Special-Interest Politics: Real-Estate Lobby Edition

Richard Rubin of the Wall Street Journal tweeted this quote from Doug Holtz-Eakin this week.

I assumed that Holtz-Eakin wasn’t talking about the tax provisions that allow businesses to deduct their business costs from their tax base, such as accelerated depreciation, or the ones that are meant avoid the double taxation of income, such as the deferral of taxes on non-repatriated business income earned (and taxed) overseas.

On the other hand, that quote made me think of the furor from the real-estate industry to the announcement that the Republicans’ tax framework plans to double the standard deduction. Why? Because while the mortgage-interest deduction was preserved in the plan, it would mean fewer taxpayers using the deduction. The Wall Street Journal reported this a few days ago:

One goal of the GOP framework is to simplify the tax code by eliminating preferences that distort economic behavior. Most itemized deductions other than mortgage interest and charitable contributions would be nixed. But the individual standard deduction would increase to $12,000 from $6,350 ($24,000 for married couples) to reduce taxes for most Americans.

The Realtors are upset because they say this middle-class tax cut would make fewer taxpayers use the mortgage-interest deduction. The National Association of Realtors trashed the framework in a statement, saying it “would all but nullify the incentive to purchase a home for most, amounting to a de facto tax increase” and ensure “that only the top 5 percent of Americans have have the opportunity to benefit from the mortgage interest deduction.”

There is so much wrong there that I don’t know where to start. First, notice the entitlement mentality on display here. It is true that for years government has taken it upon itself to prop up homeownership — with various degrees of success. Yet that doesn’t mean that this is a good idea or even within the proper scope of the role of government. So to the extent that the framework removes some of these distortions, it is a good thing.

Moving to a system where fewer people itemize is also a good thing. Tax simplification doesn’t simply bring more fairness to the tax code — it increases efficiency, and it saves taxpayers money and time by reducing their compliance costs.

Third, this quote implies that everyone benefits today and that losing this deduction would mean higher taxes for taxpayers. Wrong. Today, roughly a third of taxpayers itemize and claim the deduction. From MarketWatch:

In 2018, 35.4 million households are expected to claim itemized deductions for mortgage interest, according to a study released in May by the National Association of Realtors and auditing firm PwC. Comparatively, the report estimated that 40.7 million taxpayers will report itemized deductions in 2018 for property taxes. (The U.S. Census Bureau estimates that there are roughly 117 million households in the U.S., which would mean that just under a third claim the mortgage interest deduction).

This is a good read, too. Research has shown that the mortgage-interest deduction mostly benefits higher-income earners. This is from Mark Calabria back in January 2017 (he was at the White House):

Fully 75 percent of federal dollars — including tax expenditures — used to subsidize housing goes to high-income households through the mortgage interest deduction and other homeownership tax benefits. Seven million households with incomes of $200,000 or more receive a larger share of these resources than the 55 million households with incomes of $50,000 or less, even though lower-income families are far more likely to struggle to afford housing. Half of all homeowners receive no tax benefit from the mortgage interest deduction, and almost all of the tax break goes to households with incomes above $100,000. At the same time, only one in four of the poorest households that are eligible for housing assistance get the help they need because of chronic underfunding.

In addition, like most subsidies, the mortgage-interest deduction artificially inflates the price of homes. That means that homeowners don’t really benefit from it because, though they do sell their homes at higher prices than they would be worth without the subsidy, they also have to buy over-priced homes.

And as Jeff Dorman explains in this piece over at Forbes, the claims that the deduction, by encouraging homeownership, has a positive impact on the economy is dubious:

Yet, thanks to a new study out based on Danish data, many people are now wondering if there is anything positive about this tax break. While the debate is not settled, right now the answer appears to be no. The mortgage interest deduction is nothing more than rent seeking on behalf of the real estate industry. It confers no benefit to society as a whole.

What the new study by economists Jonathan Gruber, Amalie Jensen, and Henrik Kleven showed, at least in Denmark, is that the mortgage interest deduction did not boost home ownership rates, only prices and the amount of money that people borrowed when they bought houses. The official rationale for a tax code that favors debt related to houses is that home ownership creates benefits to society because it makes people feel more invested in their communities and should thus be encouraged. If the mortgage interest deduction only increases mortgage debt and home prices, not home ownership, then it is a failed policy and its repeal should be considered.

MarketWatch adds:

At the same time, the tax break doesn’t seem to incentivize homeownership a whole lot. Government data show that the homeownership rate in Canada (69%) is actually slightly higher than in the U.S. (63.7%), despite the fact that the Canadian tax code doesn’t include any deduction for mortgage interest paid. And rental households obviously don’t see the tax benefit, since they don’t have access to it. “It’s not clear that the U.S. has had a boon of homeownership because of the mortgage interest tax deduction,” Chacón said.

These results are consistent with the findings of many other studies, such as this one by my colleagues Jason Fichtner and Jacob Feldman. See this very recent study’s findings:

We simulate the effect of tax reform on the housing market. Eliminating the mortgage interest deduction causes house prices to decline, increases homeownership, decreases mortgage debt, and improves welfare. Our findings challenge the widely held view that repealing the preferential tax treatment of mortgages would depress homeownership.

There is so much more out there on the issue. While I have my issues with the doubling of the standard deduction (mostly I don’t like that it kicks more people off the tax rolls), I recognize that it will bring very needed simplification to the tax code. The furor of the real-estate lobby is evidence of that. Their criticism should be ignored for the benefit of all.

Realtors Go on $11 Million Lobbying Spree

Washington’s most powerful trade associations spent more than $30 million on lobbying in the third quarter as Congress ramped up efforts to overhaul of the U.S. tax code.

Real estate groups were among those spending heavily, according to lobbying disclosures released Friday for the three months ending Sept. 30. The National Association of Realtors, routinely among Washington’s biggest spenders, doled out $11.1 million during the period. The National Association of Real Estate Investment Trusts spent $1.23 million, a record for the group.

The White House and Republican congressional leaders released a framework for overhauling taxes on Sept. 27, three days before the end of the quarter. Several groups have said they lobbied tax-writers during the months leading up to the release, including an effort that succeeded in killing a proposed levy on imports. Trump has said the legislation will be “the largest tax cuts in U.S. history.”

The Realtors have been fighting to preserve the federal deduction for mortgage interest. While the proposed tax framework would retain “tax incentives for home mortgage interest,” the NAR is concerned that another measure — a proposed increase in the standard deduction — would render the mortgage deduction less valuable to many homeowners.

US home sales ticked up in September as Houston recovers

U.S. home sales rose slightly last month as the Houston housing market quickly recovered from Hurricane Harvey. Still, a shortage of available homes is thwarting many would-be buyers and limiting sales.

The National Association of Realtors said Friday existing home sales increased 0.7 percent to a seasonally adjusted annual rate of 5.39 million. That’s the first increase after three months of declines.

Yet sales have fallen 1.5 percent from a year ago, the first year-over-year decline since July 2016. That’s because so few homes are for sale, particularly at lower prices. Buyers have bid up housing costs: The median home price rose to $245,100, up 4.2 percent from a year ago. That’s faster than wage gains.

“It’s simply impossible to sell more homes when the number of homes for sale keeps falling,” said Svenja Gudell, chief economist for housing data provider Zillow. “And the parts of the market most in need of more homes for sale, the low-to-middle segments, are also those experiencing the biggest inventory shortfalls.”

Home construction has been slowed by a shortage of available workers, developers say. Home construction fell 4.7 percent last month, partly because of the hurricanes. And many home owners are reluctant to sell with so few other houses available, creating a vicious cycle.

New construction may slow even more in the coming months, keeping inventories low, the Realtors said. Construction workers — and building materials such as lumber — are being diverted to repair and rebuilding work in the aftermath of the storms and the wildfires in California. That should slow new home building and limit the number of homes for sale.

Employers are hiring and mortgage rates remain low, which typically would lift sales. But the number of affordable homes available is falling sharply, according to data from real estate brokerage Redfin. It calculates that the number of newly-listed homes for less than $260,000 plunged 14.9 percent last month from a year ago. New listings priced between $260,000 and $470,000 fell 4.7 percent.

Only homes priced above $470,000 — the most expensive one-third of the market — saw listings actually increase, by 2.3 percent.

The number of homes for sale sank 6.4 percent from 12 months ago to 1.9 million homes, the fewest in any September since the Realtors began tracking the number in 2001.

In Houston, sales rose 4 percent from a year ago after plunging 25 percent in August. Lawrence Yun, chief economist for the Realtors’ group, said some of that gain may reflect investors purchasing damaged properties.

In Florida, Hurricane Irma sharply lowered sales last month, which were 22 percent lower than a year ago, the Realtors said.

Sales fell more than 15 percent from a year earlier in Miami, Fort Lauderdale, Jacksonville, Orlando and Tampa, according Redfin. Sales in Miami plunged 38.4 percent.

“The housing market is running on fumes due to low inventory,” said Redfin chief economist Nela Richardson. “The inventory shortage is most severe for affordable homes. There has not been an increase in homes priced under $260,000 in two years.”

Bob McVey of Georgetown named Delaware Realtor of the Year

The price of liberty is eternal vigilance.

North Bay fire victims to face construction worker shortage – KGO

Homeowners who lost their homes in the North Bay wildfires may find it difficult to locate construction workers to rebuild their fire-leveled houses.

That’s one of the issues raised by the chief economist of the National Association of Realtors, who spoke to ABC7 News after giving a presentation to the Santa Clara County Association of Realtors 2017 conference in Santa Clara on Thursday.

Lawrence Yun, Ph.D., says construction workers from across the country, including California, have been lured away by bonuses offered to help with massive hurricane reconstruction in Florida and Texas.

“With other regions of the country also facing a large shortage of construction workers,” Yun said, “I think this rebuilding activity will be a multi-year… it may be three, four years out before there’s some normalcy in the real estate market in the Santa Rosa region.”

TAKE ACTION: How you can help victims of the North Bay fires

Dr. Yun says there also will be some short-term concerns about missed mortgage payments because of homeowners who have lost their jobs as a result of businesses destroyed in the North Bay fires.

San Jose mortgage broker Pam Foley suggested, “maybe they can create forbearance on the loan, which postpones the payments or postpones collection of the payments, but they should start that conversation as soon as possible just so the lender’s aware.”

Several real estate firms were busy soliciting donations at their booths at the real estate conference to help fire victims. Some of the victims are real estate colleagues.

Doug Goss and Jim Myrick at Keller Williams Bay Area Estates in San Jose and Los Gatos said they knew of seven Santa Rosa area realtors who lost their homes.

Keller Williams also sent a load of emergency supplies to help their colleagues.

Associates at an Alain Pinel office have raised $24,000 so far. The vice president of the Santa Clara County Assn. of Realtors, Anne Hansen, has made a rental property she co-owns available gratis to an elderly couple who lost their North Bay home to fire.

“I mean you’re homeless, where are you going to go? And you’re in your 80’s, and you’re breathing all that smoke. So they can stay as long as they want, really,” said Hansend.

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NAR invests in Notarize to help push for more mortgage eClosings

Second Century Ventures, the investment arm of the National Association of Realtors, announced it is investing in Notarize, a remote notary platform.

The announcement reaffirms a strong push in the industry toward remote eClosings.

Notarize recently helped pioneer remote notarizations into the mortgage industry, bringing complete end-to-end digital mortgages into reality.

Compared to the previous option that required either some in-person contact or a notary to eSign closing documents via a shared tablet, the company’s solution allows borrowers to FaceTime or Skype with the notary, making it a completely remote eClosing, with a notary not having to physically be present.

With the investment from the largest trade group representing Realtors, Notarize plans to scale these remote eClosings across the country.

According to a recent survey conducted in partnership with NAR members, more than 60% of Realtors said they experienced a closing last year that was delayed or cancelled due to one of the parties not being able to be physically present.

And, 30% of respondents said anywhere between 5-25% of their closings were delayed or cancelled

Nearly 90% of the members responded saying they believe online closings would be important for them and their clients.

This new partnership should help fix with these Realtor concerns. “A faster, more secure closing reduces stress and improves the overall experience, and we believe Notarize is the company that will make this a reality for agents across the country,” said Bob Goldberg, CEO of NAR.

The investment from NAR follows Notarize’s participation in the REach Accelerator program, a program that brings new technology companies into the real estate market.

Notarize is only one of 13 investments that NAR has ever made through its venture fund. 

70 Percent of Realtors® Self-initiated Real Estate Career, Identify People Skills as Most Important

WASHINGTON, Oct. 18, 2017 /PRNewswire/ — The majority of Realtors® self-initiated their career in real estate and identify strong people skills as the most important trait to be a successful agent, according to the National Association of Realtors® new research report, Choosing a Career in Real Estate: A Perspective on Gender, Race and Ethnicity.

The Choosing a Career in Real Estate report was developed to discover how and why Realtors®, members of the National Association of Realtors®, chose real estate as a career and to examine gender, race and ethnicity in real estate. 

Realtors® Self-initiated Career

Realtors® Self-initiated Career

“A career in real estate offers a work environment and diversity of opportunity that attracts all types of individuals, and the report’s findings are a reflection of that,” says NAR president William E. Brown, a second-generation Realtor® from Alamo, California and founder of Investment Properties. “That being said, NAR remains committed to ensuring that its membership continues to reflect America’s growing diversity.”

Choosing a Career in Real Estate
According to the report, nearly 70 percent of Realtors® self-initiated their career in real estate based on interest in the industry, and almost 20 percent were referred by a friend. Sixty-nine percent of males self-initiated their career compared to 65 percent of females, and 20 percent of women were referred by a friend, compared to 18 percent of men. Seventy-five percent of Black and African American members self-initiated their career in real estate – more than any other ethnic group – while 27 percent of Asian and Pacific Islander members had their career in real estate referred by a friend, also more than any other group.

Attractive Aspects of Real Estate
Nearly seven in 10 Realtors® found flexible hours to be the most attractive aspect about being a real estate agent, followed by interest in the industry (64 percent), working with people (54 percent), entrepreneurial field (50 percent) and salary possibilities (49 percent).

The report also surveyed Realtors® about important skills to possess to be successful in real estate. People skills (86 percent), self-motivation (84 percent) and negotiation skills (73 percent) ranked as the most important skills in residential real estate, while negotiation skills (69 percent), problem solving skills (63 percent) and analytical reasoning (62 percent) were viewed as the top skills for commercial real estate professionals.

The report also surveyed members on whether they began their career in real estate or if they transitioned into their current position from another industry, and the majority of Realtors® (82 percent) started their professional career doing something outside of real estate. Real estate is more often the second career for females (51 percent) and the third career for males (36 percent).

Sixty-one percent of Black and African American members stated that real estate is more often a second career, more than any other ethnic group. Male members were more likely to have a previous career in management or sales, and in contrast, female members were more likely to have a previous career in management, office support and education.

Females make up 63 percent of NAR’s membership and those who work exclusively in residential have a median gross income from real estate of $46,700, compared to $54,600 for men. Women tend to be younger in age and more likely to work part-time. When it comes to residential business activity, women had a median of eight sales transactions, compared to seven for men.

Asian and Pacific Islander members working exclusively in residential real estate have the highest median gross annual income of all ethnic groups at $56,800, followed by White and Caucasian members at $54,200, Hispanic and Latino members at $41,700, and Black and African American at $23,000.

Those who work in dual specialties, both residential and commercial, tend to have higher gross median incomes at $89,300.

Seventy percent of female members work exclusively in residential real estate, compared to 45 percent of male members. Fifteen percent of males work exclusively in commercial real estate, compared to only 4 percent of females.

Hispanic and Latino members make up the largest share of those working exclusively in residential real estate (71 percent), and Asian and Pacific Islander members make up the largest share working in both commercial and residential real estate (37 percent). Twelve percent of White and Caucasian members work only in commercial real estate, compared to 3 percent or less for all other ethnic groups. 

Dual specialists typically have 10 residential transactions and one commercial transaction. Dual specialists tend to have more experience in residential real estate than those working exclusively in residential real estate and are more likely than others to work in small towns, rural areas and resort areas.

Race and Ethnicity in Real Estate
Comparing the activity of each ethnic group in real estate, the report finds that White and Caucasian members make up 82 percent of all NAR members and had the most transactions and highest sales volume. Asian and Pacific Islander members had the highest median gross income, sold the most expensive homes and had the highest median dollar value of residential sales transactions. They also had the second highest median years of experience (10 years) and the second largest group of members over 60 years in age (29 percent).

Black and African American members have the lowest median gross income and sell the least expensive homes, however, they make up the largest group working less than 20 hours a week and are also the largest group to receive less than half their overall income from residential real estate.

These findings indicate that the income of Black and African American members is more diversified outside the industry, and that real estate is only a part-time source of income. Hispanic and Latino members are the largest group specializing exclusively in residential real estate (71 percent), the largest group with less than one year of experience (25 percent) and are the youngest members.

Hispanics and Latino members have the second most median residential sales transactions and sold the third most expensive homes, according to the report.

NAR offers many resources to promote diversity in its Realtor® membership through its Equal Opportunity and Cultural Diversity program, including education, grants, partnerships and events. The NAR Diversity Initiative Grant Program provides grants to help fund outreach efforts to minority consumers and bring more diversity into Realtor® membership and leadership. NAR’s diversity course, At Home with Diversity, gives Realtors® tools and training to better serve today’s diverse consumers. NAR has also successfully built partnerships with housing groups and professional real estate organizations representing the multicultural community.

Choosing a Career in Real Estate: A Perspective on Gender, Race and Ethnicity report was based on a survey sent from March to April 2017 to 144,000 members of the National Association of Realtors®.  A representative sample of 6,363 members responded to the survey, an adjusted response rate of 4.4 percent. 

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.nar.realtor. This and other news releases are posted in the “News, Blogs and Videos” tab on the website.

View original content with multimedia:http://www.prnewswire.com/news-releases/70-percent-of-realtors-self-initiated-real-estate-career-identify-people-skills-as-most-important-300538879.html

SOURCE National Association of Realtors

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National Association of Realtors honors GLVAR’s Global Business Committee

The Global Business Committee of the GLVAR was recently honored by the National Association of REALTORS  with a Platinum Global Achievement Program Award.LAS VEGAS – The Global Business Committee of the Greater Las Vegas Association of REALTORS® (GLVAR) was recently honored by the National Association of REALTORS® (NAR) with a Platinum Global Achievement Program Award.

“Las Vegas has been the focus of foreign investment for many years, as evidenced by recent upticks in commercial and residential sales to global clients,” GLVAR President David J. Tina said. “The Global Committee has a number of REALTORS® who are experts that specialize and understand the diverse needs and laws governing international clients. This award is a testament to that expertise and places Las Vegas among the top global groups in the country.”

GLVAR’s Global Business Committee focuses on international real estate opportunities and education. It is chaired by local REALTOR® Tamara Larisa Tyrbouslu, who has earned the Certified International Property Specialist (CIPS) designation and teaches CIPS courses to her fellow GLVAR members. Tyrbouslu said this is the fourth straight year that GLVAR’s Global Business Committee has received this highly respected award.

“There are 110 global committees and councils across the country,” she said. “We are one of 15 to earn this distinguished award. By earning NAR’s platinum award again next year, we’ll be eligible for the even more impressive ‘Diamond’ status coveted by other U.S. global groups.”

To earn the platinum award, committee members had to complete an extensive application that includes benchmarking its global initiatives, including marketing, education and trade missions.

In informing GLVAR about the award, Janet Branton, NAR senior vice president of commercial and global services, said, “I hope you are as proud of this achievement as we are of the hard work and dedication that your association has contributed to raising members’ awareness of global business in your local market. Your council has demonstrated the utmost commitment to helping members capture their share of the global real estate market in the United States, in addition to connecting your council and members to the global community in your area.”

NAR will present the award Nov. 4 at its REALTORS® Conference Expo in Chicago.

About the GLVAR
GLVAR was founded in 1947 and provides it’s more than 14,000 local members with education, training, and political representation. The local representative of the National Association of REALTORS®, GLVAR is the largest professional organization in Southern Nevada. Each GLVAR member receives the highest level of professional training and must abide by a strict code of ethics. For more information, visit www.LasVegasRealtor.com.

Central Texas home sales decline 4.3% in September

Single-family home sales declined across most areas of Central Texas in September, while the median price in the region overall rose more than 5 percent, to $291,464, the latest figures show.

In its monthly report released Tuesday, the Austin Board of Realtors said there were 2,433 home sales in the Austin-Round Rock metro last month, down 4.3 percent from September 2016. Half of the homes sold for more than $291,464 and half for less, for a 5.3 percent increase in the median price over the prior September.

“Despite last month’s dip in home sales activity, it’s important to remember that we’re comparing our current figures to the record-breaking housing market activity in 2016 and it’s not necessarily indicative of a downturn,” Brandy Guthrie, president of the Austin Board of Realtors, said in a written statement.

Home sales declined in most Central Texas counties last month compared with September 2016, with the exception of Williamson County, where volume was up 1 percent. Home sales declined 8.6 percent in Travis County; 0.3 percent in Hays County; and 4.1 percent in the city of Austin.

Home prices, however, continued to rise at a steady pace. Within Austin’s city limits, the median price rose 4 percent, to $355,000.

Although the region’s housing supply is edging up, it still remains a seller’s market, experts say.

“Home builders in Central Texas continue to play catch-up, trying to keep pace with the demand for housing brought on by the surging population in the region in recent years,” said local housing market consultant Eldon Rude, principal of 360 Real Estate Analytics. “The strongest segment of the market remains first-time home buyers, many of whom are eager to purchase a home after tiring of constant rent increases for their apartments.”

Lawrence Yun, chief economist for the National Association of Realtors said the “steady depletion of housing inventory” in the local market “is resulting in a fast rise in home prices and affordability challenges. The construction of single-family homes as well as condominiums needs to ramp up higher in order to fully satisfy housing demand and maintain housing affordability. Otherwise, job growth could stall and bring less dynamism to the local economy.”

Richard Caprioli, a real estate advisor with the Engel Völkers real estate brokerage in Austin, said that with affordability a “huge concern,” some buyers are turning to condominium living.

“I’ve had a huge amount of interest in my new development listing, SoMa Village,” a gated community of 46 condominiums under construction at 6800 Manchaca Road with prices starting at about $300,000, Caprioli said. “I think this part of South Austin, just south of Ben White (Boulevard), is one of the hottest areas right now. Buyers are smart and well informed, they see the value in new construction pre-sales pricing and are willing to lock in a good price now and wait for completion in the spring.”

Barbara McLaughlin, an agent with JB Goodwin Realtors in Austin, said that after a slow September, the resale market has started picking up in the last two weeks. She said she also is seeing “a lot more traffic” in new-home communities, where some builders are offering buyers discounts of $15,000 to $20,000.

Looking ahead, Rude said he expects Austin’s housing market “to remain healthy well into 2018, although the recent slowing in job growth in the area might begin to dampen demand late next year or in early 2019.”

Yun said that slightly higher mortgage rates next year “will further pressure affordability and therefore attest to even greater need for new home construction to tame home price pressure.”