relevant post from Windermere, during this time.
Posted in Buying by Sandy Dodge
Image Source: Canva
Thanks to COVID-19, the new reality is that many open houses and home tours are being conducted virtually. For prospective home buyers, this new territory brings an added element to prepare for in the home buying process. Some of the questions that should be asked in a virtual home tour parallel those of in-person tours, but others are unique to today’s virtual world.
Could you zoom in?
Sometimes it can be difficult to get a true glimpse at what you want to see in a room. Asking the agent to zoom in on specific features is commonplace in virtual home tours, and they understand this is part of the viewer experience. Don’t hesitate to ask multiple times. Getting a better look at everything you want to see will help you feel like you’ve gotten the most out of your virtual tour.
How many square feet are in this room?
Virtual tours can slightly distort space, making it tough to gauge the size. The room-to-room square footage is information the agent is sure to have handy. Since you can’t be there in person, it will help you piece together the virtual visuals with the sense of physical space that we’re all accustomed to feeling in the places we live.
What color is that?
In the smartphone era, and computer era at large, we have come to understand that digital representations of color are not always true to the eye. Ask the agent to confirm specific colors so you can plan accordingly. Have a color swatch on hand or look the colors up online as you go through the tour.
When were the appliances last updated?
The importance of this question rings true in past, present, and future. Knowing the state of the home’s appliances, and the likelihood and timing of when they will need replacement, is vital information for both assessing the move-in readiness of the home and understanding what costs might lie ahead.
Has the seller provided an inspection?
This is another example of a critical question, whether your home tour is virtual or physical. If the seller has already done an inspection, ask the agent to lead you to any areas of concern based on the inspector’s findings. If there is anything that has not yet been addressed by the seller, have your agent ask what their plan is for making the necessary repairs/updates.
When is the offer review date?
Understanding the seller’s timeline for reviewing and accepting offers will help guide your decision-making process and allow you to strategize based on the timeline.
Whether your home tour is physical or virtual, getting the information you need to make an informed decision remains paramount. Although there is no substitute for physically being in the home you are looking to buy, keeping these questions in mind will position you well as you progress through the home buying journey.