Denver’s logjam of homes for sale may be loosening
DenverPost.com | September 21, 2016 | Aldo Svaldi
After tightening for 10 consecutive quarters, the inventory of homes available for sale in metro Denver loosened in the third quarter, according to a report Wednesday from Trulia. “While it is nothing to celebrate wildly if you are home buyer, it may be a sign that the market is freeing up and that the gridlock is starting to break,” said Ralph McLaughlin, chief economist at Trulia, a residential real estate website. McLaughlin, in an interview, even coined a new term to describe Denver’s housing market — “coolingish.”
Metro Denver’s inventory of homes for sale stood at 7,426 on July 1, up 2.8 percent from July 1, 2015, Trulia said. Hardly a huge gain, but metro Denver hasn’t seen a year-over-year increase in the quarterly count of homes available for sale since late 2013. Nationally, the inventory of homes for sale in the third quarter fell 6.8 percent, marking the fifth consecutive quarter of year-over-year declines in the inventory of existing homes.
Trulia divides homes into three affordability tiers: starter, trade up and premium. In metro Denver, the inventory of starter homes, with a median price of $226,463, rose 12.3 percent. Trade-up homes, median price of $348,967, experienced a 16 percent increase in inventory. The inventory of premium homes, median price of $602,450, fell 4.1 percent. Still, premium homes dominated, accounting for just under six out of 10 homes available for sale on July 1. Trade-up homes were about a quarter of the total and starter homes, which tend to move fast when they hit the market, were just 15.3 percent.
Metro Denver’s inventory is still only about 40 percent to 50 percent of the historical average, and remains super-tight. But McLaughlin notes a lack of affordability appears to be weighing on the Denver starter-home market. The median price in that segment has shot up 20 percent in the past year, and “starter” buyers seeking a median home in that tier face mortgage costs at 46 percent of income — well above the 36 percent lenders are typically comfortable providing.
Another thing to watch for, McLaughlin said, is to what degree investors who acquired foreclosures and other bargains during the housing downturn put their rentals on the market and cash in at the peak. That could help push up inventory even more. Metros with the biggest jumps in inventory included Cape Coral, Fla.; Miami; Las Vegas; and Fresno, Calif. San Francisco and San Jose, two of the nation’s most expensive housing markets, had 19.3 percent and 8.7 percent jumps in inventory in the third quarter, Trulia said.
Healthy demand will likely prevent home prices from falling any time soon in the nation’s hottest housing markets, said McLaughlin. But he does expect gains to moderate and notes buyers and sellers should pay attention to the chill in the air.
How your neighbor’s Airbnb rental can affect your property values
WashingtonPost.com | September 7, 2016 | Ilyce Glink and Samuel J. Tamkin
I’ve been scouring the Internet (without success), looking for data regarding whether short-term rentals (STRs, e.g., Airbnb, HomeAway, etc.) increase or decrease property values in the areas around them, as well as whether home buyers are more likely to pay more for a home that can be rented as an STR. It would be great if you could look into this. There is a major debate about this in my condo community, as well as in Austin where I live.
Short-term rentals are of increasing concern to homeowners, real estate agents, local communities, and the National Association of Realtors (NAR). At the 2016 Realtor Legislative Meetings in in May, a panel of industry experts spent 90 minutes discussing whether short-term rentals infringed on property rights.
According to a news release published after the event, co-moderator Christopher McElroy, a Realtor from Colorado and chairman of NAR’s State & Local Issues Policy Committee, said owning property comes with a “bundle of rights,” including the opportunity to rent owned property to another individual. However, advancing technology has expanded choices for consumer travel and changed traditional rental market time frames to much shorter periods. McElroy said, “The increased popularity of short-term rentals puts additional pressure on availability and affordability [of lodging options] in tourist communities, and now local governments are looking at ways to tax them in a similar way as hotels or bed-and-breakfasts.”
Also noted in the release, Brian Blaesser, a real estate attorney partner at the Boston office of law firm Robinson & Cole, said that local governments are seeking to regulate rental housing in various ways, including through registrations and inspections. “Fundamental property rights state that you should be able to buy, rent or sell a property,” he said. “Limiting renting is taking away one of those three rights, and further regulations beyond registration and inspection can be dangerous.”
The panel agreed that renting a property for less than 30 days is still a residential activity vs. a commercial activity. In other words, just because you lease your home overnight doesn’t necessarily make it a commercial property.
There are other concerns afoot. In the January issue of Realtor Magazine, a story by contributing writing Carolyn Schwaar covered a variety of issues relating to short-term rentals, including zoning and other local law restrictions on short-term rentals, the shifting nature of those laws, and the effect of short-term rentals on property values and the second-home market.
In terms of the effect short-term rentals have on neighbors, it’s a negative effect if the neighbor is renting what’s known as a “party house,” but a positive if a property can advertise “rentable areas,” such as an in-law unit or coach house with its own entrance. In areas where short-term rentals are accepted or encouraged, and neighbors aren’t hostile to it, a home with “rentable” features might sell for more money, according to some Realtors. And in some areas, said Craig Kalkut, vice president of government affairs at the American Hotel and Lodging Association, there’s evidence that vacation-home sales are going up because these sorts of platforms have become an accepted way to book a vacation.
But there are many communities looking to restrict online options such as Airbnb, HomeAway, VRBO and FlipKey, or at least make money from the transactions. Portland, Ore., legalized Airbnb short-term rentals, requires homeowners to have a permit, and receives tax and lodging fees. In your home town of Austin, city officials are looking to strengthen short-term rental restrictions, and perhaps even outlaw it in some neighbors. In San Francisco, an upcoming ballot initiative would increase restrictions, according to Realtor Magazine.
Condo buildings often have their own restrictions relating to rentals and typically do not allow short-term rentals of less than six months, or in some cases one year. That would mean overnight or even monthly rentals would not be allowed. The condos that do permit monthly rentals are often in vacation communities, where people might want to rent a house in the mountains for a month in the summer, or by the beach in the winter.
From a sales point of view, condo buildings should tread carefully, as it’s easy to run afoul of Fannie Mae or Freddie Mac’s rules regarding what would make a building ineligible for loans by either of these quasi-governmental organizations. Fannie Mae, for example, will not buy a loan for a property if the building allows units to be rented by the day. In effect, that rule means buyers in your condo building would become ineligible for a Fannie Mae loan.
According to a spokesman for NAR, the organization hasn’t taken a position on either side of the argument. After all, someone is still buying and selling these properties, whether they’re primarily owner-occupied, vacation homes, second homes or investment homes.
Given the new nature of these rentals and occupancy issues, it may vary greatly from one neighborhood to another whether short-term rentals help or hurt a neighborhood or a particular development.
Freddie Tests Less-Stringent Loan Program
RealtorMag.com | September 21, 2016 | AnnaMaria Andriotis
In a new pilot program, Freddie Mac and two non-bank lenders are easing income and documentation requirements for mortgage borrower applicants. The aim is to fuel more mortgage originations among first-time buyers, who tend to have more low to moderate incomes, and to better reach those who live in underserved areas, The Wall Street Journal reports.
In the pilot program, Freddie Mac says that applicants will be able to use the income of others who live with the borrower but who aren’t going to be on the mortgage to qualify. Also, income from second jobs that borrowers have held, even for a short period of time, can now be factored in. The program will also not require borrowers to come up with bank statements to show how they saved for their down payment.
The pilot program does not lower down payment or credit score requirements.
Sister mortgage giant Fannie Mae offers a similar program. However, the loosened standards are new to Freddie Mac.
Freddie Mac says the changes took effect on Monday. The pilot program will be offered for the next 12 months to mortgage applicants with Alterra Home Loans, based in Las Vegas, or New American Funding in Trustin, Calif. After 12 months, Freddie Mac will determine whether to expand its pilot program.