Short Tem Rental-Abnb Properties taxed as Commercial
Colorado rental homeowners may be getting hit with heavier taxes if a state bill passes in the next few months, and it could leave a lasting mark on the housing market.
The legislation would classify short term rental properties as ‘commercial’ and therefore institute a higher tax rate on the homeowners, bringing in hundreds of millions in additional revenue for the state each year.
The bill, if passed, would see short-term rental home owners pay property tax at four times the rate they do currently. The bill has been voted to advance to the full legislature in January, but many rental homeowners are concerned about its potential impact.
“Supporters of the tax argue that it is necessary to address the state’s affordable housing crisis,” Newsweek. “They point out that short-term rentals are often taken off the long-term rental market, driving up prices for residents.”
Ultra Wealthy Buying Apartment Buildings
Over the past decade, ultra-wealthy individuals and their firms have more than doubled their investments in apartments, largely in the sector known in the US as multifamily housing, according to research from Knight Frank.
Today, many of those investors are betting that they can snag a deal as apartment building prices have fallen amid the recent commercial-property downturn. At the same time, a broad housing shortage bodes well for rents in major cities over the long term.
“This is a sector set for growth,” said Liam Bailey, Knight Frank’s global head of research. “If you have deep pockets and you can get in the market, it’s a really interesting time.”
Earlier this year, a real estate firm led by Israeli billionaire Eyal Ofer bought a 57-unit apartment building just steps from Manhattan’s Gramercy Park. One of Latin America’s richest families is hunting for deals to buy multifamily buildings as they seek to break into the US real estate market.
In late 2022, an investment firm backed by Carlyle Group Inc. co-founder David Rubenstein raised money from wealthy investors globally to buy apartment buildings, as well as logistics properties.
As reported and courtesy of Bloomberg News.
PREDICTION BY CHATgpt REGARDING REAL ESTATE
I’m sorry, but I don’t have access to real-time or future-specific data, including predictions for investment real estate in Long Beach, California or any other location. Predictions for real estate markets are influenced by numerous factors, including economic conditions, housing demand, interest rates, local regulations, and more. To make informed decisions about investing in Long Beach or any other real estate market, it’s essential to consult with local real estate experts, review market reports, and consider economic trends and forecasts from reliable sources. Additionally, you may want to reach out to a real estate agent or investment advisor who specializes in the Long Beach area for more tailored insights and advice.
CHATGPT outlook on Real Estate Market in USA
As of my last knowledge update in September 2021, the real estate market in the United States was experiencing significant activity and varied conditions across different regions. However, please note that market conditions can change rapidly, and it’s always recommended to consult up-to-date sources for the most accurate and current information.
Prior to September 2021, the U.S. real estate market was generally characterized by the following trends:
- Strong Demand: There was high demand for housing due to low mortgage rates, favorable lending conditions, and a growing population. This demand often led to increased competition among buyers.
- Rising Home Prices: The prices of homes were generally rising across many areas in the U.S., driven by limited housing supply and high demand. This trend led to affordability concerns in some regions.
- Inventory Shortage: Many areas faced a shortage of available homes for sale, resulting in a competitive seller’s market. Limited inventory contributed to the rising home prices mentioned earlier.
- Urban Migration: The COVID-19 pandemic brought about a shift in housing preferences, with some people moving away from densely populated urban areas to suburban or rural areas in search of more space, lower costs, and a different lifestyle.
- Regional Variation: Real estate conditions varied across different regions and even within local markets. Factors such as job growth, economic conditions, and population trends played significant roles in determining the local real estate market.
It’s important to note that real estate markets can be dynamic and subject to various factors, including economic conditions, interest rates, government policies, and demographic shifts. For the most accurate and current information about the U.S. real estate market, it’s advisable to consult reputable sources, real estate professionals, and industry reports that provide up-to-date data and insights.
Rental landlords may have to brace for impact of New Supply
The pressure will come during the second half of this year and into the next as more rental supply hits the market, reaching the highest level since the 1980s, according to RealPage.
“We're going to deliver more supply than what we can realistically absorb,” Carl Whitaker, director of research and analysis at RealPage told Yahoo Finance.
Rent prices have fallen the most in three years in May as the number of rentals grows, tipping the rental market scale in favor of tenants. The median asking rent dropped to $1,995 in May, down 0.6% from a year ago, Redfin reported, the steepest annual decrease since March 2020.
Redfin noted the amount of completed units available grew 24.2% in April from a year ago. Separately, RealPage found that more than 500,000 are scheduled to be finished in the next two years. Most of those new buildings are mainly Class A apartments, Whitaker said.
“We're delivering all this new housing, which means more options for renters,” Carl Whitaker, director of research and analysis at RealPage, told Yahoo Finance. "The challenge, though, is that the new supply that delivers just inherently tends to be at the very top of the price spectrum.”
One homebuilder, Lennar (LEN) raised a red flag Thursday about the surge of new apartments in the rental market. The company expects a loss of about $10 million from its multifamily business unit in the third quarter. That follows an operating loss of $8 million in the second quarter and a loss of $22 million in the first quarter.
“We see that there is general downward pressure on rents as many markets have become somewhat overbuilt, and there is additional inventory being completed and coming online,” Stuart Miller, executive chairman at Lennar on the earnings call with analysts Thursday.
Miami-based Lennar said in December it would hold off its plans to spin off its multifamily division, called Quarterra, due to market uncertainties. The challenges Lennar is up against are similar to what rental property owners are facing across the country as more apartments create a headwind for the market.
“While rents won't likely drop significantly, they are not likely to grow very much either, and remember that rentals and rent equivalents make up a significant part of the CPI calculation," Miller said.
MULTI UNIT RESIDENTIAL INVESTMENT FORECAST-LOS ANGELES METRO 2023
Apart from broader economic headwinds, Los Angeles County’s apartment sector faces several local happenings that will push year-end vacancy to its highest point since 2010.
Beginning in February, tenants across Los Angeles proper must pay their current monthly rent to avoid eviction, with a requirement to pay back all outstanding rent by August. While some tenant protections will remain, the expiration of the moratorium should place eviction activity beyond the pre- pandemic rate.
Meanwhile, the volume of units slated for delivery in 2023 will rise by 7,000 on an annual basis. Greater Downtown Los Angeles is the epicenter of up-coming completions. Here, an estimated 10,000 apartments will be added at a time when local Class A vacancy is on par with the long-term average. This suggests local concessions usage and luxury availability will rise over the near term. Elsewhere, Westside Cities and the Greater San Fernando Valley should also feel some supply-side pressure, with each expected to add more than 2,900 units.
The wave of rental additions noted across the Los Angeles metro area should continue beyond 2023, as at least 50 conventional apartment projects broke ground last year. Activity in Class C-heavy submarkets reflects buyers’ outlook. Home to a nationally tight lower-tier vacancy rate despite its sizable inventory, the metro area will remain a focal point for investors targeting older complexes with fewer than 30 units.
The recent approval of Proposition ULA — which places a 4.0 percent to 5.5 percent tax on the sale of properties valued at more than $5 million in the city of Los Angeles — may provide near-term opportunities for buyers targeting these complexes, if owners decide to dispose prior to the measure taking effect.
Areas with some of the most affordable rents should continue to appeal to investors, as these localities should record stable demand for the foreseeable future. South Bay cities and Southeast Los Angeles may top investors’ lists, as each locale entered this year with 1 to low-2 percent Class C vacancy.
Sources: Co-Star Group & Real Capital Analytic
Commercial Real Estate has remained Resilient according to JP Morgan-Chase
According to JP Morgan, while the future of the office is unclear, commercial real estate has remained resilient in the first half of 2023.
- Multifamily rental costs rising more slowly:Multifamily properties are still going strong. The national vacancy rate for multifamily was at 4.5% at the end of 2022, according to Moody’s Analytics, even as the rate of rent increases fell. Vacancy rates vary widely across metro areas, but the median vacancy rate nationwide is 3.9% as of April.
- Increasing affordable housing:The country’s affordable housing supply continues to lag far behind demand. A multipronged method to growing the housing supply is critical moving forward. Efforts may include finding creative ways to preserve, build and finance affordable housing—the primary focus of the firm’s Capital Solutions group—and working with public entities to create zoning variances that allow greater density in residential areas.
- The strength of retail: E-Commerce accounts for roughly 15% of retail, but that doesn’t mean consumers can get everything online. There are still services that favor or even require in-person visits. For example, trips to the nail salon, barbershop and sports bar are still standard.
- Industrial may be stabilizing:Fueled by e-commerce and an everything -on-demand economy, industrial has been booming for years.. While the asset class remains healthy, it may be starting to soften. The vacancy rate for distribution and warehouse space was 4.1% throughout the second half of 2022—a record low, as the rate has steadily declined each quarter since the end of 2020. The rate rose 10 basis points in the first quarter of 2023 to 4.2%.
- Office space still up in the air:Remote and hybrid work have largely reduced demand for office space. Still, A-class properties are performing well. Office properties with leases of 10 years or more may be able to ride out the market correction. But B- and C-class office buildings—especially those located with shorter leases outside prime locations—face challenges as the workplace evolves.
Unaffordable Prices Are Back on Top as Most Common Reason Buyers Can’t Make Purchase
BY ROSE QUINT on FEBRUARY 1, 2023 • (0)
An earlier post revealed that 65% of buyers who were actively engaged in the process of finding a home in the fourth quarter of 2022 have spent 3+ months searching for a home without success. The inability to find an affordable home (45%) is the most common reason buyers looking for 3+ months can’t make a purchase. In second place follow the inability to find a home in a desirable neighborhood and getting outbid by other buyers (tied at 30%).
When asked what they are most likely to do next if still unable to find a home in the next few months, 46% of active buyers searching for 3+ months said they will continue looking for the ‘right’ home in the same location (down from 50% a quarter earlier); 38% will expand their search area (up from 35%), 23% will accept a smaller/older home (down from 33%), and 16% will buy a more expensive home (down from 28%).
Meanwhile, the share who plan to give up their home search until next year or later fell to 21%, down from 28% in the third quarter. This is the first time the share has declined in six quarters.
**Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets. The HTR is produced quarterly to track changes in buyers’ perceptions over time. All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult. Results are seasonally adjusted. A description of the poll’s methodology and sample characteristics can be found here. This is the final in a series of six posts highlighting results for the 1st quarter of 2022.
Measure Q Property Tax Increase
One of the biggest changes for Long Beach property owners will be a property tax increase due to Measure Q’s adoption in November.
The $1.7 billion bond measure will help modernize LBUSD schools and it will raise property taxes by $60 for every $100,000 of assessed value.
Tweaks to statewide housing law will also change how and where housing is allowed to be built in the city. Senate Bill 6 allows housing in areas generally permitted for retail or office space if the project meets certain requirements. Another law, AB-2097, will require cities to show proof that a parking minimum is needed for a project to avoid negative impacts to the neighborhood where it’s proposed.
If you’re looking to build an ADU, or accessory dwelling unit, in 2023, AB-2221 allows you to include a detached garage for your additional unit. Long Beach has an ordinance governing ADUs built in the city and has looked to speed up the approval process as the city tries to increase housing production.
Another new law will make it cheaper to tear out your lawn and replace it with native landscaping. Programs like the Long Beach Water Department’s Lawn-to-Garden initiative offer residents funds to help with those conversions, and under AB-2142 that money will no longer count as taxable income.
This article is posted with courtesy of Jason Ruiz of Long Beach Post
HOUSING MARKET PREDICTIONS FOR 2023