Americans Rank Real Estate Best Investment for 7 Years Running [INFOGRAPHIC]

Americans Rank Real Estate Best Investment for 7 Years Running [INFOGRAPHIC] | MyKCM

Some Highlights

  • Real estate has outranked stocks, savings accounts, and gold as the best long-term investment among Americans for the past 7 years.
  • The belief in the stability of housing as a long-term investment remains strong, despite the many challenges our economy faces today.
  • Of the four listed, real estate is also the only investment you can also live in. That’s a big win!

Posted on July 15, 2020 at 10:02 pm
Cara Milgate | Posted in Investor Tips & Strategy, Market Trends & Stats |

Buyer Demand Growing in Every Region

Buyer Demand Growing in Every Region | MyKCM

Buyers are out in full force this fall, increasing the demand for homebuying in all four regions of the country.

According to the latest ShowingTime Showing Index,

“Home showing activity was up again nationwide with a 4.6 percent rise in traffic, as the traditionally slow fall season began with a marked boost in buyer interest.”

Buyers clearly have the right idea, as mortgage rates have dropped over a full percentage point since the fall of 2018. They’ve hovered in a historically low range since this summer, making the overall cost of homeownership significantly more attractive and affordable.

Here’s the breakdown of how ShowingTime reports current buyer traffic patterns across the country:

“The West Region, which until August had experienced 18 consecutive months of flagging home buyer traffic, lead the four regions in year-over-year improvement with an 8.9 percent increase in buyer activity.

The South followed with a 6.4 percent increase, the largest such improvement in the region since April 2018, with the Northeast Region’s 5.6 percent increase the next largest among the four regions.

The Midwest’s more modest 0.8 percent year-over-year growth rounded out the nation’s promising month.”

Buyer Demand Growing in Every Region | MyKCMWith ShowingTime reporting “nationwide growth for the second consecutive month, a first since December 2017 – January 2018”, it’s one more reason why selling your house this winter is the way to go. List while buyers are on the market, before competition with other sellers pops up in your neighborhood.

Bottom Line

If you’re thinking of waiting until spring to sell, think again! Let’s get together to discuss listing your house now while buyer traffic is actively surging throughout the country.


Posted on November 15, 2019 at 3:41 pm
Cara Milgate | Posted in Investor Tips & Strategy, Market Trends & Stats, Seller Tips & Strategy |

This is Not 2008 All Over Again: The Mortgage Lending Factor

This is Not 2008 All Over Again: The Mortgage Lending Factor | MyKCM

Some are afraid the real estate market may be looking a lot like it did prior to the housing crash in 2008. One of the factors they’re pointing at is the availability of mortgage money. Recent articles about the availability of low-down payment loans and down payment assistance programs are causing concern that we’re returning to the bad habits of a decade ago. Let’s alleviate the fears about the current mortgage market.

The Mortgage Bankers’ Association releases an index several times a year titled: The Mortgage Credit Availability Index (MCAI). According to their website:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is…a summary measure which indicates the availability of mortgage credit at a point in time.”

Basically, the index determines how easy it is to get a mortgage. The higher the index, the more available the mortgage credit.

Here is a graph of the MCAI dating back to 2004, when the data first became available:This is Not 2008 All Over Again: The Mortgage Lending Factor | MyKCM  As we can see, the index stood at about 400 in 2004. Mortgage credit became more available as the housing market heated up, and then the index passed 850 in 2006. When the real estate market crashed, so did the MCAI (to below 100), as mortgage money became almost impossible to secure.

Thankfully, lending standards have eased since. The index, however, is still below 200, which is half of what it was before things got out of control.

Bottom Line

It is easier to get a mortgage today than it was immediately after the market crash, but it is still difficult. The difference in 2006? At that time, it was difficult not to get a mortgage.


Posted on November 15, 2019 at 3:40 pm
Cara Milgate | Posted in Buyer Tips & Strategy, First-Time Home Buyer Tips, Investor Tips & Strategy, Mortgage Lending |

IRS Provides Safe Harbor for Rental Real Estate Owner Tax Deduction

On September 24, the IRS issued Revenue Procedure 2019-38, clarifying rental real estate owners’ eligibility for the highly anticipated tax break under section 199A of the Internal Revenue Code

Section 199A Deduction Generally

Under section 199A, many owners of pass-through entities (such as sole proprietorships, partnerships, S corporations, and some trusts and estates) qualify for a tax deduction of up to 20% of their qualified business income (QBI). QBI is the net amount of qualified items of income, gain, deduction, and loss from any qualified trade or business.

“Trade or Business”

There is no bright-line test as to what constitutes a “trade or business,” which the IRS generally defines as “an activity carried on for a livelihood or in good faith to make a profit.” Whether a trade or business exists depends on the facts and circumstances of each case. Regularity of activities and the production of income are important elements, and a profit motive and ongoing efforts to further the interests of the business are necessary for the trade or business to exist. Knowing the uncertainty present under existing tax law regarding whether rental real estate owners are eligible for the deduction under section 199A, the IRS previously released Notice 2019-07, a proposed version of a safe harbor, for determining when rental real estate activities constitute a “trade or business.” Revenue Procedure 2019-38 finalized that safe harbor with certain modifications, clarifying that a “trade or business” is deemed to exist in the context of rental real estate, provided the safe harbor requirements are satisfied.

The Revenue Procedure specifically noted that failure to satisfy the safe harbor requirements does not preclude a taxpayer or the IRS from otherwise establishing that an interest in rental real estate is a “trade or business” for purposes of section 199A. This clarification is favorable for owners of rented real property that may find the requirements of the safe harbor requirements (discussed below) to be too onerous to satisfy, but that are otherwise able to establish that a “trade or business” exists under general tax principles.

Safe Harbor Requirements

Effective for tax years ending after December 31, 2017, the safe harbor is available to taxpayers and relevant pass-through entities interested in claiming the deduction with respect to a “rental real estate enterprise.” For the purpose of section 199A, the Revenue Procedure defines a “rental real estate enterprise” as an interest in real property held to generate rental or lease income.

Below are the requirements outlined in the Revenue Procedure for a rental real estate enterprise to satisfy the trade or business requirements under section 199A:

  • Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise.
  • For rental real estate enterprises that have existed for less than four years, 250 or more hours of rental services must be performed per year. For other rental real estate enterprises, 250 or more hours of “rental services” must have been performed in at least three of the past five years. “Rental services” specifically include (i) advertising to rent or lease the real estate; (ii) negotiating and executing leases; (iii) verifying information contained in prospective tenant applications; (iv) collection of rent; (v) daily operation, maintenance, and repair of the property, including the purchase of materials and supplies; (vi) management of the real estate; and (vii) supervision of employees and independent contractors.
  • The taxpayer must maintain contemporaneous records regarding the services performed (including a description of the services, the dates on which such services were performed, the identity of the person who performed the services, and the total hours spent performing the services). The contemporaneous records requirement applies to tax years beginning on or after January 1, 2020.
  • The taxpayer or relevant pass-through entity must attach a statement to its tax return filed for the tax year(s) for which the taxpayer relies upon the safe harbor, which statement must include a specific representation that the requirements of the Revenue Procedure have been satisfied.

Safe Harbor Points of Interest

Mixed-Use Interests are Eligible.

The proposed safe harbor left uncertainty as to whether mixed-use properties were eligible for the deduction under section 199A. The final Revenue Procedure provides that an interest in mixed-use property may either be treated as a single rental real estate enterprise or may be bifurcated into separate residential and commercial interests. For additional clarity, the final Revenue Procedure also defines “mixed-use property” as a single building that combines residential and commercial units. Should owners try to utilize the safe harbor for a mixed-use property as a single rental real estate enterprise, they should be aware that it may not be treated as part of the same enterprise as other residential, commercial, or mixed-use property. The eligibility of mixed-use interests is favorable to taxpayers, but it does prompt owners to evaluate their property portfolios to decide whether bifurcation is favorable to categorizing a mixed-use property as a single enterprise.

Extensive Record-Keeping Requirements May Prompt a Shift in How Employees and Independent Contractors are Supervised.

Despite requests of many commenters to lower the number of rental services hours required to satisfy the proposed safe harbor, the IRS retained a requirement of 250 rental service hours for safe harbor eligibility in the final Revenue Procedure. This compliance burden is reduced in part by allowing the services of both employees and independent contractors to satisfy the requirement. Owners should find this allowance favorable, but it requires consistent and detailed invoicing practices with service providers (which may require adjustment to existing practices).

Triple Net Leasing is Ineligible for the Safe Harbor.

Property leased under a triple net lease is not eligible for the safe harbor. Commenters requested a clear definition of a “triple net lease.” The IRS responded that for the purposes of the Revenue Procedure, a triple net lease includes a lease agreement that requires the tenant or lessee to pay taxes, fees, and insurance, and to be responsible for maintenance activities for a property in addition to rent and utilities. The IRS further clarified that this includes a lease agreement that requires the tenant to pay a portion of the taxes, fees, and insurance, and to be responsible for maintenance activities allocable to the portion of the property rented by the tenant. Although triple net leases are not eligible for the safe harbor, this does not preclude the owner from otherwise establishing that the rented real property constitutes a “trade or business” under general tax principles for purposes of section 199A.

Takeaways

  • Owners of mixed-use properties should evaluate their portfolios to decide whether bifurcation or single enterprises are preferable when categorizing their interests for purposes of the safe harbor. Should owners try to utilize the safe harbor for a mixed-use property as a single rental real estate enterprise, they should be aware that it may not be treated as part of the same enterprise as other residential, commercial, or mixed-use property. These considerations are especially pertinent due to the requirement for separate record-keeping, which will be necessary should an interest be bifurcated. Therefore, the earlier these considerations are made, the better prepared owners will be to meet the 250 hour requirement.
  • Beginning in 2020, separate and contemporaneous records are required for safe harbor eligibility. Owners interested in availing themselves of this safe harbor may need a new approach to recordkeeping for their rental properties. Employees and independent contractors do not always report the amount of hours spent servicing a property. Each organization should consider what documentation it will need in 2020 and subsequent years so as to satisfy contemporaneous requirements.
  • Owners with rented real property in their portfolios should evaluate their leases to see whether they constitute triple net leases for the purposes of the safe harbor and, if so, whether such leases may nonetheless satisfy the “trade or business” requirement of section 199A under general tax principles.

Posted on October 4, 2019 at 10:33 pm
Cara Milgate | Posted in Buyer Tips & Strategy, Investor Tips & Strategy, Tax Deductions |

How Does the Supply of Homes for Sale Impact Buyer Demand?

How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCM

The price of any item is determined by supply, as well as the market’s demand for the item. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand).

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCMThe darker the blue, the stronger the demand for homes is in that area. The survey shows that in 3 of the 50 U.S. states, buyer demand is now very strong; only 2 of the 50 states have a ‘weak’ demand. Overall, buyer demand is slightly lower than this time last year but remains strong.

Seller Supply 

The index also asked: “How would you rate seller traffic in your area?”How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCMAs the map below shows, 18 states reported ‘weak’ seller traffic, 29 states and Washington, D.C. reported ‘stable’ seller traffic, and 3 states reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyers who are looking for homes.

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together to help you capitalize on the demand in our market now.


Posted on October 3, 2019 at 11:02 pm
Cara Milgate | Posted in Buyer Tips & Strategy, First-Time Home Buyer Tips, Investor Tips & Strategy, Listing Information, Market Trends & Stats, Seller Tips & Strategy |

3 Signs the Housing Market Is on the Rebound

3 Signs the Housing Market Is on the Rebound | MyKCM

The residential real estate market has been plodding along for most of the year. However, three recent reports show the market may be on the verge of a rebound:

1. Existing Home Sales (closed sales) are up, marking two consecutive months of growth.

2. Pending Home Sales (contracts signed) are up with each of the four major regions reporting both month-over-month growth and year-over-year gains in contract activity. Here is the month-over-month growth:

  • The Northeast rose 0.7%
  • The Midwest increased 0.6%
  • The South increased 1.4%
  • The West grew 3.1%

3. Buyer Traffic (the number of people shopping for a home) is up compared to the same time last year, and for the first time in 13 months.

  • The Northeast is up 5.9%
  • The Midwest increased 1.3%
  • The South is up 2.7%
  • The West grew 2.2%

In their most recent report, ShowingTime Chief Analytics Officer, Daniil Cherkasskiy explained:

“The trend we saw in year-over-year buyer traffic in previous months continued across the United States. For all four regions there were more showings per listing this year compared to last year, making it the most competitive August in the last five years.”

Lawrence Yun, Chief Economist with the National Association of Realtors, believes the uptick in activity will continue into the future:

“It is very encouraging that buyers are responding to exceptionally low interest rates…With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020.”

Bottom Line

If you are thinking about selling your house, there are purchasers out there who are ready, willing, and able to buy.


Posted on October 3, 2019 at 10:59 pm
Cara Milgate | Posted in Investor Tips & Strategy, Market Trends & Stats |