4 Vacation Home Issues Every Buyer Should Know


Before clients purchase a vacation home, make sure they're ready for the responsibilities of owning a second property.

"Costs of owning and renting a vacation home can be very high," says Todd Huettner, owner of Denver-based lending company Huettner Capital. "The hassles and costs of short-term vacation rentals are higher than most people expect. … People are way too optimistic about rental rates, vacancies, management fees, maintenance costs and home value increases."

Owners buying a second home in a different part of the country than their primary residence may have to consider new climate issues, such as damaging blizzards in the mountains or corrosion from salty air in beachside communities, Huettner says.

The vacation-home market has made a full recovery in recent years, with prices returning to what they were in 2006, according to the National Association of Realtors® (NAR), the median sales price increased by 4.2 percent in 2016 to $200,000.

The Wall Street Journal featured some considerations for buyers who aspire to purchase a vacation property:

1. Check your reason for buying. Some buyers find that a vacation home can be a moneymaker. Sabrina Robinson of Santa Cruz, Calif., said that she rents her vacation condo in Lake Tahoe to tourists year-round. The rental income covers her mortgage and utilities and generates a $20,000 profit annually.

But buyers of second homes don't always want to become landlords.

"Our buyers today are buying for a number of reasons, with the number one reason being lifestyle and use," says Nick Cassini, senior vice president of sales and marketing for Four Seasons Private Residences in the Caribbean island of Anguilla. NAR surveys also find that vacationing is the primary motivation for buyers who purchase a second home.

2. Assess the location. Sales prices and rental demand can vary significantly between locations. "The owners who are most displeased are ones that rush the purchase decision because they are blinded by their dream," says David Angotti, co-founder of SmokyMountains.com, a vacation rental listing site in Tennessee. "For example, they fail to understand that location, view, features and other amenities are critical to the overall revenue."

Owners may also want to consider how far their second home is from their primary residence. Fifty-seven percent of vacation properties are located in beachside or lakeside communities at a median distance of 200 miles from owners' primary properties, according to NAR.

"In our experience, living close is really helpful if something goes wrong, but there are a huge number of services out there to hold keys, offer concierge services, or otherwise help if you live farther away," says Laura Hall, communications director for Kid & Coe, a vacation rental website. "So anything is possible if you're willing to pay for it."

3. Budget for the true costs. Buyers shouldn't just focus on purchase price, rental rates and recent market trends when considering purchasing a second home. They need to be aware of other factors that can push up costs, such as fees for cleaning, management, routine maintenance and repairs. For example, homeowner association fees can be more than $1,000 a month in some markets. Financial experts recommend that buyers also factor in real estate taxes, insurance costs, utilities and any state sales tax on rental income.

4. Consult local rules. If the intent is to rent out a second home, check out local ordinances and homeowners association rules, which may reduce the pool of potential renters.

Source: "What to Consider Before You Buy a Vacation Home," The Wall Street Journal (June 11, 2017)


Vacation Rentals in St. Augustine Beach - Cause for Concern?


The vacation rental business, as in other areas, has been booming in St. Augustine and St. Augustine Beach. A quick search on Airbnb shows an abundance of offerings in both cities.

Vacation rentals in St. Augustine Beach have steadily increased since 2013, and now more than 80 vacation rentals occupy the nearly 2 square mile city.

While the business is a boon for some, some residents have voiced concerns about dealing with demands on parking and other issues associated with the rentals.

Peter Wayte, a St. Augustine Beach resident, said he’s troubled by the number of people allowed to stay at vacation rentals and the number of cars allowed to park at one place.

He said he’s OK with renters, just not in large numbers at one house.

“It’s when the population explodes — that’s the problem,” he said.

St. Augustine Beach had more than 20 “transient lodging facilities” (less than one month or 30 days rental) in fiscal year 2013, according to city business tax receipt records. That has increased to more than 80 that registered with the city in the current fiscal year that ends Sept. 30.

“It’s obviously a very popular means of property use, because … I live two blocks from the ocean and even the house next to me is a vacation rental,” City Manager Max Royle said.

The city’s land development regulations allow up to 100 transient lodging facilities in medium density land use district (hotels, motels and similar businesses excluded). Property owners have to register them with the city, and property owners are responsible for making sure guests abide by city codes, according to the city’s regulations. Inspections are also required.

“We have a limit of 100 vacation rentals. … It’s sort of first-come, first-served,” Royle said.

Vice Mayor Undine George said she has received complaints from residents about vacation rentals, and has witnessed the impact on parking.

“I think the biggest complaint I get from citizens is [why do] our zoning laws and our definitions of use allow the activity of short-term rentals, which most people consider a commercial activity, to take place inside … a single-family residential structure,” she said.

Two people over 15 years old are allowed per bedroom, and an additional two people for one sleeper sofa per floor of the residence, according to city regulations. Parking is restricted to the site of the rental and the number of spaces provided on the site. Overflow parking goes to public parking spaces.

As far as adding additional regulations, the city is limited.

State law prohibits local governments from banning vacation rentals and or regulating how often they’re rented or how long people stay. Rules that were in place before June 1, 2011, were exempted from that law.

Craig Thomson, a beach tree advisory board member, wrote in an email to The Record that he and his friends are most concerned about zoning matters, such as reduced setbacks allowed by the city.

“Many of the larger houses currently being built are intended for short term rental purposes,” according to Thomson. “This process/purpose is changing the character and livability of our established family oriented neighborhoods.”

The demand for vacation rentals has been noticed by Frank O’Rourke, broker for St. Augustine Real Estate Company. He said the demand now for people buying investment properties solely as a means to generate income, such as through short-term rentals, is as strong now as it has ever been. He’s sold a number of those in St. Augustine Beach, he said.

While he hears some complaints about vacation rentals in the area, they don’t come often.

“I’ve lived in St. Augustine Beach for over 30 plus years,” O’Rourke said. “There’s always been a mix of rentals and permanent homeowners … so you kind of bought in with that mentality early.”


Fed Raises Rates 3 Months after Last HIke


The Federal Reserve has raised its benchmark interest rate for the second time in three months and signaled that any further hikes this year will be gradual. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.

The Fed's key short-term rate is rising by a quarter-point to a still-low range of 0.75 percent to 1 percent. The central bank said in a statement that a strengthening job market and rising prices had moved it closer to its targets for employment and inflation.

The message the Fed sent Wednesday is that nearly eight years after the Great Recession ended, the economy no longer needs the support of ultra-low borrowing rates and is healthy enough to withstand steadily tighter credit.

The decision was approved on a 9-1 vote, with Neel Kashkari, the head of the Fed's regional bank in Minneapolis, the dissenting vote. The statement said Kashkari preferred to leave rates unchanged.

The Fed's forecast for future hikes, drawn from the views of 17 officials, still projects that it will raise rates three times this year, unchanged from the last forecast in December. But the number of Fed officials who think three rate hikes will be appropriate rose from six to nine.

The central bank's outlook for the economy changed little, with officials expecting economic growth of 2.1 percent this year and next year before slipping to 1.9 percent in 2019. Those forecasts are far below the 4 percent growth that President Donald Trump has said he can produce with his economic program.

In recent weeks, investors had seemed unfazed by the possibility that the Fed would raise rates several times in the coming months. Instead, Wall Street has been sustaining a stock market rally that began with President Donald Trump's election in November, buoyed by the prospect that tax cuts, an easing of regulations and higher spending for infrastructure will accelerate growth.

A robust February jobs report – 235,000 added jobs, solid pay gains and a dip in the unemployment rate to 4.7 percent – added to the perception that the economy appears fundamentally strong.

That the Fed is no longer unsettling investors with the signal of a forthcoming rate increase marks quite a change from the anxiety that prevailed after 2008, when the central bank cut its key rate to a record low and kept it there for seven years. During those years, any slight shift in sentiment about when the Fed might begin raising rates – a step that would lead eventually to higher loan rates for consumers and businesses – was enough to move global markets.

In 2013, then-Chairman Ben Bernanke sent markets into a panic merely by mentioning that the Fed was contemplating slowing the pace of its bond purchases, which it was using then to keep long-term borrowing rates low.

But now, the economy is widely considered sturdy enough to handle modestly higher loan rates. Inflation, which had stayed undesirably low for years, is edging near the 2 percent annual rate that the Fed views as optimal.

And while the broadest gauge of the economy's health – the gross domestic product – remains well below levels associated with a healthy economy, many analysts say they're optimistic that Trump's proposed tax cuts, infrastructure spending increases and deregulation may accelerate growth. Those proposals have lifted the confidence of business executives and offset concerns that investors might otherwise have had about the effects of Fed rate increases.

Yet for the same reason, some caution that if Trump's program fails to survive Congress intact, concerns will arise that the president's plans won't deliver much economic punch. Investors may start to fret about how steadily higher Fed rates will raise the cost of borrowing and slow spending by consumers and businesses.

The Fed typically raises rates to prevent an economy from overheating and inflation from rising too high. But throughout the Fed's history, its efforts to control inflation have sometimes gone too far – slowing borrowing and spending so much as to trigger a recession. Already, the current expansion, which officially began in 2009, is the third-longest in the post-World War II period.

The Fed's benchmark rate, after modest increases in December 2015 and December 2016 and again on Wednesday, is still quite low by historical standards. But if the Fed ends up raising rates three or four times this year and follows up with three additional hikes in 2018, its benchmark rate would be left at a level that might start to dampen economic activity.


Florida Pays Less Taxes Than Residents of 39 States


WalletHub's 2017 Taxpayer Survey and its yearly Tax Rates by State finds Floridians' tax burden from state and local governments fairly reasonable. Overall, Florida ranked 10th for its effective state and local tax rate, meaning only nine other states charge less.

The state was solidly average in real estate taxes – No. 25 out of 50 states – but it ranked No. 8 for total sales and excise taxes. Florida ranked slightly toward the bottom, No. 28, for its vehicle property tax.

The latest WalletHub survey looked closely at taxes as the federal tax deadline approaches. According to respondents, 20 percent of Americans would get a tattoo that said "IRS" if it would allow them to avoid paying taxes in the future; 16 percent would move abroad and 10 percent would stop talking for six months if it would relieve them of their lifetime tax burden


2017 Housing Forecast - Existing Home Sales Up


Frank O'Rourke, Broker attended the 2016 REALTORS® Conference & Expo held this past weekend in Orlando.  While attending the residential housing and economic forecast session it was noted that the market should see more millennials entering their prime homebuying years, rising household formation, and continued job gains boosting overall demand, leading to a slight increase in existing-home sales in 2017.

Lawrence Yun, chief economist of the National Association of Realtors®, presented his 2017 housing and economic forecast and was joined onstage by Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta, who discussed the economic conditions that he believes support what will be a “net positive” for the housing sector.  

Heading into the final months of data for 2016, Yun expects existing-home sales to finish at a pace of about 5.36 million – the best year since 2006 (6.47 million). In 2017, sales are forecast to grow roughly 2 percent to around 5.46 million, and then with a more prominent jump of 4 percent in 2018 (5.68 million). The national median existing-home price is expected to rise to around 4 percent both this year and in 2017.

In front of a packed room of thousands of Realtors® and industry guests, Yun and Lockhart both commented that the housing market this year has been a mixed bag of positives and challenges.   

“The gradually expanding economy, multiple years of steady job creation and mortgage rates under 4 percent all contributed to sizeable interest in buying a home this year,” said Yun. “However, it’s evident that demand and sales slightly weakened over the summer as stubbornly low supply limited buyers’ choices, accelerated price growth and hindered some consumers’ belief that now is a good time to buy a home.”

Lockhart remarked on current inventory levels impacting affordability. Citing limited land availability, shortages in construction labor and tight credit for homebuilders, Lockhart said these factors are contributing to the overall supply shortages for affordable housing.  

Looking to next year, Yun thinks the tight supply and affordability issues affecting buyers in many markets will very slowly but surely start to abate. As housing starts steadily increase, both he and Lockhart are optimistic that housing demand will include leading-edge millennial households finally dipping their toes into the market at a growing rate.

In NAR’s recently released 2016 Profile of Home Buyers and Sellers, the median age of first-time buyers was 321. According to Yun, while repaying student debt, shaky job prospects after the recession and marrying and having children later in life have delayed first-time buyers’ ability and willingness to buy, the wave of potential buyers entering their 30’s is increasing considerably in coming years.

 “NAR surveys from both current renters and recent buyers prove that there’s an overwhelmingly strong desire among the younger generation to own a home of their own,” said Yun. “The housing market over the next couple of years should get a big lift in demand from these new buyers. The one caveat is it’s essential that there’s enough new and existing supply at entry-level prices for them to reach the market.”

Lockhart remarked, “The coming years of housing demand will be millennial-driven and will support the single-family sector.”

Yun anticipates housing starts to jump 5.3 percent next year to 1.22 million. However, this is still under the 1.5 million new homes needed to make up for the shortfall in recent years and keep up with the growing demand. New single-family home sales are likely to total 570,000 this year and rise to around 620,000 in 2017.

“Multi-family housing construction has dominated the building landscape in recent years and only recently started to level off,” said Yun. “Hopefully this is a sign that homebuilders will begin to significantly shift their focus to single-family housing. Both a large bump in new homes and homeowners selling is needed to get supply levels at healthier levels.”

Commenting on the overall health of the U.S. economy, Yun noted that continued overseas instability and flat business investment will lead to an unsatisfactory year of expansion. Although a boost in exports fueled economic growth to just a tick under 3 percent in the third quarter (first estimate), GDP for all of 2016 is still expected to be under 3 percent for the eleventh straight year.

“While the gains have been uneven by state, region and even gender, the 15 million jobs created since 2010 have bolstered consumer spending and housing demand,” said Yun. “Over the next two years, the economy will likely stay on a path of around 2 percent growth with a tightening labor market and stronger inflation.”  

“The pace of job gains has been stronger than economic growth the last two years,” remarked Lockhart. “The housing sector has challenges, but the industry’s near-term outlook is one of continued improvement.”

Yun foresees a gradual uptick in borrowing costs heading into next year. By the end 2017, he expects rates to be around 4.5 percent. Lockhart also anticipates a gradual uptick in rates in the next two years, but said the economy currently does not call for a quickly rising rate environment.

“Increasing mortgages rates have the potential to further dent affordability in markets where supply struggles to recover to more balanced levels,” said Yun. “Despite these likely pressures, the increase in home sales next year will be supported by the continued release of pent-up demand and the beginning of stronger participation from first-time buyers.” 


St. Johns County Has Second Lowest Unemployment Rate In Florida


St. Johns County has seen an increase in its overall workforce in the last year and has experienced an almost equal boost in jobs as the unemployment rate remains low, government data released Friday show.

The monthly release from the Florida Department of Economic Opportunity showed that St. Johns County had the second-lowest unemployment rate in the state during September at 3.7 percent. The was virtually unchanged from August’s rate of 3.6 percent.

It’s also nearly identical to September 2015 when the county posted an unemployment rate of 3.8 percent.

In the last 12 months, the county has seen its total workforce rise to 117,440 — an increase of more than 4,000 since September 2015. And the number of people employed has moved from 108,817 to 113,071 in that period.

The only county with a lower unemployment rate than St. Johns County in September was Monroe County at 3.2 percent. Hendry County had the state’s highest unemployment rate at 11.3 percent.

Overall, Florida’s seasonally adjusted unemployment rate was 4.7 percent in September 2016, unchanged from the August rate, but down 0.4 of a percentage point from a year ago. Rates for individual counties are not seasonally adjusted.

The seasonally adjusted U.S. unemployment rate was 5.0 percent in September.

The number of jobs in Florida was 8,428,000 in September 2016, up 276,300 jobs compared to a year ago. The industry gaining the most jobs was professional and business services (up 59,400 jobs, 4.8 percent). Other industries gaining jobs included leisure and hospitality (up 49,900 jobs, 4.4 percent) as well as education and health services (up 49,700 jobs, 4.1 percent).

The Jacksonville Metropolitan Statistical Area, which includes St. Johns County, had an unemployment rate of 4.6 percent.

Those counties surrounding St. Johns reported relatively low unemployment rates. Clay county had a rate of 4.5 percent, followed by Duval County (4.9), Flagler (5.5) and Putnam (6.1).