Two new laws that went into effect this month will have an effect on home buyers and home owners. One law affects home buyers purchasing foreclosed property, and the other is with regard to the Maryland homestead property tax credit.
First, H.B. 1373 Real Property – Foreclosed Property Registry, which went into effect October 1st, requires that Maryland homes purchased at a foreclosure sale be registered with the State of Maryland. According to the foreclosure registry website a “foreclosure purchaser” must initially register a home within 30 days of the foreclosure sale, and a final registration within 30 days of the recordation of the deed. A “foreclosure purchaser” is defined by H.B. 1373 as being “…the person identified as the purchaser on the report of sale required by Maryland rule 14–305 for a foreclosure sale of residential property.”
You might wonder why a registration is necessary once a foreclosed home is purchased. The registry was an outgrowth of purchased foreclosed homes that remained vacant. Vacant homes are at risk for a variety of problems; and if left vacant and untended for long periods of time can not only become an eyesore, but can risk the health and safety of the immediate neighborhood. Trespassing and infestation is a major concern; the longer a home sits vacant and untended, the probability increases for vandalism, vermin, squatters, and gang activity.
The law is most likely aimed at lenders that purchase back their own foreclosure or bulk purchasers, because at one time it was possible that some of these homes sat untended for long periods of time. In the past, such homes might have been cited for health and safety code violations with the intent to have someone tend to the home. However, since ownership may not have been clear due to the foreclosure process or absence of a point of contact, some of these attempts went unheeded.
The other law that went into effect this month is H.B. 1081 The Homestead Property Tax Credit Reform Act of 2012. The purpose of the law is to stop the abuse of applying the credit when not applicable. Home owners who are “caught” claiming multiple properties and/or rented properties may have to pay uncollected tax and possibly a penalty.
But enforcement of this law has been questioned, as was reported by Steve Kilar for the Baltimore Sun in his October 1st article (Homestead Credit Penalty Goes Into Effect This Week). Some are concerned if and how the penalty would be applied to those who are “caught” wrongly receiving the homestead credit. Enforcement may, as was reported, rely on the requirement for the State to prove “willful misrepresentation.”
The effort to weed out those who are undeserving of receiving the homestead credit began several years ago, when in 2007 home owners were required to apply to receive the credit. This application process is culminating to a frenzy of home owners who have not yet reapplied. And according to the Maryland Department of Assessments and Taxation, home owners who have yet to apply/reapply for the homestead credit will have until December 31st to submit the application. If you are unsure if you have applied/reapplied, you can check your status by following the instructions on the SDAT website on the homestead credit).
This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.
In today’s housing market, chances are that you may looking to buy a new home rather than a resale;
be prepared and know what you can reasonably expect from the home builder, as well as understanding how to resolve problems with the builder. Whether or not you have a licensed real estate agent representing you in the transaction; the Maryland Office of the Attorney General Consumer Protection Division provides consumers guidance, pertinent information and other resources to dealing with a home builder and buying a new home built in Maryland.
Unfortunately, many home buyers believe they do not need representation when buying a new home. Because the new home builder reps are often friendly, helpful and may appear to be on your side in the transaction; it is understandable how a home buyer may misconstrue the home builder’s sales persons’ loyalties. However, home buyers must recognize that the builder’s sales people represent the home builder.
Before engaging a home builder and their sales people, you should check out whether or not the home builder is registered with the Home Builder Registration Unit. Additionally, unless the home builder hires a licensed real estate agent to represent them, the home builder’s sales reps must also be registered with the Home Builder Registration Unit.
Before entering into a contract with a home builder,
you might consider reading the consumer information booklet that home builders are required to provide consumers before entering into a new home sales contract. The booklet is provided by the Home Builder Registration Unit of the Maryland OAG Consumer Protection Division and discusses: choosing a builder, the contract, how your deposit is protected, custom home contracts, construction of your home, and resolving problems.
The Maryland OAG Consumer Protection Division oversees a Home Builder Guaranty Fund “that allows consumers to seek compensation for losses resulting from an act or omission by a registered builder who constructs a new home for a consumer.” You may seek compensation from the guaranty fund if your home builder is registered with the Home Builder Registration Unit and you entered into a contract for a new home built in Maryland after January 1, 2009.
Payments from the Home Builder Guaranty Fund are to cover actual loss that result from “an act or omission by a registered builder as determined by the Consumer Protection Division or a court of competent jurisdiction…” The Guaranty Fund is not meant to cover such items as: attorney fees, punitive damages, interest, court costs, personal injury, or subsequent damages. The “actual loss” that is covered refers to “the costs of restoration, repair, replacement or completion that results from the incomplete construction of a new home, a breach of an express or implied warranty, or a failure of the builder to meet certain construction standards or guidelines.”
Guaranty Fund claims must be made “within 2 years after the consumer discovered or should have discovered the loss or damage or within 2 years after the new home warranty expires, whichever comes first. If the consumer files a claim against the home warranty plan, he or she must file the claim against the Guaranty Fund within 4 months after that claims process is exhausted.”
For further information on the Home Builder Registration Unit, consumer information booklet, and the Home Builder Guaranty Fund – visit the Maryland OAG Consumer Protection Division website on home builders (www.oag.state.md.us/Homebuilder/index.htm).
A June 11th report by the National Association of Realtors® discussed how international home buyers are an increasingly important segment of the U.S. housing market (realtor.org). The NAR release, “International Sales Continue to Climb in U.S. Market, Realtors® Report,” indicated that the dollar volume of U.S. homes bought by foreign home buyers increased about $16.1 billion over the last year. As encouraging as this may sound, there’s more to the story than you might imagine.
Interestingly, the report stated that average price paid for a U.S. home by an international home buyer is $400,000; and 30% of the homes purchased were priced between $250,000 and $500,000. Because foreign home buyers typically find it difficult to obtain a mortgage, it was reported that 62% of the purchases were cash deals. The NAR report stated that although many of these home purchases were for primary residences, a majority of international home buyer purchases were for vacation and investment uses.
Would you believe that 55% of international home buyers originated from Canada, China, United Kingdom, Mexico, and India? Canada accounted for the largest number of foreign home buyers (24%), followed by China (11%), the U.K. and Mexico (6% each).
But before you decide to learn a new language, you should note that four states have received the most attention from these home buyers; Florida, Arizona, California, and Texas “accounted for 51% of the purchases.” Of these sales, Florida accounted for 26% of all foreign home purchases, and California coming in second with 11% of foreign purchaser sales.
This market segment is not a new phenomenon; international home buyers have participated in the U.S. housing market for a long time. It just seems as if this segment of home buyers has been stronger during economic turmoil (Are you old enough to remember the influx of Middle East investors during the 1970’s and Japanese investors during the 1980’s?). The increasing number of international home buyers investing in the housing market is a tribute to the perceived value of U.S. real estate.
By the way, the influence of international sales has not gone unnoticed by Congress either. In an effort to help stimulate this sector of the housing market, S. 1746: Visa Improvements to Stimulate International Tourism to the United States of America Act was introduced in October 2011, by Senators Charles Schumer [D., N.Y.] and Mike Lee [R., Utah], and H.R. 3341: Visa Improvements to Stimulate International Tourism to the United States of America Act, was introduced in November 2011 by Rep. Mazie Hirono [D-HI2] and Rep. David Dreier [R-CA26]). These bills offered resident visas to foreign investors who invested at least $500,000 in U.S. real estate. However, some have criticized such stimulus as an empty gesture because international home buyers may not need additional incentive to purchase homes in the U.S.
Will foreign home buyers save the housing market, as a U.S. News and Report piece suggested (October 28, 2011)? Unlike the clichéd climax of a dramatic film noire, when the foreign investor saves the day, the answer may be “yes” and “no”. Although housing is receiving an increased amount of attention from foreign investors, it is unlikely that the increased activity itself would save the U.S. housing market. However, the increased foreign investment in U.S. housing may boost the perceived value of housing and the perception of home ownership.
Inventories of homes for sale are at a five year low. The last time home inventories were this low, homes were sometimes selling as soon as you could put a “for sale” sign in the yard. For some, the recent shrinking inventories are a welcome sign of market equilibrium; even analysts at Barclay’s site low housing inventory as one indication of a housing comeback.
For others, however, the shrinking inventory is a sign that supply is just lessening to demand. Many individuals who might have previously thought of buying home are, for now, putting off home ownership. Many people are delaying family formation and do not want to be “anchored” by a home in a tight employment market. As Fed Chairman, Ben Bernanke, discussed in a speech given in February to the National Association of Home Builders, economic uncertainty has impacted the willingness to commit to home ownership. “…housing may no longer be viewed as the secure investment it once was thought to be…” (“Housing Markets in Transition”; federalreserve.gov).
As the inventory of homes for sale homes shrinks, the number of rentals increases- along with rent! According to rental statistics compiled by the Greater Capital Association of Realtors® (gcaar.com), fourth quarter 2011 rental listing volume increased about 89% compared to the fourth quarter 2010. Additionally, fourth quarter 2011 average rent list prices for Montgomery County increased 11.4% compared to the fourth quarter 2010; and the average rent price for Montgomery County increased 5.29% compared to the fourth quarter 2010.
More evidence of a strong rental market comes from the National Association of Home Builders (nahb.org): the Multifamily Vacancy Index (MVI) fell in the fourth quarter of 2011 indicating fewer rental vacancies. Additionally, the Multifamily Production Index (MPI), which measures builder and developer sentiment about current conditions in the multifamily market, is at its highest since 2005; the MPI component measuring developer sentiment for market-rate rentals is at an all time high.
The recent shift in the perception of homeownership has resulted in a falling homeownership rate: recent seasonally adjusted homeownership rates have been slowly declining from the all time high of 69.2% reached in the first quarter of 2005. The most recent seasonally adjusted homeownership rate (Q3 2011) is 66.1%, which is similar to the homeownership rate of 66.2% reported by the 2000 Census.
But evidence of a housing market attempting equilibrium comes from a May 9th National Association of Realtors® news release suggesting that home prices are stabilizing. First quarter 2012 “Median sales Price of Existing Single-Family Homes for Metropolitan Areas” compiled by the NAR indicate that although average national home sale prices decreased 0.4%, and average home sale prices for the Washington DC region increased 5.7% (realtor.org)
Reports of a recovering housing market may be supported by recent increases in home buyer activity. Market data reported by GCAAR indicates that “contracts” (also known as pending sales) increased 12.4% for the month of April (compared to April 2011); and increased 8.5% year to date 2012 (compared to the same period last year).
Even though home prices may be stabilizing, buying a home could still be cheaper than renting. According to Trulia’s Winter 2012 Rent vs. Buy Index (trulia.com), homeownership is less expensive (and may still be a better deal) than renting in 98 of 100 metro areas- including the Washington DC metro area.
The National Association of Realtors® latest news release of April 26th stated that March’s increased pending home sales figures is an indication that the housing market is recovering. The NAR reported that March’s Pending Home Sale Index (the PHSI is a “forward looking number indicating contracts signed”) increased from February’s PHSI and is much higher than the PHSI a year ago. Lawrence Yun, NAR Chief Economist, claimed; “The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices, will be rising in more areas as the year progresses…” (realtor.org).
Regardless of the newly sparked optimism for the housing market, a news release of one week prior (April 19th) indicated although March’s existing home sales were better than the previous year, the number of home sales declined from February’s totals. Dr. Yun cautioned that, “We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest”…“Home sales could be held back because of supply factors and not by demand…”
My local market (Montgomery County MD, which includes Bethesda, MD, Chevy Chase MD, and Rockville MD) is part of the one of the stronger housing markets in the country, and pending sales are strong. The April 2012 Montgomery County Single Family Home Housing Report released by the Greater Capital Area Association of Realtors (gcaar.com) indicated that the number of contracts increased 12.4% compared to the same time last year, as well as increasing 8.5% year-to-date compared to the same time last year.
However, when looking at closing sales, pending sales may not be converting. Although the number of settlements of single family homes in Montgomery County is reported to have increased 5.8% in April 2012 from April 2011, the number of settlements year-to-date has decreased 1.6% from the same time last year.
Additionally, housing inventory continues to pose a problem for the market. Montgomery County single family home new listings decreased 14.6% in April 2012 from April 2011; while total actives reported for year-to-date through April 2012 decreased 15.1% for the same time last year. A diminished housing inventory is not so much an issue of meeting an increased buyer demand, as Dr. Yun has stated; but rather the issue may be that the declining housing supply may be lowering to meet buyer demand.
However, if housing inventories were not meeting an increased buyer demand, then we might be experiencing something akin to what occurred 2005 through 2006 (when homes sold relatively quickly, the average time on market was less than 30 days, and home prices were increasing). But we’re not experiencing the activity of 2005-2006. Additionally, the average single family home sale price for Montgomery County as reported by GCAAR is $496,144 for the month of April 2012 (compared to $515,161 for the same time last year).
Two new laws that went into effect this month will have an effect on home buyers and home owners. One law affects home buyers purchasing foreclosed property, and the other is with regard to the Maryland homestead property tax credit.
Two new laws that went into effect this month will have an effect on home buyers and home owners. One law affects home buyers purchasing foreclosed property, and the other is with regard to the Maryland homestead property tax credit.
