Mortgage Rates Inch a Bit Higher this Week

After four weeks of declines, the average rate for a 30-year, fixed-rate mortgage rose to 6.12% from last week’s 6.09%. It may suggest some short-term stability. McLEAN, Va. – The average long-term U.S. mortgage rate ticked up slightly this week after four weeks of declines, a possible sign of stability that could draw in home shoppers with spring buying season weeks away. Mortgage buyer Freddie Mac reported Thursday that the average on the benchmark 30-year rate inched up to 6.12% this week from 6.09% last week. The average rate a year ago was 3.69%. The average long-term rate reached a two-decade high of 7.08% in the fall as the Federal Reserve continued to raise its key lending rate in a bid to cool the economy and bring down stubborn, four-decade high inflation. At its first meeting of 2023 last week, the Fed raised its benchmark lending rate by a quarter point, its eighth increase in less than a year. That pushed the central bank’s key rate to a range of 4.5% to 4.75%, its highest level in 15 years. While acknowledging that some measures of inflation have eased, Fed Chair Jerome Powell appeared to suggest last week that he foresees two additional quarter-point rate hikes this year. Though those rate hikes do impact borrowing rates across the board for businesses and families, rates on 30-year mortgages usually track the moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans. Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Federal Reserve does with interest rates can also influence the cost of borrowing for a home. The big rise in mortgage rates during the past year has devastated the housing market, with sales of existing homes falling for 11 straight months to the lowest level in more than a decade. Higher rates can add hundreds of a dollars a month in costs for homebuyers, on top of already high home prices. The National Association of Realtors reported earlier this month that existing U.S. home sales totaled 5.03 million last year, a 17.8% decline from 2021. That is the weakest year for home sales since 2014 and the biggest annual decline since 2008, during the housing crisis of the late 2000s. The rate for a 15-year mortgage, popular with those refinancing their homes, rose this week to 5.25% from 5.14% last week. It was 2.93% one year ago. Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Renting a Room Can Hurt Homestead Tax Exemptions

Some Fla. homeowners with homestead property-tax exemptions are finding that the exemption is at risk if they rent out part of the home or run a small business. SARASOTA, Fla. – When Dan Graue read a letter from the Sarasota County Property Appraiser that notified him he had been dodging taxes on his homesteaded property and now owed more than $64,000 in fines and back taxes, he thought there must have been an error. He and his wife, Jennifer, had owned the house off Bahia Vista Avenue since 1995, after purchasing the home from Jennifer’s family, which had owned the property since the 1950s. They quickly learned the property appraiser meant business. Florida’s homestead tax breaks are some of the most generous in the nation, shielding homeowners from hundreds, thousands or even far more annually in taxes, depending on the value of their primary residence. The exemption also carries the benefit of a cap on how much their taxable property value can rise each year, a coveted perk in an era of skyrocketing real estate prices. However, partially because of those advantages, the penalties for claiming the homestead exemption but not qualifying for it can be steep. A lawsuit over Sarasota County Property Appraiser Bill Furst’s handling of a similar homestead case was argued before the Florida Supreme Court late last year. The court’s ruling in that case could have far-reaching implications for homeowners who rent out portions of their property or who have home-based businesses and may face similarly steep bills for back taxes and penalties if they find themselves in local property appraisers’ sights – not to mention local governments’ tax coffers. At issue is the Graues’ decision to rent out a small garage apartment behind the property’s main house for years. The county property appraiser says as a result, they forfeited nearly half of their property’s homestead exemption and owe 10 years of back taxes, plus 15% interest and a whopping 50% penalty. They say their only option will be to turn the apartment into a short-term rental, since that would generate more revenue to pay off the debt sooner. “And nobody wants that,” Dan Graue said. After negotiations and an inspection, the property appraiser did come down from the nearly half of the homestead to about a quarter that no longer qualifies for the homestead exemption. Getting back the lost value of the homestead isn’t an option, and if the Graues don’t rent the property out now, the assessed value of the portion they rented will be calculated at today’s market value. Jennifer Graue said she feels like, in most cases if you break the law, you pay a fine or serve your jail time and the punishment is over. But for them, unintentionally breaking the homestead law will carry an indefinite sentence of higher tax bills. “In this case, we can’t say, ‘We’ll never rent it again’ and keep our homestead capped at where it should be,” she said. “It doesn’t make sense to me.” “The worst thing we could do now would be to reverse it, because (the assessed value of the property) goes to today’s value,” Dan Graue said. “There’s no choice.” Enforcing the law Furst said his office doesn’t make the laws, nor does it have discretion applying the penalties for breaking the law. “I feel sorry for the guy with the garage who gets caught and didn’t know,” Furst said. “But, you know, we don’t have the luxury of choosing which laws to enforce.” He said many of the homestead exemption violations he investigates begins after a neighbor alerts the office of a potential infraction. Brian Loughrey, chief deputy at the Property Appraiser’s Office, said the office has even changed procedures in an attempt to let people know when they may be breaking state law. The Property Appraiser’s website has an entire section dedicated to this issue and the office mails a postcard after the automatic renewal of a homestead every year that includes possible ways a homestead exemption can be lost, including the renting of any portion of the property. “We think the law is pretty clear,” Loughrey said. “It’s your homestead, up to the point that you use your homestead for commercial purposes. A business is not used for your homestead.” Furst also expressed some frustration with the penalty structure, but noted that portion of the law allows his office no discretion. “You can’t get 15% interest anywhere,” he said of the steep rate. Furst also disagrees that if he prevails in the case pending before the state Supreme Court – oral arguments took place in November – that it will result in more homeowners being penalized. Instead, he contends, if the court rules against him, homestead exemptions will be ripe for abuse from commercial property owners looking to minimize their tax liabilities. Furst was initially elected in 2008 and has shown a willingness to go the distance when legal challenges or issues arise regarding tax assessments and exemptions. He lost his last battle before the Supreme Court when a clerical error resulted in a significantly reduced tax assessment for a waterfront property and he sought to collect the full amount after the bill had already been paid. Furst had also challenged Marie Selby Botanical Gardens’ tax exempt status on the grounds that a business venture with Michael’s on East no longer qualified them for a full property tax exemption for a nonprofit. A magistrate in 2021 ruled that most of the land on the 15-acre bayfront campus would remain exempt, although, some of the property now does pay property taxes. Can a home-based business cost an exemption? The case now before the Supreme Court, Furst v. Rebholz, was filed in 2015 by Rod Rebholz. Rebholz, who has since died, lived on the first floor of a two-story house in Sarasota County, and rented four rooms on the second floor. Like the Graues, Rebholz was notified part of his homesteaded property did not qualify for the tax exemption because of the second-floor rentals. His attorney, Sherri Johnson of Johnson Legal of Florida P.L., argued the decision was unconstitutional, as the statutes governing homestead exemptions did not give the property appraiser the authority to split a homestead. Both the trial court and an appellate court agreed, ruling removal of a portion of a homestead was unconstitutional. But in arguments before the Supreme Court last fall, many of the justices posed questions indicating support for Furst’s case. Furst’s lawyers pointed to other parts of state homestead exemption laws that allow for the splitting of a homestead exemption, arguing that if he cannot split a homestead exemption even if a commercial business is being run out of the property, it will lead to abuse and higher taxes for taxpayers. But the justices also seemed uncomfortable allowing the property appraiser to decide what constitutes a commercial purpose. Justice Jorge Labarga noted that someone who bakes cookies for sale out of their home kitchen could be considered a commercial purpose and questioned what portion of the homestead would be given up in that instance. “The problem is where do you draw the line,” Labarga said. “The person who bakes cookies and sells them to stores out of their kitchen, does that become non-exempt property? That portion of the kitchen? Do we just do the oven? … I mean, where do you draw the line on these things?” Jason Lessinger, an attorney at Sarasota’s Icard Merrill representing the Property Appraiser’s office, acknowledged the complexity but insisted each case must be examined on an analysis of the facts. Lessinger cited an example of a person selling makeup from their home. If that person used a portion of the residence exclusively as a place of business, then it may not be eligible for a homestead exemption, particularly if they depreciated the space on their taxes. “Or better yet, I form a corporation and I lease those spaces to the business,” he said. “That’s no longer a homestead use.” Still, the majority of the questions dealt with outcomes of a ruling for Furst. Johnson did not concede that Rebholz ran a commercial business, though one of the tenants had been renting a room for 15 years. Effect on working from home? Last year, Rep. Fiona McFarland, R-Sarasota, filed a bill that would have provided property appraisers across the state some discretion on how they apply the 50% penalty and 15% interest in such cases. The bill would have also allowed a homesteaded residential property owner to rent out rooms or a garage apartment without losing the tax exemption. The bill never got out of committee. McFarland said that she believes state law needs to be changed, given rising rents and housing issues across the state. “We ought to do everything we can to free up available rooms,” she said. But given the bill’s fate last year, it’s unlikely she will file it again. She said the penalty issue could potentially be addressed by attaching language to other legislation. Johnson, the attorney in the Rebholz case, said she doesn’t believe a bill is needed, as she argues Florida law does not allow for splitting of a homesteaded, residential property. She also said if the Florida Supreme Court rules against Rebholz, it could prompt government property appraisers across the state to target people renting rooms on homesteaded properties. She also said that renting a room can be helpful for seniors on fixed incomes as Florida continues to battle rising rents. “As housing prices have gone up, sharing housing is one way to make ends meet,” she said. She also said the trend of people working from home since the pandemic is another area for worry if the Supreme Court overturns the lower courts’ rulings in the Rebholz case. “I think the Property Appraiser’s position could be very problematic for people who don’t work in traditional work environments,” she said. Dan Graue said he’s found the property appraiser’s office helpful, and that he’s learned a lot about property law in recent weeks. After he questioned the calculation that he should lose 45% of his homestead exemption given the size of the space rented, the property appraiser’s office inspected it and reduced homestead exclusion to about 29%, cutting the potential back taxes and fines by more than half. Graue said he would prefer to lose no more than 20% of the homestead exemption. “That takes it out of the heart attack zone,” he said.

FHA: Some Buyers Can Request Second Appraisal

New HUD process will allow FHA borrowers to request a second appraisal if they suspect their first appraisal was skewed due to an appraiser’s racial bias. WASHINGTON, Fla. – Housing and Urban Development (HUD) Secretary Marcia L. Fudge announced that HUD, through the Federal Housing Administration (FHA), is creating a process that people seeking FHA financing can use to request a review of their property appraisal if they believe the results may have been skewed by racial bias. A homeowner refinancing their home with an FHA-insured mortgage, for example, will be able to take steps to ensure that their appraisal is fair. Fudge’s FHA policy change is, according to HUD, the first step to solidify processes lenders must follow when a borrower requests a Reconsideration of Value (ROV) review if their concern centers on unlawful discrimination. It gives borrowers a new option if they suspect bias in the appraisal process. “This announcement is an important step forward in rooting out appraisal bias in this country,” says Fudge.

Collier County Commissioners repeal 60-day rent increase ordinance

The Collier County ordinance that said landlords had to provide a 60-day notice to renters if they planned to increase the rent by 5% or more has been repealed. The board of commissioners voted Tuesday to repeal the ordinance less than a year after it was passed in October. The repeal passed 4-1. In December, the idea to repeal the ordinance was introduced. Advocates for the ordinance argued that the county had not given the measure enough time to work. In December, Collier County Commissioner Rick LoCastro said that the Fair Notice to Tenants Ordinance didn’t have teeth. “The question I asked every time is, so what has been the effect?” said LoCastro in a December meeting. With the ordinance repealed, landlords will no longer face a fine if they do not give a 60-day notice to renters when they intend to raise rents by 5% or more.