Latest news with #PropertyPlay
CNBC
a day ago
- Business
- CNBC
Why cutting capital gains tax on home sales wouldn't solve the country's housing issues
Real estate experts are weighing in on a potential end to capital gains tax on home sales — as floated by President Donald Trump this week — and whether it could help unlock the housing market. The capital gains tax on homes hasn't changed in roughly 30 years, but the National Association of Realtors has been pushing for it. They calculate that 15% of current homeowners would be hit with the tax should they sell in today's market. "Their accountants are saying don't sell the home because of the tax," said Lawrence Yun, the NAR's chief economist, on a call with reporters Wednesday. "So naturally if there was a lifting of the exemption amount, we would see potentially a good portion of those listing." Yun noted some retirees want to downsize, but aren't because of the resulting capital gains tax, which is currently assessed on profits of more than $250,000 for individuals and $500,000 for couples. Most of those hit with the tax would have to be on the higher end of the market. The median price of a home sold in June was $435,300, according to the NAR. The share of homes priced above $750,000 that sold during the month was 17%. The tax only applies to the difference between what a homebuyer purchased the house for and what they sold it at, minus certain improvements. CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today. Home prices have risen dramatically since the start of the pandemic, up roughly 52% in the past five years nationally. Even with that steep rise, those on the lower end of the market would not surpass the current exemption. The tax hits high-end homeowners and baby boomers who have owned their homes for several decades and may now be looking to downsize. "But frankly that's not what really is going to matter for the housing market," Stephen Kim, a housing analyst at Evercore ISI, told CNBC's "Closing Bell Overtime" Tuesday. "What's really going to matter is a return of confidence. We believe that a lot of the actions that the Trump administration has taken has created instability and uncertainty, and people who are going to make the biggest purchase of their life, they don't like to have any kind of insecurity or uncertainty," he said. Redfin Chief Economist Daryl Fairweather suggested that cutting the tax could actually keep homeowners intheir homes longer because some decide to sell just as they're approaching the level of gains where the tax would hit. "It's not clear to me this would help the housing market. If anything, I would like to see them reduce taxes on improvements to homes, like if you're putting in an ADU, and that's what increases the value of your home," Fairweather said on CNBC's "Fast Money."
CNBC
2 days ago
- Business
- CNBC
June home sales drop as prices hit a record high
Sales of previously owned homes in June dropped 2.7% from May to 3.93 million units on a seasonally-adjusted, annualized basis, according to the National Association of Realtors. Analysts had expected a drop of just 0.7%. Sales were unchanged from June 2024. This report is based on closings, so contracts that were likely signed in April and May, when the average rate on the 30-year fixed mortgage jumped above 7% a few times and never went below 6.8%, according to Mortgage News Daily. "High mortgage rates are causing home sales to remain stuck at cyclical lows," said Lawrence Yun, chief economist for the NAR, in a release. "If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters becoming first-time homeowners and elevated sales activity from existing homeowners." Mortgage rates have not moved markedly in the last several months, remaining stubbornly high amid concerns over the broader economy. The average rate now is 6.77%. CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today. Supply continues to gain, with 1.53 million units for sale at the end of June. That is an increase of 15.9% year over year and represents a 4.7-month supply at the current sales pace. A 6-month supply is considered balanced between buyer and seller, so the market is still lean. The median price of a home sold in June was $435,300, up 2% year over year and another record high for the month of June. That is the 24th consecutive month of annual increases. "Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth. This is holding back first-time home buyers from entering the market," said Yun, noting also that the average homeowner's wealth increased by $140,900 over the past five years. Sales continue to outperform on the higher end of the market. Homes priced below $100,000 dropped 5% annually. Homes priced between $100,000 and $250,000 rose 5%. And homes priced above $1 million jumped 14%. Houses are spending longer on the market, at an average of 27 days compared with 22 days last June. Higher-end homes are selling faster than those priced below $500,000. First-time buyers represented 30% of sales. Historically that demographic makes up 40% of all buyers. The share of all-cash deals remained elevated at 29% of sales. Pre-Covid, cash sales accounted for roughly 20% of the market. Homes listed received an average of 2.4 offers, down slightly from 2.5 last month and from 2.9 a year earlier.
CNBC
2 days ago
- Business
- CNBC
Institutional landlords see new competition from an unexpected source
It's getting harder to sell a home, as rising supply, high mortgage rates and waning consumer confidence conspire to keep potential buyers on the sidelines. Now some frustrated sellers are deciding to de-list their properties and instead offer them on the rental market. These new rentals are coming in direct competition with institutional investors in the rental space, especially in the markets where those investors are most prevalent. The largest investors, those with more than 50,000 homes in their portfolios, are highly concentrated geographically. Names like Invitation Homes, American Homes 4 Rent and Progress Residential each hold over a third of their assets in just six U.S. housing markets, according to an analysis by Parcl Labs: Atlanta, Phoenix, Dallas, Houston, Tampa, Florida, and Charlotte, North Carolina. These markets have seen inventory growth of well over 20% in the past year — much of it from former owner-occupants. "When these home sellers cannot find buyers, they face three choices: delist and wait, cut price to find market clearing level, or convert to rental. The last option creates what Parcl Labs terms 'accidental landlords': Owners who enter the single-family rental market not by design, but by necessity," wrote Jesus Leal Trujillo, principal data scientist at Parcl Labs. Garret Johnson bought his Dallas home two years ago, but recently got a new job in Houston. He thought selling his home last March would be easy. "There weren't many buyers, just lookers, and people were biding their time waiting for better rates. [There was] a lot of economic uncertainty in those months, March and April, that we had listed the house, so I think that played a factor as well," Johnson said. After a few months, Johnson decided to try putting his home up for rent. It wasn't his ideal plan, he said, but in just the first few days, he had several offers. The rent doesn't fully cover his mortgage, Johnson said, but he recast his loan and put more equity in the home to lower the payments. He also changed his homeowners insurance to a landlord policy for additional savings. Johnson said he doesn't expect to sell for several years. CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today. "I've gotten to be creative, and hopefully the goal is, in the next few years, to start to turn a profit on the month-to-month basis of the rent versus mortgage," he said. The inventory of homes for sale has already been growing steadily over the past year, especially in the formerly hot pandemic migration markets like the Sun Belt. Homes are sitting on the market longer as sellers, used to the heady price hikes of the last five years, are reluctant to lower their prices. As more for-sale supply enters the rental pool, that could limit landlord pricing power. "You're not going to see big reductions in rent, but maybe you won't be able to get 4% or 5% increases on your rent. Maybe it's just 1% to 2% in some cases," said Haendel St. Juste, a senior equity research analyst at Mizuho Securities. "But the professional big guys, INVH, AMH, have been getting 4% to 5% renewal rates and 75% retention in their portfolio. So keeping people in the homes at 4% to 5% rent is a key part of their business model." This is not, however, the first time this has happened. "We saw something like this in 2022 after mortgage rates doubled: A huge uptick in the number of people who owned one property besides their primary residence," said Rick Sharga, CEO of CJ Patrick Co., a real estate advisory firm. The largest single-family rental REITs are now selling more homes than they're buying, according to a count by Parcl Labs. That does not, however, mean they're exiting the market. "They are deploying more funds into build-to-rent projects, rather than competing with smaller investors and traditional homebuyers for resale properties," said Sharga, suggesting that doing so limits the threat from those so-called accidental landlords. That minimizes some of the risk, but St. Juste said the biggest landlords will have to incur some occupancy decline in order to optimize their revenue, as opposed to just slashing rents. "The incremental risk from this slow selling season is that there could be more supply, you know, come this fall, come next spring, that could limit some of the rental growth upside for next year," he said.
CNBC
2 days ago
- Business
- CNBC
Mortgage demand flatlines at low levels, as mortgage rates hit 4-week high
Mortgage rates rose last week to the highest level in four weeks, but mortgage demand didn't really move. Total mortgage application volume increased 0.8% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, increased to 6.84% from 6.82%, with points remaining unchanged at 0.62, including the origination fee, for loans with a 20% down payment. Applications to refinance a home loan, which are most sensitive to weekly rate moves, fell 3% for the week and were 22% higher than the same week one year ago, when interest rates were just 2 basis points lower. While the annual jump may seem large, that's only because the volume is so very small. Applications for a mortgage to purchase a home rose 3% for the week and were also 22% higher than the same week one year ago. "After reaching $460,000 in March 2025, the purchase loan amount has fallen to its lowest level since January 2025 to $426,700," said Joel Kan, an MBA economist. "With the 30-year fixed rate still too high to benefit many borrowers, refinance applications were down almost three percent for the week." CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today. Mortgage rates moved slightly lower to start this week, according to a separate survey from Mortgage News Daily. Markets reacted positively Tuesday morning to details from Treasury Secretary Scott Bessent's thoughts on whether or not Federal Reserve Chairman Jerome Powell would leave office early. Last week, bond yields rose on concerns he might. "In not so many words, Bessent told Trump not to fire Powell and this morning's [Tuesday's] coverage just expanded on that sentiment," wrote Matthew Graham, chief operating officer of Mortgage News Daily. "The Bessent news helped the bond market begin the day in stronger territory."
CNBC
2 days ago
- Business
- CNBC
How companies are using body heat sensors to make offices more efficient and hospitable
Butlr heat sensing tech provides insights into office space utilization. A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. As more and more employees return to the office, by choice or by force, large companies are more interested than ever in understanding how they use the space. The pandemic fundamentally changed how and where people work, and even in the return-to-office dynamic, there is a greater focus on how to best utilize and monetize office space, as well as make it more energy-efficient. To that end, some companies are using body heat. Butlr, a 6-year-old, San Francisco-based startup that was a spinoff of MIT Media Lab, leverages body temperature technology to understand how humans act and interact in the office without using cameras. In other words, it's anonymous. Sensors placed around the office space record the heat and then incorporate AI to look at every aspect of physical interactions. That includes occupancy, foot traffic, frequency and location of meetings, areas that are unoccupied or crowded and the impact on heating and cooling systems. But it goes beyond that. "By understanding how colleagues act and interact in the office while ensuring privacy, you can make it a place that is more productive, collaborative and aligned with the corporate culture – one where they look forward to being there," said Honghao Deng, CEO and co-founder of Butlr. "This can impact retention and performance, and you may even see attitudes shift from negative to positive." Companies use the data to make decisions about layout and design, retrofits, hybrid work schedules, maintenance, cleaning schedules and lease negotiations. CNBC's Property Play with Diana Olick covers new and evolving opportunities for the real estate investor, delivered weekly to your inbox. Subscribe here to get access today. The costs of so-called office fit-outs, or upgrades to spaces, are on the rise, according to a new report from JLL. "Increased focus on in-office attendance, employee experience and sustainability performance is leading focus on investing in high quality workspaces, with increased spend on materials and finishes and shifting cost profiles on many projects," according to the report. JLL also noted that those rising costs, as well as economic uncertainty, are contributing to hesitancy in CRE investment decisions. That has the potential to have long-term impacts on the overall workplace. Both raw material price increases and labor shortages are increasing overall construction costs across all regions. Still, more and more companies are pushing workers back to the office and solidifying flexible work arrangements into the culture. That flexible work paradigm, according to Deng, has more employers seeking data and insights into actual office usage. "You can think about this from both a cultural and a financial perspective," he said. In April, Butlr announced the completion of its latest investment round for a total of $75 million in funding to date. The company's clients span office, higher education and senior care and include names like Verizon, CBRE, Carrier and Compass Group. The company serves customers in North America, Europe and Asia.
