Matrix Blog

Explainer

How the GOP Tax Bill Might Impact U.S. Residential Real Estate

December 14, 2017 | 5:49 pm | Investigative |

Both houses of Congress have passed far-reaching tax bills with a lot of common ground between them. The U.S. Senate and U.S. House of Representatives are in the process of merging their versions into a single bill that will be voted on, and if it gets out of committee, it will be submitted to the president for signing.

Unlike the 1986 tax reform bill, which took six months of public hearings and discussion on both sides of the aisle, this tax bill was worked on for a year by the GOP and was passed very quickly without most of the signers knowing what was actually in it. Therefore I anticipate an ongoing procession of additional insights that impact the housing market as more people read the bills or the eventual law.

This lack of transparency and vetting alone is not great news for housing, which is very dependant on an “uncertainty-free” environment. In addition, there is a “get it done before Christmas” deadline.

Here is what I mapped out but this is only what we think we know by reading many interpretations with source links presented at the bottom of the table below. Here’s the pdf version of the table.

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Explainer: Overall Median Sales Price Submarket Changes May Not Fall In Range

October 29, 2017 | 8:39 pm | Infographics |

This title is way too wonky but I found it hard to pare down. It’s easier to explain visually.

When I complete my research for Douglas Elliman in a particular housing market and the percent change in the overall median sales price doesn’t fall within the individual submarkets like averages do, I periodically receive inquiries from media outlets or real estate professionals to clarify. Many people see median sales price much like they see average sales price: proportional.

In this case, the median sales price change for resale to new development ranged from -23% to +1.9% yet the overall median increased 9.3…clearly outside of the range both submarkets established.


So I whipped up the following infographic with sample sales transactions and applied median and average sales price to illustrate how median sales price percent change for the overall market might not always fall within the individual submarket percent price changes. However, in an “average” analysis, the overall result will always fall within the range of the submarkets.

I hope the following color-coded breakdown below helps illustrate this clearly – be sure to click on the image once to expand or a second time for the extra large version.


[click to expand]

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[Leverage] Calculating Your Home Investment Return Realistically

March 16, 2014 | 9:00 am | Infographics |

leverageinfographic
[click to expand]

I think many, if not most people calculate the return on their home as an investment as this CNN/Money calculator does. After seeing this, I whipped up a theoretical infographic illustrating how the use of leverage in a home purchase factors in to your return. It’s super simplistic, not factoring in opportunity cost, use and enjoyment, tax deductions, improvements and other factors because I wanted to show the power of leverage.

Forget about price indices like Case Shiller or similar. I can’t tell you how many times I have seen a home price index paired up against a stock price index as a way to determine which investment is better. Apples and oranges.

Measure your ROI using what you invested (down payment) and what your home equity expanded (or contracted) to.

The CNN/Money rate of return calculator is really only a measurement of home price appreciation compared to the same period for stocks and bonds as an opportunity cost – comparing different asset types side by side – yet that’s not how the majority of homebuyers interact with their home as an investment.

It’s most often about leverage.

UPDATE
An appraisal colleague and friend of mine pointed out that in my original version, I incorrectly used the word “profit” within the infographic rather than what I was actually talking about: “equity” ie return on investment (ROI) – how much the original down payment gained over time. The numbers all remained unchanged.

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