Monthly Archives: May 2016

Back on Infrastructure Spending

U.S. cities and states are decreasing their spending on everything from highways and police stations, to sewage systems, which could have widespread effects on the economies of communities, The Wall Street Journal reports.

WSJ reports that state and local governments spent in August $248.47 billion on construction, the lowest amount since March 2014. States are curtailing investments in infrastructure and higher education in trying to spring economic growth forward, says Gabe Petek, managing director for state ratings at S&P Global Ratings.

“We’re seeing anemic [government] revenue growth and consistent austerity-oriented budgets,” says Petek.

For example, in Kansas, city officials delayed 24 road-construction projects this spring in trying to help balance the state’s budget.

Many states continue to struggle to fully recover from the Great Recession and the large declines in tax revenues that occurred from it. Pew Charitable Trusts reports that in late 2015, inflation-adjusted tax revenue was lower in 21 states compared with the peak before or during the recession.

State tax revenues continue to fall too, dropping 2.1 percent in the second quarter compared to a year earlier, according to the Rockefeller Institute of Government. Such revenue decreases are curtailing state and local municipalities’ ability to borrow money for capital projects.

The University of Connecticut has felt the affects. It had to delay a $150 million renovation of its Gant Science Complex by several months as well as a $10 million remodel of the roof at Gampel Pavilion.

“We’re trying to balance priorities,” says Scott Jordan, the university’s chief financial officer. The cuts are “forcing us to take a look at what things support our core mission and Connecticut’s economy.”

Nevertheless, analysts expect things to look up soon for municipalities. Construction of public buildings—such as courthouses, fire stations and other government facilities—are forecasted to increase in 2017, according to predictions from Dodge Data & Analytics in its recent annual outlook.

“This is expected to be the bottom of the cycle for public buildings, as government fiscal conditions have slowly mended,” the report notes.

Real Estate Rise from 50

The U.S. home ownership rate rebounded slightly in the third quarter, after having plummeted to a 50-year low in the previous quarter. The Census Bureau reported this week that the home ownership rate rose to 63.5 percent last quarter.

Household formation is increasing, despite the rate still being lower than a year ago and far off from its 69.2 percent peak during the housing boom. In the third quarter, more than 1.1 million households were added.

Household formation is the number of newly occupied housing units, which includes both rented and owned. Most of the recent uptick in household formation has been attributed to the renter side. Just under half of the new households formed in the third quarter were from home owners.

“Though the majority of household formation is still renters, the owner-occupied share was at its highest level in a decade,” says Jed Kolko, chief economist at Indeed, an online job site. “Both the improving economy and the aging of millennials will give home ownership a boost.”

As millennials age into their 30s, they’re starting to form new households. They often opt to first rent before settling down and purchasing a home, say housing analysts. A survey conducted by Trulia this year shows 80 percent of millennials say they want to own a home, which is the highest share of any other generation.

Generate Offline Referrals

Facebook: is it friend or foe when it comes to building your business? On the face of it, a social media site like Facebook would seem to be a no-brainer for reaching out to people when they’re ready to buy or sell a house. But often the reality doesn’t live up to the potential. You either spend too much time on the platform for little return or you turn off people by marketing too directly to them.

A top producer in the Atlanta area, Maura Neill, thinks she’s found the right balance. The RE/MAX Around Atlanta agent uses Facebook in a variety of ways, but one way she uses it to good effect is to build attendance at events she hosts twice a year. And it’s these events—off-line, in-person, on the ground—that build her business in the end.

In fact, she says, she gets anywhere from half a dozen to a dozen referrals out of these events, and that is part of the concrete ROI she sees from her social media effort.

Neill talks in-depth about how she uses Facebook in The Takeaway with Nobu Hata, a new audio podcast series. Neill’s remarks are featured in the latest Voice for Real Estate news video from NAR.

Also looked at in the video is the big win by the real estate industry against what many saw as overreach by the federal government on anti-kickback enforcement. A federal appeals court has shot down the Consumer Financial Protection Bureau’s enforcement of Sec. 8 rules under the Real Estate Settlement Procedures Act (RESPA). The CFPB imposed a massive fine—$109 million—against a mortgage company for sending referrals to mortgage insurers that used its affiliated mortgage reinsurance business.

Back when HUD administered RESPA, such “tying” arrangements were considered fine, depending on how they were structured. But when CFPB took over RESPA enforcement, it said they weren’t fine and hit the company for illegal referrals. What’s more, it imposed its fine retroactively, so the company was on the hook for the arrangement even during the years HUD said it was legal.

NAR sent a friend-of-the-court brief to the appeals court that said such retroactive enforcement was wrong, and the court agreed. Not only did it require the CFPB to withdraw the fine, it said CFPB’s interpretation of Sec. 8 was incorrect. HUD’s was the correct one.

In another video segment, an NAR analyst explains why it’s going to take a few years before lenders will be able to make federally backed rural home loans quickly under a new direct endorsement program that Congress created for the Rural Housing Service. FHA already uses direct endorsement and NAR for a long time called on Congress to let RHS use it too for rural home loans. Congress agreed, but RHS doesn’t have the money to make the system changes it needs to make it happen, so even though RHS has the authority, it’s going to be around 2019 before quicker rural home loans happen.