Welcome to the Center for Housing and Tax Research

As of December 1, 2022, actions by the Federal Reserve to slow the economy have pushed the 30-year fixed rate mortgage rate up to 6.49%. At the end of Nov-21 it was 3.07%. This is an increase of 342 bps. Fear of additional mortgage rate increases and stock market gains from 2021 have, up to this point, kept the demand for SFR homes very strong. The Case-Shiller 20 city home price index which did increased by 10.5 % YOY for Sep-22 is likely to slow. Zillow.com reported that home values in Sep-22 tumbled (MOM), in many formerly-hot markets, including including Phoenix (-2.0%), San Francisco (-1.5%), Las Vegas (-1.3%) and Los Angeles (-1.0%). Do rents follow home prices? Rental rate appreciation for apartments in multi-unit building in several cities are beginning to slow (see Nov-22 Blog). Rents for detached rental properties in most cool-weather cities have stabilized in the single digits. 

Investor Impact on the SFR MKT

Do Investors Compete Against Home Buyers Who Intend to Live in the Property and Thus Raise Prices?

Recent research shows that investor purchases impact owner occupied purchase prices at time t – the time when the investor purchase the property.  The CHTR research shows that each one unit higher share of investor purchases in a CBSA raises HPA on owner occupied properties by 2.5 bps. In a city like Chicago, IL with an investor share during Mar-21 of 32 percent, potential homebuyers paid 80 bps more to own their home had investors not participated. This would have added an extra $1,600 to house that was selling in 2020 for $200k and sold for $211.4k in 2021 but might have sold for $209.8k.

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The Impact Of A 1% Increase In State Income Tax Rates On Net-outmigration Of High-Income Taxpayers In The Initial Year:

TCJA is a national law which does not change a state’s stated marginal tax rate. The impact, however, is to raise taxpayer’s income tax burdens in high SALT states. This negative financial change could motivate some high-income taxpayers to leave the state. We look at the experience of three states which raised their marginal income tax rate during some point in the years 2012 – 2018 to guage the impact of a 1% tax rate increase on net-outmigration.

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Rental Markets:

Does Lower Rent Appreciation Follow Lower Home Price Appreciation In A City, Twelve Months Later?

Renters generally enter a contract with a landlord for one year. In this sense, it is only when the tenant leaves the property, or when 12 months after a contract has been signed, the landlord is able to raise (or lower) the rent. It is widely perceived in 2022 that the U.S. has a housing shortage and that rental vacancies are at historic lows. Renters have very little pricing power when vacancies are low (they either pay what the landlord asks, or they try to leave and find other forms of shelter).

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The Impact Of Interest Rate Changes On the Rent/Income Ratio of a City

Since Dec-18, the Federal Reserve initiated a series of interest rate changes to bolster economic activity. In response, the 30-year mortgage rate fell from 4.87% on Nov-18 to 2.87% on Jul-21. This 200 bps decline in mortgage rates made homebuying cheaper, and caused home prices to rise. All of these rate declines kept businesses strong which had a positive impact on income. Rents also increased in many cities over this time. Did the interest rate changes cause incomes to increase more than rents? In other words, are renters better off in 2022 than they were in 2018?

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