Making Hay While the Sun Shines

It’s been one year since the COVID pandemic began, and home buying continues to surge. 2020 was a record-breaking year for the U.S. housing market. The typical U.S. home was worth $266,104 in December, up 8.4% from the year prior. A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession, according to Lawrence Yun, chief economist of the National Association of Realtors (NAR). Sales also rose 22.2% year over year, and existing home sales reached the highest level in 13 years.

Today, the real estate market—both commercial and residential—remains blazing hot. Although you may have heard there’s no inventory, we continue to receive a continual flow of bottom-lined purchase agreements. Sellers’ homes are selling almost as soon as they’re listed on the market and are often subject to bidding wars.

According to Redfin, the supply of available homes dropped 24% year over year in January. Additionally, nationwide, 58% of Redfin’s home offers in January faced bidding wars. Our beautiful tourist destinations in northern Michigan are a prime target of many luxury and second-home buyers, as buyers continue to buy vacation homes to live and work remotely.

Even with rising mortgage rates and higher prices, economists say the market should remain strong due to very tight inventories and increasing demand, as more millennials are projected to buy houses this year. According to NAR’s Home Buyer and Seller Generational Trends Report, millennials make up the largest share of the homebuying population at 38% and are the fastest-growing segment of home buyers.

Market News

Building Activity

While the sale of existing homes has skyrocketed, sales of newly built homes fell more than expected in February, as builders faced higher costs and persistent delays. The number of homes sold and for sale prior to being built has surged over the past year. This number has risen 20% year over year, as of February, according to the Census Bureau. Building activity is being delayed due to material shortages, which has caused increasing affordability issues, according to Chuck Fowke, chairman of the National Association of Home Builders. Fowke noted that soaring lumber prices have added more than $24,000 to the price of a new home.

Despite the apparent challenges, new construction of single-family homes is expected to grow this year, according to Norada Real Estate Investments. The median price of $349,400 is 5.3% higher than last year. So, while new home prices rise due to rising lumber prices, the lack of existing homes for sale means new construction is the only option for some prospective home buyers.

Closing Delays

With market demand as high as it is, how quickly are homebuyers and borrowers getting to the closing table (virtually or physically)? NAR members were recently surveyed on their recent real estate transactions.

According to the survey, 65% of sale contracts were settled on time, but 29% faced a delay. 6% were terminated prior to settlement. Top issues that prompted a delay include:

• Financing issues: 22%
• Appraisal issues: 20%
• Home inspection/environmental issues: 11%
• Titling/deed issues: 11%
• Contingencies stated in the contract: 6%

According to an ICE Mortgage Technology origination report, the average time to close all transaction types averaged 58 days between December 2020 and January 2021, which averages 10 days longer than the results from a year prior.

CSS has been working relentlessly to help you close as efficiently as possible, whether you’re a seller, buyer, or borrower. With a multitude of closing alternatives, both physically and virtually, we provide the most convenient, efficient, and safe methods of closing to our customers.

Tax News

2020 Michigan Income Tax Filing Deadline Extension

The State of Michigan has extended its 2020 Individual Income Tax return deadline to May 17 to align with the federal tax return deadline. Taxpayers who need additional time can request an extension to October, but an approximation of information is required to be submitted to avoid penalties and interest accrual.

2020 Federal Income Tax Filing Deadline Extensions

In an effort to assist individuals and households affected by various natural disasters, the IRS has issued postponements of the 45-day and 180-day federal tax deadlines for the following victims*:

• Texas: Due to the winter storms that began February 11, 2021, the entire state now has until June 15, 2021, to file various individual and business tax returns and make tax payments.
  
  
• Oklahoma: Due to the winter storms that began February 11, 2021, the entire state now has until June 15, 2021, to file various individual and business tax returns and make tax payments.
  
  
• Louisiana: Due to Hurricane Zeta, which began October 26, 2020, victims within select counties and parishes now have until March 1, 2021, to file various individual and business tax returns and make tax payments. Individuals and households affected by Hurricane Zeta that reside or have a business in Acadia, Allen, Ascension, Assumption, Beauregard, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Evangeline, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Bernard, St. Charles, St. Helena, St. James, St. John the Baptist, St. Landry, St. Martin, St. Mary, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana parishes qualify for tax relief. Taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.

If you believe you may qualify for disaster relief, please check the IRS Tax Relief in Disaster Situations page for updates.

An “Affected Taxpayer” includes individuals and businesses located in the Covered Disaster Area. Affected Taxpayers are entitled to relief regardless of where the relinquished property or replacement property is located. Affected Taxpayers may choose either the General Postponement relief under Section 6 OR the Alternative relief under Section 17 of Rev. Proc. 2018-58. Taxpayers who do not meet the definition of Affected Taxpayers do not qualify for Section 6 General Postponement relief.

Option One: General Postponement under Section 6 of Rev. Proc. 2018-58 (Affected Taxpayers only). Any 45-day deadline or 180-day deadline (for either a forward or reverse exchange) that falls on or after the Disaster Date is postponed to June 15, 2021 for Texas and Oklahoma and March 1, 2021 for Louisiana (the “General Postponement Date”). The General Postponement applies regardless of the date the Relinquished Property was transferred (or the parked property acquired by the EAT) and is available to Affected Taxpayers regardless of whether their exchange began before or after the Disaster Date.  

Option Two: Section 17 Alternative (Available to (1) Affected Taxpayers and (2) other taxpayers who have difficulty meeting the exchange deadlines because of the disaster. See Rev. Proc. 2018-58, Section 17 for conditions constituting “difficulty”). Option Two is only available if the relinquished property was transferred (or the parked property was acquired by the EAT) on or before the Disaster Date.  Any 45-day or 180-day deadline that falls on or after the Disaster Date is extended to THE LONGER OF: (1) 120 days from such deadline; OR (2) the General Postponement Date. Note the date may not be extended beyond one year or the due date (including extensions) of the tax return for the year of the disposition of the relinquished property (typically, if an extension was filed, 9/15 for corporations and partnerships and 10/15 for other taxpayers). Please see Revenue Procedure 2018-58, Section 17, and the Notices shown on https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.