Kentucky REALTOR® News
OPINION by Robertson "Rip" Phillips, 2019 President of Kentucky REALTORS®
As an association representing approximately 11,300 real estate professionals in Kentucky, we have heard loudly from our members for years that they not only cannot afford to insure themselves but in many cases, their families. REALTORS® are sole proprietors and working small business owners.
According to the US Department of Labor, 2.07 million people are employed in Kentucky. Seven percent of the total employed workforce in the U.S. are independent contractors. For Kentucky that is approximately 145,000 – (roughly the populations of Bowling Green, Owensboro, and Hopkinsville combined) who do not have access to the often more affordable health care insurance option available to those employed by larger companies through a vehicle known as Association Health Plans (AHPs). Who are Kentucky’s independent contractors? In real estate professions, these individuals are auctioneers, appraisers, plumbers, home inspectors, and REALTORS®, to name a few. Studies indicate that a decreasing number of these individuals are covered by private health insurance. As a second-career REALTOR®, a huge obstacle for me when entering this industry was the lack of health care coverage provided by an employer. In my case, individual insurance was a tremendous financial burden and I was thankful to be able to attain coverage under my wife’s employer’s plan in order to make the commitment to a new career as an independent contractor. Unfortunately, not all aspiring REALTORS® or independent business owners are as fortunate.
At the Federal level, Congress passed legislation in 2018 to expand the current laws around AHPs that would give independent contractors (working owners and sole proprietors) the ability to participate in AHPs, just as their small business counterparts have enjoyed for years. Early this year, and with much appreciation, we acknowledged the wisdom of the Kentucky General Assembly to conform Kentucky’s insurance laws with the federal rules making Kentucky one of the first states to be able to create these plans for this category of businesspeople. Kentucky’s lawmakers were strong in their views on this as the senate was unanimously in favor and 81 of the 100 members of the House in Kentucky’s General Assembly voted to pass this legislation which was recently signed into law by Governor Bevin.
Unfortunately, a lawsuit filed by 12 state attorneys general is challenging the rule. In March a federal judge in Washington, D.C., struck down a U.S. Department of Labor rule which would have opened Association Health Plan options to Realtors® and other U.S. small business owners, and that has stopped the forward motion of these new rules in their tracks.
Those opposed to the new rule changes believe the new laws for AHPs would sabotage the Affordable Care Act (ACA) and that if the new rules are upheld at the federal level, the new health plans could discriminate against people with pre-existing conditions through expensive riders and increased premiums. This is simply inaccurate, as AHPs are specifically forbidden to deny coverage to individuals based on health factors. The cost of small group market plans typically has been 8 to 18 percent higher than they are for large employer plans depending on the insurance market. Seventy percent of the National Association of REALTORS® members surveyed also indicated that they did not qualify for a premium tax credit under the Affordable Care Act. The ACA requires the “employer” to have two or more employees. A working owner without employees is considered both an employer and an employee under the federal Employment Retirement Income Security Act (ERISA), but not under the ACA.
Being part of an AHP provides the individuals who choose to be their own bosses - and their families - with the opportunity to purchase health care at a more affordable cost since AHPs and the subsequent rules would allow state-based plans to provide health coverage to working owners with no employees. We applaud Kentucky’s General Assembly for attempting to move Kentucky forward in addressing the health care dilemma faced by so many Kentuckians and we are hopeful that the outcome of the federal lawsuit will be to uphold the rules Congress established to allow these plans to be created in all the states. In our opinion, this is not a partisan issue, but one of free-market competition that will always benefit the informed consumer. I am optimistic that hard-working Kentuckians will be offered freedom and flexibility through another option to satisfy their health insurance needs and give them the ability to choose a plan that best suits their needs.
Recently, the Kentucky Real Estate Commission unveiled proposed changes to certain administrative regulations relating to advertising and signage that have been unchanged for many years. Among the changes were “clarifications” and new definitions for a variety of terms.
On July 10, Kentucky REALTORS® Government Affairs Committee discussed the definitions and advertising requirements found in 201 KAR 11:011, 201 KAR 11:105, and 201 KAR 11:461. The committee made four recommendations for changes to the newly proposed regulations.
Kentucky REALTORS®’ President Rip Phillips delivered these comments at the public hearing held on July 23 in Frankfort. The comment period for these proposed regulations ended July 31. The recommendations provided by KYR are:
- Definition of “Single Agency” – KYR recommends that the Commission leave the definition of “Agency” as is and remove the definition of “Single Agency”. The KYR Government Affairs Committee feels the term “Single Agency” would be confusing and would, therefore, cause members to noncompliant with this part of the regulation.
- Definition of “Family Relationship” - KYR recommends to the Commission the removal of the phrase “regardless of distance of relationship” in the definition of “Family Relationship” due to this potentially becoming an issue in small communities and areas of Kentucky. The Kentucky REALTORS would like to propose the new definition of “Family Relationship” read as follows: “any known familial relationship between a licensee and party”.
- Regulation Related to Advertising - KYR recommends that the addition of the phrase “or written” to Section 3(4). The new Section 3(4) would now read as follows: Advertisements that include an audiovisual presentation shall include an audible or written announcement of the content required by Section 2(2) of this administrative regulation at the beginning of the advertisement. KYR’s Government Affairs Committee feels this is needed due to the fact that audiovisual presentations are often short in nature. If the person making the audiovisual presentation were required to say everything in Section2(2) instead of displaying it on the screen, the video would last much longer. For this reason, the KYR Government Affairs Committee would like to see the words “or written” added to Section 3(4).
- Regulation Related to Advertising - In Section 8 of the newly proposed advertising regulation, the language states that “the Commission shall begin enforcement of Section 3 sixty (60) days after the effective date of this administrative regulation.” KYR recommends a six (6) month effective date. Our proposal would read as follows: “Section 8. Effective Dates. The Commission shall begin enforcement of Section 3 six (6) months after the effective date of this administrative regulation”. Our members felt sixty (60) days was not an adequate amount of time to become compliant the newly proposed Advertising regulation.
Newly filed administrative regulations changes under 201 KAR 11.220, 11.210, 11.190, 11.170, and 11.002 that address mandatory E & O insurance, licensing & renewal for brokers and agents, procedures for filing complaints and requirements for education providers will be reviewed by the KYR Government Affairs Committee to determine if any comments and/or recommendations for changes to them are needed. If so, KYR will recommend those changes at a hearing now scheduled for August 21st at 10am in Frankfort. Anyone interested in attending and being involved is encouraged to attend. Of course, KYR will update its membership on any progress made during this important process.
KYR believes that the continued growth of the relationship between the Kentucky Real Estate Commission and Kentucky REALTORS® serves to strengthen an industry vital to the Kentucky economy. We appreciate the Commission members’ willingness to serve their profession and the citizens of Kentucky.
NOTE: Anyone interested in reviewing the proposed regulations or learning more about the hearings and public comment period may visit the KREC website at krec.ky.gov.
For only the second time in the last ten years, June home sales did not top those of the previous month. June home sales have historically been three percent higher than that of May’s (of the same year). June saw a five percent drop in that figure as closings fell to 5,097 sold, down from 5,347 in May 2019. June’s figure was down year-over-year from last June by 2.4%. Strong spring sales this year still have the year-to-date closings at a record pace, though slowing, at 25,402 homes sold. This is up almost one percent from this time last year (25,179).
Nationwide, existing-home sales as a whole are down 2.2% from a year ago (5.39 million in June 2018). “Home sales are running at a pace similar to 2015 levels – even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country,” said Lawrence Yun, NAR’s chief economist. Yun says the nation is in the midst of a housing shortage and much more inventory is needed. “Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices,” he said.
Yun said other factors could be contributing to the low number of sales. “Either a strong pent-up demand will show in the upcoming months, or there is a lack of confidence that is keeping buyers from this major expenditure. It’s too soon to know how much of a pullback is related to the reduction in the homeowner tax incentive.”
June’s days-on-market figure is down over five percent to 102 days. This is nearing the all-time low of 95 set last July. The year-to-date DOM figure is slightly higher at 111 days, down almost four percent from 2018’s mark of 115 days.
Rip Phillips, President of Kentucky REALTORS®, says that Kentucky’s sales slowdown is mirroring the nationwide sales dip. “We knew this correction was coming this year, we just didn’t know exactly when”, he said. “What remains to be seen is when home prices will level-off this summer. REALTORS® know well that higher prices mean that some consumers who want to buy a home will just have to wait longer.”
The median home price surpassed $140k for the first time just 2 years ago (July 2017). As expected, June 2019 sets the new all-time high mark at $146,745. This is up 1.7% over June of last year.
If no more homes were placed on the market in Kentucky, it would take 3.1 months to sell everything in inventory at present. That figure is at the lowest point since it began being tracked by Kentucky REALTORS® in 2013. Economists say that a healthy housing market has about a 6-month inventory level. In the Commonwealth, supply just can’t keep up with the increasing demand. The unfortunate side-effect of this is rising prices.
President Trump signed an executive order this week establishing a White House Council on Eliminating Barriers to Affordable Housing Development. The council will consist of members from across 8 Federal agencies and will be chaired by Secretary of Housing and Urban Development (HUD) Ben Carson. It is reported that this new council will engage with State, local, and tribal leaders to identify and remove obstacles that impede the development of new affordable housing. It will also look at the effect Federal, State, and local regulations are having on the costs of developing affordable housing and the economy.
The National Association of Realtors (NAR) welcomed the news of the announcement and applauded the actions of the Administration. In a release from NAR, 2019 President John Smaby said, “Today, despite historic economic growth and recovery, misguided regulations and gaps in new home constructions have stopped far too many Americans from purchasing a home. The National Association of Realtors® thanks President Trump for taking much-needed steps to address housing affordability in this country, and we look forward to continuing to work closely with the White House to ensure the American Dream remains attainable for all those who seek to become homeowners.”
In Kentucky, May closings surged 5.6% to 5,346 homes, up from 5,064 in 2018, marking the second-highest May on record. Year-to-date closings are also just off the pace of the 2017 record high year. So far in 2019, 20,295 homes have sold, up from 20,046 at this time last year.
Lawrence Yun, NAR chief economist, said lower-than-usual mortgage rates have led to a nationwide increase in pending home sales for May. “Rates of 4% and, in some cases even lower, create extremely attractive conditions for consumers. Buyers, for good reason, are anxious to purchase and lock in at these rates.” Yun said consumer confidence about home buying has risen, and he expects even more activity in the coming months. “The Federal Reserve may cut interest rates one more time this year, but there is no guarantee mortgage rates will fall from these already historically low points,” he said. “Job creation and a rise in inventory will nonetheless drive more buyers to enter the market.”
May’s days-on-market figure rose ten percent to 110 days, up from 100 days in May of last year. The year-to-date number is slightly higher at 113 days, which is a three percent drop over this time last year.
Rip Phillips, 2019 President of Kentucky REALTORS®, says that the rising demand is actually having an effect on the real estate industry. “Increasing numbers of individuals are seeking to get licensed in Kentucky”, he said. “Economists look at job creation as the mark of a strong economy. Conversely, when the economy strengthens the housing market, it leads to job creation in those related positions. That’s good news for the industry responsible for 15% of Kentucky’s gross state product.”
The ever-increasing demand for homes is still driving prices upward. The median home price rose almost five percent to $140,813, up from $133,923 in May of 2018. This is second only to June of last year when the median closing price reached $144,581).
Kentucky REALTORS® (KYR) President Rip Phillips announces that KYR has joined the National Association of Realtors® amicus brief in defense of the Department of Labor’s (DOL) Association Health Plan rule. Amicus briefs are legal documents filed in appellate court cases by non-litigants that have a strong interest in the subject matter in question. Earlier this year, a federal court ruled that provisions of the DOL’s rule were unlawful, a ruling adversely impacting Realtors® seeking more cost-effective and comprehensive health insurance solutions through AHP options.
“Passage of the Patient Protection and Affordable Care Act resulted in significant regulatory changes to the individual insurance market, some of which have benefited Realtors®,” the brief reads. “However, ACA changes have also resulted in significant increases in health care costs, leaving many individuals to forgo coverage, which jeopardizes the health, safety and financial stability of their families and others.”
Kentucky REALTORS®, along with a number of other state and local associations, has agreed to join NAR in protecting AHPs, which has been the subject of litigation since shortly after the rule was finalized in June of last year. Others participating in the amicus brief include five state and local associations that are currently offering AHPs to members, including the Baldwin County Association of Realtors® in Alabama, the Greater Las Vegas Association of Realtors®, the Kansas City Regional Association of Realtors®, the Nevada Realtors®, and the Tennessee Realtors®.
To date, over 3,000 Realtors® and their families have found cost-effective health insurance solutions through these five association health plans. Many more Realtor® associations are also exploring AHP options but have been delayed due to the uncertainty surrounding this litigation. “The independent contractors of Kentucky deserve the option of Association Health Plans,” said Kentucky REALTORS® President, Rip Phillips. “The lack of insurance coverage options should not be a barrier to entering the real estate industry. While the recent court action has postponed our efforts to create another health insurance option for our members, we are grateful to the Kentucky legislators who helped to pass HB396 during the 2019 General Session to conform state insurance laws to the federal ones which we hope will allow us to move ahead”, he said.
“Supporting the Department of Labor’s rulemaking will continue to help safeguard our members’ ability to join an association health plan. Ensuring the freedom to choose quality coverage is key to cultivating a deep participant pool and strong marketplace, and Kentucky REALTORS® will continue to support the DOL’s efforts to expand these options in Kentucky and across the nation.”
NAR’s amicus brief discusses DOL’s lawful authority to expand access to AHPs by interpreting the working owner provisions to promote flexibility while not conflicting with existing statutes. NAR also describes the comprehensiveness of AHP coverage and the many successful plans already in place that is resulting in significant savings and benefits to many working owners. If the courts final ruling is adverse and pending any appeals, independent contractors may lose the ability to access insurance coverage through an AHP, sacrificing valuable savings on premiums, and broader network access with more comprehensive benefits.
“While NAR continues to explore and tackle barriers to a national AHP insurance option, we are learning from the many successes being implemented by state and local Realtor® associations,” NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota, said. “These initial programs are helping us ensure our members and their families can secure these effective, affordable health insurance options moving forward. We must continue to protect the AHP options that so many Realtors® have come to rely on for coverage and so many more deserve access to.”
NAR is a founding member of the Coalition to Promote and Protect Association Health Plans, which also submitted an amicus brief in this case. NAR recently created an updated map showing the state-by-state regulatory environment as it applies to working owners, which also links to a detailed chart outlining specific actions by individual states.
The number of homes available for sale continues to slide in Kentucky. That figure sits at a near-record low of 3.5 months, which is the time it would take to sell off all listed homes if no others were added to the market. This fact hasn’t seemed to slow down sales just yet, however. April 2019 saw 4,581 homes sold which is up half a percent over April 2018’s figure of 4,552. Year-to-date, homes sold stands at 14,903 across Kentucky, a slight dip of half a percent.
Nationwide, pending home sales declined in April, a modest change from the growth seen a month before, according to the National Association of Realtors®. Only one of the four major regions – the Midwest – experienced growth, while the remaining three regions reported a drop in their respective contract activity. The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 1.5% to 104.3 in April, down from 105.9 in March. Year-over-year contract signings declined 2.0%, making this the 16th straight month of annual decreases.
Lawrence Yun, NAR chief economist, said the sales dip has yet to account for some of the more favorable trends toward homeownership, such as lower mortgage rates. "Though the latest monthly figure shows a mild decline in contract signings, mortgage applications, and consumer confidence have been steadily rising,” he said. “It’s inevitable for sales to turn higher in a few months."
April’s days-on-market figure fell nearly ten percent to 104 days, down from 115 days in April of last year. The year-to-date number is slightly higher at 113 days, which is a six percent drop over this time last year.
Rip Phillips, President of Kentucky REALTORS®, said that dwindling inventory continues to be the trend. “Kentucky needs to experience an increase in new construction.”, he said. “What can fuel this? We need the Commonwealth to continue putting in pro-business policies that help increase wages. We also need more affordable housing with programs such as first-time homebuyer tax credits being used in other states to meet the demand”.
While the median home price rose only a fraction in April to $136,053, it still bests last April ($136,019) to reach the all-time high for this month. This marks the fourth straight month of year-over-year gains in home prices for the Commonwealth.
As an advocate for businesses of all sizes for approximately three decades now, there has been one issue that has remained consistent for me to hear about from business owners across the board. It has been their concerns and difficulties in finding affordable health insurance coverage for themselves and their employees.
Over the decades, health care reform attempts have been plentiful, with solutions being sought at many levels. States and the federal government have made attempts to address a multitude of components and cost-drivers each have identified in their health care systems. Former Administrations and Congress have made efforts to fix our ailing system, but most of these have only added to the cost of health care in America. Health care, unfortunately, due to a complexity of factors, does not react or behave like other traditional markets or types of businesses.
REALTORS® are real estate professionals who are members of the local, state and National Association of REALTORS® (NAR). In Kentucky, more than 11,300 Realtors are members of the state association and involved in all aspects of real estate. Each is part of the 1.3 million members of NAR which is America’s largest trade association. The overwhelming majority of these individuals are not employees of realty offices, but independent contractors who operate autonomously from their affiliated real estate companies. Thus, for most of them, their business expenses and health insurance coverages are paid for out of their own pockets and not by their employers.
A longstanding method of gaining lower cost health insurance has been to leverage group buying power. The opportunity to spread insurance risk across a large pool of insureds through multi-employer plans offered through business or trade associations has worked to achieve reduced rates for many businesses who employ people for decades. Left out until only recently when new federal laws were adopted, however, were independent contractors. Just two years ago, these businesspeople have been given the ability through federal legislation to participate in association health plans (AHPs). Both federal and state governments jointly regulate AHPs, so before this could happen, each state had to conform its insurance laws to the federal law. During the 2019 General Assembly, we were in full support of actions taken by Kentucky’s Legislature to make this happen.
Multiple states across the country have successfully begun AHPs for their members through sponsoring associations. Despite all the progress, 12 states (including Kentucky) and the District of Columbia filed suit to stop the final rules of the Department of Labor on AHPs. A recent ruling of the U.S. District Court for the District of Columbia struck down provisions of the Department of Labor’s final rule clarifying the definition of “employer” (under ERISA for the purposes of establishing an AHP). The states argued the DOL exceeded its authority in issuing the rule, which would circumvent protections put in place by the Affordable Care Act. This action has had a chilling effect on insurers who have been working in states who have not yet had the chance to offer AHPs to independent contractors. As our association has worked with major insurers to evaluate the viability of implementing an AHP, these providers have put us on hold as a result of uncertainty regarding the court ruling and appeal process.
The National Association of REALTORS® supports the appeal of this ruling and has encouraged the Department of Justice to protect the AHP rule that would provide working owners of all types of businesses with new cost-effective health insurance plans.
While we wait for a decision on the court ruling, federal lawmakers are working another angle to solve the problem. In April, Senators Enzi (R-WY), Alexander (R-TN), and others introduced the “Association Health Plans Act of 2019.” The bill would codify the DOL rule, to protect the expansion of association health plans to small businesses and the self-employed.
The Kentucky REALTORS® and a host of other organizations who represent independent business people remain optimistic that these efforts will result in an outcome that would allow these hard-working Americans the freedom and flexibility to have another option for their health insurance and be able to choose a plan that best suits their needs.
Kentucky REALTORS® (KYR) announces that Jenny Dixon has been hired as the Education and Real Estate Industry Coordinator. Her first day with KYR will be May 6th. She brings with her a strong background in customer service and event coordination.
Jenny comes to KYR from Dean Dorton in Lexington, KY where she worked most recently as a Human Resources Specialist. In this role, she conducted reference checks and benefits orientations for new hires, maintained personnel records, and coordinated meetings. She also maintained the department’s budget and ran weekly productivity reports.
Jenny also previously worked as special events coordinator for Alltech in Nicholasville, KY, and as assistant Registrar for Sullivan University in Lexington. She received her Bachelor of Science in Business Administration and Marketing as well as a master’s degree in Human Resource Management.
“We are delighted to welcome Jenny to our team”, said Steve Stevens, Kentucky REALTORS® C.E.O. “She brings many talents and new energy that will benefit our organization greatly as we continue to expand our work to more areas of the real estate profession, as well as our continuing strong support of Realtor members.”
Jenny’s role at KYR will be to report to the Director of Education on Kentucky Realtor Institute-focused duties and to assist with allied industry collaborative projects and as coordinator for a new commercial real estate program.
Dropping inventory continues to be the main concern as the Kentucky housing market continues to hum along at a near-record pace. The first quarter of 2019 closed with 10,322 homes sold, down just one percent over the same period last year. Kentucky home sales in March were down less than a half-percent over March 2018 at 4,252.
Existing-home sales retreated in March, following February’s surge of sales, according to the National Association of Realtors®. Each of the four major U.S. regions saw a drop-off in sales, with the Midwest enduring the largest decline last month. Lawrence Yun, NAR’s chief economist, anticipated waning in the numbers for March. “It is not surprising to see a retreat after a powerful surge in sales in the prior month. Still, current sales activity is underperforming in relation to the strength in the jobs market. The impact of lower mortgage rates has not yet been fully realized.”
Both 2019 year-to-date and March housing inventory numbers fell about 3%. This inventory shortage continues to drive up the median sale price of residential units in Kentucky. March’s inventory currently stands at 3.65 months. Rising sale prices should eventually moderate the number of units sold and slowly boost inventory, but we are not seeing this happen yet.
March’s days on market number stands at 118 days, which is down slightly from 120 days in March of last year. The year-to-date number is slightly lower at 116 days, which is the lowest point in well over a decade.
Rip Phillips, President of Kentucky REALTORS®, said that despite early talk of a possible housing downturn in 2019, Kentucky is seeing no signs of flagging numbers. “GDP is up 3.2% as the U.S. economy grew at a faster pace than expected in the first quarter and posted its best growth to start a year in four years”, he said. “The numbers we are seeing statewide right now are indicating that we might see another near-record year like we did in 2018.”
The median home price rose only slightly in March to $132,913. This is up less than a half-percent over March 2018 which saw a median price of $132,367. That figure was the all-time high for March. Nationwide, the median existing-home price for all housing types in March was $259,400, up 3.8% from March 2018 ($249,800). March’s price increase marks the 85th straight month of year-over-year gains.
The Kentucky Real Estate Commission (KREC) announces a new online licensing process for all applicants for a real estate license. Applicants will now be able to apply and pay for their professional license through the KREC website https://krec.ky.gov/Pages/default.aspx.
“Our priority for the Public Protection Cabinet (PPC), which includes the Real Estate Commission, is to provide exceptional service to everyone who contacts our agencies,” said Secretary K. Gail Russell. “Our goal at KREC is to provide the most efficient business processes, including applications, which will benefit all customers.”
In addition, Secretary Russell states online licensing reduces staff time in processing applications and decreases turn-around time between application and issuance of a license.
Harold E. Corder, executive director of the Kentucky Real Estate Authority (KREA), reminds real estate license applicants that a national criminal background check is required by state law before taking the licensure examination.
“Our agency accepts national criminal background checks from two agencies, the Kentucky State Police (KSP) and the Federal Bureau of Investigation (FBI),” said Corder. “The price of a KSP report is $33.25 and has a one-to-two week turn-around time, depending on the time of the year. The price of an FBI report is $18 with an estimated one-week turn-around. KSP sends the report directly to the Commission and the FBI sends the report to the individual.” Both formats are accepted with online applications.
Besides applying for a license online, current licensees may utilize the online services portal to renew their license, update personal contact information, place a license into inactive status, verify a license, and view continuing education history and requirements. Principal brokers can also complete those functions, plus view and print licenses, accept or release a licensee, and view contact information.