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Yearly Archives: 2021

Mortgage Rates Up Slightly – But Still-Low 3.12%

Mortgage rates changed little this week, though the survey took place before the Fed announced three possible 2022 rate hikes, which might have an impact.

SILVER SPRING, Md. (AP) – The average interest rate on a long-term mortgage in the U.S. ticked up slightly this week but remained historically low just as the Federal Reserve announces that it will begin tightening credit.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year, fixed rate home loan was up this week to 3.12% from 3.10% last week. A year ago, the rate stood at 2.67%.

The average rate on a 15-year mortgage fell again this week, to 2.34% from 2.38% last week. One year ago, that rate was 2.21%.

On Wednesday, the Federal Reserve announced, as expected, that it would begin dialing back its monthly bond purchases – which are intended to lower long-term rates – to combat accelerating inflation. That move could raise borrowing costs across the economy in the coming months, but policy changes don’t always immediately affect other loan rates. Even with three rate increases next year, its benchmark rate would still be historically low, below 1%.

Demand for housing has surged during the pandemic as people seek more space after being holed up at home for the better part of nearly two years. Even with rock-bottom interest rates, many would-be homebuyers have been left empty-handed due to a limited supply and home prices around 20% higher than a year ago.

Builders have struggled to keep up with demand as supply chain breakdowns continue to delay projects, compounding the lack of available homes and skyrocketing prices.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

https://www.floridarealtors.org/news-media/news-articles/2021/12/mortgage-rates-slightly-still-low-312

FHFA Says It Found Racial Bias in Appraisals

The federal housing agency claims it saw thousands of cases of potential bias, based on a keyword search for red-flag words in millions of appraisals.

WASHINGTON – The Federal Housing Finance Agency (FHFA) says it found thousands of cases of potential bias in neighborhood descriptions written by appraisers used for home valuations. Under the allegation it included in a blog post, the FHFA described its findings after examining millions of agency property valuations.

“From millions of appraisals submitted annually, a keyword search resulted in thousands of potential race-related flags,” Chandra Broadnax, senior examination specialist, and James Wylie, an associate director, wrote in the Dec. 14 post.

The FHFA is part of an interagency task force to examine the role bias could be playing in housing inequity. The task force plans to provide recommendations to the White House early next year.

The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice prohibit appraisers from advocating for the cause or interest of any party or issue. Also, USPAP states an appraiser must not perform an assignment with bias and must comply with all laws, regulations and applicable client requirements. The Federal Fair Housing Act has prohibited racial discrimination in appraisals since 1968 as do State fair housing laws throughout the country.

Still, several allegations of appraisal bias have surfaced over the past year.

In the Realtor Magazine May-June issue, Dawn M. Molitor-Gennrich, president of Molitor-Gennrich Consulting Inc., and Francois K. Gregoire, 2021 vice-chair of the National Association of Realtors®’ Real Property Valuation Committee, wrote that even “without ill intent, some may not always competently adhere to appraisal standards. Recognizing the urgency of maintaining public trust, industry leaders will continue to address allegations of illegal conduct.”

Molitor-Gennrich and Gregoire spotlighted several recent efforts by the appraisal industry to address recent allegations.

The FHFA’s review focused on what appraisers wrote on appraisal forms regarding neighborhood descriptions and other attributes. In the FHFA blog post, agency officials cited examples where appraisers referenced the neighborhood’s racial makeup or the percentage of the local population comprised of immigrants. Another example the FHFA cited from its report was a neighborhood description that explained the area as “originally founded as whites-only city or sundown town” but has since become “fairly diverse” with a “diverse school system.”

“By updating industry norms on the type of neighborhood information that is appropriate to include and moving neighborhood descriptions away from the examples we shared above, we can begin to establish more equitable assessments that ensure fair and unbiased property valuation for all,” Broadnax and Wylie wrote in their blog post on Dec. 14 at FHFA.gov.

Source: “Reducing Valuation Bias by Addressing Appraiser and Property Valuation Commentary,” FHFA Insights Blog (Dec. 14, 2021) and “Thousands of Home Appraisals May Contain Racially Biased Language, Federal Regulator Finds,” MarketWatch (Dec. 15, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/fhfa-says-it-found-racial-bias-appraisals

Buyers Are Going to Santa Claus (Indiana)

Looking to live on Silver Bell Circle or Mistletoe Drive? Agents in Santa Claus, Ind., say buyers from across the U.S. are moving in due to the town’s name.

NEW YORK – Santa Claus, Ind., and Frankenmuth, Mich. – another Santa-inspired wonderland – have been booming since the start of the pandemic, The New York Times reports.

“We have a lot of people moving to Santa Claus from California, Illinois and Minnesota,” Lisa Gengelbach, a broker at Key Associates, told The New York Times. “A lot of them are retiring here, but there are families coming, too. … The name of the community is what brings a lot of people here, and the feeling keeps them here. But it’s not over the top; it’s not gaudy. It’s not like everything is red and white.”

In Santa Claus, Ind., the streets have merry names – like Silver Bell Circle and Mistletoe Drive – and themed communities, such as the gated community of Christmas Lake Village, which has three lakes named Holly, Noel and Christmas. The small-town appeal, St. Nick statues around town and holiday-themed businesses, like Santa Claus Haus and Santa’s Candy Castle, have drawn new residents in search of yearlong yuletide cheer during the pandemic.

“We looked at other towns near here that had equal value in terms of real estate, but they didn’t have that extra Santa thing,” says Nancy Schwab, who relocated with her husband to Santa Claus, Ind., during the pandemic. “That was the deciding factor. This is an enchanting, darling place – just Christmas all the time.”

Another Santa-inspired town, Frankenmuth, Mich., about 80 miles northwest of Detroit, has also seen new residents moving since the pandemic began.

“Either they had family ties here or they’d heard good things about it, and because of COVID, they could work from home,” says Andrew Keller, an owner of JMW Real Estate. Keller says he has had more than $15 million in business in Frankenmuth this year, about a 50% increase compared to 2019.

Source: “Santa Claus’s Real Estate Is Booming,” The New York Times (Dec. 14, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/buyers-are-going-santa-claus-indiana

What Does 2022 Hold? NAR Asked 20 Experts

Housing prices will climb 5.7% and inflation, while declining, will be 4%. NAR Chief Economist Yun predicts interest rates will rise to a still-low 3.5%.

WASHINGTON – Expect slower housing price appreciation, easing inflation and rising interest rates in 2022, according to a survey of more than 20 top U.S. economic and housing experts by the National Association of Realtors® (NAR).

Lawrence Yun, NAR chief economist and senior vice president of research, unveiled the consensus forecast during NAR’s third annual year-end Real Estate Forecast Summit.

For 2022, the group of experts predicted that annual median home prices will increase by 5.7%, inflation will rise 4% and the Federal Open Market Committee will twice increase the federal funds rate by 0.25%. However, that prediction may already come up a bit short, since the Fed announced on Wednesday that it will likely raise interest rates three times next year.

“Overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. “Though forecasted to rise 4%, inflation will decelerate after hefty gains in 2021, while home price increases are also expected to ease with an annual appreciation of less than 6%. Slowing price growth will partly be the consequence of interest rate hikes by the Federal Reserve.”

Mortgage rates have an imperfect relationship with interest-rate hikes, which tend to directly impact short-term credit, such as credit cards and adjustable-rate mortgages (ARMs). However, Fed boosts to interest rates do have a tendency to move rates higher on longer-term loans, such as 30-year mortgages.

Yun forecasts that U.S. GDP (growth domestic product) will grow at the typical historical pace of 2.5%, barring any major, widespread transmission of the omicron COVID-19 variant. He expects the 30-year fixed mortgage rate to increase to 3.5% as the Fed raises interest rates to control inflation but noted this is lower than the pre-pandemic rate of 4%.

Looking back at the housing market this year, Yun says it performed better than it has in 15 years, with an estimated 6 million existing-home sales. As mortgage rates tick up slightly, Yun predicts that existing-home sales will decline to 5.9 million in 2022. He also forecasts a modest increase in housing starts to 1.67 million as the new-home industry sees some relief from supply-chain backlogs.

At the economic summit, NAR also identified “Top 10 Housing Market ‘Hidden Gems’” – areas expected to see outsized price growth in 2022.

Two of those “hidden gems” are in Florida: Palm Bay-Melbourne-Titusville and Pensacola-Ferry Pass-Brent.

“The housing sector performed spectacularly in 2021 in many markets, with huge gains achieved in places like Austin, Boise and Naples,” Yun said. “Several markets did reasonably well in 2021, but not as strong as the underlying fundamentals suggested. Therefore, in 2022, these ‘hidden gem’ markets have more room for growth.”

© 2021 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2021/12/what-does-2022-hold-nar-asked-20-experts

Citizens’ Board Rejects 8% Rate Hike, Asks for 11%

After the Fla.-owned property insurer’s staff announced its recommendation – an 8% average policy rate increase – the board rejected it and now wants a full 11%.

TALLAHASSEE, Fla. – With thousands of new policies a week pouring into Citizens Property Insurance Corp., the state-backed insurer’s board on Wednesday approved seeking 11% across-the-board rate increases next year.

The Citizens Board of Governors tossed aside a widely reported staff recommendation that, in part, called for increasing homeowners’ rates by an average of 7.3% in 2022, with the hikes varying based on factors such as location.

The 11% increase would still need approval from the Florida Office of Insurance Regulation, and it wouldn’t take effect until August when policies start to renew.

The board also decided to request an across-the-board hike of 12% that would take effect for policies that renew in 2023.

“Why don’t we go for the 11% and call it a day?” board Chairman Carlos Beruff said after Citizens Chief Actuary Brian Donovan raised it as an option.

The decision, which came after little board discussion and no public input during a meeting in Tampa, would mean Citizens is raising rates by the maximum amounts allowed by a new state law.

In the past, Citizens was prevented from passing along increases of more than 10% a year to individual policyholders – a concept that has become known as a rate “glide path.” The new law (SB 76) gradually increases that cap to 11% in 2022, 12% in 2023 and ultimately to 15% in 2026.

Citizens, which was created as an insurer of last resort, has seen massive growth during the past two years as financially struggling private insurers have dropped policies and sought large rate increases from regulators. As of Friday, Citizens had 747,654 policies. By comparison, it had 532,788 policies on Nov. 30, 2020, and 444,323 policies on Nov. 30, 2019, according to data posted on the Citizens’ website. Citizens officials expect to have more than 1 million policies by the end of 2022.

Citizens President and CEO Barry Gilway said private property insurers have been losing money in Florida since 2017.

“When they’re unprofitable, they want to write less business,” Gilway told the board Wednesday. “That’s what’s happening.”

Gilway also said Citizens’ rates are “ridiculously competitive,” typically charging less than private carriers.

State leaders have long sought to shift policies from Citizens to the private market, at least in part because of potential financial risks if major hurricanes hit the state. But in parts of Florida, homeowners have little choice but to turn to Citizens for coverage.

The Citizens staff recommendation going into Wednesday’s meeting would have led to an average 8% increase in 2022 for what are known as “personal lines” accounts. That included the average 7.3% hike for homeowners, along with increases for condominium-unit owners and renters.

It’s unclear whether the Office of Insurance Regulation will allow 11% and 12% across-the-board hikes. In approving 2021 rates, regulators rejected some proposals by the Citizens board, including a proposal that would have led to substantially higher rates for new customers of the state-backed insurer.

Source: News Service of Florida

https://www.floridarealtors.org/news-media/news-articles/2021/12/citizens-board-rejects-8-rate-hike-asks-11

DOJ Reaches Record Sexual Harassment Settlement: $4.5M

A N.J. landlord will pay $4.5M to settle DOJ’s lawsuit and an additional $107K civil penalty – the largest amount allowed under the Fair Housing Act.

ELIZABETH, N.J. – A New Jersey landlord has agreed to pay $4.5 million to settle a lawsuit alleging he demanded sexual favors from tenants to keep their housing and evicting those that resisted his advances.

The settlement agreed to by Joseph Centanni, a landlord who has owned hundreds of rental units in and around Elizabeth, N.J, is the largest settlement the U.S. Justice Department says it’s secured over alleged sexual harassment in housing.

“The need for housing is a basic human need,” Acting U.S. Attorney Rachael A. Honig of the District of New Jersey, said in a statement. “Joseph Centanni exploited that need, and the important federal programs that attempt to meet it, by threatening to deny his victims a roof over their heads if they did not submit to his demands for sexual acts.”

Raymond Londa, an attorney for Centanni, told CNN that his client “did not in any way shape or form admit or acknowledge wrongdoing or liability” and settled to avoid drawn-out litigation. “He continues to deny the allegations made against him in this and in any other cases,” said Londa.

The settlement money will compensate men and women allegedly targeted by Centanni, and awaits approval by the U.S. District Court for the District of New Jersey.

The department’s lawsuit was brought under the Fair Housing Act and alleges that Centanni harassed tenants for at least 15 years. According to the lawsuit, Centanni took applicants and tenants to empty apartments, laundry or storage rooms where he would ask for massages, expose himself, demand oral sex or force them to touch him.

The lawsuit alleges he demanded sexual favors to get or keep housing, as well as reduced rent. Additionally, Centanni will pay a $107,050 civil penalty, the largest amount allowed under the Fair Housing Act.

The department said Centanni participated in the federal Housing Choice Voucher Program (commonly known as Section 8) that paid him approximately $102,000 monthly.

In March, the Union County Prosecutor’s Office charged Centanni with committing sexual crimes against 13 tenants.

Copyright 2021 United Press International, Inc. (UPI). Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI’s prior written consent.

https://www.floridarealtors.org/news-media/news-articles/2021/12/doj-reaches-record-sexual-harassment-settlement-45m

1 in 5 Buyers Single Women – Twice the Percentage of Men

Single men and women buy homes for the same reason – a desire for ownership – but while 19% of all homebuyers are female, only 9% are men.

CHICAGO – According to the National Association of Realtors® (NAR), when it comes to homebuyers, the percentage of single women is second only to married couples.

Currently, single women make up 19% of the home-buying market, while less than half that percentage (9%) are single men, and married couples make up 60%.

Single women and men generally agree on their reasons to buy – a high desire to own a home of their own – even though women outnumber men by about a 2-1 ratio. However, their home selection can vary, and the number of women who purchase a home to be near friends and family is double that of men.

Single women buyers are also more likely to purchase a home if they have a child under the age of 18, and they’re more likely to purchase a multigenerational home to accommodate adult siblings, adult children and grandparents: 17% of single women buyers have kids under the age of 18 who live with them, and 13% live in a multigenerational home, according to NAR’s Profile of Home Buyers and Sellers.

Source: Realtor Magazine (12/10/21)

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https://www.floridarealtors.org/news-media/news-articles/2021/12/1-5-buyers-single-women-twice-percentage-men

Evictions Slowly Rise After Ban Ends

BOSTON (AP) – Soon after losing his trucking job amid the pandemic, Freddie Davis got another blow: His landlord in Miami was almost doubling the rent on his Miami apartment.

Davis girded for what he feared would come next. In September, he was evicted – just over a month after a federal eviction moratorium ended. He’s now languishing in a hotel, aided by a nonprofit that helps homeless people. The 51-year-old desperately wants to find a new apartment. But it’s proving impossible on his $1,000-a-month disability check.

“We live in America, and the thing is, people like me, we got to go to the street if we don’t have no other place to go because we can’t afford rent,” said Davis, who lost a leg to diabetes, suffers congestive heart failure and is recovering from multiple wounds on his other leg and foot. “I really can’t do nothing.”

The federal ban, along with a mix of state and federal moratoriums, is credited with keeping Davis and millions of others in their homes during the pandemic and preventing the spread of the coronavirus.

There was a brief lull in evictions after the ban ended. But housing advocates say they’re on the rise again in many parts of the country – though numbers remain below pre-pandemic levels due to the infusion of federal rental assistance and other pandemic-related assistance, like expanded child tax credit payments that are also set to end.

Part of the increase is due to courts catching up on the backlog of eviction cases. But advocates say the upsurge also shows the limits of federal emergency rental assistance in places where distribution remains slow and tenant protections are weak. Rising housing prices in many markets also are playing a role.

According to the latest data from the Eviction Lab at Princeton University, evictions have been rising in most of the 31 cities and six states where it collects data. Evictions in September increased 10.4% from August. October numbers were 38% above August levels and 25% higher than in September. Filings fell around 7% from October to November and now remain nearly 48% below pre-pandemic levels.

Among places where evictions are returning to normal are Connecticut as well as Houston, Indianapolis, and Cincinnati and Columbus, Ohio, according to the Eviction Lab.

Florida, too, has seen a significant rise, with filings in Tampa and Gainesville returning to near pre-pandemic levels.

“There was a batch of initial commentary coming out when the moratorium ended and the tone … was, well, there wasn’t a tsunami so we don’t have an eviction crisis on our hands,” said Ben Martin, senior researcher at Texas Housers, a nonprofit focused on housing issues. “That initial narrative was somewhat misleading. What we are seeing is a reflection of reality, which is that evictions take time to work their way into and through the court system.”

Among the concerns is that landlords who got federal assistance are still evicting tenants. A survey of nearly 120 attorneys nationwide from the National Housing Law Project found 86% had seen cases like this. They also saw increasing instances of landlords lying in court to evict tenants and illegally locking out tenants.

“In many states, landlord tenant law is antiquated and designed to provide results for landlords,” said Shamus Roller, executive director of the National Housing Law Project. “Instead of adjudicating the facts, courts function as conveyor belts, moving tenants toward eviction.”

Among those who contend they were illegally evicted is Faye Moore. The 72-year-old returned home from work in October to find her life spread out on the sidewalk.

Behind several thousand dollars rent on her two-bedroom townhouse in an Atlanta suburb, Moore figured she would get the chance to present her case to a judge, including that the management refused to take her rent money for months and that she was given no notice before she was evicted.

“I’m devastated. It was a house full of furniture. Everything,” said Moore, a retired mental health therapist who is now staying in a hotel with her 61-year-old partner, Garry Betared. “It was like a storm came in and devastated everything. I can’t find my important papers or anything.”

Cicely Murray, a HUD housing counselor with the Neighborhood Assistance Corporation of America who is working with Moore, was most upset that the couple were evicted without a court hearing and forced to fend for themselves.

“I’m angry that anyone would put an elderly couple out without trying to figure out what resources are there,” Murray said. “We are still in a pandemic. … You are putting people in precarious situations who are some of the most fragile.”

As Christmas approaches, there are plenty of signs that eviction cases will keep rising.

According to the U.S. Census Bureau’s Household Pulse Survey, those saying they weren’t confident of paying next month’s rent increased from about 5 million at the end of September to 6.3 million in the latest data.

States and localities are also struggling to spend their portion of the $46.5 billion in federal Emergency Rental Assistance. According to a November report from the National Low Income Housing Coalition, 28% of grantees – 32 states and 80 localities – spent less than 30% of their first allocation of money and risk losing those funds. Among them is Nebraska, which spent only 6% of its funding through September and just 7% through October.

Some landlords are refusing to take part in the program, said Caitlin Cedfeldt, a staff attorney at Legal Aid of Nebraska, while others have grown tired of waiting and are moving to evict. Tenants, some of whom got initial help but still face economic hardship, are being told they can’t yet reapply for additional help.

Missouri only spent 18% of its funding through September but has since improved.

“We have so much more work to do,” U.S. Rep. Cori Bush, a St. Louis Democrat, said, citing data showing that evictions during the pandemic “have taken lives.”

There are some states and local governments that “feel, ‘We don’t want this money. We don’t want this federal aid,” she said. “And, we have some landlords who say that they don’t want the money as well. So that makes it harder for the money to be dispersed.”

Gene Sperling, who is charged with overseeing implementation of President Joe Biden’s $1.9 trillion coronavirus rescue package, said some increase in evictions was inevitable after the ban ended. “But fortunately because the Emergency Rental Assistance program is now paying full back-rent to about 500,000 renters each month, the eviction tsunami that experts feared has not occurred,” he said.

Georgia, which spent less than 10% through November, has announced a plan to speed up dispersal using a tool to check whether renters have gotten help and to increase awareness of the program.

On the flip side are states and cities running out of rental assistance. The Treasury Department expects that upwards of $30 billion, or about two-thirds of the money, will have been spent or allocated by the end of the year. As the law dictates, Treasury is expected to begin reallocating funds from places not spending it to those in need.

Texas has stopped accepting new applicants because it has allocated all its funds, though it continues to process applications received before the deadline. Oregon has stopped taking new applicants for now.

The state of New York has spent or committed nearly all of its money, as has Philadelphia. California will soon exhaust its funds, while Atlanta has closed its program to new applicants. Austin, Texas, also stopped taking applications.

“It’s particularly concerning that a number of these programs are now shutting down because all funds have been expended or obligated,” said Peter Hepburn, research fellow at the Eviction Lab. “If that funding gets removed, landlords may have less incentive to work with tenants.”

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. Associated Press writers Adriana Gomez in Miami and Jim Salter in O’Fallon, Missouri, contributed to this report.

https://www.floridarealtors.org/news-media/news-articles/2021/12/evictions-slowly-rise-after-ban-ends

Fed Meets: Expect 3 Interest Rate Hikes in 2022

In an abrupt policy shift, the Fed will also stop economy-boosting bond purchases twice as fast as planned, and possibly halt that program altogether in March.

WASHINGTON (AP) – The Federal Reserve will quicken the pace at which it’s pulling back its support for the post-pandemic U.S. economy as inflation surges, and it expects to raise interest rates three times next year.

In an abrupt policy shift, the Fed announced Wednesday that it will shrink its monthly bond purchases at twice the pace it previously announced, likely ending them altogether in March. The bond purchases were intended to hold down long-term rates to aid the economy but are no longer needed with unemployment falling and inflation at a near-40-year high. The accelerated timetable puts the Fed on a path to start raising rates in the first half of next year.

The Fed’s new forecast that it will raise its benchmark short-term rate three times next year is up from just one rate hike it had projected in September. The Fed’s key rate, now pinned near zero, influences many consumer and business loans, whose rates would likely also rise.

The policy change the Fed announced in a statement after its latest meeting had been signaled in testimony Chair Jerome Powell gave to Congress two weeks ago. The shift marked Powell’s acknowledgement that with inflation pressures rising, the Fed needed to begin tightening credit for consumers and businesses faster than he had thought just a few weeks earlier. The Fed had earlier characterized the inflation spike as mainly a “transitory” problem that would fade as supply bottlenecks caused by the pandemic were resolved.

But the run-up in prices has persisted longer than the Fed expected and has spread from goods like food, energy and autos, to services like apartment rents, restaurant meals and hotel rooms. It has weighed heavily on consumers, especially lower-income households and particularly for everyday necessities, and negated the higher wages many workers have received.

In response, the Fed is shifting its attention away from reducing unemployment, which has fallen quickly to a healthy 4.2%, down from 4.8% at its last meeting, and toward reining in higher prices. Consumer prices soared 6.8% in November compared with a year earlier, the government said last week, the fastest pace in nearly four decades.

The Fed’s new policy shift does carry risks. Raising borrowing costs too quickly could stifle consumer and business spending. That, in turn, would weaken the economy and likely raise unemployment.

Yet if the Fed waits too long to raise rates, inflation could surge out of control. It might then have to act aggressively to tighten credit and potentially trigger another recession.

Fed officials have said they expect inflation to cool by the second half of next year. Gas prices have already come off their peaks. Supply chain bottlenecks in some areas are gradually easing. And government stimulus payments, which helped spur a spike in spending that boosted inflation, aren’t likely to return.

Yet many economists expect high prices to persist. That likelihood was reinforced this week by a government report that wholesale inflation jumped 9.6% for the 12 months ending in November, the fastest year-over-year pace on records dating to 2010.

Housing costs, including apartment rents and the cost of homeownership, which make up about one-third of the consumer price index, have been rising at a 5% annual pace the past few months, economists at Goldman Sachs have calculated. Restaurant prices jumped 5.8% in November from a year ago, a nearly four-decade high, partly reflecting higher wage costs. Such increases will likely keep inflation well above the Fed’s 2% annual target next year.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

https://www.floridarealtors.org/news-media/news-articles/2021/12/fed-meets-expect-3-interest-rate-hikes-2022

Multifamily Owners Also Holding on to Property

NEW YORK – Multifamily investors are increasing hold times for their properties, and not just by a few months either. Investment firms and fund managers are doubling and even tripling hold periods, partly because it’s what their investors want, and partly because it just makes sense, given current market conditions.

Historically, hold periods for multifamily properties have not lasted beyond five years. Investors – small and large, private and institutional – didn’t want to lock up their money for an extended period of time. In fact, the thought of committing to a particular asset for 10 to 15 years was intensely unappealing because it didn’t allow owners the flexibility to change course.

But the need to cut and run is no longer as strong, and that changed sentiment is leading to a shift in hold periods, according to Jahn Brodwin, a senior managing director with management consulting firm FTI Consulting.

“I’m hearing a lot of frustration from my clients – how hard it is to find investments that meet their criteria – and the answer is to buy more dynastically,” Brodwin says. “A lot of the wealth in this world has been built by owning the same real estate for several decades.”

Managers that previously held assets for three years are stretching their ownership from five to seven years. And those that previously held multifamily assets for longer than seven years are shifting their investment strategy to 10 years or longer.

“This is evolutionary,” says Brodwin. “Real estate fund managers have this pile of money that they’re trying to deploy, and it just doesn’t make sense, on a short-term basis, to sell the multifamily assets they already own, given what’s happening with cap rates, inflation and housing demand dynamics.”

Investors want their dollars to continue working

The Beach Company, based in Charleston, S.C., has been investing in commercial real estate since 1945, typically underwriting shorter hold periods for its multifamily investments. Its new fund, Beach Real Estate Fund (BREF), is structured differently: investing exclusively in multifamily properties across the Southeast, it buys with a planned seven-year hold with three one-year extensions.

The firm’s decision to increase its hold period for the new fund was driven, in part, by investor preference. By and large, BREF investors don’t want to go through the investment decision process over and over. They also prefer recurring yields over capital gains and other taxes, which means they gravitate toward longer-term investments. In fact, some investors favor hold periods in excess of those outlined by the fund, up to 10 years.

“Our investors are primarily investing for the long term, and they want their dollars to be at work producing consistent yields for the long term,” says Leonard Way, senior vice president and fund manager with BREF. “They enjoy making a profit, but then want to get the money back to work.”

Longer holds align with positive multifamily outlook

But accommodating investor preferences is just one of many reasons fund managers and investment firms are lengthening their hold periods. The positive outlook for the multifamily sector, driven by a shortage of housing and promises of strong renter demand and NOI growth for the foreseeable future, are reasons enough to hang onto multifamily assets.

“This demand makes multifamily properties a longer duration asset,” says Al Lord, founder and CEO of Lexerd Capital Management, a Summit, N.J.-based real estate investment firm that has managed more than $1 billion in assets since its founding and primarily acquires opportunistic multifamily assets.

Lord points out that investment firms and asset managers often look to Freddie Mac’s National Apartment Investment Market Index (AIMI) when evaluating whether to hold or dispose of multifamily assets. The index captures key performance measures of a representative sample of properties across major U.S. markets and compares rental income to the cost of investment, property price growth and mortgage rate.

Through the pandemic, AIMI has shown considerable strength. Heading into the third quarter, the index increased 5.2% compared to an average of just 2.0% over the past two years. Property prices increased 7.5%, while the historical average was 6.6%, and permits were down by 3.9%, in contrast to a historical average of 11.7%.

“As conditions for improved cash flows from rental income continue, institutional investors will prefer to hold multifamily assets for a longer horizon,” Lord says.

Inflation encourages multifamily investment

If the promise of NOI growth isn’t enough to motivate fund managers and other investors to stay the course with their existing holdings, today’s inflationary market will likely push them over the edge.

Historically, multifamily assets have been good hedges against inflation. As inflation expectations rise, fund managers will likely prefer to extend the hold periods for these assets to mitigate adverse consequences from inflation risk, Lord says.

The annual inflation rate in the U.S. surged to 6.2% in October 2021, the highest since November 1990 and above forecasts of 5.8%. Economists expect the inflation rate to reach 6.3% by the end of the year.

Earlier this month, Federal Reserve Chair Jerome Powell said it’s likely that inflation will moderate “meaningfully” in the second half of 2022 as supply chains issues get resolved, but “the risks of higher inflation have moved up.”

“When you’re in an inflationary period, the question is whether the inflation will be sustained, how long and how much,” Brodwin notes. “Multifamily properties tend to perform better because most leases reset every year, if not sooner, and owners have the ability to take advantage of the inflationary increase while costs remain fixed. They’re essentially making money two ways.”

Struggling to redeploy capital

Beyond macroeconomic trends, asset managers might also feel compelled to extend their hold periods because there’s so little available inventory. There’s a dearth of properties on the market, and competition far exceeds supply, so investment firms aren’t sure they’d be able to find enough multifamily properties to acquire.

“I do think that low supply and high demand is keeping people in their investments because the pool of attractive alternatives is pretty small,” says Tess Gruenstein, senior vice president of acquisitions and portfolio management at Bailard, a $5 billion wealth management firm. “If I own great institutional-quality multifamily product and sell it, I’m going to have to replace it. I’m taking a gamble. Who knows what I’ll end up with? But if I stick with what I have, I already know how it’s performing and what to expect.”

Dori Nolan, senior vice president of national client services at mortgage services provider Berkadia. says she’s seen several owners decide to recapitalize or refinance existing assets even though they initially planned for a five-year hold. “They have decided to recapitalize or refinance because they like the real estate and market,” she notes. “Product is scarce, so they don’t want the money back because they can’t deploy it.”

Jeff Klotz, CEO of The Klotz Group of Companies, says the Florida-based multifamily firm has incrementally increased its hold periods since 1995. On the low end, the company’s typical hold period was 24 months. Now, it’s 48 months or longer.

“Although we can sell at a high price, we are struggling to find places to redeploy that capital,” Klotz notes, adding that limited inventory and difficulties in redeploying capital are working together to create a vicious cycle.

“The more crowded the market becomes, the less inventory becomes available, forcing owners to hold for longer periods, thus further reducing the inventory available and increasing hold periods.”

© 2021 Penton Media

https://www.floridarealtors.org/news-media/news-articles/2021/12/multifamily-owners-also-holding-property

Realtors Step Up After Southern Tornado Strike

Dozens of lives were lost when tornadoes hit dozens of towns, and a local Realtor association’s building suffered major damage as people start to rebuild.

MAYFIELD, Kentucky – The historic series of tornadoes that tore through the South left a highway of destruction in their wake. Many homeowners lost everything, and Realtors have been stepping in to help.

An early theme in helping victims, however, is what to do? Immediate needs – food, shelter, clothes – must be addressed, but with so much loss, programs to address immediate, short-term and long-term needs are just now being formulated. Kentucky Governor Andy Beshear says that assessing the destruction will take weeks.

Realtors – a part of every American community – also felt the impact. In one of the hardest-hit cities, Mayfield, Kentucky, the Mayfield-Graves County Association of Realtors® had significant damage to its building with its roof torn off, though no one was inside at the time. Executive Officer Jensey Blackwood shared a photo of the building on Facebook.

Marsha Case, president of the Central Kentucky Association of Realtors®, lives about 250 miles away from where the tornadoes hit, and has been collecting supplies to take down to the victims. “There’s agents from every office, other brokerages are dropping off – it’s just a team effort,” Case said to RisMedia. “Everyone is trying to do something – every walk of life, just bringing bags and boxes and everything they have that they can possibly get down there.”

“Our hearts are with those impacted by the tornadoes that devastated much of the southern and midwestern United States this weekend,” according to a statement from National Association of Realtors® (NAR) President Leslie Rouda-Smith. “NAR and the Realtors Relief Foundation are working with our partners on the ground – particularly in Kentucky – to determine how we can most effectively help these communities heal and recover.”

Other ways Realtors can help

  • American Red Cross: The American Red Cross continuously collects donations for people impacted by disasters. The Red Cross uses monetary donations to provide essentials like hot meals, hygiene items and shelter to those with the greatest need. Donate online by visiting the American Red Cross website.
  • The United Way has established a U.S. Tornado page focusing on Central United States Tornado Response and Recovery Funds. Currently, they’ve identified four communities within Kentucky, West Tennessee, Missouri and Northeast Arkansas seeking donations and support. Additional communities will be added as damages and relief needs are assessed. 
  • Disaster Recovery Fund of St. Louis: The United Way of Greater St. Louis is collecting donations through their Disaster Recovery Fund to support the long-term recovery needs of community members impacted by the tornadoes. To aid those living in Missouri, visit the United Way of Greater St. Louis website to learn more about online and offline donations.
  • Northeast Arkansas Tornado Recovery Fund: The United Way of Northeast Arkansas established a Tornado Recovery Fund to aid those impacted and devastated by the tornadoes. They partnered with local officials to ensure that all donations are distributed to communities with the greatest need. Donate to the Northeast Arkansas Tornado Recovery Fund by visiting the United Way website.
  • Tennessee Disaster Relief: The United Way of Tennessee is collecting online and offline donations through the Tennessee Disaster Relief fund. They provided a list of counties most in need with links to donate directly to those areas. Donate by visiting the United Way of Tennessee website.
  • United Way of Kentucky: Kentucky’s United Way network is working with emergency management and disaster partners to aid communities and families devastated by the tornados. They’re collecting online donations through the United Way of Kentucky website and asking people to consider rounding up their donations to cover the cost of credit card processing fees.

© 2021 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2021/12/realtors-step-after-southern-tornado-strike

A Fla. Company’s Holiday Bonus? 2 Free Homes

A/C and plumbing company Mechanical One will hold a drawing and give away two homes next Dec. – a bonus and one-year employee-retention incentive.

ALTAMONTE SPRINGS, Fla. (AP) – While many companies are offering bonuses or higher pay as a way to lure and keep workers, a central Florida business is offering a drawing for two brand new and mortgage-free houses.

Mechanical One, which provides air conditioning and plumbing for new developments, is planning to hold the drawing next December, President and CEO Jason James told the Orlando Sentinel.

“My passion is really trying to reinvent employee appreciation,” James said. “Our business model is really, if we take care of our people, they are going to do more for us than any marketing budget.”

The company has bought two lots for the three-bedroom, two-bath homes and has set aside a $500,000 budget for the project.

James told the newspaper he thought about other incentives, such a giving away a car or a vacation. But then he decided he wanted his employees to be able to enjoy their own homes.

“Many of our employees own a home already, but a lot of them rent,” he said.

To qualify for the drawing, employees must be with the company for a full year and take a financial literacy class, paid for by the company. They also must perform 20 hours of community service at a nonprofit of the employee’s choosing.

“They get a financial education, which helps them get to the goal of owning their own home anyway, and it has an impact on the community,” James said.

The privately held company of nearly 100 people began operations in July, so no employees qualify yet, the newspaper reported. James announced the drawing during a Dec. 4 employee gathering.

The home giveaway is another in a series of steps companies have taken this year to fight against what some call the Great Resignation. Many workers who left jobs during the pandemic have not returned, and a survey by business consultants PwC found that 65% of employees are searching for a new job.

Many fast food chains have offered signing bonuses and corporations including Costco, Amazon and Chipotle have raised their minimum wages to $15 an hour or more.

James, 40, told the Sentinel he was inspired to create a company with an employee focus after a stint with Chik-fil-A, which has twice-yearly outings for employees and their families and has a low-cost health care plan.

He had been working in HVAC and plumbing for about six years before starting his own company.

James said he and other new CEOs are part of a changing of the guard in the industry, incorporating more smart technology in buildings and with a keener eye on the labor pool.

“There’s a labor shortage in these trades because they’re skilled,” he said. “You’ve got to have quite a lot of exposure and training to understand these systems.”

Anthony Mitchell, Central Florida plumbing operations manager for Mechanical One, said excitement is already high throughout the company.

“There’s nothing like coming home to the wife and saying, ‘Honey, I’m bringing home a new house,’” he said.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

https://www.floridarealtors.org/news-media/news-articles/2021/12/fla-companys-holiday-bonus-2-free-homes

No Foreclosure Wave on the Horizon

Of the at-risk homeowners leaving forbearance, 73% have at least 20% home equity – and 28% have at least 50%. They may sell but they can avoid foreclosure.

DENVER – Millions of U.S. homeowners took advantage of a government program that provided them a reprieve from mortgage payments when their finances took a hit during the pandemic.

As the clock runs out on those “forbearance” agreements, a large majority of homeowners who sought relief have exited and are back on track with their payments. Just over 1 million active forbearance plans were still in place in mid-November, down from a high of nearly 5 million forbearance plans in the early days of the pandemic, according to Black Knight, a real estate data provider in Florida.

“Most borrowers, even though they had the ability to skip payments, kept paying,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association during a panel on the topic hosted by the National Association of Real Estate Editors in Miami on Wednesday. That makes it unlikely a surge in distressed sales and foreclosures will roil the markets in the months ahead, he and other experts on the panel predicted.

There will be somewhere around 180,000 mortgages in foreclosures this year, said Rick Sharga, an executive vice president with RealtyTrac. Before the pandemic, foreclosures were averaging closer to 500,000 a year, Sharga added. And although he predicts foreclosures will rise sharply in the months ahead on a percentage basis, it will be from a very low base. It won’t be until late next year when the volume returns to historic levels.

A big reason foreclosures won’t swamp the market is that many troubled borrowers have enough equity in their homes to sell and move on, even if that isn’t their preferred course. And buyers are waiting to snap up any that do show up.

RealtyTrac, in an analysis released Wednesday, estimates that 73% of borrowers currently in foreclosure have equity of 20% or more, while 28% had equity greater than 50% in the third quarter.

In Colorado, only 2% of homeowners are seriously underwater on their loans and 93% have positive equity, according to RealtyTrac.

During the housing boom and bust, about a third of all homeowners, not only those in foreclosure, owed more on their mortgages than their homes were worth. Those who got behind had no easy way of escape and a reduced incentive to try to hang onto their homes.

Although many struggling homeowners have home equity this time around, some also have damaged credit scores and diminished incomes that block them from tapping that equity, said Jim Riccitelli, CEO of Unlock, a new financial-tech firm that helps struggling borrowers tap the equity they couldn’t otherwise access.

Aside from turning to a specialized lender, the resale market does offer troubled borrowers with equity a quick out. About half of listings that hit the metro Denver market sold in five days or less last month, according to a report last week from the Denver Metro Association of Realtors.

But those struggling borrowers need to replace the homes they are leaving. And unlike during the housing crisis, the rental market is much less favorable and vacancy rates much lower.

In short, most troubled borrowers can get out, but they may not like the place they find themselves on the other side.

Copyright © 2021 The Denver Post Corp.

https://www.floridarealtors.org/news-media/news-articles/2021/12/no-foreclosure-wave-horizon

FEMA Calls for Comments to Improve Land-Use Rules

The public can attend a virtual meeting today and submit comments until Jan. 27. FEMA wants to make sure its planning rules consider climate change.

WASHINGTON – The Federal Emergency Management Agency (FEMA) is seeking input on how to change flood insurance, an influential program that both sets standards for resilience in buildings across the country and encourages repeated building in vulnerable areas.

FEMA’s open call for comments from the public will last until Jan. 27, and participants will have the opportunity to write in and attend a virtual meeting this afternoon. In particular, the agency is looking for feedback on how the program can update its land-use rules to better fit the floods of the future.

Right now, FEMA’s flood insurance rules – and the flood risk maps that underlie them – have major blind spots around climate change, using historical data that don’t consider future sea level rise and stronger rains. In parts of the country like the Charleston region, where swelling rivers and rising tides can collide with each other, the blind spots are worse because flood maps only consider one or the other.

But FEMA’s call for public input and a recent announcement that the agency is looking at several aspects of the insurance program are hopeful signs, said Joel Scata, a water and climate attorney with the Natural Resources Defense Council.

“I think this request for information is an acknowledgement by FEMA (that flood insurance is) not working as a program should,” he said.

Flood insurance was originally meant as a safety net for those caught in disasters that the private market won’t insure, and it’s required to get a mortgage on many homes. But it can serve to trap flood survivors in a cycle of destruction and repair, which The Post and Courier exposed in its 2020 report “Fixed for Failure.”

At the same time, the flood insurance program has been financially insolvent roughly since Hurricane Katrina in 2005. It carried $20.5 billion in debt as of August 2020, according to the Government Accountability Office.

Together with the Association of State Floodplain Managers, NRDC petitioned FEMA earlier this year to reconsider how it regulates development in the communities that are part of the flood insurance program. FEMA accepted that petition, and in asking for public comment now, is starting the process to potentially change the federal rules around the program.

“Right off the bat, we are at a place we haven’t been in 40 years, pretty much, in terms of updating the minimum standards of (flood insurance),” said Chad Berginnis, executive director of the floodplain group.

Among other rules, flood insurance regulations determine how high a building should be when it’s located in a floodplain. Cities and towns can choose to add on extra height to get a break on their insurance premiums, but advocates are hoping that FEMA will make the additional height standard nationally, to acknowledge that floods are worsening over time, Scata said.

Another nonprofit, Anthropocene Alliance, would like to see building discarded altogether in 100-year-storm floodplains, said co-founder Stephen Eisenman. He said that height rules can have unintended consequences, such as when houses are lifted by piling dirt on home lots – creating mounds that push more floodwaters into older developments.

FEMA is also considering a national standard that would dictate what homeowners have to say about their flood histories when selling their houses. That would be a major step because right now each state sets its own rules. South Carolina dictates that sellers have to disclose any FEMA claims they’ve made, a change that came after The Post and Courier’s reporting, but not how bad the damage was.

Eisenman’s group is right now running a “Flood FEMA” campaign, encouraging flood survivors to inundate agency officials with their personal stories. But the point isn’t just to pressure officials, he said.

“I think (FEMA) wants to make these changes,” Eisenman said. “Some of them may worry developers or politicians allied with local developers, and (the agency) needs to know the public supports them.”

Those who wish to write in with comments can do so online.

Copyright © 2021, The Post and Courier. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2021/12/fema-calls-comments-improve-land-use-rules

Fla.-Owned Citizens Insurance Wants 8% Hike in 2022

The increase is an average and could be more or less for some homeowners. The request must first be approved by the Office of Insurance Regulation.

TALLAHASSEE, Fla. – Citizens Property Insurance Corporation’s Board of Governors on Wednesday will be asked to approve a recommendation of a 2022 rate package that reflects a new 11% cap on annual rate increases in 2022.

Board members will consider a statewide average increase of 8.0% for personal lines policyholders – homeowners, condominium unit owners, mobile homeowners, dwelling and renters. If approved by the Office of Insurance Regulation (OIR), the 2022 rates would go into effect for new and renewal policies after Aug. 8, 2022.

Homeowner policies would increase by an average 7.3%. Condo owners would see an average 10.8% increase. Renters rates would increase by 9.0% on average.

By law, Citizens must recommend actuarially sound rates, while complying with a legislative glide path. In 2021, the Florida Legislature increased the rate cap on individual polices to 11% in 2022 and 12% in 2023, excluding coverage changes and surcharges. If approved, the recommendations will be submitted to the OIR.

Citizens prepared a 2022 rate kit, which provides information about its 2022 rate filing, including county-by-county estimates for specific policy types, along with frequently asked questions.

Source: News Service of Florida

https://www.floridarealtors.org/news-media/news-articles/2021/12/fla-owned-citizens-insurance-wants-8-hike-2022

What Will 2022 Real Estate Look Like in S. Fla.?

FORT LAUDERDALE, Fla. – After a year of record price growth in South Florida housing, what does 2022 hold? We asked experts to weigh in on a range of topics, from affordability to mortgage rates to migration and supply and demand.

Home prices will grow, but slower than the past year

Experts predict that prices for homes should increase, but not at the record pace they did over the past year and a half.

“We don’t expect to see the same price appreciation we had last year, though we don’t expect to see a decline in pricing,” said Eli Beracha, director of the Hollo School of Real Estate at Florida International University.

A realtor.com forecast predicts that South Florida housing prices may rise almost 6% over the next year, while a Zillow forecast predicts that home price appreciation could shoot up by 15%.

A few factors are going to cause slower price growth: more inventory as sellers try to capitalize on the hot market, new developments hitting the market and an increase in mortgage interest rates.

Demand from foreign and out-of-state buyers will continue to drive South Florida’s housing market, but experts also expect new inventory to alleviate some of the pressure that has been fueling the pandemic-era housing boom.

“I see a pretty hot market, with a little extra inventory coming into the marketplace. That may affect the balance a bit, but I don’t foresee a huge relief for buyers,” said Patty Da Silva, broker at Green Realty Properties in Cooper City.

On a national level, home prices could grow about 3%, according to realtor.com.

Experts say the market will still favor sellers, as demand and limited inventory will keep the balance in their favor. Bidding wars and multiple offers on homes will probably still be a common.

Another factor in pricing? The supply chain issues and lack of labor. Both will continue to lead to increased construction costs and thus higher prices for buyers, said Brett Forman, executive managing director, eastern U.S. at Trez Capital.

“It is more expensive and the labor, as well as the supplies, are more expensive, so naturally this will lead to price increases from top to bottom making it far more difficult to deliver affordable product,” said Forman.

Rents will rise, tightening the rental market

Rents won’t stop growing in the new year. Factors include dwindling inventory, demand from people who have been priced out of the housing market and newcomers to the region renting before they purchase a home.

“We have such a finite amount of supply to begin with that it’s going to be a strong market through 2022,” said Nathan Zeder of the Jills Zeder Group said.

In fact, experts predict that rents will rise an additional 8% in the South Florida area after seeing year-over-year increases of more than 20%.

“Miami is going to be looking at a lot of affordability challenges,” said Zillow Economist Nicole Bachaud. Her research indicates that South Florida will become the most unaffordable region in the country for renters, relative to income in the new year.

More buildings will come to the market in 2022, as compared to the past few years, but it may not be until 2023 or 2024 that inventory levels catch up with demand and rents start to level off, explained Ryan Shear, managing partner at PMG.

“I don’t think rents will go down next year. There is a time coming, but there isn’t enough supply right now to hamper rent growth,” he added.

Those looking for a rental should be prepared for a competitive market, and should expect to be less picky and expand their search criteria, Zeder added.

Dr. Edward Murray, associate director of the Jorge M. Perez Metropolitan Center at Florida International University, noted that “there is a severe shortage which is driving up prices. Adding to the pressure is the fact that most South Florida households can’t afford to buy, so they have no choice but to rent, thus adding to the demand.”

Mortgages rates to inch higher

Low interest rates of 2.8% and lower have drawn buyers to the market, but interest rates are projected to rise to about 3.6% and possibly higher by the end of 2022. Most experts say it’s unlikely that the rise will dampen the market – there is such huge demand for housing in South Florida that a slight uptick won’t have a significant effect.

Many of those flocking to South Florida are coming from states where home prices are substantially more expensive, so they’re less affected by an uptick in mortgage rates.

In fact, news of higher interest rates could cause buyers to swarm the market in the beginning of the year, as they try to beat the increases, said Stuart Rohatiner, CPA with Gerson Preston.

“Even with the rate increases we anticipate; we won’t see them jump significantly in the next 12 months,” said Heather Zatik, Centennial Bank’s senior vice president of commercial lending.

However, rising interest rates can have a negative effect on first-time buyers, causing them to have less purchasing power and pricing them out of the market, Rohatiner added.

“For the average homebuyer, it will be less affordable, and many are likely to be priced out of the market,” said Zatik.

Yes, inventory is coming back, but it’s not enough

A lack of inventory will be one of the biggest issues facing homebuyers this year.

“Inventory is our biggest worry,” said Tony Rodriguez-Tellaheche, owner & managing broker of Prestige Realty Group. “There is a lot of development advertised,” said Ignacio Diaz, co-owner and managing partner of developers Group P6, “but the question is, is there going to be enough supply to meet that demand?”

After years of underbuilding, it will take a few years before South Florida can catch up to how much housing is needed, experts say.

Affordability

The affordability crisis won’t be solved anytime in the near future, and affordable housing is crucial to making sure workers stay in South Florida’s economy.

“The housing that we have now and that price of that housing is already out of reach for the average worker,” said Skip Miller, on the board of directors with the Housing Leadership Council of Palm Beach County. “Any increase in housing prices will just make that problem worse.”

Existing home prices are already unaffordable to over 90% of South Florida’s households, and the further rise in prices could have the greatest effect on workers in lower wage service sector jobs, explained Dr. Edward Murray, associate director of the Jorge M. Perez Metropolitan Center at Florida International University.

In terms of affordable housing, Broward County can expect to see five to 10 low-income tax credit housing projects announced, but nothing that will help fully address the dire need for affordable housing, Murray added.

© 2021 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.

https://www.floridarealtors.org/news-media/news-articles/2021/12/what-will-2022-real-estate-look-s-fla

A Black Couple Sues Appraiser, Alleges Racial Bias

At least three Black homeowners in three separate states have now “whitewashed” their home after a low appraisal only to see it reappraise for more money.

MARIN CITY, Calif. – A California couple has filed a housing discrimination lawsuit, alleging that an appraiser lowered the value of their home by nearly $500,000 because they’re Black.

Paul Austin and Tenisha Tate-Austin say their Marin City home in the San Francisco Bay area was appraised at $989,000 – much lower than previous appraisals done when refinancing. The couple says they invested $400,000 in renovations, including a 1,000-square-foot addition to the home, but the new appraisal showed their home value increased by only 10%.

The couple arranged for a second opinion from a different appraiser. This time, they asked a friend, who is white, to pretend to be the homeowner in “whitewashing” their home, as they called it. They removed family pictures and artwork or any indication that the homeowners were Black.

This time, the home appraised for nearly $1.5 million.

The couple is suing the first appraiser, who is white, claiming she was racially biased in her assessment. Their lawsuit has been widely reported by media outlets.

Other cases of minority homeowners taking steps to “whitewash” their homes for an appraisal have surfaced in Indiana and Ohio, with similar results raising their homes’ valuation, CBS reports.

Source: “Black Couple Files Lawsuit Claiming Home Value Was Underestimated by Half a Million Dollars Because of Their Race,” CBS News (Dec. 8, 2021) and “California Couple Says Appraiser Devalued Their Home By Nearly $500K Because They Were Black,” Blavity.com (Dec. 8, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/black-couple-sues-appraiser-alleges-racial-bias

For Many Agents, Instagram Is Marketing’s Gold Standard

The tools on Instagram may be more real estate-friendly that some other social media platforms – and they’re a good place to highlight listings.

AUSTIN, Texas – Among social media platforms, Instagram remains the gold standard for many agents and brokers who say it’s an important way to set themselves apart while attracting more business.

Instagram is still best-known for the Feed, a vertically scrolling stream of photos and videos, based on algorithms that prioritize content based on what it predicts users like most.

Stories is another key feature. It appears at the top of the app but disappears after 24 hours. Once a user taps a story, it autoplays and will automatically load the next story if a user doesn’t tap out of the space.

Meanwhile, Reels launched in 2020. It lets users access Reels via a “play” button at the bottom of the app. Reels are oriented around video, and users scroll through content by swiping up.

Ian Grossman, a Keller Williams agent based in Austin, Texas, initially posted images of homes for sale, but he eventually started adding memes and especially videos.

Loida Velasquez, an agent in Southern California with eXp Realty, conducts a recurring live video show on Instagram that involves interviewing influential women in the business.

“When I’ve incorporated myself and my hobbies, that has enabled me to connect to people on a different level, outside of real estate,” Velasquez says.

Eric Simon, a licensed agent who runs a real estate-focused media company, believes agents should focus on a specific audience, such as people in their region. Other tips from agents include using specific hashtags to target audiences, following and engaging with larger and more successful accounts, and cross-promoting across various platforms.

Source: Inman (09/30/21) Dalrymple II, Jim

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/many-agents-instagram-marketings-gold-standard

COVID-19 Pushed Home Insurance Costs Higher

“Replacement cost” covers the rebuild of a destroyed home, and that option is now more expensive for the same reason new homes are: higher supply costs.

NEW YORK – The consequences of the COVID-19 pandemic reached into a number of industries, including home construction, which faces a shortage of supplies and trained labor. At the same time, demand for new construction or home remodeling is on the rise.

As a result, it costs more to insure a home and, in some cases, prices rose more than inflation.

The Insurance Information Institute (III) found that insurance premiums spiked an average of 20% to 30% during the last year in California, Florida and Louisiana, while the current inflation rate is about 6%. While many economists say the increased costs are transitory, the pandemic continues its wave of disruptions with each new variant that emerges, including omicron, which has spread quickly.

“Home insurance is not tied to the market value of a home, but based on reconstruction cost,” says Jeff Brewer of the American Property Casualty Insurance Association. This means that not only premiums are rising – already $1,400 a year on average – but also some homeowners might not realize that they’re now underinsured.

Mark Friedlander of III said climate change and billion dollar catastrophes are another issue facing homeowners.

“We’re seeing more expensive catastrophic events across the United States this year, including 18 weather disasters with losses that each exceed $1 billion,” he said. Friedlander added that in Florida, only three of its 52 local insurers have shown a profit. Homeowners’ insurance premiums are likely to rise even if policyholders maintain their coverage levels, but homeowners need to re-evaluate the cost of rebuilding a home and ensure they have appropriate coverage levels.

Source: Forbes (12/08/21) Leefeldt, Ed; Danise, Amy

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/covid-19-pushed-home-insurance-costs-higher

New FinCEN Reporting Could Include Brokers, Agents

WASHINGTON – On Dec. 6, 2021, the US Financial Crimes Enforcement Network (FinCEN) solicited public comment on how it should impose recordkeeping and reporting requirements on certain persons involved in all-cash real estate transactions. Comments must be submitted to FinCEN by Feb. 7, 2022.

The requirements contemplated in the 2021 Anti-Money Laundering Regulations for Real Estate Transactions (ANPRM) may be applied nationwide to a broad range of real estate transactions, including commercial real estate transactions.

They also may impose obligations on market participants that currently are not subject to federal anti-money laundering compliance obligations, such as real estate developers, managers, lenders, and investment advisers and investment companies involved in real estate.

The 2021 ANPRM is the first step in the rulemaking process and will most likely be followed by a detailed proposal and a final rule. In this Legal Update, we provide background on FinCEN’s approach to real estate transaction reporting requirements and summarize the 2021 ANPRM.

As discussed further below, potentially affected participants should consider submitting comments on the 2021 ANPRM to encourage FinCEN to draft a detailed proposal that appropriately weighs the goals of preventing money laundering with potentially burdensome compliance obligations.

Background

To aid in the detection and deterrence of money laundering, in 1970, the U.S. Congress passed the Currency and Foreign Transactions Reporting Act, colloquially known as the Bank Secrecy Act (BSA), which enlisted financial institutions to monitor and report on certain customer activity.

While the BSA covers a broad range of financial institutions, FinCEN has issued regulations implementing the BSA only for a smaller subset (covered financial institutions). Covered financial institutions subject to FinCEN regulation include banks; casinos; money services businesses; broker-dealers; mutual funds; insurance companies; futures commission merchants; introducing brokers; dealers in precious metals, precious stones or jewels; credit card system operations; certain loan and finance companies; and housing government-sponsored enterprises.

However, many categories of persons involved in real estate closings and settlements remain outside the definition of covered financial institutions, even though FinCEN has considered adding certain market participants since at least 2003. This includes many nonbank market participants in the commercial real estate sector.

In recent years, FinCEN has shown a particular interest in expanding the scope of the BSA to cover a wider range of transactions involving real property. Since 2016, FinCEN has issued a series of geographic targeting orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind legal entities (US and non-US) used in certain “all-cash” purchases of residential real estate, and to report these persons and purchases to FinCEN. In addition, on the same day FinCEN announced the 2021 ANPRM, President Biden announced a broader strategy to combat corruption and illicit finance by implementing initiatives similar to the contemplated requirements discussed in the 2021 ANPRM.

2021 Anti-Money Laundering Regulations for Real Estate Transactions

The 2021 ANPRM indicates that FinCEN remains concerned with money laundering vulnerabilities in the U.S. real estate market and notes that more than 30% of the transactions reported under the GTOs involve a beneficial owner that has been the subject of a Suspicious Activity Report. Further, FinCEN believes that these vulnerabilities are not limited to the transactions covered by the GTOs, and include real estate transactions in the commercial markets and involving natural persons.

And while the GTOs only apply to a subset of localities (e.g., metropolitan areas in Texas, Florida, New York, Massachusetts, California, Hawaii and Nevada), the 2021 ANPRM contemplates extending reporting requirements to all real estate transactions nationwide. Accordingly, FinCEN states that it is preparing a proposed rule that would impose nationwide recordkeeping and reporting requirements on certain persons participating in transactions involving non-financed purchase of real estate.

Covered transactions

The 2021 ANPRM contemplates a broad scope of coverage for the proposed regulation. FinCEN states that the non-financed purchase of real estate refers to “any real estate purchase or transaction that is not financed via a loan, mortgage, or other similar instrument, issued by a bank or non-bank residential mortgage lender or originator, and that is made, at least in part, using currency or value that substitutes for currency.”

It also contemplates that the proposed regulation may cover all non-financed purchases of real estate regardless of dollar value – although it also requests comment on the appropriate transaction threshold for covered transactions, if any.

As with the GTOs, it appears likely that the proposed regulation will cover residential real estate. Further, FinCEN implies that all-cash commercial real estate transactions will be covered by the proposed rule and states that it is interested in commenters helping it define how commercial real estate projects involving bond financing, multiple transactions or multi-year development periods may be addressed. It also solicits comment on applying the proposed regulation to non-financed purchases by natural persons, including nominees and “straw-man” purchasers and trustee/trust arrangements.

Covered participants

The 2021 ANPRM recognizes that not all real estate transactions involve the same types of participants. For example, it notes that title insurance is not mandatory in every U.S. real estate transaction, and therefore, imposing a regulation solely with respect to title insurers would not ensure complete coverage.

Accordingly, FinCEN suggests several categories of participants who might be covered by the proposed regulation.

FinCEN suggests in one part of the 2021 ANPRM that covered participants might include real estate brokers and agents, lawyers representing a buyer or seller, title insurers or title insurance representatives, closing agents, appraisers and inspectors.

However, in another part of the 2021 ANPRM, FinCEN states that it also is considering whether settlement agents, escrow companies and agents, real estate investment companies, real estate development companies, real estate property management companies, real estate auction houses, investment advisers, private money lenders and money services business should also be covered participants for compliance purposes.

In a third part of the 2021 ANPRM, FinCEN suggests that individuals in the private equity industry also could be covered persons. Given FinCEN’s broad interpretation of its authority, it is conceivable that any and all of these categories of participants could be viewed as financial institutions under the BSA.

FinCEN also recognizes that an overly broad approach to identifying covered persons could lead to unnecessary and duplicative reporting. Therefore, it suggests that the proposed regulation might contain a “cascading” approach, through which there would be one and only one covered person for each covered transaction.

Potential requirements

The 2021 ANPRM states that, at a minimum, FinCEN believes that the proposed regulation should require covered persons to collect, report and retain information on covered transactions. It then states that the two alternatives FinCEN is considering are: (i) requiring covered persons to report all covered transactions to FinCEN or (ii) requiring covered persons to adopt comprehensive (four-pillar) anti-money laundering compliance programs and monitor and report suspicious activity to FinCEN.

The first approach would mirror the requirements of the GTOs, while the second approach would be similar to the compliance obligations imposed on most other types of financial institutions.

FinCEN also requests comment on how it might apply other compliance obligations, such as customer due diligence and beneficial ownership identification requirements to the real estate industry.

Takeaways

The 2021 ANPRM would impose anti-money laundering compliance obligations on a broad swath of the U.S. real estate sector. Many categories of previously unregulated market participants would be subject to extensive reporting and recordkeeping obligations under either contemplated approach. For some categories, such as lawyers, this will become part of the long-running debate regarding the appropriate use of FinCEN’s authority.

For other categories of professionals, such as commercial real estate developers, managers, lenders, and investment advisers and investment companies involved in real estate, the 2021 ANPRM may raise new issues that they have not yet confronted. These market participants and their trade associations should consider engaging with FinCEN to help shape the proposed regulation. While it is clear that FinCEN intends to act, thoughtful engagement early in the process can help channel that action toward more efficient regulation.

Finally, market participants that are most likely to be subject to the proposed regulation, such as title insurers, might begin to consider how they will implement an anti-money laundering compliance program. At a minimum, having good recordkeeping and a strong culture of compliance will help to ease the transition to whatever approach FinCEN eventually adopts.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright © 2021 The Mayer Brown Practices; © Mondaq Ltd, 2021. All rights reserved. Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the Mayer Brown Practices).

https://www.floridarealtors.org/news-media/news-articles/2021/12/new-fincen-reporting-could-include-brokers-agents

Buyers Shouldn’t Quit Jobs Before Securing a Mortgage

Many people want a higher quality of life, but lenders consider quitting jobs or opting for self-employment as a red flag that can scuttle a mortgage approval.

TROY, Mich. – As record numbers of Americans leave their jobs during The Great Resignation, a mortgage lender advises homeowner hopefuls to consider the impact of changes in their employment on mortgage loan eligibility.

David Hall is president and CEO of Hall Financial, a mortgage brokerage founded in Troy in 2016 with a growing Grand Rapids location at 4949 Plainfield Ave. NE, Suite 100. The brokerage does business primarily in Michigan – with Grand Rapids being one of the hottest markets in the state – as well as in Tennessee, Florida and Virginia.

Hall said the growing national trend known as The Great Resignation or The Big Quit – people leaving the workforce during the COVID-19 pandemic – comes while home prices are being driven up by short supply and high demand for homes, making this one of the trickiest times in history for homebuyers to find a place that meets their needs while also qualifying for a mortgage loan.

While no two scenarios are the same, Hall said certain factors generally have a negative impact on borrower eligibility.

“There are gaps in employment that make sense that are not a problem (such as someone going from one job to another); however, just one scenario – and I can point out a lot of them for you – is that for some folks who have decided to walk away from their current position and start their own business (self-employment), it’s very much a big issue in terms of being able to get a mortgage,” he said.

“In today’s day and age, with regulators very nervous about clients who are self-employed being able to sustain their business, you need a two-year history self-employed to be able to qualify for a mortgage, so that is a huge issue. When somebody goes from a position where they’re working as a W-2 worker, to somebody who’s starting their own business, they are not eligible to get a mortgage.”

An exception to this, he said, is if the person starting a business has a spouse or partner who makes a large enough salary to qualify for the home loan amount they’re looking for.

“In a scenario where, let’s say both spouses were making $75,000 and they needed both incomes to qualify, and then one went self-employed, they wouldn’t qualify anymore, but in a scenario where you only needed one spouse to qualify, that would work,” he said.

Quitting a job and going self-employed also would be a hurdle in qualifying for a Federal Housing Administration (FHA) loan or Veterans Affairs (VA) loan, Hall said.

“With self-employment, in and of itself, the rules have gotten very stringent, so much so that some companies have decided not to do self-employed loans anymore because they’re that difficult to do in today’s day and age,” Hall said. “What you’ll find, talking to self-employed business owners in general about most of their experiences with a mortgage over the past 12 months, is they’re probably pulling their hair out because it’s become very difficult.”

Hall said the rules changed mostly due to the impact of COVID on small business revenues.

“Past income was no longer as much of an indicator of future income for a restaurant or somebody who owned a fitness center, where there was a serious issue with that kind of business,” he said. “Other businesses did well, but typically, what you’ll find the regulators in the mortgage industry will do is obviously when there’s more risks, they get nervous, and so to the degree that you were self-employed during COVID, the rules got a little bit more difficult.”

Those whose businesses are unaffected by COVID who want to get a home loan might be able to qualify, but they likely will need to provide more detailed financials to prove they are not a risk, Hall said.

In 2022 and beyond, Hall is hopeful that the effects of the pandemic on businesses will ease, and mortgage loan guidelines will become less stringent.

Hall said he understands many of the people leaving the workforce altogether are doing so out of necessity, due to childcare shortages and health issues, but it’s important that the adult members of the household look at their financial picture, whether they already have a mortgage loan or would like to get a new one, to determine they can pay for what is likely to be any family’s largest expense by percentage of income.

He said a change in employment also can affect households that would like to refinance an existing loan.

“Let’s just say somebody is at 4% on their interest rate, and they want to refinance because they want to go to a 3%, or they want to take some cash out. If they change materially how much money they’re bringing in the household to the degree that they don’t qualify anymore, they’re not going to be able to refinance,” he said. “They’re going to continue to pay on that loan at 4%, instead of taking advantage of these record-low interest rates.”

Hall advises the best way to prepare for changes in one’s borrowing or financing picture is to talk to a mortgage lender early, long before making changes, to understand the full impact.

Copyright © 2021 Gemini Publications. All rights reserved.

https://www.floridarealtors.org/news-media/news-articles/2021/12/buyers-shouldnt-quit-jobs-securing-mortgage

First Street Analysis: Flood Threat to Commercial RE

The company that lists residential flood risk on realtor.com released its latest report on commercial RE. It suggests that repair costs could rise 25% by 2051.

SAN FRANCISCO – A new report from First Street Foundation and global engineering and consulting firm Arup looks at the risk to communities from flooding. Previous First Street studies provided flood risk data for individual homeowners – it creates the “risk from flooding” for realtor.com home listing – and the latest report offers an assessment of flood-related risks on the commercial market.

The report, “The 4th National Risk Assessment: Climbing Commercial Closures,” assesses the risk of flood damage to 3.6 million retail, office, and multi-unit residential properties across the United States. It analyzes economic impacts over the next 30 years as climate change increases. It looks at impacts by metropolitan area, including lost days of productivity and output caused by damage to retail and office buildings, as well as associated closures due to repair times.

First Street says its report “provides investors, business owners, financial institutions and economists with crucial data on the extent of flood risk to commercial and multi-unit residential properties, and helps to quantify economic loss associated with that risk in ways not previously possible.”

Key findings

  • 729,699 U.S. retail, office and multi-unit residential properties face a risk of flood damage
  • The annual costs to repair or replace damaged buildings could grow by roughly 25% – from $13.5 billion in 2022 to over $16.9 billion – by 2052 due to climate change
  • Flood damage to commercial buildings could result in 3.1 million days of lost business operation in 2022 due to repairs, growing to 4 million days by 2051
  • Commercial damage has consequences for metropolitan areas and states. The annualized financial impact to local economies is expected to grow by 26.5% from $49.9 billion in 2022 to $63.1 billion in 2052

“Business needs consistency and predictability in order to plan, invest and grow their operations and allow communities to thrive,” says Matthew Eby, founder and executive director of First Street Foundation. “In partnership with Arup, we are demonstrating that American businesses and local economies face much more uncertainty and unpredictability … on their bottom line than they may realize. Flooding that leads to lost days of operation and lengthy repair times … could have significant broader national and even global economic consequences.”

The report aggregates property-level data at the metro and state level. Additional data, including the future flood risk to individual properties, can be accessed from First Street Foundation and more detailed risk analysis can also be requested.

© 2021 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2021/12/first-street-analysis-flood-threat-commercial-re

OK for Loan Programs to Address Systemic Racism

HUD legal opinion: Special Purpose Credit Programs – a type designed to correct past lending shortfalls to protected groups – are legal under the Fair Housing Act.

WASHINGTON – Can a lender legally create a special program for communities that have historically experienced lending discrimination?

Yes, according to a legal decision rendered by the Department of Housing and Urban Development (HUD).

In 1976, Congress created Special Purpose Credit Programs (SPCP) when it amended the Equal Credit Opportunity Act (ECOA). The SPCPs were created to “help remedy longstanding discrimination in credit markets,” noting that “such remedial programs do not themselves constitute unlawful discrimination.”

However, HUD says a number of lenders haven’t created programs because they’re “worried that those programs may run afoul of the Fair Housing Act and other federal anti-discrimination laws.”

HUD’s legal opinion, released Monday, makes it clear that in HUD’s opinion, the Fair Housing Act doesn’t pose a threat to creating an SPCP.

According to HUD, the Fair Housing Act “prohibits discrimination in the sale or rental of housing … based on race, color, religion, sex, disability, familial status, or national origin.” However, it’s not “limited to preventing discrimination alone, as Congress included an affirmative provision requiring the federal government to take a proactive role in redressing longstanding housing discrimination.”

It says SPCPs should be “carefully tailored,” but they generally don’t discriminate within the meaning of the Fair Housing Act, “just as they do not constitute discrimination under ECOA.”

The response by housing groups was positive.

“Special Purpose Credit Programs are an innovative approach to addressing a problem that has persisted for decades,” says National Association of Realtors® President Leslie Rouda Smith. “We look forward to learning more about these programs and how they can potentially benefit homebuyers around the country.”

Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association, says he appreciates HUD’s clarification.

“SPCPs exist to help low-income and historically disadvantaged borrowers, and this clarification is an important step in providing lenders additional tools to help these borrowers purchase a home,” Broeksmit says. “We look forward to working with HUD, the CFPB, and other regulators to assist in the expansion of compliant SPCPs to meet their potential for assisting communities and reducing the racial homeownership gap.”

© 2021 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2021/12/ok-loan-programs-address-systemic-racism

How Quickly Will Mortgage Rates Rise in 2022?

Even experts have trouble accurately predicting mortgage rates, but given Fed moves, one suggests only a slight increase – about 3.5% overall in 2022.

NEW YORK – Mortgage rates play a big role in borrowers’ buying power – and super-low rates over the past year allowed many homebuyers to stretch their housing budgets, an important tool as they faced high home price increases.

But many economists predict higher rates over the next few months. What can homebuyers expect for 2022?

While the trajectory of rates is never simple to predict, particularly due to the ongoing pandemic, Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors® (NAR), told Yahoo that she believes mortgage rates are poised to rise slowly in 2022.

“Inflation rose to its highest level since 1990,” Evangelou told Yahoo. “When inflation rises, lenders ask for higher interest rates as compensation for the decrease in purchasing power. Thus, if inflation remains elevated for a longer period, that will drift up mortgage rates.”

She also expects the Fed to raise interest rates in the first half of 2022 to try to manage inflation, and another Fed change – the tapering of its monthly bond purchases – should also push mortgage rates higher. Mortgage rates often follow the 10-year Treasury yield and, with those expected to rise, mortgage rates will likely follow.

Evangelou expects the 30-year fixed-rate mortgage to average 3.3% in the first quarter of 2022, rising to 3.5% for the year.

For comparison, the 30-year fixed-rate mortgage averaged 3.11% for the week ending Dec. 2, Freddie Mac reports. Mortgage rates the last few weeks have been moving higher from their sub-3% lows earlier in the year.

Evangelou says that despite the jump in 2022, rates will still not be high: “Consumers shouldn’t panic,” she says. “Even with this increase, mortgage rate (increases) will be slow.”

Source: “Mortgage Rate Forecast for 2022,” Yahoo! (Dec. 7, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/how-quickly-will-mortgage-rates-rise-2022

Offices Downsizing Space – but Also Décor

NEW YORK – When the U.S.-based management consulting company McKinsey said the Covid-19 pandemic had thrust the world five years into the future, e-commerce promoters told us we were already in the digital age.

Office owners sulked, wondering what to do with their big spaces now that everyone was working from home. For imaginative investors, the office spaces were going to be converted into new uses. Few could make this work. In June, the Fortune Magazine’s website wrote that 74% of Fortune 500 CEOs expected to reduce office space.

“For tech companies, like Facebook or Square, adopting remote or hybrid workplaces isn’t surprising. But old guard financial firms like JPMorgan announcing plans to cut back on office space seemed to spell bad news for commercial real estate,” wrote Fortune.

The office has been losing the allure, with those working from home happy to do it.

In a recent interview with The Standard, David Chola, lead architect at Adroit Architecture said there’s a shift in preferences for home designs, with demand for spacious offices dwarfing that of other features, such as a private garden or balcony. Chola said what was initially thought of as a knee-jerk reaction to the pandemic was slowly becoming a reality as many workers sought to work from home.

Not only that, the décor that some offices have had for ages was now seen for what frugal office owners would deem it: excesses.

To remain modern, appealing and probably different from others, offices packed all kinds of expensive furniture and other decorations. And when suddenly the usefulness of the space declined, what became of the expensive décor?

“New office owners have restrained their budgets, thus going for just enough office spaces with simplified décor and infrastructure,” says Erick Koguya, founder, InforAfrica group, an architecture and interior design firm. He says huge offices are no longer deemed necessary. The scramble for the bottom, where the bare minimum is just enough, looks like the new normal.

“Architectural designs have changed in the sense that new home developers now demand the incorporation of home office spaces. As a result of the negatively impacted economy, some office owners have resolved to reduce their square footage,” says Koguya.

Consider a secretary who no longer needs to have a pile of files on her desk or in-and-out trays of the boss’s assignments. At home, she only needs a computer, which is her workstation. The office computer is also connected to the internet and can operate faster, but that one costs more money with a swivel chair, an expensive table and other decorations atop it?

What happens when the secretary, with just enough at home, performs just fine? What becomes of it when the office is now vacant and workers can find comfort working from home?

“For any developers who heavily invested in Class A offices, we cannot conclusively say it was a waste,” argues Moses Okemwa, managing director at Amber Construction Ltd. “We live in a dynamic world which demands flexibility and creativity – that will ensure the spaces are taken up. This could include making the offices smaller to attract more clientele or the shrinking business operations, or redesigning the available space to accommodate other activities like eateries, wellness centers, accommodation and conferencing.”

Instead of adding décor for the sake of flaunting financial muscle and appearing modern, office owners want spaces tailored to the new needs of workers and customers.

“For architects, design and construction of building forms and spaces is an ever-changing quest. This is because buildings are designed to accommodate the evolving human and machine requirements,” says Okemwa.

Covid-19 has brought about new dynamics on office space requirements in location, size and general spatial planning. The need for social distancing and installations of hygiene management stations has seen the modern office space more open, hygienic, properly ventilated and probably with self-testing and sanitization stations for workers and guests

Probably, some of the most valuable things in the office which act as decorations will be gone for good. In their place, offices will invest in crucial things for the office. These might cost a fortune, but they will not be mere flexing of muscles.

“The décor for office spaces may or may not vary, but what is certain is that the users are now more health-conscious and therefore even the selection of materials to use for décor will have more considerations on health,” says Okemwa. “Work stations may also be more flexible since the work from home option may demand that a work station is used by more than one person.”

CNBC recently quoted Brent Capron, an interior design director, as saying developers have become more focused on creating better ventilation systems for indoor spaces. He has seen greater demand for buildings with ample natural lighting and access to the outdoors, such as private gardens or balconies where workers can spread out.

But Capron also expects workplace design to “follow a pattern of drawing from the hospitality industry by creating inviting, comfortable spaces through strategic lighting, furniture arrangement, art and décor, background music, and scent technology meant to evoke association with space,” CNBC writes.

Capron says décor might still act as a huge attraction to the potential employee. U.S. publication Computerworld notes that even as many firms push back a full return to the office, the glut in office space continues to grow, particularly in the U.S.

Firms are now doing away with décor and infrastructure that add little value to the end product. They focus on what will boost their business.

“Microsoft is adapting offices to include conference rooms that cater to virtual meetings with eye-level cameras and screens on the walls. That setup allows remote employees to maintain eye contact with in-office colleagues as if they were all face-to-face,” notes Computerworld.

Buildings are being greened, life-saving interventions being upgraded and ease of operation at the fore. But the exaggerated carpets, expensive lighting, imported chairs and other unnecessary factors in the office that see overheads soar have now been seen for what they are: a luxury.

© 2021 Standard Group Limited Provided by SyndiGate Media Inc. (Syndigate.info).

https://www.floridarealtors.org/news-media/news-articles/2021/12/offices-downsizing-space-also-decor

How Will FEMA’s Flood Ins. Revamp Affect Me?

Most homeowners won’t see radical changes under new pricing guidance, but some may be surprised their flood coverage costs less – or maybe more.

WASHINGTON (AP) – In the past year, the southwestern Louisiana city of Lake Charles weathered two hurricanes, intense rainfall that sent water gushing down streets and a deep freeze that burst pipes. Yet Tommy Eastman may eventually drop coverage on his four-bedroom home – which has so far escaped damage – because the cost of his flood insurance is going up.

“Once it starts getting over $1,000, I’m gonna start thinking, ‘Well, what am I doing?’” said Eastman, a real estate agent whose annual policy is scheduled to climb from $600 to $2,500 over the next several years.

Under a revamped federal flood insurance program rolled out this fall, millions of homeowners are set for rate hikes that officials say more accurately reflect a property’s risk. That includes the vast majority of the 1.7 million homeowners with relatively cheap policies in areas federal officials previously deemed low or moderate risk – and where coverage is voluntary.

The overhaul is intended in part to make it more expensive to develop in risky areas. But some worry the price hikes will only make it harder to convince homeowners to voluntarily buy or keep flood coverage, particularly in middle- and working-class areas.

“We have no high-rise condominiums, we have no sandy white beaches. It is a working coast in our state,” said Jim Donelon, Louisiana’s insurance commissioner.

The Federal Emergency Management Agency (FEMA) says its new insurance program factors in the characteristics of individual properties, such as how close they are to water, how expensive they are to rebuild and whether they face multiple types of flood risk. In many parts of the country, such risks are growing as climate change increases the strength of hurricanes and the intensity of rainstorms.

“We’ve learned that the old way of looking at risk had lots of gaps, which understated a property’s flood risk and communicated a false sense of security,” said David Maurstad, a senior executive of the National Flood Insurance Program (NFIP).

In spite of identifying more flood risk across the country, the new system doesn’t change who is required to buy coverage. In areas FEMA deems highest risk – known as the 100-year flood zone – flood insurance is required on government-backed mortgages, and many banks also require it for mortgages in high-risk areas. FEMA has said the flood maps aren’t meant to predict where flooding may occur, but where coverage is required to help communities make building decisions.

In recent years, homeowners living in places where coverage isn’t required have faced losses in the billions of dollars. Between 2017 and 2019, nearly 40% of the flood claims FEMA received were for properties that fell outside zones where insurance is required, an agency representative told Congress last year.

Many properties outside the flood zones face risk “that has always been there but has never been identified,” said Matthew Eby, executive director of First Street Foundation, a research firm that produces detailed maps of flooding risks.

First Street estimates that 14.6 million properties across the U.S. are at substantial risk of flooding, far more than the number of flood policies the federal government insures. A Government Accountability Office (GAO) report this year recommended that the federal government update the rules on who is required to get coverage to protect more high-risk homes from flood disasters. A separate GAO report found FEMA’s flood maps do not reflect the latest climate science or key flood hazards such as heavy rainfall.

FEMA said it has not studied how the rate changes will affect voluntary take-up of flood insurance, and the agency has not publicly disclosed details on how high premiums will climb beyond the first year. A Congressional Research Service report said Risk Rating 2.0 will more accurately signal a home’s flood risk, but that the higher prices “may mean that insurance for some properties is considered unaffordable.”

Raising rates and having more people opt for coverage also matters for the financial health of FEMA’s flood insurance program, which is $20.5 billion in debt. Since its launch in 1968, many insurance experts say the program has deeply subsidized flood insurance by not charging rates that properly reflected a home’s risk. The federal government underwrites most flood insurance policies in the U.S.

For new policyholders, FEMA’s new rates took effect in October. For existing policyholders, new rates start taking effect in April.

Since rate hikes are capped at 18% a year, it will take years for some to reach their new rates. Policyholders can call their insurers to get details on how their rates will change. Unlike before when broad groups of policies saw increases, Risk Rating 2.0 will adjust prices individually.

Higher rates will make flood risks clearer, and ideally encourage more homeowners to get insurance in areas where coverage is voluntary, said Joel Scata, a lawyer at the Natural Resources Defense Council, an environmental advocacy group. He said that Congress should act to address affordability for lower-income families.

Aric Pohorelsky, a Lake Charles resident, envisions another scenario. He pays $517 a year for flood insurance on a 3,700 square-foot home, but said the same policy would cost $5,000 for a new homeowner.

“If people leave in vast numbers … I don’t think it’s going to be because of Risk Rating 2.0,” he said. “I think it’ll be just because of the stress of dealing with major hurricanes.”

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. Phillis reported from St. Louis. The Associated Press receives support from the Walton Family Foundation for coverage of water and environmental policy. The AP is solely responsible for all content.

https://www.floridarealtors.org/news-media/news-articles/2021/12/how-will-femas-flood-ins-revamp-affect-me

Fla. Continues to Struggle with Affordable Housing

MIAMI – The panel of academics and housing professionals assembled before the Florida Senate committee last week delivered a unified message: Florida is in the throes of an affordable housing crisis and more money is needed to keep the economy humming.

Fueled by taxes on soaring real estate values, Gov. Ron DeSantis on Thursday found $144 million more than he had last year in the state account and proposed $355 million in affordable housing initiatives as part of his $99.7 billion budget proposal. If legislators approve, it will mean the state would spend more than the $209 million they dedicated to workforce and low-income housing this budget year. And it could mean the largest amount spent on the issue in more than a decade.

For many Floridians still recovering from pandemic-imposed unemployment, eviction notices and unpaid rent, the heavy investment couldn’t come at a more important time.

According to a new research report by Apartment List, a rental listing company, Florida leads the nation in housing unaffordability with the percentage of renters – 56.5 % – who spend 30% or more of their income on housing.

The high cost-burden rate is worse in the state’s major metropolitan areas. For example, 62.7% of renters in Miami are spending half of their income or more on housing, the highest percentage of the nation’s 100 largest metro areas, the report found.

Tampa led the nation, along with Phoenix and Las Vegas, with highest rent increases in the last year, climbing by 34% or more since the start of the pandemic.

In these Sun Belt markets, “the pandemic did not start a new trend, so much as accelerate an existing one,” the November report stated. “Affordability here was waning even before the pandemic ignited a rush of new rental demand.”

Data tells the tale

Economists and housing experts from Florida International University’s Metropolitan Center and the University of Florida’s Shimberg Center for Housing Studies assembled by the Senate Community Affairs Committee provided data and details to explain why this matters.

Most workers in Florida can’t afford to rent a typical two-bedroom apartment, said Ned Murray, associate director of the Florida International University Metropolitan Center. A full-time worker would need to earn $24.43 an hour to pay the typical rent of $1,270 a month, but the median wage in Florida is $17.26 an hour, he said.

In many parts of the state, the situation is even worse. In Miami Dade County, the median renter income is about $35,000 and the average rent is over $3,000. “You can do the math,” he said.

Murray cautioned legislators to stop talking about Florida’s economic development strategic plan and labor shortages without addressing affordable housing. He pointed to Monroe County, which in 2007 faced a worker shortage and a stagnant economy because of its lack of affordable housing units.

“When you’re paying 50 cents or more on every dollar for rent…it means you get up and leave because your quality of life is gone,” he said. “If you’re trying to feed your children, clothe them, buy medicine, if you’re paying that amount of money on rent, or housing cost in general, you have very, very little residual income left.”

William O’Dell, director of the Shimberg Center, said that the housing costs are also pricing many people out of the market. The median home price in Florida peaked in 2006 at about $337,000 and, while prices bottomed out during the Great Recession, they have steadily increased again and are now at just over $300,000, he said.

But as housing costs in Florida have risen, incomes have not, O’Dell said. “We’ve seen a slow but steady increase in the proportion of higher income households becoming cost burdened.”

Now, as real estate values appreciate, the state is losing hundreds of thousands of affordable housing units exactly at a time when it needs them most.

“We’re on a treadmill,” said Murray of FIU. “We’ve got this continuous pressure on the market that’s really created this incredible imbalance. There’s really nothing quite like it in the country.”

Legislature doesn’t have a great track record

The Legislature in 1992 anticipated that with Florida’s growth there would be an increased demand to balance rising real estate costs with the need for workforce housing. It created a dedicated revenue source for affordable housing by putting a portion of the documentary stamp tax on real estate transactions into the William E. Sadowski Affordable Housing Trust Fund.

By 2002, legislators began sweeping money from the fund to pay for other priorities, and Florida’s affordable housing stock declined at the same time real estate costs were rising. After nearly two decades of siphoning housing money, legislators last year announced they would stop the practice. They passed SB 2512, which reduced the amount of money going into the Sadowski fund from 24 cents on the dollar to 9.7 cents and passed a law intended to ban fund sweeps in the future.

If legislators abide by a new law this year, they will have a projected $315 million projected to use from the fund. The governor proposes adding another $40 million to support workforce homeownership, including down payment assistance and closing cost assistance. That money would come from reserves, now available because of the governor’s veto of a previous attempt by legislators to sweep $40 million from the affordable housing trust fund.

“It’s a significant bump, and every penny of it is needed and every penny will be spent and well spent,” said Mark Hendrickson, executive director of the Florida Association of Local Housing Finance Authorities. “There’s more money this year because there’s more real estate transactions and real estate costs more money.”

But will legislators keep their promise to leave the funds alone?

“They’ve made a promise that there are no more sweeps,” Hendrickson said. “We are grateful, and we’re taking them at their word.”

For his part, DeSantis included a fleeting reference to the cost of soaring rents when he made his budget announcement and implied that the federal government ban on evictions was the cause for the rising costs.

“People want to come to Florida, but things are getting more expensive,” he said. “The rents have gone up because of the CDC policy, which was misguided for so long.”

Roots in the recession

But the economists told the Senate committee that Florida’s affordable housing crisis has been building since the Great Recession.

“Up until about 2004, we were relatively affordable and that was one of our competitive advantages,” Murray explained. “We had cheap land and relatively affordable housing. That’s no longer the case. We are now one of the most unaffordable states in certain metropolitan areas.”

What’s worse, he said, the problem is not unique to South Florida, Orlando or Tampa/St. Petersburg. It is also affecting businesses trying to attract workers in places like Fort Myers and Jacksonville.

“Just like the economic shock of the pandemic was unprecedented … the housing market boom that we’re seeing right now, is unprecedented as well,” he said.

O’Dell of the University of Florida summed it up for the Senate committee: “Invariably, you’re going to have to spend more money on this issue to begin to solve it throughout the state of Florida.”

Will a $355 million investment make a difference?

“It will make a difference,” Hendrickson said. “I don’t think it ends it.”

© 2021 Miami Herald. Distributed by Tribune Content Agency, LLC.

https://www.floridarealtors.org/news-media/news-articles/2021/12/fla-continues-struggle-affordable-housing

Be Careful Using Emojis: Interpretations Vary

Study: Men and women often interpret emoji facial expressions differently. Men see the yellow thinking face as positive, for example; women not so much.

NEW YORK – New research suggests that more people misinterpret the meaning behind an emoji, and as more business correspondence occurs via text or email, people who think an emoji adds context to their message may find that it adds confusion rather than clarity.

You should use emoji carefully when communicating with clients, suggests a report in the science journal Computers in Human Behavior.

Researchers note that men and women often interpret common emoji differently, which could lead to misunderstandings. Wayne State University psychologist Michigan Lara Jones and other researchers found that women tend to use emoji more than men. Emoji use is also more common among younger adults and more prolific in communication with friends than bosses or other work leaders.

But women may read more into emoji than men, according to the study. For example, women may interpret neutral or ambiguous facial emoji as more negative than men. Jones cites the “thinking” emoji as another example: Men tend to view this emoji as slightly positive but women often view it as negative.

The “smiley face with horns” and “eyebrows raised” emoji are also commonly interpreted by men and women differently. And the smiley face emoji may mean happiness to older age groups but send vibes of sarcasm and condescension to younger people. Likewise, a skull emoji may mean danger to some but “dying of laughter” to others.

Researchers don’t advise people to stop using emoji altogether; the symbols have become too common and important in digital conversations and can make communication feel more personal. But researchers suggest avoiding using them with recipients of a different generation unless you know the recipients’ communication style and preferences.

Source: “A New Study Shows Why You Should Be Cautious About Using Emojis at Work,” Inc.com (Dec. 7, 2021); “That Emoji Could Win You (Or Cost You) a Professional Relationship,” forbes.com (Oct. 4, 2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

https://www.floridarealtors.org/news-media/news-articles/2021/12/be-careful-using-emojis-interpretations-vary

Gov. DeSantis’ Budget Includes Housing, Environment

The budget – a proposal to the Florida Legislature for the 2022 session – includes a number of Florida Realtors’ legislative priorities, such as affordable housing aid.

TALLAHASSEE, Fla. – Florida Governor Ron DeSantis announced his Freedom First 2022-23 state budget recommendations on Thursday, and his proposal includes a number of Florida Realtors®’ core legislative priorities, notably affordable housing and environmental goals.

The governor’s budget outlines DeSantis’ priorities heading into the 2022 session of the Florida Legislature. It represents his spending priorities and recommendations for the amount of money he believes should be allocated to the different areas of the state budget, such as education, healthcare, transportation, etc.

Lawmakers aren’t obligated to accept DeSantis’ proposals, but his budget often operates as a roadmap for policies and funding amounts. The governor also has the power to do “line-item vetoes” of final budget items, and it gives lawmakers insight into issues the governor does and does not favor.

“This is a huge, huge budget. This is a huge deal,” DeSantis said during a news conference. “This is something that is going to have very positive effects. We are doing that while remaining the lowest per-capita tax burden in the country.”

Overall, DeSantis’ proposal is about $2 billion less than the current year’s budget, according to his office. His budget would continue to use federal money to fund some key issues, such as a plan to eliminate state gas taxes for five months starting in July. The federal government allocated that money to make up for about $1 billion in lost gas-tax revenue ordinarily used for transportation projects but lost during the pandemic lockdowns.

Affordable housing

Governor DeSantis’ budget provides $40 million to create a revolving loan program that supports workforce homeownership, including down payment and closing cost assistance. His proposed program is similar to the Hometown Hero Housing program Florida Realtors is already working with lawmakers to create next year.

The governor recommends $355.5 million to fully fund the State and Local Government Housing Trust Funds with the following breakdown:

  • $95 million for the State Apartment Incentive Loan (SAIL) Program
  • $220.5 million for the State Housing Initiatives Partnership Program (SHIP)

Environment

DeSantis recommends over $980 million for Everglades Restoration and Water Resources Protection. That amount would bring the four-year investment from the DeSantis Administration to over $3 billion, which surpasses the governor’s goal of $2.5 billion set over four years ago.

$660 million for Everglades restoration includes:

  • $86.5 million for Restoration Strategies
  • $372 million for the Comprehensive Everglades Restoration Plan (CERP)
  • $69 million for the EAA Reservoir
  • $50 million for specific project components designed to achieve the greatest reductions in harmful discharges to the Caloosahatchee and St. Lucie Estuaries
  • $83.3 million is included for the Northern Everglades and Estuaries Protection Program

$195 million for targeted water quality improvements includes:

  • $125 million for the wastewater grant program
  • $50 million to accelerate projects to meet scientific nutrient reduction goals
  • $20 million for critical infrastructure including wastewater and stormwater projects in Biscayne Bay

$50 million to restore Florida’s springs

$35 million to improve water quality and combat the algal blooms, including blue-green algae and red tide:

  • $15 million for innovative technologies and short-term solutions to aid in the prevention, cleanup and mitigation of harmful algal blooms
  • $10.8 million to increase water quality monitoring
  • $5 million to assist county governments with their responses to emergency biological debris conditions associated with red tide events
  • $4.2 million in funding for continued support of research activities conducted by the Center for Red Tide Research and long-term collaborative partnerships among FWC, the University of South Florida College of Marine Science and Mote Marine Laboratory

$40 million for the alternative water supply grant program to help communities plan for and implement vital conservation, reuse and other alternative water supply projects

$100 million for the stabilization, treatment, and closure of the Piney Point site

$100 million for the Florida Forever Program

Over $550 million for Resilient Florida Program

© 2021 Florida Realtors®

https://www.floridarealtors.org/news-media/news-articles/2021/12/gov-desantis-budget-includes-housing-environment

Mortgage Rates Hold Firm Another Week – 3.10%

The Fed cut bond buying and may raise interest rates soon. But the 30-year, fixed-rate mortgage isn’t affected so far, down .01% from last week’s average.

SILVER SPRING, Md. (AP) – The average interest rate on a long-term mortgage in the U.S. held firm again this week.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year, fixed-rate home loan ticked down this week to 3.10% from 3.11% last week. A year ago, the rate stood at 2.71%.

The average rate on a 15-year mortgage also dipped slightly, to 2.38% from 2.39% last week. One year ago, that rate was 2.26%.

Many economists expect U.S. interest rates to rise in coming months as the Fed pivots from the easy money policies it adopted after the coronavirus outbreak ravaged the U.S. economy in the spring of 2020.

Last week, Federal Reserve Chair Jerome Powell hinted that the central bank would shift toward tightening credit more quickly than it previously suggested. Powell said it would be “appropriate” for the central bank to consider accelerating the reduction of its bond purchases at its meeting next week. That could lead to the Fed hiking its benchmark interest rate as early as spring.

The U.S. housing market has seen a surge in demand during the pandemic as people seek more space after spending a big chunk of the past two years working from home. Lured by low interest rates, many prospective homebuyers have been thwarted due to a limited supply of homes for sale and rapidly rising prices. Builders have struggled to keep up with demand as supply chain snarls delay projects.

Copyright © 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

https://www.floridarealtors.org/news-media/news-articles/2021/12/mortgage-rates-hold-firm-another-week-310