Published on: March 4, 2019
Although efforts to reduce homelessness have had some success over the past two decades, they have fallen well short of eliminating the problem. The Department of Housing and Urban Development (HUD) reports that 552,800 Americans experienced homelessness last year, an increase of 0.3 percent over the previous year’s total. This is the second consecutive year the numbers have trended upward, reversing gains that have reduced homelessness overall by 13 percent since 2010.
The report cites the acute shortage of affordable rental housing as a major factor contributing to the uptick in homelessness since 2017. The National Low Income Housing Coalition estimates that shortfall at about 7.2 million units needed but not available to the lowest income renter households, more than 70 percent of which are “severely cost burdened,” meaning that they must spend more than half their income on rent and utilities. These households can afford a one-bedroom rental unit in only 22 counties in the country, the HUD report notes.
Among the report’s other findings:
- Children represent approximately 30 percent of the homeless population – women represent 40 percent of the total.
- Minorities are disproportionately represented in the homeless population. Blacks comprise 40 percent of the homelessness total although they represent only 13 percent of the general population; Hispanics, representing about 18 percent of the population, account for 25 percent of the homeless population. total although
The report did note some areas of progress. The number of homeless veterans has declined by half since 2010 and fell another 6 percent last year. The number of homeless families with children, which has fallen by almost 30 percent since 2010, also continued to decline last year. HUD attributes success in this area to the agency’s support of “rapid rehousing” programs for families nationwide.
“Local planners are increasingly using [this strategy] to move families into permanent housing more quickly and at lower cost” than traditional transitional housing programs. Local homelessness ‘prevention” programs and better coordination among different assistance programs have also been effective, the report notes. These ‘housing first’ models have provided efficient and cost-effective responses, “assisting families experiencing temporary crisis as well as those enduring the most chronic forms of homelessness,” the report says.
Mortgage delinquency rates reached their lowest level in 11 years last year, as rising incomes, higher equity ratios and conservative underwriting policies “put U.S. homeowners on solid ground,” according to Frank Nothaft, chief economist for CoreLogic, which produces a monthly delinquency report. The November report pegged the overall delinquency rate at 0.4 percent, 0.2 percent below the year-ago level. Delinquencies fell year-over year in all major categories:
- Early stage (30-59 days past due) – 2 percent in November of last year vs. 2.2 percent in November 2017;
- Mid-stage ( 60-89 days past due) – 0.7 percent vs. 0.9 percent;
- Serious (90 days or more past due, including loans in foreclosure) – 1.5 percent vs. 2 percent – representing the lowest serious delinquency rate for any month since 2007.
The positive economic trends that have pushed delinquency and foreclosure rates down to the lowest levels in two decades “will continue to provide a cushion if the housing market should turn down,” Nothaft predicts.
Throwing a little cold water on that optimistic outlook, Moody’s analysts are questioning whether the falling delinquency trend will continue. Their concern: Looser underwriting standards and rising consumer debt levels may put increasing pressure on household finances.
A Moody’s report notes that the fourth quarter residential mortgage delinquency rate was 15 basis points higher than the same quarter in 2017, supporting their view that delinquencies “will increase modestly over the next year….With interest rates up and refinance volumes down,” the report explains, “originators are pressed for volume,” and will respond by loosening underwriting standards.
Looser credit and slower home price appreciation “will more than offset strong employment conditions,” Moody’s predicts. “Although consumers’ financial health is generally strong,” the report acknowledges, “there is a risk that they will take on too much credit in the present accommodative environment.”
DEBT LEVELS RISING
Moody’s analysts aren’t alone in their concern about the financial health of American consumers (see above). The Federal Reserve Bank of New York reports that consumer debt levels, which have been growing steadily since 2013, reached a record $13.5 trillion in the fourth quarter of last year. Although mortgage debt declined overall, auto debt has been increasing and auto loan delinquencies have been rising. More than 7 million borrowers were at least 90 days behind on their auto loans, according to the New York Fed report. Credit card debt, meanwhile, hit $870 trillion, matching the peak reached in 2008 before the economy melted down.
A recent survey by Bankrate also identified cause for concern about credit card debt. Nearly 30 percent of the 1,000 consumers surveyed in January of this year said their credit card balances are larger than their emergency savings – that’s up from 21 percent who cited that imbalance last year.
“This disturbing trend is evidence of a lot of the strain households are under,” Greg McBride, Bankrate’s chief financial analyst, told Marketwatch.com. Although wages have been increasing, the cost of living has been increasing faster, he noted, and wage growth “is not evenly distributed.”
Economic turbulence ─ resulting from the trade war, the government shutdown, and successive increases in interest rates ─ has created “a perfect storm of debt and little savings,” McBride cautioned. On the other hand, he suggested, current economic conditions remain generally favorable, creating an ideal opportunity for consumers to begin paying down some of their debt and increasing their savings, so “they can better weather an economic storm, whenever that should arise.”
Some economists think those storms are in sight. New York Times columnist Paul Krugman, a Nobel prize winning economist, sees “a good chance” the country will suffer another recession within the next two years. Economists responding to a Reuters survey in February saw a 25 percent chance of a recession before the end of this year, up from 20 percent in the January poll. The most pessimistic in this group put the recession odds in the next two years at 75 percent.
A DIFFERENT MARKET
It was only a few headline cycles ago that homes were selling regularly for above their listing prices. No longer. Approximately 19 percent of homes sold in the second half of last year exceeded the asking price ─ a three year low and the seventh consecutive monthly year-over-year decline, according to data compiled by Zillow. Increases in inventory and mortgage rates are responsible for the dip, Zillow analysts suggest.
More homes for sale gave buyers more choices and eased the competitive pressure to buy quickly, the Zillow report explains, while higher mortgage rates made some buyers “more conservative in their bidding.” Based on current trends, the report predicts that the gap between buyers and sellers will continue to narrow, as sellers are forced to become more realistic in a market that increasingly favors buyers.
A Redfin report describes a similar trend. Only 13 percent of the offers submitted by the company’s agents triggered bidding wars in January, down from 53 percent in the same month last year. An increase in the number of homes for sale and a decline in the buyers seeking them has reduced the competitive frenzy apparent in some markets last year, the report notes.
“Buyers have heard that the market has slowed, so now they’re trying to get all of their ‘wants,’ not just their ‘needs,’” Redfin Agent Kalena told Housing Wire. While buyers are responding to a change in market conditions, she noted, “many sellers have not yet recognized that the market has shifted.”
Birds migrating from colder climates this winter have had a lot of human company: Residents of high-tax states trying to escape the effects of a 2017 law capping deductions for state and local taxes at $10,000.
Florida appears to be a prime destination. New York Gov. Andrew Cuomo blamed the large number of New Yorkers moving to the Sunshine State for New York’s $2.3 billion tax shortfall last year. Recent census data seem to support his claim. Florida reported the highest migration-related population gain between July of 2017 and July of 2018, while New York reported the largest population loss.
Florida home sales also reflect the migration impact, according to the Wall Street Journal, which reported that “preliminary data show a jump in Florida home purchases by buyers from high-tax states.” A real estate appraiser quoted by the Journal said he is “starting to see New Yorkers as Florida’s new foreign buyer.”
Nelson Gonzalez, whose company (EWM Realty) specializes in high-end listings, agreed. He told the Journal that most of the buyers of properties priced at $10 million last year were “tax refugees” from New York and other high-tax states.
IN CASE YOU MISSED THIS
Facing a far from warm welcome from community activists and some elected officials, Amazon has canceled its plan to construct a headquarters in Long Island. Critics, decrying the subsidies required to lure the company and the gentrification resulting from its move to a relatively low-income neighborhood, applauded the decision. Supporters of the plan were appalled by the spurning of jobs, tax revenue and business the Amazon development was expected to produce.
Millennials struggling to enter the housing market should blame their parents, who are aging in place rather than selling their homes to purchase smaller ones or to move into retirement communities. Freddie Mac estimates that approximately 1.6 million homes are being “held off the market” because of this trend.
A Connecticut resident whose application for a firefighter job was rejected because he failed a drug test is suing for discrimination, claiming that his medical use of marijuana is legal and should not have disqualified him for the job.
Rising rents are having an impact on lease renewals, but not the one you would expect: RealPage reports that tenant retention rates in the 50 largest rental markets topped 52 percent last year, up from 51.7 percent in 2017, which was a previous record. Providence, RI recorded the third-highest retention rate (61.3 percent) behind Milwaukee and Newark-Jersey City, tied at 61.9 percent.
Some developers are starting to build smaller homes to make them affordable for middle-income buyers.
TIMING TRIPS UP TRESPASS CLAIM
The evil that men do, it is said, lives after them. Trespass claims and covenant violations have a shorter life span, a Kentucky Appeals Court decided.
This dispute (Rosquist v. Clark) involved alterations to lots in Victoria Estates, a lakefront community. John and Judy Rosquist purchased their property (Lot 92) in 1999; Cynthia Clark purchased a neighboring lot (89) in 2006. Several years before both purchases, the developer excavated areas in front of the lots at different times. The work on the Rosquists’ lot widened a cove that bordered both lots to give the Rosquists’ lot access to a private fishing lake. The Rosquists subsequently added a floating dock, a fire pit, and a rock wall at the edge of their lot, all of those improvements completed several years before Clark purchased her property.
In 2011, about five years after purchasing her lot, Clark sued the Rosquists, claiming that the widening of the cove had encroached on her property and that the floating dock trespassed on it. Clark also charged that both the cove excavation and the Rosquists’ additions violated the association’s covenants, because neither the developer nor the Rosquists had obtained prior association approval of that work. Clark demanded the restoration of her lot to its original condition, plus several thousand dollars in damages as compensation for the reduced market value she said she had suffered.
The trial court found that Clark had no claim related to the original trespass (the developer’s widening of the cove), because it occurred before she purchased the lot and did not transfer with it. However, the court determined that the Rosquists’ dock floated over submerged land belonging to Clark, constituting a continuing trespass for which Clark could assert a claim. The court also ruled that the developer and the Rosquists had violated the covenants, which Clark, as an owner in the community, had the right to enforce.
Accordingly, the court ruled that:
- The Rosquists should restore Clark’s lot to remedy the trespass;
- Clark was entitled to an additional equity remedy because of the covenant violation; and
- She was also entitled to injunctive relief to remove the cloud she claimed the trespass had created on her title.
The Rosquists appealed those conclusions and the Appeals Court reversed all of them.
Statute of Limitations Applies
Addressing the trespass claim, the court noted that trespass actions are governed by a five-year statute of limitations. A key question here, the court said, was when the statutory clock began to run. That question, in turn, depended on whether the trespass was deemed to be “permanent” or “continuing.” For a permanent trespass, , the court said, the countdown begins on “the date the structure was completed and its operations commenced, or the date of the first injury, or the date it became apparent that the injury would occur.” For a continuing trespass, however, damages are recoverable only for the five years immediately preceding the filing of the civil action.
The trial court’s determination that Clark could not claim damages for damages resulting from work predating her purchase was “sound,” the Appeals Court said, “and appear[ed] to be based upon the court’s determination that the trespass was a permanent one.”
The court’s subsequent conclusion that damages were appropriate because the trespass was “continuing” was inconsistent with that initial finding, the Appeals Court pointed out. But even a continuing trespass would have been barred by the statute of limitations, which, the court noted, would prohibit claims for damages that occurred more than five years before the complaint was filed. Clark initiated her action in 2011, which means she would have to demonstrate that any damage she suffered occurred in the five years immediately preceding it. Because she was unable to do that, the court concluded, Clark “[could] not establish a prima facie case that [she is] entitled to relief on this basis.”
Covenant Violations Don’t Apply
Turning to the covenant violations, the Appeals Court agreed with the lower court’s finding that the developer who expanded the cove had failed to obtain permission from the homeowner association for that work. But the Rosquists did not own their lot at the time, the court noted, and could not be held responsible for violations that predated their ownership. “A proceeding in equity does not provide a mechanism for the enforcement of restrictive covenants against parties who were not owners of the real property burdened by those covenants,” the court ruled.
The court dismissed the Rosquists’ failure to obtain permission for design and placement of the floating dock they added as “a mere technical violation ─slight and inconsequential.” There was no suggestion that the dock “fails to meet the structural and aesthetic requirements established by the covenants,” the court said, and “no allegation that the design or placement of the dock affects the ongoing interests of the community in any way.”
The fact that Clark waited five years after purchasing her lot before initiating her action also undermined her request for injunctive relief requiring the Rosquists to remove their floating dock and restore her property to its pre-excavation contours. “There is no substantial benefit to any property owner to require the removal of the dock, and we are persuaded that it would be inequitable under these circumstances to require the Rosquists to restore the contours of Lot 89,” the court concluded.
Turning finally to the title issue Clark had alleged, the Appeals Court concluded that there really wasn’t one. Clark can’t claim title to anything beyond the water’s edge, the court noted, and a dock floating at the edge of the cove “does not constitute an act sufficient to create a cloud” on her title. “Under the circumstances of this case,” the court concluded, “the equitable powers of the court cannot be used to enjoin a trespass.”
“We have not been on a constructive track. I think that’s fair to say.” Former Federal Reserve Chairman Paul Volcker, in a recent Podcast interview.