According to the National Association of Realtors, existing home sales for April’s housing market came in at 5,8500,000. This was a miss from estimates and the third straight month of declines in sales.

I have been saying we should expect home sales to moderate since the end of summer 2020, and that is what we see in this report. This sales trend looks very normal to me. We saw a massive move-up in sales in the second half of 2020 and now were are getting the correcting declines. In the last existing home sales article for HousingWire, I wrote that we should see some sales prints under 5,840,000. We didn’t see that in this report but we should see some in the future.

My biggest fear for the U.S. housing market for 2020 to 2024 is that home prices could escalate to an unhealthy level. Since the end of summer 2020, I have been expressing this concern in various interviews, including on Bloomberg Financial.

Having the best housing demographics ever during the years 2020-2024, along with the lowest mortgage rates, gives you the best supply of replacement buyers ever. This is one of those advantage/disadvantage situations. The disadvantage is that total inventory levels are shallow, creating a bidding frenzy for the few homes on the market without too much growth in mortgage demand. Even though we do not see a credit boom, the bulk of existing-home sales demand is from primary-residence mortgage buyers.

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    The post Existing home sales data: A bad sign for housing market? appeared first on HousingWire.

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    National median home prices reached $370,528 for the month of April, a 22% increase year over year and a new record, according to a recent study from Redfin.

    The number of homes for sale also sank to a record-low average of only 19 days on the market. And 49% of homes sold for above asking price — a record high.

    The numbers are a bit exaggerated, per Redfin Chief Economist Daryl Fairweather, due to the COVID-19 pandemic slowing homebuying and selling in April 2020 and skewing the numbers. But the fact remains, she said, that low inventory is going to keep prices high.

    “There simply aren’t enough homes for sale in America for everyone with the desire and the means to buy one right now,” Fairweather said. “Until new construction takes off — over the course of years, not months — home prices will continue to increase. This housing boom is nowhere close to over.”

    With an aforementioned 49% of April homes already selling above asking price, it’s likely May and June will report record highs as well, Fairweather said.

    “To put the scarcity of housing into context, there is plenty of room for supply to increase and demand to taper off, and we would still find ourselves in a historically strong seller’s market,” Fairweather said.

    Also of note was April’s average sale-to-list price ratio, which went above 100% to a record high of 101.6%.

    “This measure also typically peaks in June, so the next two months may also hit record highs if the market continues to follow a typical seasonal pattern into summer,” Fairweather said.

    Regional numbers also reflect the enormous difference in house sales from April 2020.

    The number of homes sold in April was up 34% from a year earlier, but only 8% from the same time in 2019. The only metro area that saw home sales decline was Rochester, New York (-3%). The largest gains in sales were in places that had the most abrupt slowdown of home sales in April 2020, including San Francisco (up 184%) and San Jose, California (up 150%) and Miami, Florida (up 120%).

    Median home prices increased from a year earlier in all of the 85 largest metro areas Redfin tracks. The smallest increase was in Honolulu, Hawaii, where prices went up 0.2% from a year ago. The largest home price increases were in Austin, (up 42%), Oxnard, California (up 26%) and Miami (+26%).

    Indianapolis, specifically, saw the largest decline in days homes spent for sale over the past year. In April 2020, homes were selling in 10 days, on average, in the midwestern city. Now, homes in Indianapolis are selling in four days, on average, underlining the trend of homebuyers seeking lots in states with less income tax and more overall space.

    “I’m helping buyers understand the current market by advising them that it’s no longer unusual for a home to sell for up to $50,000 above asking price,” said Andrea Ratcliff, an Indianapolis-based Redfin agent. “Builders have waiting lists of at least a year and people are hesitant to sell their homes because there are so few options available for them to buy.”

    Approximately half of all homes in Denver, Seattle, Portland, Oregon and Omaha, Nebraska sold in five days, Redfin reported.

    The post Home prices rapidly climbing toward $375,000 appeared first on HousingWire.

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    Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin, in a letter to Jean-Baptiste Le Roy, 1789.

    Thankfully, after more than a year with innumerable challenges, it appears that the pandemic will end. From an economic perspective, the government acted boldly to support households and businesses through the crisis with monetary and fiscal stimulus. Now, just as the recovery has commenced, after a four-year pause we are at the beginnings of another tax debate.

    In this column, my aim is to provide you with some of the context for this debate with respect to the state of the U.S. federal budget, particularly on the revenue side, and of overviews of the 2017 Tax Cuts and Jobs Act (TCJA) and President Biden’s tax plans and the two 2021 proposals: The American Jobs Plan and The American Families Plan.

    Government budget and tax statistics

    For those looking to quickly understand the current state of the U.S. federal budget, I would recommend looking at the new set of infographics put together by the Congressional Budget Office (CBO). As shown there, in fiscal year 2020, the federal government spent $6.6 trillion, while it took in $3.4 trillion in revenue. I expect I will be writing more about the implications of budget deficits that exceed $3 trillion in future columns, but today I wanted to focus on the revenue side.

    In FY 2020, the infographic shows that of those $3.4 trillion in revenues, individual income taxes accounted for $1.61 trillion, payroll taxes for $1.31 trillion, corporate taxes for $212 billion, and other revenues for $289 billion. Other revenues include remittances from the Federal Reserve ($82 billion), excise taxes ($87 billion), customs duties ($69 billion), estate and gift taxes ($18 billion), and miscellaneous fees and fines ($35 billion).

    I highlight these data both because it is interesting to see the relative magnitudes of these different revenue sources, and because it might surprise some people, given the amount of ink spilled on some of the smaller items.

    Next, it is worth looking at how tax revenues have changed over time. In Exhibit 1, revenues are measured here by the CBO as a share of GDP. The economy grows over time, and revenues on a dollar basis grow with it. Measuring these revenues as a share of GDP scales them appropriately. Tax revenues tend to increase when the economy is booming and fall during recessions.

    In addition to these changes, the different revenue components can rise or fall if tax policy changes. The major tax bills, including the TJCA, are shown in this chart. These four types of revenues are ranked the same as they are in dollar terms; and in total, revenues were 16.3% of GDP in FY 2020. On average, that share has been 16.8% over the last 20 years. In FY 2020, both individual and corporate taxes declined as a share of GDP due to the recession.

    Exhibit 1, Source: CBO

    Goals of tax reforms

    Understanding some of the top-line numbers with respect to the federal government’s revenues, let’s review the TJCA and discuss the changes that Biden’s tax plans are proposing. It is helpful to begin by thinking about what each proposal aimed to accomplish.

    At the highest level, tax reforms can be placed in one of three categories: tax increases, tax cuts, or revenue-neutral “fundamental” tax reforms. The goals of the first two are straightforward – to raise more revenue to address rising deficits or offset additional spending, in the first case, or to boost the economy by cutting taxes, in the second. A fundamental tax reform attempts to improve the efficiency with which taxes are collected to improve the economy’s functioning.

    Clearly, actual proposals can be combinations of these categories and the labels can sometimes be in the eye of the beholder. For the two proposals discussed here, the TCJA was a fundamental tax reform/tax cut with a goal to increase the rate of growth, while the Biden administration proposals overall represent a tax increase motivated to support increased spending.

    To its proponents, the TCJA was a fundamental tax reform with goals to lower marginal tax rates and broaden the tax base by eliminating deductions and exemptions. There were also efforts to simplify the tax code by doubling the standard deduction, which greatly reduced the number of households that needed to itemize deductions.

    Proponents forecast that this type of tax reform would make U.S. corporations more competitive, would increase productivity and economic growth, and as a result, would lead to a revenue neutral outcome – even though households and businesses would be paying at lower marginal rates.

    Those opposed to these changes argued that the cut in marginal rates for corporations and individuals would lead to a disproportionate tax break for those with higher incomes. That concern highlights another common goal of tax reforms, i.e., to alter the distribution of taxes paid. 

    Again, it is helpful to look at the data on this question. Exhibit 2 below shows the income before taxes, means-tested transfers, income taxes, and after-tax income by household income quintile. A few items to note:

    • The highest income group has much higher average income on both a pre-tax and after-tax basis. This group also pays a large share of federal taxes. (Looking within this highest 20% of earners, this pattern is also true when you look at the top 1% or top 0.1%. The tax code is progressive, with higher earners paying at a higher rate).
    • The middle three quintiles pay a smaller share of federal taxes, but don’t receive much in the way of means-tested transfers. As a result, their level and share of after-tax income is similar to that for their pre-tax income.
    • The lowest 20% of earners receive most of the means-tested transfers and pay no federal income taxes. (They do pay payroll taxes). The combination means that after-tax income is higher than pre-tax income for this group.
    Exhibit 2, Source: CBO

    The Urban-Brookings Tax Policy Center (TPC) is one of the groups that produces detailed analyses regarding the distributional impacts of tax proposals. As shown in Exhibit 3, the TCJA was anticipated to lower taxes across the income distribution, but the average tax cut in dollars and percentage points was larger at the top of the distribution. Note that the TPC analysis provides additional detail at the high end of the distribution.

    Distributional Impact of the 2017 TCJA

    Exhibit 3

    The TCJA made a number of changes to the tax code. Among those of most interest to mortgage market participants were provisions that:

    • Lowered corporate rates from 35% to 21%, but limited some corporate deductions
    • Lowered individual income tax rates at all levels except the lowest income bracket
    • Doubled the standard deduction but limited or eliminated exemptions and other deductions, including:
      • Limited deductions for state and local taxes (SALT) to $10,000; and
      • Reduced the cap on the mortgage interest deduction (MID) from $1 million to $750,000
    • Added a deduction for pass-through businesses (199a) where up to 20% of Qualified Business Income (QBI) could be deducted.
    • The changes to the corporate tax rate were “permanent,” while the changes to the individual provisions were limited to 10 years and are scheduled to snap back to their prior levels in 2026.

    An industry concern during the debate on the bill related to a provision which would have eliminated the tax deferral on the creation of mortgage servicing rights (MSRs). MSRs are booked as a balance sheet asset when loans are sold into the secondary market and show as book earnings at that time. However, if the servicing is retained, the lender does not receive any cash income when the MSR is created. The tax deferral in the current code recognizes this difference between book and tax income, taxing servicing income over time as the cash arrives.

    The TCJA included an exemption for MSRs to recognize this important aspect of lenders’ businesses. If this had not been included, it likely would have caused a sharp reduction in the value of MSRs, which would have both hampered liquidity in the MSR market, and ultimately would have been reflected in higher mortgage rates to borrowers, as the value of servicing is tightly connected to primary mortgage rates. As noted below, this concern has resurfaced again with the latest proposals from the new Administration.

    The Biden administration proposals

    The Biden administration has proposed the $2.3 trillion American Jobs Plan (AJP) and the $1.8 trillion American Families Plan (AFP) to rebuild infrastructure, as well as provide new spending for a host of educational, public health, and other initiatives. To pay for these expenditures – at least partially, the plans include a series of provisions that would largely reverse the TCJA’s tax rate cuts for corporations and higher income individuals. As of this writing, I am basing my comments on the high-level summaries of the Biden tax plans provided. More detailed language is likely to be provided shortly.

    I will focus here on the tax elements of the two proposals that would directly affect real estate markets.  The real estate-related tax proposals fall into six main categories:

    1. The most significant “pay-for” in The American Jobs Plan (AJP) is an increase in the corporate tax rate from 21% to 28%. The plan also proposes a “minimum book tax” for corporations of 15%. 
    2. The AFP would increase the top individual tax rate from 37 to 39.6%, reversing the cut from the TCJA.  
    3. For households making more than $1 million, the AFP proposes an increase in the capital gains rate to 39.6%, putting it on par with the proposed top tax rate for ordinary income.  Adding in the Medicare tax on investment earnings, the top capital gains rate would increase to 43.4%. The proposal would also eliminate the stepped-up basis of assets at death, increasing the taxation of intergenerational businesses.  
    4. In addition to the changes to capital gains taxation, the proposal also recommends eliminating carried interest, a tax treatment that permits asset managers to recognize earnings from investments they manage as capital gains rather than as ordinary income.  The 1031 like-kind exchange deferral of capital gains taxation would also be eliminated for gains greater than $500,000. 
    5. No changes were proposed for the capital gains exclusion on primary residences. There was also no mention of changes to individual provisions (including the lowered MID cap and the SALT limitation) from the TCJA that will sunset after 2025.
    6. As part of the AJP, the administration is proposing to invest $213 billion in affordable housing. The expectation is that this would take the form of an expansion and revision to the Low-Income Housing Tax Credit (LIHTC), and perhaps the creation of a new Middle-Income Housing Tax Credit (MIHTC), as well as the Neighborhood Homes Investment Act (NHIA).

    While each of these items have potentially important impacts on the housing and mortgage markets, I am going to focus on just a few. First, the minimum book tax has the same potential to disrupt the MSR market as the proposal in 2017. If lenders are taxed on the book gain from the creation of an MSR, well before they see the cash income from the servicing asset, servicers will retain less and sell more MSRs, putting downward pressure on MSR values. This market impact would be true even if the minimum book tax were only applied to the largest lenders, as a reduction in MSR values would be felt by all lenders in the market. Moreover, as noted above, a reduction in MSR values will ultimately lead to higher mortgage rates for borrowers.

    With respect to the commercial real estate market, the limitation on 1031 like-kind exchanges, particularly in the context of potential increases in capital gains rates and an elimination of the step-up basis, will also have a depressing effect on the market. Investors in commercial estate utilize this provision to rollover capital gains from one property to a “like-kind” property. Given the long-term and unique capital demands of real estate, in the TCJA, this provision was retained for real estate investments, but the AFP would limit this treatment to gains under $500,000, which could curtail the pace of commercial real estate transactions and associated lending activity.  

    Although residents of states with high property values and steep state and local tax rates (e.g., New York, New Jersey, California) had been hoping for a reversal of the SALT deduction limitation, to date such a change is not part of the proposal.  

    What comes next

    We are soon expecting more detailed versions of these proposals from the Biden administration. By mid-summer, Congress may be well on the way towards legislating on these topics. As always, the details of each of this tax provisions really matter, and they may change at any step along the way, from the administration’s initial proposal, to a final bill signed by President Biden.

    Industry participants should keep a close eye on these proceedings, understanding the broader context of the debate with respect to the budget, the level of revenues needed to finance government spending, the distribution of tax liabilities, and the specific provisions which may impact real estate market

    The post What the Biden tax plans mean for the housing market appeared first on HousingWire.

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    There are few things as exciting as cutting the ribbon on a new property or development that you have nurtured from the ground up, from raw land into a viable and profitable real estate venture. But land development is not only exciting and lucrative; it can also be frightening and draining.

    On the one hand, as a developer, you are free to imagine whatever your budget will allow, from an elaborate single-family home to a cohesive residential community or more. On the other hand, land development requires extensive time, access to large amounts of capital, and often includes many unexpected challenges.

    Becoming a successful builder-developer requires you to be equal parts focused, prepared, and gutsy. (Maybe a double dose of that last ingredient!) Not everyone is cut out for this track in the world of construction.

    real estate podcast

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    Imagine you’re friends with hundreds of real estate investors and entrepreneurs. Now imagine you can grab a beer with each of them and casually chat about failures, successes, motivations, and lessons learned. That’s what we’re aiming for with The BiggerPockets Podcast.

    How to choose the right parcel of land

    Mastering land development requires years of hands-on training. In addition to learning about the various geographic differences in soil composition and building materials, it also takes time to understand market requirements that shift from location to location. These aren’t only related to client interest, but also laws and ordinances. As you fine-tune your skills, hopefully, you can minimize the common challenges that many non-experienced builders encounter.

    I’ve learned many of those costly lessons the hard way across many years in the industry. I want to demystify industry secrets, clarify necessary processes, highlight essential documents, and provide guidance on the thinking behind the most successful building methods and approaches. As you read along, you will be able to make the land development process more enjoyable and your builder dreams a reality.

    Every developer starts their project by choosing a parcel of land to build on. But like everything in life, it’s never that simple. To be successful, there are some key areas you should consider as you determine which piece of land to purchase and develop for your new project.

    What are the zoning classifications?

    Land parcels are plotted on zoning maps which are created and managed by local municipalities (city, county, or state) that oversee the construction of development projects. The purpose of these maps is to ensure the municipality’s growth and building development are in alignment with the needs and vision of the community. For example, an area zoned for schools is usually not placed adjacent to an industrial zone. Zoning classifications will help you determine the type of building project that is allowed according to your parcel’s designation.

    These are the most common zoning classifications:

    • Single-family residential
    • Multi-family residential
    • Commercial
    • Light industrial
    • Industrial
    • Agricultural
    • School/church

    Be aware that zoning classifications are not uniform between municipalities, therefore it is critical to contact the zoning office for every parcel you want to develop.

    The details you want to make sure you obtain (usually available on the website of the local building and zoning department) include:

    • Size and use of buildings
    • Minimum and maximum lot sizes
    • Building coverage (permeable surface)
    • Setbacks
    • Density limitations
    • Parking requirements
    • Allowable business

    Obtain a zoning map to ensure your project parcel does not sit directly adjacent to a zoning district classification that could adversely affect your project.

    Should the current zoning conflict with your intended project, a call to the local Department of Building and Zoning can help you determine if a zoning classification change is possible. Unfortunately, zoning changes are often lengthy processes.

    To protect your cash flow and vision for what you want to develop, make sure your attorney structures your deal to make the purchase contingent upon proper zoning and issuance of permits. This is a common approach that shouldn’t cause any issues.

    Is the land suitable for septic?

    Before a problem takes root, make sure to start any land development project with a thorough understanding of the soil composition of the parcel. Understanding the state of your soil will enable you to construct with the right materials in the right location, providing long-term value and benefit.

    To determine if you have strong soil that’s suitable for building, most local municipalities require the use of a soil engineer. The results of their many tests are usually required to some degree before getting a building permit as well as a certificate defining the source of clean drinking water (potable).

    Start with a percolation test (aka PERC test) if you need a septic system. You want to make sure that the soil on your land can properly support a septic system. This means determining if the field is sufficiently permeable to absorb liquid flowing into it. You don’t want waste or sewage seeping back up and pooling on the surface.

    A soil engineer will use a much deeper hole, often 7-10 feet or deeper, as they look for a high water table and the presence of rock ledges or impermeable soil that could block water absorption. Keep in mind that a failed PERC test means you may not be afforded the right to build. Make sure your purchase is contingent on passing this test.

    Is water runoff a concern?

    Once your parcel is deemed suitable to support a septic/waste system, the soil engineer can proceed by preparing a topographical survey (known in the biz as a “topo”) to determine the natural flow of water and the potential risk of pollution. The building department is especially concerned with this test, as it will provide valuable information regarding the possibility of water runoff to neighbors.

    Should your new development create negative water distribution issues, a solution can usually be achieved with newly placed retaining walls, drainage swales, and a variety of other natural and human-made structures. Keep in mind, that solution will add unexpected expenses to your project.

    A contaminant test may be required, especially if you are in an area known for various toxins. The soil engineer can also verify that there are no toxins or contaminants (like lead, arsenic, or cadmium) in the ground. The local Department of Health and Environmental Control can usually provide guidance relative to which contaminants, if any, are prevalent in your project area.

    Ultimately, once safety is accounted for, a good soil composition test will help you determine if you will be able to properly support the weight of the buildings being planned. Unsuitable land areas are usually pretty obvious, like swamps, bogs, or parcels that are near nuclear power plants or chemical retention ponds.

    A good building site has soil that doesn’t shift, expand or shrink drastically. Typically, this tends to be a mix of gravel and sand, which offers great stability and handles the presence of water very well. These tests are important pieces of information that will impact how you build your foundation.

    Quick DIY soil test

    Here’s a do-it-yourself soil test that can give you an early indication of your soil’s suitability for building before you do any professional testing. Simply take a ball of damp soil in your hands from your proposed parcel and see how it crumbles.

    Soil heavy with clay will most likely retain its shape in your hand, indicating high water concentration which is bad for foundations due to its tendency to shift around as it dries or moistens. If there is too much sand, the soil will have trouble retaining its shape, foreshadowing the kinds of problems your foundation is likely to face. Soil that crumbles in bigger chunks tends to indicate the right mix of materials.

    While land development takes a lot of money, time, and risk, the payoffs are usually massively satisfying. Happy building!

    More on development from BiggerPockets

    Every developer starts by choosing a parcel of land. But like everything in life, it’s never that simple. To be successful, there are some key things to consider as you determine which piece of land to purchase and develop for your new project.

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    For every one person who left low-tax states in the last eight years, an average of four people moved into those same states, according to a new report from Redfin.

    The trend is reversed in high-tax states, where an average of 2.5 people left for every one person who moved in.

    The study encompasses migration to and from 48 U.S. states from 2013 to 2020, correlated with rates of sales tax, income tax and property tax in 2020. For the national average, the 15 states with the lowest taxes are considered “low-tax states” and the 15 states with the highest taxes are considered “high-tax states.” 

    Nevada, Florida, South Carolina and Texas top the list of low-tax states attracting new residents. Florida, specifically, has the seventh-lowest tax rate in the country and gained more residents than all but four other states from 2013 to 2020. For every seven people who moved into Florida, just one person left.

    “A lot of people are moving into Jacksonville, Florida, from places like California and the East Coast because they can work remotely,” said Heather Kruayai, a Florida-based Redfin agent. “They figure it’s a pretty good deal to pay no state income tax and live at the beach. Competition and prices are up and supply is down this year, partly due to those out-of-state buyers who sold homes in expensive markets and are buying homes using cash in Florida.”

    Texas, with the eighth-lowest tax rate in the country, also saw five people move in for every person who left.

    “Three-quarters of my clients are moving to Austin from the Bay Area, and some are coming from other parts of California or New York,” said Andrew Vallejo, an Austin-based Redfin agent. “There are a lot of reasons to move to Texas, but for many homebuyers the fact that there’s no state income tax is one of the most attractive things. Low taxes are also motivating big companies like Tesla, Apple and Google to open offices in Austin, which brings in even more people.”

    In Austin, the average out-of-town homebuyer had a budget that was 32% higher than local residents, according to Redfin’s study. Home prices were up more than 42% year over year to $465,000 in April. And while Texas doesn’t have an income tax, it does have relatively high property taxes.

    “Low taxes are contributing to higher home prices in Austin,” Vallejo said. “With so many people moving here, especially those earning six figures and stock compensation from tech companies, prices are multiplying. Builders and sellers can price homes higher than they used to because buyers are willing to pay more.”

    In looking at states with high tax-rates, New York lost more residents than any other state from 2013 through 2020 — for every eight people who left, just one person moved in. The state has the sixth-highest tax rate in the U.S. 

    Illinois and New Jersey are both among the top four states in the country in terms of both taxes and the number of people moving away. And California, which has the highest tax rate in the country, ranks 15th in terms of out-migration, with about one person moving in for every three people who left.

    The idea of “more space” has driven homebuyers during the pandemic, with people wanting to get out of crowded metros and into homes with more land. Typically, the states people are moving too tend to have lower-to-no state income taxes.

    “Tax rates are one factor for homebuyers deciding whether to move and which state they ultimately land in, but just how important they are is different for everyone,” said Taylor Marr, Redfin’s lead economist. “When people have the flexibility to move to another part of the country, they consider factors like living close to family and friends, job opportunities, cultural amenities, and outdoor activities in addition to how much of their paycheck goes directly into their pockets.”

    The post Low-tax states are winning the real estate battle appeared first on HousingWire.

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    Old Republic is making some changes to its C-Suite. The title insurance giant announced that Frank Sodaro will succeed Karl Mueller as chief financial officer when Mueller retires at the end of June. Mueller has been with Old Republic since 2004.

    Sodaro, who joined the company as deputy chief financial officer in 2017, will officially begin as CFO on July 1, the company said in a press release.

    “Frank’s extensive accounting, corporate finance and insurance business experience adds substantial depth and bench strength to our corporate accounting and finance group, as well as to Old Republic’s most senior operating management team,” said Al Zucaro, Old Republic CEO and chairman.

    Chris Lieser will move into Sodaro’s role as deputy CFO. Lieser has worked in Old Republic’s title insurance business for 37 years.

    Mueller will work with Sodaro, a CPA by training, in an advisory role until he retires, the company said.

    “The appointments of Sodaro and Liester reflect the board’s confidence that they will continue to serve with excellence — affirming the great tradition of professional and loyal service Karl Mueller exemplified,” said Craig Smiddy, Old Republic president.

    The company posted a total operating revenue of $2.3 billion for the first quarter 2021 — up from only $764 million in the first quarter of 2020. Income was reported at $502 million, a huge recovery from the first quarter of 2020 when Old Republic reported a loss of $605 million. Total expenses for the first quarter were $1.7 billion, a 12.4% increase from the first quarter of 2020.

    Old Republic saw a total of $670 million in net income in 2020, excluding investment gains or losses, up 21% from $554 million in 2019. For all of 2020, the company reported a 20% increase in title insurance income, rounding out at $3.29 billion — compared to $2.74 billion in 2019.

    Last year saw a boon for title agencies across the board, as insurers wrote $19.2 billion in premiums in 2020 — a nearly 22% increase from the $15.8 billion in 2019. Interestingly, though, Old Republic saw a slight drop in its marketshare from 2019 (15.4%) to 2020(15%).

    The post Old Republic announces new chief financial officer appeared first on HousingWire.

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    On May 13, FHFA Director Mark Calabria wrote an op-ed published in the Wall Street Journal defending the final “living wills” rule published in the Federal Register on May 4. The key to this op-ed is understanding what was left out. His clear disdain for the structure of the GSEs as well as their ability to absorb risk is made clear, but there are critically important points in the rule that he carefully avoided in his op-ed.

    The final rule is a meaty one, taking into account the feedback from 12 comment letters that FHFA received, mostly from trade groups, consumer advocates, and think tanks.

    What is really amazing is that you might think that industry would have learned their lesson after the release of the PSPA Amendment in January that snuck in several provisions adverse to the housing sector. This January amendment, you may recall, put the cap on sales of second homes and investor properties, limits to the cash window, caps on multifamily, and limits on sales that include a combination of borrower attributes.

    But here we go again. The proposed “living wills” rule received only a handful of thoughtful comments, but the final rule essentially listened to and subsequently ignored the vast majority of them. So where is the outcry? Why aren’t stakeholders responding to yet another action that may show the blueprint for Director Calabria’s intentions?

    But silence prevails. Despite the concerns about liquidity following the CARES Act forbearance requirement and the cost to servicers, the first payment forbearance 500/700 bp fees that quickly caused pricing adjustments, the 50 basis point refinance fee, and the items in the January PSPA referenced above, industry largely has kept their concerns constrained. But why?

    The industry should trust a person by what they say. And What Director Calabria has said for many years is that these companies are too big, that they crowd out private capital, and that they pose way too much taxpayer risk and need to be dealt with.

    The FHFA Director has sole authority, requiring no approval from either Congress or Treasury, to put the GSEs into receivership or into successor entities. In fact, Calabria stated this himself in an interview in May of 2020. In this interview he stated it clearly, “Endless limbo is not an option under statute. FHFA has the power and the responsibility to end the conservatorships of the GSEs. Congress authorized FHFA to do this by either reconstituting the GSEs into a successor entity or entities, restoring them to a position of financial stability and shareholder control, or placing them in receivership. HERA does not require congressional action to end the conservatorships.”

    Given what is widely believed to be frustration that he could not accomplish a final solution while Secretary Mnuchin was heading the Treasury Department, he appears to now be looking at the authorities he has if choosing to act alone.

    So, if you have not read the final rule, I encourage you to do so. But assuming you won’t, let me give you the highlights:

    1. The “living wills” are being required in order to establish a plan for moving the GSEs into receivership should they be unable to back the risk/obligation to support MBS Investors.

    As the rule states: “FHFA is also authorized to appoint itself as conservator or receiver of an Enterprise if statutory grounds are met. When appointed receiver of an Enterprise, FHFA must establish a limited-life regulated entity (LLRE), which immediately succeeds to the Enterprise’s federal charter and thereafter operates subject to the Enterprise’s authorities and duties.”

    This point about LLREs is important, because the term “limited life” is a key element that sets a timeline for the new companies to become fully capitalized and IPO’d before they statutorily would simply be shuttered.

    2. One of the key elements here is the discussion of getting enough capital so as to avoid the necessary trigger to be put into receivership in the first place.

    Unfortunately, despite pushback in comments made to the proposed rule, the line of credit in the PSPA cannot be considered as a resource, even for an interim period. In other words, once the “living wills” are completed and submitted and approved, the risk of an FHFA action could become real as it is virtually certain that they would not meet the resource requirement without the PSPA support in the short run.

    As the final rule states clearly: “Each Enterprise would be prohibited from assuming that any extraordinary support from the United States government would be continued or provided to the Enterprise to prevent either its becoming in danger of default or in default.”

    Given the way the rule is written, it would be plausible for the director to exercise his authority fairly quickly. In fact, the final rule states this clearly, “FHFA will require the Enterprises to develop ‘credible’ plans to facilitate their ‘rapid and orderly resolution’ by FHFA as receiver.”

    3. One other element of concern in the final rule.

    The rule states the following: “The Enterprise resolution planning process will begin with identification of an Enterprise’s ‘core business lines’ (CBLs) – those business lines of the Enterprise that plausibly would continue to operate in the LLRE, considering.”

    There is extensive discussion in the final rule of what would be included, but the risk here is enormous. While the GSEs will submit their definition of CBLs, it will need to comply with the framework in the rule that any CBL “supports” the proposed CBL definition listed “servicing, credit enhancement, securitization support, information technology support and operations, and human resources and personnel.”

    Because the move into receivership to create successor entities would be limited to CBLs only, many questions are arising. Do some unique programs like early funding (ASAP), the cash window, and some expanded product, among many other functions, fit the definition of CBL?

    For example, the rule states: “Finally, FHFA agrees that an Enterprise is not responsible for continuation in business of third parties that provide associated supports.” This should be an indicator of what may be admitted in a “living wills” plan. One final note, the rule states clearly that FHFA will have final say in determining what can fit as a CBL in the “living wills” regardless as to what the GSEs submit.

    There have been a number of policy leaders who have published concerns about the FHFA since Mark Calabria came in as director. The warning signs are not just idle concern. Calabria has shown his objectives from the beginning. Now, with the time left in his term waning — given the likelihood that the administration would likely want him gone — one has to ask whether he might rush the development of the these wills despite allowing for up to two years to do so.

    In fact, just days ago the director gave a speech at the Brookings Institute where he suggested that the timeline could be much faster, as soon as six months.

    So, the cautionary tale here is that he had shown us where he is going long before he came into the role at FHFA. But this process, which does not allow for the use of the PSPAs as a resource, shows that, at least in the short run, the GSEs will be well short of the capital needed to survive.

    FHFA again made its perspective clear in the rule, stating: “FHFA believes it would be inconsistent to allow the Enterprises to factor into their resolution plans – plans that are premised upon some future adverse event – any remaining PSPA support that might exist today.”

    Could capital alone be enough to take action under his sole authority as FHFA director and execute a process to submit the GSE’s to receivership status, thus forcing the creation of LLREs who can only operate with CBLs? What would MBS investors think and how would they behave? How would lenders and ultimately borrowers be impacted?

    One thing that is clear is that this FHFA believes that the private sector can pick up a lot more of the GSE space, whether it be second homes, investor properties, cash window loans and more. Why wouldn’t he try to finish the job he started before he is forced out by the Biden Administration? That is the question.

    This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

    To contact the author of this story:
    Dave Stevens at

    To contact the editor responsible for this story:
    Sarah Wheeler at

    The post FHFA’s final “living wills” rule ignores industry concerns appeared first on HousingWire.

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    This week’s question comes from Gre on the Real Estate Rookie Facebook Group. Gre is asking: How do you find accurate property tax info, including school taxes, when running numbers on a potential investment property?

    Great question Gre! Running your numbers accurately is super important when making sure a deal will be profitable, thankfully, there are many online (and in person) resources where you can find accurate property taxes within minutes.

    If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

    This is Real Estate Rookie, show number 78.
    My name is Ashley Kehr, and I am here with Tony Robinson and today we are back with another episode of Rookie Reply. Hey, Tony.

    What’s up, Ash? How is your day going today?

    Pretty good. Nothing real exciting. I took my son to… He started a little gymnastics fun camp thing so me and him went to that this morning, but other than that, it’s a beautiful day outside and I’m stuck in my closet.

    That’s so funny. It’s been super gloomy the past two days in SoCal so we’ve been stuck inside too.

    Yeah, I also brought my motorcycle back from Texas, so I think I might go for a motorcycle ride today.

    Oh, man. Your first ride in New York.

    Actually, I did one the other day. I did 15 miles-

    Fifteen miles?

    And I was freezing. I even had a sweatshirt on, my motorcycle jacket on, gloves on, my helmet and I was so cold. At one point, I pulled over because I felt myself shaking. So I pull over, I’m like, okay, I’ll just sit in the sun. Because it was sunny out but it’s still cold. Sat in the sun for a minute, cars go by me and I feel one car slowing down next to me. And I’m like, oh, great. Here we go. It’s somebody I know or whatever. And it’s just this guy. He’s like, “Hey, are you okay? Do you need help?” And I was just, “I am good.” I gave him the thumbs up and he just kept going. Then I pulled out behind him and kept going, but it was really funny.

    Hey man, that’s awesome. So are you riding anywhere in particular or just like a leisure stroll through Western New York?

    Oh yeah, I found that I can’t go over 50 miles without feeling like I’m going to blow off the bike. So yeah, just a real casual stroll. And, so that one ride was basically a straight shot. It was one road to my rehab. So like 20 miles there, 20 miles back pretty much.

    I see, I see.

    And then a couple turns to actually get to the house, yeah.

    Fun time.

    Anyways, today on Rookie Reply, do you want to go ahead and read off our question today? We pulled this one from Facebook.

    Yeah, absolutely. So today’s question comes from [Gray 00:02:10] Clifton and Gray’s question is, “As a newbie, I’m learning so much, but I was wondering how do you guys find accurate property tax information, including things like supplemental school taxes, when you’re running numbers on potential investment properties? I’m looking at multiple cities and states and my first purchased, only ended up having a lot more taxes than I realized even though it’s still a good rental property for me, but I just want to make sure I don’t make that same mistake again. Thanks in advance.”
    So Gray’s question is pretty much around how do you estimate property taxes accurately? I can kind of share what I do and then Ash, if you’ve got something different you can jump there. There’s a few different ways you can do it, or at least that I’ve done it. The first way is you can go to the County Assessor’s Office, online, not the actual office, you can pull up their website and you can type in the address, the parcel number, whatever information you have. And it’ll usually pull up all of the property tax amounts for that property over the last several years, and you can use that as a basis.
    I’ve also used websites like PropStream. They have pretty accurate property tax information and even like Zillow, I’ve compared Zillow’s to the County Assessors and a lot of times those numbers are pretty spot on as well. But like Gray, I’ve had a situation where I looked at that data and when I actually purchased the house, it ended up going way up. So I usually put a little bit of a buffer on whatever those previous year’s taxes are. And the last thing that I’ll do is I’ll ask other investors in that market what their property taxes are, because if they’ve recently purchased, they’ve got a house that’s similar to mine, that at least gives me a ballpark of whether or not what I’m seeing online aligns with what’s happening in the real world.
    That’s what I’ve done in the real world. Ash, what about you?

    My first thing would be to look first, is what kind of taxes do you have? So around me it’s very common to have a school tax, a county tax, so the town and county tax. And then also sometimes there’s a village tax and you’ll have three tax payments. So the village tax is common if there’s village water, there’s public utilities there. And then, you know I live out in the country, we have our own septic. We don’t have any village tax at all which is nice, but we’re not getting some of the amenities of public water and a public sewer. But… So first I would look at that as to what taxes does this property actually have.
    And then like Tony said, you go to county websites and you can pull and you can verify. So around me the different towns, some you can’t even find online, which is really, really annoying, but you can go to the school website a lot of times. And sometimes I’ll just Google, “Springville School property taxes”, and the website will come up as to where that’s linked, and sometimes you really got to go through like a school website and click through, okay, here’s this department to go to this department and to go to this page and then you find it, but Google will be your best friend. Just Googling exactly what you’re looking for, to pull that up, going to the town or the village website.
    Sometimes even you have to go to “pay my bill” and click on “pay my bill” and it’ll be like, okay, do you want to pay your water bill? Do you want to pay your property tax bill? And you can search the property tax bill from there.
    Other ones have just the whole assessment roll where it’s just thousands of pages of every property and what the tax was for that year. And it’s not an actual search where you can put in the address, but all you do for that is go to… use your webpage find key and then type in either maybe the owner’s last name or the start of the property address and then it will start pulling it up, and you can use that find and replace key that your computer has.
    Also, so as Tony talked about having your property reassessed after you purchase the property, if you think that is going to happen and it is illegal in some areas, I don’t know about all, to have this done after you purchase your property. But you can find out how they actually calculate your taxes. So if you… the property is assessed at $150,000 right now, how do they calculate what percentage are you being taxed at, so you know what that amount is. Okay, well, if you’re purchasing the property for 200,000 and you think that your assessed value is going to go up to 180 or something like that, calculate it, use their calculation, their percentage to see what that tax would actually go up to, worst case scenario, that you are reassessed.
    And then also the GIS mapping website for your county too, is a great tool as to where to find a property tax information too. You just click right on the parcel and it’ll show you owner history and also tax payment for town and county too.

    Yeah, great advice. I’ve also heard of investors just calling the county and just asking them, “Hey, what do you think this number will be next year?” And sometimes they’ve been able to get a decent estimate going that way as well. But I say, whatever number you land on just add some level of buffer because it is hard to kind of nail that number down exactly.

    And your property taxes usually aren’t the same exact amount every single year, they usually do creep up every year. So you are probably going to pay, even if it’s a hundred dollars more or something like that the next year, than what they actually were when you purchased it.

    And Ash, we should probably just define what you meant when you said reassess, right? So if the initial owner owned the property, there was some tax basis that they were using… and every county, city kind of does it differently, but there’s some value that the county has assessed that property at. And whenever a property changes hands, a lot of times they can go back and then reassess that property to see what the new tax assessment is today. So it’s basically the county just saying, hey this property used to be worth $100,000 when the old owner has it. Now we assess it’s value to be $200,000. That means the taxes are going to go up based on that new value.

    Yeah, that’s a great explanation. I’m glad you broke that down, it’s basically the value they see your home as, and it’s usually less than what the actual value is. If you look at the actual tax bill, it will say your full market value and then what the assessed value is on your property, and sometimes those numbers can be way off. Sometimes they can be in your benefit, sometimes they can not be.
    One thing that’s hard to estimate is a new development when you’re doing… you’re buying vacant land and you’re going to build on there. What are your taxes going to be? When we built our personal house, we had gone to the tax assessor and just asked, this is the floor plan we’re kind of looking at, the square footage. This is how many acres we’re putting on to the property, what do you think it would be? And to kind of get an estimate.
    But also parceling off a property too. If you’re buying around here it’s common for farmers to maybe sell off some of their land and… But they want to keep their house, and so they’re selling 20 acres and they hadn’t gone through a tax period yet where that’s been a separate 20 acres, maybe off their 100 acres. And that’s where you have to figure out too, what will your taxes be. Because there is no history of taxes yet, for that property as it’s separate parcel.

    Awesome. Well, I think we hit pretty much everything there is when it comes to estimating taxes. I don’t know, you got anything else on your side?

    I don’t know, I feel like there was one more thing I was going to say about it, but yeah, it’s long gone now.

    Yeah, anytime that you’re analyzing a property, these are all estimates you know, and if you’re being off by $50 or $25 on your property taxes breaks the deal, then maybe reconsider whether or not it’s a deal that you want to go after anyways.

    Yeah. I think at least verify what they are now, know exactly what they are. So don’t just take what the realtor is telling you they are, or what the homeowner is telling you what they are. Look it up, ask for the tax bills, use some of these websites we mentioned to verify that data and then go and estimate what the future may hold.
    And another thing too is that if you are reassessed, so whether it’s because you purchase the property, the tax assessor’s coming and reassessing that property and seeing what the new value is, or the whole town as a whole is… The whole town is reassessing every single property. This recently happened in the city of Buffalo where everyone’s property was reassessed. You can actually go and you can fight that. They have a date set where you can come and you can say why you don’t think this is fair and why this is the actual value. So, if you have that happen, that’s definitely an option for you and reach out to the Assessor’s Office to see when that date is that… There’s a word for it, I can’t think of what it’s called, but they call that date something where you can actually go and kind of protest what your property was reassessed for.
    There’s also companies out there that will actually do that full process for you, of disputing your property taxes and the new assessed value, and they just take up a percentage of what you would’ve paid or something like that. The percentage of the money they’re saving you. So that’s always an option for you too.

    Hmm (affirmative). I didn’t know that about the company, that companies exist that do that. That’s super interesting.

    Yeah. I can’t give you any examples but I know they’re out there.

    You know they’re out there somewhere.

    I know people that have used them, and use them anytime they’re reassessed even if they save 100 bucks a year, they paid the person maybe 20 bucks or whatever to save… But, yeah.


    Hey, well, think that’s it for our property tax episode.
    But also something really interesting if you guys are doing market research and looking for maybe an out-of-state market, is look at the property taxes too when you’re analyzing a market, because they vary widely and you can go online and you can just Google “what are the worst states for the highest property tax” or anything like that and maybe that can help you narrow down where you actually want to invest.
    Right now property taxes are really high in New York and a motivation for me to invest out of state would be because they are so high here. And I look at it, okay, I can get houses pretty cheap right now in my area, but I’m paying maybe $20-30,000 now, but I’m paying $5,000 every single year going forward in property taxes. Maybe I would rather go out of state and buy a property for 150,000 and only pay 3000 in taxes every single year, because once I have that 150 paid off, I’m paying a lot less in property taxes every year. And instead of… I’d rather pay more money now than continuously pay money every single year.

    Every year forever. Yeah, it’s a really good point because we have cabins in Tennessee that are almost 3000 square feet and we’re paying like 130, 140 bucks a month in property taxes. And I have a 900-

    Why are you going to make me cry right now?

    We have a 900 square foot house in Joshua Tree and we’re paying like 317 a month in property taxes. We’ve got our 391 square foot studios, I think we’re paying 290 or 280, something like that a month in property taxes. So it’s a really good point that property taxes should be included when you’re comparing markets as well.

    Yeah. Hey, well you guys, thank you so much for joining us. These episodes, if you haven’t heard already, are going to be released on the very new Real Estate Rookie YouTube channel, so make sure you guys subscribe to that, yeah.
    Every week you’ll see the podcast episodes on there, but you’ll also… There’ll be another video released every single week with a different tips, advice, tricks to real estate investors specific to rookies. Some will be by me, some by Tony and some from our awesome contributors, Kyle and Lauren who are on episode one of the Real Estate Rookie podcast.
    Thank you guys for listening, I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. We’ll see you guys back next Wednesday with a new guest and make sure you guys join our Facebook group: Real Estate Rookie. We’ll see you guys again.


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    HW+ appraiser calculator

    Robin Sheridan, a real-estate broker with Compass Washington, recently listed a three-bedroom home in Seattle for $795,000. The 76-year-old brick home had what Sheridan considered a “funky layout,” with two rooms added to the back that didn’t quite integrate into the flow of the home. Still, they functioned well as office spaces.

    Sheridan received 29 offers on the property, which went pending within five days – and sold for $1.013 million, or 27.4% over the list price.

    As anyone involved in the residential real-estate market knows, bidding wars – and contract prices exceeding the list price – are the norm today in many markets around the nation.

    Sheridan’s listing appraised at the contract price, and the deal went through without a hitch. But how do appraisers value a home in a market where prices are escalating rapidly – and where nearly two-thirds (64%) of listed homes faced bidding wars in March, according to Redfin, due to low mortgage rates and a severe shortage of homes for sale?

    “The challenge is that the sales data you’re looking at is dated,” said Shawn Telford, chief appraiser at CoreLogic. “While the comparable sale might have closed three months prior to the appraisal, it went under contract before that, and market conditions five months ago were different than they are today. That’s where appraisers put on their thinking caps and dig in and do their research on how they might adjust the comparable sale they’ve selected to account for current market conditions.”

    Indeed, time adjustments are a valuable tool that appraisers use to reflect changing prices in the local housing market. “They might look at the last three to six months of sales activity – or longer – in a defined market and try to extrapolate what the trend is,” Telford said. “If home prices increased month over month by 1%, they can use that pattern to support an upward adjustment to the comparable to accurately reflect what the subject property might be doing.”

    The rest of this content is for HW+ members. Join today with an HW+ Membership! Already a member? log in

    HW+ includes weekly long-form digital content, HousingWire Magazine, access to HousingStack, and free admission to all HousingWire virtual events.

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    As you probably know by now, the Federal Housing and Finance Agency has limited GSEs to a 7% cap on loan purchases for second home and investment properties. This means that lenders who sell these types of loans to Fannie Mae and Freddie Mac will be subject to restrictions if their volume exceeds 7%. 

    How does this impact originators? It could pose a real challenge. Real estate investors see a significant opportunity in the single-family rental space. Due to tight inventory and increased competition, investors need to close on loans quickly. They need a go-to lender who can get it done. This is a new environment of managing specific loan volume within the overall agency production, now and going forward. The options for originators and their real estate investor clients get smaller trying to find someone to do these loans. Along with the cap, guidelines are tightening for these loans, making alternative loan solutions––such as non-QM––a must-have loan offering outside of Agency. 

    Are there lenders not subject to the limit? Yes, and Angel Oak Mortgage Solutions is one of them. Our loans are backed by private capital through our affiliate Angel Oak Capital Advisors and we are not held to limits set forth by the FHFA. This allows us to continue to support originators and their investor clients without any restrictions. It is business as usual for us when it comes to second home and investment loans. We have Agency options, and when that won’t work, we can pivot quickly to a non-QM product without a delay for a quick close. 

    What are solutions outside of Agency? Angel Oak Mortgage Solutions offers several non-QM loan options to purchase second homes and investment properties. Investor Cash Flow is an easy loan for real estate investors not wanting to use tax returns or income. This loan qualifies using the cash flow of the property. A Bank Statement loan allows bank statement submissions instead of tax returns. Full doc options include Platinum Jumbo and Portfolio Select. Portfolio Select is a good option for those just two years out of foreclosure, short sale, bankruptcy or deed-in-lieu. 

    Find a non-QM partner: Angel Oak Mortgage Solutions not only has the product options to help but also many other resources for support. Finding buyers for investment and second home loans doesn’t have to be a challenge when you have a lender helping you. We can help educate you and your referral partners so that it is understood that the FHFA cap is not a risk aversion but a decision to simply better manage a disproportionate focus on investor loans. Let us educate you on how to use non-QM to close more of these loans resulting in more referrals. We have presentations, marketing flyers and innovative products ready to help you get it done. We will schedule a meeting or webinar anytime for you or your clients. 

    Learn more

    The post How does the FHFA 7% loan cap on GSEs affect originators? appeared first on HousingWire.

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