How Will New Tariffs on China Impact the US Housing Market?

WRITTEN BY JAYMI NACIRIHow Will New Tariffs on China Impact the US Housing Market?

New home prices are already posing an affordability problem for many buyers, mortgage rates continue their upward climb, a labor shortage is hurting the construction industry, and now, newly announced tariffs against China “could wind up imposing a $2.5 billion tax increase on residential construction,” said the National Association of Homebuilders(NAHB).

In what is being characterized as a dangerously escalating trade war, President Trump has announced he is “moving immediately to impose 10% tariffs on an additional $200 billion worth of Chinese imports, including $10 billion of goods used by the home building industry. This 10% levy represents a $1 billion tax increase on residential construction. Making matters even worse, the tax hike will rise to $2.5 billion on Jan. 1 when the president said the tariff rate will jump to 25% if the two nations have not resolved their differences by year end.”

NAHB Chairman Randy Noel put out a strongly worded statement decrying the move and outlining the impact the tariffs are expected to have on the housing market. “With America facing a housing affordability crisis, it is counterproductive to enact policies that will needlessly drive up the cost of housing. We respectfully urge the administration to change course and work to resolve these trade disputes in a manner that won’t harm American businesses and consumers.”

Pushed by a rampant lack of inventory, high prices have made purchasing a home difficult in many areas of the country and for a large portion of would-be buyers. Yet, the market has remained strong. Will this newest challenge be the hit that reverses its course? That’s what many experts fear.

“New homes could get more expensive thanks to new steel, lumber tariffs,” said Hanover Mortgage Company. “Lumber tariffs added $6,000 to $10,000 to the cost of a median-priced home” after the U.S. placed a tariff on Canadian lumber; Realtor.com said about a third of “softwood lumber used in new-home construction” comes from Canada. “But the cost of new homes isn’t the only way tariffs have an effect on single-family housing. The Canadian lumber duty was also projected to reduce investment in single-family structures by $1.1 billion, according to the NAHB. If a similar reduction were to now occur because of these new tariffs, that could slow new home building. Inventory constraints could be further exacerbated and fuel even more competition for homes.”

In addition, “The planned tariffs would tack on 25% to the cost of steel, used in home foundations, floors, and high-rise construction, and 10% for aluminum from foreign suppliers, effectively increasing its price,” they said. “This will increase the cost of construction on residential and commercial projects.”

The economic impact is also expected to be felt in other areas for Americans, raising daily costs and further harming buying power. “The tariffs are aimed at hurting China, but they could hamper the American economy and bring pain for consumers,” said the New York Times. “Unlike the first round of tariffs, which were intended to minimize the impact on American consumers, this wave could raise prices on everyday products including electronics, food, tools and housewares.”

Then there is the potential impact on interest rates. If Chinese interest in US Treasury securities wanes, causing those rates to rise, it will likely also cause a spike in mortgage rates. Economists are further troubled by historical precedent that saw a negative impact on the economy in general. Investor’s Business Daily referenced both the Smoot-Hawley tariffs (and how much blame they “deserve for the Great Depression”) and the Reciprocal Tariff Act (and “how much credit President Franklin Roosevelt deserves for…putting the U.S. on a path to lower tariffs”). Put simply, they said, “the stock market doesn’t like tariffs, and if Trump pushes it too far, he could sink the stock market.”

melting-watch

MARKET WATCH

Single Family Home Activity in the Antelope Valley

In the last 24 hours
09/20/18

New Listings …  23
Sold …  15
Pending …  29
Expd/Wthd/Cancld …  12
Price Increases …  03
Price Reductions …  31
Number of listings* …  1598
Average Days on Market …  76
Short sale/pay listings …  08
Equity listings …  1475
Bank owned listings …  16
HUD, Corp, Probate and Auction listings …  49
Days of inventory (at the average rate**) …  39.44
Days of inventory (at yesterdays rate**) …  59.19
Actual Number of days of inventory***  …  399.5

View the last 8+ years of data HERE!

 

* Count includes all ACTIVE and CONTINGENT MLS listings
** Assuming no future growth or reduction
*** At yesterdays depletion rate (∞ indicates negative depletion,
inventory would not be depleted at this sales rate)
ALL DATA WAS DERIVED FROM THE “GREATER ANTELOPE VALLEY
ASSOCIATION OF REALTORS®” AND IS DEEMED RELIABLE.
THE CALCULATIONS OF THAT DATA IS THE
RESPONSIBILITY OF DON GOCKEL, REALTOR®

“Cite and Fine” Policy is at Work in California

WRITTEN BY "Cite and Fine" Policy is at Work in California

A recent forum of the Orange County [California] Association of Realtors® focused on enforcement actions by the California Department of Real Estate (DRE). Chief among the topics was the department’s “cite and fine” policy. The presenter, Ms. Summer Goralik, is a former DRE investigator who now acts as a consultant to brokers on matters relating to DRE compliance issues (expertdrecompliance.com). She knows whereof she speaks.

The department’s “cite and fine” authority is found in California Business and Professions Code §10080.9 and Commissioner’s Regulations 2907.

A 2014 DRE Bulletin explains the workings of “cite and fine” this way: “A citation or other formal action will be considered when a violation is found after an investigation, audit, or examination of a licensee’s records by CalBRE [now, DRE] in response to a complaint, through random selection of a licensee for an office visit, or from completion of a routine audit. Depending upon the nature (such as the level of seriousness and potential for harm) and type of the violation, the appropriate action will be determined.”

The Department says that “a citation is likely the appropriate action” in cases of “relatively minor and technical violations, especially in those instances where there has been no injury or loss to a consumer…” Th ey include in their examples of relatively minor violations “failure to disclose a real estate license identification number in their first point of contact advertising material.”

Suppose a citation has been received. “The citation will identify the violation(s) you committed, provide information on how to pay the fine, describe any corrective action needed (if necessary), and explain the process for contesting the citation, if you choose to.”

Offenders will appreciate the policy that “information regarding specific citations issued – and any fines paid – will not be posted on the DRE website, nor will such information be attached to one’s individual public licensee website record.” Still, the information is public and can be obtained through a Public Records Act request.

There is a review process if an accused wants to contest the citation. The first level of review is a Citation Review Conference which is an informal review of the citation conducted by the DRE. If the citation and fines are upheld, the next level would be a formal administrative hearing before an administrative law judge. That can take both time and money. Clearly, it will often seem prudent simply to pay the fine.

Not much has been heard of “cite and fine” until lately. Ms. Goralik pointed out that in the months from July 2017 until March 2018 (most recent figures available), there have been 768 citations issued and $311,550 in fines collected. (The money collected, by the way, goes to the Real Estate Recovery Fund – for consumers – not to the Department’s operational budget.)

The emphasis of this activity has been on compliance issues with respect to the recently-issued advertising regulations. Real estate ads occur in a perfect venue for the application of “cite and fine”. A department investigator could stay home in his or her pajamas and compile lists (along with evidence) of non-compliant ads in the Sunday newspaper. Not to mention all the non-compliant websites and postings of listings.

Some prominent companies and agents have already felt the sting of the increased “cite and fine” activity. Others can expect to. It’s a good time to get compliant.