02.06.25

ISSUE # 109

CIC Info Bytes 02/06/25

CIC Info Bytes are frequent, succinct updates providing educational and engagement opportunities that help your community thrive!  Please forward and share this newsletter with your peers, neighbors and colleagues so they can connect and join.

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Where’s the Enforcement?

• Homeowners across the country want reasonable protections and enforcement of state law.  While it may seem self-evident, laws do not enforce themselves.  Someone has to act to hold individuals and businesses and governments accountable.  Regardless of the state, individual owners are responsible for taking action.  

The best examples of governmental enforcement and licensing are Florida, Nevada, and Virginia.  Ontario Canada's CMRAO is the best example of CIC governmental oversight in the world.

The reason enforcement is lacking is simple: resources.  States like Washington struggle to fund the constitutional right of public defense.  🎗️ N.B. Condos, co-ops and HOAs are regimes based on restrictions instead of basic rights.

...Sponsored in the Senate by a diverse group of prominent Democrats and Republicans, Senate Bill 5404 would require the state to cover at least 50% of the costs that counties incur to hire attorneys for indigent defendants....

...Although most U.S. states pay for all or most public defense services, Washington’s counties and cities currently cover more than 96%. Those costs have doubled since 2012 to more than $200 million annually, and counties say they expect new caseload limits will drive the costs up even more…

…Hot spots for defense problems include King County in Western Washington and the Tri-Cities in Central Washington. There’s also a bipartisan bill to repay law school loans for new public defenders and prosecutors.  “This isn’t a political issue” or an issue of state versus local control, said Young from the counties association. “It’s a basic constitutional right.”

But advancing an expensive bill could prove challenging, especially at a time when state lawmakers are grappling with multibillion-dollar projected deficits and other big-ticket demands, including for public schools.  Although there’s no official fiscal note for SB 5404 yet, the counties association says public defense costs across Washington could surpass $550 million over the next two years, accounting for the Bar’s new caseload limits.  SB 5404 would put the state on the hook for 50% of today’s public defense costs and 100% of those related to the caseload changes. That could mean Washington paying $340 million over the next two years, and more later...

WA counties want big money to address public defender crisis — Daniel Beekman | The Seattle Times | January 27, 2025

Texas Beach Club Special Assessment

• McKinney,  Texas: A $12,000,000 beach club renovation has drawn the ire of at least one Stonebridge Ranch Community Association (SCRA) homeowner.  Dual takeaways:

  • Owners should be careful not to make unfounded accusations and assumptions that volunteer directors are on the take when big-ticket projects come up.  Many directors are simply doing their best to serve their community.

  • Major improvements (vs. maintenance, repair and replacement), especially items that will require a special assessment, should always be put to a vote of the owners.

🎥 VIDEO: Battle brewing over multimillion-dollar pool renovations at McKinney community — Marvin Hurst | CBS News Texas | February 06, 2025

Chapel Hill, North Carolina: A tale of runaway housing prices and dwindling affordability.

The three-bedroom Victorian-style home at 1139 Great Ridge Parkway looks nearly identical to when it was built in 2010. On paper it is unrecognizable.  The Chapel Hill, N.C., house is currently listed for $520,000, more than double what it first sold for in 2011. A buyer who puts 20% down would have a mortgage payment of about $2,800 at a 6.96% interest rate, nearly triple the monthly cost in 2011. Then add property taxes and insurance, both of which have risen sharply.

“We could never afford this house today,” current owner Rachel Walker said.  Walker and her husband Brian bought the house in 2020 for $315,000 with a 3.75% mortgage rate. The price was a stretch then, but they knew the home would appreciate. They never imagined its value would rise by roughly two-thirds in under five years.  The dramatic change in value tells a story of home affordability across the country. Through three owners in 14 years, the house hasn’t had major renovations or additions beyond a fresh coat of paint. Yet its rise in value, coupled with higher mortgage rates and inflation, made it harder to reach 1139 Great Ridge Parkway and addresses like it along the road to the American dream.  

“The bar keeps getting higher and higher for what it takes to afford the typical home,” said Daryl Fairweather, Redfin chief economist. “Many first-time buyers wish they could take a time machine back five years to when both prices and mortgage rates were significantly lower.”

• In January 2012, the household income required to afford the typical home in the U.S. was $39,223, according to Redfin.

• As of November 2024, home buyers need to earn $126,764, a 223% increase…

One House, Three Owners: The Ballooning Cost of the American Dream — Veronica Dagher | WSJ | January 25, 2025

• 10 takeaways from the 12th National Risk Assessment report:

  • Climate change is reshaping the US housing market via rising insurance costs and shifting preferences, creating a feedback loop of climate risks, population movement, and changing property values.

  • Insurance costs are rising much faster than mortgage payments, more than doubling as a percentage of those payments (from 7-8% to over 20%) between 2013 and 2022.

  • Climate change is disrupting historical Sun Belt population growth.  These states have absorbed over 40% of US natural disaster costs since 1980.

  • A new analytical framework combines rising insurance premiums with changing demand and migration to quantify climate risk impact on property values and economic vitality.

  • Risk-based insurance pricing could drive a 29.4% average premium increase by 2055 (18.4% correction, 11% climate risk).

  • Miami (322%), Jacksonville (226%), Tampa (213%), New Orleans (196%), and Sacramento (137%) face the highest insurance premium increases.

  • Over 55 million Americans may relocate to less vulnerable areas by 2055, starting with 5.2 million in 2025.

  • Neighborhoods face varying futures: Climate Abandonment (26%), Risky Growth (31%), Tipping Point (27%), Economic Decline (11%), and Climate Resilient (5%).

  • Economic strength may not offset severe climate impacts, creating "tipping points" in some growing areas.

  • By 2055, 84% of neighborhoods may see negative property value impacts from climate risk, totaling $1.47 trillion in losses.

Property Prices in Peril | The 12th National Risk Assessment Property Prices in Peril — First Street | February 03, 2025

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For a number of reasons, homes in the US are generally underinsured.

A 2023 working paper published by the Federal Reserve Bank of Philadelphia found reason for homeowners to be concerned about the adequacy of insurance payouts. Looking at policy and claims data from California wildfires between 2013 and 2020 that burned at least 1,000 acres and one structure, the researchers found almost 40% of post-fire claims are underpaid. Homeowners in particular on average only receive about 72% of what they’re legally due, according to the paper, likely because they aren’t willing or able to undertake a long negotiation.

“A back-of-the-envelope calculation suggests that households receive about $200,000 to $300,000 less than their entitled amount under California law,” the authors wrote.

Survivors of recent wildfires recounted painstaking attempts to claw back enough cash to rebuild what they lost. They had to contend with unsympathetic customer service agents, demands from insurers for documentation long turned to ashes and discoveries that their policies don’t cover anywhere near the amount needed to replace their home and personal belongings. Many regretted not digitizing their insurance paperwork in advance…

LA Fires Revive Trauma for Homeowners Battling Insurance Claims — Olivia Raimonde and Alexandre Rajbhandari | Bloomberg | January 22, 2025

California Wildfires, Property Damage, and Mortgage Repayment

— Siddhartha Biswas, Mallick Hossain & David Zink | Federal Reserve Bank Philadelphia | 11/2023 

• US home sales ticked up to round out 2024.

Sales of new US homes ended 2024 on a high note as customers took advantage of incentives from builders, leading to a second straight year of increased purchases.

The annual pace of new single-family home sales accelerated 3.6% to 698,000 last month, reflecting a sharp advance in the US West, government figures released Monday show. The median estimate in a Bloomberg survey of economists predicted 675,000 annualized sales. For the full year, customers purchased 683,000 homes, up about 2.5% from 2023’s total.

US New-Home Sales Beat Estimate, Rising for Second Straight Year — Michael Sasso | Bloomberg | January 27, 2025

Will the government adjust capital gains deductions for primary residence sales?

If you’re selling your home in 2025, you might wonder why the capital gains tax exclusion for your primary residence—$250,000 if you’re single, $500,000 for couples—remains unchanged from 1997, the year it was implemented. 

Yes, this obscure but critical number has not changed since Bill Clinton lived in the White House and the world was mourning the death of Diana, Princess of Wales. And as the value of more and more home sales exceed the capital gains tax exclusion, according to a recent analysis by CoreLogic, a growing group of homeowners who want to sell are mulling whether they really want to pay a tax that was originally targeted at the wealthy…

Why is the capital gains tax making the U.S. housing crisis worse? — Glen Luke Flanagan | Fortune | January 27, 2025

Built Environment

• Boca Raton, Florida: Dangerous precedent?  Multifamily in a traditionally single-family home neighborhood...

In perhaps an unexpected opposition, some Boca Raton neighbors say they’d much prefer nearby land in their community to stay as an area reserved for business instead of allowing new homes to be built there.

Residents of the Palm Beach Farms neighborhood in east Boca Raton say they would favor, for example, having businesses like a nail salon. They’d want that instead of the land being rezoned to allow a new two-story condo project that would feature four two-story townhome-style residences.

There’s been much public resistance over that proposal, with many residents calling for it to be halted.

“We would love a nail salon. We would love a new 7-Eleven. … We would love many other uses there that are currently allowed. We’re not opposed to it changing,” said Tamara McKee, a resident in the neighborhood, during a city meeting about the project on Jan. 16. “What we’re opposed to is breaking and making a zoning carveout in our little neighborhood. … We really, really don’t want it.”

Their chief concern about the project, called Ibis Row, which could rise at 1700 Juana Road, is introducing multifamily homes into a single-family home neighborhood.

“This is a dangerous precedent for the residents, our neighborhoods,” said Geoffrey Zann, a resident in the neighborhood, during the meeting. “Single-family home neighborhoods have a desired aesthetic and character that people have spent maybe most of their money to purchase a home in these neighborhoods. You have a quiet residential area. Higher density is going to impact that.”...

Boca Raton condo proposal draws fire from neighbors who say it’s too much, too close — Abigail Hasebroock | South Florida Sun Sentinel | January 27, 2025

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New York, New York: The Waldorf Astoria’s hotel > hotel + condominium conversion is nearly over and prices start at over $4,000/sqft.  Fancy a new pied-à-terre?

Nearly a decade after it shut for an extensive renovation, people will once again be sleeping at the Waldorf Astoria. While the grand Art Deco hotel remains very much under renovation, condo closings have started, according to Douglas Elliman, which is handling sales. “We have contracts signed on studio residences to our larger, expansive residences, with nearly an equal split of buyers locally from New York City, the domestic United States, and internationally,” Loretta Shanahan, senior director of sales at Waldorf Astoria Residences New York, wrote in a statement. The three closings so far range from a $1.8 million studio to a $3 million one-bedroom with two going for slightly under the asking and one for slightly over. Many other units are in contract and will likely start closing soon…

It’s been a lengthy, extraordinarily expensive renovation — the developer has confirmed that it’s in the billions but won’t specify further — with leadership changes, COVID delays, and the complications of updating and converting an enormous, landmarked property dragging out the process. The storied midtown hotel, purchased from Hilton Worldwide Holdings by China’s Anbang Insurance Group for $1.95 billion in 2015, closed down two years later for a condo conversion and massive overhaul. The tower was to e made over into 375 condos with 375 hotel rooms below, and the landmarked public spaces — Peacock Alley, the ballroom, the lobby, the entrances off Park and Lexington — meticulously renovated by Skidmore, Owings & Merrill…

...the closings, if nothing else, prove that the project is sufficiently complete for buyers to move into their units, even if there’s still scaffolding and plenty of hard-hat zones. Condos currently on the market range from a $1.87 million studio to an $18.75 million four-bedroom with interiors by Jean-Louis Deniot. They aren’t as extravagant as some of the recent hotel condos that have hit the market — prices are in the mid-$4,000s per square foot, a fair amount less than the top-of-the-line condos at, say, the Aman, which traded in the high $6,000s — but have solid luxury features like herringbone floors, Gagganeau appliances, marble baths, and “concierge closets” by the front door — i.e., little cabinets that can be opened from the outside and inside, so that items need not be left indecorously on the doormat...

Residents Can Finally Begin Moving Into the Waldorf Astoria — Kim Velsey | Curbed | February 05, 2025

💡“The things that worked the best in a period of declining and ultra-low rates will not necessarily be the things that work best in a period of stable and generally higher rates, and people have to accept that.” — Howard Marks | Oaktree Capital Group

“If you can get low single-digit returns from the S&P 500 with great uncertainty and 7.3% from high-yield bonds contractually, isn’t it better?,” he said. “Everybody should look at their holdings and try to make sure that the things they own, they own based on strong and improving fundamentals.”

Oaktree’s Howard Marks Says Don’t Expect Low Interest Rate Era to Return — Denitsa Tsekova and Alexandra Semenova | Bloomberg | January 28, 2025

• The 2025 legislative session has generated well over 100 bills to date that relate to common interest communities!  You’ll find many linked bills in the tracker above.

• Have some legislation for us to share?  Please let us know!