U.S. homebuilders’ outlook improved in June as record-low interest rates and demand for more space spurred buyers to re-emerge after the coronavirus shut down sales and construction.

A gauge of builder sentiment jumped to 58, a 21-point gain from May, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Analysts expected a reading of about 46, the average of 37 estimates compiled by Bloomberg. A rating above 50 is considered positive. June’s increase was the biggest on record for the index and followed a seven-point uptick in May.

The largest homebuilder ETF surged to pre-crisis levels on data showing a surprise increase in sales of new houses last month.

State Street's SPDR S&P Homebuilders exchange-traded fund, ticker XHB, rallied as much as 4.6% to the highest level since March 6. Purchases of single-family houses in the U.S. unexpectedly climbed in April after sales dropped the most since 2013 in March, when much of the U.S. economy shut down to stem the spread of coronavirus.

U.S. homebuilder sentiment rose in May by more than forecast following a record slump a month earlier as a pickup in sales and demand expectations pointed to stabilization in the real estate market.

The National Association of Home Builders/Wells Fargo Housing Market Index increased by 7 points to 37, according to data Monday. In April, the gauge plummeted 42 points, the most in records to 1985. The median projection in a Bloomberg survey of economists called for 35 in May. Readings above 50 indicate more builders view conditions as good than poor.

The Covid-19 pandemic and the resulting remote work boom is accelerating a “Great Migration” from expensive and tax-heavy coastal regions and major cities into more affordable states in the U.S. South and West, according to Susquehanna Financial Group.

The “forced transition” to remote work among white-collar firms will lead employers to reevaluate their approach to real estate and workforce location more broadly, analyst Jack Micenko wrote in a note published Monday.

U.S. new-home construction remained robust in January and applications to build jumped to the highest level since 2007 as low mortgage rates and a solid labor market continued to fuel housing demand.

Residential starts slipped 3.6% to a 1.57 million annualized rate, still the second-fastest pace of the expansion, after an upwardly revised 1.63 million pace in the prior month, according to government figures released Wednesday. January starts exceeded the median estimate in a Bloomberg survey of economists. Permits, a proxy for future construction, advanced 9.2% to a 1.55 million rate, the highest since March 2007.

Governor Gavin Newsom just passed an order that effectively creates an eviction freeze for residential tenants in California who are unable to pay rent as a result of changed finances due to the COVID-19 pandemic. This has taken the form of Executive Order N-37-20, which will remain in effect through May 31, 2020.

The Order raises a number of questions however, including when the Order applies, how it affects evictions, and whether it overrides local measures currently in effect.

As part of the State of Arizona’s response to the current public health crisis, on March 24, 2020, Arizona Governor Ducey issued Executive Order 2020-14, titled “Postponement of Eviction Actions.” A copy of the Executive Order is linked here: https://azgovernor.gov/executive-orders Residential landlords considering taking any action against tenants, including evictions, should be aware of this Order before proceeding.

In summary, the Order effectively requires all Arizona law enforcement officers who are typically charged with enforcing “eviction action orders” (from Arizona courts) to “temporarily delay enforcement” of such orders in various circumstances, including for tenants who are quarantined, or who are residing with others who are quarantined, because of COVID-19 (including self-quarantines pursuant to orders from licensed medical providers) or for tenants who have a health condition that “makes them more at risk for COVID-19 than the average person.” The Order also requires such actions to be delayed if the tenant has “suffered a substantial loss of income resulting from COVID-19” due to job loss, reduction in compensation, and similar economic problems arising out of the pandemic. Thus, the Order is designed to provide some protection for tenants who have medical or financial problems arising out of and relating to the COVID-19 crisis.

The Coronavirus has been the subject of an extraordinary amount of media coverage since the start of 2020. As we approach the end of the first quarter of the year, its impact on local and global economies and our way of life cannot be ignored. This Alert will provide the construction industry with guidance and recommendations for navigating commercial risk resulting from the Coronavirus pandemic.

The potential impacts of the Coronavirus to the construction industry are wide reaching. Consequences on a project site can include quarantines or other governmental actions resulting in impacts to the project work force. Offsite impacts can cover a much broader scope of issues including labor shortages at factories of manufacturers or fabrication facilities, resulting in production delays, transportation embargoes causing project supply issues, or governmental actions which inhibit manufacturing and production causing supply chain shortages and inabilities to service existing demands. So, what can contractors facing such impacts do to avoid losses, mitigate the impacts, and prepare for what’s to come?

Reprinted courtesy of Peckar & Abramson, P.C. attorneys Levi W. Barrett, Steven M. Charney, Warren E. Friedman and Christopher B. Kinzel
Mr. Barrett may be contacted at lbarrett@pecklaw.com
Mr. Charney may be contacted at scharney@pecklaw.com
Mr. Warren may be contacted at wfriedman@pecklaw.com
Mr. Christopher may be contacted at ckinzel@pecklaw.com

Groundbreakings on new U.S. homes surged in December to a 13-year high, giving the housing market momentum heading into the new year amid low mortgage rates, solid job growth and optimistic buyers and builders.

Residential starts rose 16.9% to a 1.61 million annualized rate after an upwardly revised 1.375 million pace in the prior month, according to government figures released Friday. The gain was the biggest in three years and well above all estimates in a Bloomberg survey. Permits, a proxy for future construction, fell 3.9% to 1.42 million.

This morning, a federal judge from the Eastern District of California granted a temporary restraining order preventing California from enforcing Assembly Bill (AB) 51.

AB 51-which was set to take effect on January 1, 2020-prohibits employers from requiring, as a condition of employment, employees to waive their right to any forum or procedure to bring claims under the Labor Code or the California Fair Employment and Housing Act. Several industry groups filed a complaint, alleging that AB 51 is preempted by the Federal Arbitration Act and violates the Supremacy Clause of the United States Constitution.

Reprinted courtesy of Jeffrey K. Brown, Payne and Fears and Raymond J. Nhan, Payne and Fears
Mr. Brown may be contacted at jkb@paynefears.com
Mr. Nhan may be contacted at rjn@paynefears.com

As 2019 winds down, the Affordable Housing Credit Improvement Act of 2019 is gaining momentum in Congress. The Act, which is aimed at expanding and strengthening the low-income housing tax credit, was originally introduced in 2016. The Consolidated Appropriations Act of 2018 adopted two key provisions of the original bill—a 12.5% increase to the housing credit ceiling for years 2018-2021 and the “income averaging” minimum set-aside election. The 2019 bill reintroduces many key provisions from the original bill, along with new provisions to further bolster the housing credit. As of the end of October, more than one-third of the House and one-fourth of the Senate have signed on to co-sponsor the bill. In summary, the key proposals in the 2019 legislation would:

• Establish a minimum 4% credit rate for tax-exempt bond financed transactions;
• Increase the housing credit volume cap by 50% over five years;
• Add income averaging as a third minimum set-aside test for 4% bond deals to mirror the modifications to Section 42 of the Internal Revenue Code adopted as part of the 2018 Consolidated Appropriations Act;