Baldwin County Association of Realtors in Alabama will offer group health, dental and vision insurance to its 2,300 members. Other Realtor groups expected to follow suit nationwide
Earlier this month, the National Association of Realtors announced there was no national solution to affordable health care coverage for the trade group's nearly 1.4 million members. But that hasn't stopped a local Realtor association in Southern Alabama from coming up with its own solution. The Baldwin County Association of Realtors says it's the first in the nation to offer group health, dental and vision insurance to its 2,300 members. From Nov. 15 through Dec. 28, Baldwin Realtors will be able to sign up for coverage starting Feb, 1, 2019 through Blue Cross and Blue Shield of Alabama.
"Being able to offer health, dental, and vision insurance to our membership is one of the most defining accomplishments of my career," said Sheila Dodson, the association's CEO, in a statement. "Knowing that independent contractors are not able to provide for their families or themselves in this vital way has always been a difficult problem for the Realtor industry. It is great to partner with Blue Cross and Blue Shield to offer premium coverage for our members, affiliates, and their staffs."
Health insurance is a top concern for many in the real estate industry. Approximately 86 percent of Realtors in the United States are independent contractors, according to NAR, meaning that, in a land where employer-based health insurance reigns, most agents are left to fend for themselves finding health care in the open market.
According to NAR's 2018 Member Profile, 21 percent of Realtors are uninsured, 45 percent of Realtors pay for health insurance out of pocket and 30 percent are covered by a spouse or partner. Only 4 percent (salaried agents) receive health coverage through their firm.
According to Troy Wilson, 2018 president of the Baldwin County association, members had long been asking for group health insurance plans, but "until recently it was never even an option."
That changed in June, when the U.S. Department of Labor announced health care reform to modify the legal definition of "employer" to include "working owners" — i.e., self-employed individuals with no employees — and to allow small businesses and independent contractors, such as real estate agents and Realtors, to band together based on location or industry to strengthen their buying power into association health plans.
"The size of the pool was key to getting the great benefit, which needed to be 2,000 or more," Wilson said in a phone interview. The Baldwin County association did not consider teaming up with another trade association, local Realtor association, the state Realtor association or NAR on this due to the logistics that would be involved, according to Wilson.
It was a "high priority" for the Baldwin association to be able to offer an AHP to its members for the beginning of the year and if the association tried to grow its pool, "we knew it would take longer," he said. "It's no different than a consideration of a new software system. It's not like anything like this exists anywhere out there. Someone needed to organize it," Wilson said.
"We would be open to other options like this in the future," he added. "Our assumption is that others are probably working on it too."
Asked whether Baldwin Realtors' was indeed the first Realtor association to offer group health insurance and whether there were any updates to a possible national solution, NAR spokesperson Jane Dollinger said in an emailed statement:
"NAR has long been advocating for health insurance solutions for real estate professionals, including association health plans. Legal uncertainty brought on by the pending lawsuit filed by a dozen attorneys general across the country, combined with varying state regulatory requirements currently makes it difficult to find and develop a national insurance option because of how such plans may be implemented and treated in each state," she said.
"However, this means there has been broader success by state and local associations, such as through small group market options, association health plans or other insurance solutions. More success at the state and local levels will set the example for others to follow and lay the foundation for a potential national solution down the road."
Under the reform, association health plans are to be governed by the same rules as private employer policies, not Affordable Care Act (a.k.a. Obamacare) rules, which means potentially cheaper coverage than what's available in the ACA marketplace, but also potentially weaker protections. This is why a dozen state attorneys general have sued the Trump administration in an effort to block the reform. They are afraid the cheaper, leaner plans will siphon off younger, healthier consumers from the ACA markets and that the new rule will lead to a spike in insurance fraud and insolvencies, according to Modern Healthcare.
The plans available to Baldwin Realtors, however, are ACA-compliant and cover the essential health benefits under the ACA, including prescription drugs, maternity care, and mental health and drug treatment. Members will also not be barred or charged more for pre-existing conditions, Wilson said. "It is compliant. It covers everything. It offers the same coverage as if someone were to do open enrollment through Blue Cross [and] Blue Shield. All we're doing is facilitating the group," Wilson said.
The association's health plans are potentially better for some members than individual or small group plans available through ACA exchanges because they may be cheaper overall and age won't be a factor in cost, according to Wilson. "The only condition to be allowed in the group coverage is you have to be a member of the association in good standing. There's no health screening or anything like that. Everyone is charged the exact same," regardless of age, gender, location, or job title, Wilson said. Affiliate members of the association — i.e. members who are not real estate licensees, such as mortgage brokers — are also eligible to participate, Wilson added.
Tim Hudnall, district account representative at Blue Cross and Blue Shield of Alabama, confirmed that Baldwin's AHP was ACA compliant and that all essential benefits are covered. "That's all we sell," he said. Asked whether the Baldwin association had to go through the state to create the AHP, Wilson said no, but that the trade group did hire a third-party vendor — Lockard & Williams Insurance Services Inc. — to supply a secure portal for enrollment and handle billing. "That way the member is never compromised on any personal information and the association never has access to any information," Wilson said.
What are the costs?
The Baldwin association offers two health plans, one with a $3,000 deductible annually that starts at $437 per month for an individual and one with a $500 deductible annually that starts at $525 per month for an individual.
Each of the two plans offer four coverage options: individual, individual and spouse, individual and a dependent, or full family coverage. For family coverage the deductibles go up to $6,000 and $1,000 respectively. The deductible does not apply to office visits, annual wellness exams or prescriptions. Vision and dental coverage can be purchased separately. "If you're only covering one person, it's $525 for one person, if you and a spouse it's maybe $100 more and then if a full family it's probably like $1,100. But there's no differentiation between member to member," Wilson said.
The association is not subsidizing any of the plans and both are under Blue Cross and Blue Shield of Alabama. "The other real benefit in group coverage is with a larger group you tend to have a more sustained premium year over year. You typically don't get as much fluctuation in the premiums," Wilson said.
The association is not sure how many of its members are uninsured. Nonetheless, Wilson believes the AHP will offer "a large portion of the association" a better option than what they have now. "There are some people that have group coverage through a spouse or through another employer. For them those other options are going to be better," Wilson said.
"But for roughly 40 or 45 percent of the association, this would be a better plan for them. Most importantly, it's going to allow coverage for some people that never had an option before from an affordability standpoint."
He knows of one member who has said the AHP will save him nearly $12,000 a year with better coverage. In his own case, Wilson currently has a Blue Cross and Blue Shield family plan and said he will save $2,340 annually on the new AHP plan and his deductible will be lower. Providing group health insurance benefits is going to be life changing for many of our members and their families," Wilson said in a statement. "This type of benefit, when utilized, can deliver value daily that is impossible to fully quantify. I'm am very proud to be a part of the leadership team who assisted in this monumental initiative."
Blue Cross and Blue Shield's Hudnall said there was "no way" to compare the Baldwin association's AHP costs to the cost of purchasing insurance through an ACA exchange because on the exchange, costs are based on an individual's age, while in the AHP, the cost is based on the average age of the members as a whole. Wilson said the AHP is written for an average age of 57 based on a census of the association, but he's not sure if that reflects the actual average age of the membership. (The median age of Realtors overall is 54, according to NAR's 2018 Member Profile.)
For younger people, costs would probably be lower on the ACA exchange, Hudnall said, while for older people he expected the AHP to be "pretty competitive." After seeing some of the insurance renewal letters the Baldwin association shared, Hudnall said, "This seems like it's going to save some of the folks over there a lot of money."
Anticipating 'a lot of activity'
Other Realtor associations are likely to follow Baldwin's lead. Hudnall said Blue Cross and Blue Shield of Alabama has been offering quotes to other Realtor associations and other trade associations in the state, but he's not sure if any others have signed up. "This is really new. I know it's something that's going to have a lot of activity. I imagine there will be more pretty soon," he said.
Because associations don't have information on prior insurance claims to submit, then demographics — including age — are a portion of the consideration for the premium, according to Hudnall. Groups with more older folks, such as Realtor associations, would typically be charged more than a trade association with younger members. "Older people tend to spend a little bit more in medical care," he said. The company aims to sign up close to 500 members in an AHP. "The more people in the plan the better stabilized it will be going forward," Hudnall said.
Inman News, November 21, 2018
Home prices are out of reach relative to incomes and mortgage rates. The big question for the economy is how the imbalance adjusts.
These should be happy times for the housing sector. The economy is booming, with more people working at higher pay, and with the sizable millennial generation reaching prime home buying age. Instead, the housing market has gone soft, acting as a drag on the overall economy rather than as a force propelling it forward.
Sales of new single-family homes were down 22 percent in September from their recent high in November 2017, and existing home sales in September were down 10 percent. This tepid residential investment subtracted from G.D.P. growth in each of the first three quarters of 2018.
Home prices have not declined nationally, at least according to the most widely followed indexes. But their rate of increase has declined, and more and more home sellers are finding they must reduce asking prices to find a buyer. Given how central housing is to the broader economy — it is the biggest driver of both wealth and indebtedness for most families, and its fluctuations have frequently been major factors in past booms and busts — this slump isn't something to be taken lightly for anyone hoping the good times will last.
So what's going on?
When you look closely at the data, it appears this paradox of a strong economy and a weak housing market is, at its core, an illustration of a fundamental rule in economics: If something can't go on forever, it won't. Home prices in a given location are ultimately tethered to the incomes of the people who either live there or want to. But for much of the last six years, that relationship has come undone. Nationally, personal income per capita has risen 25 percent since the end of 2011, while the S&P/Case-Shiller national home price index is up 48 percent (neither figure is adjusted for inflation).
The gap is even larger in the big coastal cities with high wages and booming job markets, but where legal and other barriers make it hard for builders to add to the supply of homes. In the San Francisco metro area, per capita personal income rose 40 percent from 2011 to 2017, while home prices rose 96 percent. Similar patterns are evident in Los Angeles, Seattle, Boston, New York and Washington. In less high-flying markets, there was still a disconnect. In the Minneapolis area, for example, incomes rose 22 percent while home prices rose 46 percent.
Those rising home prices got help from years of very low mortgage rates, which put more expensive homes within reach for people at a given income level. Activity was also probably boosted by some bounce-back effect after the housing market crash of 2007-09, a result of pent-up demand for homes that were not bought while the market was collapsing.
Rates bottomed out in late 2012 at 3.31 percent for a 30-year fixed-rate mortgage. They have been moving upward in fits and starts since, including a full percentage point in the last year alone to nearly 5 percent — still low by historical standards, but high compared with the ultralow levels that had enabled these huge price gains.
There's no doubt that demographics are favorable for housing demand. The peak birth year for millennials was 1990; it's a group that is turning 28 this year and thus entering prime years for home buying. As it happens, 28 is exactly the median response in a Bankrate survey that asked adults for the ideal age to buy a home.
But that doesn't matter if prices are out of reach relative to incomes. Moreover, lending standards have remained more rigorous than they were during the last housing boom, so it has been harder for people to stretch to buy a home. The inability of people to buy homes they can't really afford is great news in terms of avoiding another crisis, but not so great for the near-term outlook for housing.
"Buyers can only stomach so many price increases until it gets unsustainable," said Daryl Fairweather, the chief economist at the online brokerage Redfin. "Prices reached a breaking point where buyers were fed up and started to consider other options," she said, including renting and moving away from the expensive coastal markets where prices are most out of whack with incomes.
As Economics 101 teaches, price movements are the way that supply and demand match up with each other. But in the housing sector especially, that adjustment can take a while. In contrast with the stock market, where relatively unemotional traders are buying and selling shares every day and the market stays liquid, home purchase and sales decisions can take months and are deeply emotional for the participants.
What seems to be happening is that sellers are trying to cling to the spring 2018 prices that their neighbors received, while there aren't enough buyers in late 2018 willing or able to pay those prices. In a Fannie Mae survey of home purchase sentiment, the proportion of people who think it is a good time to buy a home has decreased significantly since the spring, to a net 21 percent from 29 percent. But so has the proportion who think it is a good time to sell, which has dropped to 35 percent from 45 percent.
You would expect, in a zero-sum transaction like a home sale, for those numbers to move in opposite directions. Instead, it seems that sellers are unhappily realizing that they aren't going to get what they thought their house was worth six months ago, and buyers still think homes are too expensive. That helps explain why transaction volume, especially for new houses, has fallen substantially while prices haven't (at least yet). It's a standoff. And the outcome of the standoff will, in the aggregate, play a role in shaping the future of the economy.
There is precedent for this, and it isn't a happy one. In the last housing boom, new home sales peaked in July 2005, and home prices didn't start declining until May 2006. It didn't start to hurt the overall economy until December 2007, when the damage had spread through an overleveraged global financial system.
But that doesn't mean this episode has to end in tears. Home prices are not nearly as out of line with incomes as they were then; speculative activity hasn't been nearly as frothy; and consumer debt levels are considerably more measured. "I think income growth will help us get out of this period," said Robert Dietz, the chief economist at the National Association of Home Builders. "We're probably looking at a period where existing home sales volume is flat to declining, and it now looks like 2017 was the peak year for transaction volume."
A strong (nonhousing) economy makes it more likely that this housing slump will end without a steep 2008-style downturn. So does the basic reality that young adults are forming families and need a place to house them.
But in the meantime, it could be a soft few months or even years of standoffs between buyers and sellers, with the big question of which comes first: sellers who settle for less after recognizing that the price they thought they would get is beyond the reach of buyers, or incomes that catch up with a housing market that got a little ahead of itself.
When economist James Gaines gave a talk recently about the economy and the real estate market, his biggest audience response came from an unexpected topic. Gaines, chief economist at the Real Estate Center at Texas A&M University, told hundreds of local real estate agents what to expect in the years ahead regarding the state's population growth and demographic changes.
"Do you know what Texas looks like in 30 years?" Gaines asked the audience. "California," he offered as the whole ballroom of folks groaned and rolled their eyes. Nothing gets a bunch of Texans more riled up than to tell them they are turning into California.
"I have used that line a number of times and get the same reaction," Gaines said. "People are always asking where are we going and what will we look like. "I'm serious about it," he said. "The problems, the issues, politically, socially, economically, land use, housing resources — go down and tick off the issues. We are going down the same path."
Gaines said the rapid growth of jobs, population and wealth that California has seen over the past few decades is similar to what Texas is now experiencing. That means the state faces the same opportunities and increasing challenges. D-FW's population, now around 7.5 million, is expected to hit 10 million by 2030.
Texas is already creating more jobs than California. And last year, the two fastest-growing population centers in the U.S. were in Texas: the D-FW metro area and Houston.
Still, even with the folks leaving the state, California has 10 million more residents than Texas. And median home prices there are more than twice what they are in the Lone Star State. A house in Texas' most expensive metro area — Austin — that will cost you just over $300,000 will go for twice that in Los Angeles and more than $1.5 million in San Francisco. With soaring home and apartment prices on the West Coast and a shortage of affordable labor, no wonder everyone, from recent college grads to Amazon's top brass, is looking east for greener pastures. And Texas is at the top of their shopping list.
No place builds more new houses than Dallas-Fort Worth. As of the third quarter of this year, D-FW was the solid leader in U.S. homebuilding with almost 35,000 single-family annual home starts, according to a new report by housing market analysts at Metrostudy Inc. Houston was second nationally with 29,370 home starts in the 12-month period ending in September. D-FW and Houston have topped the country in home construction for several years. And the two Texas titan building markets show no sign of a slowdown. D-FW starts were up 8.7 percent and Houston starts were 6 percent higher than a year ago, Transwestern found.
While D-FW builders are still busy, what they are building has changed, according to Metrostudy's Paige Shipp. "Over the past 12 months, builders and developers have been addressing the need for affordable new homes by developing in previously overlooked submarkets and building smaller, less amenitized homes," said Shipp, regional director of Metrostudy's D-FW market. "As such, the median price has dropped since last year.The decrease in price is not devaluation, rather it's an indication that buyers are purchasing smaller, more affordable homes."
Shipp said that homebuyer traffic has slowed in North Texas in recent months. "While this cooling may worry some, it should be viewed as a positive stabilization of an overheated, frenzied market," she said. "Builders and developers should use this opportunity to catch their breaths and return to the fundamentals of homebuilding including land acquisition and selling." Shipp said the inventory of vacant new homes in the D-FW has increased to the highest level since 2012.
Dallas-area home prices grew less than 5 percent in August from a year earlier, according to the latest nationwide comparison. It was the first time in almost six years that Dallas-area home appreciation has been at such a low level in the closely-watched Standard & Poor's Case-Shiller Home Price Index. "Following reports that home sales are flat to down, price gains are beginning to moderate," S&P's David M. Blitzer said in the report. "The seasonally adjusted monthly data show that 10 cities experienced declining prices. Other housing data tell a similar story: prices and sales of new single family homes are weakening, housing starts are mixed and residential fixed investment is down in the last three quarters."
Home prices in North Texas have cooled in 2018 after years of double-digit percentage annual gains. Still, Dallas-area prices are about 45 percent higher than a decade ago, before the economic downturn and housing crash. "There are no signs that the current weakness will become a repeat of the crisis," Blitzer said. "Without a collapse in housing finance like the one seen 12 years ago, a crash in home prices is unlikely."
The slowdown in home price growth may be good news for potential buyers who have struggled to find homes they can afford. "It's more welcome news for would-be homebuyers, who must be breathing a collective sigh of relief that home price growth finally has slowed," Skylar Olsen, Zillow's director of economic research, said in a statement. "Softening appreciation after the rapid growth of just a few months earlier is a sign that fierce competition is dying down. Potential buyers who were intimidated during the heat of the market may find the breathing space now to make a calm, considered decision about whether to lock in a mortgage before rates rise further."